Comment: Strategic litigation on modern slavery

Over recent months, there have been a huge number of events and discussions on modern slavery, prompted by the UK’s Modern Slavery Act. As someone working in this area and with an interest in the latest developments, I have been to a lot of these, many of which end up saying the same things: a regurgitation of the Act and its related guidance. However, earlier this week I went to an event that added something new (for me at any rate), provided genuinely useful inputs and provoked thoughtful discussion.

The event was ‘Strategic Litigation on Modern Slavery’ and organised by a partnership between the Business & Human Rights Resource Centre and the University of Notre Dame Law School. Nick Grono of the Freedom Fund defined strategic litigation as that which has a wider objective than simply to benefit the litigants. For example, it may seek to draw attention to an issue, change policy, law or public attitudes or achieve broader social change. I am not a lawyer and so the extent of my engagement with this topic has been to answer questions on what would happen if a company did not publish a modern slavery statement and to try to allay fears among business of how people might use any content they do publish to make cases against them.

Companies are rightly anxious when they see Nestlé, Costco and others in court dealing with high profile allegations of slavery in their supply chains. Unfortunately the response among some is to choose not to meet the disclosure requirements, which have lower civil penalties that are unlikely to be pursued immediately, than to publish a statement which they fear might risk litigation.

The event provided a number of helpful arguments to support a transparent and proactive approach to addressing modern slavery:

  1. Increasing regulatory burden

We are increasingly seeing regulations that require companies to conduct or report on the social due diligence they are undertaking, whether that is the UK’s Modern Slavery Act, the US Federal Acquisition Regulation, the European Non-Financial Reporting Directive, French legislative proposals or the Swiss responsible business initiative (among others).

This is a strong sign of the direction that legislation is moving in and these are being complemented by non-legal developments such as updates to the OECD Guidelines for Multinational Enterprises, the Corporate Human Rights Benchmark and a new benchmarking exercise by Know The Chain looking specifically at approaches to tackling modern slavery.

Companies that fail to be proactive and seek simply to comply with each law they become subject to are likely to be left behind and constantly on the back foot. It makes good business sense to tackle issues early and comprehensively, rather than trying to manage minimum efforts across multiple jurisdictions.

  1. Companies can face litigation if they knew or ought to have known about modern slavery transgressions

The key here is ‘ought to have known’ and it is this that is increasingly being used by litigators, particularly in the US. If one company declares that there are issues in their supply chains then other companies with the same or similar supply chains arguably ought to have known that there would be issues in theirs. Or if investigative journalists publish evidence of slavery, then companies have no defence of not knowing.

Nick Grono explained how the use of strategic litigation is starting to change the cost-benefit analysis for companies. Where previously it may have been cheaper to continue using exploitative supply chains or may have been deemed too expensive to tackle, the risk of being sued now has to be factored in. For one company in the US, Signal International, this has already led to bankruptcy after a civil suit brought against them by workers who had been trafficked from India to work in their operations. 

Professor Roger Alford from the University of Notre Dame highlighted some of the many ways that legislation is being used to bring actions against companies, including the Trafficking Victims Protection Act (which says that you can be sued as a financial beneficiary of human trafficking) and domestic tort litigation, which reframes human rights abuses in language more familiar to judges making it easier to prosecute. For example, every act of torture is also assault and battery, while forced labour may also be false imprisonment.

  1. The Modern Slavery Act expects companies to ‘know and show’

The UK legislation deliberately has no punishment should companies find slavery in their supply chains, seeking instead to encourage businesses to hunt out exploitation, address it and be transparent about doing so. Kevin Hyland, the Anti-Slavery Commissioner, reinforced the point that the primary goal of the Modern Slavery Act is to put the issue on corporate agendas and get them to tackle problems where they find them.

Companies that treat the UK Modern Slavery Act as a compliance exercise are failing to recognise the expectations of the legislation. Indeed, Phil Bloomer from the Business and Human Rights Resource Centre stated that “Audits and compliance have not brought out the hidden issue of modern slavery”.

The message I took away was that companies which see strategic litigation as a disincentive to take action are putting themselves at risk by not seeking to understand the situation in their own supply chains, while remaining at risk of legal action.

One concern for me remains. The UN Guiding Principles on Business and Human Rights expect companies to use their influence to provide effective remedy for victims of adverse impacts and not to cut and run at the first sign of trouble. However, if companies can be sued for financially benefitting after they have found evidence of slavery or trafficking in their supply chains, will this discourage them from working with suppliers to improve the situation? The risk of litigation may incentivise companies to switch suppliers as a first step rather than seeking to put things right. This is an important point for those using strategic litigation as a tool to bear in mind. My hope is that potential litigators will first encourage companies to maintain engagement and seek to put things right for any victims, only moving to litigate in the absence of effort.

A video recording of this event will appear on the Business & Human Rights Resource Centre website.