The case of South Korea – Verpatzter test run for sustainability chapters

EU sues South Korea over labour rights dispute
At the end of January 2021, an arbitration panel rejected the EU Commission’s complaint that South Korea was in breach of labour law agreements under the Common Free Trade Agreement. This decision is likely to cause abdominal pain in Brussels, after all, the EU Commission is also insisting on the alleged effectiveness of its sustainability agreements with regard to other trade agreements, such as those with the Mercosur countries.
Due to continued criticism from civil society and parliamentarians, the EU Commission launched a broad process in 2018 to improve its sustainability agreements. In doing so, it considered providing them with sanctions (such as suspension of trade privileges). However, it quickly came to the conclusion that the ‘dialogue-based’ variant was preferable to a ‘sanction-proven’ one. This is incomprehensible. The rest of these free trade agreements do provide for sanctions if their provisions are violated. The sharpest sword is probably the notorious corporate lawsuits, to which only companies have access, but not governments or even victims of human or labour rights violations. The toothless provisions of the sustainability chapters, on the other hand, fall far short in their effectiveness. The ‘South Korea judgment’ confirms this.
The first of the new generation: Free Trade Agreement with South Korea
But back to the beginning: The EU-South Korea FTA was the first of a new generation of agreements and, when it provisionally entered into force in 2011, it was presented as the EU’s most ‘ambitious’ and ‘comprehensive’ agreement to date. For the first time, there was a chapter on Trade and Sustainable Development (TSD), which included labour and environmental standards. In this way, trade agreements should be made more balanced, as they are per se primarily aimed at boosting trade at all costs and maximising the profits of a few, often to the detriment of the environment and human rights. In the TSD chapter of the EU-South Korea Agreement, the parties committed to ‘respect, promote and implement’ the core labour standards of the International Labour Organization (ILO) and to progressively ratify and implement the fundamental ILO conventions. In addition, the TSD chapter created institutional structures such as a forum for civil society dialogue and a Domestic Advisory Group (DAG). The agreement also provides for consultations on violations of provisions of the sustainability chapter.
In fact, massive labour rights violations have been known in South Korea for years. The International Trade Union Confederation (ITUC) repeatedly reports on labour rights violations, police violence against strikers and mass arrests, especially of trade union leaders. In July 2016, KCTU President Han Sang-kyun was sentenced to five years in prison for organising ‘illegal demonstrations’. He was sentenced to three years in prison.
The EU is forced to act
The EU has long ignored these grievances, but has been repeatedly called upon by DAG civil society representatives to take formal steps under the trade agreement (in January 2014 and December 2016). Finally, the EU could no longer go beyond this and, as a first step, sought formal intergovernmental consultations between South Korea and the EU, as provided for in the sustainability chapter of the agreement (December 2018 to December 2019). As these were unsuccessful, the EU actually filed its first complaint under a bilateral free trade agreement. The EU argued that South Korea's failure to ratify several core conventions of the International Labour Organization (ILO), in particular Convention 87 on the freedom of association of workers, violated the terms of its 2010 trade pact. The EU is particularly concerned about the domestic rules in South Korea, which seem to prevent ‘platform workers’ and freelancers – such as Uber drivers or carers – from forming independent trade unions, as their independent status means that they are not recognised as ‘workers’.
Toothless tiger
The arbitration panel, which was made up of three persons in December 2019, should actually reach a conclusion as early as March 2020. Several hearings were delayed, resulting in a ‘judgment’ only since January 2021. Judgment in quotation marks, because the panelists have to submit a report and an evaluation. However, they do not provide for any consequences for the rights and obligations of the contracting parties. South Korea therefore has no pressure to improve its employment law situation.
In fact, the case was rejected by the panel:[i] The Panel noted that South Korea's efforts to ratify ILO core labour standards were not optimal and that much remains to be done. However, it could not see any breach of the provisions of the sustainability chapter, since the agreements made in the trade agreement on labour rights and ratification of the ILO conventions were formulated too non-bindingly. Thus, no breach of the treaty could be demonstrated, since the agreement only obliged South Korea to make ‘continued and sustained efforts’, but not to actually ratify the ILO agreements. For example, Seoul was able to claim that it had tried to bring the ILO conventions through its legislature – but that there had never been a majority there.
The case shows – also with regard to other agreements, such as China or Mercosur – that the existing provisions in sustainability chapters are not at all suitable for implementing human rights or environmental due diligence obligations. As long as trading partners do not have to fear suspension of the agreed trade provisions and the agreements in the sustainability chapter are kept so vague, the pressure to act is low.
This is further underlined by the fact that South Korea argued that it had not violated agreements of the agreement, as the working conditions for, for example, transport services were not to be seen in connection with the trade agreement with the EU. Here, too, it becomes apparent that the non-binding language of the chapter offers wide scope for interpretation.
In fact, there is already another way of dealing, but the EU is ignoring it: The CJEU has ruled in the so-called Singapore case that a trade agreement can be suspended if there are violations of environmental and labour standards. In theory, the EU would not have to change anything, but only implement it.[ii]
Alessa Hartmann
The author is responsible for trade and investment policy at the organization PowerShift e.V.
[i] See Report of the Panel of Experts: https://trade.ec.europa.eu/doclib/docs/2021/january/tradoc_159358.pdf
[ii] See 26 Opinion 2/15, ECLI: EU: C: 2017:376, para. 161. For further discussion, see Nesbit, Ankersmit, Friel and Colsa, ‘Ensuring compliance with environmental obligations through a future UK-EU relationship’, (London: Institute for European Environmental Policy, October 2017) pp. 27-8.