The past few weeks have been rife with controversy stemming from Western brands’ responses to reports of human rights violations in China’s Xinjiang province. Companies, such as Nike, H&M, Burberry and Hugo Boss, have landed on the receiving end of Chinese backlash after addressing forced labor concerns and cutting ties with suppliers in the region. At the same time, another group of brands is coming under fire – albeit not for distancing themselves from the region, but for allegedly failing to act and concealing their ties to suppliers that operate using the forced labor of more than 1 million ethnic Uighurs and other Muslim minorities in Chinese detention camps.
According to a complaint that was filed with the Paris Prosecutor Office on April 12, French legal association Sherpa, human rights NGO Collectif Ethique sur l’étiquette, the Uyghur Institute of Europe and an individual Uyghur victim claim that based on publicly available information, “a large number of brands and distributors in the fashion sector” – specifically, Uniqlo, Zara’s parent company Inditex, Skechers USA Inc. and French apparel group SMCP, the owner of the Sandro and Maje labels – maintain ties to suppliers in the region, and as a result, “may be involved in the forced labor imposed on the Uyghur population.”
Sherpa asserts that despite the publications of reports from various researchers and media outlets since 2019 that “highlight the existence of systematized forced labor in the Xinjiang Uyghur Autonomous Region by the Chinese government,” Uniqlo, Inditex, Skechers, and SMCP have “continue[d] to subcontract part of their production or to market goods using cotton produced in the region, and thus, [are] knowingly taking advantage in their value chain of the workforce in a region where crime against humanity are being perpetrated.”
The retail companies’ alleged failure to sever their relationships with suppliers linked to Xinjiang “exposes the impunity of transnational corporations that profit from these crimes through their modus operandi and business model,” Sherpa argues, noting that its newly-filed complaint is merely “the first of a series of filings organized by the European Center for Constitutional and Human Rights that will be filed in the coming months in other European countries.”
Inditex, Skechers, SMCP, and Uniqlo have not commented on the recently-initiated proceedings. However, when asked about its ties to Xinjiang during an earnings call on Thursday (one day before Sherpa filed its complaint), Tadashi Yanai, the chairman and president of Uniqlo’s parent company Fast Retailing Co., stated that the group “wants to be politically neutral,” and declined to comment on whether it sources any of the cotton for its wares from the Chinese region.
Meanwhile, in a lengthy statement released in March, Skechers revealed that it maintains a supplier relationship with Dong Guan Lu Zhou Shoes, a manufacturer that previously confirmed its employment of Uyghur individuals. The Southern California-based footwear company stated that in response to reports of forced labor, it conducted multiple audits of Dong Guan Lu Zhou Shoes beginning in 2017, and found “no reason to believe that Lu Zhou is using any forced labor.”
According to Skechers, the Uyghurs in Lu Zhou’s workforce “are employed on the same terms and conditions as all other factory employees and in particular with respect to workings conditions, pay promotions, etc.,” and most importantly, “all workers, including those from the Uyghur ethnic minority, are free to leave if they no longer wanted to work at Lu Zhou.” Its stance – which comes in the midst of a larger sanctions battle with the U.S. the 27-nation European Union, Britain and Canada on one side and China on the other – has been praised by the likes of Elijan Anayat, a spokesperson for the Information Office of Xinjiang regional government, who stated late last month he believes that Skechers “will be appreciated by Chinese customers and win greater (market) shares,” highlighting the delicate at play for Western brands.
Possible Liability
“Supported by Members of European Parliament Raphaël Glucksmann and Reinhart Butickhofer, as well as by the World Uyghur Congress,” Sherpa stated on the heels of filing the complaint that it opted to initiate legal action in order “to shed light on the role played by multinational companies in the crimes committed against the Uyghur people and to enable French courts to rule on their possible criminal liability.”
As for what potential legal ramifications might look like for the companies named in the Sherpa-filed complaint, the French Corporate Duty of Vigilance Law comes to mind, particularly in lieu of an EU-wide ESG due diligence law. By way of the Loi de Vigilance, France established “a legal obligation to adhere to a standard of reasonable care, while performing any acts that could foreseeably harm human rights or the environment.” As such, large French companies – i.e., those with “at least 5,000 employees itself and in its direct or indirect subsidiaries with registered offices in France” or a total of 10,000 employees in France and abroad, and/or foreign companies headquartered outside France, with French subsidiaries, if those subsidiaries employ at least 5000 employees in France – are required to monitor their supply chains for human rights and environmental protection violations.”
Specifically, the law mandates the companies that meet the size requirements for applicability – and it is not clear if any of the companies listed in Sherpa’s complaint do – “establish a reasonable vigilance plan to allow for risk identification and the prevention of severe violations of human rights, health and safety or environmental damage resulting from the operations of the company, its subsidiaries, subcontractors and suppliers.” Should a company fail to comply with its vigilance plan, the law “provides a route for third parties (such as trade unions and NGOs) to seek an injunction forcing compliance,” according to a recent note from Gibson Dunn. It also creates a corporate negligence cause of action for any harm suffered that could have been avoided if the company had complied with the requirements of the vigilance law.
In the first “substantive claim for damages” since the French law was adopted in 2017, 11 French and American NGOs initiated a case against French retailer Casino in March before the tribunal judiciaire of Saint Étienne seeking damages in connection with the company’s alleged involvement in the deforestation of the Amazon rainforest via its relationship with “meat providers involved with the clearing of the rainforest.”
“As somewhat of a test case for the French court on the civil liability remedy under the [Corporate Duty of Vigilance Law],” Gibson Dunn asserts that the proceedings against Casino “will inevitably be monitored closely by NGOs and companies alike,” fashion industry entities, included.
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