Following the announcement that the European Commission will introduce mandatory human rights due diligence (“HRDD”) legislation for EU companies, the question arises as to what a post-Brexit UK will do in response.
Five years ago, when the UK Modern Slavery Act (the “UK MSA”) came into force, the then Home Secretary (Theresa May) championed the section 54 reporting requirement as “a truly ground-breaking provision” that “will increase competition to drive up standards”. Whilst the ambition stated by Ms May was doubtless admirable, the United Kingdom is no longer at the cutting edge of law reform in this area.
While Australia has since followed a similar approach to the UK, France has in the meantime introduced the world’s first mandatory HRDD law (covering not just modern slavery issues, but all human rights, as well as environmental issues) and there have been calls for similar law reforms in Germany, Kenya, Norway, Switzerland, Thailand and the US.
In the UK, an independent review last year encouraged reform to the UK MSA, the UK government refreshed its guidance in 2017 and the UK government has been pushed to legislate further in this area. However, the law in the UK has remained unchanged since the enactment of the UK MSA.
The UK government has recently stated that “[t]he UK will in future develop separate and independent policies in areas such as (but not limited to)… the environment [and] social policy… maintaining high standards as we do so”. It is not clear, however, whether this means that the UK will implement legislation compatible with or exceeding the HRDD standards proposed to established in the EU.
The UK government may well find itself in a difficult position. Being seen simply to follow the lead of the EU could be criticised by those who see Brexit as an opportunity to diverge from common rules. That said, if key rules around the protection of human rights are seen to drop materially below those within the EU, particularly so soon after Brexit, that will fuel many of the concerns held by pro-Remain voters regarding the risk of lower standards. In this regard, the EU’s proposals have the support of both of civil society and a large segment of the business and investor community. They also reflect the broader convergence of standards and expectations in relation to HRDD.
If the UK does look to introduce a mandatory HRDD law, it may try to differentiate its new law from the EU’s law. On an issue such as human rights, the UK government may seek to show that the UK is maintaining higher standards than the EU.
Whilst such a position, if tenable, might be politically attractive (potentially appeasing both pro- and anti-Europeans), the UK and the EU having inconsistent HRDD laws would be inefficient for business. Rather than a multinational company being able to create a single, global approach to HRDD which can focus on the most salient human rights, the most robust due diligence and the most effective steps in response, there may be a degree to which the business will also need to mindful of (potentially purely technical) variations between regimes, increasing the costs of compliance.
Germany (which will assume the rotating presidency of the European Commission in July 2020), has already indicated support for the push towards mandatory HRDD requirements. It is expected that more details of the proposed legislation will be announced in the second half of this year. There are good arguments for the UK to follow the EU’s lead, provided that the EU regime is sufficiently robust. As always though, the political landscape is less clear and whether the UK follows the EU may be as much tied up in politics as it is dependent on human rights considerations.
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© Herbert Smith Freehills 2021