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Talisman Energy, Sudan, and Corporate Social Responsibility

  • Chi Carmody (a1)

Summary

In 1998, a Canadian oil company, Talisman Energy Incorporated of Calgary, acquired part interest in an oil concession in southern Sudan. In 1999, it began exporting oil from the region and paying royalties to the Sudanese government, some of which have been used to fund government forces engaged in a civil war against separatists in the south. The war has caused numerous human rights abuses. Talisman’s investment in Sudan therefore raises concerns about corporate operations in countries where there are serious and frequent human rights violations. What are Talisman and Canada’s obligations at this particular juncture — a point of fertile development in the field of international corporate social responsibility? This comment examines this question in light of recent events.

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1 For a background to the conflict, see generally Holt, P. M. and Daly, M. W., A History of the Sudan: From the Coming of Islam to the Present Day, 5th ed. (Harlow, UK: Longman, 2000); Woodward, P., Sudan, 1898–1989: The Unstable State (London: L. Crook Academic Publishers, 1990).

2 UN Economic and Social Council, The Situation of Human Rights in the Sudan, E/CN.4/ 1999/38/Add.I, para. 42 (1999).

3 Ibid. at para. 159.

4 International Monetary Fund [hereinafter IMF], Sudan: Staff Report for the 2000 Article IV Consultation and Fourth Review of the First Annual Program under the Medium-Term Staff-Monitored Program, IMF Country Report No. 00/70 (June 2000) at p. 21.

5 IMF staff observe that military expenditures increased by 35 per cent in the 2000 program compared with 1999 and have “encouraged the authorities to keep it below budgeted levels” but note that “pressures for increased expenditures in this area are not likely to abate in the near future.” Ibid. at 24 and 35.

6 UN Economic and Social Council, The Situation of Human Rights in the Sudan: Note by the Secretariat, E/CN.4/2001/48, para. 21 (January 25, 2001).

7 Amnesty International, Sudan: The Human Price of Oil, May 2000, AFR 54/01/ 20OO, at p. 2.

8 The Declaration of Principles was concluded under the auspices of the East African Intergovernmental Agency for Development. It can be accessed at <www.web.net/˜iccaf/humanrights/sudaninfo/cdnpolicysudanbkgd.htm>.

9 Khartoum Peace Agreement, signed on April 21, 1997 in Khartoum, see <http://www.sudmer.com/StatsP/New_Folder/agreement.htm>.

10 Other partners in the GNPOC consortium are a wholly owned subsidiary of the China National Petroleum Corporation (40 per cent), a wholly owned subsidiary of the national oil company of Malaysia, Petronas (30 per cent), and the national petroleum company of Sudan, Sudapet (5 per cent). Key management positions are occupied by representatives of each member of the consortium. Decisions made by committees within the GNPOC require an affirmative vote of two members of the board representing at least 6O per cent interest.

11 See Talisman Corporate Social Responsibility Report, 2000, available at <http://www.talisman-energy.com/responsibility/CorpResp.pdf> at p. 28 [hereinafter CSR Report]; and Talisman Energy Annual Report 2000, at p. 59, which can be accessed at <www.talisman-energy.com/financial/2000annual.html>.

12 In its CSR Report, supra note 11 , Talisman notes that “periodic threats are made by rebel forces and clearly indicate that both [GNPOC] personnel and property are considered legitimate targets in the war against the Government of Sudan.”

13 Amnesty International, Sudan: The Human Price of Oil, May 2000, AFR 54/ 01/20OO, at p. 8.

14 In its CSR Report, supra note 11, Talisman notes that “[d]espite the Company’s stated position regarding the use of the Heglig airstrip and advocacy efforts in this regard, we believe that there were at least four instances of non-defensive usage of the Heglig airstrip in 2000. On these occasions, helicopters or planes landed on the airstrip for reasons that we could not determine were related to oilfield security and their presence was considered non-defensive by Talisman.” See CSR Report, supra note 11 at 16. See also Sallot, J., “Ottawa Covering Up for Talisman in Sudan, MP Says,” Globe and Mail (May 5, 2001) A5.

15 Harker, J., Human Security in Sudan: The Report of a Canadian Assessment Mission (January 2000), which can be accessed at <http://www.dfait-maeci.gc.ca/africa/sudan-e.asp> at 15 [hereinafter HarkerReport].

16 The Harker Report suggested that the Canadian government adopt a step-by-step approach to the situation, with a public statement expressing grave concern by the Minister of Foreign Affairs, followed by an announcement that certain exports to Sudan would be subjected to scrutiny under the Export and Import Permits Act, R.S.C. 1985, ch. E-19, followed, if necessary, by placement of Sudan on the Area Control List. Harker also identified application of the Special Economic Measures Act, S.C. 1992, c. 17 as a possibility. Ibid.

17 The text of the International Code of Ethics for Canadian Business is available at <www.uottawa.ca/hrrec/busethics/codeint.html> [hereinafter Code of Ethics]. For background information, see Chase, S., “Talisman Bows to Ottawa, Adopts Business Code of Ethics,” Globe and Mail (December 11, 1999) A1.

18 CSR Report, supra note 11.

19 Dictionary of Canadian Law (2nd ed.) (Scarborough, ON: Carswell: 1995) at 260. For a discussion on the international context, see Barcelona Traction, Light and PowerCo. (Belgiumv. Spain), [1970] I.C.J. Rep. 3.

20 Ian Brownlie refers to the situation of intergovernmental corporations of private law whereby “states may by treaty create legal persons the status of which is regulated by the national law of one or more of the parties” and gives the example Eurofima, a company set up by 14 European countries under Swiss law in 1955 to jointly manage railway rolling stock. Even in this instance, however, there was reference to a governing system of domestic law. See Brownlie, I., Principles of Public International Law (5th ed.) (Oxford: Oxford University Press, 1998) at 67.

21 “The firmly established rule at common law was that directors owe a fiduciary obligation to the corporation, but not to individual shareholders. The current view would appear to be that, while special circumstances may give rise to a fiduciary relationship between a director and shareholders, no general fiduciary obligation exists.” Tétrault, McCarthy, Directors’ and Officers’ Duties and Liabilities in Canada (Toronto: Butterworths, 1997) at 42–3; see Bell v. Source Data Control Ltd. (1988), 66 O.R. (2d) 78 (C.A.); Brant Investments Ltd. v. Keep Rite Inc. (1987), 60 O.R. (2d) 737 (H.C.), aff’d (1991), 3 O.R. (3d) 289 (C.A.). In the United Kingdom, see Howard Smith Ltd. v. Ampol Petroleum, [ 1974] A.C. 821 (P.C.); in the United States, see Revlon Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A. 2d 173 (Del. 1986).

22 In July 2000, the British government introduced a socially responsible investment regulation under section 35 of the Pensions Act 1995 (c. 26), which requires pension funds to disclose the extent to which they consider social, environmental, or other ethical criteria in investment decisions and policies directing the exercise of rights attached to their investments.

23 Universal Declaration of Human Rights, G.A. Res. 217A (III), U.N. Doc. A/810 at 71 (1948).

24 Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy, 17 I.L.M. 422 (1978) [hereinafter Tripartite Declaration of Principles].

25 OECD Guidelines for Multinational Enterprises, 15 I.L.M. 969 (1976).

26 International Code of Conduct on Transnational Corporations, 23 I.L.M. 626 (1984).

27 Tripartite Declaration of Principles, supra note 24 at 424.

28 Amnesty International Guidelines for Companies, available at <www.amnesty. org.uk/business/pubs>.

29 Social Accountability 8000 is a standards association established in 1997 to verify international labour conditions in a transparent manner. It is modeled on the International Standards Organization (ISO) 9000 standard that is used by companies for quality control purposes. See <www.cepaa.org/introduction.htm>.

30 UN Secretary-General Kofi Annan first proposed the UN Global Compact in an address to the World Economic Forum in January 1999. He challenged world business leaders to help build the social and environmental pillars required to sustain the new global economy. The compact encompasses nine principles drawn from the Universal Declaration of Human Rights, supra note 23, the ILO’s Fundamental Principles and Rights at Work, 88th Session, Geneva, June 1998, and the Rio Principles on Environment and Development, U.N. Doc.A/CONF.151 /5/Rev. 1; 31 I.L.M. No. 874. The compact promotes good practices by corporations. It does not endorse companies. See <www.unglobal-compact.org>.

31 The Taskforce on the Churches and Corporate Responsibility (TCCR) is an ecumenical coalition of major churches in Canada. It assists member organizations in promoting and implementing policies adopted by the TCCR on the social and environmental responsibility of Canadian-based corporations and financial institutions. See <www.web.net/~tccr/>.

32 The Global Sullivan Principles [hereinafter GSP) derive from the original Sullivan Principles, a code of conduct for companies operating in South Africa that was devised by a Philadelphia cleric, the Reverend Leon Sullivan, in 1977. In 1997, they were updated and renamed the GSP. See <globalsullivanprinciples.org>.

33 The UN Commission on Human Rights Sub-Commission on the Promotion and Protection of Human Rights is currently working on a set of draft Universal Human Rights Guidelines for Companies. See UN Doc. E/CN.4/Sub.2/2001/ WG.2/WP.1/Add.1 (2001).

34 Guidelines for Multinational Enterprises, 40 I.L.M. 237 (2001). The guidelines are recommendations made by OECD member governments to multinational enterprises that address a range of corporate activities that have become of pressing concern since the last set of general OECD guidelines, which were issued in 1976.

35 In January 1999, the European Parliament adopted a set of proposals on the accountability of European-based multinationals. The proposals, derived from a report entitled Towards a European Code of Conduct, A4-0508/98, aim to establish a European monitoring platform concerning multinational accountability on a broad range of social issues.

36 UN Draft Human Rights Guidelines for Companies, UN Commission on Human Rights, E/CN.4/Sub.2/20oo/WG.2/WP.1/Add.1 (May 25, 2000).

37 See Convention Concerning Indigenous and Tribal Peoples in Independent Countries, ILO Convention No. 169, 28 I.L.M. 1382 (1989); Convention on Biological Diversity, 31 I.L.M. 818 (1992); Draft Universal Declaration on Indigenous Rights, 34 I.L.M. 541 (1995).

38 Code of Ethics, supra note 17.

39 Ibid.

40 Ibid.

41 CSR Report, supra note 11 at 9.

42 Ibid. at 41.

43 Ibid. at 11.

44 Ibid.

45 Ibid. at 4.

46 International Covenant on Civil and Political Rights, 993 U.N.T.S. 3 (1976); International Covenant on Economic, Social and Cultural Rights, 999 U.N.T.S. 171 (1976).

47 International Convention on the Elimination of All Forms of Racial Discrimination, 66O U.N.T.S. 195 (1966).

48 ILO Convention on Discrimination (Employment and Occupation), 362 U.N.T.S. 31 (1958).

49 Declaration of Principles, supra note 8; and Khartoum Peace Agreement, supra note 9.

50 Code of Ethics, supra note 17.

51 UN Guiding Principles on Internal Displacement, contained as an annex to the Report of the Representative of the Secretary-General, Francis M. Deng, UN Doc. E/CN.4/1998/53/Add.2 (February 1998). See Principle 6(3).

52 CSR Report, supra note 11 at 17.

53 Ibid. at 18.

54 Harker Report, supra note 15 at 84.

55 Ibid. at 15.

56 With respect to this particular incident, John Harker went so far as to express in the report his hope that the government of Canada “will call for an investigation of [this] serious allegation” and added that “[w]e hope Talisman will join us in calling for, and facilitating, the investigation we seek.” Ibid. at 14.

57 CSR Report, supra note 11 at 42.

58 “Certainly, there seem to be few, if any, Nuer or Dinka at work at Heglig, which seems to fit a widely held view in Western Upper Nile that the [government of Sudan], thus GNPOC, views all non-Arabs as potential threats to security & If Talisman was serious about being a good corporate citizen, it would win the support of its GNPOC partners to have an audit of hiring and employment practices carried out by the International Labour Organization.” Harker Report, supra note 15 at 14 [emphasis in original].

59 Amerasinghe, C. F., “Jurisdiction Ratione Personae under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States” (1974–5) 47 Brit. Y.B. Int’l L. 227 at 267.

60 “Canada has in the past expressed grave reservations concerning private sector involvement that may heighten tensions or otherwise fuel ongoing conflicts. Canada has consistently discouraged companies from doing business in Sudan and in 1992 suspended all support, including export finance and trade development programs. It has also issued warnings regarding the risks of working in the Sudanese oilfields due to security concerns and the potential danger to employees.” Harker Report, supra note 15 at 25.

61 Article 4 of the Special Economic Measures Act, S.C. 1992, c. 17, provides that the government may only invoke the Act “for the purpose of implementing a decision, resolution or recommendation of an international organization of states or association of states, of which Canada is a member, that calls on its members to take economic measures against a foreign state.” Alternatively, measures may be taken where the government “is of the opinion that a grave breach of international peace and security has occurred that has resulted or is likely to result in a serious international crisis.” The phrase “grave breach of international peace and security” is generally taken to mean Security Council action under Chapter VII of the UN Charter, June 26, 1945, Can. T.S. 1945 No. 7.

62 See Lacey, M., “Sudan War in Agenda for Powell in Africa Visit,” New York Times (May 23, 2001); Perlez, J., “Suddenly in Sudan, a Moment to Care,” New York Times (June 17, 2001); Harker, J., “A Small Start on Peace,” Globe and Mail (June 1, 2001) (referring to the commencement of negotiations between the Khartoum government and southern forces in Nairobi).

Talisman Energy, Sudan, and Corporate Social Responsibility

  • Chi Carmody (a1)

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