Modern Slavery & the supply chain

8 March 2017

The fight against modern slavery is an urgent issue in times of globalised trade and international supply chains. This is reflected in actions by both legislators and companies that are mindful of their corporate social responsibility.  With increasing frequency, businesses are asked by their customers to disclose details of their supply chain as well as the measures they have taken to prevent modern slavery.

At the legislative level, the Modern Slavery Act 2015 (MSA 2015) was adopted in the United Kingdom. Its application and provisions are discussed below.  The law applies to any company operating in the United Kingdom with a minimum global turnover of £36m.  And it should be noted that the law applies irrespective of whether there is even the slightest suspicion of modern slavery in a company’s business or supply chain.

So what is modern slavery?  In English law, it is defined as a situation in which “a person holds another person in slavery” or “requires another person to perform forced or compulsory labour”. Modern slavery can manifest itself in many forms.  Child labour and inhuman working conditions can, for example, fulfil the definition. The law also applies to human trafficking in all forms.

The MSA 2015 applies to an organisation if the following conditions are met:

  • The organisation is set up as a body corporate. It is for these purposes irrelevant whether the entity in question is a corporation or not, so limited partnerships or LLPs are also caught.  It is also irrelevant whether the body corporate is registered in the United Kingdom.  Accordingly, foreign body corporates are affected as well.
  • The organisation supplies goods or services in the United Kingdom, whether directly or through a subsidiary.
  • Furthermore, the organisation must have a worldwide aggregate turnover of at least £36m. This relates to the turnover of the organisation as a whole (including all its subsidiaries) irrespective of where they do business.

The MSA 2015 requires organisations that are affected to compile and publish a “slavery and human trafficking statement” (MSA Statement) for each financial year in which the above criteria apply. In this statement the organisation should describe the steps it has taken to recognise and prevent modern slavery in its business and supply chains.  The MSA Statement can provide information about:

  • 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 are not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate; and
  • the training about slavery and human trafficking available to its staff.

Alternatively, an organisation may state in its MSA Statement that it has taken no such steps. It is, however, unlikely that many will choose this option because of the possible significant impact on a business’s reputation.

The MSA Statement of a parent company has to include any subsidiary that is part of the parent company’s business or part of its supply chain. A subsidiary, to which the MSA 2015 criteria apply, must also publish an MSA Statement. If both the parent and the subsidiary are affected by the Act, they may publish a single MSA Statement as long as it also covers the measures taken by both entities.

Under the law, MSA Statements must be published by the relevant organisations with regard to any financial year ending on or after 31 March 2016. Thus, all companies to which the above criteria apply will soon be affected. There is no statutory requirement as to the timing of the publication of the statement. It should be made “as soon as possible”.

The MSA Statement must be approved by the governing body of the organisation (for example, the board of directors) and signed by one of the body’s members.  It has to be published on the organisation’s website.

In case of non-compliance, the authorities may in theory force the publication of an MSA Statement by seeking an injunction. However, the UK Government has expressed the hope that organisations will comply voluntarily, given the reputational risks at play.

We will be happy to answer any questions you may have regarding the requirements of the MSA 2015 and the preparation of an MSA Statement.

Alex Kaufmann Author
Alex Kaufmann
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