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A UK-based human rights group has launched a legal campaign to stop the online fast-fashion group Shein from securing a blockbuster listing on London’s Stock Exchange.
Stop Uyghur Genocide, which alleges minority Uyghur people are being used as forced labour in Shein’s cotton supply in China’s north-western Xinjiang region, this week urged the Financial Conduct Authority, the UK financial regulator, to block Shein’s application, challenging the potential listing on legal grounds.
“Any attempt by Shein to list on the [London Stock Exchange] should be refused,” said a statement issued by UK law firm Leigh Day, which is representing Stop Uyghur Genocide. The statement added that the FCA had a “statutory duty of integrity and to protect its investors”.
Leigh Day did not cite specific evidence in support of its allegation that forced labour is used in Shein’s supply chain.
A letter sent by Leigh Day to the FCA, seen by the Financial Times, contends that allowing the listing would be inconsistent with the UK’s obligations to the International Labour Organization, a UN body that protects labour standards.
The letter also presses the FCA to require Shein to provide additional information “regarding the accuracy of its published Modern Slavery statement”.
Under the Modern Slavery Act, large businesses in the UK have to publish a statement every year that sets out steps they have taken to ensure slavery and trafficking do not take place in their operations or supply chains.
Chinese-founded Shein, which could fetch a market valuation of about £50bn, filed confidential paperwork for an IPO with the FCA earlier this month, bringing it a step closer to a London listing following the company’s decision to ditch a planned IPO in New York.
That followed a barrage of criticism in the US, where China hawks including Republican senator Marco Rubio lobbied the securities regulator to reject Shein’s IPO application if the company did not agree to enhanced disclosures. Any listing would need to be approved by Chinese authorities because the majority of Shein’s staff and manufacturing are in the country.
Shein privately sought to convince US politicians and regulators that its products do not contain Xinjiang cotton but has shied away from making public statements referencing the region for fear of angering Beijing, the Financial Times has previously reported.
The US has banned imports of cotton and other products from Xinjiang citing “horrific abuses” against the region’s mostly Muslim Uyghur people, who civil rights groups say have been used as forced labour in fields and factories — something China categorically denies.
“Stop Uyghur Genocide expects UK financial institutions to uphold the high ethical standards that they pay lip service to and to make clear that London isn’t the place to come for a ‘no questions asked’ approach to capital,” said Leigh Day solicitor Ricardo Gama, who represents Stop Uyghur Genocide.
“At the very minimum, regulators must make sure that laws in place to root out modern slavery are complied with,” he added.
Shein’s possible IPO would be a much-needed boost for the UK market. Senior politicians including Conservative chancellor Jeremy Hunt and Labour shadow business secretary Jonathan Reynolds have met figures from the company in recent months.
Labour, which is leading in the polls for general election on July 4, has argued that London should welcome a Shein flotation because it would impose higher regulatory standards on the company than elsewhere.
The FCA declined to comment on the legal letter sent by Stop Uyghur Genocide.
It added: “We pay manufacturing suppliers competitive rates so they can pay fair wages to their workers.” Shein said that an independent audit of 4,000 workers at supplier factories in China found that they earn on average twice the local minimum wage.
