UK: Court pronounces National Crime Agency refusal to investigate cotton from suspected Uyghur forced labour as unlawful, putting importers at risk of prosecution
"U.K. Companies Trading In Forced Labor Goods Risk Prosecution", 7 July 2024
End of June 2024, Global Legal Action Network (GLAN) [...] and the World Uyghur Congress (WUC) [...] won a case that will affect all U.K. companies trading with China. Their initiated legal action challenged the decision of the National Crime Agency (NCA), a national law enforcement agency in the United Kingdom, which refused to investigate Uyghur forced labor cotton imported from China. The Court of Appeal pronounced such a refusal to be unlawful. The judgment will have massive consequences for high street retail giants trading and importing goods that may be tainted in forced labor, confirming they are now exposed to legal risk. If a company knows or suspects that the imported goods were produced in criminal circumstances - such as through forced Uyghur labor - they could be prosecuted under the Proceeds of Crime Act 2022 for trading criminal property. [...]
The judgment deals with two important questions: 1) whether it was necessary for the NCA to identify a specific product as criminal property before commencing an investigation into whether a money-laundering offense has been committed; and 2) whether paying the market value of the goods has the effect of “cleansing” criminal property so as to preclude its recovery from anyone who subsequently acquires it, or the recovery of the proceeds of its onward sale.
The Court of Appeal concluded that “it is clear that, on a fair reading of the decision letter, the NCA proceeded on the basis of an error of law. The decision letter, read as a whole, would convey to the reasonable reader that the NCA proceeded on the basis i) that it was necessary to be able to identify specific criminal property and criminal conduct before there can be a ‘proper basis’ for a [Proceeds of Crime Act 2022] investigation, (whether criminal or civil); and moreover, ii) that the provision of ‘adequate consideration’ anywhere in the supply chain would prevent any goods imported into the U.K. from being identified as criminal property or recoverable property. Both those propositions are, and are now accepted to be, wrong as a matter of law.”
The Court of Appeal emphasized that “a purchaser or importer who suspects the goods to be the product of forced labor or other human rights abuses would not be able to rely on [general exceptions to the recovery of the property in] Section 308 [of the Proceeds of Crime Act 2022].” As such, British importers of goods from Xinjiang will not be able to rely on the argument that they paid the market price for the goods. This is an important step to ensure that U.K. importers play their role in eradicating forced labor in the supply chain.
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