Hong Kong Considers Draft Law Requiring Companies to Report on Modern Slavery

by Littler
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[co-author: Dominic Hui]*

The Hong Kong legislature is currently considering draft legislation which, if enacted, will require certain companies—including those incorporated outside of Hong Kong—to publish a “slavery and human trafficking statement.”  This requirement is modelled on the United Kingdom’s Modern Slavery Act.1  But the Hong Kong draft law, known as the “Draft Modern Slavery Bill 2017” (the “Draft Bill”), goes further than the U.K. act in that it creates a host of criminal and civil offenses related to modern slavery, and empowers courts to issue orders to prevent certain persons from committing those offenses.  If enacted, this Draft Bill will add to the increasingly complex landscape of national laws that place direct obligations on companies to identify and eliminate modern slavery from their own operations and from the operations of those companies’ business partners.

Why Has This Draft Bill Been Proposed?

The Draft Bill was first proposed in November 2017 by two members of Hong Kong’s Legislative Council.  The legislative members, in a letter to the Legislative Council of Hong Kong, justified the need to pass the Draft Bill by pointing out that the United States had placed Hong Kong on the “Tier 2 Watch List” in recent Trafficking in Persons (“TIP”) Reports,2 alongside “countries such as Afghanistan, Pakistan, Niger and Qatar.”3  Hong Kong’s continued lack of efficacy in combatting human trafficking, the legislators argued, may result in Hong Kong being “further named and shamed or even sanctioned, if we continue to lack the relevant laws to combat human trafficking.”     

The stated purposes of the Draft Bill are, therefore, threefold:  (1) to “give effect” to Article 4 of the Hong Kong Bill of Rights, which prohibits slavery and forced labor, (2) to “give effect” to Article 1 of the United Nations’ Supplementary Convention on the Abolition of Slavery of 1957, which inter alia prohibits forced marriage, and (3) to provide protection for victims of slavery and trafficking. 

Which Companies are Covered Under the Draft Bill?

As for the requirement to publish a “slavery and human trafficking statement,” the Draft Bill covers any “body corporate” or partnership—wherever it is incorporated—that conducts “business or part of a business in Hong Kong.”  Thus, any company—regardless of its citizenship—that operates in Hong Kong may be covered under the Draft Bill.  While the companies may have to meet a “total turnover” threshold to be covered, that threshold is not currently defined, as the Draft Bill directs the Chief Executive to publish regulations on that issue.    

What do Covered Companies Need to do?

The Draft Bill, if enacted, would require covered companies to prepare a “slavery and human trafficking statement” (“Statement”) every financial year.  This Statement would require companies to outline the steps they have taken during the financial year to ensure that slavery and human trafficking is “not taking place in any of its supply chains, and in any part of its own business.”  Alternatively, companies would have to submit a Statement that they have not taken any steps at all.  

The Draft Bill does not define the phrase “supply chains.”  Though we await further developments, we note that the term “supply chain” presents operational and definitional challenges.  For example, this lack of definition raises the question as to whether the Draft Bill will require covered companies to report on steps taken with regard to only “first-tier” business partners with whom the companies direct contractual relationships, or whether other business partners need also be considered. 

By creating this Statement requirement, the Draft Bill joins the ranks of other similar national laws that require such disclosures, placing market pressure on companies to prevent, identify, and eliminate modern slavery practices in companies’ operations and among business partners.  Other national laws include the U.K. Modern Slavery Act, the California Transparency in Supply Chains Act,4 and a recent draft law introduced in Australia.5

What Should be Included in the Statement?

The Draft Bill does not appear to mandate the disclosure of any specific information on the “steps” a company takes to ensure that slavery and human trafficking is not taking place in its operations and the operations of suppliers.  Instead, the Statement “may” include information about:

  • The company’s structure, its business and its supply chains;
  • Its policies in relation to slavery and human trafficking;
  • Its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
  • The parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and steps taken to assess and manage that risk;
  • 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; and,
  • Trainings about slavery and human trafficking available to its staff.

The Statement must be approved by the board of directors (or equivalent management body) and signed by a director (or a general partner in the case of limited partnership).

Where is the Statement Published?

If the company has a website, then the Statement must be prominently published on the website’s homepage.  If the company does not have a website, then a copy of the Statement must be provided to anyone who makes a written request for it, within 30 days of the date of receipt of such request.

What is the Consequence if a Company Fails to Publish the Statement?

The Chief Executive may bring civil proceedings against a non-compliant company in the Hong Kong High Court for any order of injunction for specific performance.  An entity that fails to comply with the injunction order will be found guilty of contempt of court. 

What are the New Criminal and Civil Offenses Created by the Draft Bill?

In addition to creating the requirement for companies to publish the Statements, the Draft Bill creates a host of new criminal and civil offenses related to modern slavery and human trafficking.  These offenses include slavery, “forced or compulsory labour,” human trafficking, forced marriage, and sex tourism.    

The Draft Bill also empowers courts to issue “slavery and trafficking prevention orders” on application by the police, an immigration officer, or Secretary of Justice.  These orders are issued if “there is a risk” that a “relevant offender” may commit an offense and it is necessary to protect likely victims from physical or psychological harm.  A “relevant offender” includes a person who has been convicted of or “cautioned” in respect of a slavery or trafficking offense in either Hong Kong or elsewhere.        

The Draft Bill also requires that the Chief Executive appoint an Independent Anti-Slavery Commissioner, who will “encourage good practice” in implementing these slavery and trafficking offenses.  

Unlike the limited scope of the covered entities under the Statement requirement, the scope of these new criminal and civil offenses is broader.  The Draft Bill states that that these offenses can be committed by “persons,” which include any body of persons, corporate or unincorporated.  Therefore, a company or even its individual directors, employees or agents may be charged with the commission of these various offenses. 

What is the Likelihood of the Draft Bill’s Passage?

The Draft Bill has been introduced as a Legislative Council Member’s bill rather than a Government bill, and therefore, the vote threshold will be higher than the simple majority required for a Government bill.6  However, currently, there has been no significant opposition to the Draft Bill voiced in the Legislative Council, media, or civil society.  Therefore, there is a strong possibility that this Draft Bill will pass into law.  Littler will continue to monitor this legislation and report on any significant developments.      

What Should Companies do to Prepare?

Companies should prepare for the passage of the Draft Bill by first taking stock of their own operations and those of their suppliers and other business partners, and identifying areas in those operations where there is a high risk of forced labor and other “modern slavery” practices.  Where such risks are identified, companies should take appropriate action to address those risks and also implement procedures to ensure that new and existing relationships remain free of such activities.  This due diligence process can be complex, so we recommend engaging the services of experienced counsel.

* Dominic Hui is a partner at Ribeiro Hui in Hong Kong.

 

Footnotes

 

1 See Tahl Tyson, United Kingdom: New Law to Combat Supply Chain Slavery and Human Trafficking, Littler ASAP (July 14, 2015).

2 The U.S. State Department, in its annual Trafficking in Persons (“TIP”) Report, analyzes the compliance of all countries with the standards for combatting trafficking set forth in the Trafficking Victims Protection Act (“TVPA”).  The TVPA creates a 3-tier system, ranking individual countries’ efforts to combat human trafficking.  These low-tier ratings in the TIP report may lead to the withholding of bilateral and multilateral aid and may spur the countries to step up their anti-trafficking efforts.  Countries on the “Tier 2 Watch List” are those that do not fully meet the TVPA’s minimum standards, and despite significant efforts from those countries to comply, the “absolute number of victims” maybe increasing.   

3 Letter from D. Kwok and K. Leung to Hon. Chan Hak-kan, January 11, 2018, Legislation to Criminalise All Forms of Human Trafficking in Hong Kong

5 See Naomi Seddon, Lavanga V. Wijekoon, Michael G. Congiu, Stefan Marculewicz, and John Kloosterman, Proposed Act Seeks to Require Large Companies Operating in Australia to Report on Modern Slavery, Littler Insight (Feb. 6, 2018).

6 Passage of a Legislative Council Member’s bill requires a simple majority vote of both Members returned by functional constituencies, and Members returned by geographical constituencies.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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