Displaying items by tag: Legal

Mexico: GCC has made new appointments to the roles of project director, chief financial and planning officer and general counsel, effective immediately. Luis Carlos Arias will now serve as project director to the company's Odessa, US, cement plant expansion. Arias previously served as the group's chief financial officer. Maik Strecker steps into the role of chief financial and planning officer. Strecker joined GCC as chief planning officer in 2020. He has two decades' previous experience in roles spanning mergers and acquisitions, business development, product line management, operations and sales and marketing. Lastly, Cesar Conde will serve as GCC's general counsel. Conde has worked for the group since 2006.

GCC's CEO Enrique Escalante said "I am confident these executives bring proved strategic and execution leadership to the Company, and I look forward to the challenges and opportunities ahead."

Doing deals with terrorists has a price: US$778m. The US Department of Justice (DOJ) revealed this week that it had fined Lafarge for its conduct in Syria between 2013 and 2014. In addition Lafarge and its subsidiary Lafarge Cement Syria (LCS) have pleaded guilty to one count of conspiring to provide material support to designated foreign terrorist organisations in Syria. It is uncertain how exactly the fine will be paid but it is worth noting that successor company Holcim reported net sales of nearly US$27bn in 2021. The fine represents nearly 2% of this.

A reasonable amount of new detail can be found on the DOJ website. LCS was essentially dealing with the Islamic State of Iraq and al-Sham (ISIS) and the al-Nusrah Front (ANF) as they would a local government in relation to the running of the Jalabiyeh cement plant. As a reminder, both of these groups were defined as terrorist organisations by the US government at the time. The relationship apparently started as monthly payments to local armed groups, including ISIS and ANF, to allow movement through checkpoints. This later progressed to a de-facto tax based on cement sales. However, it became worse when LCS started asking ISIS to block or tax imports of cement from Turkey-based competitors into northern Syria as part of a revenue-sharing agreement. Effectively LCS was fixing the price of cement in a war zone by collaborating with terrorists. In the end LCS, the intermediaries and the terrorist groups made around US$80m whilst they were working together.

Holcim’s interpretation of the ruling was keen to point out that the conduct in Syria was recognised by the DOJ as not involving Holcim in any way. The DOJ did agree that Lafarge’s executives didn't disclose their activities in Syria to its successor company Holcim either before or after the merger in 2015. However, it pointed out that Holcim had not carried out due diligence of LCS’s operations in Syria. It added that, “Lafarge, LCS and the successor company also did not self-report the conduct or fully cooperate in the investigation.”

Despite this, other information that Holcim also highlighted was that the US authorities were now happy that effective compliance and risk management controls were in place to prevent anything similar happening again. Crucially, it said that the DOJ didn’t think that an independent compliance monitor was required. It pointed out that none of the conduct involved Lafarge’s operations or employees in the US and that none of the Lafarge executives were working for Holcim or any associated company. Finally, the group wanted to report that the DOJ found that none of the former Lafarge executives involved shared any of the “methods, goals or ideologies” of the terrorist groups operating in area at the time.

The immediate reaction from all of this is what happens to the ongoing legal case in France, also about Lafarge’s conduct in Syria? In mid-May 2022 the Court of Appeals confirmed a charge of complicity in crimes against humanity against Lafarge. The company then reportedly started the appeal process at the Supreme Court. Other charges, including financing terrorism, endangering life and violating an embargo, were lodged earlier in the legal process. The US is generally seen as being the leading prosecutor of international corporate crime but if the French legal system also issued a fine to Lafarge on the same scale things could become difficult for Holcim. The other complication for the French legal case is that the national intelligence services allegedly used Lafarge’s links with the Syrian terror groups to acquire information but they did not warn the company that it was committing a crime.

Holcim is a different company from what it was when LafargeHolcim formed in 2015. It is being run by a new chief executive officer who came in from another company well after the merger and is diversifying away from the trio of cement, concrete and aggregates with the addition of a fourth business area of light building materials. Alongside this the group has been selling off businesses in the developing world and focusing on Europe and North America. Yet it is still being defined by the criminal actions of a company it absorbed seven years ago and the behaviour of staff long gone. Those actions have been investigated and punishment delivered. More may be coming.

Syria/US: A US court has found Lafarge Cement Syria guilty of conspiring to provide material support to the terrorist organisations al-Nusrah Front (ANF) and ISIS in Northern Syria during 2013 and 2014. Lafarge Cement Syria and its parent company, France-based Lafarge, agreed in 2011 to pay the terrorists for Lafarge Cement Syria employees' 'protection' and the continuation of the Jalabiyeh cement plant's operations, as well as to gain an economic advantage over other Syrian competitors. During the duration of the agreement, Lafarge Cement Syria recorded US$70.3m in sales. Coalition forces fighting against ANF and ISIS damaged the plant in an airstrike 'to reduce the facility's military usefulness' on 16 October 2019.

The court ordered Lafarge Cement Syria to pay criminal fines and forfeiture totaling US$778m.

Sweden: The Environmental Protection Agency (Naturvårdsverket) and the county administrative board of Gotland have both recommended rejecting Cementa’s application to extend its operating permit for its integrated Slite cement plant by four years. At present the current temporary permit will expire at the end of 2022, according to the Dagens Industri newspaper. The county administrative board has requested more information and Naturvårdsverket has found issues in the application with groundwater and nature protection area issues.

Cementa says that it submitted it application to the Land and Environment Court in April 2022 and that it was deemed complete by the court, which announced the application. In July 2022, opinions were received from around 10 authorities and associations, such as the Geological Survey of Sweden (SGU), Naturvårdsverket and the Norwegian Sea and Water Authority. Cementa added that it has now responded to this feedback.

“There are and must be high requirements for permit applications, so it is natural that there will be many views and questions in this type of examination,” said Karin Comstedt Webb, vice president of HeidelbergCement Sweden. “We have now clarified the application further and are now looking forward to the main hearing in October 2022. We are confident that our application is complete and we have been keen to show even more clearly that the business can be conducted in coexistence with nearby residents, and surrounding environmental and natural values. We see good conditions for the timetable announced by the court to be kept, which is crucial for the Swedish cement supply not to be jeopardised in the coming years.”

Further views on the application will be submitted in September 2022. The Land and Environment Court will then hold a hearing in October 2022 and a final decision is expected the end of 2022.

A disturbing story has emerged this week concerning attempts by an unknown party to seize control of Holcim Russia. The situation marks a dangerous new phase for multinational companies operating in Russia. This includes a number of building materials producers and their suppliers.

The public side of events started on 26 July 2022 when Holcim Russia announced on its website that a legal case concerning an unpaid loan against it had been initiated at a court in Chechnya and that someone was also trying to change ownership documents with the Federal Tax Service. This was then followed by an interview by Forbes Russia with the new alleged owner of the construction materials company explaining how he had made the so-called acquisition. Holcim Russia immediately hit back hard with multiple and well researched reasons why this couldn’t be so. These included the supposed private investor’s apparent lack of a business past, a long criminal history, psychiatric records, social media accounts of an individual of seemingly modest means and so on. Kommersant FM has since reported that the court in Chechnya took the side of the asset raider but that both the Federal Security Service (FSB) and the Ministry of Industry and Trade are now investigating the case.

Taking loans from a mystery businessman with no apparent past does not look credible for a multinational like Holcim and its subsidiaries. This particular method was also flagged up by one of the legal sources quoted by Kommersant FM as a recognisable corporate scam in Russia dating back to the 2000s. What is more certain is that Holcim reported that it had a 100% interest in Holcim Russia in its annual report for 2021. It then said it was going to leave the Russian market in late March 2022 following the start of the war in Ukraine a month earlier. By May 2022 it said that it had attracted the interest of 30 possible buyers. Only this week Holcim’s chief executive officer Jan Jenisch confirmed in the company’s second quarter conference call that divestment discussions were 'active' and ongoing with a 'solution' expected in the coming months. The timing of Holcim Russia’s sudden difficulties is therefore noteworthy given that a potential buyer has not yet been publicly announced.

Whoever has tried their luck at taking over Holcim Russia has done so at a time when anti-Western sentiment is high in Russia. For example, the government attempted to pass a new law seizing the assets of Western companies trying to leave the country in July 2022. Any intervention by the authorities is likely to take some of this into account and they may be wary of helping an organisation with perceived European links. Naturally, the nationalist card was played up in the interview with Forbes Russia. For its part, Holcim Russia has commented that the ongoing 'illegal action' might lead to production delays for building materials supporting key housing and infrastructure projects. Whatever is going on it must be a tense time for Holcim Russia and its 1500 employees. We’ll leave the last word to Holcim Russia’s general manager Maxim Goncharov who has described the situation as the “theatre of the absurd.” He is not wrong.

Mexico: State police have intervened during a confrontation between rival groups for control of Cruz Azul’s Tula cement plant in Hidalgo. A group of workers, allegedly numbering 1000 people, aligned to the faction that controls the majority of Cruz Azul’s cement plants travelled to the site in Jasso by bus and taxi on the evening of 26 July 2022, according to La Jornada newspaper. Another group defending the plant reportedly blocked local roads and used sticks, pipes and stones to repel the assault. The police managed to deter most of the convoy travelling to the plant. However, eight deaths occurred when some of the attackers made it through.

The Tula cement plant is the sole remaining Cruz Azul unit still controlled by former company director Guillermo ‘Billy’ Álvarez and his associates. The rest of the company is under the command of Cruz Azul’s directors José Antonio Marín and Víctor Manuel Velázquez.

It’s been a good week for carbon capture projects in Europe with the announcement of who the European Union (EU) has selected for a grant from its Innovation Fund. 17 large-scale projects have been pre-selected for the Euro1.8bn being doled out in the second round of awards. On the cement and lime sector side there are four projects. These include projects at Holcim’s Lägerdorf cement plant in Germany, HeidelbergCement’s Devnya Cement plant in Bulgaria, Holcim’s Kujawy plant in Poland and Lhoist’s Chaux et Dolomites du Boulonnais lime plant in France. Large-scale in this instance means projects with capital costs over Euro7.5m. To give readers some sense of the scale of the projects that the EU has agreed to pay for, if the funding was shared out equally between the current bunch, it would be a little over Euro100m per project. This is serious money.

Devnya Cement’s ANRAV carbon capture, utilisation and storage (CCUS) project in Bulgaria has received little public attention so far so we’ll look a little more closely at this one first. No obvious information is available on what capture technology might be in consideration at the plant. HeidelbergCement’s leading experience in carbon capture technology at cement plants gives it a variety of methods it could use from a solvent scrubbing route to something less common. What the company has said is that, subject to regulatory approval and permitting, the project could start to capture 0.8Mt/yr of CO₂ from 2028.

What has also been revealed is that the project is linking up via pipelines to a depleted part of the Galata gas field site in the Black Sea. Oil and gas company Petroceltic Bulgaria is a partner and the aim of the project is to start a CCUS cluster in Eastern Europe. with the potential for other capture sites in Romania and Egypt to join in. This is noteworthy because much of the focus for the burgeoning cement sector CCUS in Europe so far has been on usage on local industrial clusters or storage in the North Sea.

The other new one is the Go4ECOPlanet project at Holcim’s Kujawy plant in Poland. Lafarge Cement is working with Air Liquide on the project. The latter will be providing its Cryocap FG adsorption and cryogenics technology for direct capture of flue gas at the plant. The transportation of the CO₂ is also interesting here as it will be by train not pipeline. Liquid CO₂ will be despatched to a terminal in Gdańsk, then transferred to ships before being pumped down into a storage field under the North Sea.

Turning to the other two grant recipients, the Carbon2Business project plans to capture over 1Mt/yr of CO₂ using a second generation oxyfuel process at Holcim Deutschland’s Lägerdorf cement plant. This project is part of a larger regional hydrogen usage cluster so the captured CO₂ will be used to manufacture methanol in combination with the hydrogen. Finally, Lhoist’s project at a lime plant in France is another team-up with Air Liquide, again using the latter’s Cryocap technology. The capture CO₂ will be transported by shared pipeline to a hub near Dunkirk and then stored beneath the North Sea as part of the D'Artagnan initiative. Around 0.61Mt/yr of CO₂ is expected to be sequestered.

The key point to consider from all of the above is that all of these projects are clear about what is happening to the CO₂ after capture. The days of ‘carbon capture and something’ have thankfully been left behind. CO₂ transportation infrastructure is either being used or built and these cement plants will be feeding into it. This will inevitably lead to questions about whether all these new CO₂ networks can support themselves with or without EU funding but that is an argument for another day.

Finally, in other news, four residents from the Indonesian island of Pulau Pari started legal proceedings against Holcim last week for alleged damages caused by climate change. Industrial CO₂ emissions are unquestionably a cause of this along with other sources but what a court might think about this remains to be seen. Yet, it is intriguing that the plantiffs have decided to go after the 47th largest corporate emitter rather than, say, one of the top 10. Regardless of how far the islanders get this is likely not to be last such similar attempt. If the case does make it to court though it seems likely that Holcim will mention its work on CCUS such as the two projects above. Only another 200-odd cement plants in Europe to go.

Switzerland: Indonesian citizens of Pulau Pari have launched a legal case against Holcim in Switzerland for its contribution to climate change. Holcim operated in Indonesia from 1971 through its subsidiary Holcim Indonesia, which Semen Indonesia acquired from the group in 2019. Pulau Pari faces increased climate change-induced flooding, including two floods in 2020. Four residents have launched the present case against Holcim for damages, funding for flood defences and positive measures towards further group CO₂ emissions reduction. Indonesia-based environmental organisation Walhi, Swiss Church Aid (HEKS) and the European Center for Constitutional and Human Rights (ECCHR) are supporting the case.

Mexico: Cooperativa La Cruz Azul has taken to Twitter to thank the executive and judicial authorities of Mexico City for their work in dismantling the criminal network which had previously taken control of the producer. Prosecutors have indicted former Cooperativa La Cruz Azul legal director Victor N, who went into hiding in July 2020, and an alleged accomplice, Joel N.

Saudi Arabia: Arabian Cement says that the Jeddah Commercial Court has ruled in its favour in a lawsuit it filed against Emaar, the Economic City Company, to claim outstanding quantities of limestone it was due in an agreement the companies signed in 2012. The court has ordered Emaar to give Arabian Cement around 4.6Mt of limestone. As part of the deal, from 2012 to 2018, Emaar agreed to provide the cement company with 44.7Mt of limestone. However, Arabian Cement maintains that it did not receive 5.3Mt of the total.

Arabian Cement previously gave land to Emaar in return for a limestone supply deal. Emmar company has been developing the King Abdullah Economic City.