Qatar has been given 12 months to end migrant worker slavery or face a possible United Nations investigation.

The warning sets the 2022 World Cup host nation on a path to becoming only the fifth ever country to face a formal inquiry by the UN’s International Labour Organisation into allegations of forced labour after Burma, Haiti, Liberia and Portugal. It could ultimately pave the way for international sanctions.

The move follows an ILO delegation to the Gulf state this month that found migrant workers stranded for months without pay and stripped of their passports. The delegation, led by the Japanese ambassador to the United Nations in Geneva, Misako Kaji, met undocumented workers who had no access to free healthcare and were deep in debt. They also saw workers’ accommodation that did “not satisfy by far the minimum standards, with most accommodation housing 10 to 12 workers per small room [and with] unhygienic and poor kitchen and sanitary facilities”.

The ILO has told Qatar to act on its warnings about the treatment of the most vulnerable workers and prove its proposed law changes are working or it could decide in March 2017 to launch a “commission of inquiry”.

Qatar has promised to introduce a new law later this year to end the kafala system under which migrant workers can only work for their sponsor and have no freedom to change employer or leave the country without their employers’ approval. Human rights campaigners have complained this allows conditions that amount to modern-day slavery for many of the migrant worker population of more than 1.5 million in Qatar.

The Qatar prime minister, Abdullah bin Nasser bin Khalifa Al Thani, reportedly admitted to the ILO that Qatar faced “a big challenge on the labour front”, but he claimed the main issues related to recruitment practices in labour-sending countries.

The delegation found that Qatar was not doing enough to stop passports being confiscated or to stop workers being forced to pay high recruitment fees, which often place them in heavy debt.

The action comes in response to a complaint from a dozen countries including the UK, France, Pakistan and Canada, that Qatar was failing to observe the UN convention on forced labour.

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They stated that “from the moment migrant workers begin the process of seeking work in Qatar, they are drawn into a highly exploitative system that facilitates the exaction of forced labour by their employers”.

This included practices such as contract substitution, recruitment fees for which many take out large, high-interest loans, and passport confiscation, they said.

“Qatar fails to maintain a legal framework sufficient to protect the rights of migrant workers consistent with international law and to enforce the legal protections that currently do exist,” they said. “Of particular concern, the sponsorship law, among the most restrictive in the Gulf region, facilitates the exaction of forced labour by, among other things, making it very difficult for a migrant worker to leave an abusive employer.”

The ILO has given Qatar credit for taking some concrete measures on workers’ welfare. It said it saw improved accommodation, called the Labour City, being built for 100,000 workers.

“Rooms measured 24 sq m and were shared by four workers,” the delegation reported. “The buildings included canteens, computer rooms, gym facilities and a TV room, and the Labour City benefited from facilities such as a health centre, shops, a police station and green areas.”

It also praised a new system to prevent the non-payment of wages by more than doubling the number of workers paid by bank transfer to more than 900,000. However, it said this seemed to benefit workers in large rather than small companies.

Sharan Burrow, general secretary of the International Trade Union Confederation, said: “Qatar has the financial means to make the real reforms, ensure safe work and decent wages, and the international community is ready to help when the government finally shows that it is serious. That day has yet to come, but the new ruling from the ILO should hasten Qatar’s realisation that the world will only be convinced by real change, not by public relations exercises.”