Financing Forced Labor: The Legal and Policy Implications of World Bank Loans to the Government of Uzbekistan

Publication Date: 

September 13, 2016


Andy Shen, International Labor Rights Forum
Sixty years have passed since the adoption of ILO Convention No. 105 (Abolition of Forced Labor Convention, 1957), yet a number of States have persisted in using forced labor for economic development, the eradication of which was a driving force behind establishing the Convention. Nowhere in the world is this problem more entrenched and pervasive than Uzbekistan. 
Each fall for the last 25 years, the Uzbek government has forced farmers to deliver annual production quotas and citizens to harvest cotton and perform other field work, all under menace of penalty. During the 2015 harvest, civil society monitors estimate over 1 million citizens were forced to pick cotton, including students, teachers, doctors, and nurses. Those who refused to pick cotton or did not meet their quota were threatened with job loss, expulsion, and other penalties conveyed by their employers, administrators, and local authorities at the order of high-level government officials. 
The Government of Uzbekistan is primarily responsible for the perpetration of its forced labor system, but two other actors have contributed to its longevity: the World Bank Group and global brands. Since 1995, the Uzbek system has been sustained in part through loans to the Government from the International Bank for Reconstruction and Development and the International Development Association, and loans to private companies sourcing Uzbek cotton from the International Finance Corporation. Barring suspension or cancellation of loans, approximately USD 308 million will be disbursed to the Government of Uzbekistan in the next five years to support its agricultural industry. 
While the UN and the ILO have annually found the Government of Uzbekistan to be in violation of international labor and human rights standards concerning forced labor, neither institution has extended or exercised its authority to consider whether the World Bank is violating international law by providing loans to the Government that are used for cotton production. No national or international court has heard or issued an opinion about this matter either. This report provides the first comprehensive analysis of the legal implications of the World Bank’s decisions to continue lending to the Government of Uzbekistan when it is aware of a plausible link between its funds and the forced labor of Uzbek citizens. The analysis, based on the circumstances surrounding a 2013 complaint to the World Bank Inspection Panel by civil society organizations representing Uzbek victims, and the national and international laws applicable to the Bank, finds that the Bank is indeed violating international law and could be held liable in U.S. courts. 
Over the last 10 years, the World Bank has constantly justified its approach to human rights by citing the Political Prohibition Provisions of its Articles of Agreement which it claims prevent it from considering non-economic factors such as human rights in its loan decisions. The Bank has never disputed, however, that it is obligated to adhere to peremptory norms of general international law, or jus cogens, in its operations. The international community has long recognized that jus cogens are non-derogable norms that sit atop the hierarchy of international law and treaties which conflict with these norms become void and terminated. This report presents a detailed assessment of the prohibition against State mobilization and use of forced labor for economic development, as defined in Article 1(b) of Convention No. 105, and concludes that this norm, which the Uzbek government has violated for the last 25 years, has attained the status of jus cogens. Therefore, in accordance with international law, all Bank financing agreements that support cotton production in Uzbekistan should be declared void and terminated. The Bank’s jus cogens obligations also require it to stop providing loans which are used in any way for Uzbek cotton production until the violation of Article 1(b) of Convention No. 105 ceases to exist. As there are currently no mitigation measures sufficient to prevent a violation of this jus cogens norm in Uzbekistan, the Bank must refrain from approving new agricultural loans while the Government’s system of forced labor is still intact. 
The World Bank has continually justified its refusal to suspend or cancel its agricultural loans by pointing to the Uzbek government’s action plans and policy commitments and assuring concerned stakeholders that its developmental approach to eliminating forced labor, mechanization of cotton production, will be effective in the long term. The Bank should note, however, that its international legal obligation to adhere to jus cogens requirements supersedes any policy or business considerations that may guide its engagement with the Uzbek government. Even an indirect violation of Article 1(b) of Convention No. 105 by the Bank could result in civil liability in the U.S. The Bank’s role as a lender, given the unique circumstances of its engagement with the Government of Uzbekistan, may not absolve it from legal liability under U.S. tort and contract law for contributing to the Government’s forced labor system. 
Besides questions of legality, the World Bank’s decisions concerning its loans to the Government of Uzbekistan raise serious concerns about the prudence and effectiveness of the Bank’s policies and strategies in countries where gross human rights abuses are perpetrated by the State. In Uzbekistan, the Bank should reconsider its developmental approach, as its unconditional engagement with the Government has undermined its mission to alleviate poverty and damaged its reputation. The example of Uzbekistan, one of the most egregious cases of IFI-supported human rights abuses in recent memory, should reinvigorate discussions within the Bank of an appropriate human rights policy which would prevent the reoccurrence of the Bank’s misconduct in the country.
The purpose of this report is to inform all concerned stakeholders of the World Bank’s serious violations of international law and the potential legal consequences that may come to bear if it continues to provide loans to the Uzbek government when the risk of systematic forced labor in the country is real. More importantly, it is hoped that this report will lead the World Bank, its member States, and its officers to seriously consider the comprehensive reforms needed to ensure the Bank no longer contributes to the perpetration of human rights abuses in countries where it operates. These necessarily include a more transparent and rights-centered loan-making process, reform of the structure and function of the Inspection Panel, and an amendment to the Political Prohibition Provisions of the Bank’s Articles of Agreement.