OECD Guidelines for Multinational Enterprises
P.O. Box 8114 Dep, NO-0032 Oslo, Norway
oecdncp@mfa
Complainants notice that Aker BP and Aker ASA’s joint response to NCP of 24 June offers ample space for successful dialogue and mediation. The two companies show competence and willingness to consider the concerns of the Complainants as well as commitment to respect human rights and comply with the OECD Guidelines. Furthermore, they explicitly state their readiness to participate in a dialogue and mediation process in good faith.
While the joint response ends with a request to reject the Complaints, its substance can be read as the start of a dialogue. Several arguments that the two companies bring forward are grounded in interpretations of the Guidelines that are both important and debatable, indicating that the Complaints raise critical questions regarding the interpretation and application of the Guidelines, whose resolution can be expected to contribute to its purposes and effectiveness and would therefore merit further consideration.
Complainants confirm their desire to participate in the specific instances mechanism and enter into dialogue and mediation with Aker BP and Aker ASA in good faith. We strongly belief that there is space for amicable solutions and are open to jointly explore all options that are in accordance with the Guidelines.
In addition to responding to the NCP’s four question, Complainants would like to share some initial reflections on several key arguments brought forward by Aker BP and Aker ASA; we took the liberty of summarizing and numbering them 1-5, see section 2 below.
Section 1. Response to the NCP’s request for additional information
The points raised by the NCP suggest a legalistic and company law-focused approach to the Complaints. While these are important questions for potential mediation – including the way that company law and the Guidelines operate side-by-side – we would like to underline that our focus is the victims of the human rights abuses and concern for remediation of harms committed against them. It would be upsetting for South Sudanese victims of colossal crimes if they were to be denied redress because of legal niceties, and losing sight of the fundamental human rights of access to remedy would risk defeating the purposes of the Guidelines.
- Which entities were acquired from Lundin Energy? Describe any corporate legal restructuring prior to the sale that may be of relevance to the Initial Assessment of the Specific Instance
The legal entities that have de jure merged in the Combined Company were publicly revealed in March 2022 in an Exemption Document, as prescribed by law, and could not prior be traced by us in the public domain. E.g., Appendix 2 of the Merger Plan establishes: “The assets, liabilities, operations and financial performance of the E&P Business during the financial year 2021 is described in Lundin Energy AB’s year-end report for 2021 (the “Year End Report”), which is attached hereto as Sub-Appendix 2.2.” The 2021 year-end report provides consolidated information. It shows that the E&P business was the heart and soul of Lundin Energy, representing app. 98% of its business, but it does not distinguish or identify any legal entity within the company. Apparently, Lundin Energy and Aker BP do not find it relevant to refer to the merged entities in order to accurately and appropriately describe their companies or to correctly understand and appraise the merger.
According to the Exemption Document, the entities that entered the Combined Company were:
- Lundin Energy Holding BV, The Netherlands,
- Lundin Energy Services BV, The Netherlands,
- Lundin Energy Norway AS, Norway,
- Lundin Energy Finance BV, The Netherlands, and
- Lundin Energy Marketing SA, Switzerland.
The structure of the transaction – distribution of shares and combination of assets and operations through a statutory cross-border merger with the short-lived single-purpose entity “Lundin Energy MergerCo AB” – is unusual. A statutory merger allows only 20 per cent of the consideration to be given in cash, requires more formalities and documentation, and normally takes longer to complete than a public offer. It is usually chosen when an exchange offer mechanism would not procure complete control under one corporate umbrella, and if there is not enough cash available to effect a mandatory offer and squeeze out the minority shareholders. As this is not the case, another circumstance is likely to have played a role.
- Which law and what provisions governed the merger? Please provide all relevant information.
The statutory merger was governed by the Norwegian Public Limited Liability Companies Act and the Swedish Companies Act. See the Exemption Document and here for the publicly available details.
- Was there a basis in applicable company law for holding the acquired Lundin companies accountable for adverse human rights impacts in Sudan prior to the merger? Please explain.
This question builds on the position by Aker BP and Aker ASA that the Complaints do not merit further consideration because none of the legal entities included in the merger are linked to the alleged human rights impacts of Lundin Energy’s operations in Sudan. Complainants have reservations about the relevancy of this question by the Norwegian NCP for the Initial Assessment of the Specific Instance. It suggests that the NCP toys with the idea that Complaints may not merit further consideration without a basis in applicable company law for holding these entities individually accountable for adverse human rights impacts. Complainants are concerned that by going this road, the Norwegian NCP could be adopting unwarrantedly restricted interpretations of the definitions of direct linkage and multinational enterprise, that could inadvertently reduce the scope of the Guidelines. The question is also irrelevant for the concern that Aker BP’s acquisition may foreseeably compel Lundin Energy to fail its responsibilities under the OECD Guidelines.
It is unclear what ‘accountable’ exactly means in this context and what kind of accountability would be required. Unqualified subordination of the Guidelines to applicable company law would create a precedent with far-reaching consequences. The underlying issues are many and warrant in-depth consideration and broad consultation. Complainants doubt whether an initial assessment is the appropriate procedure for this. A carefully structured dialogue between the parties within the NCP mediation framework may be more appropriate and is likely to contribute to the purposes and effectiveness of the Guidelines.
In addition, Complainants note that Lundin Energy’s E&P business in Norway was built using the profits from Sudan. “The sale of Sudan 5A has resulted in a strong balance sheet for Lundin Petroleum with positive cash balances and no long-term debt. As a result we will be able to fund the purchase of the DNO assets and the development capital expenditures associated with these assets from internal cash and third party borrowings. We will still have remaining borrowing capacity following the acquisition to fund further acquisitions should opportunities arise. (…) We have agreed to purchase the UK, Irish and the majority of the Norwegian assets of the Norwegian oil company DNO for cash consideration of USD 165 million. This is another milestone transaction for Lundin Petroleum which will be the catalyst for the next phase of growth.”[1]
Complainants submit that the question is not relevant for a decision to consider or reject the Complaints. Would the NCP nevertheless tend to reject the Complaints unless it can find a basis in applicable company law for holding the merged Lundin companies accountable for adverse human rights impacts, Complainants would appreciate the occasion to clarify their position in depth prior to such a decision.
See section 2, 1 below for preliminary reflections on the substance of in this important issue.
- What is the basis for the assertion that Lundin Energy alone will continue to bear all costs and retain all liabilities related to the war crimes indictment and its underlying circumstances? Please explain
“Lundin Energy has agreed to indemnify the Target [also known as the ‘Combined Company’ that is now registered as ‘Aker BP ASA’] against losses, liabilities, costs or expenses, arising or incurred as a result of the underlying facts and circumstances relating to the Indictment, including both criminal claims and civil claims, and including the costs of handling such claims, incurred by or being made against any member of the Target group (including any successor entity) prior to or after the completion of the Merger.”[2] And “The Sudan legal case will remain with Orrön Energy (…). Legal costs in relation to the defence of the Company, and its representatives, are expected to be approximately MUSD 4 for the second half of 2022.”[3] None of the documents published by the two merger companies mentions or attributes responsibilities for potential non-judicial liabilities.
Section 2. Reflections on the joint response by Aker BP and Aker ASA
- None of the companies that Aker BP acquired from Lundin Energy are linked to the alleged human rights impacts of Lundin Energy’s operations in Sudan.
The two companies’ assertion raises critical questions about the implications of the nature of the relation between different entities within as single parent company. It opens a discussion about the linkages between legal separation within a company, direct linkage through business relationship, and ownership of human rights responsibilities. These important issues are further complicated by the fact that the realms of company law and corporate human rights standards do not always fit together well and that their rules are not always cut in stone; for instance, courts increasingly acknowledge the essential unity of the entities that make up multinational companies in the context of tort and crime.
Complainants believe that the internal distribution of legal roles within Lundin Energy or Aker BP is irrelevant for the Complaints. Our prima facie reaction is that all entities within a parent are directly linked with the parent, and that victims’ rights to redress do not cease, no matter how companies are sold, bought or restructured. The strict separation of responsibilities between different entities within a company that is usance in company law practice is a recognized obstacle to respect for human rights, especially the right to remedy, and would seem inconsistent with the Guidelines.
- It is difficult to see how Aker BP’s alleged failure to identify, prevent and mitigate adverse impacts related to Lundin Energy’s potential liability to compensate victims could be considered by the NCP whilst the criminal proceedings are ongoing.
The identification of human rights risks associated with the merger would require answers to different questions and an utterly different process than criminal proceedings. Few if any of the questions that the court will decide directly concerns the Complaints.
- It would not have been possible to conduct a detailed review of a complex set of facts that is currently subject to lengthy litigation.
Risk-based due diligence is at the heart of the human rights responsibilities of companies. The Guidelines do not support that court procedures substitute for a company’s own responsibility to assess risks. The exceptional magnitude of the merger transaction would seem to justify a review of multiple complex sets of facts, including the exceptionally salient human rights allegations.
- Examination of the issues covered in the Complaints under the NCP procedure require Lundin Energy’s participation.
Lundin Energy is no party to Aker BP and Aker ASA’s responsibility to conduct HRDD, engage with stakeholders, and prevent facilitation of ongoing (unremediated) adverse impacts. Besides, Lundin Energy defends itself aggressively with all available means against all criminal allegations. It is difficult to see how its participation would positively contribute to the outcome of a related dialogue and mediation process.
- Lack of remedy for past violations does not constitute an ongoing human rights violation.
Again, an important and debatable issue. The Complaints are based on the fact that the right to an adequate and effective remedy is both an independent human right and a central part of all other rights.[4] All business enterprises have a responsibility to respect all internationally recognized human rights. The UN Working Group on the issue of human rights and transnational corporations and other business enterprises confirms explicitly that this includes the right to an effective remedy as recognized in the international human rights mechanisms. Consequently, businesses should not cause, contribute to or be directly linked to an adverse impact on the right to an effective remedy, that is, taking any action that “removes or reduces the ability of an individual to enjoy” this right.”[5] We would welcome to learn more about the position of the two companies on this matter and to have in-depth discussion about it. Resolution of this issue can be expected to contribute to the purposes and effectiveness of the Guidelines.
On behalf of the Civil Society Coalition on Natural Resources, Global Idé, Church Aid, Liech Victims Voices, Norwegian Peoples Aid, PAX, South Sudan Council of Churches, and Swedwatch,
Egbert Wesselink
PAX
wesselink@paxforpeace.n;]l
[1] Lundin Petroleum, Report for the nine months ended 30 September 2003, p. 1 and 2.
[2] Aker BP and Lundin Energy combine their oil and gas businesses, Press release, 21 December 2021, p. 10.
[3] https://www.orron.com/investors/guidance.
[4] See, UN Declaration on Human Rights at Article 8; International Covenant on Civil and Political
Rights, art 2(3); International Convention on the Elimination of Racial Discrimination, art 6;
Convention against Torture and other Forms of Cruel, Inhuman or Degrading Treatment or Punishment, art. 14.
[5] Report of the Working Group on the issue of human rights and transnational corporations and other
business enterprises, A/72/162, 18 July 2017, par. 65.
