Friday Live Workshop Modern Slavery – what lawyers need to know

The Modern Slavery Act 2015 (MSA) introduced victim support, a basis for prosecuting traffickers and the provision of transparency in supply chains. Given the widespread implication of the legislation for contracts and procurement, it’s vital for lawyers to understand what compliance with MSA means for businesses.

Sharon Benning-Prince and Dr. Mike Emberson delivered an insightful and moving workshop on the MSA, highlighting the extent of the problem and blight on peoples’ lives. They also outlined the regulatory regime, the compliance requirements for businesses and discussed some of the limitations.

Modern day slavery – the facts

Despite the abolition of slavery nearly 200 years ago, its modern incarnation is a more difficult matter to eradicate. Modern slavery is much less visible and more pervasive as it is threaded and embedded throughout the economies of many states.

It is estimated that some 45.8 million people are currently subject to some form of slavery in the world. It is the fastest growing criminal industry, and the second most profitable criminal industry to drugs. Equally as shocking as these statistics is the fact that three-quarters of UK companies believe there’s a likelihood of modern slavery in their own supply chains.

The common areas within business where this can arise are:

  • Production sites, Distribution centres and Co-packing operations
  • Contractors – catering, cleaning, security
  • Supply chains

The sectors that are particularly at risk are:

  • Agriculture and food processing
  • Garment and textile industry
  • Construction
  • Hi-tech and IT

The MSA regulatory regime

The MSA 2015 applies to businesses (public and private companies and partnerships), with a global turnover of over £36million, which carry on a business or part of a business in the UK. The obligation commenced for all relevant businesses that had a financial year ending on or after 31 March 2016 and the modern slavery statement must be made as soon as reasonably practicable after the end of the relevant financial year.

Such businesses are required to publish a disclosure statement each financial year that contains the following:

  • Explains the steps taken by a business during the financial year to ensure that slavery and human trafficking is not happening either within the business or in its supply chain; or
  • Explain that the business has taken no such steps.
  • The statement should be published on the business’ website with a prominent link on the homepage.
  • The statement should be approved by the board of directors and signed by a director, or approved by the members and signed by a member in the case of a limited liability partnership.

There is no prescribed form for the disclosure statement in the MSA and statements vary enormously in the detail they provide. There is guidance from the Home Office, which includes the following information:

  • Organisational structure, its business and its supply chains
  • Policies in relation to slavery and human trafficking
  • Due diligence processes in relations to slavery and human trafficking in its business and supply chains
  • The parts of its business and supply chain where there is a risk of slavery and human Trafficking taking place and steps it has taken to assess and manage the risk
  • Effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measures against such performance indicators as it considers appropriate
  • The training capacity about slavery and human trafficking available to its staff.
  • The statement must be approved at board level, signed by a director.

It must be noted that even if businesses do not fall within the £36million threshold themselves, they may be asked by customers or third parties to comply with their code of practice and MSA declaratory statements. In this way, the obligations under the MSA will cascade down to smaller businesses that will need to adhere to the transparency provisions.

Thus the regulatory regime is aiming to ‘bite twice, and the need for due diligence, policies and anti-slavery provisions are requirements for all those in the network of supply chain networks.

Enforcement

Curiously, the MSA does not provide for a central repository or monitoring of the disclosure statements and it falls to The Business & Human Rights Resource Centre to maintain a register with the statements from around 1,800 companies to date. It produced a report on the first FTSE 100 companies to report here concluding that  there was a lack of detailed information on the structure of supply chains, information about specific risks or instances of modern slavery in the supply chain.

Criticisms of the regime are that there are no financial penalties in producing ‘tick box’ statements and, more fundamentally, the Government’s approach to enforcement. There is no penalty for non-compliance: the aim is that the threat of reputational damage for non-compliance, or for weak and/or misleading statements will be the driver of the aims of the MSA. Notwithstanding that the Act contains no financial penalties for non-compliance there was a discussion around civil proceedings where costs and compensation could be awarded to litigants. Indeed, this has already happened once and was a combined seven figure sum, and the courts have the power to freeze bank accounts/seize assets of a company in this regard although this has not yet been invoked.  The effectiveness of the legislation will depend on the scrutiny by others such as shareholders, NGOs and investors.

 It is too soon to evaluate how effective the MSA is in meeting its aims. The wide-ranging impact and scope for businesses seems to be at odds with the absence of a formal monitoring process of compliance and enforcement.

The Business & Human Rights Resource Centre currently maintains a public record of companies’ statements under the UK Modern Slavery Act https://business-humanrights.org/en/uk-modern-slavery-act-registry and this is a valuable resource of examples. It is important for lawyers to understand where the businesses they advise stand on this matter and have procedures in place to collect the data to produce the disclosure statement.

 

Sharon Benning- Prince is an Obelisk consultant and specialist in this area and Trustee of the Medaille Trust, the UK anti-trafficking charity.

 Dr. Mike Emberson has been involved in ant-trafficking work since 2003 and has worked for the Salvation Army, Migrant Help and Genesis Consultancy. He is the CEO of the Medaille Trust http://www.medaille-trust.org.uk/