Report 10: The Last Part of the Prosecution’s Presentation  

Gavel on a dark background

The prosecution completed the final segment of its opening presentation this week, thereby concluding the phase of its presentation pertaining to the defendants’ liability. The prosecution spent most of this week´s proceedings by describing the military events that occurred in South Sudan in 2002 and 2003 by referring to different internal reports and documents.

If you have not read last week’s report, see here for an account of external reports regarding the widespread offensive military attacks allegedly conducted in Block 5A by the Government of Sudan and their regulated militias during 2002 and 2003. Upon the completion of the prosecution’s statement concerning the liability aspect, they introduced the forfeiture claim. On the last day of this week´s hearing, the prosecutors also presented a chronological summary of significant events between the years 1997-2003. We will cover the prosecution’s chronological summary in our cohesive summary of the indictment, which we will publish on our website in the upcoming weeks.   

Internal Security Reporting and the Continued Operations and Road Construction

The prosecution referred to numerous internal security reports to describe the information to which Ian Lundin and Alexandre Schneiter were privy, as well as what that information meant for the company’s continued operations and construction of the road to Ler. The internal reports described the serious fighting that was occurring in the area and how it affected the road construction.  

The prosecution referred to an internal security report from the 14th of August 2002 which stated that “The army is doing some arrangements before giving HCC the green light to restart the work on Ler Road.” HCC refers to Heglig Construction Company, which carried out the road construction. On the 25th of August 2002, another internal report noted that there had been no progress on Ler Road as serious fighting had occurred between the militia group SSUM and Peter Gadet’s forces. However, internal security reports from the beginning of September described that the work on the road was proceeding. An internal security report from the 11th of September 2002 mentioned that the road had entered Mirmir Forest. “This is the area where it was previously described as serious fighting between the rebels and the military,” prosecutor Henrik Attorps added. A report from two days later, the 13th of September 2002, stated that the SSIM commander James Lia Diu declared that he was ready to defend the Ler Road. Here, the prosecutors noted that while the report stated that the commander would defend the road, it was a direct defense but rather was a part of an offensive military operation.  At this point, Judge Tomas Zander interrupted the prosecution and pointed out that it was written in the report that it was a defense. Prosecutor Henrik Attorps responded that “It can be a defense of the existing road as a part of the offensive. We should not draw too big conclusions from this. It [the area where the road was located, eds. remark] will never be under control because it is a war zone all the way.” After a brief discussion about the meaning of defense and control, Alexandre Schneiter’s defense attorney Per E. Samuelsson wanted to comment on the matter. “It should be clear that we dispute all claims of control here and there, when the prosecutor alleges that the government did not have control over an area.” Prosecutor Henrik Attorps responded, “Does Alexandre Schneiter’s defense mean that the government had control?” Samuelsson replied, “What we mean is that we deny your claims.” “Okay, then everything is as usual,” Attorps replied with a smile.  

After this brief back-and-forth, the prosecution continued by referring to a security report from the 16th of September 2002. The report described that “[A] very bad incident took place on Ler Road. A fighting took place soon after between the army and the rebels. Any further work on the road before signing the peace agreement could be a suicide.” The day after, it was reported that the work on Ler Road was suspended. A few days later on the 19th of September, Ken Barker, Operations Manager for Lundin Petroleum, wrote in a report: “The security in Block 5A is unacceptable at this time. The government is insisting that the construction of the Ler Road continues. I am strongly of the opinion that the government forces would never completely be able to control this area against guerilla attacks. My speculation is that the immediate aftermath of the signing of the peace agreement the balance of power in our operational area would change overnight. We are going to be talking to a whole new bunch of people.” Barker further recommended that “Operational plans should be based on a peace agreement in the end of this year.”  The prosecution claimed that despite the knowledge of the battles connected to the road, the company’s participation in the construction of the road continued. The prosecution then referred to a report from the Sudanese security personnel from the beginning of October 2002 which was sent directly to Alexandre Schneiter and described the road construction and the security situation. In the report it was stated that “The army is proceeding to Mirmir area to suspend the security belt for the work on the Ler Road.”  

The prosecution claimed that after 2002, negotiations over the construction of the road and its costs continued. They mainly dealt with cost recovery, which the prosecution claimed therefore presuppose that there was a cost. During this time in 2002, Alexandre Schneiter had been involved in the work related to the safety in Block 5A. He received daily security reports from the area, including updates on how the road construction was progressing. The prosecution believed that the reports were sent to him as a part of his regular work and were essential for him to be able to carry out his duties. The prosecution referred to a weekly security report from Ken Barker from the 28th of July 2002 that stated: “Still awaiting agreement from OEPA that the Ler Road is 100 % cost recovered (addendum to contract)”. Oil Exploration and Production Authority (OEPA) was a body within the regime that reported to the Minister of Energy and Mining, Awad Ahmed El Jazz. OEPA was responsible for Sudan’s interests in matters related to the exploration activities and was also involved in matters connected to the Security in Block 5A. A subsequent security report from Ken Barker from the 20th of October 2002 reported that the Addendum to the All-Weather Road had been executed. The week before, Barker reported: “Awaiting response from Geneva regarding the addendum to the All-Weather Road to Ler.”  

Here, the prosecution claimed that Ken Barker received a decision on the matter from Geneva. They maintained that Alexandre Schneiter and Ian Lundin were in charge and that they were involved in the negotiations regarding the road construction. Alexandre Schneiter was the person who received daily reports on the progress of the road construction and the safety situation. This alleged act of aiding and abetting was portrayed as a continuation of prior actions, with a particular emphasis on Ian Lundin’s involvement. Additionally, the prosecution highlighted previous instances of complicity where decisions were made to sustain the ongoing activities, with military security arrangements being implemented. The prosecution further explained that these circumstances constitute the context in which this act of complicity must be assessed.   

Exchange of Information Between the Different Oil Companies in the Region

The prosecution referred to different security reports from the Lundin companies and Talisman to show that there had been an exchange of information. The prosecution emphasized this exchange of information to show that Ian Lundin and Alexandre Schneiter were aware of the information appearing in Talisman’s reports. For instance, the prosecution referred to a security report from Talisman from the 1st of October 2002. In this report, Talisman noted the incidents described above that occurred on the All-Weather Road and the subsequent fighting near Mirmir and Ler. The report also contained information that the prosecution stated had been provided by managers from the Lundin company. One chapter in the security report dealt with the ongoing construction of the road to Ler. Thus, the prosecution claimed that there had been an exchange of information between the Lundin companies and Talisman. On the 9th of October, Petroleum Securities published a report that was sent directly to Alexandre Schneiter, in which he was informed that the current security manager El Hajtan Al Amin would be replaced by Mohammed Mokhtar. A couple of days later, Ken Barker sent a report to the Lundin company management in Geneva saying that El Hajtan Al Amin “will return to his previous position in the government.” Another security report from Talisman later that month described how the military captured Mirmir and that the purpose had been to “open up towards Ler.” In this report, they also mentioned Mokhtar’s new position as security manager and that he was seen as having better contact with the military. The report noted that “Mokhtar has gained great experience in his time and will be a tremendous asset for Lundin.” The prosecution stated that this also showed that there was an ongoing exchange of information between the companies since it made clear that Talisman had good knowledge of the Lundin companies’ activity.  

The prosecution referred to another security report from Talisman from the 23rd of January 2003 that they claimed also suggested that there was an exchange of information. The report described the fighting in Mirmir in January 2003 and how it affected the road construction around Ler. The road to Ler was called the Lundin Road in the report. The assessment in the report was that the military would continue building the road and that Peter Par would continue opposing the road construction. The report stated that “The eagerness to complete this road over the past year indicate the government’s position regarding future oil development. They appear desperate to open up Block 5A for oil activity.” The prosecution also referred to a report from Talisman from the end of July 2002 which stated that despite the peace negotiations, they assessed that the situation in the oil areas remained unstable, especially regarding security and the militia. They further noted that the Lundin Road was to be extended and stated that this project would be a test of the security situation in the region. Talisman’s assessment was that “Lundin are making a pragmatic decision and are funding it in some way.” The prosecution also pointed out that the reports made clear that Lundin Petroleum was very dependent on information from the government.

The First Independent Media Travel Along the All-Weather Road

The prosecution also provided an addition to section G of the indictment where they referred to an article from “Dagens Nyheter” from the 28th of April 2001 written by Anna Koblanck who will be heard as a witness later. In the article, Koblanck described her observations from Bentiu and when she was travelling along the All-Weather Road. The article noted that “Dagens Nyheter has been the first independent media to travel along Lundin Oil’s heavily criticized route to the oil fields in South Sudan.” It also cited interviews with civilians “The oil industry has been running for eight years now, but there is no development here, says a man who himself works for the regime in Bentiu”. The vice governor of the region, on the other hand, believed that the oil had done a lot of good for the people of Bentiu and Rubkona. He mentioned the road that Lundin Oil had built was a benefit, as well as the four clinics that Talisman had built. Koblanck further described that some believed that, for the sake of the oil industry, the regime’s soldiers had displaced tens of thousands of people from the area. “My village was burned down a month ago and now we live under a tree, says a woman who comes to fetch water.” When Koblanck asked who attacked her village, three SSIM soldiers quickly interjected that it was the rebels. Koblanck wrote that “[T]he All-Weather Road is lined with misery and military, already at the gate we are met by soldiers on guard.” Koblanck further described how they were accompanied by an army car with four soldiers and a powerful machine gun that “guarantees our safety” when they travelled along Lundin’s Road to the south together with Lundin Oil’s PR Manager, Maria Hamilton, and the company’s security officer, Rickard Ramsey.  Koblanck described how they travelled back to Rubkona by helicopter in the late afternoon together with Maria Hamilton. “So, you can see all the villages that the oil companies have not burned down, says the pilot jokingly,” she wrote. Koblack described in the article how they did not see any villages at all, nor the road of Lundin Oil since the pilot flew 3km east of the road.   

The Forfeiture Claim

On the last day of this week’s hearing, the benches in the courtroom were packed. The company Orrön Energy filled its seats with no less than three representatives from the company, as well as two company lawyers. The reason for their presence this day was that the prosecution was going to present the forfeiture claim. The prosecutor’s side was also represented by more people than usual, as a prosecutor’s auditor was present during the day to present and go through the forfeiture claim.      

The prosecutor’s auditor began with a general presentation about the claim and continued thereafter to present an expert opinion from Mikael Runsten, an expert who holds a Ph.D. in economics from the Stockholm School of Economics. An opinion was obtained from Mikael Runsten after the defense criticised the method that the prosecution used to calculate the financial benefit of the sale of Block 5A. After a second opinion, Dr. Runsten was tasked with identifying a suitable calculation method. The prosecution explained their premises for the claim by arguing that the different Lundin companies (See here for a description of the different companies) should be seen as a single economic entity when assessing criminal liability. The prosecution stated that regardless of what the companies were called, Sudan was an important area of operations between 1997-2003. To bolster this argument, they referred to the companies’ annual reports. In addition, the prosecution stated that the forfeiture can be directed against the parent company as the parent company and the subsidiary are to be seen as the same economic entity. The prosecution came to this conclusion by stating that the parent company had the rights to Block 5A and received the profit from the sale. The parent company operated the business in Sudan through a wholly owned subsidiary. However, the prosecution claimed that in practice, business decisions were made by the parent company. The prosecution stated that in the subsidiary Sudan Limited, no decisions were made about the actual operations and that the relevant board decisions were made by the parent company. Furthermore, the prosecution stated that Ian Lundin and Alexandre Schneiter were senior executives in the parent company throughout the whole time of the crime.    

Based on the evidence presented, the prosecution stated that the sale of the rights to Block 5A were of great importance to Lundin Petroleum AB. The prosecution referred to the press release from the 28th of April 2003 when Lundin Petroleum announced the sale of the rights regarding Block 5A. The prosecution also referred to an article from the Swedish newspaper Dagens Industri from the 29th of April 2003 for which Ian Lundin was interviewed. The article quoted Ian Lundin as saying “[I]t is a good deal we have received 2 dollars per barrel for what we have found, and the field is completely undeveloped, we have received full value.”  Continuing on the same theme that the parent company had the rights to Block 5A and subsequently received the profit from the sale, the prosecution referred to an excerpt from a board meeting from the 12th of August 2003, which read: “The sale of Block 5A has had a major impact on the result but the result is very good even without the sale of Block 5A.”  

Based on the company’s own figures, the prosecution concluded that Lundin Petroleum made a profit of 720 098 000 SEK (63 160 664, 16 EUR), after deductions from exchange rate losses, through the sale of rights to Block 5A. “The profit has benefited Lundin Petroleum AB for many years,” Mikael Runsten concluded. The prosecution further stated that profits from the sale of Block 5A constitute in their entirety profits from criminal activity. The auditor hired by the prosecution stated that the profit had been gained through the company’s continued operations and the criminal aiding and abetting of complicity in international law offenses and is therefore to be considered as a criminal profit in its entirety.  

The prosecution then presented Mikael Runsten’s calculation method which differed from the method previously used by the prosecution, as Runsten did not find the previous method to be suitable for the purpose. Mikael Runsten’s result was based on two calculations methods: expected value development and actual value development. The first method, expected value development, was a calculation of what return an owner could expect in the long term from an investment in Lundin Petroleum. The model is thus based on a return requirement. The second method, actual development, was a calculation of the value development a long-term owner of Lundin Petroleum has de facto received. Calculation of the increase in value to which an estimated share of ownership should be entitled until 31 December 2018 and 31 December 2021, respectively. As well as a calculation of the value of dividends that the share of ownership should have received. Runsten’s calculation method based on expected and actual returns gave a range between SEK 2, 381,300,000 SEK to SEK 24,974,100,000. The main rule according to Chapter 36, Paragraph 1c of the Swedish penal code is that the actual return should be applied. The prosecution stated that within the framework of reasonableness assessments, the prosecutors had chosen the expected return (lowest value) and until the 31 December 2018 (shortest time), which gives a claim on SEK 2,381,300,000. The prosecution thus concluded that the profit from the sale of Block 5A was estimated at over two billion SEK. 

Next Report

Since the prosecution is finished with its statement regarding the defendants’ liability, a new stage in the trial will begin. To give the defense time to prepare for Ian Lundin’s opening presentation and statements of fact, the court has not scheduled any hearings for the two upcoming weeks. The trial will continue on the 28th of November when counsel for the plaintiffs will have an opportunity to present their arguments. The defense is scheduled to begin presenting their case the following day, the 29th of November.