IFC has an active project with Indorama Kokand Textile (IKT), a cotton yarn producer, to finance the expansion of a textile plant in Fergana Valley, Uzbekistan. IFC also has seven active projects with Hamkorbank, a licensed commercial bank headquartered in Andijan, Uzbekistan.  These projects include a combination of equity and loan investments, as well as a Global Trade Finance Program. According to IFC, its loans aim to enable Hamkorbank to expand the scope of its lending program to micro, small, and medium enterprises (MSMEs), with a focus on remote areas, which is aligned with IFC’s financial markets strategy for Uzbekistan. IFC’s Global Trade Finance Program (GTFP) supports selected Hamkorbank export/import transactions.

In June 2016, CAO received a complaint related to several IFC projects in Uzbekistan.  CAO found the complaint eligible in August 2016 in relation to two IFC clients: IKT and Hamkorbank. The complaint was filed by a coalition of non-governmental organizations (NGOs) on behalf of Uzbek human rights monitors and alleged victims of forced labor in the cotton fields (the “Complainants”). The complaint raises concerns about the existence of forced labor in IKT’s supply chain. With regard to Hamkorbank, the complainants state that there is a significant risk that Hamkorbank participates in a “coercive financial system and is not conducting adequate due diligence to ensure its participation is not supporting forced labor and the related attacks against independent labor monitors.” The complaint also states that IFC’s investment in Hamkorbank may finance companies that utilize or benefit from forced labor in the cotton system, and that IFC has not fulfilled its due diligence and supervision responsibilities.

CAO found the complaint eligible for assessment in August 2016. During the assessment, complainants, IKT, and Hamkorbank agreed to engage in a voluntary dialogue process facilitated by CAO. CAO’s assessment report is available at the below links in English, Russian and Uzbek.

In July 2018, CAO convened a meeting between IFC and the complainants, along with other local Uzbek human rights defenders, related to the case and ongoing dispute resolution process. A communique, drafted jointly by IFC and the complainant group, is available at the below links in English, Russian and Uzbek.

The complainants and local human rights defenders that were invited to participate in the process organized themselves into a “Group in Mediation” (GM). In January 2019, three of the complainants split off and left the GM. CAO has convened multiple meetings between the GM and Hamkorbank, and as a result, the parties signed a Framework Agreement in July 2019 and an Interim Agreement in October 2019. The parties decided to keep the original agreements confidential. As per the provisions of the Interim Agreement, the Group in Mediation monitored the occurrence of forced labor among Hamkorbank employees (direct involvement, as well as indirect participation) from October 21 to December 20, 2019. In July 2020, the Group in Mediation declared that they were satisfied with the results of the abovementioned monitoring and that they believed the claims against Hamkorbank indicated in the complaint were resolved. The parties have jointly drafted three public communiques, available below in English, Russian and Uzbek.

CAO has also convened joint meetings between IKT and the GM. IKT and the GM signed an interim agreement in November 2020 in their joint efforts towards dispute resolution. While the parties decided to keep the interim agreement confidential, they jointly drafted a communique regarding the results of their collaboration during the 2020 cotton harvest, which is available below in English and Russian. Additionally, the parties decided to continue their collaboration through the 2021 cotton harvest season and jointly selected an independent expert to advise them in developing a mutually acceptable methodology for labor monitoring practices related to IKT’s cotton supply chain. The jointly drafted TOR for the expert is available below. The work of the expert is funded by PeaceNexus, a private Swiss foundation which agreed to provide methodological input and funding for the parties to conduct the activities agreed upon in the interim agreement.

In 2021, one of the three non-GM complainants indicated that they no longer wished to be involved and decided to withdraw from the case. CAO continued discussions with the other two non-GM complainants, one in exile outside Uzbekistan, and all parties regarding these other complainants’ involvement in the dispute resolution process. Due to COVID-19-related restrictions, the process was delayed.

As a result of the monitoring activities conducted by the parties during the 2021 cotton harvest season, GM agreed that there was no systemic forced/child labor in fields that are part of IKT’s cotton supply chain. One of the non-GM complainants participated in the monitoring activities with the GM.
The parties finalized a report on the activities performed during the 2021 monitoring period, including a section related to joint recommendations. Since the parties established that the central issue in the complaint (forced labor and child labor in the cotton fields) was resolved, they agreed to close the Dispute Resolution phase and signed a final settlement agreement on August 29, 2022.

Additionally, the parties decided to continue to collaborate, particularly in monitoring and addressing concerns related to working conditions in the fields from which IKT sources cotton.  A collaboration agreement was signed on August 29, 2022.

In 2023, after finalizing a joint monitoring report regarding the situation in the fields during the 2022 cotton harvest, the parties decided to continue to collaborate through the 2023 cotton season harvest. In accordance with the provisions of the collaboration agreement, CAO has been actively monitoring the implementation of the agreements. Upon the conclusion of the mutually agreed-upon activities related to the 2023 cotton season harvest, the case will be closed.

In September 2023, CAO hosted a roundtable in Tashkent, during which participants shared their experiences and insights from the CAO Dispute Resolution process.

CAO has continued discussions with the only non-GM complainant who has been unable to participate in the Dispute Resolution process in Uzbekistan. Their views will be reflected in CAO’s Conclusion Report upon implementation of agreements reached and closure of the case.