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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Global | Publication | July 2018
According to the International Labour Organisation (ILO), an estimated 50 million people globally were living in modern slavery on any given day in 2021. The maritime shipping industry remains an area of high modern slavery risk given the vulnerabilities of seafarers, recognised as among the most essential yet vulnerable working populations in our global economy. These vulnerabilities are exacerbated by the fragmentation of regulatory oversight among flag states, limited visibility of conditions on board, complex supplier arrangements and practical limitations on effective enforcement of working standards. In recent years the human rights impacts of the shipping industry on workers has come under scrutiny, shining a spotlight on the exploitative labour practices at sea, prolonged periods of work, power imbalances and substandard living conditions on board vessels.
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:
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:
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:
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.
House of Representatives Standing Committee on Transport, Communications and Infrastructure, Parliament of Australia Ships of Shame: Inquiry into Ship Safety (1992) 36 – 37 (‘Ships of Shame Report’).
Rudi Hartono and Ors v Ministry for Primary Industries and Anor [2018] NZSC 17.
Rudi Hartono and Ors v Ministry for Primary Industries and Anor [2018] NZSC 17.
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