The NCA and supply chain investigations

Angelika Hellweger of Rahman Ravelli considers the National Crime Agency’s recently-stated stance regarding supply chains and forced labour.

The UK’s National Crime Agency (NCA) has said that it is prepared to investigate companies that import goods that are either made or assembled by forced labour, as such products could constitute the proceeds of crime.

In a High Court ruling in World Uyghur Congress V Secretary of State for the Home Department, Commissioners for HM Revenue and Customs and National Crime Agency [2023] EWHC 88 (Admin), the first judgement dealing with forced labour from Xinjiang region, it was stated that the NCA accepted an argument put forward by the lobby group the World Uyghur Congress that a company could be targeted under the Proceeds of Crime Act 2002 (POCA) for acquiring, using or possessing goods that were made in conditions that breach UK laws regarding modern slavery or are crimes against humanity.

Investigation

The World Uyghur Congress had been seeking to compel the NCA to open an investigation into companies that imported textiles made with cotton from China’s Xinjiang Uyghur Autonomous Region.

This region produces an estimated 20% of the world’s cotton. But the High Court heard that the Chinese government forces Uyghur people to work in “concentrated, closed off, military-style” textile processing centres in Xinjiang. The UK government believes that more than a million Uyghurs have been held in extra-judicial detention, where forced labour is widespread.

The High Court’s judgment was handed down following a judicial review application brought by the World Uyghur Congress against three UK government agencies concerned with the supervision of the UK’s borders: HMRC, the Border Force and the NCA.

The World Uyghur Congress stated that the defendants’ failure to investigate the presence of cotton from the Xinjiang region value chain stemmed from a misinterpretation of two laws: the Foreign Prison-Made Goods Act 1897 (FPMGA) and the Proceeds of Crime Act 2022 (POCA). The FPMGA requires proof of an unbroken chain between the imported goods (“a specific consignment”) and their manufacture in a “foreign prison”. For the application of POCA, a claim would also need to show that such goods were purchased for inadequate consideration.

The High Court upheld the NCA’s decision not to open an investigation into any companies under either the FPMGA nor under POCA, on the grounds that it did not have sufficient evidence to suspect a crime had been committed by identifiable individuals.

However, the High Court’s judgment also made clear that companies might face liabilities in connection with alleged human rights abuses or criminal wrongdoing in their supply chains when certain legal and evidential thresholds are met.

The NCA had stated that opening a criminal investigation would be problematic as the World Uyghur Congress had not identified a “specific consignment” of goods that could be the subject of one.

But the agency stated that it accepted “the possibility that the intelligence picture may change at any time”. It has since said that it will assess and review any new information that becomes available. Significantly, the NCA did not challenge the lobby group’s argument that companies should be held responsible for how their goods are made.

Argument

The World Uyghur Congress has yet to decide whether it will appeal against the judgment. But it has said that the ruling has shown how law enforcement agencies could hold businesses in the UK responsible if evidence exists to show the use of forced labour or other criminal practices in their supply chains.

The argument that was put forward by the World Uyghur Congress that goods produced using modern slavery or forced labour can be treated as criminal proceeds may also be of wider significance for supply chains. As an example, the argument could, in theory, be applied to materials and products that have been acquired through environmental crimes, such as deforestation.

The case, therefore, can be viewed as a stern reminder to companies of the need to ensure they are conducting due diligence on all aspects and stages of their supply chains.

The NCA now appears to be prepared to bring supply chain-related prosecutions if the evidence is available. Any company that is unaware of precisely what activities are involved in their supply chain – or chooses to be wilfully ignorant regarding them – may face severe legal and reputational problems.