Paper Excellence will not have its FSC status revoked after FSC International conducted a “corporate group review” of allegations that it had deep operational and ownership ties to Asia Pulp & Paper (APP).
In November, Wood Central reported that Paper Excellence – which has 40 mills across Canada and the US – was the subject of an investigation after Greenpeace raised concerns about the company’s ties to APP.
At the time, Greenpeace said it had a “preponderance of evidence” that shows Paper Excellence is part of the same business structure as Asia Pulp & Paper, claiming “they’re both controlled by the same corporate parent, Jakarta-based Sinar Mas.”
In response, Canada’s FSC branch rubbished the claims, saying it has reviewed the matter “multiple times—and has concluded each time that there is no majority ownership relationship between APP and Paper Excellence.”
As reported by Canada’s CBC News, FSC hired McMillan LLP, one of Paper Excellence’s go-to law firms, to conduct the company’s review.
“We are shocked that the FSC would hire McMillan LLP, Paper Excellence’s lawyers, to investigate Paper Excellence,” Shawn-Patrick Stensil, program director at Greenpeace Canada, said in a statement.
Meanwhile, in a statement issued on Friday, FSC said that “before engaging McMillan LLP, FSC conducted a conflict of interest check and found none.” Whilst McMillan CEO Tim Murphy said, “McMillan observes the rules of professional conduct at all times, but we can say that there is no conflict.”
Wood Central understands that Paper Excellence uses FSC certification to sell products into the North American market – with a suspension or loss of certification putting the commercial viability of Paper Excellence and its 22 million hectares of Canadian forest at risk.
According to FSC, “no corporate control” exists between Paper Excellence and APP. Adding that Indonesian businessman Jackson Wijaya “is the sole direct or indirect legal owner of the Paper Excellence Group Entities and holds the sole and exclusive right to control them.”
Mr Wijaya’s father is the head of APP, and his family controls it; he held executive positions in the large China wing of his family’s business empire until at least 2017 – with Greenpeace and Auriga Nusantara both arguing that the FSC’s review was not credible in interviews with CBC News.
“They do not disclose the data that they used,” Auriga Nusantara’s chairman, Timer Manurung, said in an interview with CBC News. “They possibly do not have comprehensive data in their analysis.”
Meanwhile, FSC said it could not share more information because the source documents are confidential, and it signed a non-disclosure agreement with Paper Excellence.
“The evidence the FSC used in the ‘investigation’ was limited to public and corporate government records and documents provided by Paper Excellence, which naturally would not reveal how control is exercised in these companies,” Greenpeace said, denouncing FSC’s use of McMillan to do the assessment.
According to CBC News, Paper Excellence has hired McMillan at least six times over the last six years to advise on more than US $6 billion transactions, including its takeovers of forestry companies Catalyst Paper, Domtar and Resolute Forest Products. It also represented a Paper Excellence subsidiary in a dispute with CN Rail.
The decision to hire McMillian “was problematic,” according to multiple legal ethics experts who spoke to CBC News: “If Paper Excellence has been their client previously, then they clearly are in a financial conflict of interest because the decision that they render will have an impact on their client’s willingness to continue their business relationship,” according to Christina Bellon, a philosophy professor at California State University, Sacramento with expertise in practical and professional ethics.
“Paper Excellence might say in response: ‘Wow, you ruled against us. We’re going to go find another law firm,” Professor Bellon said.
Meanwhile, Allan Hutchinson, a law professor at Osgoode Hall Law School in Toronto and author of two texts on legal ethics, suggested there are “on the face of it, several conflicts of interest.”
“The corporation may be happy for this law firm to be involved because they think that the law firm will protect their interests against the agency,” he said. “The agency may think, ‘We’re happy to use the corporation’s lawyers because we’ll get a better sense of what’s going on.’ Both of those are conflicts of interest.”
He said the review “obviously wasn’t an independent one because if you wanted an independent one, it’s hard to imagine why you would utilize and employ the law firm of the corporation you’re looking into.”
According to CBC News, Paper Excellence did not answer questions about how much it has paid McMillan LLP over the years or whether it has a current retainer with the firm. A spokesperson said in an email that the company is “pleased” with the FSC’s conclusion and has “done nothing to warrant” the revocation of its certifications.
The FSC previously told CBC that it has examined ties between APP and Paper Excellence “multiple times” and has always arrived at the same conclusion: that “there is no majority ownership relationship” between the companies.
- Please note: Wood Central does not take a legal position on FSC’s decision concerning the Paper Excellence legal matter. It nonetheless has an obligation to report the news and reports on the statements made by Greenpeace, FSC Canada, and CBC News in Canada. To learn more about the case, visit Wood Central’s special feature from November.
