It is estimated that 30% of the world’s production of cotton originates in China. Of that cotton 85% originates in Xinjiang, which is the centre of the Uyghur atrocities. Recently before the High Court, the World Uyghur Congress (“the WUC”) argued that UK authorities were under a duty to block and/or launch money laundering investigations into the many imports of Xinjiang cotton brought into the UK - many by household names in the clothing industry – because of the high likelihood of prison and forced labour forming the start of the supply chain.
On 20 January, the High Court handed down its judgment. In R (on the application of) World Uyghur Congress v SSHD, HMRC and the NCA  (“World Uyghur Congress”) the High Court refused the claim, for the reasons explained below. The High Court’s reasons are important - not least because they accept that UK companies can face criminal liability for importing goods from Xinjiang, and because they do not close the door on comparable, but far more specific, supply chain challenges succeeding in the future.
Evidence was before the court of the horrific internment, “re-education” and correctional forced labour measures administered by the Chinese authorities against vast numbers of Uyghur people. The cotton and textile industry in Xinjiang is integral to the repression being implemented by the Chinese state. Uyghur people are forced to pick cotton and work in textile factories linked to the internment camps, and prison inmates are routinely exploited to support cotton production.
The WUC is an NGO which brought the case against the Home Secretary, HMRC and the NCA (“the Defendants”). The crux of WUC’s claim for judicial review was that the Defendants had acted unlawfully when blocking, or failing or refusing to launch, criminal investigations into imports of cotton from Xinjiang. Central to this argument was the WUC’s evidence that it is a near-certainty that any Xinjiang cotton shipment forms the proceeds of crimes committed by the Chinese state against the Uyghur people.
The WUC argued that the Defendants misdirected themselves when interpreting two key statutes concerning their powers. In a claim for judicial review, it is notoriously challenging to persuade the court to direct a specialist public authority investigator to take action or investigate; the court is deferent to the specialist knowledge, ‘polycentric’ considerations and scarce resources of the investigator (see for example the cases of Bermingham and Corner House Research, both brought against the then-Director of the SFO). In keeping with the line of case law in this area, the WUC aimed to establish that the Defendants’ stated interpretations of the law were misdirections or fetterings (restrictions) of administrative discretion.
The WUC’s case – in brief
To make its argument, the WUC’s case was constructed around two key legal themes.
- The Defendants had failed to honour the provisions of the Foreign Prison-Made Goods Act 1897 (“FPMGA”). Section 1 FPGMA, broadly, prohibits the import of goods made wholly or partly in foreign prisons.
- The NCA had wrongly interpreted the Proceeds of Crime Act 2002 (“POCA”) when failing to bring criminal investigations for money laundering into Xinjiang cotton imports.
Theme one – The FPMGA
There was significant evidence before the court about the exploitation of prisoners in Xinjiang for the cotton industry. But the key argument here was over the evidential standard set by the FPMGA for foreign goods to be prohibited. Section 1 FPMGA bites when to HMRC’s “satisfaction”, “evidence tendered to [HMRC]” shows that goods were wholly or partly made in a foreign prison.
Put simply, the High Court agreed with the Defendant’s interpretation of this section. HMRC argued that, in practice, evidence would need to be produced linking a specific consignment of Xinjiang cotton to a specific facility meeting the definition of a foreign prison for section 1 to apply. The WUC failed to persuade the court that this was an impermissibly narrow reading of section 1, amounting to a misdirection.
The Home Secretary presides over Border Force and a Border Force Information Note featured in the evidence. It stated that Border Force’s policy, when investigating section 1 FPMGA breaches, was to respond to evidence on a "reactive basis" only, rather than launching its own proactive investigations. The High Court dismissed the WUC’s argument that this was an unlawful fettering (restriction) of Border Force’s powers under s. 1 (and others) of the FPMGA.
Theme two - POCA
The WUC brought wide-ranging arguments under POCA. Again, there was significant evidence before the court of China’s conduct towards the Uyghur people being indicative of conduct that would be criminalised in the UK – under the Modern Slavery Act 2015 and potentially the International Criminal Court Act 2001 (crimes against humanity). It was accepted in principle that cotton consignments from Xinjiang could be the proceeds of crimes and that – subject to the mental element being met – those importing the consignments, including corporates with supply chains linked to Xinjiang, could face money laundering liability. The Defendants accepted that the most “apposite” POCA offence for a supply chain arrangement would be s. 329, relating to the acquisition, use and possession of “criminal property”.
The POCA arguments were also defeated partly under the same lines of defence made to the FPGMA argument. In order for a s. 329 offence to be committed, the cotton consignment would need to be shown to be “criminal property” under s. 340 POCA: broadly being a person’s benefit from “criminal conduct”, which is conduct that would be an offence if it occurred in the UK. The NCA’s interpretation of POCA required that specific evidence of criminal acts, linked to a specific consignment of Xinjiang cotton, would be needed to argue that a s. 329 offence had possibly been committed. The court agreed with the NCA’s interpretation of the law here and found that it was not a misdirection.
It is a defence to the s. 329 POCA offence where a person acquired or took possession of criminal property for “adequate consideration”. The High Court agreed with the NCA that for UK companies to be prosecuted under POCA in these circumstances, it would have to be shown that “the consignment had been purchased for significantly less than its value” (applying s. 329(3)(a)). The Defendants pointed out the complexity of applying this provision to a global supply chain. If at any point in such a supply chain “stretching many thousands of miles”, criminal property was bought for adequate consideration, s. 329 POCA would not apply.
The Court also noted the mental element involved in the criminal offence. Another requirement to meet the definition of “criminal property” under s. 340 POCA is that the alleged offender “knows or suspects” that the property is a person’s benefit from criminal conduct.
If the WUC had succeeded, the ramifications for the UK clothing industry – and others importing goods from Xinjiang - would have been difficult to overstate. Corporates with supply chains linked to Xinjiang may have found themselves subject to criminal investigation for serious money laundering offences by the NCA, and further Xinjiang cotton imports would have been blocked.
Though the High Court accepted the “striking consensus” in respect of human rights abuses in Xinjiang, it emphasised its “limited role” in World Uyghur Congress. It could not find that the Defendants misdirected themselves in law when considering their interpretations of the law which informed their legal powers. The NCA’s case at court appeared to accept that if the NCA is in possession of specific evidence of criminal acts linked to a specific consignment of Xinjiang cotton, such that the NCA sees sufficient grounds to suspect that an identifiable criminal offence has been committed by identifiable individuals, an investigation may arise. This clarifies the possible money laundering supply chain liability in such circumstances.
Other jurisdictions have treated this issue differently; the Global Legal Action Network went as far to say that World Uyghur Congress makes the UK an “international outlier”. The USA’s Congress has not left this issue to the courts. The Uyghur Forced Labour Prevention Act, brought into effect last year, assumes that any product made in Xinjiang is the product of forced labour and bans its import. In 2021 NGOs filed criminal complaints against textile and retail corporates in France, Germany and the Netherlands alleging complicity in crimes against humanity for their indirect profiting from Xinjiang; the French complaint led to the opening of a major criminal investigation.
On one view, from the standpoint of POCA, World Uyghur Congress effectively “puts off” two major issues for later resolution.
The first is the legal question of whether or not low prices paid for cotton goods coming from Xinjiang would be adequate consideration under s.329 POCA for the cotton in question, with the result that its acquisition is rendered exempt from the scope of the money laundering offence of acquiring, using or possessing criminal property. Plainly, if the adequate consideration test is not met, then an offence under that section is capable of being committed. However, what is “adequate consideration” in the context of a market that is centred on slave labour?
Secondly, there is the impact of company’s own due diligence requirements to consider. In order to commit a money laundering offence, a defendant has to know or suspect that the property they acquire is or represents the proceeds of crime. Companies are under increasing pressure to carry out human rights due diligence in respect of their supply chains in order to meet reporting requirements. It follows that the more a company and those who run it know about the specific geographical origin of each shipment they receive - and the circumstances in which those shipments were produced - the more likely it is that they will come to suspect a connection with crime. This in turn would expose both the company and the individuals concerned to money laundering charges.
World Uyghur Congress is another example of the innovative and fast-developing litigation being brought in respect of supply chain liability; one of the first in the UK brought in the criminal sphere.
The WUC is considering an appeal. Corporates with supply chains linked to Xinjiang, civil society, and criminal and public lawyers will no doubt follow developments closely.