Cambodia: Securing compensation for ANZ-backed land grab

Phnom Penh Sugar Corporation and ANZ Bank

Overview

When a Cambodian sugar company, with powerful friends in high places, illegally seized and bulldozed farms and residential land from more than 1,500 families to make way for a sprawling plantation and refinery, the communities organized collectively to push back. Their struggle received a significant boost when we discovered that the project was financed by Australia’s ANZ bank, which had failed to do its human rights due diligence on the loan. Inclusive Development International helped the families file a formal complaint with an Australian government agency, and in a world first, the bank agreed to provide compensation to the communities that had been forcibly displaced.

CASE FILE

Location: Thpong and Oral districts of Kampong Speu province
Project Sugarcane plantation and refinery
Company: Phnom Penh Sugar Company
Key concerns:

 

·      More than 1,500 families forcibly displaced from their farms

·      More than 100 families forcibly evicted from their homes

·      Destruction of crops and livelihoods

·      Harsh and dangerous working conditions

·      Child labor

·      Destruction of protected forests

·      Violation of Cambodian laws

Community goals: Compensation and livelihood restoration
Key investors and financiers: ANZ Bank
Our partners: Equitable Cambodia, OECD Watch, BankTrack, Oxfam Australia, Uniting Church of Australia

It was more than six years in the making, but the landmark settlement that Inclusive Development International and Equitable Cambodia secured from ANZ bank on behalf of Cambodian communities has set an important human rights precedent for the global banking industry.

For the first time ever, a commercial bank has effectively paid compensation for the actions of one of its corporate clients after acknowledging that its human rights due diligence had been inadequate.

ANZ had provided a loan to the Phnom Penh Sugar Company for a controversial sugarcane project established through the illegal seizure of homes and land, forceful evictions, destruction of legally protected forests, and with the help of dubious government approvals and concessions.  After we filed a formal complaint with the Australian National Contact Point for Responsible Business Conduct, ANZ’s acts and omissions were found to be inconsistent with the bank’s own polices and the ethical business guidelines of the Organization for Economic Cooperation and Development (OECD).

A little over a year later, ANZ agreed to our long-standing demand that it divest itself of the revenue it earned unjustly from the Phnom Penh Sugar deal and provide those funds to the affected families to help them get back on their feet.

We’re currently working with Equitable Cambodia to distribute the settlement funds to the families in Kampong Speu, who have been struggling for the past decade since their forced displacement by Phnom Penh Sugar.

We’re also advising ANZ, as part of an external advisory group, on the development of what is set to be the world’s first human rights complaint mechanism established by a commercial bank. ANZ has committed to establishing a mechanism that is accessible to communities affected by the bank’s clients operating around the world, and which meets international human rights standards for effectiveness.

Not only does this win help address the hardship experienced by the impacted communities, but it also helps to solidify the emerging global norm that when a bank contributes to adverse human rights impacts through its lending activities, it has a responsibility to contribute to a remedy.

Our Actions

In October 2014, Inclusive Development International and Equitable Cambodia filed a complaint against ANZ to the Australian National Contact Point for Responsible Business Conduct, an Australian government body that promotes the OECD Guidelines for Multinational Enterprises and works to resolve claims of corporate misconduct.

We lodged the complaint on behalf of the affected families who were forcibly displaced and dispossessed by Phnom Penh Sugar. The complaint details widespread violations of human rights, including forced evictions, military-backed land seizures, destruction of crops and property, arbitrary arrests and intimidation of villagers and the widespread use of child labor. It argues that ANZ breached its responsibilities under the OECD Guidelines and the UN Guiding Principles on Business and Human Rights by contributing to these abuses through its actions and omissions and failing to take reasonable measures to prevent or remediate them.

Inclusive Development International and Equitable Cambodia argued in the complaint that ANZ contributed directly to Phnom Penh Sugar’s unjust activities and profited from those activities, so it had a responsibility to provide reparations to those affected.

In June 2018, the Australian National Contact Point found that ANZ’s actions were inconsistent with its own policies and the OECD Guidelines. In a rare rebuke of a commercial bank, the National Contact Point said the human rights risks of doing business with the sugar company “would likely have been readily apparent” to ANZ. The Australian government body called on the bank to strengthen its due diligence systems and instigate “methods to promote and demonstrate internal compliance with its own stated corporate standards with respect to human rights.” It also recommended that ANZ establish a grievance resolution mechanism “as a way of demonstrating that its actions are consistent with community expectations around the accountability of multinational enterprises in this area.”

In October 2018, ANZ’s CEO Shayne Elliott told a parliamentary committee that they were indeed considering compensating the hundreds of families that suffered as a result of its investment. Inclusive Development International, Equitable Cambodia and ANZ had ongoing contact following this statement, which eventually led to a request for Australia’s National Contact Point to facilitate a new dialogue between the parties through its good offices process.

In February 2020, ANZ, Inclusive Development International and Equitable Cambodia reached a landmark agreement, which includes:

  • A contribution by ANZ of the gross profit it earned from the loan to help alleviate the hardships faced by the affected communities and support their efforts toward rehabilitation.
  • A commitment by ANZ to review and strengthen its human rights policies, including its customer social and environmental screening processes, and specific grievance mechanism accessible to affected communities.

Background

In January 2014, two confidential social and environmental assessment reports leaked to Inclusive Development International revealed that ANZ Royal Bank provided significant financing to Phnom Penh Sugar Company, which owns and operates the controversial sugar plantation and refinery in the Cambodian province of Kampong Speu. ANZ Royal was a controlled entity of the Australia and New Zealand Banking Group Ltd. (ANZ), the third largest bank in Australia. (ANZ has since sold its stake in the Cambodian entity).

At the time ANZ gave the green light for the deal, Phnom Penh Sugar and its sister company Kampong Speu Sugar Co. Ltd. were embroiled in a conflict with hundreds of families in the Thpong and Oral districts of Kampong Speu province, where their sprawling sugar plantation was established by seizing homes, rice fields, orchards, grazing land and community forests relied upon by local farmers in at least 21 villages.

Phnom Penh Sugar received approval from the Cambodian government for an economic land concession of approximately 9000 ha in Thpong district in February 2010. On the same date, Kampong Speu Sugar was awarded an adjacent concession of 9,052 hectares in Oral district. The adjoining concessions are registered to the notorious Cambodian Senator and tycoon Ly Yong Phat and his wife Kim Heang.  In March 2011, Prime Minister Hun Sen signed a decree allowing land in the Oral Wildlife Protected Area to be reclassified and the Kampong Speu Sugar concession to be expanded by 4,700 hectares.

Key concerns about the project include:

Violations of Cambodian law – The total landmass of the adjoining concessions is over 23,000 hectares – more than twice the land size permitted under the Cambodian Land Law. The twin concessions were also granted without adherence to the procedural legal requirements for land concessions, including prior public consultations on the proposed project, prior completion of an Environmental and Social Assessment, and assurances that lawful landholders would not be displaced and that access to private land would be respected.

Forced Evictions – Beginning in February 2010, the company began illegally seizing and bulldozing farm and residential land belonging to more than 1,500 families in Thpong and Oral districts. Crops, including rice, mango, jackfruit, banana and coconut trees, were seized and cleared.  An estimated 100 families in two villages were forcibly evicted from their homes and resettled onto small residential plots without any infrastructure or services. The company used the police and the military, including the former Khmer Rouge “Battalion 313”, to intimidate people into accepting inadequate compensation for losses, including infertile replacement land.

Destruction of protected forests – Community forests, legally recognized by the Forestry Administration, and protected State forest in the Oral Wildlife Sanctuary were also illegally cleared by the company, including dense forest beyond the boundaries of the concession.

Impoverishment and destruction of livelihoods – As a result of the loss of farmland, grazing land, crops and access to forest resources, affected people have been impoverished and faced with food insecurity. Many affected families have pulled their children out of school and have had no choice but to work with them on the sugar plantation, which for many people has become their only livelihood option since losing their productive resources.

Poor working conditions – Working conditions on the plantation are harsh. Pay is low and work is hazardous due to lack of compliance with workplace health and safety regulations. These hazards caused the deaths of at least three workers, who were killed by plantation equipment.

Environmental and health impacts – The firm’s activities have had significant environmental and health impacts on surrounding communities, including as a result of its dumping of wastewater. Local villagers claim that this dumping occurs once a year with the runoff flowing into community streams and other water sources, killing fish and affecting the health of villagers and their livestock.

Legal harassment of land defenders – Affected people who have protested their dispossession have been jailed or otherwise subjected to legal harassment by the courts as a result of complaints filed by company staff. Others have been banned from working on the plantation along with their family members. At least 38 villagers have faced criminal charges or court summons due to their protests.

ANZ’s role

ANZ commissioned the consulting firm International Environmental Management Co to prepare a “Phase 1 Environmental and Socio-economic Site Assessment” when it was considering financing Phnom Penh Sugar. The assessment report, dated November 23, 2010, failed to mention the high-profile conflict that the company was having with local communities displaced by its land concessions, which had been reported extensively in the local English-language press in Cambodia throughout 2010. Nonetheless, the assessment did note a number of social and environmental concerns, such as encroachment of the land concession into the protected Phnom Aural Wildlife Sanctuary. Of particular significance was its recommendation to “conduct a detailed impact assessment in the project area according to the assessment guidelines provided by the Equator Principles and IFC Performance Standards.” This recommendation was rated “high” in terms of “urgency to address impact.”

In 2011, ANZ proceeded with a corporate loan to Phnom Penh Sugar without ensuring that such assessment would be conducted, or that social and environmental risks identified would be mitigated.

This significant omission, and the decision to proceed with financing of Phnom Penh Sugar despite the well-documented concerns, was at odds with ANZ’s own human rights standards and its responsibilities under the UN Guiding Principles on Business and Human Rights.

After Inclusive Development International brought these concerns to ANZ’s attention in January 2014, the bank encouraged Phnom Penh Sugar to develop an action plan to address the communities’ grievances.  This effort proved ineffectual and ANZ severed its ties with Phnom Penh Sugar in July after the company repaid its loan prematurely.

A complaint lodged by Inclusive Development International and Equitable Cambodia on behalf of affected communities to the Australian National Contact Point led to adverse findings in 2018 that ANZ’s actions were inconsistent with its own policies and the OECD Guidelines.

Following further advocacy from Inclusive Development International and partners in Australia, in February 2020, the Independent Examiner of the Australian National Contact Point facilitated a meeting which resulted in a landmark agreement to resolve the complaint.

ANZ agreed to contribute the gross profit it earned from the loan to help alleviate the hardships faced by the affected communities and support their efforts toward rehabilitation. ANZ also agreed to review and strengthen its human rights policies, including its customer social and environmental screening processes and grievance mechanism.

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