Polish buyer LPP denies payment liability; Bangladeshi exporters say they have proof

Infograph: TBS

Polish apparel retailer LPP has denied allegations that it owes outstanding payments to Bangladeshi garment exporters, saying reports of payment arrears are "entirely unfounded".

Responding to an email from The Business Standard, the company said, "LPP settles all obligations to suppliers in Bangladesh on an ongoing basis. Reports of alleged payment arrears owed by our company to factories in Bangladesh are entirely unfounded."

However, LPP did not respond to TBS's query on its decision to suspend sourcing from Bangladesh.

According to Bangladeshi exporters, LPP sources more than $700 million worth of garments from Bangladesh each year.

The dispute centres on export orders placed with FES Retail, a Russian company. Bangladeshi suppliers claim LPP acted as the guarantor for those orders and the associated payments. They allege they have not received payments for shipments to FES Retail for the past 18 months, with outstanding dues amounting to around $40 million.

Exporters say repeated negotiations have failed to resolve the issue, prompting some suppliers to file lawsuits against LPP in Bangladeshi courts. Shortly after the legal action, LPP announced on 30 July that it was suspending its business relationship with Bangladesh.

Rejecting responsibility, LPP said the disputed orders were placed by a company that acquired its Russian subsidiary in 2022.

"The matter concerns orders placed by a company to which we sold our Russian subsidiary in 2022. We are not a party to this dispute and bear no responsibility for obligations incurred by a separate entity," the company said.

It added, "We understand the difficult situation faced by the actual debtor's counterparts; however, all claims should be directed to the company genuinely responsible for the outstanding liabilities."

LPP also said it remains in regular contact with the Bangladesh Embassy in Warsaw to clarify the issue and correct what it described as false information.

Exporters reject LPP's claim

Bangladeshi exporters dispute LPP's position, insisting the company guaranteed payment for the exports.

Enamul Kabir, managing director of buying house ENSA Clothing, said his company is still awaiting $51,000 for garments exported to the Russian buyer through LPP.

"We have all the documents proving that LPP acted as the payment guarantor for these exports," he told TBS.

According to Kabir, previous shipments to the same buyer were paid by LPP, with some payments made directly from Poland.

"They informed us only in July this year that they were no longer associated with the Russian company. But we had been exporting through LPP for a long time. Why didn't they inform us earlier?" he said.

Kabir said his company has also filed a lawsuit to recover the outstanding payment.

A leading Bangladeshi exporter, requesting anonymity, said other international brands have expressed support for Bangladeshi suppliers after learning about the dispute involving LPP.

Meanwhile, police have reportedly visited the homes of several officials at LPP's Dhaka office following the lawsuits, adding another layer of complexity to the situation.

Industry sources said around 772 Bangladeshi companies supply products to LPP. They now face uncertainty following the legal dispute, unresolved payment claims and LPP's announcement that it is suspending business with Bangladesh.