Sembcorp's China legal proceedings draw to a close

Sembcorp Industries did not disclose the outcome of the case right after the Chinese court dismissed the appeal of its joint venture wastewater treatment unit Sembcorp Nanjing Suiwu last October, sparking criticism from some corporate governance watc
Sembcorp Industries did not disclose the outcome of the case right after the Chinese court dismissed the appeal of its joint venture wastewater treatment unit Sembcorp Nanjing Suiwu last October, sparking criticism from some corporate governance watchers. PHOTO: SEMBCORP INDUSTRIES

Company says its joint venture unit has received final mediation document over criminal, civil pollution cases

Conglomerate Sembcorp Industries has concluded the multimillion-dollar legal proceedings it faced over pollution offences in China - a case that made headlines recently because of disclosure issues.

The firm said yesterday that its joint venture wastewater treatment unit Sembcorp Nanjing Suiwu had received the final mediation document from the Chinese court.

Sembcorp holds a 95 per cent stake in the unit.

The legal proceedings consisted of a criminal case and a related civil case over illegal discharge of wastewater by Sembcorp Nanjing Suiwu.

Under China court rules, these two cases were regarded and tried as one.

Sembcorp's share of the fines and cash settlement for both claims stands at $54 million - $10 million for the criminal case and a $44 million settlement for the civil claim.

It stated that these were fully provided for as of Sept 30 last year, with no further financial impact.

Further, it has committed to new investments of $45 million over the next four years to develop projects and initiatives to support environmental protection in China, with a substantial portion of this being earmarked for upgrading of the facilities for the wastewater treatment business in Jiangsu.

The outcome of the case had not been disclosed right after the Chinese court dismissed Sembcorp Nanjing Suiwu's appeal last October, sparking criticism from some corporate governance watchers and a regulator's article on timely and adequate disclosures of significant litigation.

Sembcorp's latest announcement, with the joint venture named and other details, stands in stark contrast to its disclosures in mid-January and September 2018.

The company said it was in "many months of difficult and sensitive negotiations with the provincial prosecutors" over the civil claim.

Sembcorp's share of the fines and cash settlement for both claims stands at $54 million - $10 million for the criminal case and a $44 million settlement for the civil claim. It stated that these were fully provided for as of Sept 30 last year, with no further financial impact.

"During the entire period, the group had sought to maintain confidentiality in order to resolve the civil claim expeditiously and with the lowest quantum possible...

"While fulfilling its disclosure obligations... the group therefore had to balance the interests and disclosure needs of all stakeholders to ensure that legal proceedings are resolved expeditiously... and in a manner that minimises the quantum of claims."

Sembcorp Industries closed down 6.02 per cent at $2.03 last Friday.

THE BUSINESS TIMES

A version of this article appeared in the print edition of The Straits Times on February 10, 2020, with the headline 'Sembcorp's China legal proceedings draw to a close'. Print Edition | Subscribe