Rosia Montana Romania Case Study
Rosia Montana Gold Mine Romania Location – Transylvania * Rosia Montana Mine * Overview • Roșia Montană Project is a gold and silver mining project initiated by Roşia Montană, Romania. If approved, it would become Europe’s largest open-pit gold mine and it would use gold cyanidation mining technique. Currently, the project is on-hold awaiting a parliamentary decision. • State-owned mining company Minvest Deva – with 19.31%, Gabriel Resources – with 80.46% (listed on the Toronto Stock Exchange (GBU symbol) and other minority shareholders – with 0.23% • Estimated 314 tonnes of gold and 1,500 tonnes of silver. 5 year stock chart for Gabriel Resources (GBRRF) Mine Plan Old Mine Impacts • Underground Mine • Open Pit Mine • Superfund Clean-up Project – Acid Rock Drainage impacting downstream for 26 miles • High poverty area of Romania Underground Roman Mining Gallery Archaeology – Roman • Extensive Roman Ruins • Mostly slave worker graves • Company spent $100 million and set aside $35 million more NGO expert – “Rosia Montana worthy of consideration as a Unesco world heritage site and that its galleries are “the most extensive and most important underground Roman gold mine known anywhere” Company expert — “An exaggeration of the importance of the site; The lack of appreciation of the precarious state of preservation and precarious integrity of many heritage-related objectives due to intense exploitation, and massive polluted environment” IFC Performance Standards Overview of Performance Standards on Environmental and Social Sustainability • Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts • Performance Standard 2: Labor and Working Conditions • Performance Standard 3: Resource Efficiency and Pollution Prevention • Performance Standard 4: Community Health, Safety, and Security • Performance Standard 5: Land Acquisition and Involuntary Resettlement • Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources • Performance Standard 7:Indigenous Peoples • Performance Standard 8: Cultural Heritage • http://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_ Corporate_Site/Sustainability-At-IFC/Policies-Standards/PerformanceStandards Cultural Heritage IFC Performance Standard 8 Cultural heritage encompasses properties and sites of archaeological, historical, cultural, artistic, and religious significance. It also refers to unique environmental features and cultural knowledge, as well as intangible forms of culture embodying traditional lifestyles that should be preserved for current and future generations. PS8 aims to guide companies in protecting cultural heritage from adverse impacts of project activities and supporting its preservation. It also promotes the equitable sharing of benefits from the use of cultural heritage. Local Town and Farms Old Town Center and Churches Resettlement • Involuntary resettlement should be avoided. • Where involuntary resettlement is unavoidable, all people affected by it should be compensated fully and fairly for lost assets. • Involuntary resettlement should be conceived as an opportunity for improving the livelihoods of the affected people and undertaken accordingly. • All people affected by involuntary resettlement should be consulted and involved in resettlement planning to ensure that the mitigation of adverse effects as well as the benefits of resettlement are appropriate and sustainable. • https://commdev.org/userfiles/ResettlementHandbook.pdf IFC Performance Standards Overview of Performance Standards on Environmental and Social Sustainability • Performance Standard 1: Assessment and Management of Environmental and Social Risks and Impacts • Performance Standard 2: Labor and Working Conditions • Performance Standard 3: Resource Efficiency and Pollution Prevention • Performance Standard 4: Community Health, Safety, and Security • Performance Standard 5: Land Acquisition and Involuntary Resettlement • Performance Standard 6: Biodiversity Conservation and Sustainable Management of Living Natural Resources • Performance Standard 7:Indigenous Peoples • Performance Standard 8: Cultural Heritage • http://www.ifc.org/wps/wcm/connect/Topics_Ext_Content/IFC_External_ Corporate_Site/Sustainability-At-IFC/Policies-Standards/PerformanceStandards RAP – Resettlement Action Plan The essential components of a RAP are the following: • identification of project impacts and affected populations; • a legal framework for land acquisition and compensation; • a compensation framework; • a description of resettlement assistance and restoration of livelihood activities; • a detailed budget; • an implementation schedule; • a description of organizational responsibilities; • a framework for public consultation, participation, and development planning; • a description of provisions for redress of grievances; and • a framework for monitoring, evaluation, and reporting. Cyanide The 2000 Baia Mare cyanide spill was a leak of cyanide near Baia Mare Romania, into the Somes River by the gold mining company Aurul, a joint-venture of the Australian company Esmeralda Exploration and the Romanian government The polluted waters eventually reached the Tisza and then the Danube, killing large numbers of fish in Hungary and Yugoslavia. The spill has been called the worst environmental disaster in Europe since the Chernobyl disaster. Large Protests in Bucharest (far away from the mine) Foreign Corrupt Practices Act (FCPA) of 1977 • The Act was signed into law by President Jimmy Carter on December 19, 1977 • United States Federal Law known primarily for two of its main provisions • One that addresses accounting transparency requirements under the Securities Exchange Act of 1934 • The other concerning bribery of foreign officials. • Amended in 1988 and 1998 • The Securities and Exchange Commission (SEC) and the Department of Justice are both responsible for enforcing the FCPA. FCPA • The idea of Foreign Corrupt Practices Act (FCPA) is to make it illegal for companies and their supervisors to influence foreign officials with any personal payments or rewards. The FCPA applies to any person who has a certain degree of connection to the United States and engages in foreign corrupt practices. The Act also applies to any act by U.S. businesses, foreign corporations trading securities in the U.S., American nationals, citizens, and residents acting in furtherance of a foreign corrupt practice whether or not they are physically present in the U.S. This is considered the nationality principle of the act. • Payments are not restricted to monetary forms and may include anything of value. This is considered the territoriality principle of the act. • An ongoing debate asks about the law’s effects. Scholars have found that the FCPA discourages US firms from investing in foreign markets. “Foreign Officials” • Government officials • United Nations officials • Official of a government owned bank • Doctors at a government owned hospital • Offering anything of value as a bribe, whether cash or non-cash items, is prohibited. Accounting • The FCPA also requires companies whose securities are listed in the U.S. to meet its accounting provisions.[16] These accounting provisions operate in tandem with the antibribery provisions of the FCPA, and require respective corporations to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls. • An increasing number of corporations are taking additional steps to protect their reputation and reduce their exposure by employing the services of due diligence companies tasked with vetting third party intermediaries and identifying easily overlooked government officials embedded in otherwise privately held foreign firms. Bribery versus Expedite Payments • Regarding payments to foreign officials, the act draws a distinction between bribery and facilitation or “grease payments”, which may be permissible under the FCPA, but may still violate local laws. The primary distinction is that grease payments or facilitation payments are made to an official to expedite his performance of the routine duties he is already bound to perform. Anti-Bribery/Anti-Corruption • Businesses increasingly focus on their core competencies, and as a result engage more third parties to provide critical business functions; businesses do not have direct control over their third parties and as such, are exposed to the regulatory and reputational risk of third party FCPA violations. • Many companies have now adopted “Anti-Bribery/AntiCorruption” (ABAC) solutions to combat this risk and help protect themselves from fines and reputational damage. • ABAC compliance solutions are a subset of Third Party Management. These systems can automatically manage onboarded third party information and monitor their ongoing activities in compliance with FCPA regulation. Example Cases ongoing • • • • • In 2010 the DOJ and the SEC were investigating whether Hewlett Packard Company executives paid about $10.9 million in bribery money between 2004 and 2006 to the Prosecutor General of Russia “to win a €35 million-dollar contract to supply computer equipment throughout Russia.”[35][needs update] In July 2011, the DOJ opened an inquiry into the News International phone hacking scandal that brought down News of the World, the recently closed UK tabloid newspaper. In cooperation with the Serious Fraud Office (United Kingdom), the DOJ was to examine whether News Corporation violated the FCPA by bribing British police officers.[36][needs update] An April 2012 article in the New York Times reported that a former executive of Walmart de México y Centroamérica alleged in September 2005 that Walmart de Mexico had paid bribes to officials throughout Mexico in order to obtain construction permits, that Walmart investigators found credible evidence that Mexican and American laws had been broken, and that Walmart executives in the U.S. “hushed up” the allegations.[37][38] According to an article in Bloomberg, Wal-Mart’s “probe of possible bribery in Mexico may prompt executive departures and steep U.S. government fines if it reveals senior managers knew about the payments and didn’t take strong enough action, corporate governance experts said.”[39] Eduardo Bohorquez, the director of Transparencia Mexicana, a “watchdog” group in Mexico, urged the Mexican government to investigate the allegations.[40] Wal-Mart and the US Chamber of Commerce had participated in a campaign to amend FCPA; according to proponents, the changes would clarify the law, while according to opponents, the changes would weaken the law.[41] Other cases are with Avon Products, Invision Technologies, BAE Systems, Baker Hughes, Daimler AG, Monsanto, Halliburton, Titan Corporation, Triton Energy Limited, Lucent Technologies. https://www.justice.gov/criminal-fraud/foreign-corrupt-practices-act FCPA could be changing • In April 2017, Attorney General Jeff Sessions traveled to an ethics lawyers conference to assure them that he would continue prosecutions under the FCPA, regardless of new SEC Chairman Jay Clayton’s expressed skepticism and of President Donald Trump’s comments that it is a “horrible law” and “the world is laughing at us” Environmental NGOs • The project met a significant resistance from environmental groups and from neighboring European countries. • A number of locals refuse to sell their properties to the Roșia Montană Gold Corporation and, in order for the project to commence, the state would need to exercise eminent domain. Large Protests Mine Your Own Business The documentary follows Gheorghe Lucian, a 23-yearold unemployed miner from the Roşia Montană in northern Romania, whose chance of a new job disappeared after an anti-mining campaign orchestrated by foreign environmentalists. The contested mining project was expected to bring in a $1 billion investment and generate 600 jobs in an area where unemployment is 70 percent. After investigating the Romanian mine, the director McAleer and Lucian then travel to other impoverished communities in Madagascar and Chile that are also waiting for large mining projects In the documentary, Lucian meets Mark Fenn from the World Wildlife Fund, who is shown living in luxurious conditions, at one point showing off his $35,000 sailboat to the cameras, all the while advocating the value of living a simplistic, village life. 2006 Documentary Mine Your Own Business • Director Phelim McAleer has stated in interviews that the film, in its essence, is not really at all a story about mining, but rather, “It is a story about human rights. The human right to a job, the human right to have your children educated, the human right to see your child reach their first birthday.” He cites among other serious concerns, the fact that high infant mortality rates are closely correlated with the sort of poverty that afflicts the region. • The film notes that the foreign environmentalists who are barring the industrial development of the area are, at best, too far removed from the people of Roşia Montană to understand their true needs and desires, and at worst, cognizant of the serious problems, and still stubbornly denying them of their right to decide the fate of their own land for themselves. McAleer points out the hypocrisy of the western environmentalists’ opposition to the mining of the mineral resources, while the western world itself was built by riches that it pulled from the Earth; to deny the people of Roşia Montană the same sort of development and prosperity, he concludes, is the height of casuistry. Waiting for Parliament Decision If the project does not go ahead, TSX-listed Gabriel which has lost more than 60% of its market value, has threatened to sue the Romanian government, believing it has a “very robust case” for up to $4 billion in damage claims. Case Study ESEM Principles • Complex and no clear solutions – wicked problem • Multidimensional – Economic, Technical, Environmental, Social, Political & Communications • Technical Engineering versus Social Engineering • Multicultural Dialogue – include all stakeholders • Corruption major challenge to building trust — FPCA • Long Term Investment required/price of gold • International Best Practices – IFC Performance Standards and Equator Principles
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