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June 5, 2013

Overseas legislation – Keep it in the family

In the absence of globally applicable health and safety laws, says Kevin Elliott, multinational organisations would be wise to share and adopt in the UK learnings from their overseas operations, even if they are run by separate legal entities.

In some respects, it would be far easier to do business around the world if a single set of global laws governed activities from a health and safety perspective. Multinational operations would be able to know with certainty that, say, machine guarding needs to be provided to the same standard whether in New Zealand or New Delhi, and working at height needs to be performed in the same manner in Birmingham, West Midlands as in Birmingham, Alabama.

Global legislation does operate successfully in terms of such activities as transportation of dangerous goods and marine pollution; sadly, however, there isn’t that level of uniformity or simplicity in the field of health and safety, and there isn’t even a remote possibility of global legal standards being adopted in all jurisdictions for health and safety. So what can organisations operating beyond the UK do to try to align operations, and what do they need to be mindful of in terms of sharing their knowledge from overseas?

‘Reputation’ of health and safety remains fiercely local. Each jurisdiction creates its own set of legislation and regulation to address a plethora of risks. Even where a group of countries comes together, such as the European Union, with a view to harmonising laws, the end result can produce as many differences as similarities in terms of health and safety regulation.  

The problem has long existed in the EU, with organisations observing, for example, that standards in Germany derived from German regulation were not as stringent as those in the UK. Now that the Union has enlarged even further, with new members joining from, in particular, Eastern Europe, we are even further away from harmonised safety requirements across the EU.

In the middle of a global economic crisis, which is particularly acute in the Eurozone, it may not be politically attractive for Member States to invoke safety legislation that could have the effect of deterring investment into the jurisdiction. Academics will refer to the infringement process, if a Member State adopts either incorrectly or late all or any provisions of an EU directive. Pragmatists will respond with the perfectly legitimate observation that, in the context of safety, there is an absence of such action.

The International Labour Organisation sets out the principle that workers should be protected from sickness, disease and injury arising from their employment. In reality, however, the ILO has even less force than the EU, operating as it does under a system of Conventions and Recommendations. Member States are under a binding international obligation to make sure their laws confirm with a ratified Convention.  

An example of an ILO Convention is the Occupational Safety and Health Convention 1981, which provides for the adoption of a coherent national occupational safety and health policy, as well as action to be taken by governments and within enterprises to promote occupational safety and health to improve working conditions. Recommendations are not binding but provide guides for national action. While the ILO has served a purpose in the global health and safety arena, it has been at a fairly basic level.

When in Rome

In today’s world, different countries not only get to draft and implement their own legislation for health and safety requirements but also choose how to enforce that legislation. For example, look at the enforcement regimes in the UK and Italy: in the UK, if there is to be a prosecution following a work-related injury or death, it will most likely be against the organisation that employed the injured party — ordinarily, a limited company, or a public body.

In Italy, however, corporate criminal liability was not even recognised in Italian law until 2001, with criminal responsibility limited exclusively to natural persons — ordinarily, a person who has effective decision-making powers and control over financial resources relevant to the safety of workers (e.g. a board director, or general or senior manager). While it is possible now under Italian law to prosecute a corporate body, it remains much more likely that an individual will be prosecuted.

Of course, as long as all local laws are observed, it is perfectly possible for a multinational organisation to set its own global health and safety standard. This can take more than one form, such as a manifesto on health/safety principles, a set of “golden rules”, or a global code-of-conduct safety provision.

In reality, organisations that have sought to implement a single set of requirements for all operations irrespective of differing local legal requirements (the implication being the organisation’s requirements will be at least as high as the most stringent legislation in any of the jurisdictions in which it operates) have been less successful than those adopting a more flexible approach.

Primarily, cultural differences mean it can be an enormous, if not impossible, challenge to implement a simple set of requirements. From operational and legal perspectives, the key seems to be to tailor the initiative, taking into account legal compliance in each country in which the organisation will be operating.

Whatever the method, an effective global safety standard will need global worker participation. This will usually require education, as worker understanding of safety and prevention may well be limited. While many organisations have safety committees, in some cases these committees have no worker representation — often a sign that worker participation in safety is limited at these locations. In the event of an incident, it can be telling and damaging if the workers’ version of what has been happening on the ground differs from the ‘official’ version, and their lack of engagement is obvious.

From a UK perspective, the Police and the HSE should take into account the presence of any standard when investigating an organisation. All aspects of a global standard that an organisation has set (or has had set for it by a parent company) are likely to be considered  “reasonably practicable” for the purposes of a charge under sections 2 or 3 of the HSWA 1974. When drafting a prospective global standard, if something is simply not achievable in the UK, then it should not be included. Any obligation in the final standard should be adopted in the UK.

Far away, so close

The Court of Appeal decision in Bodycote highlights the need for organisations with both UK and overseas operations to share and adopt in the UK learnings from their overseas operations. This is the case even if the UK and overseas operations are run by separate legal entities.
Bodycote is part of a multinational group that specialises in a hot isostatic pressing process. The group has 260 companies, and 11 sites operate the HIP process worldwide, three of them in the UK, including a site at Hereford.

The facts of the Bodycote case are that, in June 2004, two employees working at the Hereford site were discovered dead in a pit surrounding a hot isostatic press that was owned and operated by Bodycote’s UK operation. The two employees who died were the works manager and the site maintenance engineer, both of whom died from asphyxiation. The pit in which they were found had filled with argon gas, which had escaped from a pressing process. The collection of argon gas in a confined space can lead to the diminution, or exclusion of oxygen, thus causing a lethal danger.

In May 2001, in California, a similar incident occurred, which led to the deaths of two employees at a HIP plant operated by another company in the same group. Those two employees had also died from asphyxiation as a result of inhaling argon and nitrogen. Following the California deaths, Bodycote introduced for its UK operations a permit system for monitoring the entry of workers into confined spaces, with the permits issued by a senior employee for such work to be carried out. However, Bodycote’s own records seemed to demonstrate that while the number of entries into confined spaces increased slightly, the number of permits dropped, possibly indicating ignorance of the permit system.

In 2002, the existing Hereford oxygen detecting system had been upgraded and included a monitor produced by a third party. That third party had offered to provide an ongoing service contract for the system. Bodycote declined and chose to undertake the work itself. However, the court found there was evidence that the maintenance work had not been carried out to an acceptable standard.

When sentencing Bodycote it was found to be a “serious aggravating feature” that a similar incident had led to the California deaths. The sentencing judge stated that it had not adequately heeded the warnings from the failures in California.

Notwithstanding the fact that these were entirely separate legal entities, it seems as though the failings in the UK arose from the fact that, clearly, the company was aware of the incident in California and had sought to identify and put in place measures to avoid a recurrence, but the court found those measures to be inadequate.
Having established that the failure to heed the California incident was a seriously aggravating feature, the Recorder considered that a fine of £800,000 would have been appropriate, if the prosecution had been contested. As a result of an early guilty plea, the fine was reduced by one third to £533,000, a sum that was upheld by the Court of Appeal.

The lessons from the Bodycote case for UK operations that have associated operations overseas are plain: ensure learnings from overseas are fed back to the UK, and make sure the UK operation puts appropriate and effective measures in place to reflect the lessons learnt.  

Kevin Elliott leads the Contentious Regulatory Team across Eversheds and specialises in HS&E matters.

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