Clifford Chance

The UK Government has responded to a House of Lords Select Committee report which proposes significant changes to the MSA in relation to scope, implementation and enforcement

Overview

On 16 October 2024, the House of Lords Select Committee on the MSA (Committee) published a report titled 'The Modern Slavery Act 2015: becoming world-leading again' (Report) following its inquiry into the effectiveness and impact of the MSA. The Report includes findings based on written and oral evidence provided by representatives of the academic community, law firms and consultants, advocacy organisations, governmental and local authority bodies, and some industry bodies and businesses, and took account of a roundtable session held with modern slavery survivors.

Although the MSA led the way internationally when enacted in 2015, the Report identifies areas where the UK has "fallen behind" in its approach to tackling modern slavery and human trafficking, and puts forward recommendations to"make the UK world-leading in the battle against modern slavery once again".

On 16 December 2024, the UK Government responded to the Report (Response) and indicated that many of the Report’s recommendations will be accepted in some form, although it remained light touch on the details.

Key recommendations related to supply chains

The Report sets out recommendations on how many elements of the MSA can be strengthened. We focus on the recommendations made regarding supply chains, and discuss below 3 issues of direct relevance to businesses: (1) the transparency in supply chains in s.54 of the MSA, requiring statements published by certain commercial organisations (Modern Slavery Statements) (2) calls for due diligence obligations that go beyond the transparency requirements in s.54 MSA, and (3) the introduction of import bans.

1. Transparency in supply chains

Modern Slavery Statements

According to the Report, Modern Slavery Statements are inconsistent in quality and content, and the lack of mandated content makes it difficult for companies to be held accountable for their transparency. This, the Report concludes, "obfuscates the transparency" that the MSA was intended to provide.

The Report recommends that the UK Government should:

a) Make publication of Modern Slavery Statements on its registry (which is currently voluntary) a mandatory practice;

b) Set out the required topics that each Modern Slavery Statement must cover, including a description of how the organisation has assessed the effectiveness of its actions;

c) Publish standardised and accessible guidance for publishing a Modern Slavery Statement, and increase awareness amongst all companies about supply chains; and

d) Create a summary dashboard, available online, with information including the total number of Modern Slavery Statements, by sector, and from organisations in scope, and examples of good and bad reporting by companies.

According to the Response, the Government is currently working with a wide group of stakeholders to update the s.54 statutory guidance to enable companies to produce high quality Modern Slavery statements and it plans to introduce further improvements to its registry, including the development of a public facing dashboard to provide additional data on these statements to the public, but has not yet made any commitment to amend the legislation itself, as the Report recommends.

Enforcement of S.54 MSA

The obligation to produce a Modern Slavery Statement under s.54 MSA applies to commercial organisations that fulfil the requirements set out within s.54(1) MSA (i.e. that it is a "body corporate" or a partnership which carries on business, or part of a business, in the UK and which supplies goods or services and has an annual turnover of £36 million or more). Nevertheless, the MSA does not currently carry any penalties for non-compliance, aside from empowering the Home Secretary to seek an injunction to require companies to comply with the transparency requirement (a power which has not been used to date).

The Report considered options to enhance enforcement of s.54 MSA requirements – including proposals to enforce director liability and to sanction directors for non-compliance. The Committee ultimately found that "the current approach of no enforcement" does not work and proposes that organisations failing to comply with the s.54 requirements should face "proportionate sanctions" (without proposing the form that such sanctions should take). It also recommends that the Government should clarify how responsibility for enforcement in its modern slavery strategy is divided between departments.

The Government’s Response notes that the MSA does have a means to enforce compliance, by empowering the Home Secretary to seek an injunction to require compliance with the transparency requirement (as identified above). The Response explains that the power has not been used to date due to costs to the taxpayer and the complexities in determining compliance with the current legislative framework. The Response also notes that the Government is considering how it can strengthen penalties for non-compliance and that it will set out next steps in due course.

2. Due diligence

The Report notably refers to calls in recent years from stakeholders to introduce mandatory human rights due diligence and a trend internationally of legal requirements for supply chain due diligence in the context of modern slavery (and beyond) – including in Germany, France, Norway, US, Canada, the UK and the EU. The Committee concludes that "the developments internationally on due diligence indicate that the UK has fallen behind" in terms of setting up equivalent protections. Importantly, many UK companies, which operate internationally, are already – or soon will be - obliged to meet such due diligence requirements in other jurisdictions where applicable to them, such that steps may be required to "level the playing field".

The Report recommends that the Government should introduce legislation requiring in-scope companies to undertake modern slavery due diligence in their supply chains and "to take reasonable steps to address problems". The Report acknowledges that this would require "giving due consideration to small and medium sized companies' ability to meet any new requirements". It also recommends that the Government should make UK due diligence laws compatible with standards emerging internationally, to make it easier for companies to comply with their obligations.

The Government’s Response reiterates that it supports non-legally binding due diligence approaches that are aligned with the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct. It also states that the Foreign, Commonwealth and Development Office is carrying out a national baseline assessment on the implementation of the UNGPs, and that the Government "will assess the best ways to prevent environmental harms, modern slavery and human and labour rights abuses in both private and public sector supply chains, including effective due diligence rules" but does not stipulate a timetable for this assessment nor set out the form that any consequent response may take.

3. Import bans

There is currently no UK legislation which prohibits goods being brought into the UK if they are produced using forced labour, and the Report recommends that the Government should consider introducing such a prohibition. Such import laws could potentially be modelled on the Uyghur Forced Labor Prevention Act (UFLPA) in the US, which the Report references, and the EU Forced Labour Regulation being introduced in the EU (adopted in April 2024 and expected to take effect in 2027), which prohibits products made with forced labour from sale on the EU market. However, unlike with UFLPA, the Report emphasises that "country-specific bans have significant foreign policy implications" and that any such laws should therefore not be targeted at particular countries, preferring to target companies identified to produce goods using forced labour. The Report further recommends that the Government should include the issue of modern slavery and forced labour in its trade negotiations.

The Government’s Response states that it will continue to assess and monitor the effectiveness of existing measures, as well as the impacts of new policy tools, but does not set out any concrete proposals for legislative action.

How do the Report (and the Response) sit alongside other recent proposals aimed at countering modern slavery?

While the Report gives new impetus to reform the MSA, it remains to be seen whether or not the Report's recommendations will be taken up, since the Government's Response falls short of committing to any clear legislative agenda.

It is also unclear whether any future legislative initiatives will take account of recent private members' bills such as the Commercial Organisations and Public Authorities Duty (Human Rights and Environment) Bill (HREDD Bill), proposed by Baroness Young of Hornsey on 28 November 2023, which sought to place a duty on companies and public authorities to prevent human rights and environmental harms, including an obligation to conduct and publish a human rights and environmental due diligence assessment, and proposed a criminal offence for certain failures to comply with the duty. The HREDD Bill was paused before its second reading and was not identified in the 2024 King's Speech as a bill on the roster for 2024-2025.

By contrast and as already noted, the EU, its member states and others are increasingly adopting legislation which imposes more stringent human rights and environmental due diligence requirements. These emerging regimes have tended to be focused on human rights and environmental due diligence more broadly, although would generally include modern slavery within their scope, while some other national due diligence legislation has targeted elements of modern slavery risk specifically, such as the Dutch Child Labour Due Diligence Act. The EU's Corporate Sustainability Due Diligence Directive (CS3D) is an example of legislation that will impact some UK companies (whether because directly in scope of its requirements or because such companies will be within the value chains of companies that have to comply). The CS3D seeks to establish a common framework for in-scope EU and non-EU companies operating in the Union to adopt and implement due diligence policies and processes to identify and address adverse human rights and environmental impacts. See further our briefings on the CS3D here and here.

Many large UK-incorporated companies are subject to CS3D and are responding by updating their operations, governance and risk management to ensure that they are aligned with its requirements. Some companies have expressed support for mandatory due diligence legislation in the UK, pointing to the benefits of a level regulatory playing field.

Next steps: Is reform for the MSA on the horizon?

The Committee's Report contains detailed recommendations for the strengthening of the MSA and concludes that there is a "substantial opportunity now for the new Government to take action and make the UK world-leading in the battle against modern slavery once again".

In response, the Government indicates that it is planning for "long term reform of the modern slavery system". It is unclear from its Response when reform will take place, and whether legislative reform of the MSA is imminent. To take one example, whilst acknowledging that legislative change would be required to strengthen the enforcement mechanism in s.54 of the MSA, the Government commits to setting out next steps more broadly "in due course" regarding "how best the government can use legislative and non-legislative measures to tackle forced labour and increase transparency in global supply chains".

What is clear is that the Committee’s conclusions will be taken into consideration as the Government formulates its strategy for more significant and sustained reform in the future.

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¹ These criteria, which are not currently mandatory (but strongly recommended), are information about:

1. the organisation's structure, its business and its supply chains
2. its policies in relation to slavery and human trafficking;
3. its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
4. 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;
5. its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate;
6. the training about slavery and human trafficking available to its staff.

²Where a person "associated with the organisation" commits any of certain offences listed in the Bill in order to obtain or retain business or a business advantage for the commercial organisation, which the organisation failed to take all reasonable steps to prevent including through conducting human rights and environmental due diligence.