The UK’s NCA May Investigate Cotton Imports Linked to Modern Slavery

The National Crime Agency (NCA) in the UK has indicated a willingness to investigate companies that import goods made or assembled by forced labourers on the grounds that those products may constitute the proceeds of crime.

This approach was confirmed in a recent case in the English High Court in the context of cotton products imported from the Xinjiang Uyghur Autonomous Region (XUAR).

On 20 January 2023, the High Court issued a ruling in a case brought by the World Uyghur Congress, a non-governmental organisation, against the Home Secretary, HMRC, and the NCA. The World Uyghur Congress had alleged that the defendants had failed to investigate potential breaches of the Foreign Prison-Made Goods Act 1897 (FPMGA) and launch a money laundering probe or start civil confiscation processes under the Proceeds of Crime Act 2002 (POCA). The World Uyghur Congress had provided expert opinions, news articles, and committee reports to the NCA, urging them to investigate concerns that certain imported cotton products from the XUAR were produced by forced labour.

The judge ultimately refused the relief sought, but said that it was clear that “these agreed concerns continue to trouble the Defendant and are the subject of active policy work and engagement” and that there “may be other tools or measures available to the executive and law enforcement agencies, or other evidence which they could receive meeting the requirements […] which could provide an effective basis for tackling the concerns in respect of cotton production in the XUAR.”

The NCA accepted the lobby group’s argument that a company could hypothetically be pursued under the POCA for “acquiring, using or possessing” goods made in conditions that breach UK laws against modern slavery or crimes against humanity. The offences contrary to Section 1 of the Modern Slavery Act 2015 are capable of constituting “criminal conduct” for the purpose of Section 340 of the POCA. However, the POCA only applies where there is a suspected offence to which it is possible to attribute specific property, or consignments of goods.

In this case, the NCA had stated that the “possibility of other information or intelligence coming to light and requiring investigation was not closed off and remains open.” The NCA explained that, prior to the proceedings, the NCA International Liaison Office in Beijing, the head of the Modern Slavery Tactical Advisors Team, and the Modern Slavery Intelligence Development Team had reviewed the information sent by the World Uyghur Congress to HMRC, which was passed to the NCA. Although this information had not changed their assessment of the matter, as nothing had been identified which provided a concrete allegation of modern slavery upon which the NCA could commence an investigation, the NCA remained “open to the possibility that the intelligence picture may change at any time.”

The court considered a report produced by the House of Commons Foreign Affairs Committee on 8 July 2021 which set out that 84% of China’s cotton comes from Xinjiang, and China provides a quarter of the world’s cotton products. The report outlined that the United States had announced a ban on cotton products from Xinjiang in January 2021, and certain businesses have taken similar measures. The judge mentioned the Better Cotton Initiative (BCI), a not-for-profit organisation operating a cotton sustainability programme which carries out assurance and licensing activities in relation to cotton production and manufacture. He noted that in October 2020 the BCI announced that it was ceasing all field activities in the XUAR.

It is believed that this judgment could pave the way for the NCA to open investigations into supply chain crimes. It is notable that the NCA did not challenge the World Uyghur Congress’s underlying prosecution theory that holds companies responsible for how their goods are made. It was accepted that it would not be necessary to prove the specific prison in which the goods were manufactured, but that a link between a specific consignment of goods and their manufacture in a foreign prison would need to be proved for the prohibition under the FPMGA.

The decision provides a reminder that companies will need to be able to show that they have done sufficient due diligence on their supply chains and can trace where their products come from. This decision is consistent with an increasing focus on environmental, social, and governance (ESG) issues in supply chains.

In the United Kingdom, a company is a legal person capable of being prosecuted for most criminal offences, unless a statute indicates otherwise. It will normally only be senior officers of a company, at or close to board level, whose acts are capable of being identified with the company, as opposed to those acting merely as the company's agents or servants. In order to establish corporate liability, it would have to be proved that the “directing mind and will” of the company suspected that the garments had been manufactured using slave labour. For example, the low cost of the garments, as well as geo-political risks, might go some distance towards proving the requisite suspicion.

NGOs, investors and shareholders are increasingly willing to litigate ESG issues in supply chains. It is believed that this is the first time a foreign court has heard arguments from the Uyghurs over the issue of forced labour in Xinjiang. This is one of several similar legal challenges aimed at putting pressure on the EU and UK governments to follow the lead of the United States, where a law has taken effect to ban all cotton products suspected of being made in Xinjiang.

Companies should take a risk-based approach to due diligence in their supply chains and ensure that there is no suspicion of products tainted by forced labour. The UK government has been urged by the Foreign Affairs Committee to “explore the possibility of banning the import of all cotton products known to be produced in whole or in part” in the XUAR and has suggested that “while much focus has been placed on the textile and apparel sector, other areas such as solar energy, agriculture and electronics also bear a substantial risk of forced labour.” Companies should stay vigilant to the possibility that the rules around imports from this region may change and put plans in place accordingly.