The built environment contains many structures built with slavery and other forms of abhorrent conduct. This has become a topical issue, both for our inherited statues and buildings and the construction projects being undertaken today. The existence of the Modern Slavery Act 2015 (MSA) and the need for various important initiatives such as the Modern Slavery Helpline, operated by Unseen, show that slavery has not been banished to the past. Instead, it is an enduring stain that will take work to eradicate in its modern form.

The construction industry is recognised as a particularly problematic sector for modern slavery. The extensive use of subcontracting and global supply chains creates real risk, but also presents an opportunity for the sector to make lasting and meaningful changes that will improve the lives of countless exploited people. Various industry bodies, businesses and participants, including Construction News, have already taken a lead in the fight against modern slavery. However, there is scope for greater pressure to be applied to the industry by employers and funders.

Large contractors and clients can impose contractual obligations prohibiting the use of modern slavery and setting out what steps should be taken to monitor compliance. Starting from the labour on site, which is still a risk on UK projects, employers can make their own assessment about how much further obligations should extend down their supply-chain.

In terms of incentive, breaches of modern slavery terms can provide the basis for an 'at fault' termination, either immediately or following the service of a cure notice. Turning a blind eye to any suspicions of modern slavery will then expose contractors to the risk of their contracts being terminated, and substantial financial claims following as a result.

The challenge with relying on termination rights is that their use involves considerable legal and commercial risks for the employer. If the termination is challenged, the employer will face substantial claims. Even in clear cases, termination will cause additional delay and costs.

The problem with penalties

For actions short of termination, the losses caused to an employer or contractor by the use of modern slavery are difficult to quantify. If the technical requirements of the specification are met then it is difficult, both from a commercial and ethical perspective, to justify the replacement of works and materials that reflect the products of modern slavery.

One option is contractual provisions that impose financial consequences for breaches of modern slavery obligations. However, the scope for these is limited by the general public policy that penalty clauses will not be enforced by the courts.

The law is gradually moving to recognise the legitimate interests that innocent parties might have in being compensated beyond the losses they have suffered from contractual breach. This was shown by the 2015 decision of the Supreme Court in Cavendish Square Holding BV v Talal El Makdessi, on liquidated damages. However, this assessment is still cast in terms of the potential effect of breaches on the business, rather than broader public policy and ethical considerations.

For the time being the best way for employers and funders to tackle modern slavery is to integrate this objective into their procurement strategy, making it a full part of their purchasing decision process, rather than a bolt-on.

The government has recognised its opportunity to tackle modern slavery in its own supply chain, as set out in its 2019 guide for commercial and procurement professionals. Employers and funders can follow a similar route, for example by:

  • Imposing mandatory requirements, such as contractors publishing statements under section 54 of the MSA, setting out the steps they have taken to ensure that slavery and human trafficking is not taking place in any of their supply chains or in any part of their business.
  • In-house or outsourced ethical due diligence, using assessments to rate contractors against the priorities and values for the projects.
  • Cooperating and coordinating to 'value engineer' their project from an ethical perspective, as well as a financial one.

Ultimately, responsible employers can ramp up the potential costs and risks faced by those unscrupulous suppliers willing to use modern slavery, helping to push the practice out of the industry. Employers and funders should seize the opportunity now to align their ethical and financial considerations.

Originally Published by Construction News.

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