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Talisman conducts its business activities with integrity and shows respect for human dignity and the rights of the individual. Talisman supports the principles of and promotes respect for the Universal Declaration of Human Rights. We lead by example, demonstrating values of tolerance and respect throughout our conduct. When considering new investments, Talisman reviews associated potential human rights issues and their relationship to our operations and we liaise with stakeholders at an early stage of business activities. Talisman promotes adherence to and respect for human rights principles in our areas of operation and will not be complicit in human rights abuses. We strive to advance best practices with host governments, partners and third parties and we seek consistency with our revised Security Policy, which is based on the Voluntary Principles on Security and Human Rights2.
Talisman reviews numerous international and domestic investment opportunities every year. In addition to the technical and economic evaluation of these opportunities, we complete an evaluation of the above-ground issues related to the commercial, legal, political, regulatory, environmental, security and human rights situations prior to any investment. Our decision to invest is based on these above-ground evaluations as well as our technical assessments.
In 2004, the Company formalized and integrated its previous function-specific due diligence processes into a comprehensive Company-wide process coordinated by the Corporate Projects and Business Development group. This coordinated approach, incorporating a review of the exploration, operations, corporate responsibility, HSE, security, legal, tax, commercial and political risks associated with a given opportunity allows for a much greater level of analysis of the issues and risks that could be faced in any new project.
In addition, Talisman established a standard due diligence template that addresses issues associated with social, human, indigenous and labour rights. This template provides a consistent first level screening that is successfully used to determine whether or not proposed activity can be conducted in a responsible manner.
In August 2004, Talisman (Peru) Ltd. [Talisman (Peru)] acquired a 25% non-operating working interest in an exploration program in Block 64, located in a largely undeveloped area in northern Peru adjacent to the Ecuador border. Prior to the decision to invest in this project, Talisman conducted an extensive due diligence review to gain a broader understanding of the possible risks and concerns associated with investing in this project. As part of this review, we consulted with Canadian government officials in Ottawa and Lima, US government officials and non-governmental organizations in North America and Peru. Furthermore, Talisman representatives traveled to Peru in November 2003 to conduct due diligence related to human rights, security and environmental issues. As part of this initiative, Talisman representatives met with local community representatives during a trip to the Block 64 area.
As a result of this assessment and the issues raised with respect to working in such a sensitive environment, Talisman (Peru) secured specific corporate responsibility commitments in the Joint Operating Agreement (JOA), including the creation of an Environmental and Community Relations Subcommittee. Talisman holds a seat on this committee. The JOA also includes provisions regarding the Voluntary Principles on Security and Human Rights, transparency and using sound industry management practices to minimize the environmental impact of the project.
The use of government security forces to protect international operations is one of the most critical challenges corporations face with respect to human rights issues. It is also an area where companies such as ours have limited control. Safety of our personnel is of paramount importance to the Company. To ensure that these security risks are minimized and that secure environments are established and maintained for our employees, we review our security practices and benchmark them against international security best practice.
In 2004, Talisman incorporated the recommendations found in the Voluntary Principles on Security and Human Rights into our own Security Policy and practices. The Security Policy provides the Company with a framework for creating safe work environments, promotes respect for human rights and advances best practices with governments, joint venture participants and third parties. It also provides any contractor personnel or private security firm supplying security services on the Company’s behalf with comprehensive policies and procedures for conducting security operations in accordance with Talisman’s standards.
In 2004, Talisman (Colombia) Oil & Gas [Talisman (Colombia)] commenced the process of relinquishing its interest in the Acevedo, Altamizal and Huila Norte Blocks in Colombia due to the lack of exploration success. However, the Company continued to closely monitor human rights issues in Colombia, by engaging in advocacy and dialogue with organizations that are in a position to influence improvements in the area of human rights. They include oil and gas industry peers, the Government of Colombia (including the Colombian ambassadors to Canada and the US) and nongovernmental organizations such as Human Rights Watch and Amnesty International.
Thanks to support from Talisman (Colombia)’s co-venturers, the Colombian government and the Association of Colombian Oil Producers, Talisman established transparent agreements for the provision of security in the Tangara Block. Recognized internationally for their leading edge approach to security and human rights, these agreements reference human rights law and stipulate that any support provided to the military shall not be used for the acquisition of lethal equipment and shall be used only for the protection of exploration activities in the Tangara Block.
Talisman also participated in a 2004 research project carried out by the Collaborative for Development Action (CDA)3. CDA is a consulting agency based in Cambridge, Massachusetts that focuses on economic and social development in Asia, Africa, Latin America and Eastern and Central Europe. The Canadian Department of Foreign Affairs and International Trade (DFAIT) sponsored CDA to document the practice of companies operating in Colombia and to provide DFAIT with a brief on how companies can most effectively and positively invest in Colombia.
Talisman continues to be subject to a lawsuit brought by the Presbyterian Church of Sudan and others commenced in November 2001 under the Alien Tort Claims Act in the United States District Court for the Southern District of New York. The lawsuit, which is seeking class action status, alleges that the Company conspired with, or aided and abetted, the Government of Sudan to commit violations of international law in connection with the Company’s now disposed of interest in oil operations in Sudan.
In December 2004, Talisman filed a motion for judgment on the pleadings, seeking dismissal of the lawsuit on the grounds that the court lacks subject matter jurisdiction to hear the lawsuit, and filed its opposition papers to the certification of the lawsuit as a class action. No decision is expected on either of these motions prior to the end of March 2005. Talisman believes the lawsuit to be entirely without merit, is continuing to vigorously defend itself and does not expect the lawsuit to have a material adverse effect. Though we did complete the sale of our indirect interest in Sudan in March 2003, we have committed to continue funding our development projects through 2005. See page 13 for more.
“Notwithstanding what we understand was a comprehensive review process, management and the board were unable to estimate the reputational risks of a significant involvement in Sudan, which proved controversial and which the company sold in 2003. Moody’s believes the company has strengthened risk assessment processes in recent years partially in response to the Sudan controversy and risk management and assessment practices appear strong.” Excerpt from Moody’s Investors Service December 2004 Corporate Governance Assessment of Talisman
2 In 2000, the Voluntary Principles on Security and Human Rights were developed by the governments of the US and the UK, selected companies in the resource sector and various civil society groups as an international framework for the provision of security.
3 For more information about the CDA, or for a copy of the CDA’s final Report, “Efforts to Operate Constructively in a Context of Conflict: Best Corporate Practices in Colombia”, visit www.cdainc.com.