The current law
In 2015, the UK became the first country in the world to require businesses to report on their progress in identifying and addressing modern slavery risks in their operations and supply chains.
Section 54 of the MSA imposes an obligation on commercial organisations that carry on business in the UK and have a total turnover of £36 million or more to publish an annual statement setting out the steps that have been taken to ensure that modern slavery and human trafficking are not taking place in their businesses and supply chains.
Statements must be approved by the company board and signed by a director (or equivalent), and be made available on the home page of the company’s website (as well as, on a voluntary basis, on a central modern slavery statement registry). If a business is unable to publish a modern slavery and human trafficking statement, that business must produce a statement explaining that it has taken no steps to produce a modern slavery and human trafficking statement.
At present, while the Secretary of State may enforce a duty to prepare a modern slavery and human trafficking statement in civil proceedings by way of an injunction, and a company failing to comply with an injunction may then be liable to an unlimited fine if held in contempt of court, there is no criminal sanction for breaching section 54 of the MSA.
The proposed amendments
The Amendment Bill proposes the following.
1. Introducing a criminal offence for supply of a false slavery and human trafficking statement
The Amendment Bill proposes a new section 54ZA, whereby a person (that is, a director, member of an LLP, or a partner) who is responsible for a slavery and human trafficking statement commits an offence if:
i. Information in the statement is materially false or incomplete; and
ii. The person either knows it is false or is reckless as to whether it is.
The proposed offence under section 54ZA would be punishable with imprisonment and/or a fine of 4 per cent of the relevant commercial organisation’s global turnover, subject to a cap of £20 million.
A person will have a defence to the proposed new offence under section 54ZA if that person:
i. Takes all reasonable steps to ensure that the slavery and human trafficking statement is corrected; and
ii. Informs the Independent Anti-slavery Commissioner as soon as practicable after becoming aware that it contains information that is materially false or incomplete.
2. Introducing a criminal offence for continuing to source from supply chain participants where the Independent Anti-slavery Commissioner has issued a formal warning.
Under a new section 54ZB, the Amendment Bill creates a new offence for commercial organisations where they continue to source from suppliers or sub-suppliers that fail to demonstrate minimum standards of transparency after having been issued with a formal warning by the Independent Anti-slavery Commissioner under a new section 41(3)(g).
The proposed offence under section 54ZB is punishable with a fine of 4 per cent of the relevant commercial organisation’s global turnover, subject to a cap of £20 million.
3. Demanding more from companies in terms of transparency.
The Amendment Bill proposes increases in the transparency standards that companies are expected to meet. By way of a new section 41(5A), the Amendment Bill provides that companies should:
i. Publish and verify information about the country of origin of sourcing inputs in its supply chain;
ii. Arrange for credible external inspections, external audits, and unannounced external spot-checks; and
iii. Report on the use of employment agents acting on behalf of an overseas government.
We have previously commented on the UK Government’s consultation to strengthen section 54 of the MSA, which concluded in September 2020. At that time, the UK Government committed to bring in changes to the legislation when parliamentary time allows. So far, the only proposed reform to be implemented is the introduction of the centralised registry for the publication of modern slavery statements, as mentioned above.
The Amendment Bill goes further than the amendments which the UK Government has previously committed to and, as a Private Members’ Bill, it does not have Government support. It therefore remains to be seen how far the proposals will go and whether they eventually become law. It could be subsumed within the UK Government’s existing efforts. Notwithstanding that uncertainty, this is another clear indication of a growing desire among UK legislators to strengthen obligations on businesses to prevent modern slavery and human trafficking.
Client Alert 2021-181