Introduction to Part II
The Canadian (鈥渢he Act鈥�) suffers from several key weaknesses common to anti-slavery transparency legislation identified by commentators and discussed in detail in the first part of our analysis. These weaknesses prevent the Act鈥檚 reporting requirements from imposing sufficient pressure on businesses to combat modern slavery effectively. By substituting remedial action and due diligence in favor of reporting, this Act does little to address modern slavery while giving the illusion of change.
We are unfortunately not surprised to find the Act wanting. The final iteration of this legislation was only passed because it was a moderate and diluted version of previous stronger proposals. Even the enactment of the Act took considerable time and effort. It is telling that Canadian modern slavery legislative proposals that addressed these weaknesses received strong opposition and failed to pass.
The widespread skepticism regarding the Act manifests itself across a legal commentary on modern slavery law and the long-standing critique of prioritizing transparency and disclosure regulation over effectively enforceable due diligence laws. In this post, we will build on this critique discussed in Part I and provide a more in-depth analysis specifically of the Canadian Act.
Detailed Review of the Act鈥檚 Shortcomings
One of the Act鈥檚 key failings is its establishment of reporting requirements without an effective due diligence component. The Act鈥檚 creation of a reporting system can be seen in its call for 鈥渢he imposition of reporting obligations鈥� in its . The other sections of the Act, however, do not impose any due diligence requirements on entities with respect to the reporting process. of the Act, for example, requires reporting entities to 鈥渞eport 鈥� on the steps 鈥� taken 鈥� to prevent and reduce the risk that forced labour or child labour is used鈥� but does not mandate any specific steps to ensure those reports are well-informed. The Act鈥檚 enforcement provisions ( and ) also fail to encourage entities to exercise due diligence, as the sanctions they provide are triggered only by not reporting or lying in a report. The sum of these provisions is a reporting system that, as described by and the , does not exert sufficient pressure on entities to cause them to implement specific measures to combat modern slavery.
The little pressure that the Act does exert on entities to make progress on addressing modern slavery risks relies entirely on threats to the entity鈥檚 reputation created by the reporting process, which may be ineffective. of the Act require reporting entities to publicize their reports on their websites and circulate it to their shareholders, with the implicit intention of shaming poor performers into action. Compliance with these requirements could be superficial because companies do not need to change corporate practices tied to forced or child labour to meet their obligations. In the words of , reporting obligations such as these risk masking the presence of modern slavery in supply chains by creating the illusion of accountability.
We also note that the scope of the Act is limited and undermines its own penalty clauses. of the Act specifies that it only applies to entities with at least $20 million in assets, at least $40 million in revenue, and an average of at least 250 employees. The Act thus commits the error highlighted by and of allowing some companies to escape accountability. The focus on larger enterprises is particularly surprising given that the penalty clause in only allows fines 鈥渙f not more than $250,000.鈥� The penalties the Act provides for are so small relative to the size of the companies targeted by the Act that the threat of these sanctions may not meaningfully deter large entities from violating the Act.
Finally, it is disappointing to observe that the Act fails to include any victim compensation mechanisms. and force companies and others to pay for failing to report or reporting known inaccuracies, but do not call for the funds collected from the fines to be extended to victims of modern slavery. Entities are therefore not forced to repair the damage caused by activities in their supply chains, and the labour provided by victims of modern slavery remains uncompensated despite the Act. As explain, the Act鈥檚 failure to require compensation for victims of child labour fails to eliminate the drivers of child labour. Relying on reputational risk by requiring companies to report whether they provide compensation for victims is a poor replacement for a requirement that companies provide such compensation.
The Future of Modern Slavery Law in Canada
Given these failures, what might come next for modern slavery law in Canada? Will the Act be reformed to eliminate its shortcomings? Will Canadian courts step in to develop the common law to more forcefully combat modern slavery? We conclude by examining these questions.
Legislative efforts to fight modern slavery are likely stalled
Despite its failings, the Act is not likely to be improved upon by Parliament in any meaningful way within the next few years. Parliament passed the bill that became the Act after due diligence laws were legislated in , , , and , and after and the along with numerous other writers had raised compelling critiques of transparency-based legislation. It nevertheless took six years and the rejection of several bills with stronger accountability mechanisms for Parliament to pass legislation that reflects neither the European laws nor the doctrinal commentary. Parliament鈥檚 failure to be swayed by the examples and commentary that existed prior to 2023 suggests that Parliament will be similarly unmoved by the criticisms that have emerged since the Act received royal assent.
One might argue that Parliament could be pressured to reform and strengthen the Act should the reporting process required under the Act reveal modern slavery abuses that go unaddressed. For this assertion to hold, the Act would actually have to reveal modern slavery abuses. Unfortunately, as discussed above, a reporting requirement without a due diligence requirement creates an incentive for reporting bodies to either report that they have no due diligence mechanism or to develop a due diligence mechanism that is entirely insufficient. description of a reporting requirement without a due diligence obligation as a 鈥榤ask鈥� is apt. Far from revealing modern slavery violations that create an uproar to which Parliament feels obligated to respond, the reporting requirement creates an illusion of accountability that will deflate public appetite for reforms to the Act.
Canadian courts might have an (as of yet uncertain) role to play in shaping modern slavery law
Parliament is not the only body that could advance modern slavery law in Canada. In its 2020 decision in (鈥�Nevsun鈥�), the Supreme Court of Canada concluded that 鈥淸c]ustomary international law is part of Canadian law鈥� and allowed claims for breach of customary international law to be heard at trial (). Canadian courts therefore might be able to advance the fight against modern slavery in Canadian supply chains if international norms regarding modern slavery rise to the level of customary international law.
The language used by the majority in Nevsun regarding what is considered customary international law moves common law developments of modern slavery law further into the realm of possibility. The Court stated that a norm should be considered a customary international law when it is generally accepted and viewed as binding (). It further specified that sources of customary international law include 鈥渋nternational conventions鈥�, 鈥減rinciples of law recognized by civilized nations鈥�, and 鈥渢he teachings of the most highly qualified publicists鈥�, amongst other sources (). This emerging 鈥榥ew norm鈥� test might allow a Canadian court might find that the diversity of commentary, international agreements, and European legislative examples we cite in this article form a customary international law of due diligence in efforts to combat modern slavery. A court that made such a finding could then cite Nevsun to justify evaluating whether the breach of that norm exposes a company to liability.
The customary international law approach to advancing Canadian modern slavery law carries promise, and we recommend that companies keep a close eye on the Nevsun line of jurisprudence as it develops. At this point, however, the Nevsun jurisprudence remains relatively underdeveloped. Our ability to draw conclusions about how courts might interpret considerations of customary international law with respect to anti-slavery reporting and due diligence is therefore quite limited. We will highlight the areas of uncertainty in the application of Nevsun with respect to modern slavery, but we will not speculate on where courts might take the case law from here.
First, the approach established by Nevsun for determining whether a norm is customary international law has not evolved in a clear-enough direction to describe a conclusive doctrine emerging from the case. After setting out the 鈥榥ew norm鈥� test described above, the majority in Nevsun held that the allegedly violated norms were jus cogens (i.e., fundamental principles of customary international law). The Court accordingly accepted these norms as customary international law without performing a 鈥榥ew norm鈥� analysis (, , ). Subsequent decisions citing Nevsun have also declined to demonstrate a detailed application of the 鈥榥ew norm鈥� test (see ; ; and ). The preference for due diligence standards in efforts to combat modern slavery in supply chains that we identified through our literature review cannot reasonably be said to be jus cogens. We would therefore have to apply the 鈥榥ew norm鈥� test to determine that the preference for due diligence standards we have identified is a customary international law, which is not possible without further judicial input on how to do so.
Second, given that the Nevsun Court was examining the question of whether a trial based on an alleged breach of customary international law should proceed (, ), it did not mandate a specific remedy for such breaches (). The out-of-court resolution of the dispute underlying Nevsun prevented a subsequent court from addressing the question of remedies. It thus remains uncertain which penalties a company would face for not exercising due diligence in attempting to eliminate modern slavery from its supply chains.
Third and finally, we are not certain how the Act鈥檚 legislative history interacts with a court鈥檚 ability to adopt customary international law relating to modern slavery. The majority in Nevsun said that customary international law is adopted into Canadian law 鈥渋n the absence of conflicting legislation鈥� (, , ). It did not, however, create a test for determining when and whether particular legislation might conflict with customary international law. This oversight is problematic given that Parliament rejected several more stringent bills and amendments before finally passing the bill that became the Act. Does this legislative history mean the Act conveys Parliament鈥檚 intention to reject stronger alternatives to combatting modern slavery? If so, does the existence of the Act prevent Canadian courts from adopting a customary international law of due diligence in efforts to combat modern slavery? We cannot know the answers to these questions until the SCC is confronted with a similar contention or another court deems it fit to expand on the Supreme Court鈥檚 discussion of conflicting legislation in Nevsun.
Conclusion
Our analysis shows that the Act suffers from many of the shortcomings of transparency legislation identified in by academic commentators. These failings include the lack of a due diligence requirement for reporting, an overreliance on reputational risk to encourage reform, limited scope, and absence of victim compensation mechanisms.
Despite the shortcomings of the Act, its history and the Act鈥檚 limited ability to unveil scandalous conduct that might cause a public uproar cause us to conclude that legislative reforms to the Act are not likely to be forthcoming. We note that the Supreme Court鈥檚 decision in Nevsun suggests that Canadian courts might have a role to play in developing Canadian modern slavery law. The Nevsun line of jurisprudence is nevertheless underdeveloped at present, which prevents us from making strong predictions about the likelihood of impactful judicial intervention.