Polish retailer LPP will continue sourcing from Bangladesh

Polish retailer LPP will continue sourcing from Bangladesh and help facilitate settlement talks over $40 million in disputed payments, rather than pay the amount itself, according to a statement issued yesterday.

LPP maintains it is not legally obliged to make the payment, the company said in a written statement issued jointly with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

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It is expected that the payment will be made gradually based on the position LPP shared with BGMEA, the association’s President Mahmud Hasan Khan told The Daily Star.

He said the joint statement was issued to prevent misinterpretation of the matter.

The payment dispute stems from unpaid dues owed by Russian buyer FES Retail to Bangladeshi garment factories and buying houses, under sales contracts guaranteed by LPP. Payments stopped following the outbreak of the Russia-Ukraine war in February 2022, and Bangladeshi suppliers were unable to recover the money despite repeated efforts.

Amid the dispute, LPP suspended new purchase orders and product development work in Bangladesh on July 30, citing a review of its sourcing strategy.

The Polish retailer said the review and suspension were intended to protect its local employees, ensure legal certainty, and maintain a stable, predictable and fair environment for business operations.

The company sources more than $700 million worth of garments annually from about 722 Bangladeshi companies, mostly sweater manufacturers. The suspension affected more than 350 factories currently doing business with the brand.

THE JOINT STATEMENT

BGMEA and LPP, in the statement, said the dispute should not adversely affect the wider Bangladeshi apparel sector.

They said the matter publicly under discussion involves alleged unpaid liabilities connected to invoices with FES Retail, which LPP said it is not legally obligated to pay.

They shared the intention to ensure legal certainty, employee safety and stable business promotion and cooperation in Bangladesh, as per the statement.

LPP said it settles its own obligations to its direct suppliers and business partners in Bangladesh on an ongoing basis.

BGMEA said it has taken note of LPP’s position that claims should be addressed to the parties legally responsible for them.

Both sides agreed that affected factories are in a difficult commercial situation. They also agreed that settlement talks should involve the party legally responsible for the payments, with LPP saying it would support dialogue without prejudice to its legal position.

BGMEA also said it will engage with relevant ministries, authorities and industry stakeholders to support a fair and orderly process, including protection of LPP officials and employees from undue harassment, pressure or unfounded proceedings.

Both organisations pledge to work together to ensure secure, stable, and uninterrupted business operations in Bangladesh while supporting a fair, transparent, and mutually acceptable resolution of the ongoing matter.

LABOUR LEADERS’ REACTION

Speaking to The Daily Star on the issue, Nazma Akter, president of Sammilito Garment Sramik Federation, alleged that international compliance standards were not followed in LPP’s sourcing from Bangladesh.

The company must pay local suppliers, she said.

She said workers would ultimately suffer if LPP does not pay, since local exporters would be unable to pay wages.

Nazma also called for the governments of Bangladesh and Poland, banks in both countries, BGMEA, IndustriALL and global unions to engage on the issue for an amicable solution.

She also said Bangladesh and BGMEA should raise the matter with the European Union office in Dhaka, since Poland is an EU member state.

Md Towhidur Rahman, president of Bangladesh Apparels Workers Federation, echoed Akter’s concerns, telling The Daily Star that LPP’s conduct amounted to cheating local companies and needed swift resolution.

He said thousands of workers employed at LPP-affiliated factories would suffer if payment is delayed, adding that international compliance and ethical sourcing standards were not followed in this case.