Government Guidance: International Law

ASIA

MODERN SLAVERY LAW

Hong Kong, China

A movement by the Slave Free Campaign has spurred anti-human trafficking action in the Hong Kong business world. In an effort to work in tandem with businesses, not against them, the Slave Free Campaign according to founder Julie Lim, “…aims to integrate human rights into business practices in order to eliminate labor trafficking in global supply chains.” The assumption by Lim is that most retail brands don’t understand what is happening in their factories operating in remote areas by middlemen. In auxiliary to the Slave Free Campaigns movement, Judge Zervos of the High Court of Hong Kong, recently made judgement highlighting the government’s failure to implement a comprehensive system of legislation and training covering slavery in all its forms. Both the Slave Free Campaign and High Court’s actions are ancillary to the increasing criticism from outside Hong Kong for a lack of action against human trafficking. The U.S. Trafficking in Persons Report downgraded Hong Kong from Tier 2 to Tier 2 Watch List last year, and the United Nations CESCR Humans Rights Committee has persistently reported the high level of trafficking in Hong Kong, China. All of these efforts have justified a need for change in Hong Kong’s policy against human-trafficking.

Aside from Judge Zervos’s condemnation of serious flaws in the legal system against trafficking, the Hong Kong Security Bureau is adamant that the legal framework in place is “solid and proven” even though the criminal law only addresses human trafficking for the purpose of prostitution, not forced labor or domestic servitude, the most prevalent concerns in Hong Kong. In 2008, neighboring Macau approved an anti-trafficking law and mainland China has a National Action Plan to Combat Human Trafficking for 2013-2020, but Hong Kong has yet to introduce a measure to combat trafficking in whole.

In recent proposed legislative changes to the Employment Ordinance (Cap. 57), the administration has proposed an amended penalty against debt bondage employment or bonded labor, the cyclic process of people giving themselves to slavery-like working conditions against a loan or inherited debt. The practice of overcharging job seekers in terms of commissions or referral fees by intermediary or employment agencies will be amended by the Legislative Council Bills Committee on Employment (Amendment) (No.2) Bill 2017. Formerly, employees subjugating employees to debt bondage were susceptible to a fine of only HK$50,000. With changes, the fine will increase to HK$350,000 and three years’ imprisonment.

The implications under the new Employment (Amendment) (No.2) Bill 2017 legislation are unclear if larger corporations will be responsible for hiring employees from middlemen that hire people using excessive commissions or referral fees, essentially debt bondage.

AUSTRALIA

MODERN SLAVERY IN SUPPLY CHAINS REPORTING REQUIREMENT

Australian Government

Inspired by the Britain’s landmark anti-slavery law, the UK Modern Slavery Act (MSA), Australia is likely to implement a similar business global supply chain reporting requirement in 2018. In response to Australia’s National Action Plan to Combat Human Trafficking and Slavery 2015-19, a National Roundtable consisting of experts from a Supply Chains Working Group (business, civil society and government agencies) recommended a modern slavery supply chain reporting requirement. Thus, the Modern Slavery in Supply Chains Reporting Requirement document was released for public consultation early last year. The government’s proposal for an anti-slavery law known as The Australian Modern Slavery Act has been modeled after UK’s Modern Slavery Act (which was based on California’s Transparency in Supply Chains Act 2010), and is seeking a balance between required transparency and limiting increased bureaucratic burdens on businesses. With annual imports equaling $192 billion, Australia’s Modern Slavery Act is targeting offshore slavery and exploitation in their import supply chain.

As outlined by the reporting requirement proposal, the definition of supply chains extends beyond first tier suppliers according to the Australian Government. In result, businesses with their headquarters or operations in Australia AND with annual total revenue currently set at AUS100 million will have to publish an annual disclosure statement on anti-slavery due diligence. Unlike the optional reporting criteria set by the UK’s MSA, Australia is requiring all qualifying entities report specific four criteria in their disclosure statement. The requirement is meant to ensure that the content of the statements is consistent and more easily comparable. The businesses’ disclosure statements are subject to approval by a board-level entity, thus promoting corporate governance and liability at senior levels.

In addition, entities will be required to publish Modern Slavery Statements on their webpages, but will not include punitive penalties for non-compliance. As in the CaliforniaTransparency in Supply Chains Act of 2010, public criticism is the primary driver for compliance. The Australian Government plans to provide a searchable database that will include disclosure statements and compliance reporting but not before providing clear and detailed guidance and awareness materials for effected businesses. In general, the Australian Government encourages all businesses to maintain a disclosure statement and engage in a corporate training program against trafficking in their supply chains.

DISCLOSURE STATEMENT

Criteria

ONE

Provide entity’s structure, operations and supply chains

TWO

Identify modern slavery risks present in the entity’s operations and supply chains

THREE

Identify the entity’s policies and process to address modern slavery in its operations and supply chains and their effectiveness (including codes of conduct, supplier contract terms and training for staff)

FOUR

Identify the entity’s due diligence processes relating to modern slavery in its operations and supply chains and their effectiveness

EUROPE

LAWFUL MONITORING OF EMPLOYEES

European Court of Human Rights

The European Court of Human Rights, an international treaty under which the Member States of the Council of Europe promise to secure fundamental civil and political rights to everyone in their jurisdiction, has deemed companies can only monitor their employees’ email if they are notified in advance. The convergence of technology, privacy, and worker rights has been evolving but without specific legislation or case law to offer guidance. In this recent decision, the Grand Chamber of the European Court of Human Rights has gone against a previous ruling by the First Chamber which allowed companies widespread powers to monitor workplace communications – similar to existing law in the United States. With the current case law, employers will not be permitted to have a general monitoring policy, instead the policy will need to be detailed, outlining why, how, and where employees may be monitored and explaining any information gathered through monitoring may be used.

European Court of Human Rights Treaty States

UNITED KINGDOM

CORPORATE LIABILITY AGAINST HUMAN RIGHTS ABUSE

Following the latest report on human rights and business by the UK Parliament’s Joint Committee on Human Rights and Business, the government has been urged to take stronger enforcement action to prevent business-related human rights abuses. As the first to adopt a National Action Plan on Business and Human Rights – an effort to implement recommendations of the United Nations Guiding Principles on Business and Human Rights – the UK Government is contemplating the report’s recommendations for stricter requirements on supply chain transparency and imposing a duty on all companies to prevent human rights abuses and creating criminal offense for failure to prevent human rights abuses.

In tandem with increased corporate liability and stemming from the UN Guiding Principles on Business and Human Rights’ framework, these ongoing negotiations for an international binding treaty on business and human rights continue in Geneva. In the current working paper, several possible elements are under debate, including:

• An obligation on States to introduce laws requiring businesses to respect human rights and to take measures to ban companies from bidding for public contracts if they fail to respect human rights.

• An obligation on States to introduce laws requiring businesses to conduct human rights due diligence to prevent human rights violations.

• An obligation on States to strengthen administrative and civil penalties for business-related human rights violations, including by providing for corporate criminal liability and prosecution of corporate officers.

• The establishment of a specialist international court or other international tribunals to prosecute transnational corporations which, according to the working paper, are said to be able to exploit the limits of territorial jurisdiction in order escape prosecution.

It is doubtful the UN will develop a new legal instrument to impose obligations under the proposed binding treaty. It is much more likely that the UK will implement legislation imposing a corporate duty to prevent human rights abuses, yet a timeline has yet to be determined.

FRANCE

DUTY OF VILIGANCE LAW

In February 2017, the French National Assembly adopted a law establishing a “duty of vigilance” for large multinational firms carrying all or part of their activity in France. The legislation, minus the proposed civil penalties for companies, was upheld in March 2017 by the Constitutional Council and shortly thereafter became law.

Businesses considered large limited liability companies that are headquartered in France with at least 5,000 employees worldwide (including through direct and indirect subsidiaries); or Foreign companies headquartered outside France, with French subsidiaries with at least 10,000 employees worldwide (including through direct and indirect subsidiaries) are subject to the new legislation. A company is considered to be a subsidiary if another company owns more than 50% of its capital, thus multinationals that own more than 50% of a company operating in France are covered by the law.

Differing from California’s Transparency in Supply Chains Act of 2010 and the UK’s Modern Slavery Act, companies are required to not only report but implement a vigilance plan and publicize their actions as part of their annual reports under the Duty of Vigilance Law. At a minimum due diligence plans are expected to include the following components:

• Procedures to identify and analyze the risks of human rights violation or environmental harms in connection with the company’s operations.

• Procedures to regularly assess risks associated with subsidiaries, sub-contractors, and suppliers with which the company has a commercial relationship.

• Actions to mitigate identified risks or prevent the most serious violations.

• Mechanisms to alert the company to risks and collect signals of potential or actual risk.

• Mechanisms to assess measures that have been implemented as part of the company’s plan and their effectiveness.

Although the Constitutional Council revoked any civil penalty provisions, companies could be subject to liability if individuals are harmed by a company’s failure to establish or implement a plan and seek damages for corporate negligence.

SWITZERLAND

SWISS RESPONSIBLE BUSINESS INITIATIVE

Based on UN Guiding Principles responsibilities, the Swiss Responsible Business Initiative (RBI) is seeking an amendment to the Swiss Federal Constitution that would require companies to conduct mandatory human rights due diligence. Although the federal council rejected a similar grass roots initiative in early 2017, citing the initiative was a deterrent of multinational companies headquartering in the country. Originally, the obligation of due diligence in addition to periodic reports were extended to all business affiliations and all companies controlled abroad, and liability penalties exceeded other countries’ legislations – combined both issues would potentially endanger Switzerland’s economic competiveness.

In another attempt, the RBI has adapted a new bill. The law is meant to regulate the obligations of companies that have their registered office, central administration, or principal place of business in Switzerland. Under the amendment, business will be held accountable based on three principles:

• Human Rights Due Diligence should be mandatory for all large companies and SMEs operating in high-risk areas.

• There should be effective sanctions for non-compliance.

• Parent companies should be liable for serious human rights abuses committed by their subsidiaries.

The proposed bill still has several hurdles to overcome. First, it must receive support from Switzerland’s lower house of Parliament or National Council. After initial approval and commencing a full draft, a subsequent referendum can be expected late this year or early 2019.

NORTH AMERICA

CTPAT

At the Annual Northeast Cargo Symposium held by the Coalition of New England Companies for Trade (CONECT) in Providence, R.I. last November, the Customs Trade Partnership Against Terrorism or CTPAT announced it is making more than just aesthetic changes to the program. In addition to a new logo, a red, white, and blue globe made of interlocking pieces, and changing the spelling, with no hyphen in its name or acronym, the program will be implementing a new “best practices” framework. The framework is still in development but will include five elemental changes:

• Senior management support, including the participating organization’s culture and management philosophy regarding security and compliance

• Innovative application of technology, as appropriate for the company’s size and resources

• Documented processes, including consistency and continuity over time

• Checks, balances, and auditing, including such areas as accountability and testing

• Evidence of implementation; that is, proof that plans have been put into practice and are being maintained

The CTPAT was established in 2001 to prevent terrorists from carrying out attacks on the United States via international networks. Program participation is a voluntary public-private partnership with 11,000-plus members, including importers, exporters, surface carriers, customs brokers, marine terminal operators, freight consolidators, and other entities. About one-third of CTPAT members are small and medium-sized companies with 70 employees or less.

Countering America’s Adversaries Through Sanctions Act (CAATSA – USA)

U.S. Customs and Border Protection (CBP) has initiated a significant communications outreach to trade stakeholders in the wake of the passage of the Countering America’s Adversaries through Sanctions Act (P.L. 115-44). That legislation contains a provision affecting the entry of merchandise with a nexus to North Korean nationals or citizens, and CBP is committed to ensuring that importers are aware of the risks associated with forced labor, their compliance responsibilities, and ways they can validate that their supply chains are free of forced labor.

Under the new law, passed on August 2, 2017, “any significant merchandise mined, produced, or manufactured wholly or in part by North Korean nationals or citizens is prohibited from entry into the United States unless CBP finds through clear and convincing evidence that the merchandise was not produced with a form of prohibited labor.” Where CBP finds such evidence of North Korean labor, CBP will deny entry, which may include seizure of the merchandise, and refer the issue to Immigration and Customs Enforcement (ICE) Homeland Security Investigations (HSI) with a request to initiate a criminal investigation for violation of U.S. law.

CBP openly welcomes allegations on forced labor at its eAllegation portal, and parties who provide original information that leads to the recovery of any penalty, fine, or forfeiture of merchandise are eligible to seek compensation under 19 U.S.C. § 1619. Compensation may be up to $250,000.

International Standards for Phytosanitary Measures (ISPMs – USA)

Late last year, U.S. Customs began issuing penalties for Wood Packing Material (WPM) violations. Non-exempt wood packaging material imported into the United States must have been treated at approved facilities at places of origin to kill harmful timber pests that may be present. The WPM must display a visible, legible, and permanent mark certifying treatment, preferably on at least 2 sides of the article. The mark must be approved under the International Plant Protection Convention (IPPC) in its International Standards of Phytosanitary Measures (ISPM 15) Regulation of wood packaging material in international trade.

As of November 1st, if any WPM from foreign origin is found to be lacking appropriate IPPC-compliant markings, or found to be infested with a timber pest, it will be considered not properly treated to kill timber pests, and in violation of the regulation. “The responsible party (importer, carrier, or bonded custodian) for the affected WPM may be issued a penalty by U.S. Customs and Border Protection (CBP) under Title 19 United States Code §1595 a(b) or under 19 USC § 1592.”

The responsible party must also adhere to the Emergency Action Notification stipulations and be responsible for any costs or charges associated with the export of the affected WPM.

Figure 1. Non-compliance markings

Figure 2. Illegible marking

Figure 3. Pest infested