 |
| Pix Credit Fincantieri |
On 6 February, it was announced that following recommendations from the Council on Ethics, Norges Bank has announced its decision regarding the observation of two companies in the Fund’s portfolio:
The Council on Ethics recommends that the Italian company Fincantieri SpA be placed under observation due to the risk that it is contributing to serious or systematic human rights abuses. It has shipyards in Italy, Brazil, Norway, Romania, USA and Vietnam.
A series of legal proceedings have revealed that several thousand people who have been employed by subcontractors at Fincantieri’s shipyards have been subjected to grossly exploitative working conditions. The Council accords weight to the fact that these practices have, in particular, impacted immigrants who are dependent on employment contracts to obtain residence permits in Italy.
Fincantieri’s new initiatives may reduce the risk of labour rights violations at its shipyards, but the Council finds that substantial uncertainty remains. This is due both to the paucity of information about actual employment conditions and the fact that many of the company’s initiatives are of recent date or are still at the planning stage.
The Council on Ethics issued its recommendation on 5 November 2024. Norges Bank announced its decision to place the company under observation on 6 February 2025.
The announcement may be accessed HERE. The Ethics Council's Recommendation may be accessed HERE.
The most interesting part of the analysis is the way in which the Council assessed the probabilities of future risk. The Ethics Council standard remains fairly consistent though now refined with its application against the set of facts revealed in its investigation of Fincantieri: " "In its assessment of future risk, the Council attaches importance to the company’s response when allegations of labour rights violations have come to light, and what the company has done to reduce the risk of such violations." (Ethics Council's Recommendation HERE). And that is where things get interesting:
The Council notes that the company has attempted to silence criticism by taking legal action against journalists, the labour inspectorate and trade union leaders. Nor are the labour rights violations mentioned in the company’s extensive sustainability reports. The Council considers that Fincantieri has persistently provided an overly positive impression of employment conditions at its yards. (Ethics Council's Recommendation HERE)That was weighed against the efforts of the company to develop and implement a human rights due diligence system aligned with the expectations in the UN Guiding Principles fr Business and Human Rights. In this case the assessment boiled down to this--the Pension Fund Global apparatus could not bring itself to trust the actions of the company, in part because of the company's history and in part because the reforms were too fresh to suggest permanence or competent implementation. The quantum of trust was sufficient to suggest that the company was moving in the right direction (as those things are measured by the Pension Fund Global apparatus), but insufficient to trust the company enough that verification was unnecessary. That appears to be the measure pursuant to which an observation recommendation was accepted.
The Ethics Council's Recommendation follows below
To Norges Bank
05.11.2024
UNOFFICIAL ENGLISH TRANSLATION
Recommendation to place Fincantieri
Summary
The Council on Ethics recommends that the Italian company Fincantieri SpA be placed
under observation due to the risk that it is contributing to serious or systematic human
rights abuses. This recommendation rests on the risk that migrant workers employed by
subcontractors engaged at Fincantieri’s shipyards in Italy are being exploited.
Observation entails the Council monitoring the case going forward and making a new
assessment at a later date.
Fincantieri is one of the world’s largest shipbuilders. It has shipyards in Italy, Brazil,
Norway, Romania, USA and Vietnam. The Italian state owns over 71 per cent of the
company’s shares.
At the close of June 2024, the Norwegian Government Pension Fund Global (GPFG)
owned 0.52 per cent of Fincantieri’s shares, worth NOK 45.9 million.
The shipyards are vast construction sites, where Fincantieri coordinates a large number
of subcontractors. In 2023, over 45,000 workers, employed by around 2,400 different
companies, were involved in a variety of production processes at the company’s Italian
shipyards. Many of the workers come from non-European countries.
A series of legal proceedings have revealed that several thousand people who have
been employed by subcontractors at Fincantieri’s shipyards have been subjected to
grossly exploitative working conditions. The workers’ pay and employment terms have
deviated sharply from statutory and collectively agreed terms and conditions. This
includes non-payment of overtime or supplements for work performed at night and on
public holidays. The workers have had to work illegally long working hours and have
received no sick pay. The Council accords weight to the fact that these practices have, in
particular, impacted immigrants who are dependent on employment contracts to obtain
residence permits in Italy. In this very vulnerable situation, they are at the mercy of their
employer.
Although the workers are employed not by Fincantieri but by its subcontractors, the
Council takes the view that Fincantieri is contributing to the abuses. The Council accords
weight to the fact that the work is performed at Fincantieri’s shipyards, access to which
is controlled. Furthermore, the Council finds it important that several employees and
former employees of Fincantieri have been indicted for complicity in the exploitation of
labour and that the company itself stands indicted for failing to have adequate systems
in place to prevent this.
iIn its assessment of future risk, the Council attaches importance to the company’s
response when allegations of labour rights violations have come to light, and what the
company has done to reduce the risk of such violations.
The Council notes that the company has attempted to silence criticism by taking legal
action against journalists, the labour inspectorate and trade union leaders. Nor are the
labour rights violations mentioned in the company’s extensive sustainability reports. The
Council considers that Fincantieri has persistently provided an overly positive
impression of employment conditions at its yards.
The above notwithstanding, the Council acknowledges that Fincantieri has established a
system to safeguard labour rights, and accords especial weight to the fact that this
system seems to be under development. In the Council’s opinion, the system has, so far,
not been sufficiently extensive or targeted, but notes that, in 2023, the company
performed its first ever due diligence assessment (on its European operations) in
accordance with the UN Guiding Principles for Business and Human Rights. This has
enabled the company to draw up an action plan that is intended to reduce the risk.
However, no quantitative targets for the company’s initiatives have been disclosed, and
the system for monitoring labour rights compliance will not been in place until 2025. The
Council therefore considers that uncertainty still attaches to how the situation will
develop going forward.
iiContents
1 Introduction ........................................................................................................... 1
1.1 Matters considered by the Council ............................................................... 2
1.2 Human rights standards ................................................................................ 3
1.3 Sources ............................................................................................................ 4
2 Background ............................................................................................................ 4
2.1 Fincantieri’s operations .................................................................................. 4
2.2 Report from the UN Human Rights Council’s working group on
human rights and multinational enterprises ......................................................... 5
2.3 Relevant legislation ......................................................................................... 5
3 The Council’s findings ........................................................................................... 7
3.1 Litigation pursuant to the law on the exploitation of labour ...................... 8
3.1.1 Ongoing cases .......................................................................................... 8
3.1.2 Court rulings ........................................................................................... 11
3.2 Defamation suit ............................................................................................ 12
3.3 Other matters ............................................................................................... 13
4 Information provided by the company ............................................................. 14
4.1 Fincantieri’s follow up of its subcontractors ............................................... 14
4.2 The company’s reaction to and reporting on the investigations .............. 18
5 The Council’s assessment ................................................................................... 20
6 Recommendation ................................................................................................ 23
iii1 Introduction
The Council on Ethics for the Norwegian Government Pension Fund Global (GPFG) has
assessed the Fund’s investment in Fincantieri SpA1 (Fincantieri) against the human rights
criterion in the Guidelines for Observation and Exclusion of Companies from the
Government Pension Fund Global (the ethical guidelines).2
Fincantieri is one of the world’s largest shipbuilders, with shipyards in Italy, Brazil,
Norway, Romania, USA and Vietnam.3 The company employs almost 21,000 people,
around half of whom are located in Italy.
Fincantieri outsources to subcontractors a large amount of the work undertaken at the
company’s shipyards.4 In recent years, there have been a number of court cases in Italy
concerning exploitation of migrant workers employed by subcontractors at several of
Fincantieri’s shipyards.
At the close of June 2024, the GPFG owned 0.52 per cent of Fincantieri’s shares, worth
NOK 45.9 million.5 The Italian state owns over 71 per cent of the company’s shares.
Fincantieri has been listed on the Italian Stock Exchange (Borsa Italiana) since 2014.6
1 Issuer ID: 919813.
2 Guidelines for Observation and Exclusion of Companies from the Government
Pension Fund Global, section 4(a):
https://www.regjeringen.no/contentassets/9d68c55c272c41e99f0bf45d24397d8c/2022.09.0
5_gpfg_guidelines_observation_exclusion.pdf. (Last visited 4 October 2024.)
3 Fincantieri, World Presence: https://www.fincantieri.com/en/group/world-presence/. (Last
visited 10 October 2024.)
4 Fincantieri (2023), Sustainability Report for 2023, p.144:
https://www.fincantieri.com/globalassets/sostenibilita2/fincantieri-sustainability-report-
2023.pdf.
5 NBIM, shareholding at the close of June 2024:
https://www.nbim.no/no/oljefondet/investeringene/#/2024/investments/equities/2689/Finc
antieri%20SpA .
6 Fincantieri (7 March 2024), Corporate Governance Report, p. 6 and p. 21:
https://www.fincantieri.com/globalassets/governance/corporate-
11.1 Matters considered by the Council
The Council on Ethics has assessed the GPFG’s investment in Fincantieri against section
4(a) of the ethical guidelines, which states that companies “may be excluded or placed
under observation if there is an unacceptable risk that the company contributes to or is
responsible for […] serious or systematic human rights violations.” The Council’s present
assessment relates to multiple court cases concerning the exploitation of migrant
workers employed by subcontractors at Fincantieri’s Italian shipyards.
The Council rests its determination of what constitutes serious or systematic human
rights violations under the ethical guidelines on internationally recognised conventions
and authoritative interpretations thereof. The Council has previously taken the position
that if the human rights abuses are of a serious nature, a few such instances are
sufficient for a company to be excluded from the GPFG. Correspondingly, the abuses do
not need to be individually as serious if they are perpetrated systematically.
When assessing the seriousness of the norm violations, the Council attaches importance
to the human rights abuses’ scope, nature and the extent to which they have occurred
repeatedly. The Council also attaches importance to whether the norm violations have
affected particularly vulnerable groups.
Although international human rights conventions are binding on states not companies,
companies can be said to contribute to human rights violations. When assessing a
company’s contribution to such abuses, the Council takes the position that there must
be a link between the company’s operations and the norm violations in question, and
the company must either have contributed actively to the norm violations or known
about them without taking steps to prevent them.
Pursuant to the ethical guidelines, the norm violations must be ongoing or there must
be an unacceptable risk of future norm violations for a company to qualify for exclusion
from investment by the GPFG. In this connection, the Council accords weight to the way
a company has responded when norm violations have been uncovered, and what it has
done to prevent any reoccurrences. When assessing a company’s initiatives, the Council
relies on the UN’s Guiding Principles on Business and Human Rights (UNGP).7 According
governance/relazioni-governo-societario/fincantieri-report-on-corporate-
governance-and-ownership-structure-2024.pdf.
7 The United Nations (UN) (2011), Guiding Principles on Business and Human Rights
(HR/PUB/11/04):
2to these principles, companies must identify their business operations’ actual and
potential adverse impacts, and remedy any norm violations uncovered. Furthermore,
the company must assess whether the initiatives it has implemented are effective and, if
necessary, make adjustments to prevent any new abuses.
1.2 Human rights standards
The Council refers to Article 7 of the International Covenant on Economic, Social and
Cultural Rights (ICESCR), which protects the right to fair and decent working conditions,
including fair pay and equal pay for equal work, with no discrimination of any kind.
Furthermore, the Covenant establishes the right to safe and healthy working conditions,
including a reasonable limit on working hours and regular days off.8 The Committee on
Economic, Social and Cultural Rights (CESCR) has highlighted how vulnerable migrant
workers are to exploitation in the labour market:
“These workers, in particular if they are undocumented, are vulnerable to exploitation,
long working hours, unfair wages and dangerous and unhealthy working
environments. Such vulnerability is increased by abusive labour practices that give the
employer control over the migrant worker’s residence status or that tie migrant
workers to a specific employer. If they do not speak the national language(s), they
might be less aware of their rights and unable to access grievance mechanisms.
Undocumented workers often fear reprisals from employers and eventual expulsion if
they seek to complain about working conditions (...).” 9
www.ohchr.org/sites/default/files/documents/publications/guidingprinciplesbusine
sshr_en.pdf
8 UN (1966), International Covenant on Economic, Social and Cultural Rights:
https://www.ohchr.org/en/instruments-mechanisms/instruments/international-
covenant-economic-social-and-cultural-rights.
9 UN (27 April 2016), Committee on Economic, Social and Cultural Rights (CESCR),
General Comment No. 23, On the right to just and favourable conditions of work
(Art. 7 of the Covenant) (E/C.12/GC/23), section E(e), p. 12:
https://www.refworld.org/legal/general/cescr/2016/en/122360.
3The Council refers, moreover, to the ILO’s Migrant Workers Convention (No.143), whose
object is to protect the rights of migrant workers.10
1.3 Sources
This recommendation rests on legal documents and newspaper articles from Italy.
Fincantieri has also published information on its website and furnished the Council with
information.
2 Background
2.1 Fincantieri’s operations
Fincantieri has nine shipyards in Italy.11 The yards act as vast building sites, with the
company’s own employees coordinating hundreds of subcontractors.12 The
subcontractors perform work inside the shipyard premises, access to which is
controlled.13 The relationship between Fincantieri and the subcontractors is based on
binding contracts, under which Fincantieri is entitled to supervise the subcontractors
and suspend or terminate the relationship as it sees fit.14
According to the company’s Sustainability Report for 2023, 80 per cent of its final
products are fabricated with the help of other companies. “Fincantieri works as de facto
system integrator, taking responsibility for the project as a whole.” The company further
states: “As regards the Italian activities, Fincantieri acts as leader and group cluster for a
10 The International Labor Organization (ILO) (1975), Convention No. 143 concerning
migrant workers:
https://normlex.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_IL
O_CODE:C143.
11 Fincantieri, World Presence: https://www.fincantieri.com/en/group/world-
presence/. (Last visited 4 October 2024.)
12 Fincantieri (2023), Sustainability Report, p. 144.
13 Fincantieri (30 January 2024), letter to the Council on Ethics.
14 Fincantieri (28 January 2020), Suppliers Code of Ethics, p. 19:
https://www.fincantieri.com/globalassets/sostenibilita2/responsabilita-
economica/fincantieri_suppliers_code_of_ethics2.pdf.
4large number (over 7,000) of Small and Medium Enterprises.”15
The company discloses that approx. 2,400 companies were involved in various
production processes at its Italian shipyards in 2023, while the number of workers
employed by subcontractors engaged at “company sites” exceeded 45,000. On average,
27,000 such workers were on site every day. Of these, around 42 per cent were Italian,
17 per cent from various other EU countries, while 40 per cent came from non-EU
countries. The largest contingent of foreign workers (26 per cent) came from
Bangladesh, while 13 per cent were from Romania.16
2.2 Report from the UN Human Rights Council’s working group
on human rights and multinational enterprises
The UN Human Rights Council’s working group on human rights and multinational
enterprises visited Italy in 2021 and published a report on its findings, in which it
highlighted the vulnerable position of migrant workers:
“Several stakeholders described the situation of migrant workers as one of occupational
blackmail where, because of their vulnerable situation, including regarding work
contracts and residency permits, workers have no choice but to work under conditions
of extreme exploitation, frequently falling into a cycle of debt-bondage. The current
regime of regularization ties the permit for the legal stay in Italy to a work contract,
which puts migrant workers in a situation of dependency, thus exposing them to the
risks of an exploitative cycle.”17
2.3 Relevant legislation
Article 36 of Italy’s constitution states that “Workers have the right to a remuneration
proportional to the quantity and quality of their work and, in any case, sufficient to ensuring
them and their families a free and dignified existence.” The country’s employment tribunals
apply the minimum wage established in collective agreements as a reference for
15 Fincantieri (2023), Sustainability Report, p. 144.
16 Fincantieri (2023), Sustainability Report, p. 145.
17 UN Human Rights Council (17 June 2022), p. 5: A/HRC/50/40/Add.2 (undocs.org).
5determining whether a company is complying with Article 36.18 Since 2016, the illegal
supply and exploitation of labour has been punishable under section 603 bis of the
Italian Penal Code.19 Whereas an offence was previously considered to have taken place
only in connection with the use of violence or threats, under the new legal provision
violence or threats are now deemed to be aggravating circumstances.20 The purpose of
the law was to combat the “gangmaster system” (in Italian caporalato) that involves the
recruitment and gross exploitation of both Italian and foreign workers, particularly in the
agricultural sector.21
In Italy, a company may be held criminally liable for offences committed on its behalf or
for its benefit.22 This includes trafficking, forced labour and the illegal supply and
exploitation of labour.23 Criminal sanctions are of an administrative nature and may, for
18 Garnero, Andrea (2018), The dog that barks doesn’t bite: coverage and compliance of
sectoral minimum wages in Italy, in IZA Journal of Labor Policy 7:3, p. 5:
https://doi.org/10.1186/s40173-018-0096-6.
19 Cucchiara, Maria Francesca and Baracchi, Anna, The Italian legal framework
against labour exploitation. A legal assessment, specifically targeting
undocumented migrants, ASGI. The article’s para. 3(c) explains article 603 bis of the
Italian Penal Code: https://media.business-
humanrights.org/media/documents/files/documents/ASGI_HRIC_BHRRC_May2017_
REV_19.7.pdf. (Last visited 28 October 2024.)
20 De Luca and Partners (30 November 2016), concerning law no. 199/2016:
https://www.delucapartners.it/en/dlp-insights/normativa/the-decree-amending-the-
criminal-offence-of-illegal-intermediation-and-exploitation-of-work-set-forth-by-
section-603-bis-of-the-italian-criminal-code-published-by-the-italian-official-
gazette/.
21 Lexology (10 November 2016), New Italian law on the ‘gangmaster system’:
https://www.lexology.com/library/detail.aspx?g=f6eeb159-2d8b-42ea-80ea-
169097391a54.
22 Law 231/2001 on the criminal liability of organisations:
https://www.normattiva.it/uri-res/N2Ls?urn:nir:stato:decreto.legislativo:2001-06-
08;231.
23 Articles 601, 602 and 603 bis of the Italian Penal Code.
6example, include fines, exclusion from public procurement contracts, the revocation of
licences or permits, and the confiscation of profits from the illegal activity. Criminal
liability does not apply to companies that have satisfactory systems to prevent the
offences so covered.24 These companies must have a structure in place that is
responsible for ensuring compliance with specified penal clauses.25
3 The Council’s findings
In 2018, the Italian police opened an investigation into Fincantieri’s subcontractors in
response to many allegations of labour rights violations in connection with assignments
at the company’s shipyards. The investigation uncovered alleged abuses relating to
2,000 people at the Porto Marghera shipyards alone.26 Some criminal proceedings have
already been determined by the courts, while other cases remain ongoing.
24 Whistlelink (22 November 2021), Italian Law 231: The criminal liability of
organisations: https://www.whistlelink.com/blog/italian-law-231-the-criminal-liability-of-
organisations/, and Baker McKenzie blog, Corporate Liability in Italy:
https://www.globalcompliancenews.com/white-collar-crime/corporate-liability-in-italy/.
25 Fincantieri (19 December 2023), Modello di Organizzazioni, Gestioni e Controllo ex
D.Lgs. 8 giugno 2001 n. 231. Description of the company’s model for compliance with
Law 231: https://www.fincantieri.com/globalassets/sostenibilita2/business-
ethics/fincantieri_modello-231-parte-generale_pubblicato-19dic23.pdf.
26 Il Fatto Quotidiano (28 March 2023), Porto Marghera, quasi 2mila lavoratori nei
cantieri navali sfruttati e sottopagati: l’indagine della Guardia di Finanza:
https://www.ilfattoquotidiano.it/2023/03/28/porto-marghera-quasi-2mila-lavoratori-nei-
cantieri-navali-sfruttati-e-sottopagati-lindagine-della-guardia-di-finanza/7111740/.
7Over the years, there have also been a number of civil lawsuits in which Fincantieri has
been found jointly and severally liable for subcontractors’ failure to pay the wages owed
to employees working on assignment at Fincantieri’s shipyards.27, 28
3.1 Litigation pursuant to the law on the exploitation of
labour
3.1.1 Ongoing cases
Porto Marghera shipyard
Legal proceedings are currently underway before a court in Venice concerning both the
exploitation of labour and corruption.29 Of the 32 individuals indicted, 17 were employed
at Fincantieri, with ten of these under indictment for the exploitation of labour. While 30
workers from Bangladesh have been named as aggrieved parties in the case, the
indictment makes it clear that there are additional victims. The matters in question are
alleged to have taken place from December 2016 to the close of 2018.30
27 To protect employees working under subcontracts, Italian law imposes joint and
several liability on the client in the event of default by the subcontractor (article
1676 of the Italian Civil Code, article 29 of Law 276/2003). B&C Legal (19 January
2022), The joint and several liability of the client in works/services contracts under
Italian Law: https://www.fincantieri.com/globalassets/sostenibilita2/business-
ethics/fincantieri_modello-231-parte-generale_pubblicato-19dic23.pdf.
28 Fincantieri has regularly included disclosures concerning such employment-related
litigation in its annual reports. Fincantieri (2023), Annual Report for 2023, p. 261:
https://www.fincantieri.com/globalassets/investor-relations/bilanci-e-
relazioni/2023/fincantieri-annual-report-2023-english-translation-non-esef.pdf.
29 Corriere de Veneto (18 April 2024), Venezia, il racconto degli operai di Fincantieri:
“Eravamo sfruttati, ma solo così mandavamo i soldi alla famiglia”:
https://corrieredelveneto.corriere.it/notizie/venezia-mestre/cronaca/24_aprile_18/venezia-il-
racconto-degli-operai-di-fincantieri-eravamo-sfruttati-ma-solo-cosi-mandavamo-i-soldi-alla-
famiglia-0e123789-6828-43cc-9bef-dc0ff16edxlk.shtml.
30 Court of Venice (28 April 2022), Indictment (RGNR NO. 3173/19, GIP NO. 1538/22).
Information concerning employment terms in the following paragraphs is drawn
from pages 8 and 10.
8Fincantieri is charged under Law 231 for failing to prevent the exploitation of labour.31
According to the indictment, the owners of two of Fincantieri’s subcontractors, along
with Fincantieri employees and agents, exploited workers in a vulnerable situation. The
workers, who are from Bangladesh, depended on being able to produce employment
contracts in order to obtain or retain residence permits in Italy. They are alleged to have
accepted a lower rate of pay than that specified in collective agreements or
commensurate with the work performed.
Pay was set at a fixed hourly rate of EUR 5–7, irrespective of when the work was carried
out or how many hours were worked (so-called “global pay”). The workers therefore lost
out on overtime supplements, supplements for working on public holidays and at night,
paid holidays and sick pay. False timesheets, with fewer hours paid according to
collective agreements, were fabricated to give the impression of lawful working
conditions. The incorrect information on the workers’ payslips also meant they lost out
on pension accruals.
Fincantieri employees are alleged to have contributed to the exploitation by squeezing
prices to such an extent that it was obvious that payments did not correspond to the
work performed. Based on a system of standard costs, time spent is alleged to have
been calculated on the basis of ideal working conditions that did not reflect the real
situation. According to the indictment, Fincantieri practically had a monopoly on the
procurement market for certain services in the district and exploited the situation to
force subcontractors to accept extremely one-sided contractual relations.
There was, allegedly, also an element of extortion with regard to the payment of work
performed without formal prior agreement because the subcontractors were told that
they had to accept the terms Fincantieri set if they wanted further commissions.
Fincantieri is alleged to have failed to perform adequate checks to ensure that
31 Il Gazzettino (28 September 2022), Marghera. Fincantieri, a processo 32 persone:
‘Operai sfruttati per costruire le navi’:
https://www.ilgazzettino.it/nordest/venezia/operai_sfruttati_fincantieri_marghera_
metodo_consolidato_sfruttamento_costruzione_navi-6954901.html. Il Gazzetino (16
November 2022), Fincantieri, la Procura: 31 indagati per sfruttamento e
corruzione.Chi sono, le accuse le la difesa:
https://www.ilgazzettino.it/nordest/venezia/fincantieri_sfruttamento_indagati_suba
ppalti_inchiesta_porto_marghera-6323710.html .
9employment terms and conditions at the subcontractors were satisfactory:
“(Fincantieri) failed to perform real checks on the conditions under which the
employees of Venice Group s.r.l. and Naval Welding s.r.l. were working, despite the fact
that such checks should have been performed and were essential, and even though
they were very familiar with the illegal wages system […] Venice Group s.r.l., Naval
Welding s.r.l. and others had practised for many years at Fincantieri S.p.A.'s facility in
order to reduce their costs and offset Fincantieri’s untenable financial terms and
conditions. The practice was known as a result of numerous complaints that various
trade unions had submitted over many years (and widely published in the
newspapers) about the illegal “global pay” scheme that Fincantieri’s subcontractors
used, and the failure to pay employees for some of the hours they actually worked.” 32
Several Fincantieri employees have been indicted for receiving bribes from companies in
return for contracts.33
Ancona shipyard
Legal proceedings are currently underway before the Court of Ancona against one of
Fincantieri’s subcontractors. It is alleged that workers from Bangladesh were forced to
pay half of their EUR 1,200 monthly salary to managers at the company they worked for.
This company had undertaken assignments relating to insulation work aboard ship. The
workers are alleged to have worked up to 260 hours a month, although it should have
been 173 hours. These offences are alleged to have taken place between 2017 and
2019.34
32 Court of Venice, Indictment (2022), p. 8. (Translation by the Council on Ethics.)
33 Il Gazzetino (12 January 2023), «Sistema Fincantieri, lavoro sottopagato», via al
processo contro dirigenti e funzionari:
https://www.ilgazzettino.it/nordest/venezia/fincantieri_lavoro_sottopagato_process
o_dirigenti_funzionari-7162167.html.
34 Today Cronaca (2 February 2024), Operai ridavano indietro metà busta paga:
"Meglio avere 600 euro che vendere rose in strada”:
https://www.today.it/cronaca/operai-bengalesi-cantiere-navale-ancona.html.
103.1.2 Court rulings
Porto Marghera shipyard
In January 2023, ten individuals from seven of Fincantieri’s subcontractors were
sentenced to terms of imprisonment of between one and two years for exploitation of
the labour force.35 In addition, three people were convicted of aiding and abetting this
by fabricating documentation to make it look as though the terms of employment were
legal. Around 80 people were listed as aggrieved parties in the case.
As immigrants, many workers depended on having employment contracts in order to
retain their residence permits in Italy, and were obliged to accept pay and working
conditions in violation of laws and collective agreements. The workers were paid a fixed
hourly rate of EUR 7 or less, irrespective of when the work took place (no supplements
for night work or work on public holidays) or how many hours they had worked in
excess of normal working hours (no overtime payment).
The Court found this to be a deliberate act for the purpose of infringing the workers’
legal and collectively agreed rights, since false payslips indicating that the workers had
received the official rate of pay had been fabricated. The workers had not received sick
pay or holiday pay or other statutory benefits. 36 Many had worked extremely long
hours, in some cases 12 hours a day.37 The Court also pointed to safety violations and to
the fact that these workers undertook the most hazardous and physically onerous
work.38
35 Court of Venice (19 January 2023), Ruling (RGNR 8149/21, 6855/2018). Il Gazzetion
(20 January 2023), Sfruttavano i lavoratori di Fincantieri, tredici condanne per 17
anni di carcere:
https://www.ilgazzettino.it/nordest/venezia/sfruttavano_i_lavoratori_di_fincantieri_t
redici_condanne_per_17_anni_di_carcere-7178482.html.
36 Court of Venice (19 January 2023) pp. 12–17.
37 Documentation relating to overtime in the ruling shows 180–200 working hours per
month. At the same time, however, normal working hours were stated as 11 hours
per day, including a one-hour lunch break, on weekdays, and six hours on
Saturdays, which adds up to a higher monthly figure for working hours.
38 Court of Venice (19 January 2023) pp. 40–57.
11Neither Fincantieri nor the company’s employees were indicted in connection with this
case. Nevertheless, the Court presumes that Fincantieri used its position of power to
dictate contractual terms that contributed to the gross exploitation of vulnerable
workers by its subcontractors. This was deemed to constitute mitigating circumstances
in the Court’s sentencing decision.39
Monfalcone shipyard
In May 2023, three employees of one of Fincantieri’s subcontractors were sentenced to
terms of imprisonment of between seven and ten years, in part for illegal labour supply
and exploitation of labour. This case also related to migrant workers who were
subjected to wage theft in that a fixed, low hourly rate was paid out regardless of when
the work was performed. The Court found that statutory rest periods had not been
complied with. The workers were also pressured, in some cases through the use of
physical violence, to hand over part of their wages to the guilty parties and to pay them
a sum of money in return for work.40
An earlier, similar, case involved a Venezuelan contractor who, when working for
Fincantieri between 2017 and 2019, allegedly exploited 11 workers from a variety of
African countries. The workers are alleged to have worked 240 hours per month and
received illegally low wages. They were also forced to hand over part of the wages they
received, corresponding to EUR 200–400, on pain of losing their jobs. The contractor
pleaded guilty and was sentenced to imprisonment for three years and ten months.41
3.2 Defamation suit
In June 2018, Fincantieri accused two journalists, a trade union leader and an employee
at the Italian National Labour Inspectorate’s regional office in Venice of defamation in
39 Court of Venice (19 January 2023) pp. 113–128.
40 Court of Gorizia (4 May 2023), Ruling 504/2023 (RGNR 696/21). La Nuova di Venezia
e Mestre (16 February 2021), Subappalti Fincantieri inchiesta fotocopia Arresti a
Monfalcone:
https://nuovavenezia.gelocal.it/venezia/cronaca/2021/02/16/news/subappalti-
fincantieri-inchiesta-fotocopia-arresti-a-monfalcone-1.39911198.
41 Il Piccolo (15 August 2021), Processo bis per caporalato dopo il rinvio per un cavillo:
https://ilpiccolo.gelocal.it/trieste/cronaca/2021/08/14/news/processo-bis-per-
caporalato-dopo-il-rinvio-per-un-cavillo-1.40601502.
12the wake of a TV programme broadcast by the media company RAI.42 Part of the
programme discussed reforms being implemented at the Italian National Labour
Inspectorate and the exploitation of workers at Fincantieri’s Porto Marghera shipyard.
The defamation case was thrown out of court as being without legal merit, with the
judge stating that if such litigation were allowed to go forward, it would have a “chilling
effect” that would adversely impact freedom of the press and freedom of expression.43
In response to this, Fincantieri stated that it: “found itself forced to file a complaint because
in said report it was accused, erroneously and totally unfounded, of organizational
deficiencies and omissions attributable, by law, exclusively to the supervisory bodies in the
field of employment protection, as well as conduct and behavior which are illegal or border
on the limits of legality, not only all to be demonstrated in concrete terms, but, above all, even
in this case, attributable exclusively to the related companies working in the shipyards of
Fincantieri, with particular reference to the Marghera shipyard.”44
3.3 Other matters
Over the past few years, several cases relating to the death of workers exposed to
asbestos at the company’s shipyards in the 1980s have been brought before the courts.
These cases relate both to criminal liability for certain former Fincantieri employees and
the company’s liability for compensation.45 The Council has not examined this issue in
further detail.
42 RAI (14 May 2018), “Fuori Controllo”:
https://www.rai.it/programmi/report/inchieste/Fuori-controllo-742a49c3-7bdc-4b4c-
b451-2d6abbb68425.html.
43 Court of Trieste (10 April 2019), Decision to dismiss the case (RGNR 4352/18), p. 3.
44 Fincantieri (31 May 2024), email commenting on the Council on Ethics’ draft
recommendation.
45 Ansa Italy (12 June 2024), Amianto, Cassazione annulla assoluzione dirigenti
Fincantieri: https://www.ansa.it/sito/notizie/cronaca/2024/06/12/amianto-
cassazione-annulla-assoluzione-dirigenti-fincantieri_aab546b8-460c-4a1e-9f2f-
08a40a1d0d78.html, and Ansa Italy (3 October 2024) Amianto nel cantiere,
risarcimento da un milione per operaio:
https://www.ansa.it/campania/notizie/2024/10/03/amianto-nel-cantiere-
134 Information provided by the company
Fincantieri has published a number of court filings as well as extensive reports on its
website. The Council on Ethics has corresponded with the company on several occasions
and has also held a video conference with its representatives.
4.1 Fincantieri’s follow up of its subcontractors
Due diligence and risk assessments
Fincantieri updated its human rights policy on 10 October 2024. According to this, the
company explicitly pledges to abide by the UN Guiding Principles on Business and
Human Rights (UNGP).46 The company’s previous policy from 2020 also referred to these
principles.47 In 2023, with the help of a major international firm of consultants,
Fincantieri carried out its first human rights due diligence assessment, as required by
the UNGP. However, this assessment encompassed only its European shipyards.48
During this process, the company identified “which risk events Fincantieri needs to
manage more carefully, including forced labour, modern slavery and human trafficking,
inadequate working conditions and violation of freedom of association, violation of health
risarcimento-da-un-milione-per-operaio_de04ef09-8f39-48de-b156-
e3811ca2d828.html.
46 Fincantieri (29 September 2024) Policy Human Rights Commitment to Respect Human
Rights and Diversity: https://www.fincantieri.com/en/media/press-
releases/2024/fincantieri-releases-new-human-rights-policy.
47 Fincantieri (28 January 2020) Policy on Human Rights – Commitment for the Respect of
Human Rights and Diversity:
https://www.fincantieri.com/globalassets/sostenibilita2/responsabilita-risorse-
umane/diversita-e-pari-opportunita/fincantieri_policy_on_human_rights2.pdf.
48 Fincantieri previously performed risk assessments that included matters relating to
labour rights, but these did not comply with the UNGP’s requirements. In an email
to the Council on Ethics dated 9 September 2022, Fincantieri wrote that: “(…) the
Group has not yet implemented a fully structured due diligence process able to map
potential human rights violations during its operations.”
14and safety at work and violation of the rights of local communities.” The initiatives that were
adopted on the basis of this risk assessment will be implemented by the end of 2025: “In
2024, we will continue implementing the action plan defined after the due diligence activity
and in 2025 we will implement the monitoring systems for human rights.”49
Suppliers’ Code of Ethics
Fincantieri requires all its subcontractors to sign the company’s Suppliers’ Code of Ethics
and thereby commit to ensuring their employees receive reasonable terms and
conditions in compliance with legislative provisions and collective agreements.50
Suppliers must also monitor compliance with the Code’s provisions, both internally and
in their own supply chains. For its part, Fincantieri pledges to “closely monitor Suppliers'
compliance with this Code, reserving for itself the right to request them all the necessary
documentation and to conduct independent audits at their facilities / premises / buildings /
plants.” 51
Companies commissioned to perform work for Fincantieri must also sign an agreement
of a more practical nature in order for their workers to enter the shipyards.52 For
example, the subcontractors undertake to register the names of the employees,
electronically record working hours, submit timesheets, provide access to payslips etc,
and undertake specific HSE procedures.
Qualification and follow-up of suppliers
Fincantieri has a qualification process for suppliers that includes occupational health,
safety and environment (HSE) and respect for labour rights.53 If they so wish, particularly
49 Fincantieri (2023), Sustainability Report, pp. 91–92.
50 Fincantieri (28 January 2020), Suppliers’ Code of Ethics, p. 4:
https://www.fincantieri.com/globalassets/sostenibilita2/responsabilita-
economica/fincantieri_suppliers_code_of_ethics2.pdf.
51 Fincantieri (28 January 2020), Suppliers’ Code of Ethics, p. 19.
52 Fincantieri (1 July 2021), Rules for the Companies Operating within the Fincantieri
Working Units: https://www.fincantieri.com/globalassets/supplier/041-
035_nousengl.pdf.
53 Fincantieri (2023), Sustainability Report, p. 133.
15important suppliers are subjected to thorough assessments and are registered in the
company’s supplier database. In 2023, this comprised 1,000 suppliers.54
In 2023, the company established a dedicated ESG assessment programme for these
suppliers. Under this scheme, strategic suppliers accounting for 32.4 per cent of the
total procurement volume were assessed.55
The most serious problems identified are followed up by the Supplier Observatory, an
internal body drawn from several departments that may order suppliers to implement
improvement plans or, if appropriate, decide to phase them out entirely. In 2023, 221
suppliers were followed up – 151 with improvement plans and 32 with phase-out plans
(12 of which on ethical grounds). 56
The company also performs an extended due diligence assessment of strategic
suppliers engaged in businesses with a high risk of mafia infiltration (e.g. transport of
waste to landfills, equipment leasing and on-site security services).57
In response to questions relating to the follow-up of suppliers not defined as strategic,
Fincantieri states: “Non-strategic suppliers, namely occasional or not critical to our
manufacturing process, are monitored if specific critical issues arise.” 58
54 Fincantieri (2023), Sustainability report, p. 133. According to the company website,
suppliers are “considered strategic in terms of presence in the Supplier Register
and turnover developed with Fincantieri S.p.A.”:
https://www.fincantieri.com/en/sustainability/economic/sustainable-supply-chain/.
(Last visited 15 October 2024.)
55 Fincantieri (2023), Sustainability Report, p. 135.
56 Fincantieri’s (2023), Sustainability Report, p. 135.
57 Fincantieri and Italy’s Ministry of the Interior (27 February 2017), National
Framework Tender Protocol Between the Ministry of Interior and Fincantieri SpA for
the Prevention of Infiltration Attempts by Organized Crime:
https://www.fincantieri.com/globalassets/supplier/national-framework-tender-
protocol.pdf.
58 Fincantieri (30 January 2024), email to the Council on Ethics.
16Whistleblowing system
Fincantieri has operated a whistleblowing system since 2009. The system enables
violations of the law and company guidelines to be reported.59 With respect to reports
relating to Fincantieri’s Italian operations in 2023, the company writes: “It should be noted
that in 2023 Fincantieri S.p,A received only 7 reports and all were investigated.”60 The
company has not received any reports about the subcontractors that have been
convicted or are under investigation.61
Monitoring
Fincantieri performs “annual second-party audits” in order to monitor strategic
suppliers.62 The companies are selected for this kind of audit on the basis of, for
example, the size of their contracts with Fincantieri, their type of business and
geographic location. Some random checks are also performed on the strategic
suppliers.63
In the latest five-year period, Fincantieri has performed 162 such audits. In 2023, 49
“second-party audits [were performed] on the Group's suppliers of priority/strategic interest
regarding the issues of respect for human rights and health and safety. Furthermore, with the
same purposes, but with the support of external companies with proven experience in the
sector, 37 additional audits were carried out. During 2023, no audit proved to be below
expectations.” 64 The company considers that the scale and design of the audits complies
with relevant guidelines, such as those set out in the UNGP.
59 Fincantieri (2023), Sustainability Report, p. 93.
60 Fincantieri (31 May 2024), email commenting on a draft recommendation.
61 Fincantieri (30 January 2024).
62 Fincantieri (May 2023), Sustainability Plan 2023–2027,
https://www.fincantieri.com/globalassets/sostenibilita2/piano-di-
sostenibilita/pdf/fincantieri_2023-2027-sustainability-plan.pdf
63 Fincantieri (30 January 2024).
64 Fincantieri (31 May 2024).
17Access and identity checks at the shipyards
Access to the shipyards is controlled. “Each subcontractors’ worker is provided with a photo
ID badge, that must be requested before the first entrance and visible during the permanence
in the shipyards.”65
All those present are clocked in and out. Fincantieri discloses that it stores data on its
own employees’ attendance. Others are simply registered as present for security
reasons. Fincantieri further states that: “The company is committed in strengthening
sample checks to match the presence of the contractors’ employees recorded on the
attendance registration system and the ones reported in the Single Labour Register. Any
discrepancies may result in the termination of the order and cancellation from the supplier
register.”
In its comments on a draft recommendation, the company stated: “The control takes
place for safety purposes but it is not up to Fincantieri to carry out an investigation into the
concrete personnel management methods, also considering the number of workers to access
the factories on a daily basis. The return of the money took place in cash and therefore it was
not possible to have an account of it.”
4.2 Other initiatives
During the video conference, Fincantieri said that the recruitment of qualified staff is
strategically important and that good employment conditions are inextricably bound up
with this. The company pointed to measures to both reduce the need for manual labour
(automation and the use of industrial robots) and to improve access to qualified
personnel (direct employment, education/training and social initiatives). The company
will also reduce the length of its supply chains. Otherwise, the company stated that
dialogue with the trade unions was better than before and that it would improve its
dialogue with the workers at its shipyards. The major personnel changes that have taken
place in the company’s top management and at the shipyards in recent years was also
highlighted.
4.3 The company’s reaction to and reporting on the
investigations
In its Sustainability Report for 2023, the company discloses that “Fincantieri has not
received any final convictions for unfair competition practices, tax evasion, corruption or
65 Fincantieri (31 January 2023).
18bribery, nor has it been involved in violations of human rights or labour rights. Moreover, no
queries were submitted by the Business and Human Rights Resource Centre (BHRRC) and no
cases were handled by the OECD National Contact Point (NCP).” 66
In response to queries concerning the cases currently before the courts, Fincantieri
states that it “applies the highest operational and regulatory compliance standards across all
its activities, and consistently bases its conduct on ethical and utmost transparency
principles.”
It further states that “With regard to the alleged corruption and worker exploitation case
referred to in the press article ‘Italian police search shipbuilding companies linked to
Fincantieri’ please note that Fincantieri is extraneous to any illegitimate behavior and fully
cooperated with the investigating authorities. Should the allegations be confirmed, the
Company will take prompt measures against any employees who may have committed illegal
activities, harming its reputation.”67
In response to queries about whether any of the companies under investigation have
been looked into by the internal control unit, the company states that it “is not a party to
the investigation and has no direct evidence on the matter. Should the Company be involved
in the proceedings, it will adopt the appropriate measures and procedures.” 68
With respect to sanctions imposed on employees charged with corruption or
exploitation of the labour force, the company disclosed that two individuals have had
their contracts of employment terminated.
In response to queries about how the board and senior management have addressed
the Court’s finding that the terms set by Fincantieri are a driver for the abuse of labour
rights, the company states: “Fincantieri constantly monitors the compliance and observance
of the laws and its own procedures within its sites. The Company is not a party to the
proceedings mentioned above, becoming aware of the matter from press articles. Should the
Company be involved in the proceedings, it will take the proper measures and procedures.” 69
66 Fincantieri (2023), Sustainability Report, p. 113.
67 Fincantieri (9 September 2022), email to the Council on Ethics.
68 Fincantieri (30 January 2024).
69 Fincantieri (30 January 2024).
19In a subsequent response, Fincantieri asserts that: “The rates for the contracts were
determined at reasonable conditions determined between the parties and the economic
parameters are higher than the minimum wages, in an unfavorable market situation for
Fincantieri due to a growth in the workload in the context of scarcity of skilled labour
availability.”70
In response to queries about whether the company has altered its control system, since
the monitoring of employment terms and conditions, including wages, does not seem to
be legally compliant and since the subcontractors have submitted false payslips, the
company states: “The statement is not correct. Fincantieri's control systems are fully in
accordance with applicable laws and stock exchange rules (…).” The company then adds: “In
order to further strengthen our controls, after becoming aware of the facts regarding
Marghera shipyard, we have intensified the existing forms of control and launched an
additional system of sanctions against companies with the provision of potential penalties up
to the exclusion from the supplier register.”
In a subsequent response, Fincantieri writes that the company took steps to remove the
supplier Venice Consorzio and related consortium members from its list of suppliers as
far back as 2018. This was due, in part, to irregularities “in the remuneration/contribution
area”, which could be illegal and constitute a risk because Fincantieri has joint and
several liability for employee salaries. It then adds that: “This proves the effectiveness of
the control system.”71
5 The Council’s assessment
The Council on Ethics has assessed the GPFG’s investment in Fincantieri against the
human rights criterion in the Fund’s ethical guidelines.
Through a number of court cases, it has emerged that several thousand employees of
subcontractors that have worked at Fincantieri’s shipyards have been subjected to
grossly exploitative employment terms and conditions. In the most serious cases,
employees at subcontractors have used violence or threats of violence to demand that
workers hand over a portion of their wages. These workers have also had to pay
recruitment fees. The majority of cases relate to non-payment of overtime, non-
payment of supplements for work at night and on public holidays, and non-payment of
70 Fincantieri (31 March 2024).
71 Fincantieri (31 March 2024).
20sick pay. The workers concerned also had long working hours without statutory rest
periods. The Council accords particular weight to the fact that this practice has impacted
immigrants who depended on an employment contract to obtain a residence permit in
Italy. In this very vulnerable situation, they are at the mercy of their employer.
The Council considers that the abuses have a considerable scope and do not appear to
be isolated incidents. Ten of Fincantieri’s subcontractors have been found guilty and
indictments have been drawn up against executives at two more in relation to such
abuses. In court documents, it has also emerged that such employment conditions have
been common over a period of many years. The Council therefore considers that the
practice constitutes a systematic human rights abuse.
Although the workers were not employed by Fincantieri but by its subcontractors, the
Council considers that Fincantieri is contributing to the abuses. The Council attaches
importance to the work having taken place at Fincantieri’s shipyards, access to which is
controlled. Fincantieri’s responsibility is underlined by the fact that the company is
jointly and severally liable for the wages paid to the employees of subcontractors at its
shipyards. It is also material that Fincantieri’s role as client has been deemed a
mitigating circumstance in the sentencing of two convicted subcontractors.
Furthermore, the Council attaches significant weight to the fact that several employees
and former employees of Fincantieri stand indicted for complicity in worker exploitation
and that the company has itself been indicted for failing to have adequate systems in
place to prevent this.
When assessing future risk, the Council attaches importance both to the company’s
response when allegations of labour rights violations have come to light and to what the
company has done to reduce the risk of such violations. The Council notes that the
company has attempted to silence criticism by taking legal action against journalists, the
labour inspectorate and trade union leaders. Fear of such reprisals may contribute to
fewer instances of wrongdoing being discovered.
The Council also considers it noteworthy that the company’s Sustainability Report does
not mention labour rights violations at its shipyards, despite the court cases being well
underway. The Council considers that Fincantieri has persistently provided an overly
positive impression of employment conditions at its shipyards. Nor does the Council
give much credence to Fincantieri’s claims to have learnt of the cases being pursued
against its subcontractors through the press.
Nevertheless, the Council attaches importance to the fact that Fincantieri has
established a system to safeguard labour rights.
21The company points to policy documents and also discloses information about its
whistleblowing channel and supplier qualification processes and monitoring systems.
The Council considers that the company has relied too heavily on document checks and
that the scope of the most thorrough control measures has been insufficient. The most
extensive checks, second party audits, focus on the 1,000 so-called strategic suppliers.
Seen in light of the 2,400 subcontractors that worked at the company’s shipyards in
2023, 49 such audits appears to be a small selection. Nor can the Council see that the
checks are implemented where the risk of norm violations is greatest, since the
suppliers’ financial and strategic significance for Fincantieri is the most important
selection criterion. Furthermore, the Council considers that the absence of
whistleblowing reports and negative findings in the audits could indicate that the
company’s control regime does not adequately identify problems relating to the working
environment.
Despite of these shortcomings, the Council places considerable wight on the fact that
this system seems to be under development. Due diligence assessments in line with the
UNGP’s specifications are one important new initiative, which the company performed
for the first time in 2023. Using this process the company has performed a more
systematic survey of the risk of human rights abuses at its European shipyards than it
has done previously. This has enabled the company to draw up an action plan to reduce
this risk. The company plans to have a labour rights compliance monitoring system in
place by the end of 2025. Although this is a positive step, it also indicates that the
company does not currently have a system against which to measure progress. Nor has
the company disclosed any quantitative targets that could provide an indication of
whether conditions are improving.
The Council further notes that there is a certain gap between policy and practice on
Fincantieri’s part. The Council fails to see why due diligence assessments are not
performed on the company’s shipyards in Asia and America, since the relevant policies
apply to the entire Fincantieri Group – not just its European operations. The due
diligence assessments which are now explicitly mentioned in the new human rights
compliance policy were, moreover, a cornerstone of the core values referenced in the
company’s policy from 2020. In other words, it took three years from the adoption of
these guidelines until one of their most important elements was in place. How firmly the
company’s compliance efforts are rooted and what force they have internally is
therefore unclear to the Council.
Although the Council acknowledges that the company’s new initiatives may reduce the
risk of systematic labour rights violations at Fincantieri’s shipyards, the Council considers
22that substantial uncertainty remains. This is due both to the paucity of information
about actual employment conditions and the fact that many of the company’s initiatives
are of recent date or are still at the planning stage. The Council therefore recommends
that the company be placed under observation for a period of two years.
6 Recommendation
The Council on Ethics recommends to place Fincantieri under observation for two years.
*
Svein Richard
Brandtzæg
Chair
Siv Helen Rygh
Torstensen
Cecilie
Hellestveit
(Sign.) (Sign.) (Sign.) (Sign.) Vigdis Vandvik Egil Matsen
(Sign.)
No comments:
Post a Comment