Our principal legal and compliance risks include risks from ongoing proceedings and investigations, as well as risks arising from changes in the regulatory environment and the non-observance of compliance requirements. Legal and compliance risks have risen in comparison with the previous year following the inclusion of risks regarding the changes to the German Renewable Energy Act (Erneuerbare-Energien-Gesetz).
Hanson asbestos-related claims and environmental damage
Some of our Hanson participations in the USA are exposed to particular legal risks and disputes relating to former activities. The most significant of these are asbestos-related claims, which, amongst other things, allege bodily injury and involve several American subsidiaries. Products containing asbestos were manufactured in the period from 1973 to 1984, and thus before these companies belonged to the Hanson Group and to HeidelbergCement. In the USA, these damage claims are being handled and intensively managed by a team of in-house lawyers in collaboration with insurers and external consultants. The dispute is likely to continue for a few more years be- cause of the complexity of the cases and the peculiarities of the American legal system. Adequate provisions have been formed on the basis of an extrapolation of the claims, the existing liability insurance coverage, and reliable estimates of the development of costs.
Furthermore, there is a considerable number of environmental and product liability claims against former and existing Hanson participations in the USA, which relate back to business activities discontinued a long time ago. There is partly insufficient insurance cover for law suits and liability loss claims relating to toxic substances such as coal by-products or wood preservatives. Our subsidiaries may also be charged further fines set by the court in addition to the clean-up costs and the compensation; there is, however, a possibility to settle authorised claims for compensation outside of court. Sufficient financial provision has been made for this event. Overall, we consider the risks related to environmental damages in North America as a medium risk.
Cartel proceedings
In the cartel proceedings initiated in 2002 against German cement companies, the Düsseldorf High Regional Court imposed a fine of around €170 million against HeidelbergCement in June 2009, which was reduced in the last instance by the Federal Court of Justice in 2013 to approximately €161.4 million and ultimately settled. The action for damages brought by the Belgian company Cartel Damage Claims SA before the Düsseldorf District Court, which was based on allegedly inflated cement prices as the result of a cartel between 1993 and 2002, was indeed rejected in the first instance for legal reasons. However, the appeal that called into question this verdict was lodged in good time and the proceeding continued. Appropriate financial provision has been made for the proceeding. We assign a medium risk to this case.
In November 2008, HeidelbergCement was confronted with additional cartel allegations, with reviews conducted by the European Commission at locations in Germany, Belgium, the Netherlands, and the UK. The investigations of HeidelbergCement and its external lawyers into the circumstances have not confirmed the alleged cartel law violations. The proceedings were continued with the issuing of questionnaires at the end of September 2009 and additional enquiries in 2010 and 2011, which HeidelbergCement answered by the respective deadlines. In December 2010, the European Commission informed HeidelbergCement that in this connection, proceedings had commenced in several EEA countries on the basis of suspicions concerning the violation of EU competition legislation. The notice from the Commission reads in part: “The initiation of proceedings does not
imply that the Commission has conclusive proof of the infringements, but merely signifies that the Commission will deal with the case as a matter of priority.”
These and other proceedings motivate us to continuously review and develop intensive internal precautions, particularly regular training initiatives – using, among others, electronic training programmes – in order to avoid cartel law violations.
Market investigation in the United Kingdom
In recent years, the Competition Commission in the United Kingdom has investigated the market structures of cement and aggregates activities and published its final report in mid-January 2014. It ascertained that there is still an insufficient level of competition in the cement market. In order to improve the competitive situation, the Competition Commission has adopted a set of measures that, among other things, foresees the sale of one of our slag grinding plants to an independent producer. It is currently unclear as to when the sale of this slag grinding plant is to take place and for what price. We rate this as a medium risk.
Regulatory risks
In some countries, laws are used to influence economic conditions, such as the cost of energy. In Germany, for example, the Renewable Energy Act (EEG) regulates the expansion of renewable energies. The costs incurred are passed on to all consumers using the so-called EEG apportionment. Energy-intensive businesses are exempted from the EEG apportionment – in part or in whole – by means of a special compensation scheme. This also includes HeidelbergCement’s production sites in Germany. In December 2013, the EU Commission started an investigation into the legality of the exemptions from the EEG apportionment in light of the fact that the regulation, which came into force in 2012, could represent unfair competition. The current federal government is simul- taneously working on a revision of the EEG in order to curb ever-increasing costs and to ensure compatibility with EU law. The outcome of the EU investigation and revision of the EEG is not foreseeable at present. There is a risk that the German cement industry, and thus HeidelbergCement plants, will have to pay more in future or even the full EEG apportionment as part of the electricity price. Furthermore, it is possible that the partial exemptions from the EEG apportionment granted in 2013 could be rescinded, and a low to medium double-digit million euro subsequent payment required to settle the 2013 EEG apportionment. We consider it unlikely that this will occur.
Sustainability and compliance risks
As part of its sustainable corporate governance, HeidelbergCement makes a special commitment to protect the environment, preserve resources, conserve biodiversity, and to act in a socially responsible way. We consider concern for the environment, climate protection, and sustainable resource conservation to be the foundation for the future development of our Group. Compliance with applicable law and Group regulations forms an integrated part of our corporate culture and is therefore a task and an obligation for every employee. Violations of our commitments or of laws and Group guidelines pose direct sanction risks in addition to strategic and operational risks, and also entail a risk to our reputation.
We have implemented a compliance programme across the Group to ensure conduct that is compliant with both the law and Group guidelines. This comprises, amongst other things, infor- mational leaflets, a compliance hotline, and employee training measures, which are conducted using state-of-the-art technologies and media such as electronic learning modules, and which focus on the risk areas of antitrust and competition legislation as well as anticorruption regula- tions. Violations of applicable laws and internal guidelines will be appropriately sanctioned. In
addition, corresponding corrective and preventive measures will be taken to help prevent similar incidents from arising in the future.
Moreover, we have developed a concept for the evaluation and the reduction of corruption risks and potential conflicts of interest, which will be gradually implemented across the Group. The development of a concept for the assessment of business partners, especially by using international sanction lists, is another area of focus of our compliance programme.
See page 88 f. for more information on sustainability, page 96 f. for more on environmental responsibility, and page 134 f. for more on compliance.