The risks of modern slavery in maritime supply chains

Introduction

According to the International Labour Organisation (ILO), an estimated 50 million people globally were living in modern slavery on any given day in 2021. The maritime shipping industry remains an area of high modern slavery risk given the vulnerabilities of seafarers, recognised as among the most essential yet vulnerable working populations in our global economy. These vulnerabilities are exacerbated by the fragmentation of regulatory oversight among flag states, limited visibility of conditions on board, complex supplier arrangements and practical limitations on effective enforcement of working standards. In recent years the human rights impacts of the shipping industry on workers has come under scrutiny, shining a spotlight on the exploitative labour practices at sea, prolonged periods of work, power imbalances and substandard living conditions on board vessels.

Regulatory landscape

In Australia, the Modern Slavery Act (2018) (Cth) (Modern Slavery Act) requires companies to report publicly on the risks of modern slavery in their operations and supply chains, and their actions to address those risks (click here for a closer look at the reporting obligations). Increasingly, other jurisdictions have introduced similar disclosure legislation. Companies with maritime transport in their supply chains should undertake appropriate due diligence and address this area of risk when reporting.

At its broadest, the term modern slavery incorporates situations of exploitation where a person cannot refuse or leave work because of threats, violence, coercion, abuse of power or deception. It includes slavery, servitude, forced labour, debt bondage and deceptive recruiting for labour or services.

Entities will need to report under the Modern Slavery Act if they are an Australian entity or carry on business in Australia a minimum annual consolidated revenue of $100 million. Reporting entities must respond to the mandatory reporting criteria, which include an obligation to describe:

• the risk of modern slavery practices in the operations and supply chains of the reporting entity and any entities it owns or controls; and
• the actions taken by the reporting entity to assess and address those risks.

In the statutory review of the Modern Slavery Act tabled in Parliament on 25 May 2023, it was recommended that the Commonwealth government lower the reporting threshold to $50 million, establish a Commonwealth Anti-Slavery Commissioner and introduce a due diligence obligation and civil penalties for non-compliance with the legislation. Apart from the law to appoint a Commonwealth Anti-Slavery Commissioner which passed on 28 May 2024, these recommendations are yet to become legally binding. However, entities should be prepared for more stringent modern slavery obligations in the future. A summary of the proposed changes can be found here.

Risks to seafarers in the shipping industry

Globally, there has been increasing public scrutiny regarding the working conditions of seafarers. The independent organisation for seafarer’s rights, the International Transport Workers’ Federation (ITF), has regularly expressed concern at charterers’ levels of due diligence concerning the working conditions aboard ships they charter. In a 2022 report, the UN Global Compact Network Australia and the Maritime Union of Australia outlined that working conditions often associated with seafaring, such as isolation, restriction of movement, unpaid wages, excessive overtime and abusive working and living conditions are key indicators of forced labour.¹ Moreover, the practice of vessels adopting a flag of convenience as a means to evade legal responsibility, prevents labour safeguards available to workers. These risks are complicated by the inherent geographical and remoteness of the industry and complex supply chains which blur visibility over the working conditions on board.²

Importance of due diligence in maritime supply chains

Despite well-documented risks in the shipping industry, criticism has been mounted that Australian businesses are still in the early stages of identifying, managing and mitigating human rights impacts in the shipping industry.³ As a result, reporting entities are now facing greater scrutiny from civil society groups and benchmarking reports, compelling them to integrate seafarers' rights into their risk management and procurement due diligence processes.

In its 2023 guidance, the ITF emphasised that the responsibilities for seafarers' labour rights extend beyond the companies directly hiring seafarers. To adhere to the principles outlined in the UN Guiding Principles (UNGPs), the ITF states that entities should be conducting human rights due diligence throughout their maritime supply chain. It is critical that entities with shipping requirements conduct the necessary due diligence to work with reputable vessel owners and operators who can verify compliance with the International Labour Organisation’s Maritime Labour Convention 2006 (MLC). The MLC sets out seafarers' rights at work, including employment terms, health and safety, living and working conditions, access to medical care and social security.

Importantly, due diligence should not be a once-off exercise but rather an ongoing process to review the implementation of commitments made by vessel owners and operators to manage human rights risks, including welfare conditions of seafarers, including crew changes.

Norton Rose Fulbright has global expertise assisting clients with human rights due diligence and reporting, as well as broader ESG advisory.

Please contact Abigail McGregor or Grace Do to discuss strategies to manage human rights risks in your operations and supply chains.

This article was originally published May 2018 and updated July 2024.