Blog Articles

By - Brian Iselin

Published : 10-12-2018

A Schrödinger Law: Australia’s Modern Slavery Act 2018

Australia recently passed a Federal Modern Slavery Act (2018)(MSA). It follows in the footsteps of the United Kingdom’s Modern Slavery Act 2015, amongst others.

Before launching in, I have worked on the subjects that fall under the umbrella term modern slavery for a long time. So, you would think the passing of the Modern Slavery Act would cause a ‘whoop’ of some sort; one that is like “Wow, that is awesome”, or even a tiny one of relief “Phew, at last, thank goodness”.

But no. I could muster no more than an “Okay, good, thanks for that. Now, let’s get serious”.

You will note that this article comes quite some time after the law’s passing because it has taken some time to put my finger on why the feeling is definitively ambivalent.

The thing is, while wanting modern slavery to be taken seriously, the passing of a weak law is surely a step up on nothing at all. But it is the smallest step after nothing at all. Is it a modern slavery law, or isn’t it? It’s the lack of seriousness that irks.

It's not every day you get to make sad jokes about Schrödinger. And at the same time, it is. As everyone knows, Schrodinger’s Cat is a physics theory, a paradox, used to explain the apparent contradiction between what quantum theory tells us is true at microscopic level and what we see with the naked eye. Essentially, a cat in a box is alive and dead at the same time if you cannot see with your own eyes.

I am sure every time you hear a joke about Schrödinger's cat a little part of you dies - and simultaneously doesn't die. So too, watching the passing of the Australian Act, a little bit of me lived and a little died.

Now, in the last few weeks there are a lot of people calling me a party pooper, a wet blanket, a glass-half empty etc. And that’s fine, keep it coming. But we cannot all think alike. It a good thing for us to not only celebrate the passing of this small step, but also for there to have been some gnashing of teeth at its smallness. In so doing, hopefully set the scene for our passion for the subject leads us to something better. And, after all, we did not all waste a lot of time giving expert evidence and submissions to the various inquiries that defined the Bill for the final Act to have so much disregarded.

So, can a law be good, and not? Yes, we have a Schrödinger law on our hands in the Modern Slavery Act.

The Act Itself

In a nutshell, because it is so widely captured elsewhere, it is estimated more than 3,000 companies should report in Australia on modern slavery risks in their operations and supply chains, and the action they have taken to tackle these. The first reports could be due by January 1, 2019. Businesses with revenue of less than AU$100 million can opt to report voluntarily. The modern slavery statements should describe the structure, operations and supply chains of the business in question, the risks of modern slavery practices in their operations and supply chains. The requirement extends to entities the business owns or controls. The reporting business needs also to describe the actions they have taken and any entity it owns or controls, to assess and address the risk of modern slavery in their supply chain.

The Act is a welcome step forward but does fall short in a few key areas. The first is there are no penalties for companies that fail to report. This means enforcement is effectively left to NGOs which could use the public repository to “name and shame” companies, and to shareholders or investors who could put pressure on the companies to comply with their reporting obligations.

The second shortcoming is that unlike the UK, there is no provision for an anti-slavery commissioner who might otherwise help enforce the law. Or at least provide some oversight. This raises questions about the efficacy of the “mandatory” scheme, which has no consequences for a failure to report.

Thirdly, because it is new, it will be some time until there is a lot of data, including about who reports and who doesn’t. But while the degree of respect paid to the law will be clear for those who dig into the central repository of statements lodged after the first year, it is really only the die-hard who will bother. There is not much of a public face to the effect of the Act.

As the UK found during their recent review of their MSA the Public Accounts Committee, there are several aspects of the law that prevent it from being as beneficial as possible in putting an end to slavery. In the UK, ‘effectiveness’ (measured by the % of those who submitted something, and the % of those submitted that meet the minimum standard), is after 3 years of operation only 9.5%.

The UK’s Public Accounts Committee found the Government’s approach through the MSA towards businesses’ compliance with its transparency in supply chains legislation is not working. Failures of oversight, even with an Anti-Slavery Commissioner appointed, mean that the Government does not have a list of the businesses that the requirement applies to or know how many have produced a statement. The UK Government does not monitor whether statements comply with the legislation and has never used its powers to penalise companies that do not comply.

The Committee noted it is important to develop prevention mechanisms within supply chains before someone is trafficked. Instead, the Government relies on NGOs, investors and consumers to monitor compliance, including two NGO-managed registries of statements. They unequivocally declared the is approach is clearly not working, as compliance with the legislation is low, with only an estimated 30% of businesses required to publish a statement having done so. Even for those companies that have produced a statement for the majority is it something of a tick-box exercise.

The experience in the UK is not all bad, of course. Although slavery still remains hugely under-reported, and still treated as something of a fringe issue by the average Brit, the issue of modern slavery has been brought to a bit more public light by the MSA and there has been an increase in public awareness, however unquantifiable that may be.

The Australian Act has the same shortcomings as the UK’s. For example, there are no repercussions for companies that do not comply and fail to publish the statement, they will merely face negative publicity. If companies are to find slavery within their supply chains, there is no law requiring them to act on it. If a person who commits one of the crimes of modern slavery can be punished under the criminal law, what is the liability for a company that profits from the slave labour within their supply chains? Moreover, no evidence is required of anything. A business reporting can say what they please, and nobody formally will check on it.

I notice people proclaiming that the central government repository is a good thing. Maybe. And maybe not. The having of the repositories in the UK means in the hands of two NGOs means that someone with independence and energy oversees and collates the data and analyses the statements. Let’s just stay the jury on that one; it is not clear to me it is a definite win to have the Federal Government collating responses.

How could we do better?

The effective life of this Act can only be measured by the change it achieves, after all, the point of a law is to make a clear difference on the question of modern slavery in supply chains. Even if there was a way to simply measure ‘transparency’ in this ‘race to the top’ that the law is meant to promote, transparency is not an end in itself. The Australian MSA’s success relies on ‘ifs’ on a number of levels. The Act will be effective if, and only if:

  • All businesses meant to report under it actually do.
  • All businesses subject to the reporting requirement meet at least the minimum requirements of the Act.
  • Improvements in operations and supply chain management come about because of the required new diligence.
  • Businesses reporting under it learn something about their risk by having to appraise it and report on it.
  • Someone makes the reports more public than just sitting in the government repository.
  • Businesses care enough about BOTH the cost and risk of public knowledge of either their low quality reporting or a failure to report. If failure to report, or to meet the minimum requirements does not cost in dividends, for example, will they still report? Is it just a P&L calculation?
  • Business have the means and know-how to actually get down their supply chains and understand and improve human rights standards in businesses with which they deal.

So, taking into account what we got, where the UK are, and what the shortcomings of both models are, we could have done better towards greater and more effective compliance by including the following elements:

  • Mandatory reporting, with financial and or publicity (naming) penalties for not doing so.
  • At least a modicum of enforcement, such as financial or publicity penalties, for not meeting a set of minimum requirements.
  • A much lower turnover threshold for reporting so that a larger number of organisations are brought under the requirements. The Act as it stands covers, perhaps, 3000 businesses. A substantial proportion of thse don’t pay proper taxes in Australia so, on the theory of similar acts, one must assume a % will not all be stepping up to voluntarily report on modern slavery unless they have something fabulous to report).
  • Extension of the law to not only business and the Commonwealth Government but all organisations; every organization buys things, ipso facto they all have supply chains. Why should huge consumers like Churches, Universities, Government departments of all types, and procurement agencies that are not Commonwealth, not participate?
  • Appoint someone to actually oversee the Act’s implementation; oversight is crucial.
  • If the aim is a race to the top for transparency, then be transparent. Publish a list compiling a) those companies required to comply, b) those submitting statements that meet the minimum requirements c) those submitting non-complaint statements, and d) those not submitting at all.

One last point to be made is about political capital. Passing a law is a long process and it requires that some politicians expend political capital, which means there is a legislative opportunity cost in using it for an MSA. Now, if this capital is spent too lightly, on a lightweight Act for instance, something else more effective on another issue may have been lost. But more importantly, that capital takes time to build up. Once spent, how long before that combination of political will and political capital are back in the same room, for the next step that everyone cheering hopes can come next? Theresa May has never again since she championed the initial UK MSA, had the political capital to expend on improving it. It is just a guess, but unless the political landscape changes away from conservatism, it may be a very long time before the bell rings for Round 2 to start.

All in all, an Act that in some ways is better than efforts elsewhere, in some ways is worse, has disregarded the bulk of expert opinion on the matter, and that has used just about all the political capital anyone has for such a law, is not a clear win. But it isn’t a clear loss, either. I agree with those cheering, and disagree with them at the same time.

In the case of Australia’s Modern Slavery Act yes, it is neither dead nor alive. But passion led us here.

Now passion can lead us to something better.