Global Law Expert Dr Felicity Gerry QC writes on two legal memos she provided with barrister Daye Gang, which have highlighted failures in corporate compliance in Myanmar.

Navigating sanctions for corporates and governments is not simple. This article sets out two examples of how corporate risk can result in non-compliance, and the work counsel can do to highlight necessary due diligence in investment in or divestment from rogue states.

Singapore Reacts to a Memo on Myanmar

The latest Singaporean business to be affected by international sanctions is Emerging Towns & Cities Singapore (ETC), the developer of the Golden City complex in Myanmar. ETC has notified the Singapore Stock exchange (SGX) that it intends to divest itself of a build-operate-transfer agreement with the Myanmar Army’s Quartermaster General’s Office that was due to last 70 years and with profits in excess of $150 million. The decision was taken after our legal memo was filed with SGX by Myanmar activists: Justice For Myanmar.

The memo was requested when SGX initiated regulatory actions against ETC after Justice For Myanmar published an investigation into payments to the Myanmar army, implicating funds raised on the SGX. ETC has commissioned two independent reviews: one by Nexia TS Advisory into contractual payments to the QMGO and fundraising; and another by Kelvin Chia Partnership into the applicability of sanctions and compliance with “applicable laws”. However, our legal memorandum found that these reviews may not address international law risks in light of the 2019 UN Independent International Fact-Finding Mission on Myanmar (FFMM) report into the Myanmar military’s economic interests, and ongoing atrocity crimes.

We also raised the necessary risk assessments for the proposed investment, including the likelihood of breach of sanctions by funds from the project reaching the Military Junta, known as the Tatmadaw and labelled Terrorist organisation. The memo highlighted several business and human rights risks as well as the consequences of breach of US and EU sanctions on Myanmar.

In addition to the ETC divestment, SGX is likely to change its approach to investment listing – progress for a jurisdiction plagued by money-laundering scandals. The legal memo found that international law and guidance places due diligence obligations on the Singapore Exchange (SGX), and possible liability on the Monetary Authority of Singapore and the Singapore Government, in relation to companies doing business with the Myanmar military.

It also found that Singapore has an international legal obligation “to investigate, prevent and cease transactions that amount to wrongful acts”, which are applicable to business transactions with the Myanmar military and its business interests. Legal remedies would be “easily pursued and enforced” against SGX if the Myanmar military’s financial organs are found to be in breach of international laws and/or compliance regulations, including international human rights and humanitarian law.

ETC suspended trading earlier this year, and on 23 March 2022 it announced it was seeking to divest its investment in Myanmar via the sale of its entire shareholdings and to cease its activity in and exposure to the Myanmar market, asking SGX for an extension of time to find and offer and seek shareholders’ approval for the proposed divestment

Singapore has been the largest foreign investor in Myanmar since 2012, having invested more than US$24 billion (S$32.2 billion) between 1988 and January 2021. Activists supported by legal expertise on international business and human rights compliance see this as an example of effective pressure on Singapore companies to cut ties with the Myanmar military and its associated businesses to undermine the regime’s political legitimacy.

Telenor Risks Investigation After Sale

Singapore is not the only country affected by international sanctions and the need for broad business and human rights compliance. Jørgen C Arentz Rostrup, Head of Telenor in Asia, has said the company’s decision to sell the communications giant Telenor Myanmar was made “with a heavy heart”. This, sadly, misses the point. Telenor has sold their Myanmar subsidiary to M1 Group, including years of customer data, with knowledge that M1 has connections with the military in power in Myanmar and with knowledge that Telenor’s actions may well be in breach of regional sanctions and business and human rights commitments.

We provided another legal memo to enable the Centre for Research on Multinational Corporations (SOMO) to call upon both Telenor and M1 to acknowledge their responsibilities for employees and customers. M1 has so far been silent. Rostrup has tried to minimise Telenor’s role and obligations. It is now for the Norwegian Government to investigate whether Telenor has prioritised finances over people and to hold Telenor to account for its decision, which puts thousands of customers and employees at risk.

Telenor has long been respected for its expansion into Myanmar, but investment into Myanmar also comes with responsibility for principled divestment if leaving. Rostrup has suggested it was not possible for Telenor to withdraw from Myanmar in accordance with its values and in compliance with human rights. This assertion should not be taken at face value when the sale netted over $105 million USD.

Companies operating legitimately and ethically in Myanmar have needed to make difficult operational choices since the coup in February 2021. If selling Telenor Myanmar was the only option, as Rostrup suggests, why sell over seven years’ worth of customer metadata – especially if such a sale is in violation of sanctions and / or the very human rights principles Telenor purports to uphold?

Telenor was aware at the time of sale that M1 would transfer 80% of its ownership to Myanmar military-linked Shwe Byain Phyu. Rather than consider the legal implications of such a sale, Rostrup has instead focussed criticism on activists, suggesting there was no alternative when alternatives, including retaining past data, do not appear to have been fully explored. SOMO, through their publication of our legal memo, called for Telenor to be transparent about the due diligence it has undertaken about the purchasers. It seems remarkable that Telenor has refused to engage with SOMO and cite corporate “survival” instead.

Telenor’s public disclosures also leave much to be desired. Telenor has only said it screened Shwe Byain Phyu for sanctions and is silent on business & human rights due diligence. Before making the sale decision, despite the complexities of the situation in Myanmar, it was incumbent on Telenor to at least assess risks pursuant to Principle 4 of the UN Guiding Principles on Business and Human Rights. This would expose liabilities on Telenor created before the sale as well as responsibilities over the sale and potentially for facilitating such abuses in the future. The Myanmar National Unity Government, Burmese citizens and residents, Telenor Myanmar customers and Telenor Myanmar employees should know why Telenor is not being transparent about such issues and what Telenor may already know. It may be that some of the $105 million USD pot could or should be retained for the benefit of customers and employees who have suffered while Telenor had holdings in Myanmar or suffer in future as a result of the sale.

Importantly, Telenor’s majority shareholder is the Norwegian state itself. Sale is, therefore, not solely a matter for the Telenor board.

Our second legal memo set out potential international legal issues arising from this particular sale to these particular companies and was addressed directly to the CEOs of Telenor and Telenor Myanmar respectively, as well as to the Norwegian Minister for Trade and Industry, who exercises the majority shareholder powers of the Norwegian state. By now, none of the major stakeholders can say Telenor and its majority shareholder were unaware of M1’s human rights record and Shwe Byain Phyu’s links to the military in power since the coup.

Telenor and its majority stakeholder, the Norwegian government, risk giving legitimacy to repression and crackdown, and in dismissing the National Unity Government’s requests for consultation as a “parallel reality”, fail to give dignity to the human rights obligations it professes to respect. The speed of the sale and Rostrup’s defensive media campaign at least suggest a hasty withdrawal based on pragmatism and profit rather than people and principle. It is now the responsibility of the Norwegian government to investigate the sales process, ensure Telenor provides available remedies for victims, and pursue accountability for any breaches of sanctions or international law.

These are just two examples of how counsel can be utilised to highlight business and human rights issues in a sanctions world for corporates who at least profess to engage in human rights compliance.

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