The EBRD faces protests in Poland over its €160 million loan to Kaufland, the supermarket group where inspectors found 1,347 irregularities under employment, health and safety rules.
The Polish Workplace Inspectorate fined 68 Kaufland personnel a total of Zl46,150 (€11,100) for breaches of labour law, and has claimed to have asked the general prosecutor to issue five criminal cases against managers in the company for false record keeping.
The inspectorate's report highlighted non-payment of overtime and night shift payments, illegal work contracts, widespread use of underpaid casual labour and unfair disciplinary procedures. It said Kaufland managers had inadequate knowledge of health and safety rules and frequently failed to report breaches.
When the EBRD made the loan on February 24, the workplace inspectors had not yet issued their damning report. But bad treatment by Kaufland's managers of its workforce has been widely reported in the press in Poland.
Kaufland's parent company, Schwarz Beteiligungs of Germany, was last year the target of a major campaign by German unions over "degrading" working conditions at Lidl, its other supermarket subsidiary.
The All-Poland Alliance of Trade Unions and Bankwatch, the NGO that monitors international financial institutions operating in central and east Europe, are demanding that the EBRD freeze all unpaid disbursements of the loan to Kaufland, and release the results of its environmental analysis on the company.
Petr Hlobil of Bankwatch says: "This is a clear example of the EBRD's failure to adhere under its own rules to high environmental standards, which include social and labour issues. The loan to Kaufland is indicative of a trend in the EBRD that prioritizes return over its public interest mandate. This is not the only EBRD client that breaches basic labour standards."
Another example of this, according to NGOs, is Fresh & Co., a Serbian food producer in which the EBRD has a 32% equity stake. The company owes workers at its Subotica plant three months' wages arrears. The campaigners also argue that EBRD's attempts to improve clients' business practices often fail: Animex, the Polish subsidiary of Smithfield Foods that borrowed $100 million from the EBRD in 2001, still fails to meet legal requirements for integrated permits and fertilization plans.
Anna Rogenbuck of Bankwatch Poland said that attempts to engage the EBRD in dialogue on sweat shop conditions at Kaufland had failed. "Kaufland's poor treatment of its workers is common knowledge in Poland, but the EBRD would not discuss it with us." Emails sent by Bankwatch in April to the EBRD's London headquarters and telephone calls to its Warsaw office, were not returned.
Gilles Mettetal, deputy head of the EBRD's agribusiness team, said that Kaufland had assured the bank that it was responding to the workplace inspectorate's report and pointed out that the company had not been fined nor convicted of any offence. He said the team had not yet studied the workplace inspectorate's report, which has been published on the internet.
Mettetal said food retail is a priority for the EBRD, and the bank had been "especially keen on Kaufland" because of the regional spread of its operations and the supply-driven character of its business. "We are not saying there are not any problems. But we concluded that Kaufland's standards on labour, hygiene, health and safety are higher than those predominant in the sector."
He added: "If there was any breach of Polish legislation that would put the borrower in breach of our loan agreements. We would then give a definite period for it to change the situation, or stop disbursements and ask for disbursed sums to be returned."
He said the bank has monitored the situation at Fresh & Co, and understands that the company has signed an agreement with labour unions. Kaufland declined to comment.