ANZ has agreed to compensate more than one thousand Cambodian families that were forcibly displaced by a sugar company it loaned money to in 2011. Advocates are calling the step a watershed for human rights in the global banking sector.
The decision to pay the families with interest earned by the loan as well as offering an admission that the bank failed to conduct proper due diligence on the project ends one of the ugliest chapters of ANZ's 13-year expansion into Cambodia.
It started in 2011 when ANZ's Cambodian arm approved a loan to Phnom Penh Sugar, a company that went on to seize and destroy the land and homes of 681 families from Kampong Speu Province in the country's south-west in collusion with the state authorities and armed forces, according to non-government organisations representing the families.
The sugar company was owned by LYP group, a conglomerate run by Cambodian senator Ly Yong Phat who is widely regarded as a business tycoon "notorious for engaging in unethical, corrupt and illegal business practices", according to local media reports. At the time the sugar company was seeking finance, activists and international media publicised its use of child labour as well as its violent clashes with local groups.
The initial complaint, filed by NGOs Equitable Cambodia and Inclusive Development Cambodia, said the report commissioned by ANZ Royal Bank to examine the environmental and social impacts of the project flagged the need for a more thorough investigation, yet this never occurred.
The complaint was picked up by the Australian National Contact Point, a little-known Treasury division responsible for overseeing the nation’s corporate commitments to the Organisation for Economic Cooperation and Development, in 2014. It later found it was "difficult to reconcile" ANZ's decision to take the sugar company on as a client due to the "readily apparent" risks associated.
"There is some doubt in this case around the extent to which ANZ's actual business practices aligned with its stated approach to human rights," the ANCP's 2018 report found.
ANZ agreeing to contribute the gross profit it earned from the loan to the affected families has created an important precedent for the banking sector.OXFAM chief executive Lyn Morgain
In February, ANZ met with the Cambodian families and acknowledged that its initial due diligence before making the loan had been inadequate and its efforts to pressure the sugar company to make up for its human rights breaches unsuccessful. ANZ recognised the continuing hardships faced by the affected communities and committed to reviewing its human rights policies, including its customer social and environmental screening processes.
The NGOs representing the families welcomed ANZ's move to compensate the families.
"Both organisations look forward to working with ANZ to continue to align its human rights approach with the OECD Guidelines and Multinational Enterprises and the UN Guiding Principles on business and human rights," the ANCP statement said.
Human rights organisation Oxfam similarly applauded the development.
“ANZ agreeing to contribute the gross profit it earned from the loan to the affected families has created an important precedent for the banking sector and we congratulate ANZ on becoming a global leader regarding an agreement of this kind," Oxfam chief executive Lyn Morgain said.
ANZ in May 2018 sold its 55 per cent stake in its Cambodian joint venture after 13 years in the country and noted it is not legally liable for the impacts arising from the land use and sugarcane project.