Corporate Liability for Human Trafficking in Europe: Legal standards exist, but are they applied?

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08 May 2017

Written by Julia Planitzer

Due diligence allows companies to fulfil their obligation to respect human rights. But how can States ensure that human rights due diligence is undertaken by businesses? A report by ICAR identifies four approaches, one of which is to consider due diligence as part of regulatory compliance: States impose liability on companies for a failure to properly act with due diligence. This can include criminal and civil liability or administrative penalties. The UN Special Rapporteur on Trafficking in Persons, Maria Grazia Giammarinaro, stresses in her report on due diligence that States must implement legislation against human trafficking, and must prevent, investigate and punish trafficking through their laws and policies. These measures, she notes, must also be directed towards business entities.

Legal instruments at European level specify that States have an obligation to establish corporate liability for human trafficking. Art. 22 of the Council of Europe Convention against human trafficking regulates the criminal liability of companies and intends to make legal entities liable for human trafficking when committed on behalf of the company; either by a person in a leading position or, under specific circumstances, by an employee. Also the provision on criminalisation of the use of services of a victim (Art. 19 of the Convention) could be an entry point to establish corporate liability.

In order to identify the rather rare cases in which corporate liability concerning human trafficking for labour exploitation has been applied already, the reports of the Council of Europe’s monitoring mechanism GRETA are a valuable source of information. An analysis of 52 GRETA reports showed relevant cases in four countries (Slovenia, Romania, Belgium and Cyprus), and the application of temporary administrative fines mentioned by one State Party (Malta).

Two cases in Belgium are particularly interesting regarding the extent to which a contractor is liable for exploitation by a subcontractor. In one case of trafficking for exploitation on motorway restaurants, the court held that the contractor was to be held liable for the exploitation of trafficked workers by the subcontractor that provided cleaning services. In a separate yet similar case, the contractor (fast food chain) was acquitted. In that case, the contractor successfully contested the charges on the grounds that there was no proof that the contractor at the top level benefited from the exploitation. In Austria, corporate criminal liability was introduced by the Act on the Responsibility of Legal Entities for Criminal Offences (CCRA, Corporate Criminal Responsibility Act) which entered into force in 2006, but cases concerning human trafficking in relation to CCRA have not been identified yet.

One of the reasons for the low number of corporate criminal law cases in relation to human trafficking lies in the difficulty to prosecute bankrupt companies. Prosecuting a bankrupt company is deemed as uneconomical. Thus bankruptcy has developed as a strategy in Belgium, for example, for companies to slow down court proceedings and avoid payment of fines. Other reasons include gaps in experience to apply relevant laws to prosecute legal persons. Furthermore, legal frameworks related to human trafficking overlap with other provisions related to social fraud or underpayment of workers and consequently, cases related to human trafficking for labour exploitation are very rare.

Claiming payments of unpaid wages in the civil justice system is often more burdensome for trafficked persons compared to criminal proceedings and includes obstacles such as lack of legal aid for civil proceedings, as the EU FRA report on severe labour exploitation shows. One successful example is the case against DJ Houghton Catching Services Ltd in which for the first time the UK High Court held that a company is liable to pay compensation to trafficked persons.

Legal instruments such as the Employers’ Sanction Directive, the Posted Workers Directive and, as of June 2016, the Enforcement Directive should ensure access to procedures to claim unpaid wages, in cross-border contexts and in subcontracting chains. However, data on the application of these instruments remains scarce. As shown by PICUM, in relation to undocumented workers, it is not clear how many complaints for unpaid wages have been lodged and in how many cases compensation was received. Workers in subcontracting chains often do not know against which company they would have a claim in the case of exploitation. In general, joint and several liability mechanisms to hold subcontractors and contractors higher up in the subcontracting chain liable, would support workers in the process of claiming wages, but are not widespread throughout the EU. Research shows that only seven EU Member States (including Austria) have implemented a more or less elaborated system of general joint and several liability for aspects related to wages. However, the EU acquis leaves a wide range of migrant workers, for instance workers from the EU working in a different EU country, uncovered.

The European legal framework obliges States to hold companies liable for human trafficking. Additionally, various legal regulations exist which should ensure that workers have the possibility to claim unpaid wages from employers and in very limited cases also from a contractor higher up in the subcontracting chain. However, in practice, implementation faces numerous challenges and there is still a long way to go before reaching effective mechanisms to claim unpaid wages. This includes for example a lack of exchange of information between different public actors involved in cases of unpaid wages. Even in cases in which a company is held liable, access to compensation for unpaid wages is challenging. Hence, corporate liability does not automatically indicate improved access to compensation for exploited persons. Current research on corporate liability for human trafficking demonstrates that obstacles to compensation in cases against individuals, as identified for instance by the European Action for Compensation for Trafficked Persons, also apply to companies.

 

Julia Planitzer is a Senior Researcher at the Ludwig Boltzmann Institute of Human Rights (Project on corporate liability for human trafficking, supported by funds of the Oesterreichische Nationalbank/Anniversary Fund, project number: 16101)