Trade unions, human rights activists and politicians have called for urgent labour reforms to protect the thousands of migrant workers building a complex of five-star hotels and museums on Saadiyat Island in the United Arab Emirates, including a new Louvre and the world's largest Guggenheim.

The International Trade Union Confederation and art activism group Gulf Labor have urged the western institutions involved in the project, including the British Museum, to take active steps to address the workers' welfare and press the UAE government to improve their conditions.

The calls come as an Observer investigation found evidence that the emirate's tourism development and investment company (TDIC), which runs Saadiyat, is failing to uphold its own employment policies, with workers left destitute, confined to their quarters and sent home for taking strike action. Migrant labourers building New York University's Abu Dhabi campus on the island were found to be suffering even worse mistreatment.

The investigation reveals that:

■ Companies are withholding the passports of migrant workers, trapping them in the UAE.

■ Thousands of workers are living in substandard or squalid conditions elsewhere in the UAE in apparent breach of the TDIC's pledge to house them all in its model Saadiyat accommodation village.

■ Dozens of workers were deported this year for striking over pay and conditions.

■ Workers decorating the university live in squalid conditions, with 10 men to a room, no free healthcare and some trapped because they have to pay back huge recruitment fees.

■ Mobile-phone video footage of a riot at the SAV in August shows dozens of men roaming the camp armed with metal spears and planks spiked with nails. Men are seen jumping out of windows to avoid the conflict.

■ A worker who claims he lost his leg while building luxury villas has been forced to live on the top floor of a migrant camp for a year. He only received a prosthetic leg last month and has been reliant on the Red Crescent for medical support. His claim for compensation and request for ground-floor accommodation have been rejected.

■ Louvre workers are having to work for nine months to a year just to pay back their recruitment fees. One worker who went on strike over poor wages was kept in his camp unpaid for three months and then sent back to Pakistan with 19 others.

The European council held a meeting on 4 December to discuss the growing concern about migrant workers' rights in the UAE and its neighbour, Qatar. The chair of the European parliament's subcommittee on human rights, German MEP Barbara Lochbihler, said migrant workers in the UAE, including those on Saadiyat Island, were exploited "on a daily basis".

She said: "Minimum labour standards are not respected, there are systematic complaints about poor accommodation and sanitation, salaries and medical services are withheld, and both experts and the migrants themselves report excessive police force and situations of forced labour. This is unacceptable.

"I therefore call on the UAE government, but also on all companies involved in the Saadiyat project – including [the] Louvre, British Museum and Guggenheim – to ensure that any form of mistreatment is addressed and that all migrants can fully enjoy their human rights."

Migrant workers on Saadiyat Island, Abu Dhabi. Photograph: Human Rights Watch

Sharan Burrow, general secretary of the International Trade Union Confederation, said the organisation was "deeply concerned by the abuses of workers' rights on Saadiyat island".

The findings reflected that labour abuses were a systemic problem in the UAE, with migrant workers suffering "extreme exploitation", including unpaid wages and excessively long working hours, she added.

Although the UAE is a member of the International Labour Organisation (ILO) it has not ratified the UN body's convention on freedom of association, which allows for industrial action. Burrow also warned the international institutions involved in the Saadiyat project that they shared responsibility for the workers' welfare. She said: "Clearly their reputations are at risk. International institutions need to be aware that if they associate their name with developments they must insist on full respect for ILO standards."

Azfar Khan, migrant specialist at the ILO, said the body was aware of the situation on Saadiyat, said although the UAE had not ratified the specific convention on strike action, it was still potentially in breach of the ILO's rules. "Even if countries have not ratified the convention they are obligated by the ILO's constitution that as member states they will not go against the article of the convention."

Nicholas McGeehan, Gulf researcher at Human Rights Watch, said: "These revelations should be a reality check for anyone who has been fooled into believing that the UAE is making progress on migrant workers' rights and they should anger the high-profile institutions who have set up on Saadiyat."

Gulf Labor, a coalition of international artists which is mounting a year-long protest against the mistreatment and exploitation of migrant workers on Saadiyat, said the findings should shame the western institutions involved.

British artist Guy Mannes-Abbott said: "The Guggenheim's image is certainly soiled. The Louvre banks millions of dollars every year for use of their 'brand', while its new museum is being built by what Human Rights Watch describes as 'forced labour'. The British Museum's role has so far escaped notice, but it should consider gifting or returning items that they will be stuffing the Sheikh Zayed National Museum with on lucrative loan agreements."

A Guggenheim spokeswoman denied that its brand had been tarnished. "We visit the workers' village each time we are in Abu Dhabi. We are satisfied with the conditions observed."

She said the museum's director, Richard Armstrong, had raised the issue of workers' rights and conditions in his most recent meeting with the TDIC last week and would continue to do so. The museum would not be discussing details of the meetings with the media as this was "a matter of cultural diplomacy," she added.

A spokeswoman for the Louvre said that, under the terms of the deal between the French and UAE governments, the TDIC held responsibility for construction and working conditions. She added that the French authorities were "particularly attentive" to social conditions on Saadiyat and would continue efforts to ensure they met high standards.

The Observer understands that the British Museum held an emergency meeting about the situation on Saadiyat to deal with adverse publicity. Attending staff were warned not to speak to the press. A spokeswoman said they would continue to review workers' rights in their regular meetings with the TDIC.

A TDIC spokesman refused to comment to the Observer. The second annual audit of worker welfare for the company by PricewaterhouseCoopers is due to be published on Sunday. Construction firms Al Jaber and Arabtec also failed to respond to inquiries.

An NYU spokesman said the university and its Abu Dhabi partners "have put into place a methodical monitoring, compliance, and enforcement system".