Follow up Statement on Banro Corporation and group of former employees

March 21, 2019

Summary

  1. This is a Follow up Statement to a specific instance concluded by the Canada’s National Contact Point (the "NCP") for the OECD Guidelines for Multinational Enterprises (hereafter "the OECD Guidelines") on May 25, 2017. The Request for Review was submitted by five (5) former employees ("Notifiers") of the Société Minière et Industrielle du Kivu (SOMINKI) in liquidation, located in Kalima (South Kivu) in the Democratic Republic of Congo (DRC), alleging conduct of Banro Corporation ("Banro" or "the Company") in the DRC was inconsistent with the Guidelines.
  2. In its , though mediation was not offered to the parties, the NCP made a series of recommendations, including that the Company make all efforts to engage with the government of the DRC to resolve the issues raised. The NCP also requested written updates from the Company on its efforts.
  3. The NCP also committed to issuing a Follow up statement approximately twelve months after the publication of the Final Statement with information on progress towards the implementation of the NCP's recommendations. 
  4. Despite persistent efforts from the NCP, the Company has failed to provide adequate information that demonstrates that the Company had made efforts to implement the NCP's recommendations.
  5. Over the last year, there have been a series of new developments with regards to the Company. The Company entered into Companies' Creditors Arrangement Act (CCAA) proceedings, underwent a debt-for-equity restructuring, a delisting from the TSX and NYSE, became a privately held Company, underwent significant changes in its senior management, and, finally, became domiciled in the Cayman Islands.
  6. The NCP is unable to confirm that the Company retains meaningful economic ties to Canada, so the Company would likely neither be eligible to receive regular services from the Trade Commissioner Service (TCS) nor trade advocacy support provided by Canada's diplomatic missions abroad. However, should the Company qualify as a Canadian TCS client in the future, its lack of constructive engagement during this follow up stage of the process should be taken into consideration.

Summary of Request for Review

  1. The request for review was submitted to the Canadian NCP on February 26, 2016, by five (5) former employees of the SOMINKI in liquidation, alleging that the conduct of the Company, at the time a Canadian mining Company operating in the Democratic Republic of Congo (DRC), was inconsistent with the OECD Guidelines.
  2. On May 25, 2017, the Canadian NCP published its  where it recognized the long-standing and difficult situation in which the ex-workers found themselves and requested follow-up actions from the Company with the aim of resolving the issues raised. The NCP's Final Statement on the specific instance can be found at: http://www.international.gc.ca/trade-agreements-accords-commerciaux/ncp-pcn/statement-banro.aspx?lang=eng.

NCP Requests and Recommendation

  1. The NCP, in paragraph 6 of the , requested that the Company:
    1. Make all efforts possible to engage with DRC government officials, in good faith, to promote a timely reactivation of the SOMINKI liquidation process with a view to working with all implicated parties to complete a reconciliation and closure process as soon as possible. It is recommended that this process focus on facilitating an expedited cash payment of the long outstanding ex-employees' final accounts;
    2. Provide a written update to the NCP by 8 September, 2017 addressing what steps the Company has taken to address the NCP request I) above regarding the re-activation of the SOMINKI liquidation process; and
    3. Provide a 2nd written update to the NCP by 8 December, 2017 regarding any outcomes achieved as a result of the implementation of the request regarding the SOMINKI liquidation process.
    4. Endorse and implement the OECD Guidelines for Multinational Enterprises and the OECD Due Diligence Guidance for Meaningful Stakeholder Engagement in the Extractive Sector.
  2. The NCP agreed to issue a Follow up statement approximately twelve (12) months following the publication of this Final Statement.

Response from the Parties

  1. The NCP had intended to publish this follow up statement in May 2018, preferably, with new information from the parties on actions taken and progress on implementing NCP recommendations. To this effect, the NCP exhausted efforts, notably with the Company, to obtain appropriate information, which contributed to the significant delay in publishing this follow up statement. The Notifiers kept the NCP informed of new developments and of any additional actions they had taken following closure of the case.

The Company

  1. The NCP requested that the Company provide an update on efforts that it had taken to finalise the SOMINKI liquidation process and settle the accounts of the former employees. Specifically:
    1. Information on relevant outreach and recent meetings and/or other communications with ex-workers or union representatives, such as the dates of recent meetings, minutes of such meetings and the decisions taken, especially those taken to organize the payments.
    2. Information on steps taken by the liquidation committee, of which the Government of the DRC and the Company are members, and by the Company itself to ensure that the payments could be made in a secure way.
  2. Despite efforts by the NCP, the Company did not respect NCP deadlines and failed to provide the information requested. Namely:
    1. There was no response provided to the request for a written update by September 8, 2017 on steps taken by the Company to address the liquidation;
    2. There was no response provided to the request for a written update by December 8, 2017 on any outcomes achieved as a result of the steps taken as described above, despite a follow up call from NCP Secretariat;
    3. The update provided on January 22, 2018 fell short of what the NCP had requested;
      • The Company forwarded letter they received from SOMINKI liquidator that simply indicated that he was working on the settlement of the workers;
      • The response prompted an email from the NCP Chair on February 8, 2018 requesting specific information to better understand the Company's efforts and the situation on the ground as per above, to which the Company failed to respond;
    4. The NCP Chair sent correspondence on March 28, 2018 expressing concern about missed deadlines and requesting specific updates;
    5. On April 4, 2018, the NCP Chair spoke by telephone with then Company President and CEO John Clarke and Vice President, General Counsel and Corporate Secretary Geoffrey Farr, who promised to provide the requested information;
    6. An update was provided by the Company on April 18, 2018 which still fell short of what the NCP had requested;
      1. The Company provided a copy of a letter sent to the SOMINKI liquidator dated April 18, 2018, a before the agreed deadline to provide feedback to the NCP;
    7. Subsequent attempts by the NCP, including several telephone calls from the NCP Chair to the Company's President/CEO and legal counsel to clarify the Company's response were not successful. The Company's website also went offline during this period.
  3. During this period, the NCP learned through media reports (not officially through the Company's management) of a series of new developments regarding the Company's operations:
    1. That the Company's mining sites in the DRC had suffered a series of armed attacks with some employees kidnapped for ransom (previously, in one of its earlier communications with the NCP, the Company claimed that it decided to halt an attempt to initiate payment to the ex-workers identified in the liquidation process due to the presence of armed groups who stormed the premises upon learning of the impending payments);
    2. After entering into CCAA proceedings, the Company had a proposed debt-for-equity restructuring approved by an Ontario Court on March 27, 2018;
    3. The Company's shares were no longer being traded on the TSX; and,
    4. The Company appointed a new Chairman and CEO, Brett Richards on May 7, 2018.
  4. Secretariat follow-up with Mr. Richards, the new Chairman and CEO, the week of July 16 and August 6, 2018 revealed that the Company had also undergone significant changes in management with the result being that corporate memory of the NCP case was compromised. Further, the Company had been delisted from the NYSE in addition to the TSX, was now privately held and was no longer domiciled in Canada, but in the Cayman Islands.

The Notifiers

  1. The NCP kept the Notifiers informed of the numerous efforts by the NCP to obtain updates from the Company, and the Company's failure to respond adequately. The Notifiers, upon learning of the debt-for-equity restructuring of the Company, registered their concerns with the court appointed monitor for the CCAA proceedings, FTI Consulting Canada Inc. The Notifiers also informed the Ontario Superior Court of their alleged unpaid severance as an outstanding liability for the Company. FTI Consulting, in their response to the Notifiers, indicated that their claim was not on the list of affected creditors and there was also no specific provision for the settlement of their claims in the proposed restructuring process.
  2. In April 2018, the Notifiers filed a complaint about their alleged unpaid severance with the UN Working Group on Business and Human Rights. Canada is yet to receive an invitation from the Working Group to respond. On July 7, 2018, while the NCP was in the process of drafting its follow up statement, the Notifiers sent a submission requesting an update on the implementation of the NCP's recommendations by the Company.

NCP Conclusions

  1. The NCP recognises the challenging context within which the Company has operated in the DRC and the recent ongoing challenges during the Company's restructuring. With this in mind, the NCP reached out to representatives of the Company on a number of occasions to better understand the Company's situation, and extended deadlines for written feedback to allow for the Company to review and comment on statements. Nonetheless, the NCP is disappointed with the lack of cooperation demonstrated by the Company during this follow up process, as reflected in the lack of response to the NCP's requests and/or the repeatedly missed deadlines, despite efforts from the NCP.
  2. Since the NCP is not able to confirm that the Company retains meaningful economic ties to Canada, the Company would not be eligible for either the four key services of the Trade Commissioner Service (TCS) or trade advocacy support provided by Canada's diplomatic missions abroad. Should the Company qualify as a Canadian TCS client in the future, its lack of constructive engagement during this follow up stage of the process will be taken into consideration.