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G-Star Raw ordered to pay damages to Vietnamese supplier
Dutch denim label G-Star Raw has been ordered by an Amsterdam court to pay damages and interest to one of its Vietnamese suppliers, which had accused the label of not respecting its commercial terms. Dutch magazine RTL Nieuws has reported that the Vietnamese factory demanded a €16 million payment after G-Star Raw cancelled orders for a specific jacket model during the pandemic.
G-Star Raw, founded in 1989, and its Vietnamese supplier, were long-standing business partners. According to the case details, in 2018 G-Star Raw pledged to order from the Vietnamese factory, over the course of three years, the ‘Whistler’ hooded quilted jacket in black water-repellent fabric, sold at a retail price of €219.95. Due to financial difficulties arisen during the Covid-19 pandemic, G-Star Raw eventually cancelled the orders placed with the Vietnamese factory, which halted production and reportedly dismissed its staff.
G-Star Raw then decided to manufacture the jackets with a supplier in Bangladesh. RTL Nieuws said the label ordered 56,000 units of the jacket.
G-Star Raw failed to abide by CSR policy
The Amsterdam court ruled that G-Star Raw is responsible for the losses and damages suffered by the Vietnamese factory, in a judgment issued on Friday April 7. The court’s decision was motivated by the local workers’ dismissal, which was deemed to be at odds with G-Star Raw’s CSR policy and with the ethical commitments the Dutch label publicly made on its website, where it writes that “When it comes to the people in our supply chain, our key focus is on achieving fair, safe and healthy working conditions, as well as protecting human rights. We engage in key industry partnerships and make use of standardized industry tools to monitor working conditions.”
Amsterdam-based G-Star Raw does not disclose its financial results. The company has been adversely affected by the crisis the jeans market has been plunged into since the late 2010s.
In the April 7 ruling, the Amsterdam court did not approve the €16 million damages demanded. It regarded the figure as excessive, without however specifying how much should be paid out in damages and interest to the Vietnamese factory.
This ruling by a European court in favour of an Asian company shows that suppliers whose rights have been infringed by European brands are able to claim financial compensation for losses suffered during the Covid-19 pandemic. It remains to be seen whether the ruling will set a legal precedent.
During the pandemic, tensions arose between Asian textile producers and some of their European commercial partners, owing to the latter’s “erratic” behaviour during the crisis, such as order cancellations after goods were produced and unilateral price renegotiations.
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