Written by 14 h 59 min International crimes, Press release-en, Strategic litigation

Lafarge Scandal Points to Difficulty for Businesses in War Zones

Published by The New-York Times, by 

As Syria began to descend into a bloody civil war, a cement plant in the embattled northeast run by one of France’s largest industrial companies was operating at full speed.

While fighting among Syrian rebels, the Syrian army and the Islamic State drove other foreign companies out of the country, the plant, operated by Lafarge S.A., was curiously able to tough it out for years: From its opening in 2010 through to 2014, cement continued to pour from its mills in Jalabiyeh, a town near the Turkish border.

On Monday, the company announced that its chief executive, Eric Olsen, would resign after an internal investigation that concluded last month found the Syrian operation’s managers paid off armed groups to allow safe passage for employees and keep supplies flowing to the multimillion-euro factory.

The group, now the world’s largest cement maker after a 2016 merger with a Swiss rival, Holcim, said it concluded that Mr. Olsen was not responsible for or aware of the activity. The group’s board has put him in charge of overseeing remedial measures and examining internal policies and financial controls to guard against future “misconduct” at any of its operations before he steps down in July.

The Lafarge scandal, as it became known in the French media, stoked ire among critics who accused the company of seeking to improve profitability despite growing danger for its employees. The situation underscores the difficulty of doing business in war-torn regions. The company has argued that its local managers saw little recourse other than paying off armed groups to guarantee the safety of staff members and keep the plant running in the midst of a worsening conflict.

But it is a challenge faced by companies around the world, particularly those working in the energy and industrial sectors. They often grapple with large investments required to get operations running and an inability to pick and choose which geographies are most conducive. Oil companies, for example, have no control over where prized resources can be found.

In the case of Lafarge, the French economy ministry is pursuing a lawsuit against the company over possible violations of international sanctions.

That move followed a complaint in November by a nongovernmental organization called Sherpa, which accused the company of complicity in war crimes doing business with the terrorist group Islamic State to keep its Syria plant open, despite sanctions by the United Nations on the group. The jihadist organization seized the plant in September 2014, forcing Lafarge to abandon it.

Lafarge has declined to publicize which local armed groups it funded, saying only that it involved “sanctioned parties.”

The issue became a point of contention in the French presidential debates, with the far-left candidate Jean-Luc Mélenchon calling for the company to be sanctioned for “plotting with the enemy,” a plea also taken up by François Fillon, the Republican contender.

Both men were edged out of the final run for the presidency Sunday by the centrist politician Emmanuel Macron and the far-right leader Marine Le Pen.

Lafarge’s difficulties began just months after it spent over 600 million euros, or $644 million, opening the facility.

Protests against the Syrian regime broke open in 2011 in the area, previously controlled by the Syrian government. The plant had created about 200 jobs in the local economy, pumping out thousands of tons of cement every day and supporting the construction of roads, transportation and other businesses nearby.

But the protests grew more violent, and by the end of that year, according to the company, employees at the plant began to face a growing security threat as local armed groups drove out the Syrian army and converged on the region. The groups interfered with employees moving between their homes and work, restricted access to supplies and harassed customers, Lafarge said.

By the middle of 2012, senior expatriate employees were evacuated from Syria and relocated to Cairo, where they oversaw the plant’s operations remotely. Lafarge said it brought in extra security personnel, and regular calls were held between managers in Cairo and the plant in Jalabiyeh to monitor the situation.

As security continued to deteriorate, managers resorted to using intermediaries to contact the armed groups, saying they were concerned “that direct contact would create additional risk vis-à-vis the Syrian government or other armed groups,” Lafarge said in a statement.

“Very simply, chaos reigned and it was the task of local management to ensure that the intermediaries did whatever was necessary to secure its supply chain and the free movement of its employees,” the company added.

That involved making payments to the armed groups through the intermediaries, “without regard to the identity of the groups involved,” Lafarge said.

By 2013, the Islamic State had moved into the area and retains a presence today.

Lafarge, in a statement, said it tried to “keep its doors open,” although it declined to specify precisely how. Sherpa, the nongovernmental organization, has alleged it did so with payoffs to the Islamic State in 2013 and 2014 to obtain safe passage for employees, and by buying oil and other materials needed to make cement from regions of Syria controlled by the terrorist group.

It is a point the French courts will be examining.

Lafarge said it would create an ethics and integrity committee to strengthen compliance, internal controls and risk management. But in the meantime, the company is continuing to defend itself in the public eye, suggesting that its staff was motivated by a “can-do” approach to maintaining operations in the chaos of war.

Last modified: 18 December 2019