Editor’s note: Shamistha Selvaratnam is a LLM
Candidate of the Advanced Masters of European and International Human Rights
Law at Leiden University in the Netherlands and a contributor to the Doing Business Right project of the Asser Institute. Prior to commencing the LLM, she
worked as a business and human rights solicitor in Australia where she
specialised in promoting business respect for human rights through engagement
with policy, law and practice.
Over the past
couple of years, there has been an international trend towards greater
regulation and transparency with respect to modern slavery in corporate supply
chains as reports of gross human rights violations in corporate supply chains
have entered the public spotlight. For example, over the past couple of years
there has been extensive
media attention in relation to the use of slaves trafficked from Cambodia,
Laos, Bangladesh and Myanmar to work on Thai fishing boats to catch fish to be
sold around the globe, with the boats considered to be ‘floating labor camps’. As
a result of events such as this, there has been increased pressure on
businesses to take steps to address modern slavery in their supply chains
through processes such as through conducting risk assessments and due
As the Ethical Trading Initiative notes, key risks facing companies in their
supply chains include the use of migrant workers; the use of child labour;
recruitment fees and debt bondage; the use of agency workers and temporary
labour; working hours and wages; and the use of subcontractors. In 2016 the Global Slavery Index reported that 40.3 million people are living in
modern slavery across 167 countries, and in 2014 the ILO estimated that forced labour in the private economy generates
US$150 billion in illegal profits per year.
In March 2015,
the UK Government passed the UK Modern
Slavery Act 2015 (the Act), game-changing legislation that targets, inter
alia, slavery and trafficking in corporate supply chains. The UK Government
also published guidance explaining how businesses should comply with the
This first blog
of a series of articles dedicated to the global modern slavery developments
provides an overview of the main elements of the Act and how businesses have
responded to it. It will be followed by a review of the proposed Australian
MSA, and a final piece on the developments in other jurisdictions that are considering
introducing legislation regulating modern slavery in the corporate context.
Global businesses and modern slavery: The challenges
There are a
number of challenges associated with modern slavery in a globalised economy. As
Genevieve LeBaron and Andreas Rühmkorf state there are in particular a number of
regulatory gaps surrounding labour standards in corporate supply chains.
Firstly, there is no binding international instrument or framework in place ‘that addresses
the conduct of companies in global supply chains, and companies are not considered
to be duty bearers in public international law’.
Secondly, there are gaps in the regulation and enforcement of labour standards
by states. Thirdly, ‘the legal structure of global supply chains makes it
difficult to hold multinational enterprises liable for violations that occur.’
Fourthly, the principles of extraterritoriality often result in host states’
laws applying rather than home states’ laws. As Shuangge Wen notes the notion of the extraterritorial application of
legislation ‘remains alien to most of the civil law body’.
Another challenge she
recognises is that the doctrine of separate legal personality which
‘effectively shield[s] [corporate] group members from being sued or liable’.
These doctrinal and practical obstacles to holding businesses accountable for
modern slavery provide the wider backdrop to the Act and must be kept in mind
when assessing its effectiveness.
Key Aspects of the Act
Section 54 of the
Act requires commercial organisations with a global annual turnover of at least
£36 million to prepare a slavery and human trafficking statement annually
through publishing a Modern Slavery Statement on their webpage in a prominent
While there is no
globally agreed definition of ‘modern slavery’ under international law, it does
appear that modern slavery is an umbrella term that covers a range of exploitative
practices. As summarised by Anti-Slavery
International, human exploitation characterised by only one of the
following features is classed as ‘modern slavery’: (i) coercion to work through
either mental or physical threat; (ii) being owned or controlled by an employer,
usually through mental or physical abuse or the threat of abuse; (iii) being dehumanised
or treated as a commodity; or (iv) being physically constrained or with limited
freedom of movement.
The Act does not
specifically define ‘modern slavery’, however, its offences include slavery,
servitude, forced or compulsory labour and human trafficking. While each of
these practices has differences, they also have some similarities. So what are
each of these practices?
- As set out in the Slavery
Convention, slavery is ‘the status or condition of a person over whom any or
all of the powers attaching to the right of ownership are exercised’.
- Servitude is similar to slavery;
however, the person responsible for the situation does not exercise the powers
of ownership over the other person.
- As defined in the ILO Forced
Labour Convention 1930 (No. 29), forced or compulsory labour is ‘all work or
service which is exacted from any person under the threat of a penalty and for
which the person has not offered himself or herself voluntarily.
- ’Human trafficking is
defined in the Act as occurring when a person arranges or facilitates the
travel of another person (for example, through transporting, transferring or
recruiting) with the view of that person being exploited.
required to report?
‘commercial organisations’ is defined as a body corporate or partnership that
carries on a business, or part of a business, in the UK wherever that
organisation was incorporated or formed. Such an organisation is required to
report under s 54 if it supplies goods and services and has a total turnover of
at least £36 million. Accordingly, the Act will apply to businesses regardless
of its geographic location, so long as it carries on at least a part of its
business in the UK.
The term ‘carries
on a business’ is not defined in the Act. The guidance provided by the UK
Government states that a ‘common sense approach’ should be applied in determining
whether a body corporate or partnership is carrying on a business in the UK. However,
ultimately, the ‘courts will be the final arbiter as to whether an organisation
‘carries on a business’ in the UK taking into account the particular facts in
individual cases.’ As at the date of this blog, there have been no court cases
in which the court has had to consider whether a particular commercial
organisation is carrying on a business in the UK.
that do not meet the definition of ‘commercial organisations’ can voluntarily produce
a Modern Slavery Statement.
commercial organisations required to report on?
organisations are required to report on the steps they have taken to ensure
that slavery and human trafficking is not taking place in any of their supply
chains and in any part of their business, or that they have taken no such
steps. The Act sets out optional criteria which statements may include
information about, namely:
- (a) the organisation’s structure, its business and its supply chains;
- (b) its policies in relation to slavery and human trafficking;
- (c) its due diligence processes in relation to slavery and human
trafficking in its business and supply chains;
- (d) the parts of its business and supply chains where there is a risk of
slavery and human trafficking taking place, and the steps it has taken to
assess and manage that risk;
- (e) its effectiveness in ensuring that slavery and human trafficking is
not taking place in its business or supply chains, measured against such performance
indicators as it considers appropriate;
- (f) the training about slavery and human trafficking available to its
Act is not prescriptive about the content of Modern Slavery Statements. The
guidance provided by the UK Government provides tips on how to write a Modern
Slavery Statement (for example, it is suggested that companies keep the
statement succinct but cover all relevant points) and how to structure the
responsible for reporting?
The Board of
directors will bear the ultimate responsibility for Modern Slavery Statements
with the Act requiring the Board to approve the statement and a director to
sign the statement. As the UK Government guidance notes, this ‘ensures senior
level accountability, leadership and responsibility for modern slavery and
gives it the serious attention it deserves.’ For limited liability
partnerships, the statement must be approved by the members and signed by a
if commercial organisations do not report?
In the event that
a commercial organisation that is required to report under the Act does not
report, the Secretary of State may seek an injunction from the High Court requiring
the organisation to comply (or, in Scotland civil proceedings for specific performance
of a statutory duty under section 45 of the Court of Session Act 1988). If the
injunction is not complied with, the organisation will be held in contempt of a
court order, which is punishable by an unlimited fine. In a public hearing held earlier this year, the UK Home Office commented
that the UK Government did not go down a ‘more punitive route’ with respect to
enforcement ‘to avoid pushing businesses away from transparency’ and that its
approach so far has been to ‘work in partnership with business, to share best
practice, to raise awareness and to encourage transparency’.
The UK Government
guidance notes that it will be for ‘consumers, investors and Non-Governmental
Organisations to engage and/or apply pressure where they believe a business has
not taken sufficient steps’, suggesting that the Government will not take
action on its own volition.
How have businesses responded?
As at the date of
this blog, 6102 companies have published 7302 statements. The statements can be
found on the Modern
website. This stands in stark contrast to the UK Home Office’s estimate of the
number of companies required to report under the Act, being between 9,000 and
11,000 entities. However, as noted at the public hearings earlier this year, no injunctions have been taken
against non-complying companies so as not to ‘discourage transparency’.
According to the Modern
Slavery Registry, of the statements published, only 19% met the minimum
requirements set out in the Act, namely: (1) the statement is published on the
business’ website with a link on the home page; (2) the statement is signed by
a director or equivalent; and (3) explicit approval by the Board is included in
the statement. Further, the Business & Human Rights Resource Centre’s
analysis of the Financial Times Stock Exchange 100's quality of reporting in
the first reporting year across six reporting areas (as summarised in its report titled ‘Modern Slavery Reporting: Case Studies of Leading
- 34% of companies complied with
the organisational and supply chain structure reporting area;
- 38% of companies complied with
the company policies reporting area;
- 46% of companies complied with
the due diligence processes reporting area;
- 38% of companies complied with
the risk assessment reporting area;
- 16% of companies complied with
effectiveness of measures in place reporting area; and
- 38% of companies complied with
the training reporting area.
Given the low
level of compliance, as stated by the Business & Human Rights Resource Centre, it appears that a ‘vast majority of
companies are failing to take effective action and must do more to address
modern slavery.’ As Radu Mares notes, the quality of reporting demonstrates ‘paper
compliance’ whereby companies are using a ‘tick-box approach’ to satisfy the
requirements in the Act ‘without providing substantive or meaningful
For example, in 2016 Ergon Associates reported that 35% of statements did not mention
risk assessment procedures and two-thirds did not identify priority risks.
Modern slavery statements
published by businesses to date highlight a number of key challenges and
barriers facing business in addressing modern slavery. As the Ethical Trading Initiative notes, these include the following
- The complexity and length of
- The insufficient resources they
have to conduct due diligence and support supplier improvements.
- The extent to which they should
provide transparency around their modern slavery risks and practices.
- Pressure from buyers to secure
low prices from suppliers.
- Lack of leverage with suppliers
in order to work with them to improve their practices.
The Ethical Trading Initiative states that the following is crucial to
ensure modern slavery action is taken by commercial organisations: senior
leadership engagement, organisational culture change, including ‘communicating
and clarifying the values, attitudes, and understanding of modern slavery to
help embed policies and make them effective’; and collaborations and
partnerships amongst different stakeholders, including other companies.
The many academic critiques of s 54 of the Act
As LeBaron and Rühmkorf, note that although the Act is considered
to be public regulation, it is indeed ‘fully dependent on private
governance tools, standards, and enforcement mechanisms to meet its aims’ and
does not introduce any new public standards.
Accordingly, it ‘blurs the binary frequently posited between ‘hard’ and ‘soft’
law in the governance of labour standards’.
Further, they argue that compliance with the Act does not actually require a
business to take steps to address modern slavery in its supply chain – all that
is required is that a statement be published on a company’s webpage signed by a
director and approved by its Board. This is strengthened by the fact that the
Act does not require businesses to report on mandatory criteria – rather it
suggests criteria that a business can (but is not required to) report on,
providing little incentive for companies to detail the actions they have taken
(if any) to prevent and address modern slavery particularly given the lack of
penalties for non-compliance.
As Shuangge Wen notes the absence of penalties and the call on the
general public to use the information contained in statements is unlikely to
encourage change within businesses. In other words, it is likely to have a
limited ‘pragmatic effect’.
This is possibly the reason why there have been such low levels of compliance
with reporting. She further argues that the Act leaves business
responsibilities with respect to respecting human rights and preventing and
addressing modern slavery up to the ‘individual organizations’ discretionary
However, as Radu Maries notes the Act’s requirement that directors sign off on
statements has ‘raised the profile of modern slavery issues within companies’
and, as a result, had an ‘internal effect on risk management’ and lead to
top-level leadership with respect to modern slavery issues.
As Justine Nolan and Gregory Bott state that the Act fails to ‘set mandatory standards
for what due diligence must encompass’ and does not hold companies ‘directly
legally accountable for any actual adverse human rights impacts connected to
Accordingly, they argue that it is unlikely to encourage businesses to take
proper action to address modern slavery in their supply chains. They contend
that an ‘improved approach’ is required that ‘links reporting with due
diligence, requires detailed disclosures, has regulatory consequences for a
failure to report, and utilises both public and private mechanisms and the
shared leverage of all relevant stakeholders’ in order to effect change with
respect to combatting modern slavery.
Mantouvalou presents a number of interesting arguments to contend
that the Act is a ‘weak’ mechanism to prevent and address modern slavery.
While she notes that the Act’s soft law approach’ to regulating modern slavery
in corporate supply chains is ‘not necessarily problematic at a theoretical
level’, she states that self-regulation present many challenges and may not be
the ‘best way to deal with business misconduct’ by itself.
This is because self-regulation can be seen as ‘simply protecting businesses from reputational damage
and for limiting their liability’, rather than encouraging businesses to take concrete
steps to combat modern slavery.
She further argues that the Act is overly narrow in its focus, with the Act
regulating slavery, servitude, forced and compulsory labour and human
trafficking to the exclusion of other exploitative practices. This suggests
that only a subset of exploitative practices are present in business conduct.
Mantouvalou contends that the corporate transparency provision in the
Act has been designed in such a manner that ‘it cannot be effective’. The
weaknesses of the provision include:
- The lack of a central list
containing the names of businesses required to report.
- The lack of a mechanism to monitor
compliance with the Act.
- The lack of a central repository for
statements that have been published by businesses.
- The lack of penalties for
non-compliance with the Act and remedies for victims of modern slavery in
corporate supply chains.
- The lack of awareness of the Act
She does however note that the Act has ‘generated discussions by companies that might not
otherwise have considered the problem of severe labour exploitation’.
criticism that the Act has received, it has nonetheless been widely recognised
that it is a step in the right direction towards increasing corporate
transparency with respect to modern slavery. However, as the UK Home Office acknowledged earlier this year, while there has been progress ‘there
is absolutely more to do’. So where to from here?
Well, a couple of
months ago, the UK Government announced that it would be launching an independent review of
the Act. As stated in the terms of reference, the aim of the review is to ‘report on the
operation and effectiveness of, and potential improvements to,’ the Act. With
respect to s 54 of the Act, a specific issue that has been noted as requiring
consideration is how to ensure compliance and increase the quality of
statements produced by commercial organisations. This blog aims to contribute
to the future work of the independent review by providing a quick overview of
the key critiques raised against the Act. Furthermore, it is essential that
other countries considering the introduction of similar legislation take
careful stock of the important lessons learned from the UK experiment to design
more efficient modern slavery legislations, but that will be the subject of our