Chris Cartmell and Elizabeth Mason
The UK’s Modern Slavery Act 2015 (“MSA”) was introduced in March 2015, heralded as landmark legislation with a world leading provision to encourage businesses to take action to eliminate modern slavery in their businesses and supply chains. Whilst businesses caught by the legislation have been publishing slavery and human trafficking statements in compliance with section 54 of the MSA, question marks have been raised overthe level of impact the MSA can have on corporate behaviour given its limited enforcement powers. We consider these limitations and engagement on human rights issues by the financial services sector below.
The MSA: an introduction
When launched in 2015, the MSA was widely exclaimedby Theresa May as the first legislation of its kind in Europe and one of the first in the world to specifically address slavery and trafficking. The legislation bolstered the protection and support for victims and established the UK’s first Independent Anti-Slavery Commissioner (“IASC”), and introduced a transparency in supply chains provision to increase supply chain accountability for businesses. All that the MSA currently requires of obligated businesses in the financial services sector is a statement (pursuant to section 54 of the MSA) which details what steps (if any) the business is taking towards eradicating modern slavery and human trafficking in its business and supply chains (“Statement”). Currently the only enforcement mechanism is an injunction (by application of the Secretary of State) forcing the business to make the Statement.
Does the MSA have sufficient enforcement powers?
The government claims to be seeing results from its introduction of the MSA. This is the case with individual prosecutions.The Home Secretary announced there were 113 convictions under the MSA in 2015. In contrast, there have been no reported cases of a business being issued with an injunction for failure to publish the requisite Statement. The lack of alternative corporate enforcement powers has fuelled the criticism levelled at the limitations of the MSA and the much hyped transparency provision.
The UK’s Joint Select Committee on Human Rights reported in April 2017 on some of shortcomings of the MSA, namely: the weak reporting requirements, the absence of a central repository listing entities required to publish the Statement and the limited scope of the MSA. The Committee concluded that the government should facilitate the passage of legislation that includes an amendment to the Public Contracts Regulation 2015 excluding obligated companies from participating in public procurement procedures where they have failed to produce the Statement. Further, the Committee acknowledged that the absence of a central list of companies required to make the Statement and the weak reporting requirements on transparency in supply chains makes it very difficult to hold companies to account. Interestingly, the Committee recommended that the UK government bring forward legislative proposals making reporting on due diligence for all other relevant human rights (not just the prohibition of modern slavery) compulsory for large businesses, together with a monitoring mechanism and an enforcement procedure.
Some commentators go further and suggest that the MSA needs to be reformed to provide for a strict liability offence and penalty provisions for corporates similar to those in the Bribery Act 2010 (“UK BA”). Section 7 of the UKBA provides that corporates may be found criminally liable for failing to prevent corruption within the business and associated parties; the only defence being that the business can evidence it has “adequate procedures” in place to prevent corruption.If such legislative change were effected, a company could be found criminally liable for slavery and human trafficking in its business and supply chains (and possibly human rights abuses more broadly).
The latest government initiative to address exploitation and slavery in the labour market, including transparency in supply chains, is the government’s appointment of Professor Sir David Metcalf (Director of Labour Market Enforcement). Sir Metcalf will be working alongside the IASC and other enforcement bodies in developing a strategy to tackle exploitation in the workplace. An introductory strategy report published by Sir Metcalf in July 2017 outlines his role and provides an overview of the areas on which Sir Metcalf intends to consult in the coming months, including transparency in supply chains. The full strategy will be delivered in spring 2018 and is expected to strengthen the enforcement activity of the IASCas well as the Gangmasters and Labour Abuse Authority in achieving supply chain transparency.
Sir Metcalf’s appointment (in addition to the government’s modern slavery taskforce chaired by the Prime Minister)is a positive development for the UK’s modern slavery agenda, however, it may not facilitate the necessary legislative reforms required to address corporate accountability on this issue. Further, whilst the financial services sector has engaged with the Joint Money Laundering Intelligence Taskforce and the Thun Group of Banks in understanding its role in addressing human rights issues (including human trafficking and modern slavery), a consensus is yet to be reached on the specifics of the sector’s responsibility in this area. Legislative reform in line with the UK BA and the Joint Select Committee’s proposed reforms to due diligence reporting on human rights would clarify where the responsibility lies.
In conclusion, the nature and intent of the MSA is to eliminate modern slavery. Whilst corporates have generally complied with their limited obligations under the MSA, legislative reform is required to encourage the changes the UK government wants to see in businesses and their supply chains. The MSA in its current form has some shortcomings, particularly in respect of corporate liability, as highlighted by the Joint Select Committee this year. Despite modern slavery being fixed on the UK government’s agenda and its recent initiatives, there is still some work to do. Whether the solution is a new corporate criminal liability offence of “failing to prevent” modern slavery and human trafficking or a less onerous provision remains to be seen, particularly in an uncertain post-Brexit environment.
Chris Cartmell (Senior Solicitor) and Elizabeth Mason (Senior Associate) are part of the Regulatory and Commercial Disputes team at PwC. Chris leads PwC’s modern slavery legal offering at PwC as part of the firm’s Corporate Criminal and Regulatory Advisory practice. Chris and Elizabeth regularly advise clients on compliance with the Modern Slavery Act 2015 as well as other criminal and regulatory regimes and associated disputes.