Transnational Corporations and Modern Slavery: Nevsun and Beyond
In a new article, Dr. Akshaya Kamalnath (Desautels Centre Affiliated Researcher and Senior Lecturer, Australian National University College of Law) considers the issue of transnational corporate responsibility as discussed in the recent SCC decision of Nevsun Resources Ltd. v Araya. The article was published in (2021) 21.2 J Corp L Studies 491-516.
Violations of human rights by corporations operating overseas, particularly in developing countries, either via subsidiaries or through their supply chains have been the subject of much discussion in the developed world. Although international law responded with non-binding declarations and principles, the lack of enforcement in these instruments meant that states committed to human rights had to do more. Cases like Nevsun Resources Ltd. v Araya in Canada and Vedanta Resources plc. v Lungowe in the UK are examples of courts fashioning liability for corporations after the fact, and in the case of Nevsun with some judicial creativity. However, as I argue in a recent article, ex ante incentives to prevent and redress human rights abuses are more beneficial than standalone ex post corporate liability mechanisms. The article also proposes a set of considerations for Canada to design an effective framework to address human rights violations by transnational corporations. My aim in this post is to briefly outline the proposal.
At present, a modern slavery bill, Bill S-211 is under consideration in Canada. Although the bill imposes penalties for non-compliance upon both the corporation and responsible executives within it, it will be useful, at least when the law is first introduced, to opt for a soft law approach so as to facilitate buy in from companies. For such a framework to be effective, an active and well-staffed regulatory agency would be essential. To ensure that this agency is not over-burdened, Canada should introduce a modern slavery law which becomes applicable to different sectors in a phased manner.
At the outset, as was done with the initial mandate of CORE (Canadian Ombudsman for Responsible Enterprise), only the sectors with the most risk, or known instances of human rights violations, like the mining and garment sectors should be asked to comply with the law. This would allow the government apparatus to effectively engage with companies to ensure compliance of both disclosure obligations and preventive measures. The learnings from the experience of companies in these sectors with regard to modern slavery obligations can then be carried forward into the next phase when the law is made applicable to other sectors.
Phased implementation of modern slavery law in different sectors would help the regulatory apparatus effectively monitor compliance. Canada’s Bill S-211 mentions a ‘designated person’ to administer the enforcement of the Act. Canada already has the CORE which can be co-opted (after ensuring that it is adequately funded and staffed) into the modern slavery law’s apparatus as the agency that works with companies to comply with the law. Although Bill S-211 has proposed fines as a form of enforcement, it is also important for regulatory agencies to work collaboratively with companies, to help companies build adequate systems to prevent and control human rights abuses. Whistle-blower hotlines (with the option of anonymous reporting) can be provided both by companies and by the regulatory agency to ensure that complaints are taken seriously and redressed at the early stages. Workers who are worried about retaliation might feel safer reporting anonymously to the government agency rather than to their employer, or to consultants appointed by their employer. The CORE’s whistle-blower programme could work in conjunction with the Ontario Securities Commission’s office of the whistle-blower. The availability of these alternative channels of reporting will incentivise companies to address complaints internally and work proactively with CORE.
Ultimately, addressing this issue of modern slavery through well designed legislation will incentivise ex ante engagement from companies and is preferable to one off judgements in egregious cases such as Nevsun.
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