On 13 February 2024, a mining disaster occurred in İliç, Erzincan, Türkiye. Tons of cyanide leach pile at the Çöpler village gold mine collapsed, and at least nine people were trapped underneath.

On one side, a company incorporated in Canada and moved its headquarters to the USA (the Controlling Company), which has investments in the USA, Türkiye, Canada, and Argentina, declaring that its workplaces are “free of fatality, injury and occupational illness,” and one of its investments in Türkiye, the Çöpler village gold mine. On the other side, “violent mining,” “contaminated environment,” “harmed animals and people,” and trapped workers under rubble.

Controlling Company’s Investments in Erzincan and Its Partnership Structure

Controlling Company is a public company traded on the NASDAQ/New York, USA; TSX/Toronto, Canada; and ASX/Australia stock exchanges.

We understand that the Controlling Company has two active investments in the İliç district of Erzincan:

• Çöpler village gold mine, and
• Yakuplu village Çakmaktepe mine.

Turkish subsidiary of the Controlling Company (the Subsidiary Company) operates the Çöpler village gold mine. The Controlling Company is the 80% shareholder of the Subsidiary Company, whereas a Turkish company (Turkish Company) with the majority of shares held by a Turkish holding company is the 20% shareholder.

Another subsidiary company (Subsidiary Company-2) operates the Yakuplu village Çakmaktepe mine. The Controlling Company and the Turkish Company again hold shares in the Subsidiary Company-2 in the above proportions. This mine is adjacent to the Çöpler village gold mine and its satellite mine.

The domination of the Controlling Company, arising from its shareholdings in the Subsidiary Company and Subsidiary Company-2, creates a group of companies’ structure among these three companies. In this respect, the provisions governing the group of companies in Turkish corporate law apply to these companies. Such provisions impose some reporting obligations on the Subsidiary Company and Subsidiary Company-2, giving the Controlling Company the right to request reports and information and imposing some liabilities on the Controlling Company. For instance, the Controlling Company can be held liable for the trust the group’s reputation inspires in society.

Controlling Company’s Values and Principles

The Controlling Company declares its values as follows:

• Respect for people,
• Respect for the environment and communities,
• Sustainability,
• Health, safety, and risk management,
• Operational excellence,
• Innovation, and
• Growth.

Accordingly, the Controlling Company embodies its corporate governance principles with policies such as the following:

• Code of Business Conduct and Ethics,
• Anti-Corruption Policy,
• Environmental & Sustainability Policy,
• Human Rights Policy,
• Land Access and Resettlement Policy, and
• Safety & Health Policy.

Controlling Company’s Practices in Türkiye

When we review the values and corporate governance principles of the Controlling Company, the following three main points at issue emerge in terms of the Çöpler village gold mine, which, together, can be summarized as environmental, social, and governance (ESG) issues:

• Compliance with laws, rules, and regulations and anti-corruption,
• Health, safety, environment, and human rights, and
• Corporate social responsibility.

Compliance with Laws, Rules, and Regulations and Anti-Corruption

According to public announcements, the Subsidiary Company has all the official papers, such as permits, certificates, licenses, environmental impact assessment decisions, and capacity increase approvals to operate the Çöpler village gold mine; the public authorities have inspected the mine many times, and the authorities suspended the mine’s activities only once for three months since December 2010, the date the mine started gold production.

However, in the criminal complaint of 15 February 2024 filed by the İstanbul Bar Association against the Subsidiary Company, the Subsidiary Company’s officials, and relevant public officials, there are allegations of probable intentional homicide, intentional pollution of the environment, toxication of things, ecocide, and abuse of office.

Different political parties and members of the parliament also stipulate similar allegations in their parliamentary inquiry motions submitted to the Turkish Grand National Assembly (the Turkish Parliament) on 14 and 15 February 2024. Accordingly, in its meeting dated 14 February 2024, the Turkish Parliament launched a parliamentary inquiry to “examine all aspects” of the incident in the Çöpler village gold mine.

Considering the İstanbul Bar Association’s criminal complaint and parliamentary inquiry motions, the validity of the above-mentioned official papers and inspections becomes questionable. In this context, if these allegations are confirmed, leaving aside the violations of the Controlling Company’s Anti-Corruption Policy, it may give rise to an investigation in the USA under the US Foreign Corrupt Practices Act, and a similar outcome may also occur under the laws of Canada or Australia.

Health, Safety, Environment, and Human Rights

The incident that happened at the Çöpler gold mine reveals that the Subsidiary Company did not care to “apply safe practices for the management of hazardous substances” or to “maintain and regularly test emergency response and recovery plans” under the “Zero Harm workplace” principle committed by the Controlling Company in its Safety & Health Policy.

There is similar conduct regarding the Controlling Company’s Environmental & Sustainability Policy, whereby it commits to using clean technologies “as they become economically feasible.” Although the Çöpler village gold mine generated approximately 1.5 billion US dollars in revenue in the last three years alone, the allegation is that the Subsidiary Company has been using old technologies in operating the mine and managing the waste. In this context, a linked allegation is that the local people, the animals, and the plants in the region have lost their health. Likewise, another allegation is that the occupational health and safety measures in the mine and waste sites are insufficient.

What is more, these allegations are not abstract claims. Two local people engaged in animal husbandry filed lawsuits at administrative courts for the cancellation of the Environmental Impact Assessment Affirmative decision of 2018 regarding the “Open Pit Operation Capacity Increase Project” of the Yakuplu village Çakmaktepe mine, which is the satellite mine of the Çöpler village gold mine. The same people also applied to the Constitutional Court in 2020 concerning the above-mentioned administrative court lawsuits. The Constitutional Court judged these applications on 01 November 2023 and 25 January 2024 and ruled that the plaintiffs’ fundamental right to respect for private life had been violated.

Besides, the Union of Chambers of Turkish Engineers and Architects filed lawsuits at administrative courts for the cancellation of two other environmental impact assessment decisions rendered in the following years. The relevant decisions are the Environmental Impact Assessment Affirmative decision of 2021 about the Çöpler village gold mine’s “2nd Capacity Increase and Flotation Facility Project” and the Environmental Impact Assessment Not Required decision of 2023 about the Çöpler village gold mine’s “Open Pit Expansion Project.” On 04 March 2024, administrative courts granted the stay of execution judgments regarding both decisions.

Furthermore, between 14 February 2024 and 01 March 2024, members of the parliament submitted 26 written parliamentary questions to the Turkish Parliament regarding the alleged violations, to be answered by the relevant ministers.

Corporate Social Responsibility

Regarding social responsibility for the region affected by the Çöpler village gold mine, there are allegations that in 2016, the Subsidiary Company entered a protocol with the local people, making financial promises for the local people to waive their rights to file complaints and lawsuits.

If these allegations are true, this is, in the first place, incompatible with the Controlling Company’s commitment to “provide affected individuals with adequate compensation to enable them to replace what has been affected,” as set out in its Land Access and Resettlement Policy. In this commitment, as it should be, there is an approach to compensate the damages of the people who, themselves, their families, their animals, and their lives are negatively affected by the mining operation. However, if the allegations are true, the Subsidiary Company paid the local people “hush money.”

In this context, leaving aside the violations of the Controlling Company’s Code of Business Conduct and Ethics and Human Rights Policy, such a protocol, if it exists, is invalid under Turkish civil law because it violates the personality rights of the local people in the first place. With this, it is difficult to predict whether there will be a lawsuit as to such invalidity because, in such a possible lawsuit, the rule of honesty and the prohibition of abuse of rights may become issues of discussion, as well as whether the local people should refund the allegedly paid money.

Last Words

The Controlling Company has not issued satisfactory explanations following the Çöpler village gold mine disaster. It seems that both the Controlling Company and the Subsidiary Company failed to consider ESG risks while focusing on financial returns. However, the approximately 60% loss of value in the Controlling Company’s shares after the incident shows that its investors have ESG considerations. Probably due to this development, the Controlling Company announced on 08 March 2024 that they made some changes in the duties and responsibilities of their senior management team. However, these changes do not mean much if they only remain on paper and words are not put into action, like the arguable values and principles of the Controlling Company.

Nevertheless, judicial and administrative processes in Türkiye are pending for now. Time will tell whether the US, Canadian, or Australian authorities will launch any investigations or stockholders in those countries will file any lawsuits.

Av. Müge Önal Başer, LL.M., LL.B.

References

1. Constitution of the Republic of Türkiye No. 2709 (Official Journal (OJ), 20 October 1982, No. 17844).
2. Environmental Law No. 2872 (OJ, 11 August 1983, No. 18132).
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8. Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1, et seq.
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