Volkswagen, Oxen, Timber, and Slave Labour in Brazil

Last week, a Brazilian Court ordered Volkswagen to pay the historic sum of US$ 30 million for collective moral damages for slave labour. This landmark judgment concludes a judicial struggle against one of the world’s largest car manufacturers for its direct involvement in slave labour in the Amazon during Brazil’s military dictatorship (1964-1985). The case was initiated by the Federal Prosecution Service in December 2024 and advanced swiftly through the courts, as Brazilian law grants priority to proceedings involving slavery-like practices, ensuring a quicker path to this groundbreaking decision.

The judgment contains numerous significant findings that will serve as important references for future cases involving serious corporate human rights violations. In this piece, however, we focus on its reliance on the UN Guiding Principles on Business and Human Rights (UNGPs), which not only impose due diligence obligations on Volkswagen but also play a key role in strengthening collective memory.

The Vale do Cristalino Farm as a Giant of Slave Labour in Pará

Between 1974 and 1986, Volkswagen managed the Vale do Cristalino Farm in Santana do Araguaia (PA). With 139,000 hectares – almost the size of the city of São Paulo – the property was the scene of serious human rights violations. Historically, Pará, where the Volkswagen Farm is located, is where most Brazilian cases of modern slavery are concentrated: between 1995 and 2023, more than 63,400 workers were enslaved in rural and urban areas in 3,295 cases (21% of total). Among the cases, the main economic activities are livestock farming, charcoal production, construction, coffee production, and deforestation. In the last three years, however, domestic work and mining have come to feature among the top five activities.

Workers were lured, forced into debt and subjected to degrading living and food conditions; exhausting working hours; restrictions on freedom in deforestation fronts up to 80 km from headquarters.

Conviction of Volkswagen in Brazil

Decades later, in a historic, consistent, and necessary ruling, the 8th Regional Labour Court now held the company responsible for subjecting its workers to conditions analogous to slavery, profiting from the services provided by men who cleared trees to create pasture. The employees suffered restrictions on their movement (guardhouse/weapons), debt bondage (food provided by the employer), forced labour; exhausting working hours; and degrading living conditions.

It is not the first time Volkswagen is involved in serious human rights violations in the country. In 2020, Volkswagen had already signed a Conduct Adjustment Agreement (TAC) with the Public Prosecutor’s Office, acknowledging its collaboration with the military dictatorship in the persecution of employees in São Bernardo do Campo (SP). At the time, it committed to paying R$ 36 million (around US$ 6.5 million) in compensation and made a public apology.

Last week’s ruling, which is still subject to appeal, ordered Volkswagen to pay R$ 165 million (around US$ 900 million) in compensation to the State Fund for the Promotion of Decent Work and the Eradication of Slave Labour in Pará (Funtrad/PA), besides ordering measures of non-repetition.

Volkswagen’s main argument concerned the statute of limitations: since the actions had occurred in the 1970s and 1980s, the company claimed they were already time-barred under Brazilian law. The Court rejected this argument, relying on a higher court decision (2nd Panel of the Superior Labour Court, in RRAg-1000612-76.2020.5.02.0053 – 20/10/2023) which expressly recognised the imprescriptibility of the absolute right not to be enslaved: the State cannot allow time to become a safe conduct for exploiters and must ensure full reparation for the victim and financial liability for the aggressor.

The judge had a wide range of evidence to form his conviction, such as a dossier produced by the Pastoral Land Commission; an inspection report prepared by then parliamentarians and journalists; and testimonies from former workers and company representatives. The farm’s director, in an extrajudicial depoiment (ID. 61ab325), even acknowledged that the recruitment system used on the farm led to exploitation and indebtedness. Based on this, he stated that the financial autonomy of a legal entity cannot be confused with irresponsibility for its own actions and that the rule that liability is transferred with the succession of assets cannot be applied to the serious violations that occurred. He concluded that Volkswagen had shareholding and administrative control of the farm; that the farm’s management was integrated into the company’s administrative structure; and that VW benefited from the venture. The grounds for the ruling also note that VW was guilty of culpa in eligendo, by hiring inspectors who treated employees in a humiliating and violent manner; and also of culpa in vigilando, failing to adequately monitor the farm’s managers to ensure that they behaved appropriately.

The Public Ministry of Labour bases its requests, among others, on the UN Guiding Principles on Business and Human Rights (UNGPs) and the American Convention (63.1), to request different remedial measures such as apologies, restitution, financial or non-financial compensation, punitive sanctions and measures to prevent further damage, such as guarantees of non-repetition. Among the reparatory measures determined is the disclosure of an apology. Among the guarantees of non-repetition is the adoption of a public commitment to monitor and combat slave labour, human trafficking, and other human rights violations in its production chain. For the UNGPs, the adoption of a public commitment is the first step to be taken on the path to corporate conduct that demonstrates concern for human rights. In addition, the ruling orders the company to include, in all contracts with third parties, clauses prohibiting the use of slave-like labour, providing access to audits, termination for violations, and remediation plans for victims, within 120 days. Another relevant point is the condemnation of the implementation of cyclical and continuous due diligence in human rights, an instrument provided for in the UNGPs for the prevention of violations.

The ruling condemns the company for collective moral damages, recognising that civil liability requires an unlawful act, damage, and a causal link. In this case, however, it expressly states that in situations of massive human rights violations, causality is not limited to direct contact with the victim, but also to the profit obtained, the position of control and the economic direction of the enterprise, noting that the highest courts in the country recognise that a company that benefits from illegal labour is part of the chain of responsibility, even if it acts through companies or contractors (p. 264). The Public Prosecutor’s Office sought a conviction in an amount that, in VW’s view, would constitute punitive damages because it was unrelated to the extent of the damage. Brazilian law adopts the principle of full reparation and not compensation with a purely punitive function (Civil Code, art. 944 ). However, the judge noted that, in the case of collective moral damages, the country’s highest labour court has already recognised that compensation serves a dual function: compensatory and punitive (or educational) (p. 266). On the other hand, the adoption of an educational character of the penalty is not prohibited in the country, since there is provision for reinforced sanctions for repeat offenders (Civil Code, art.404) and the adoption of the concept of social dumping, which has also allowed for more robust sanctions in labour courts.

In addition to the compensation, the company was required to create a channel for reporting labour violations; include clauses prohibiting slave labour in contracts with third parties; promote human rights training for managers and field teams; and adopt human rights due diligence processes with risk mapping and mitigation plans (p. 294-296).

Why is this case important?

According to Brazilian law (Criminal Code, art. 149) , slave labour is defined as forced labour; exhausting working hours; degrading conditions; and restriction of movement. This concept is broader than that of international conventions and guarantees greater protection for workers and was applied in the case.

As the judge pointed out in the ruling, impunity cannot be perpetuated. As in the 2016 case of Hacienda Brasil Verde Workers v. Brazil, judged by the Inter-American Court of Human Rights, it is up to the State to investigate and punish all violations whenever new evidence emerges (para. 445).

There are many relevant issues tackled on the sentence (capacity to be sued, statute of limitations, etc) that deserve to be further explored. From the perspective of business and human rights, the determination that the company must carry out human rights due diligence (HRDD) is particularly relevant. An instrument known since 2011, when the UN Human Rights Council adopted the UNGPs, HRDD has been adopted in other regulatory frameworks as an instrument to prevent negative impacts on human rights caused by economic activities. There is no legislation in Brazil requiring its adoption, although gradually, companies in the production chains of German and European companies are being pressured to adopt procedures that demonstrate their concern for respecting human rights and that they are actively working to prevent harm.

The decision is groundbreaking when it chooses to use the UNGPs in its reasoning, clarifying their weight: although soft law, nothing prevents them from informing the content of the elements of the sentence (p. 283). The first step corporations need to fulfil in order to show their true concern about human rights is to establish a policy, a code, or other form of commitment with this issue (p. 285). The decision imposes that to VW, as does the German Act on Corporate Due Diligence Obligations in Supply Chains (6.2). In the same venue, the decision condemns VW to adopt HRDD, as mentioned above. The German Act also provides for the implementation of a human rights and environment due diligence (3.1) as a cyclical mechanism (10.1), while the decision has set a deadline for the first cycle to happen (180 days). The decision takes into consideration the fact that VW is being charged for acts committed many years ago and the company procedures regarding managing risks to third parties might have improved. In this sense, it does justify the ruling after so many years with the fact that such egregious human rights violations need an answer; on the other hand, it ponders that the measures already taken by the company nowadays need to be taken into consideration when evaluating the implementation of procedures such as HRDD.

The conviction of Volkswagen in Brazil is a milestone in the fight against contemporary slave labour. Cases such as that of the Vale do Cristalino farm expose how large companies must also be held historically and legally accountable. Beyond the more than US$ 30 million compensation, what is truly at stake is the construction of a collective memory – one that ensures that episodes of exploitation are neither forgotten nor repeated.