Beyond Trafficking and Slavery

Supply chains roundtable: Nick Grono

Nick Grono
3 September 2016
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Question 3 – how can we promote business accountability for labour standards in supply chains?

The ILO estimates that the annual profits from ‘forced labour’ amount to $150 billion per year. Much of this exploitation takes place in corporate supply chains.

Of course, although while numbers in this space must be treated with caution, we do know that forced labour is often highly profitable for those who perpetrate it. It allows businesses or small-scale employers to illicitly minimise their labour inputs – usually the largest component of their operating costs – and hence to minimise the cost of producing goods and services. This, in turn, maximises profits. It also enables otherwise uneconomic businesses to remain financially viable, albeit at a massive social cost.

We’ve seen this starkly in the Thai seafood industry over the last year or so. Decades of overfishing in the Gulf of Thailand have severely depleted fish stocks, with the result that fishing boats can only remain economically viable if owners coerce their migrant crews to work for minimal or no pay.

Yet, despite the global prevalence of forced labour, there are almost no prosecutions for this crime. The combination of the economic benefits that accrue to perpetrators and this lack of prosecutions means there is a rational (albeit illegal and immoral) economic model underlying the use of forced labour by some employers in supply chains.

One way to challenge this and to promote business accountability would be to change that economic calculus. Strategic litigation is a means that we could use to do this. Successful litigation can impose significant financial costs on the corporations at the top of the supply chain, which are the ultimate beneficiaries of forced labour, and it could serve as a warning to others. The recent Signal case in the US resulted in a large US engineering company being ordered to pay $14 million to five Indian workers who were forced to work in its camps. Facing hundreds more potential claimants, the company went into bankruptcy.

Greater investment in strategic litigation against corporations with forced labour in their supply chains would undermine their illicit economic model, challenge their current impunity, and serve as a deterrent to others.

Question 4 – in the absence of extra-territorial legislation to ensure and enforce business accountability, how can workers best be protected in international supply chains?

There is existing legislation that can be used to protect workers in international supply chains, though it is far from comprehensive in its reach.

Firstly, the US Trafficking Victims Protection Act of 2000 has explicit extraterritorial reach as a result of a Reauthorisation Act in 2008. It means that US-based companies can be prosecuted or sued for damages in US courts for severe exploitative practices in their operations in other countries. 

Secondly, in the UK, tort law can be used to sue companies for forced labour if they have a sufficient UK presence and other requirements for tort liability are met, even when the exploitation takes place overseas. In one of the clearest cases of companies being held to account for actions abroad, in 2014 a £55 million settlement was reached between the Shell oil company and residents of a fishing community in the Niger Delta region of Nigeria, which had been devastated following two oil spills from a Shell pipeline. The British courts have also ruled that a parent company can be held liable for the failure of a subsidiary company to ensure the health and safety of employees. Thus, on the basis of UK tort law, UK companies could potentially be sued for negligence or unsafe workplaces, if they directly lead to forced labour.

Thirdly, anti-corruption legislation can also be used to tackle things like slavery and human trafficking. The reason for this is that transnational trafficking into forced or bonded labour almost invariably involves bribes being paid to officials somewhere along the route. So when Nepali workers are ‘trafficked’ to work on World Cup construction sites in Qatar, bribes are paid to get the necessary permits and authorisations to leave Nepal and obtain work visas in Qatar. US and UK companies paying bribes in these circumstances could be criminally prosecuted under the Foreign Corrupt Practices Act and the Bribery Act respectively. And, given that senior management can be held directly responsibly for corrupt conduct by their subordinates, this provides a strong incentive for corporate leaders to stamp out trafficking in their recruitment efforts.

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