The UK is leading the way in the fight against modern slavery through the Modern Slavery Act 2015. Is the UK legislation the gold standard?

The Modern Slavery Act 2015 has global reach as supply chains stretch across the world. A global trend of anti-slavery campaigns and legislation has begun.

United Nations (UN)

The UN Global Compact is a global agreement on 10 principles, including Principle 4: the elimination of all forms of forced and compulsory labour.

It is a voluntary initiative based on commitments by CEOs to implement sustainability principles and to take steps to support UN goals. The initiative enjoys support from the G8.

Separately, the UN has published its UN Guiding Principles on Business and Human Rights which has inspired human rights initiatives around the world.

Individual country initiatives

A number of countries have recognised the problem and we understand are looking at various initiatives.

Countries which are attempting to pass legislation include France, Switzerland and the United States.

France

On 30 March 2015 the French parliament passed Private Bill 501.

Before it becomes law, it must go to the French Senate which has the right to change the wording of the Bill. It was sent to the Senate on 24 March 2016. Thereafter, the Bill must receive Presidential approval to become law.

If it becomes law, the Bill will apply to French companies with over 5,000 employees based in France or 10,000 employees globally (if those employees are under the French company's direct control).

Those companies within the employee threshold must prepare a 'plan de vigilance' (a Plan) setting out the oversight mechanisms which the company has in place to identify and mitigate against the following risks:

  • Human rights and fundamental freedoms
  • Impact to health
  • Serious impact to the environment
  • Personal injury

The Plan must include activities of subsidiaries and of subcontractors and suppliers where there is an established contractual relationship.

The Plan must be made public and included in the company report that publicises the remuneration of officers of the company.

The first Plans must be prepared and published by 31 December 2016. The proposed penalty for non-compliance is a non-tax deductible fine of up to 10 million Euros.

Switzerland

A Responsible Business Initiative campaign has been instigated in Switzerland by the Swiss Coalition for Corporate Justice.

The campaign proposes an amendment to the Swiss constitution. It is understood the initiative was influenced by the UN Guiding Principles on Business and Human Rights.

If successful, businesses would be required to carry out due diligence to:

  • identify impacts (both real and potential) on internationally recognised human rights issues and environmental standards
  • stop existing violations
  • to account for the actions they have taken

The law would attract civil liability to enable people adversely affected by international activities of Swiss companies to bring a claim for damages against the Swiss company in Switzerland.

The campaign has gathered enough signatures and the initiative will be considered by the Swiss government in October 2016. Thereafter Swiss citizens will decide the future of the initiative when it is put to them in a referendum.

The Netherlands

The Dutch government are focussing on sustainable garment production and textile supply chain.

With the guidance of the Social and Economic Council of the Netherlands, they have tabled an agreement to adopt a collaborative approach with a coalition of industry, trade unions and civil society organisations.

The proposed agreement to tackle human rights and environmental issues including the following:

  • protection from forced and child labour
  • safe conditions for employees
  • achieving a living wage
  • reduction of excessively long working days
  • dialogue with independent employee representatives

Counties including Bangladesh, India, Pakistan and Turkey will receive particular focus.

Parties to the agreement will work together to identify supply chain issues at all stages of the chain, to set objectives which are achievable within three to five years and to draw up an annual improvement plan. The parties will input into a joint report each year setting out the activities carried out and what they have achieved. From year three, parties will report individually on progress they have made.

Funding is being sought for the agreement which it is hoped will be signed in June 2016. It is hoped that the company signatories will represent at least 30% of sector sales in the Netherlands.

Qatar

Following a complaint by the International Labour Organisation, Qatar is proposing to introduce a new law to end the kafala system whereby migrant workers can only work for their sponsor. Under this system, workers cannot change employer or leave the country without their employer's approval.

The International Labour Organisation has told Qatar to prove its proposed law changes are working or the ILO could launch a 'commission of inquiry' in March 2017.

USA

There is an appetite in the United States to achieve greater transparency in the supply chain, disclosure requirements and the traceability of materials within supply chains to ensure materials sourced are free of human rights abuses.

The leading pieces of supply chain transparency legislation in force in the United States are the Dodd Frank Wall Street Reform and Consumer Protection Act, Section 1502 regarding conflict minerals and the California Transparency in Supply Chains Act 2010. We have previously reported on a case brought under the Californian Act and whether the UK Modern Slavery Act will develop in the same way.

In addition to the above, a federal bill, Business Transparency in Trafficking and Slavery Act (H.R. 3226), is understood to be in Committee stages.

We understand that HR 3226 is a federal bill which aims to provide consumers with better clarity to determine whether their purchases are free from slavery, human trafficking, child and forced labour.

If enacted, any 'covered issuer required to file reports with the Securities and Exchange Commission (SEC)' under Section 13 of the Exchange Act with global receipts of $100 million, will be required to submit an annual report to the SEC regarding the steps taken to assess and address slavery, human trafficking, child and forced labour within their supply chains. The report will be published on the SEC's website as well as on the issuer's website through a prominent link to the relevant information labelled 'Global Supply Chain Transparency.'

It is not clear whether it includes goods as well as services.

The proposed mandatory disclosure requirements include:

  • supplier audit and a requirement that suppliers ensure that recruitment of labour and manufacture of products take place in compliance with local laws relating to child and forced labour and human trafficking
  • training of company staff in relation to supply chain management and child and forced labour and human trafficking
  • details of the action plan in place if an instance of child or forced labour and human trafficking is found together with the details of the victim support available.
  • Policies in place to mitigate, evaluate and assess the risk of forced and child labour, slavery and human trafficking in the company supply chain
  • How compliance with policies is tracked internally and how policy breaches are corrected

The Bill was referred to Committee on 27 July 2015. It is reputed to have a 2% chance of being enacted.

Australia

Australia's Criminal Code has included anti-slavery and human trafficking offences since 1995. The Code includes the following offences for conduct both inside and outside Australia:

  • Slave trading, human trafficking or be involved with a commercial transaction involving slavery - 25 years imprisonment
  • Conducting a business involving forced labour or causing another person into forced labour - 12 years imprisonment

Criminal liability will also arise if an organisation provides finance intentionally or recklessly 'to any commercial transaction' involving slavery,

Furthermore, there is automatic criminal liability if an organisation provides finance to a business involving servitude or forced labour.

It is possible to defend liability if an organisation has carried out due diligence to prevent slavery in its supply chain or to have a culture within the organisation that does not allow slavery like conditions. On the other hand, if an organisation is not able to put forward such a defence that could be taken as evidence against it.

Hong Kong

In Hong Kong it is an offence, punishable by a maximum prison sentence of 10 years, to traffic persons into the territory for the purpose of prostitution.

In addition. If a person fails to make a disclosure to the Hong Kong Joint Financial Intelligence Unit where that person suspects or knows that property is the proceeds of an indictable offence or if a person deals in the proceeds of slavery or human trafficking, they will commit an offence under the Organised and Serious Crimes Ordinance (Cap 455).

Brazil

Brazil is a high risk country for the purposes of modern slavery because it has large construction, agriculture and garment industries where forced labour is rife.

In response to the problem, in 2004 Brazil developed the Lista Suja: The Dirty List which 'named and shamed' companies who use forced labour in their supply chains. The Dirty List was updated every six months and was fully searchable. It included:

  • The owner of the company
  • Where the offence took place
  • The number of workers subjected to forced labour

Consequences of being on the Dirty List were extremely damaging ranging from brand damage to fines and the loss of lending opportunities.

As a result, in December 2014 the Dirty List was suspended in response to pressure from industries and financial penalties were suspended.

A new list was put forward on 31 March 2015 but as far as we are aware, has not been released.

Conclusion

It is clear that the abolition of human trafficking, slavery, forced and child labour is high on the International agenda. Corporate values and culture are gradually changing but the race to the top will take time.