[co-author: Iris Karaman]

The Australian National Contact Point for the OECD Guidelines for Multinational Enterprises (“AusNCP”), which handles “specific instances” relating to alleged non-observance of the Guidelines, has released its final statement (https://cdn.tspace.gov.au/uploads/sites/112/2018/10/11_AusNCP_Final_Statement.pdf) on a case concerning the Australia and New Zealand Banking Group’s (“ANZ”) financing of a Cambodian company engaged in human rights abuses.

In 2011, ANZ provided Phnom Penh Sugar (“PPS”), a company based in Cambodia, with a loan facility through its partially-owned Cambodian subsidiary, ANZ Royal Bank. PPS used the loan to finance the development of a sugar plantation and refinery. PPS was said to have engaged in forced evictions, arbitrary arrests, child labour and dangerous working conditions leading to workplace deaths, throughout the development of the project.

A complaint was lodged in 2014 to the AusNCP by two NGOs, Equitable Cambodia and Inclusive Development International, on behalf of 681 displaced families. They complained that ANZ, as financier to PPS, had breached certain aspects of the General Policies and Human Rights chapters in the OECD Guidelines because it failed to take reasonable measures to prevent or remedy human rights abuses. The AusNCP considered that it was “difficult to reconcile ANZ’s decision to take on PPS as a client with its own internal policies and procedures – which appear to accord with the OECD Guidelines – as the potential risks associated with this decision would likely have been readily apparent“. Concerns about PPS were already publically available when ANZ decided to accept it as a client in 2011.

In its recommendations, the AusNCP did not endorse the complainants’ suggestion that ANZ be forced to divest its profits from the loan to provide compensation to the displaced families; making specific recommendations about financial compensation falls outside the AusNCP’s scope of authority. Instead, the AusNCP recommended that ANZ introduces methods to promote internal compliance with its own corporate standards relating to human rights and further strengthens the application of its human rights due diligence arrangements, to ensure that future human rights risk is captured. It also recommended that ANZ establishes a grievance resolution mechanism for victims in relation to breaches of ANZ’s corporate standards in relation to human rights. ANZ is to report back to AuNCP on its progress in 12 months’ time.

Other financial institutions, and indeed companies in general, should take note of the following key points in the AusNCP’s conclusions and recommendations:

• It is not sufficient for a company to have internal human rights standards; these must also be consistently applied when establishing new commercial relationships. A financial institution is therefore advised to set in place internal control systems to promote compliance with its stated human rights standards. For example, when deciding whether to take on a new client, it is important to collect and assess publicly available information on that client’s human rights record and the particular risks associated with the project that is being financed.
• It is recommended that financial institutions put in place a grievance mechanism to support the effective operation of its human rights standards.

A full list of all specific instances that have been lodged to date with OECD NCPs, many of which are still under progress, can be found here: http://mneguidelines.oecd.org/database/searchresults/?q=%23all.

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