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“Watershed moment for supply chains” – a lesson in decision making

The judgment in World Uyghur Congress v National Crime Agency is a landmark 'monumental victory', the ruling of which will have potential implications and considerations for anyone importing goods from overseas.

The Court of Appeal’s ruling that the National Crime Agency (“NCA”) misdirected itself in law when it chose not to investigate whether imported cotton goods were the product of forced labour or other human rights abuses has – quite properly it seems to me – been described as a ‘monumental victory’ by the Appellants.

The lessons for UK business is clear, it is time for companies to look very closely at their supply chains or risk prosecutions and/or having their goods confiscated as proceeds of crime.

Lawyers for Global Legal Action Network (“GLAN”) have described the judgement as a “watershed moment for supply chains…. trading and profiting from forced labour and other crimes all around the world”.

It is certainly the case that there are potential consequences in legal risk terms for UK companies importing and trading in what GLAN describe as “forced labour goods”. The judgement confirms that if a company knowingly or with suspicion imports goods which have been made in criminal circumstances – such as in this case through forced Uyghur labour – they could be prosecuted under the Proceeds of Crime Act for trading criminal property

This case comprised challenge of the NCA’s failure to investigate companies suspected of importing and trading in forced labour cotton. The Court of Appeal found that this refusal to investigate was unlawful and requires NCA to remake its decision. The expectation is that this decision will lead to a full investigation into imports from the Uyghur region, and perhaps increased pressure on the NCA to stop “tainted” goods entering UK markets.

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The NCA’s argument was that once “adequate consideration” (i.e. market value) was paid for criminal property, the property is de facto “cleansed” of its criminal character and can be freely bought and sold without consequence. However, the Court’s view was that while a purchaser is protected when they pay adequate consideration for criminal property, as soon as they transfer that property they are then exposed to criminal liability. This means criminal property can be bought but not passed on.

The Court of Appeal ruled that the NCA had made a mistake in law by stating that a specific consignment of forced labour cotton needed to be identified in order for them to commence an investigation.

This case has particular significance insofar as the government and court readily accept that forced labour is occurring in China and that goods produced in these circumstances amount to the proceeds of crime under UK law. This was underlined by the Court of Appeal, which noted that the lower court had identified “a “striking consensus” as to the clear and widespread exploitation and abuses in that industry involving forced labour, and that forced labour accounts for a significant proportion of all cotton originating from China”.

Beyond the facts of this case, the judgement may prove to be a pivotal moment for supply chains where participants know or at least suspect they are trading in goods which are the product of forced labour or other human rights abuses. It is now absolutely clear that they will be committing criminal offences whenever they transfer those goods and can be prosecuted and/or their products could be confiscated. It makes no difference that someone along the way may have paid a fair price for the products.

There are wider political implications as this decision may well prompt authorities in other jurisdictions to review their own approach to enforcement of equivalent laws.

Experience would suggest that a good decision would be to use this case as a prompt for careful examination of supply chains; helping manage legal risk and avoiding backlash from consumers whose money may inadvertently have been funding forced labour.

If you have any questions about this case or about matters regarding supply chains and procurement, please get in touch with Tristan, or one of our  specialist Procurement Lawyers.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

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