Landmark High Court Decision on Supply Chains and Human Rights

Landmark High Court Decision on Supply Chains and Human Rights

Overview

The British Government has defended a claim brought by the World Uyghur Congress ("WUC") and the Global Legal Action Network ("GLUN") (together, the "Claimants") over the alleged failure to tackle imports of Uyghur forced-labour cotton into the UK. Findings from the case create important milestones that have the potential to impact international trade and the use and import of forced labour goods across a wide variety of sectors.

The case is particularly significant for several reasons; it was the first time that issues relating to Uyghur repression had been raised in a foreign court, as well as the first case concerning the proceeds of human rights abuses as criminal property under the Proceeds of Crime Act 2002 ("POCA"), which is further explored below.

The claims

Evidence presented by the Claimants before the Court explained that 30% of the world’s production of cotton originates in the People's Republic of China ("PRC"), and of that 85% originates in the Xinjiang region. The measures impacting the Uyghur workers in the region include forcing them to pick cotton and live and work under coercive conditions. In addition, evidence presented alleged that prison inmates are routinely used to provide labour to support cotton production at other parts of the value chain.

The Government did not dispute such claims, having stated to Parliament on 12 January 2021 that "the evidence of the scale and the severity of the human rights violations being perpetrated in Xinjiang against the Uyghur Muslims is now far-reaching" and that these claims were supported by "a large, diverse and growing body of evidence".

However, the Government disagreed with the Claimant's allegations that the Home Secretary, HMRC and the National Crime Agency unlawfully failed or refused to investigate imports from Xinjiang, which constituted breaches of (i) POCA and (ii) the Foreign Prison Made Goods Act 1897.

POCA

In relation to POCA, the Claimants alleged that the cotton in question constituted "criminal property" as it was obtained as a result of crimes against humanity and forced labour. The Court acknowledged that cotton produced by enslaved Uyghurs could be the proceeds of crime, yet concluded that there was not enough evidence under the particular circumstances to require the Government to investigate. The Government stated (and the Court agreed) that, in the absence of identifying that a specific consignment of goods is the product of the relevant criminality, the requirements of POCA would not be met and therefore no offence would be committed. Moreover, while the specific offence relating to the criminal property would not be required, at least the kind of criminal activity would need to be established as well as further useful information such as the details of when and by whom the conduct was committed.

FPMGA

Similarly, the Claimant's arguments under the Foreign Prison Made Goods Act 1897 ("FPMGA") failed on evidentiary grounds. As its title suggests, the FPMGA prohibits the importation of goods (proved to the satisfaction of customs officials) as having been made or produced in any foreign prison. The Court held that under the FPMGA it had to be proved that, by evidence to the satisfaction of the relevant enforcing officer, on the balance of probabilities the relevant goods were in fact made in a foreign prison and that insufficient evidence of this had been presented by the Claimants.  The Court also highlighted the importance of distinguishing between goods which were actually tainted from those which in fact were not, in order to avoid grouping all imports together into the same category and leading to the forfeiture of goods which were not prohibited.

The final judgment was handed down on 20 January 2023, and the Claimants are currently considering whether an appeal to the High Court's decision might be appropriate.

A Possible Solution?

The Court's judgment specifically acknowledges the difficulty in establishing the evidentiary requirements necessary under both POCA and FPMGA in the context of goods made using forced labour, particularly in situations where alleged abuses are extremely difficult to monitor effectively.

The judgment also reiterates the House of Commons Foreign Affairs Committee Report's (the "FAC Report")'s findings of serious concern that products made from forced labour are making their way into UK value chains. In order to address this issue, the Report recommends the imposition of an assumption that any product originating in the Xinjiang region should be assumed to be the product of forced labour, which could be displaced by definitive proof that the product was not tainted (i.e. a 'reverse burden of proof'). This mechanism would place the evidentiary onus on the importing company, rather than the courts, to rebut the assumption that goods made in a particular region have been made using forced labour.

Indeed, the reverse burden of proof approach is currently adopted in the United States under the Uyghur Forced Labor Prevention Act, enacted on 23 December 2021. The EU's current proposed forced labour laws  - which would apply to all imports of products from any region in the world using forced labour - stops short of such burden of proof for companies. Instead, it requires national authorities in EU Member States, including border officials, to implement the prohibition. (Please see our latest article on the EU's Proposed Regulation to ban products made using forced labour for further information).

Import legislation was also proposed in the UK in May 2022 under the Import of Products of Forced Labour from Xinjiang (Prohibition) Bill, which follows a similar approach to that in the United States by requiring all companies importing products from Xinjiang to the UK to provide proof that the manufacture of those products has not involved forced labour. However, this Bill has not yet progressed beyond a second reading in the House of Commons. The debate remains particularly sensitive given the potentially wide implications on import and trading relations more generally, and whether specific legislation aimed at tackling forced labour imports in the UK will be enacted remains to be seen.

Broader Impact on Supply Chains

In his judgment, Justice Dove was careful to highlight the limited role that the court has in relation to a challenge of this kind. However, he did note that “[t]he outcome of the case does not in any way undermine the striking consensus in the evidence that there are clear and widespread abuses in the cotton industry in [Xinjiang], involving human rights violations and the exploitation of forced labour.

While much of the focus so far has been placed on the textile and apparel sector, the House of Commons Foreign Affairs Committee Report explains that other areas such as solar energy, agriculture, and electronics also bear a substantial risk of forced labour and that "until there can be definitive proof that products are not tainted by forced labour, UK companies and consumers should not be purchasing them".

These developments form part of a wider international trend of new proposed laws and legal actions against both companies and governments seeking to ban the import and use of products made using forced labour. Once again, this case reinforces the need for organisations to be particularly vigilant when importing products or operating in potentially high-risk areas and the importance of ensuring that company policies, due diligence and risk assessment measures are fit for purpose.

 

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