Shipbuilding Contracts and the Norwegian Transparency Act

In recent years, there has been a growing emphasis on corporate responsibility regarding human rights and working conditions globally. This trend has culminated in various legislative measures, including Norway’s Transparency Act of 2021^[1],  which mandates larger enterprises to assess and disclose their impact on fundamental human rights and decent working conditions.

The shipbuilding industry is widely scrutinised for its labour practices. Norwegian-linked shipowners, who contract with shipyards, for instance in Turkey and Asia, must now ensure that their operations align with the Transparency Act. The Act seeks to promote fundamental human rights within Norwegian enterprises and, in particular, their supply chains. The Act applies specifically to large enterprises that exceed certain thresholds in revenue, balance sheet total, or employee numbers, and it requires these enterprises to conduct due diligence assessments in line with the OECD Guidelines for Multinational Enterprises.

To facilitate compliance, Nordisk has drafted a Human Rights Compliance Clause for incorporation into shipbuilding contracts. This clause requires the builder to adhere to the shipowner’s human rights policies and assists the shipowner in complying with the Norwegian Transparency Act. The builder commits to maintaining high standards of human rights throughout the contractual engagement, in accordance with the United Nations Guiding Principles on Business and Human Rights^[2] . The clause also requires builders to ensure that their subcontractors meet the same standards, with the shipowner being entitled to perform audits and inspections to verify compliance.

This approach reflects a proactive stance in corporate governance by integrating adherence to international human rights standards into the fabric of contractual obligations. Implementing such clauses not only mitigates the risk of legal implications but it is also a prudent strategy for safeguarding against operational and reputational risks.

For shipowners linked to Norway, incorporating such clauses in shipbuilding contracts is important, especially in regions where labour standards might not naturally align with those mandated by Norwegian law. As ever, Nordisk is always available to assist its members with this integration, ensuring that their global operations remain both compliant and competitive in a world increasingly focused on ethical business practices.  Do get in touch with the Nordisk Transactions Group  for a copy of the Human Rights Compliance Clause.

^[1] – The act came into force on 1 July 2022
^[2] – guidingprinciplesbusinesshr_en.pdf (ohchr.org)