ANZ sets human rights precedent in settlement with communities displaced by company it financed

In a landmark settlement, Australia’s ANZ Bank has agreed to pay a financial package to families in Cambodia forcibly displaced by a sugar company it loaned money to in 2011.

Observers say it sets an important precedent for the banking industry and demonstrates that the OECD’s human rights grievance system is starting to gain some teeth.

ANZ’s decision follows a five-year battle led by NGOs Equitable Cambodia and US-based Inclusive Development at Australia’s National Contact Point for OECD Guidelines for Multinational Enterprises (NCP).

In 2014, on behalf of affected families, the NGOs filed a complaint against ANZ for loaning money to Phnom Penh Sugar, which had displaced villagers from sugar plantations.

"The agreement sets an important precedent for the banking industry, and we welcome ANZ’s leadership in this regard"

In May 2016, Phnom Penh Sugar offered compensation to Kampong Speu villagers who alleged forced eviction and other abuses on their land, though at the time the offer garnered mixed responses.

Now, ANZ has agreed to a financial package, though it says it is not legally liable for the adverse impacts arising from the land use concessions and sugarcane project.

The Australian NCP, housed at the Australian Treasury, ruled in 2018 that ANZ’s loan to Phnom Penh Sugar was inconsistent with the bank’s own policies and the OECD’s ethical business guidelines.

At the time, ANZ acknowledged that its initial due diligence was inadequate.

Soeung Sokhom, a representative of the affected families, said: “We have experienced huge difficulties with our livelihoods since the sugar company took our land almost ten years ago, and this contribution will greatly help our situation. The whole affected community, including me, are deeply grateful that ANZ has resolved our complaint.”

ANZ has agreed a contribution of the gross profit it earned from the loan to help rehabilitate affected communities. It has also committed to review and strengthen its human rights policy.

Natalie Bugalski, Legal Director of Inclusive Development International, said: “This agreement sets an important precedent for the banking industry, and we welcome ANZ’s leadership in this regard.”

Eang Vuthy, Executive Director of Equitable Cambodia, also praised ANZ, but added: “This does not in any way replace Phnom Penh Sugar’s responsibility to fully compensate the communities for their damages.”

OECD Watch welcomed the settlement, saying it showed the importance of the OECD’s due diligence guidance for corporate lending, which was launched last year.

“It is the first time we are aware of a private bank agreeing to contribute directly to remedy for harms to which it contributed through its lending. OECD Watch encourages governments to ensure this form of robust due diligence is implemented by all banks and companies by passing mandatory due diligence legislation.”

The settlement also represents the third time in the 20-year history of the OECD’s human rights ‘soft law’ that a complaint has resulted in acceptable financial remedy from the point of view of complainants, says Inclusive Development International.

It comes as ANZ faces a new complaint at the OECD human rights grievance system, from victims of the Australian bushfires who are arguing that the bank has a role in financing climate change.

The financial sector is seeing increasing OECD Guidelines complaints with six new cases filed against the sector in the past six months.