Cement, compliance, and crimes against humanity in Syria

Swiss-French cement company LafargeHolcim has admitted to “unacceptable” measures that may have led to company cash being used to fund terrorist groups in Syria—including ISIS—while also putting employees’ lives at risk in order to keep its newly built plant open.

Lafarge’s Syrian unit had paid third parties to work out arrangements with armed groups, including “sanctioned parties,” to maintain operations at the cement factory in 2013 and 2014. The company says, however, that it is unable to establish which groups ultimately received the funds, adding that local managers at the Syrian plant “acted in a manner they believed was in the best interests of the company and its employees” but without the direct knowledge of the group board.

Lafarge’s cement plant started production in May 2010, nearly three years after building work began and at a cost of U.S.$680m. But by September 2014 the political and security situation had become so untenable that the company was forced to lay off all its’ local staff and abandon the site. The group has not attempted to operate on site since.

Allegations surrounding Lafarge’s activities in Syria have dogged the company for the past year, and it is currently the subject of two lawsuits—one by the French Finance Ministry, and the other jointly pursued by two human rights organisations (including 11 people who were former employees in Syria). These legal actions mark the first time that non-profit organisations have filed suit against a multinational corporation for financing terrorist activity, complicity in war crimes, and crimes against humanity.

Under pressure, and in response to a series of damaging press stories, LafargeHolcim set up an internal independent investigation under the supervision of the board’s finance and audit committee. On 2 March the company issued a statement following the review.

The investigation found that “the deterioration of the political situation in Syria posed very difficult challenges for the security and operations of the plant and its employees.” These included threats to the safety of employees, as well as disruption of supplies needed to operate the plant and product distribution.

According to LafargeHolcim, different armed factions controlled or sought to control the areas around the plant. As a result, “it appears from the investigation that the local company provided funds to third parties to work out arrangements with a number of these armed groups, including sanctioned parties, in order to maintain operations and ensure safe passage of employees and supplies to and from the plant.”

“Why did Lafarge not evacuate us? Even inhabitants from the nearby village fled the day before the attack. It seems like Lafarge used us as a human shield to protect the plant. They’ve put us too much in danger.”
Anonymous employee present at plant during ISIS attack

However, the investigation “could not establish with certainty the ultimate recipients of funds beyond those third parties engaged” and found that “in hindsight, the measures required to continue operations at the plant were unacceptable.”

Furthermore, the investigation revealed “significant errors in judgment that are inconsistent with the applicable code of conduct,” but added that “those responsible for the Syria operations appear to have acted in a manner they believed was in the best interests of the company and its employees.”

Following the internal review, the company has committed to take a number of steps to improve its procedures and controls around “high-risk third parties and joint venture partners.”

It has approved the creation of an ethics, integrity, and risk committee, which will be supervised by a member of the executive board, and it has said that—with the help of outside counsel—it will adopt a more rigorous risk assessment process focusing (in particular) on high-risk third parties and joint venture partners. It will also introduce a restricted-party screening programme, a new sanctions and export control programme, as well as further (unspecified) risk management efforts following a benchmarking exercise that the company has carried out.

The company also wants to send out a strong message that compliance is a boardroom issue and that it is reinforced by a strong tone at the top. “The board has instructed executive management to vigorously implement these actions, which are designed to further strengthen and resource a state-of-the-art compliance organisation and processes reflecting best practices.”

The board “makes it clear that there can be no compromise with compliance nor with adherence to the standards reflected in the company’s code of conduct no matter the operational challenges,” the statement adds.

LAWSUIT DETAILS

Below are details from the lawsuit alleging Lafarge’s complicity in human rights abuses.
On 15 November 2016 human rights groups Sherpa and the European Center for Constitutional and Human Rights (ECCHR), as well as 11 complainants who are former Syrian employees, filed suit against Lafarge and its subsidiary Lafarge Cement Syria (LCS) for their actions in Syria.
The complaint argues that by having business relations with ISIS in Syria, Lafarge may have taken part in the financing of the terrorist group, and is therefore complicit in war crimes and crimes against humanity.
In a statement, Miriam Saage-Maass, vice legal director at ECCHR said: “The Lafarge case highlights once again how multinationals doing business in conflict zones can directly fuel armed conflicts and contribute to grave human rights violations committed therein. Companies like Lafarge must be held accountable.”
LCS owns a cement factory in the north of Syria, between Raqqa and Manbij. According to the human rights groups’ complaint, in 2012—when the conflict escalated in the north of the country around Raqqa and Aleppo—LCS repatriated its expatriate staff, but kept on Syrian employees working in the Jalabiya plant.
During 2013, conflicts intensified and ISIS seized the north of Syria, controlling many of the checkpoints on the roads surrounding the Lafarge plant. According to the information Sherpa and ECCHR collected, LCS would have entered into arrangements with ISIS in order to maintain production by paying for passes issued by the jihadist organisation and buying raw materials necessary for cement production, such as oil and pozzolana, in areas under ISIS’s control.
An employee who was working at the plant at the time says that he has seen documents that prove that Lafarge collaborated with ISIS. “ISIS delivered a specific document that enabled cement trucks from Lafarge to cross their checkpoints. At the beginning in May 2014, it was a simple note from ISIS, written by hand, where they had put the stamps of the financial department of ISIS,” he says.
Sherpa and ECCHR are also filing suit against the cement manufacturer and its subsidiary for reckless endangerment. They allege that the company did not set up appropriate safety measures around the vicinity of the plant; that they kept employees going to work in spite of the growing number of checkpoints controlled by ISIS; and that staff were not evacuated when the plant was attacked.
An employee present at the plant on the day of ISIS’s attack said in a statement: “Why did Lafarge not evacuate us? Even inhabitants from the nearby village fled the day before the attack. It seems like Lafarge used us as a human shield to protect the plant. They’ve put us too much in danger.”
Source: Sherpa

However, the company’s admission of its failings has done little to appease Sherpa, the Paris-based human rights group that filed a criminal complaint against the company on 15 November, accusing it of financing terrorism in Syria and of having “business relations” with militant group ISIS—and thereby being complicit in war crimes and crimes against humanity.

In a statement also released on 2 March, Sherpa attacked the company’s assertion that the Syrian subsidiary acted independently and without the knowledge or consent of the board when making payments to high-risk contractors.

“The internal investigation of Lafarge shouldn’t imply that only the Syrian subsidiary is responsible [for] arrangements with armed groups,” said Sherpa in its statement. “The French parent company holds 98.7 percent of the subsidiary and was most of the time the source of all decisions it made,” it added.

Sherpa says that such “partial recognition of the facts demonstrates yet again the need for a legislation requiring multinationals to respect human rights in the course of their activities abroad.”

As luck would have it, on 21 February the French Parliament adopted such legislation, known as the “multinationals’ duty of care law,” which is aimed at preventing human rights violations committed by large corporations in developing countries where access to justice for the victims is unlikely and where companies are equally unlikely to be properly held to account. The legislation was proposed in early 2015 as a response to the Rana Plaza disaster in 2013, when a clothing factory in Bangladesh collapsed killing over 1,000 people.

The bill needs to be approved by the country’s Constitutional Council before becoming law. Lawyers have suggested that the legislation will be passed, but that there are likely to be some amendments to ensure that it is more “business friendly.” In fact, the bill has already been softened to gain parliamentary approval: The idea of criminal prosecutions for company directors has been ditched, and the threshold used to determine which companies would be liable under the legislation was raised so that only the world’s biggest businesses would be impacted by it.

Under the legislation as it currently stands, large groups (whose staff exceeds in the aggregate either 5,000 employees in France or 10,000 employees worldwide—which, in effect, means the world’s biggest 150-200 companies) would be required to set up and actually implement and report annually on procedures aimed at identifying and preventing serious damages or infringements to human rights, fundamental freedoms, health and safety, or the environment that may result from their activities or from the activities of their suppliers. Judges can issue fines of up to €10m if companies fail to establish vigilance plans, and up to €30m if this absence results in otherwise preventable damages.

While many countries have adopted voluntary codes of conduct regarding supervision of their suppliers, France is the first country to adopt binding legislation that covers all human rights abuses and which creates obligations for parent and sub-contracting companies across the whole supply chain. Belgium and Spain are debating whether to also have similar legislation in place. In May 2014, the European Commission pressed the need for more responsible management of global supply chains and commercial practices in developing countries in a policy paper (known in EU parlance as a “communication”). But the measures that it proposes remain non-binding for EU companies.

Despite taking the lead, France’s bill still has its limitations. The burden of proof still falls on the victims, who often lack the means to seek justice, further accentuating the imbalance of power between large companies and victims of abuse. Added to that, if a parent company is deemed to have implemented an adequate vigilance plan and damages occur, the company will not be liable. Under the planned legislation, a company is not required to guarantee protection from damage—only that is has done everything in its power to avoid damages.

Sandra Cossart, head of the globalization and human rights programme at Sherpa, says that the law “does not create a new regime of responsibility for companies because there is no obligation for results, just for diligence.” So, she says, French companies will not be held responsible for the failings of their sub-contractors, as long as they have a due diligence plan in place.