Modern slavery risk in Australian international supply chains – are you managing your exposure?

The Australian Maritime Safety Authority (AMSA) has issued its longest ever ban of 36 months to the ship “MV Maryam” for, amongst other things, “serious deficiencies” relating to the working and living conditions of its seafarers. Other than the fact that it amounts to the longest ever ban of a vessel from Australian waters, this ban is significant because it reminds Australian businesses that they may be exposed to the risk of modern slavery breaches arising in their global supply chains.

For international shipping and logistics operators, the Australian modern slavery laws mean that they can expect greater scrutiny from Australian businesses who are actively required to manage this risk. Shipping and logistics operators who can demonstrate that they are not a modern slavery risk will have a competitive commercial advantage over those who cannot or have a poor track record of enforcement action in Australia and elsewhere.

Background to Australia’s longest ever ban

On 28 May 2021, the Panama-flagged, Aswan Shipping owned “MV Maryam” was issued an unprecedented 36-month ban after AMSA found that the ship was unseaworthy and that the living conditions on board were in breach of the Maritime Labour Convention 2006 (the Convention). Specifically, the ship had no electricity, no running water, no sanitary facilities and no ventilation, making conditions “unbearable” for its seafarers, according to AMSA.

Days later, another Aswan Shipping owned vessel, “Movers 3”, was detained in Weipa, Queensland, for what AMSA called “appalling” working and living conditions for seafarers and subsequently hit with an 18-month ban. In its media release announcing the bans, AMSA said, “our message could not be clearer – substandard ships that fail to meet internationally agreed safety standards and labour conditions are not welcome in Australian waters.”

Labour rights violations and modern slavery in international supply chains

International supply chains are particularly susceptible to labour rights violations and modern slavery risks. The reasons for this can be attributed to a variety of factors, including:

• international supply chain workers may be from countries with poor track records when it comes to human and labour rights and may have cultures of corruption
• the involvement of multiple parties across international supply chains often gives rise to the risk of inconsistent labour standards within such supply chains and a fragmented system of regulatory oversight
• practical limitations on effective enforcement of basic conditions throughout complex international supply chains, owing to the number of jurisdictions in which supply chain activities may be performed and the number of parties involved.

In the shipping sector, these issues were somewhat overcome by the Convention, which came into force on 20 August 2013 and to which Australia is a signatory. For businesses in or trading to or from Australia, Australia has also implemented the Modern Slavery Act 2018 (Cth). We consider the Convention and Modern Slavery Act below.

The Convention – the ‘seafarers’ bill of rights’

Australia, as well a large faction of the developing and developed shipping world, is a signatory to the Convention, widely known as the ‘seafarers’ bill of rights’. This means that the operation of any vessels that fly the flag of a country that has ratified the Convention are covered by the Convention. The main purpose of the Convention is to establish minimum working and living conditions for all seafarers on board such vessels, by providing standards for minimum requirements for seafarers as to conditions of employment, accommodation, food, catering, health protection, medical care, welfare and social security protection.

In Australia, the Convention has been implemented into domestic law by the Navigation Act 2012 (Cth) and associated regulations, including, most relevantly, Marine Order 11, which encompasses the Convention’s standards for living and working conditions on vessels. This legislation allows AMSA to take action, such as directions, detention or banning orders, against vessels that do not comply with these requirements while in Australia. Even vessels that are registered in a country where the Convention is not in force must demonstrate to AMSA’s satisfaction certain standards for every seafarer on board. Ensuring compliance with the Convention is a key enforcement target of AMSA.

Australia’s Modern Slavery Act

The Modern Slavery Act 2018 (Cth) (Act) came into force in Australia on 1 January 2019 and establishes a mandatory reporting regime for entities who:

• are either an Australian entity or a foreign entity carrying on business in Australia
• have an annual consolidated revenue of at least A$100 million.

Commonwealth and corporate Commonwealth entities are also captured. This reporting regime requires reporting entities to publish a “modern slavery statement”. The mandatory criteria for these statements are set out in full in the Act, but essentially, the reporting entity must include the risks of modern slavery practices in its operations and supply chains or that of any entity it owns or controls, the actions it (and any entity that it owns or controls) has taken to assess and address those risks and a description of how it assesses the effectiveness of the actions it has taken. These statements are maintained on a Modern Slavery Statements Register. Failure to comply with an entity’s obligation to report may lead to the ordering of remedial actions by the Minister.

NSW has also passed modern slavery legislation, but it awaits a commencement date as the NSW Government seeks to introduce further amendments following discussions with the Commonwealth Government around ensuring consistency with the Commonwealth legislation.

Businesses covered by the Modern Slavery Act must assess and report on the risk of modern slavery within their supply chains – including international supply chains.

Accordingly, in recent years, Australia has moved towards developing a comprehensive modern slavery legislative framework to deal with the issue, both within Australia and throughout international supply chains.

The remainder of this article discusses how Australian businesses can meet their obligations to manage supply chain modern slavery risk and how shipping and logistics businesses can ensure that they can meet the standards that will increasingly come to be imposed by their Australian customers. 

How can businesses meet their modern slavery risks in international supply chains?

Some of the ways in which you can ensure your business complies with Australia’s modern slavery legislation are as follows:

1. familiarise yourself with your business obligations and of those with whom you do business or who otherwise make up your supply chain – to do this, it may be helpful to map out your business operations and supply chains
2. carry out a modern slavery risk assessment – identify parts of your business operations and supply chains where there is a risk of modern slavery taking place. For Australian businesses, this may include considering third-party risks arising from international shipping and logistics providers, as well as suppliers. For shipping and logistics providers, this may include considering third-party risks arising from vessel owners, managers and crewing agents. For ports, this may include considering third-party risks arising from the owners and operators of vessels calling at the port
3. implement policies in relation to modern slavery – this will involve collating current policies, identifying gaps, adapting existing policies and formulating new policies, as needed. These policies should inform, amongst other things, decisions on who you choose to do business within your supply chain and/or on what terms
4. manage any of the risks identified in the risk assessment – this may involve adapting or introducing contract terms and codes of conduct to ensure compliance with modern slavery legislation and penalties for failing to do so
5. establish processes to monitor the effectiveness of the steps taken to prevent modern slavery in the business or its supply chains – this may include regularly checking enforcement agency notices, such as the AMSA website, to identify the operators of vessels which have been banned from Australian ports
6. if modern slavery is identified, ensure you take requisite remedial steps – this may include reporting the incident to relevant authorities, such as the AMSA, so that they can take more appropriate action, such as issuing a direction, detaining and or banning the ship
7. develop training for staff on modern slavery risks and impacts.

Shipping and logistics providers should be prepared to show their Australian customers that they have addressed each of the above matters. Businesses that can demonstrate an effective commitment to managing modern slavery risks and a clean track record will gain a valuable competitive commercial advantage over those that cannot. On the contrary, shipping and logistics businesses that cannot demonstrate such matters will become ‘untouchable’ as Australian businesses will not be able to deal with them for fear of exposing themselves to the risk of modern slavery breaches.

Conclusion

The banning of the “MV Maryam” is a timely reminder to Australian businesses that their international supply chains are susceptible to labour rights violations and modern slavery risks.

Australia has a comprehensive legislative framework that ensures businesses proactively manage such risks, including within their international supply chains.

Further, Australian regulatory authorities in the shipping and logistics space have identified such risks as a key enforcement target going forward.

Australian businesses should be proactively managing the risk of modern slavery in their supply chains to ensure that their supply chains do not bring them into breach of modern slavery laws. Shipping and logistics businesses trading to or from Australia should ensure that they can respond to modern slavery enquiries of their Australian customers to make themselves lower risk and more attractive to Australian businesses than their competitors. 

Authors: Nathan Cecil & Melanie Long

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Nathan Cecil

Melanie Long

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