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Four years after the implementation of the Modern Slavery Act in the United Kingdom – and with other jurisdictions following suit – Lucy Trevelyan examines how effective anti-slavery laws are and how onerous their provisions are for in-house lawyers.
More than 40 million people are in slavery today, according to figures from the International Labour Organization. In a work context – which makes up 25 million of the total – slavery can take many different forms, including forced labour and bonded labour, slavery in supply chains, child labour and the exploitation of migrant workers in conditions amounting to slavery.
Traditionally, says Sean Selleck, a partner in Baker & McKenzie’s Melbourne office, modern slavery in the western world has predominately been identified in the sex work industry. However, in recent years, victims of modern slavery have been identified in agriculture, construction, domestic work, meat processing and cleaning, hospitality and food services.
The widespread prevalence of modern slavery – which last year cost an estimated £4.3bn in the United Kingdom alone – has led to efforts being stepped up on a global level to combat this scourge on society.
In the last year alone, leaders at both the Group of Twenty (G20) and Group of Seven (G7) meetings declared they would take action to eradicate child labour, forced labour, human trafficking and modern slavery in the world of work. Meanwhile, consultations by an intergovernmental working group set up by the Human Rights Council continue in a bid to agree an international legally-binding instrument to regulate, in international human rights law, the activities of transnational corporations and other business enterprises. Additionally, the Global Call to Action issued in 2017 by UK Prime Minister Theresa May – which lays out principles for governments to help tackle modern slavery in global supply chains – has now been endorsed by 77 states.
Whether these initiatives and other global accords are effective, says Selleck, is largely based on whether any introduced domestic legislation or international treaty includes mandatory due diligence and/or penalties for non-compliance. ‘The presence of such measures is likely to result in more concerted effort, whereas the lack of such measures is likely to see a more limited action response,’ he says.
And therein lies the rub. Although several countries – such as the UK with its Modern Slavery Act 2015 and more recently Australia with its Federal and New South Wales (NSW) Modern Slavery Acts – have devised legislation requiring certain companies to publish an annual modern slavery statement outlining what they are doing to stop modern slavery in their own organisation and their supply chains, some of the new measures have been criticised for lacking teeth.
In France, for example, a 2017 law introduced the obligation for global companies to establish a ‘Vigilance Plan’ with action points aimed at preventing serious violations to human rights and fundamental freedoms, people’s health and safety and the environment. However, a penalty contained in the original draft, which could have seen firms fined up to €30m for non-compliance, was removed.
‘If this text was the result of a great initiative from the French legislature, some are questioning its actual impact due to the removal of the special fine,’ says Caroline Froger-Michon, partner at CMS in Paris.
Naomi Seddon, a shareholder at Littler
With regard to French criminal law, she adds, modern slavery penalties in the French jurisdiction are stringent enough but in practice, these penalties are reduced and there is room for improvement when it comes to enforceability.
California, of course, was a pioneer in legislating to tackle modern slavery with its Transparency in Supply Chains Act of 2010. However, says Naomi Seddon, a shareholder at Los Angeles law firm Littler, the disclosure laws relating to trafficking or modern slavery have been criticised as being too lax or not being sufficiently enforced.
‘Criticism is healthy and helps bring further awareness to this issue, but we need to also keep the focus on allowing business to explore flexible and entrepreneurial solutions that share the responsibility for eradicating this problem with other stakeholders, and most importantly with states,’ says Seddon. ‘This problem is too complex to be solved by business alone.’
One helpful step would be to see better coordination of efforts among states so that businesses are not caught up working to achieve compliance with a patchwork of disclosure laws that have nebulously-drafted standards and that do not take into account (or sufficiently respect) compliant disclosures from other jurisdictions.
‘In this regulatory environment, businesses are expending resources on complying with a patchwork of similar disclosure laws instead of using those same resources to more productively implement solutions,’ Seddon adds.
The much-heralded UK Act, meanwhile, contains no legal requirements on what needs to be included in a statement and no penalties or enforcement action for organisations that produce very brief statements and/or do little within their organisations to combat slavery.
Beatriz Araujo, a partner in Baker & McKenzie’s London office, notes that while there has been a lot of criticism as to the quality of the modern slavery statements produced by organisations thus far, there has also been increased media attention and scrutiny on modern slavery and how organisations are addressing this.
‘This scrutiny is only likely to increase further with time and as organisations also see what steps their competitors are taking to address slavery issues in their business and supply chains. This is likely to lead to improvements on the policies and procedures organisations have in place to combat slavery,’ she says.
Claire McKee, an associate in Dentons’ UK Employment team says some have criticised the UK government for not doing enough to identify and protect potential victims of slavery. Such critics include the Winston Churchill Memorial Trust, which declared in December that Britain is lagging behind the work of other countries.
‘Its research showed that a lack of financial, legal and pastoral support for slavery victims, as well as an absence of secure immigration status, leaves many victims too afraid to give evidence against offenders and that this is hindering the government’s progress in tackling modern slavery,’ says McKee.
The UK government did last year announce a review to report on the operation, effectiveness of and potential improvements to the Act and also pledged to write to the chief executives of 17,000 organisations that had not yet published a modern slavery statement, warning they could be named and shamed for breaching the law.
Araujo predicts that if organisations’ approach to modern slavery is not seen to be improving as a result of legislation, governments may look to introduce stricter reporting requirements and penalties for non-compliance. ‘This is likely to include requirements on the actual content of modern slavery statements as well as penalties for organisations whose statements, as well as policies and procedures, are seen to be inadequate.’
Blazing a trail in this direction is the NSW Modern Slavery Act, which as well as having half the revenue threshold (AUD $50m) for entities required to comply with reporting obligations than its Federal Act counterpart, also introduces penalties of up to AUD $1.1m for non-compliant companies, including those who fail to prepare and publish a modern slavery statement.
The NSW Act is the first of its kind in Australia, says Aaron Goonrey, a partner at Lander & Rogers in Sydney. ‘It contains many of the same reporting obligations as the Federal Act, however, a notable absence from the Federal Act that is included in the NSW Act is the requirement to report on training available to employees on modern slavery.’
The NSW Act also carries a penalty of a maximum fine of AUD $550,000 and/or two years’ imprisonment for the contravention of modern slavery risk orders relating to slavery-related offences, says Geoff Cairns, a partner in Dentons’ Sydney office.
Simon Lewchuk, Senior Policy Advisor at World Vision Canada, a private relief and development agency, warns however that when it comes to modern slavery in corporate supply chains, punitive measures aren’t necessarily the right approach. ‘Rather, it is important that there are regulatory and policy initiatives in place that encourage companies to assess their supply chains to see where they might be at risk for modern slavery and to implement effective due diligence processes to prevent these risks and mitigate harm to victims.’
All this legislation aimed at forcing businesses to take steps to stamp out modern slavery is, of course, laudable and necessary given the scale of the problem, but the bulk of the new regulatory burden is likely to predominantly fall on in-house legal teams. But what should an in-house lawyer’s role be in tackling modern slavery and what are the tell-tale signs that might alert them to the presence of slavery?
‘In-house lawyers play an important part in ensuring that businesses comply with requirements, particularly in relation to director level involvement which has pushed up awareness and engagement of in-house counsel,’ says Sarah Ozanne, of counsel at CMS in London. ‘They should also be involved in updating policies, including recruitment, anti-slavery, ethics, whistleblowing and procurement, risk assessments, due diligence processes – including know your customer (KYC), training and setting and reviewing performance indicators.’
Marius Petroiu, a senior associate in the Litigation, Arbitration, Insurance, Employment (LAIE) team at CMS in Romania, says in-house lawyers could use their legal experience to promote awareness of the topic of modern slavery externally (eg, by publishing articles in the media on the topic). Petroiu also notes that an important role in fighting against modern slavery is played by non-governmental organisations (NGOs), which are common in Romania. Lawyers might give considerable help to NGOs by providing assistance to them in the form of legal information.
From a reporting perspective, says Araujo, a key thing to remember is that, as well as being a legal document, an organisation’s modern slavery statement is also a marketing document. ‘It is looked at by customers and potential customers and should be drafted to highlight in the best possible light the initiatives, practices and policies an organisation implements as well as the principles and behaviours it follows and encourages.’
Many organisations that are accused of having not yet published a statement, she says, are likely to be subsidiaries of global organisations who believe they are covered by their parent organisation’s statement. In-house lawyers therefore have a role in making sure a statement clarifies which subsidiaries within the larger organisation’s group are covered.
Beatriz Araujo, a partner at Baker & McKenzie
‘They should also ensure the statement is published on the website of each subsidiary and has been properly approved by the relevant board and signed by a relevant director,’ adds Araujo. ‘Otherwise, governments in countries where a statement is required by law may start taking action against organisations [they do not] believe are complying with the legislation.’
Barbara Grossman, a partner in Dentons Canada’s Toronto office, warns in-house lawyers to be aware of the potential civil litigation exposure and reputation risks from supply chain issues that were highlighted in the recent Ontario Court of Appeal decision in Das v George Weston Limited (2018).
‘This dealt with a proposed Ontario class action against a Canadian corporation and the supply chain audit firm it engaged, arising out of the physical collapse of a manufacturing facility in Bangladesh, killing and injuring thousands. Most of the dead and injured were factory workers making garments for international export. Many of those workers were making garments for a well-known Canadian brand owned and controlled by the Canadian corporation that was sued,’ explains Grossman.
Detecting modern slavery may be one of the more complex tasks confronting today’s multinational companies and buyers of overseas components and products, says Suzanne Spears, partner at Allen & Overy in London.
‘Most instances of this practice are hidden in an opaque network of different sub-contractors,’ says Spears. ‘However, it may be one of the most important tasks, given the reputational effects and legal risks associated with being accused of involvement with the practice.’
Companies should undertake due diligence on their suppliers’ chains, she says, identifying and assessing human rights impacts, acting upon the findings, tracking these measures and communicating how impacts are addressed.
Spears explains that her firm encourages companies to focus on four different areas. Firstly, around sub-contracting, as ‘sub-contracting without the knowledge and permission of buyers is one of the primary obstacles to identifying and combatting modern slavery.’
A second area is ethical recruitment practices. Spears says that ‘the opaque conditions of the recruitment processes is the main obstacle for companies to identify modern slavery: too many sub-contractors, temporary employment agencies or the involvement of middlemen provide fertile ground for abusive working conditions and exploitation.’
Access to remedy is another important area. ‘Feedback from workers helps to identify and manage slavery risks in supply chains,’ Spears notes.
Suzanne Spears, a partner at Allen & Overy
Finally, companies are encouraged to look at purchasing practices. ‘The structural persistence of modern slavery derives from purchasing practices that put extreme pressure on suppliers, like extremely tight production windows, short-term contracts, last-minute or short-term orders and severe payment terms,’ highlights Spears.
General counsel should also know about ongoing tort cases such as those in the United States against chocolatiers accused of aiding and abetting child slavery in Africa, and cases brought by consumers against a wide range of other businesses linked to slave labour for inadequate public disclosures, Spears says.
‘As slavery is a crime under international law that apparently attracts universal jurisdiction, general counsels also should know about the criminal charges being brought recently – in Sweden and France for example – against business executives and multinational companies for other crimes under international law.’
In terms of tell-tale signs, Araujo says, it is hard for someone within an organisation, and particularly in-house legal teams, to spot modern slavery issues themselves. ‘The key is to ensure there are open discussions and communications both within the business and with suppliers to understand what is happening and how business is being done as well as effective policies and procedures in place both internally and with suppliers.’
The main area in which in-house lawyers may see signs of modern slavery will be in their organisation's supply chains, says Goonrey. ‘If in-house lawyers are removed from day-to-day interactions with their suppliers and their suppliers’ workers, it may difficult for in-house lawyers to spot the tell-tale signs of modern slavery. In-house lawyers should speak with their suppliers and, if possible, conduct, or have business partners conduct, site visits of supplier locations.’
To further the international fight against modern slavery, says Juan Bonilla, partner at Cuatrecasas in Madrid and Senior Vice Chair of the IBA Employment and Industrial Relations Law Committee, more Western countries should enact legislation similar to that of the UK and France.
‘This would be a good starting point, even if further measures will be needed,’ says Bonilla. ‘This could include the increased use of International Framework Agreements reached between multinational companies and trade unions at a global level, since they may also involve the unions on enforcement measures.’
Creating the obligation for multinational companies to conduct internal audits of their cross-border supply chain would also be a welcome measure, Bonilla says, as would facilitating industry level agreements between the different competitors where such competitors will commit to take certain actions (traceability, audits) to tackle modern slavery. ‘It would also be desirable to see the creation of some sort of directors’ liability, whereby directors of the holding company would be liable for breaches of legislation on modern slavery at a global level,’ he adds.
Brazil’s approach to ending modern slavery includes the creation of the lista suja (‘dirty list’), which publicly names and shames companies that use forced labour in their supply chains; the prohibition of slave labour in Brazil’s Penal Code; and an amendment to its Constitution in 2014 to allow the confiscation of property from those who benefit from slave labour.
In October, the Canadian Government announced Canada’s first national human trafficking hotline, expected to launch in the spring of 2019. The hotline will be a confidential, multilingual, 24/7/365 service for victims / survivors of modern slavery who wish to seek help and want to be in contact with social and emergency services and law enforcement agencies. The service will receive information from the public about suspicious incidents and provide callers with links to resources and information.
Also in October, a Canadian parliamentary report recommended that the Canadian government introduce legislation and other measures that would incentivise companies to take more action to address the risks of modern slavery and child labour in their operations and global supply chains.
The most recent initiative in fighting modern slavery in Russia includes the ratification earlier this year of the Protocol to the Forced Labour Convention of 1930, which requires states to adopt effective measures to prevent forced labour and to provide victims with protection and access to effective remedies, including compensation.
The Russian President has also approved the Concept for the state migration policy for 2019-2025, which refers to the exposure and prevention of trafficking in human beings as one of its main goals.
Unlike other countries such as the UK or France, Spain has not implemented any specific piece of legislation aimed at fighting modern slavery. The Spanish Parliament only enacted an implementation of the European legislation on disclosure of non-financial information for public companies but this is not aimed at tackling and fighting modern slavery in itself.
With the current composition of the Spanish Parliament and the changes seen in the past few months in the Spanish government, the passing of a specific piece of legislation on modern slavery is not expected soon.
The regulators have very limited jurisdiction. As an example, if modern slavery is not accompanied by any sort of bribery to public officials at the level of foreign subsidiaries, the Spanish regulators would not have any enforcement authority.
In-house and compliance lawyers in Spain are only responsible for enforcing the foreign pieces of legislation that may have been implemented outside of Spain. As an example, in-house counsel of big multinationals in Spain have been focused on being compliant with the UK Modern Slavery Act and on properly fulfilling the statement, but this has been undertaken in conjunction with UK in-house and UK outside counsel.