The cost(s) of Globalization

- a case study approach -

Written by : Jonathan Huizinga

Student number : 270922
Course : Corporate Social responsibility
Hand-in date : 9th November 2007
The cost(s) of Globalization - a case study approach -

Table of contents
Chapter 1: Background information........................................................................................4
Interest in topic...................................................................................................................4
Limitations .........................................................................................................................4
Parties involved ..................................................................................................................4
Oy Metsä Botnia .............................................................................................................4
Nordea............................................................................................................................5
OECD.............................................................................................................................5
the Bellona Foundation...................................................................................................5
CEDHA ..........................................................................................................................5
IFC .................................................................................................................................5

Chapter 2: Conquering the world ............................................................................................7

Current position..................................................................................................................7
The River Uruguay treaty ...................................................................................................7
Location .............................................................................................................................8
Production ..........................................................................................................................9
Wood ..............................................................................................................................9
Economy.........................................................................................................................9
Chemicals.......................................................................................................................9
Natural environment .....................................................................................................10
Impact studies...............................................................................................................10
Population ....................................................................................................................11
Financing..........................................................................................................................12

Chapter 3: Theory meets practice..........................................................................................13

Principles of Ethics...........................................................................................................13
Deontology ...................................................................................................................13
Consequentialism / Utilitarianism.................................................................................13
Ethics of virtue..............................................................................................................14
Contractarianism..........................................................................................................14

Chapter 4: Reflection............................................................................................................15
Initial point of view ..........................................................................................................15
the Match of Ethics...........................................................................................................15
the mathematical outcome ................................................................................................16

Appendix 1: Complaint filed to the International Court of Justice

Appendix 2: Botnia’s Principles of Social Responsibility (partly)
Appendix 3: ING-Group's formal reason for discontinuation

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The cost(s) of Globalization - a case study approach -

Introduction

“Globalization is a fact of life. But I believe we have underestimated its fragility”

- Kofi Annan, seventh secretary-general of the United Nations

In the years passed, Western Europe strongly developed and perhaps even moved up the
evolutionary ladder. Fact is that the standards of life increased. People started to expect more
evolved standards of life and demanding more from society in general; demanding a
contribution towards an improved society from everybody (from citizens to corporate
citizens).

These increased expectations were translated back, by the companies but also the people, to
increased monetary values. Party the result of this translation is the fact that companies moved
abroad to search for cheaper places, all in order to satisfy demand and staying competitive.
This resulted in the fact that companies moved further and further away, ‘conquering’ the
world; globalization in process.

These cheaper places inherently came with different expectations, from governments but also
its citizens: corporate and individuals. Fewer expectations in light of laws and regulations but
also fewer expectations in terms of the quality and return of the jobs offered; which evidently
resulted in fewer expenses for companies which as a result caused prices to drop.

As said, cheaper, from the Westerners point of view, is always better. However do we merely
accept these differences in expectations, or do we (party) uphold our expectations also
abroad? These are questions currently asked by corporations and people all over the world;
the advent and evolution of ethics in life.

This report analyses the quest of Oy Metsä Botnia to constructing a new factory in Uruguay,
the expectations from the company and all stakeholders involved, ranging from the financial
institutions financing the project up to the local community in the Fray Bentos area. It also
focuses on the differences in expectations, which resulted in a clash of ethics and an explosion
of the problems.

I would like to thank Mr. Arnd Mehrtens for his inspiring lectures and for the useful input
from Ms. Michaela Carriere and Ms. Mariaelena Murphy.

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The cost(s) of Globalization - a case study approach -

Chapter 1: Background information

This chapter focuses on the general background information and it covers topics as to why
this case study was chosen, the limitations of this report and it introduces the major parties
involved throughout this report

Interest in topic

Before joining IBS I worked as a bookkeeper at a big shipping company in the northern part
of Holland. This shipping company focussed on bulk shipping and one of the shipments made
was wood pulp; (one of the) main product(s) of Oy Metsä botnia (from here on referred to as
Botnia). Still having connections with the shipping industry, in national and international
context, I stumbled across this problem and wanted to gain more insight and understanding on
how the process has been so far and how it could have escalated this far.

Limitations

Unfortunately, due to restrictions as to the number of pages as well as restrictions in light of

the time to be spent on this report, not all the perspectives could be discussed in necessary
detail. Doing so would take us outside of the scope of this project. Therefore only the most
important parties involved are discussed upon and the problems are distilled into core
problems.

Discussing more parties would indeed present the reader with a more complete picture of the
problems at hand, however not discussing all the parties and only giving a distillation of the
problems at hand will not present the reader a distorted or biased view1.

Parties involved
Oy Metsä Botnia
The forest industry company Oy Metsä Botnia was founded in 1973
and is one of the world’s biggest manufacturers of bleached wood
pulp. Even today the production was being done in Finland by five
factories divided over the country.

Its product, wood pulp, is basically chopped wood treated with

chemicals to make it white. Wood pulp in its turn is being used to
produce paper and paper like products such as cardboard. The wood
is currently being harvested from the one of the biggest national
forests of Europe located in Finland*

1
This merely represents the view of the author oft his report and it can be seen as incomplete.

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The cost(s) of Globalization - a case study approach -

Nordea

Nordea is financial services group operating in Northern Europe and its main and original
bases of operation are: Norway, Sweden and Finland. The bank is an aggregate of several
smaller banks from the respective countries which merged between 1997 and 2000 forming
Nordea. Currently Nordea has more than 1,100 branches in 19 different countries and it can
be seen as a formidable player in the world of financial institutions.

OECD

The Organisation for Economic Co-operation and Development (OECD) was founded in 1948
and it is a non-profit international organization of thirty countries -EU and non-EU- that all
accept the principles of representative democracy and a free market economy2.

The countries which have signed the treaty oblige themselves to adhere to the OECD
guidelines which boils down to fostering prosperity and fighting poverty through economic
growth and financial stability, taking into account the environmental and social implications,
not only adhering to but also going beyond the Universal Declaration of Human Rights.

the Bellona Foundation

The Bellona Foundation is an international environmental Non-Governmental-Organization

(NGO) based in Oslo, Norway. Founded in 1986 as an action/protest group, it has grown into
one of the world’s most recognised and respected technology and solution oriented,
environmental companies. The Bellona Foundation works together with governments, experts
and other NGOs to achieve solutions to the world’s most important environmental problems
and it tries to keep the public aware and educated about these problems3.

CEDHA

The Center for Human Rights and Environment (CEDHA) is based in Argentina and it is a
non-profit-organization which aim it is to create an equal relationship between the
environment and the people. It therefore places grave importance to justice and access to
justice as well promoting socially and environmentally sustainable development, through
community participation4.

IFC

The International Financial Corporation (IFC) is part of the World Bank. Its main focus is to
promote sustainable economic development in developing countries by encouraging / co-
financing the establishment of enterprises in its member states. By encouraging / co-financing
these developments it helps creating jobs, build / help develop economies, and generate tax
revenues.

2
Adapted version of the one as given on
http://www.oecd.org/pages/0,3417,en_36734052_36734103_1_1_1_1_1,00.html
3
Adapted version of the one as given on http://www.bellona.org/articles/Who_we_are
4
Adapted version of the one as given on http://www.cedha.org.ar/en/general_information/

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As said, projects will only be supported when they are deemed to be sustainable, this means
that these projects have to be environmentally and socially sound and they will help improve
the quality of life for those living in the country affected by the enterprise5.

5
Adapted version of the one as given on http://www.ifc.org/ifcext/about.nsf/Content/WhatWeDo

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The cost(s) of Globalization - a case study approach -

Chapter 2: Conquering the world

This chapter assesses what actually happened in the last couple of years from right after
Botnia took the decision to build a new wood pulp factory in Uruguay up to last week when
the inauguration was planned to take place. It assesses the explosion of problems which stem
from conflicting interests as well as the importance of money and political power.

Current position

“November 5, 2007 – Montevideo, Uruguay. Erkki Varis, Oy Metsa Botnia's CEO travelled to
Uruguay to inaugurate Botnia's newest pulp mill plant last week, but much to his dismay, he
had to return home empty handed. [Shortly before the inauguration] … the Minister's cell
phone rang. He turned white, fumbled his words, and announced that “the inauguration
would be suspended”. It was no small matter, the Spanish King was on the phone … It turns
out, Uruguayan President Tabaré Vazquez forgot the Spanish King was mediating the three
year dispute with neighbouring Argentina, and had requested that neither country do
anything to aggravate the tension caused by the billion dollar Finnish pulp mill investment.6”

From the previous it can be concluded that the mill, after a couple of years of construction, is
still not producing any wood pulp and it is bound to take a lot more time as sources indicate
that there are still legal problems which are to be settled; legal problems in Argentina,
Uruguay, the Netherlands as well as in Norway and Sweden.

How could things get so out of hand?

The River Uruguay treaty

Due to increased demand for wood pulp, Botnia saw an opportunity to grow and after having
done research they decided to build a new wood pulp factory in the Fray Bentos area in
Uruguay. This is where the first problem started,
as the plant is located on / near the river, which is
officially the international waterway between
Uruguay and Argentina. In a bilateral treaty signed
by Uruguay and Argentina on 26 February 1975*
they obliged themselves to discuss all decisions
which could effect the quality of the water and the
areas effected.

For unknown reasons Uruguay did not inform /

discuss this with Argentina, and started signing
documents with Botnia for initial approval of the
new pulp factory. Perhaps it was the investment of
$1,2BN involved?

6
http://www.cedha.org.ar/en/more_information/blundering.php
* Source: International Court of Justice: www.icj-cij.org

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Of course these kinds of investments can not be kept quiet which resulted in diplomatic
tensions between the two, until this point in time friendly, neighbouring states. As a result
there were discussions back and forth however for unknown reasons the matter was not
resolved between the two states and a mediator had to be appointed; the King of Spain. At a
certain moment in time consensus was about to be reached on the condition that Botnia would
seize construction of the mill for 90 consecutive days in order for both parties to settle the
dispute further.

Botnia did however not adhere to his demand from the King of Spain and continues building
the factory. The official reasons are unknown however rumours have it that the main reason
could be the fear of dropping stock prices in Europe. This lead to the fact that consensus was
forced to fail even further fuelling the diplomatic tension between the two countries. This
resulted in the fact that Argentina filed started legal action with the International Court of
Justice in the Hague accusing Uruguay of breaching the 1975 river treaty7.

Legal proceedings are still on its way and are thought to take another couple of years before
the International Court of Justice comes with a verdict. If there is actually a breach of the
1975 river treaty, the Court can force Botnia to demolish its mill, even if it’s already in
production.

Why wouldn’t Botnia just adhere to the single demand of the Spanish King?

Location

In addition to the previous mentioned there is also the classification of the industry in relation
to the location. Due to the use of serious toxic chemicals, in order to bleach the wood chips
this type of industry was deemed and classified as a category A. This category stands for the
industry which has the highest environmental risk, according to the IFC’s guidelines.

The location as chosen by Botnia is one of the prime tourist regions or Uruguay, surrounded
by wonderful riverside beaches, a natural balanced environment and one of the cleanest rivers
in Uruguay and Argentina as well as being situated on one of the world’s most important
freshwater resources8.

Even if Botnia has safeguards in place in order to prevent contamination of the air, water,
plant / animal life and / or the overall environment and its population9 there only needs to go
something wrong to cause harm in any way.

It can therefore be argued that serious questions have to be raised with regards to the choice of
the location. According to the CEDHA / the Bellona instance filed, it was merely due to the
proximity of waterways, trees and international roads, only taking into account the production
side of the reasoning; being the cheapest. Can it even be argued that the expectations (read:
regulations) of the stakeholders for this location were the lowest?

7
A part of this case is included in Appendix one
8
Source: Specific Instance filed by the Bellona Foundation and CEDHA against Nordea SA
9
The discussion as to which extent Botnia has these in place is elaborated upon later in this report

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Can it therefore be argued that merely research was done on account of expenses?

Production
Wood:

As already elaborated upon, Botnia’s ‘financial injection’ is the largest ever done by a single
company in the history of Finland and Uruguay. The scope of the factory and its resources
needed is therefore not to be underestimated. According to CEDHA / the Bellona Foundation,
the factory’s output would range between 1,5mln and 2,0mln tons of pulp, which is equal to
4.0mln tons of wood being used.

Due to its huge amount of wood needed, a lot of land has to be given different purposes which
will harm the biodiversity of the area. It will be outside of the scope of this report to dive into
the problems which are tied to the lack of biodiversity; it suffices to say that it is not to the
benefit of the soil and other plant / animal life to promote this.

Economy

It is a fact that the locals, just as in other similar developed countries, need the local
environment for the production of food and vegetables, and need the rivers for its water and
its fish. What would be the impact of such a huge factory for these essential factors of
survival?

Given the scarcity of land in this region it means that the local farming will be harmed leading
one the one hand that local citizens are forced to ‘shop’ for food elsewhere, but that the local
economy is harmed due to the fact that trade ‘growing food vs. selling’ can occur fewer times.
However it also has to be acknowledged that as a counter effect of building the factory it will
generate 300 jobs, which will fuel the local economy.

When taking an overall look at the economy it can be argued that an investment of this
magnitude will always help the country. That however is not the case with this investment.
This is due to the fact that Botnia has received approval from the Uruguayan government to
set-up a tax-free zone, meaning that for the next 25 years they do not have to pay any taxes.

In addition to this Botnia already signed contracts with European suppliers to supply them
with the resources needed for production; not taking into account small resources such as
general management overhead (computers, paper, pens etc.)

Can it therefore be argued that the (local) economy does (almost) not benefit from Botnia?

Chemicals:

Despite the fact that the company needs huge quantities of wood it also uses large quantities
of highly toxic chemicals, in order to process and bleach the wood pulp. There are two ways
of producing wood pulp: the one is called Elemental-Chlorine-Free (ECF) and the other Total-
Chlorine-Free (TCF)

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These two ways of processing refer to the use of the chemicals, to the by-products created by
using these chemicals, to the residual chemicals left and to the way in which these residual
chemicals and by-products are disposed of.

In light of this report is suffices to say that level of environmental friendliness is still
discussed about, one expert favouring the one while the another favours the other. It is
however remarkable to see that Botnia´s largest mill in Finland is producing according to the
high standard TCF-formula and that the ECF-formula is cheaper to implement.

Natural environment

Despite the way in which the bleaching of the pulp is taken care of, there is always impact on
the natural environment. Impact due to the following aspects:
- ´creating´ pollution by means of its production process, pollution in the air as well in
the water
- the import of resources and the export of the pulp will generate a huge amount of
additional traffic which will also negatively influence the environment
- due to the increase of planting additional trees the ground water level will be
negatively influenced which has its impact on other users of the same water (such as
local farmers)
- having such a huge factory will negatively influence the attractiveness of the region
for tourists, which will adversely effect the environment

Impact studies

Of course, the overall impact of such a factory was considered by Botnia. Opting for co-
financing by the IFC, which is part of the World Bank, they were to adhere to the IFC’s
regulations concerning financing these types of industries which clearly states that extensive
socio- / economic and environmental impact studies have to be done.

According to final overall opinion of Hatfield Consultants (the company hired by the IFC /
Botnia to conduct an environmental impact study) the project is to be classified as acceptable,
not noting any adverse consequences, anyway those of magnitude, to the environment10.

The socio- / economic impact studies were done by Botnia itself however is hardly any use
mentioning them as they were far from complete and was completely biased in favour of
Botnia11. Having conducted such questionable research can it therefore be concluded that
Botnia just conducted these impact studies to get financial approval by the IFC and Nordea?

Can it therefore be argued that the focus of the company is on quick production and profits?

10

http://www.ifc.org/ifcext/lac.nsf/AttachmentsByTitle/Uruguay_ExpertsReport_Sep06/$FILE/Uruguay_ExpertsR
eport_Sep06_English.pdf
11
The opinion expressed is the opinion of the writer which reflects the non-existance or the scarce positive
reasons as given by Botnia to the topics as discussed

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Population:

The impact studies as elaborated upon earlier were already the second version which was
distributed to the stakeholders. The first version was only elaborated upon due to pressure
from the local community.

The resistance this project fostered is and was huge. Given the negative impact this
investment might have on its total environment ranging from the negative (or barely positive)
impact it might have on the economy up to the impact it might have on the plant- and wildlife.

As a result, there was a local uprising, resulting

in massive demonstrations, one of the biggest
ever displayed on account of the questionability
of a project of such magnitude.

The ‘highlight’ of these demonstrations was the

100-day-anniversary of a blockade of the
international bridge connecting Uruguay with
Argentina. This bridge is also the main route by
which the construction site of Botnia was
supplied wiith building material. As a result,
alternative routes had to be taken which resulted
in a massive loss of time and money.

During the inauguration, as elaborated upon

previous, the Botnia site had to be guarded by
the army which were dispatched by request of
the President of Uruguay.

From the data as collected by CEDHA and the

Bellona Foundation, the main reason for the
local uprising was a lack of involvement with the
project.

When being disregarded in such a big change in one’s local community, it will create anger
and angry people will take it far to protest and object. In addition to this lack of involvement
there was also the pace with which Botnia wanted the plant to be operational (also recall the
negligence on their behalf to adhere to the request of the Spanish King)

Can it therefore be argued that when properly recognizing the stakeholders, carefully listening
to them in combination with the (perhaps perception) of having no rush, it could have gone
differently?

Worth mentioning is the fact that Empreserial ENCE (a similar company building a similar
plant up-river) did adhere to the request of the Spanish King and they are not facing any
resistance of the local community whatsoever.

Was it merely a matter of time and money?

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Financing

The last two but certainly not two least important stakeholders are Nordea and the IFC as co-
financers of the Orion project12.

Given the fact that the impact studies, as elaborated upon earlier, met the criteria of the IFC,
they approved the loan to the company (which was the start of the blockade of the bride). In
addition to this Nordea also approved the loan. The reasons for approving the loan however
are not clear. Uto this moment in time Nordea has refused to comment on the allegations
made, hiding behind the confidentiality of the customer, in this case Botnia.

Interesting fact remains that Nordea was the second bank to which the request of this loan was
made, the first one being the ING-Group. They however discontinued negotiations with
Botnia and inherently rejected to loan. The reasons for this however are not clear. The official
reason for this as given by the ING-Group is:

“With respect to ING’s involvement in Botnia’s pulp mill project in Uruguay, we kindly
inform you that ING’s advisory and coordinating role in relation to this project has been
concluded. In agreement with the project sponsor, ING’s further participation in the process -
whereby funds would be made available to the project - is no longer under consideration.”13

Given the quantity of the loan and the profit which was to be made by the ING-Group it is
odd that they discontinued their negotiations and this gives reason to think that they were
hesitant to the impact of the project on the community in the Fray Bentos area, in Argentina,
or a possible deterioration of their own image due to their support for this project.

Can it therefore be argued that there is something fundamentally wrong with this project?

12
There are two other banks involved however these can be generalized upon given the scope of this report
13
The full text of the formal response as given by the ING-Group is included as appendix 3

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Chapter 3: Theory meets practice

This chapter assesses and links the theoretical guidelines to the practice as elaborated upon in
the previous chapter and it discusses the four principles of ethics.

Principles of Ethics

Managers may improve their ethical decision making if they factor into their proposed
actions, decisions, behaviours, and practices a consideration the four foundations of ethical
principles, these are:
o Deontological
o Consequentialism / Utilitarianism
o The ethics of virtue
o Contractarianism

Deontology

Deontology is an approach to ethics that focuses on the rightness or wrongness of actions

itself instead of focusing on the rightness or wrongness of the consequences of those actions.
The deontological approach can also be described as ‘duty’ or ‘obligation’-based ethics14.

When assessing the actions of Botnia against the deontological point of view, it can be
concluded that, because of the rightness of the action’s Botnia engaged themselves in –
adhering (minimally) to the standards as laid down by certain guidelines- ethically speaking
they did not do anything wrong. The intent was rightful and therefore the verdict positive.

Consequentialism / Utilitarianism

In contrast to the deontological approach to ethics, the consequentialistic point of view holds
that the actions are judged by their effect rather than by the rightfulness or wrongness of the
action itself. In this approach to ethics two different distinctions can be made to further divide
this approach:

o Act utilitarianism: a person performs the acts that benefit the most people,
regardless of personal feelings or the societal constraints such as laws
o Rule utilitarianism: takes the law into account and is concerned with fairness. A
rule utilitarian seeks to benefit most people through the fairest and most just means
available.

When assessing the effect of the actions as undertaken by Botnia it can be concluded, given
the perspective and reasons as laid down in this report, that the only parties which are favored
by them are: Botnia themselves, the shareholders of Botnia, (European) suppliers and
Customers of Botnia. Despite these advantages no weight is being given to other variables in
the process such as local people, the local economy, the political climate as well as the local
environment.

14
This explanation is based on the one as given by wikipedia

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What does this however mean? Does this mean that the individual variables are to be
weighted in order to get an average impact of the actions as undertaken by Botnia? Or do all
the actions have to be positive in order to get a positive verdict on account of
consequensialistic approach to ethics?

Ethics of virtue

The ethics of virtue judges a person (or company) by their character rather than by an action
that may deviate from his / its normal behavior. It takes the person's morals, reputation and
motivation into account when rating an unusual and irregular behavior that is considered
unethical.

When assessing this case study on account of virtue ethics it gets more complicated. When
comparing the factory as built in Uruguay and the one as built in Finland differences are
noticeable on account of the overall impact the company has on its environment; a good
example is the fact that the factory is Finland has implemented the TCF formula in
contradiction to the factory in Uruguay where the more questionable FCF formula is being
used.

There is however not enough information at hand in order to asses Botnia’s ‘normal’ way of
behaving and it therefore is also impossible to say whether or not, on account of virtue ethics,
they can or can not be blamed.

Contractarianism

The contractarianistic approach to ethics justifies moral principles or political arrangements

by appealing to a social contract that is voluntarily committed to under ideal conditions. Two
examples of this approach to ethics are:
o Social contract
o Psychological contract

By assessing this case study on account of the social contract it can be argued that the
Uruguayan government broke its social contract, with on the one hand its people and on the
other hand with Argentina.

To make the circle in this report complete, when assessing Botnia’s actions on account of the
psychological contract we have to start comparing the expectations the local people have
developed versus the ones as given by them by Botnia; this however is difficult to do.

When reading that due to the hurry of Botnia for completing the factory, employees were
faced with dangerous situations, with regards to the chemicals being used, it can be argued
that Botnia broke its psychological contract with its employees.

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Chapter 4: Reflection
The interesting question which can be asked at this point in time, when taking into account the
previous mentioned, is whether or not Botnia made unethical decisions and / or did unethical
actions.

Initial point of view

When I started writing this report I was convinced that this was certainly the case, and that
Botnia made numerous unethical decisions, all mounting to an explosion of conflicts of
interest down the road (the time in which the factory was built). However when you take into
account everything said so far it can also be argued the extent to which wrongdoing occurred
can be lessoned perhaps even be summarized in a couple of points.

the Match of Ethics

Yes, it has to be acknowledged that the main reason for Botnia coming to Uruguay was to
make money and that money was their thriving force behind the majority of actions
conducted. But is this act of selfishness to be considered as wrong? To certain extend it can
also be argued that we, mankind, only act out of selfishness and that every action has some
kind of return for us.

This statement however does not justify all of Botnia’s actions:

First of all they did not adhere to the request of the Spanish King, to seize all operations for
90 consecutive days. Rumour has it that this was done out of fear for lower stock prices in
Europe. In this case money prevailed over the diplomatic environment, destabilizing two
countries, which also had its effects on the local population.

Second, are the impact studies which were done, and redone solely due to the fact that the
local population started to impose to the plans but moreover to the impact of those plans.
From these plans it can be concluded that the local environment won’t be harmed by the
Orion project (that is harm of any magnitude, it has to be acknowledged that always harm is
done with this size of factory being built and being operated). However on the other hand the
environment could have had more advantages of the plant being there, outsourcing more to
local companies in stead of importing from Europe? Not creating a tax-free zone and paying
taxes to the government?

The third reason, also closely related to the second one, is the overall engagement of Botnia in
the local community. In Finland they do a lot of sponsoring, why not do the same or similar in
Uruguay as well?

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The cost(s) of Globalization - a case study approach -

The last reason, which is from my point of view also the most important one, is the fact that
the local people have not been involved in the process of building the factory in the Fray
Bentos area. As elaborated upon earlier this fostered anger and caused numerous actions and
demonstrations, up to a specific instance filed by CEDHA to the National Contact Point for
Sweden and Finland accusing Botnia and Nordea of breaching the OECD guidelines.
Informing the people and making them an integral part of the process would have saved a lot
of trouble, time and money for all parties involved.

the mathematical outcome

Yes, Botnia could have done certain aspects better and yes perhaps they broke a couple of
ethical rules, however calling the Orion project unethical is not just, not from the points as
elaborated upon in this report.

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Appendix 1: Complaint filed to the International Court of Justice

3. Whereas on the basis of the statements of facts and law alleged in the Application,
Argentina requested the Court to adjudge and declare as follows:

“1. that Uruguay has breached the obligations incumbent upon it under the
1975 Statute and the other rules of international law to which that instrument
refers, including but not limited to:
(a) the obligation to take all necessary measures for the optimum and rational
utilization of the River Uruguay;
(b) the obligation of prior notification to CARU and to Argentina;
(c) the obligation to comply with the procedures prescribed in Chapter II of the
1975 Statute;
(d) the obligation to take all necessary measures to preserve the aquatic
environment and prevent pollution and the obligation to protect biodiversity
and fisheries, including the obligation to prepare a full and objective
environmental impact study;
(e) the obligation to co-operate in the prevention of pollution and the
protection
of biodiversity and of fisheries; and
2. that, by its conduct, Uruguay has engaged its international responsibility to
Argentina;
3. that Uruguay shall cease its wrongful conduct and comply scrupulously in future
with the obligations incumbent upon it; and
4. that Uruguay shall make full reparation for the injury caused by its breach of the
obligations incumbent upon it”;

4. Whereas by a request filed in the Registry on 4 May 2006, immediately after the filing of
the Application, Argentina, invoking Article 41 of the Statute of the Court and Article 73 of
the Rules of Court, and relying on the facts alleged in the Application, requested that the
Court indicate the following provisional measures:

“(a) pending the Court’s final judgment, Uruguay shall:

(i) suspend forthwith all authorizations for the construction of the Orion mill;
(ii) take all necessary measures to suspend building work on the Orion mill;
(iii) take all necessary measures to ensure that the suspension of building work
on the CMB mill is prolonged beyond 28 June 2006;
(b) Uruguay shall co-operate in good faith with Argentina with a view to ensuring the
optimum and rational utilization of the River Uruguay in order to protect and
preserve the aquatic environment and to prevent its pollution;
(c) pending the Court’s final judgment, Uruguay shall refrain from taking any further
unilateral action with respect to construction of the CMB and Orion mills which
does not comply with the 1975 Statute and the rules of international law necessary
for the latter’s interpretation and application;
(d) Uruguay shall refrain from any other action which might aggravate or extend the
dispute which is the subject-matter of the present proceedings or render its
settlement more difficult”;

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Appendix 2: Botnia’s Principles of Social Responsibility (partly)

BUSINESS RESPONSIBILITY
o We carry out our operations responsibly and develop them in long-term co-operation
with our stakeholders.
o We act in compliance with current legislation and cooperate openly with authorities.
o We are committed to the continuous improvement of our activities, products and
services.
o We evaluate the economic, social and environmental impacts of acquisitions and
investments.

ECONOMIC RESPONSIBILITY
o We do not tolerate corruption or bribery in our operations.

SOCIAL RESPONSIBILITY
o We respect human rights and do not violate them.
o We recognise our employees’ rights to freedom of association and collective
bargaining. We encourage open dialogue between our employees and the man-
agement.
o We value different cultures and treat each person as an individual.
o We promote equality in our operations.
o We enhance a safe and healthy working environment for our employees.

ENVIRONMENTAL RESPONSIBILITY
o We recognise and proactively reduce the environmental impacts of our operations and
prepare for environmental challenges.
o We aim to develop and implement technologies and practices that have a minimum
impact on the environment.
o We improve the energy efficiency of our production processes and aim at increasing
the share of renewable energy and decreasing carbon dioxide emissions.
o We advance sustainable forestry and consider the preservation of forest biodiversity to
be important.

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Appendix 3: ING-Group's formal reason for discontinuation

“With respect to ING’s involvement in Botnia’s pulp mill project in Uruguay, we kindly inform you that
ING’s advisory and coordinating role in relation to this project has been concluded. In agreement with
the project sponsor, ING’s further participation in the process - whereby funds would be made
available to the project - is no longer under consideration.
Please note that this is the joint decision of parties involved. With regard to concerns expressed by
several organizations on ING’s involvement in Botnia’s pulp mill project, this joint decision was not
based on the assessment of the project’s compliance with Equator Principles.”

th
Source: email dated 8 of November, written by Arnaud Cohen Stuart (Corporate Responsibility &
Sustainable Development officer ING-Group)

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