Supply chain liability: Overseas forced labour and exploitation claims back in the news

This year, the High Court determined that the liability claims of 24 former migrant workers against Dyson will be tried in London early next year, beginning with the claims of six individuals.

The claims allege conditions of forced labour, human trafficking, and abusive working and living conditions – and in some cases, detention, torture or beating – said to have occurred in Malaysia between 2011 and 2012.

Forced labour claims against Dyson: What is alleged?

The alleged conduct is said to have occurred when the workers were employed at Dyson supplier factories. Negligence, false imprisonment, intimidation, assault, battery, and unjust enrichment are specifically alleged.

The defendants include three Dyson entities; two based in England, one in Malaysia. The Malaysian entity contracted with the factories. The UK entities were responsible for the promulgation and oversight of Dyson group’s supply chain.

The claimants allege that the Dyson companies owed them a duty of care because, it is said:

1. they exerted a high degree of control over the manufacturing operations and working conditions at the factories; 
2. were responsible for promulgating and implementing certain mandatory policies and standards concerning the working and living conditions of workers in the Dyson supply chain; and 
3. were responsible for implementing these policies and standards through training, supervision (including regular audits) and enforcement.  

It is argued that Dyson knew of the high risk of forced labour in Malaysian manufacturing from public sources, through their audits and monitoring, and were expressly informed of the mistreatment. Dyson denies the claims. It denies that it had any knowledge of the factories’ conditions, that it owed a duty of care to the workers, and that it had control over the Malaysian factories. The Malaysian factories and the Royal Malaysian Police are also defendants to the claims. 

UK jurisdiction over overseas human rights abuses

The High Court ruling follows a Supreme Court decision last May which ended a drawn-out dispute on jurisdiction which ultimately established England as the appropriate forum to hear the claims, rather than Malaysia. The latest ruling orders Dyson to disclose certain “known” documents referenced in the discontinued defamation case brought by Dyson against Channel Four News and ITN regarding reports on the allegations of forced labour in its supply chain.

The Dyson litigation confirms that corporates may be sued in the UK for human rights abuses alleged to have been committed in their supply chains or by their suppliers, even where the harm is said to have taken place overseas. It builds on principles developed in recent cases where the UK courts consider that a UK parent company may owe a duty of care to individuals harmed through an overseas subsidiary where it had a sufficient level of control.  

Throughout its judgment on jurisdiction, the Court emphasised the primacy of the claim against Dyson UK, based on the fact that group policies were promulgated, implemented and overseen from the UK and reference international frameworks, such as the UN Guiding Principles on Business and Human rights.

In separate proceedings, last year, the High Court granted 131 claimants permission to serve a re-amended claim form on Tesco Plc and others in a case which alleges conditions described as including forced labour and debt bondage while producing Tesco F&F garments at V.K. Garments in Thailand.   

The Uyghur precedent and proceeds of crime

These cases have been brought against the wider background of legislative developments around mandatory human rights and environmental due diligence which impose duties on in-scope companies to identify, prevent, mitigate and where relevant, remediate adverse human rights impacts in their global operations and supply chains.

The risk implications in relation to financial crime are significant and should not be overlooked. In World Uyghur Congress v NCA [2024] EWCA Civ 715, the Court decided that the proceeds from goods produced under forced labour may give rise to UK money laundering offences under the Proceeds of Crime Act 2002 (the “Act”) and, crucially, that it may no longer be possible to rely on the goods being sold for adequate consideration as an absolute defence. 

Under the principal money laundering offences in sections 327 to 329 of the Act, any entity that receives, transfers or otherwise deals with such proceeds with knowledge or suspicion of their criminal origin may be exposed to liability, not only the direct perpetrator of the underlying conduct. The suspicion threshold is low and does not require actual knowledge. On that basis, a company that has received red-flag information through audits, NGO reports or whistleblowers may find it difficult to argue that it did not suspect that goods were produced by criminal conduct. If Dyson is found liable for the alleged abuses, following the court’s reasoning in Uyghur, the proceeds from goods manufactured in the factories could amount to proceeds of crime. 

The case highlights the importance, for companies with complex global supply chains, of treating supply chain due diligence as a criminal compliance obligation, not merely a reputational or civil liability matter.

The World Uyghur Congress case was back in the news this year when campaigners criticised the NCA for not re-taking its decision regarding the goods. The episode underlines that the enforcement landscape in this area remains active and that the appetite for scrutiny of supply chain conduct extends beyond the civil courts.

Supply chain due diligence: A new approach for businesses

The willingness of UK Courts to accept jurisdiction and examine claims alleging modern slavery and other human rights abuses in global supply chains, the financial crime consequences that could flow from a finding of liability as well as the broader development of human rights and environmental due diligence obligations, reflect a discernible shift from compliance to enforcement.

Law makers and regulators are increasingly focused not merely on whether policies and processes exist, but on whether they are effectively implemented and acted upon. It is no longer sufficient to point to the inclusion of contractual terms or the carrying out of audits alone; what is required is demonstrable action to identify, prevent and remedy adverse impacts and legal violations. In this context, relevant businesses should revisit their approach to these issues as a matter of urgency.

Key steps for businesses with global supply chains

• Review existing supply chain contracts to assess the adequacy of provisions addressing ESG commitments, human rights protections, and environmental due diligence obligations.

• Assess applicable regulatory obligations and evaluating governance and oversight structures in light of the duty of care principles emerging from cases such as Dyson and Tesco, to ensure that contractual frameworks are supported by effective monitoring, escalation and remediation mechanisms.

• Draft or update contractual protections — including appropriate warranties, indemnities, audit and reporting requirements and risk allocation provisions — and monitoring and enforcing the same to mitigate reputational, civil and criminal exposure arising from supply chain non-compliance.

Conclusion

Establishing a unified and robust contractual and governance framework that addresses human rights, environmental and supply chain transparency requirements is essential to managing the legal, reputational, commercial and criminal risks that these developments present.

This is a C-suite and executive issue, not just a compliance one.