Modern Slavery and Human Trafficking reporting: the risks of modern slavery in maritime supply chains

According to the International Labour Organisation (ILO), at any given time an estimated 40.3 million people globally are in modern slavery, which includes 24.9 million in forced labour. The global shipping industry has been identified as being particularly susceptible to the risk of modern slavery given seafarers are often from nations with human rights, labour rights and corruption challenges. The fragmentation of regulatory oversight among flag states, and practical limitations on effective enforcement of basic conditions on board vessels, exacerbate the problem.

In the UK, the Modern Slavery Act requires companies to report publicly on the steps they are taking to combat slavery and human trafficking in their operations and supply chains. In Australia, the Commonwealth Government has announced its intention to introduce a comparable reporting requirement that may go further. In Hong Kong, legislators have indicated a similar intention and a draft Bill is under consideration.

The UK Modern Slavery Act also applies to foreign companies that conduct business in the UK (see our comparative analysis on the law reform in the region here).  The effect of this reporting requirement is that companies will need to examine their supply chains to identify whether there is a risk of modern slavery occurring, before they can report on the steps they are undertaking to combat modern slavery. Companies subject to a reporting obligation, whose supply chains include maritime transport, will need to address that area of risk when reporting. Even where domestic law lacks a reporting requirement, companies operating internationally may need to take action.

At its broadest, the term modern slavery' incorporates situations of exploitation where a person cannot refuse or leave work because of threats, violence, coercion, abuse of power or deception. It includes slavery, servitude, forced labour, debt bondage, and deceptive recruiting for labour or services.

In the UK, companies with UK operations and a turnover of more than £36 million annually are required by section 54 of the Modern Slavery Act 2015 to report on the steps they are taking to combat slavery and human trafficking in their own operations and their supply chains. While it is possible to report that “no steps have been taken”, the UK Government guidance strongly encourages companies to be transparent and include in their statements the following:

• the organisation’s structure, its business and its supply chains;
• its policies in relation to slavery and human trafficking;
• its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
• 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;
• 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; and
• the training and capacity building about slavery and human trafficking available to its staff.

Companies are required to publish their statement on their website.

There is no modern slavery legislation currently in force in Australia. However, the Government has announced that it intends to introduce a Modern Slavery Bill in the first half of 2018. Based on the Parliamentary Inquiry report tabled (see our article here) it is anticipated that an Australian reporting requirement will be broadly similar to that required by the UK Act, but with some important differences. In short, organisations with an annual turnover of at least AUD50m up to AUD100m (the exact amounts are yet to be announced) are likely to be required to report against mandatory criteria, and there is likely to be a central, Government-sponsored public repository of published modern slavery reports.

Broad reporting requirements continue a growing trend for companies involved in the shipping industry to be subject to public scrutiny. The independent organisation for seafarer’s rights, the International Transport Workers’ Federation (ITF), has regularly expressed concern at charterers’ levels of due diligence concerning the working conditions aboard ships they charter. Government enquiries and even the law reports, periodically record examples of practices having attributes of slavery, including withholding crew pay, or even crew starvation.¹ A 2012 inquiry by the New Zealand Government found a high incidence of human rights and labour law violations by foreign flagged chartered vessels operating in New Zealand’s EEZ and noted instances where local companies were required to compensate unpaid workers. Other relevant recent examples include:

• In June 2017, the general cargo ship Tahsin was detained by the Maritime and Coastguard Agency in the UK Port of Sharpness in Gloucestershire. Reportedly according to an ITF inspector, crew members stated they were forced to work in conditions which included the denial of clean drinking water (resorting to drinking sea water), being provided with out of date food, and the failure of the shipowner to pay seafarers’ wages.
• In March 2018, the New Zealand Supreme Court allowed a group of Indonesian seafarers compensation for their unpaid wages, from the sale of a Korean flagged sister vessel forfeited to the New Zealand Crown for offences against the Fisheries Act 1996 (NZ).²

Legislative responses will increasingly harness the power of publicly accessible information (such as central repositories containing all published modern slavery statements). In future, such sources may feature in media coverage or prompt questions from shareholders or other stakeholders.

Long and complex supply chains increase the risk of links with some form of labour standards risk. Companies that are already reporting under the UK’s Modern Slavery Act will have taken steps to investigate their manning agencies, repair yards, bunker suppliers, providores, port agencies and update the questionnaires they use in charter chains. Suppliers may not themselves be required to report under any legislation, but are increasingly likely to be responding to customers who must report. Accordingly many businesses - regardless of where they are based - will sooner or later find themselves on a trajectory towards reporting as a result of the introduction of laws in the UK, EU or Australia. Steps in preparation for meeting reporting requirements (or indirectly, the expectations of customers and counterparties for their reporting) include:

1. Mapping the organisation’s structure, businesses and supply chains.
2. Formulating policies in relation to modern slavery – this will involve collating current policies, identifying gaps, adapting existing policies and formulating new policies, as needed.
3. Carrying out a risk assessment – identifying those parts of the business operations and supply chains where there is a risk of modern slavery taking place. Due diligence for owners should include vetting managers, agents, officers and, in the case of time or voyage charterers, their counterparty ship owners.
4. Assessing and managing identified risks – this may include carrying out further due diligence in the entity’s operations and supply chains and reviewing and adapting contract terms and codes of conduct with suppliers.
5. Considering and establishing processes and KPIs to monitor the effectiveness of the steps taken to ensure that modern slavery is not taking place in the business or supply chains.
6. Carrying out remedial steps where modern slavery is identified.
7. Developing training for staff on modern slavery risks and impacts.

The burden of increased regulation may also create competitive advantage for compliant operators in some trades and markets. On the whole, history suggests that the pace of change will be uneven and slow. Nevertheless, it is clear that the power of public scrutiny has already spurred the relatively rapid rise of modern slavery, as a business risk for the shipping industry.

Norton Rose Fulbright has experience globally assisting clients with modern slavery risk management and reporting, as well as broader business and human rights advice and worked closely with the Joint Standing Committee on Foreign Affairs, Defence and Trade Inquiry into a Modern Slavery Act, providing regular pro bono assistance and participating in the public hearing held in Sydney on 23 June 2017. Click here to download the submission. Norton Rose Fulbright also has been actively participating in the Attorney-General’s Department national consultation process to refine the Government’s proposed Modern Slavery in Supply Chains Reporting model.

Norton Rose Fulbright is currently collaborating with BIICL on a further research project focusing on human rights issues in supply chains which will seek to provide recommendations to companies, including those subject to reporting obligations under modern slavery legislation. Please contact Abigail McGregor, JP Wood or Greg Vickery to discuss further how modern slavery legislation may impact on your business and ways to manage your supply chain risks.