Regulatory intelligence for US exporters

UK Forced Labor Ruling Raises Criminal Liability Risks for Importers, Groups Say

The U.K. must reassess whether it should investigate cotton imports from China suspected of being made with forced labor after an appellate court ruled last month that the country’s National Crime Agency wrongly decided against opening the probe.

Start A Trial

The Global Legal Action Network and the World Uyghur Congress, the two organizations that brought the original claim, said they expect the decision will lead to a “full investigation into imports” from China’s Xinjiang region and a “commitment from the NCA to stopping tainted goods entering UK markets.”

The ruling “will have massive consequences for high street retail giants trading and importing forced labour goods,” they said. If a company knowingly or with suspicion imports goods made with Uyghur forced labor, it “could be prosecuted” under the U.K.’s Proceeds of Crime Act as a result of the U.K. Court of Appeal ruling, they said.

The decision came after the GLAN and WUC in 2021 sued British authorities for not stopping cotton imports that the two groups said were made with forced labor (see 2210260077). The country’s High Court ruled in January 2023 that U.K. authorities correctly determined not to investigate the imports after the government argued that it couldn’t open an investigation unless there was a clear connection between criminal activity and the imports.

But the appellate court said this argument was an “error of law.” The U.K. still can open an investigation under the Proceeds of Crime Act even if the government doesn’t have evidence to “justify the use of those powers at the time of importation,” the court said.

The appellate court also said it needs to correct a potentially wrong precedent from being set, adding that there’s a “legitimate concern” that the High Court judge was “to be understood as endorsing the proposition that there is a need to establish criminal conduct or criminal property before an investigation” can begin. This may “discourage” the NCA and other U.K. investigative agencies “from commencing investigations into corruption (particularly where it occurs overseas) in the absence of concrete evidence of particular crimes carried out by particular persons.”

The appellate court also disagreed with the High Court’s ruling that any criminal liability for money laundering tied to the imports, including the U.K.’s right to seize the proceeds of a crime, is waived as long as those proceeds have been paid for with “adequate consideration” and “have passed through a number of hands in a business context.” The judge “appeared to accept” the NCA’s argument that the imports aren’t “tainted” if the importer pays market value for the goods.

If the judge accepted that “at any point in a market supply chain stretching many thousands of miles, the chain could be broken merely by the use of adequate consideration in any of the transactions involved, he was wrong to do so,” the appellate court said.

GLAN and WUC said this ruling means that even if buyers are "protected when they pay adequate consideration for criminal property, as soon as they transfer that property they are exposed to criminal liability. This means criminal property can be bought but not passed on."

An NCA spokesperson didn’t immediately respond to a request for comment, but the agency told Reuters: "We respectfully note the judgment of the Court of Appeal and are considering our next steps."