Oil and Politics: Talisman Energy and Sudan: Tephen Obrin

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OIL AND POLITICS: TALISMAN ENERGY

AND SUDAN
STEPHEN J. KOBRIN*
I. INTRODUCTION
On March 9, 2003, Talisman Energy, a large Canadian in-

dependent,1 sold its 25% share of the Greater Nile Petroleum
Operating Company (GNPOC) in Sudan to a subsidiary of In-
dia’s national oil company for about $771 million.2 Talisman
had been in Sudan for less than four years, purchasing its 25%
stake from Arakis Energy, another Canadian independent, in
October 1998.3
At first glance the project appears to have been a spectac-
ular success. In August 2000, two years after signing the con-
tract, Talisman announced that it expected its current year’s
income to be four times that of the previous year and that it
now pumped more oil and gas than any other Canadian com-
pany.4 Oil production was consistently described as exceeding
expectations: Sudan’s 2001 output was up 16% compared to
the previous year, production was estimated to reach 300,000
* Stephen J. Kobrin is the William H. Wurster Professor of Multina-

tional Management at the Wharton School of the University of Pennsylvania.
The author would like to thank Stephen Bell of BHPBilliton for his consider-
able help with this project.
1. An independent oil company is distinguished from the vertically inte-
grated “majors” in the industry in that it typically is both smaller and partici-
pates in only a limited portion of the value chain. See, e.g., ALBERTO CLÔ, OIL
ECONOMICS AND POLICY 44 (2000). Talisman Energy’s operations involve ex-
ploration, development, and production of oil and natural gas—upstream
operations—but not refining or retail distribution. See Talisman Energy,
Talisman Energy: About Us, at http://www.talisman-energy.com/aboutus/
aboutus.html (last visited Apr. 15, 2004).
2. Canadian Press, Talisman Completes Sale of Sudan Oil Interest, TORONTO
STAR, Mar. 13, 2003, at C6.
3. Lily Nguyen, As Talisman Cuts Sudan Ties, Some Weigh Wisdom of Foray,
GLOBE & MAIL, Mar. 13, 2003, at B1.
4. Tamsin Carlisle, For Canadian Firm, an African Albatross—Oil Driller
Talisman Energy Pays a Painful Price for Its Sudan Investment, WALL ST. J., Aug.
17, 2000, at A19.
425
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426 INTERNATIONAL LAW AND POLITICS [Vol. 36:425
barrels per day (bbls/d) in 2003, and the project’s pipeline to

the Red Sea reached capacity in 2002.5
Talisman’s stock price, however, did not reflect these
“facts on the ground.” While the company’s shares sold at a
20% premium (to net asset value) before the investment, it
was priced at a 10 to 20% discount during the period Talisman
was in Sudan.6 The share price recovered almost immediately
upon announcement of the sale, trading very close to its all
time high in June 2002.7
What accounts for this difference between investors’ per-
ceptions and the company’s performance? The answer, in
large part, is a sustained effort by activists to link Talisman to
the massive violations of human rights that have occurred dur-
ing Sudan’s brutal civil war and the successful campaign by
these groups to persuade institutional investors to divest the
company’s stock.
Talisman left Sudan to escape a political crisis over a sub-
sidiary which never accounted for more than 12% of its opera-
tions; the company felt that the benefits gained from Sudanese
production were not worth the considerable costs. Talisman
CEO Jim Buckee’s statement after the sale was announced is to
the point: “Talisman’s shares have continued to be discounted
based on perceived political risk in-country and in North
America . . . . Shareholders have told me that they were tired
of continually having to monitor and analyze events relating to
Sudan.”8
Oil has always been a risky business in terms of both geol-
ogy and politics. Crude oil deposits are often found in loca-
tions that are difficult to access, provide inhospitable operat-
5. See ENERGY INFO. ADMIN., U.S. DEP’T OF ENERGY, COUNTRY ANALYSIS

BRIEF: SUDAN, at http://www.eia.doe.gov/emeu/cabs/sudan.html (last
modified Jan. 13, 2003); Exploration Hums as Sudan’s Oil Output Reaches Pipe-
line Capacity, OIL & GAS J., Aug. 26, 2002, at 45; Sudan, OIL & GAS J., Mar. 18,
2002, at 51.
6. See Carlisle, supra note 4, at A19; David Olive, Sudan’s Misery Sure to R
Outlast Sudan, TORONTO STAR, June 21, 2002, at E4.
7. Wojtek Dabrowski, Out of Sudan: Talisman’s Shares Climb After Reported
Oil-Stake Sale, GAZETTE (Montreal), June 14, 2003, at D10.
8. Press Release, Talisman Energy, Inc., Talisman to Sell Sudan Assets
for C$1.2 Billion (Oct. 30, 2002), available at http://www2.ccnmatthews.
com/3gCNRP/pdf/20021030131n.pdf.
2004] OIL AND POLITICS 427
ing environments, and are in politically unstable or violent

countries.
The first determinant of the oil industry struc-
ture is the inherent unpredictability of investments in
foreign oil ventures which has always made them
highly speculative. Probabilities of large losses have
had to be weighed against the possibilities of large
gains. The risks that the foreign oil company con-
fronts are technical, economic and political . . . .
The foreign oil company carries the ever-present
political risks that the government of the host coun-
try may alter or terminate its concession, impose
heavier royalties or taxes, or even nationalize all or
part of its investment. Or war, civil disturbances, or
economic crises may stop oil production or cause un-
compensated loss of its property.9
Political risks have always been a factor in international
operations: International oil companies were first national-
ized in Russia after the Bolshevik revolution.10 A total of ten
countries nationalized oil production before 1970, and during
that decade there was widespread nationalization of opera-
tions in producing countries.11 There have been numerous
instances of governments forcing renegotiation of contractual
terms, and of oil production and pipeline operations—and oil
company personnel—caught in the midst of violent con-
flicts.12 Petroleum exploration, development, and production
are not for the faint of heart.
Political risk, however, has normally been country-spe-
cific. Oil companies were concerned primarily with events
9. NEIL H. JACOBY, MULTINATIONAL OIL: A STUDY IN INDUSTRIAL DYNAM-

ICS 16-17 (1974).
10. Stephen J. Kobrin, Diffusion as an Explanation of Oil Nationalization: Or
the Domino Effect Rides Again, 29 J. CONFLICT RESOL. 3, 13 (1985).
11. Id. at 13-14.
12. See, e.g., Brian Ellsworth & Patricia I. Vasquez, CVP to Displace PDV in
Handling Private Contracts in Venezuela, OIL DAILY, Aug. 26, 2003 (LEXIS,
Newsletter Database) (detailing recent contract renegotiations in Vene-
zuela); Judy Greenwald, Political Risk Insurers Owe Firm $162 Million, N.Y.
TIMES, Dec. 23, 1985, at A2 (reporting on suits following Peru’s contract re-
negotiations); Richard Rubin, U.S. Firms Cleared to Negotiate With Libya,
PLATT’S OILGRAM NEWS, Feb. 13, 2002, at 1 (LEXIS, Newsletter Database)
(discussing Libya’s contract renegotiations).
within the host country that could compromise ownership

rights, operations, or the safety of employees.13 The root
cause of Talisman’s difficulties was its operations in Sudan.
However, the company was able to manage in-country political
risk: Despite the fact that its concession was located in an ac-
tive war zone and was the target of armed attacks, the oil pro-
duction and transport business in that country was successful
and profitable. The political risks that drove Talisman out of
Sudan took form in North America and reflect the increasing
complexity of the political environment in which the oil indus-
try, and all multinational firms for that matter, now operate.
The Talisman case is emblematic of changes in the polit-
ics of the oil industry and, more generally, of significant
changes in the international political system which have taken
that system well beyond its state-centric Westphalian origins.
The modern international political system was defined by ge-
ography (mutually exclusive territorial jurisdiction), state cen-
trism (states as the only actors and the only subjects of public
international law), and the absence of any central authority.14
It was a world of discrete and meaningful borders and sover-
eign states. The political environment in which the oil indus-
try now operates is changing rapidly and is becoming much
more complex.
States are no longer the only significant actors in interna-
tional politics. International organizations such as the United
Nations and civil society advocacy groups or non-governmental
organizations (NGOs) now play a major role. Borders and sov-
ereignty are far from inviolate, and the once sharp distinction
between domestic and international affairs is becoming
blurred. The separate spheres once occupied by public and
private authorities (and public and private actors) are becom-
ing interwoven, overlapped, and confused.15
13. See JACOBY, supra note 9, at 17. R

14. See Stephen J. Kobrin, Back to the Future: Neomedievalism and the
Postmodern Digital World Economy, 51 J. INT’L AFF. 361, 363 (1998) [hereinaf-
ter Kobrin, Back to the Future].
15. See generally BRINGING TRANSNATIONAL RELATIONS BACK IN: NON-
STATE ACTORS, DOMESTIC STRUCTURES AND INTERNATIONAL INSTITUTIONS
(Thomas Risse-Kappen ed., 1995) (analyzing the impact of non-state actors
on world politics and on the foreign policies of states); Virginia Haufler,
Crossing the Boundary Between Public and Private: International Regimes and Non-
State Actors, in REGIME THEORY AND INTERNATIONAL RELATIONS 94 (Volker
The Talisman case illustrates both these changes in inter-

national politics and the political risks faced by international
firms. Talisman’s problems stemmed only indirectly from the
risks of doing business in Sudan; rather, they resulted from the
interactions of a number of very different political actors lo-
cated primarily in North America. First, sustained and well-
organized efforts by Canadian and international civil society
advocacy groups were able to inform a wide swath of the pub-
lic about the brutal human rights violations in Sudan, link Tal-
isman directly to them, and mobilize campaigns to convince
investors to sell.16 Second, while multinational firms have al-
ways gotten caught in jurisdictional disputes and inter-state
politics, the web in which Talisman was ensnared is unusually
complex, involving both U.S. and Canadian domestic politics
and U.S.-Canadian relations.
Third, the concept of state sovereignty is undergoing
change, and by the late 1990s there was no question whatso-
ever that human rights abuses would not be protected by na-
tional borders. Kofi Annan, the Secretary-General of the
United Nations, stated, “Nothing in the U.N. charter pre-
Rittberger ed., 1993) (dicussing the interactions between state and non-state
actors); Peter J. Spiro, Globalization, International Law, and the Academy, 32
N.Y.U. J. INT’L L. & POL. 567, 569-72 (2000) (discussing the reconstruction
of international society to recognize non-state institutions).
16. See, e.g., AM. ANTI-SLAVERY GROUP, WESTERN CAPITAL AIDS GENOCIDAL
WAR EFFORT IN SUDAN (1999) (documenting the links between Talisman and
human rights abuses), at http://www.iabolish.com/act/camp/divestment/
about/AASGdivestmentreport.htm; AMNESTY INT’L, SUDAN: OIL IN SUDAN:
DETERIORATING HUMAN RIGHTS (2000) (documenting the links between
human rights violations in Sudan and foreign oil companies, including Talis-
man), at http://web.amnesty.org/library/indexENGAFR542001200?open&
of=ENG-SDN; Press Release, Am. Anti-Slavery Group, Anti-Slavery Group
Hails Texas Teachers for Divesting from “Slave Stock” (Oct. 30, 1999), at
http://www.iabolish.com/news/global/old/austin10-30-99.htm (announc-
ing the first victory in the Anti-Slavery Group’s divestment campaign aimed
at Talisman); Press Release, Amnesty International, Sudan: Talisman Energy
Must Do More to Protect Human Rights (May 1, 2001), at http://web.am-
nesty.org/library/index/ENGAFR540102001; Press Release, Inter-Church
Coalition on Africa, Sudan Urgent Action Updates and Bulletin 1999 #3:
Sudan, Oil, Crimes Against Humanity . . . and Canada (Sept. 20, 1999), at
http://www.web.net/~iccaf/humanrights/sudaninfo/urgact3sudan.htm
(calling on citizens to write the Canadian Minister of Foreign Affairs expres-
sing concern about Talisman’s actions in the Sudan).
cludes a recognition that there are rights beyond borders.”17

While the war in Sudan is a domestic affair, albeit with some
external involvement, there is a clear recognition that the
human rights abuses which occur there, including the slave
trade, are an international problem subject to international
remediation.18
Last, Talisman Energy is a private actor that found itself in
a no-man’s land between a public and private role. There
were a number of attempts to hold Talisman “responsible” for
human rights violations in Sudan, including its failure to use
its leverage with the government to effect change in that re-
gime’s policy.19 Thus Talisman, a Canadian company, found
itself being sued in a court in New York for actions it was ac-
cused of taking in an African country.20
This Essay will proceed by first reviewing the troubled and
violent post-colonial history of Sudan and then discussing Tal-
isman’s entry into that country’s oil industry. It then turns to
the allegations against Talisman and the efforts mounted by
NGOs to attempt to force both the Canadian government and
investors to sanction the company for its role in exacerbating
human rights violations in Sudan. The Essay next deals with
U.S. domestic politics and U.S. attempts to sanction Sudan,
U.S.-Canadian interactions, and the Canadian government’s
position vis-à-vis Talisman. It then looks briefly at the question
of public authority and the court case against the company.
The Essay concludes with a discussion of the implications of
the case for the politics of the oil industry.
17. Kofi Annan, Two Concepts of Sovereignty, ECONOMIST, Sept. 18, 1999, at
49.
18. See, e.g., G.A. Res. 51/112, U.N. GAOR, 51st Sess., U.N. Doc. A/RES/
51/112 (1997); Question of the Violation of Human Rights and Fundamental Free-
doms in any Part of the World: Situation of Human Rights in Sudan, Comm’n on
Human Rights, Report of the Special Rappoteur, U.N. ESCOR, 59th Sess.,
U.N. Doc. E/CN.4/2003/42 (2003).
19. See, e.g., GEORGETTE GAGNON ET AL., DECONSTRUCTING ENGAGEMENT:
CORPORATE SELF-REGULATION IN CONFLICT ZONES—IMPLICATIONS FOR HUMAN
RIGHTS AND CANADIAN PUBLIC POLICY 3 passim (2003), available at http://
www.law.utoronto.ca/documents/Mackin/DeconstructingEngagement.pdf;
HUMAN RIGHTS WATCH, SUDAN, OIL, AND HUMAN RIGHTS 385-437 (2003),
available at http://www.hrw.org/reports/2003/sudan1103/sudanprint.pdf.
20. Presbyterian Church of Sudan v. Talisman Energy, Inc., 244 F. Supp.
2d 289, 303 (S.D.N.Y. 2003).
II. CIVIL WAR IN SUDAN

Sudan has been racked by civil war for all but eleven of
the years since its independence from Great Britain in 1956
(the war actually started in 1955).21 The “second civil war,”
which began in 1983, has been characterized by a vicious bru-
tality resulting in two million deaths—the majority civilian—
and over four million displaced persons.22 Sudan, which has
been described as a microcosm of the African continent,23 sits
on the divide between primarily Arab and Muslim North Af-
rica and the primarily Black, Christian, and “Animist” area
south of the Sahara. The southern provinces are ethnically di-
verse, containing a large number of tribes and linguistic
groups.24 As will be seen, a focal point of the war has been the
Upper West Nile region in which Talisman’s operations were
located.
The origins of the conflict go back to the “Southern Pol-
icy” established under British Colonial rule after World War I,
which proscribed the teaching of Arabic and Islam in the
three southern provinces and encouraged the use of English
and conversions to Christianity.25 The policy was designed to
curtail the north’s influence and resulted in the isolation and
political and economic marginalization of the three southern
provinces. That isolation has continued to this day and is a
primary cause of the current civil war in Sudan.26
Sudan’s independence, in January 1956, found the coun-
try in the midst of a rebellion; that rebellion intensified in
1958 when General Abboud seized power and began a cam-
paign to forcibly extend Islam to the south.27 By 1963, it had
taken the form of a “full-fledged civil war.”28 Another coup
21. INT’L CRISIS GROUP, GOD, OIL AND COUNTRY: CHANGING THE LOGIC
OF WAR IN SUDAN 3 (2002).
22. Id.; Randolph Martin, Sudan’s Perfect War, 81 FOREIGN AFF. 111, 111
(2002).
23. Pablo Idahosa, Business Ethics and Development in Conflict (Zones): The
Case of Talisman Oil, 39 J. BUS. ETHICS 227, 230 (2002).
24. Id. at 230-31.
25. INT’L CRISIS GROUP, supra note 21, at 8. R
26. See GAGNON ET AL., supra note 19, at 15; INT’L CRISIS GROUP, supra R
note 21, at 6, 8, 13; Idahosa, supra note 23, at 230. R
28. Id.
resulted in General Nimeiri becoming President in 1969.29 Af-

ter a foray into Cold War politics and a failed communist
coup, Nimeiri began negotiations resulting in the Addis Ababa
agreement of 1972, which provided security guarantees and
some degree of political and economic autonomy to the
south.30 The agreement ended Sudan’s first civil war after sev-
enteen years.31 While the Addis Ababa agreement held for
eleven years, by the late 1970s Nimeiri was under increasing
pressure from hardliners to again exert control over the south,
and his regime turned from left-authoritarianism to strict Is-
lamism.32
The situation in Sudan was complicated by the discovery
of oil in the southern provinces during the 1970s, which even-
tually dramatically altered the balance of power in the country
and provided an additional motivation for conflict. Chevron
was granted a concession in 1975, started drilling in 1977, and
discovered significant reserves of oil in the early 1980s.33 Sta-
bility and peace in Sudan then quickly deteriorated into a re-
sumption of an even more brutal civil war. In 1980, Nimeiri
attempted to redraw the boundaries of the Upper Nile prov-
ince to include the areas where oil had been discovered,34 and
in 1983 he issued an order abrogating the Addis Ababa agree-
ment, returning powers to the central government, eliminat-
ing the south’s autonomy, and dividing it into three adminis-
trative provinces.35 A few months later, he transformed Sudan
into an Islamic state, declaring that sharia was to be the law
29. Id. at 10.

30. Id. at 10-11.
31. GEORGETTE GAGNON & JOHN RYLE, REPORT OF AN INVESTIGATION INTO
OIL DEVELOPMENT, CONFLICT AND DISPLACEMENT IN WESTERN UPPER NILE, SU-
DAN 18 (Canadian Auto Workers Union et al., 2001), available at http://
www.iabolish.com/act/camp/divestment/Rylefinal.pdf; INT’L CRISIS GROUP,
supra note 21, at 11; SUDAN UPDATE, RAISING THE STAKES: OIL AND CONFLICT R
IN SUDAN 75 (1999), available at http://www.sudanupdate.org/REPORTS/
Oil/Oil.pdf (last visited Apr. 11, 2004).
32. INT’L CRISIS GROUP, supra note 21, at 12; Idahosa, supra note 23, at R
231.
33. JOHN HARKER, CAN. DEP’T OF FOREIGN AFF. AND INT’L TRADE, HUMAN
SECURITY IN SUDAN: THE REPORT OF A CANADIAN ASSESSMENT MISSION 12
(2000). A Lebanese newspaper claimed Chevron’s discoveries were larger
than reserves in Saudi Arabia. SUDAN UPDATE, supra note 31, at 15-16. R
34. HUMAN RIGHTS WATCH, supra note 19, at 96-97. R
throughout the country.36 Southerners mobilized around the

Sudan People’s Liberation Army (SPLA) to rebel, and the war
resumed in all its fury.37
General Nimeiri’s regime lasted until 1985, when it was
overthrown by the army after a general strike and popular up-
rising.38 Sadiq al Mahdi became Prime Minister,39 and for a
time it appeared that peace was once again possible. But Gen-
eral Umar al-Bashir, who took power in a 1989 coup,40 re-
sumed the war with a vengeance, pursuing the “imposition of
God’s law” throughout the country.41 While a settlement now
appears possible, during the time Talisman operated in Sudan
the country was still in the midst of a very violent and brutal
civil war. One observer characterized the fighting as accom-
plishing very little militarily: “The government controls only
key garrison towns in the south; the rest of the region is ruled
by the SPLM or one of the many other factions that have
evolved over the years.”42 I will return to the state of the war in
the late 1990s as part of the story of Talisman’s operations in
Sudan.
It is important to note that the civil war in Sudan is com-
plex, and, by the late 1990s, it could no longer be character-
ized as a straight-forward conflict between the Islamic north
and Christian, “Animist,” and tribal south. While the govern-
ment’s attempt to impose Islam and Islamic law on the entire
country continues to fuel the conflict, the longstanding
marginalization of the southern provinces, an attempt by the
Government to extend its control over the disputed areas, and
a struggle among several groups for control over Sudan’s terri-
36. Id.
37. See GAGNON & RYLE, supra note 31, at 18; HARKER, supra note 33, at R
53; INT’L CRISIS GROUP, supra note 21, at 13. R
39. Id.
40. Id.
41. Id. at 14-15. See SUDAN UPDATE, supra note 31, at 78; Martin, supra R
note 22, at 113. R
42. See Martin, supra note 22, at 111. The SPLM (Sudan People’s Libera- R
tion Movement) is the political arm of the SPLA. See J. MILLARD BURR &
ROBERT O. COLLINS, REQUIEM FOR THE SUDAN: WAR, DROUGHT, AND DISASTER
RELIEF ON THE NILE 13 (1995).
tory and resources are all important reasons for the continued
fighting.43
During the 1990s, the war evolved from its roots as a
largely north-south conflict “into a contest for power that in-
volves groups from across the nation.”44 In addition to the
forces of the government in Khartoum and the SPLA, it in-
volves a relatively large number of militias and inter-tribal fac-
tions, some of whom change sides as it is advantageous.45 As
Randolph Martin describes it,
Sudan’s low intensity conflict little resembles a war in
the traditional sense, with national armies fighting
over a contested border. The vast majority of Sudan’s
casualties are not combatants killed in battle but
southern civilians who fall victim to famine and dis-
ease . . . .46
The war involves a massive displacement of civilians, at-
tacks on civilians by a number of different groups, and human
slavery as a result of raids by Khartoum-supported murahaleen
militias on southern tribes.47 While both sides are guilty of
atrocities and attacks on civilian non-combatants, there is gen-
eral agreement that the primary responsibility for the destitu-
tion, death, and destruction in the south lies with the govern-
ment of Sudan.48
III. OIL AND THE ENTRY OF TALISMAN

Oil exploration and development in Sudan began in the
early 1960s and accelerated in 1974 when Chevron was
granted a concession in which Shell later took a 25% inter-
43. In a background paper, Talisman Energy attributed the conflict to

“[R]oots in tribalism, with elements of religion, Marxism, regional conflicts,
colonialism and uneven economic development.” TALISMAN ENERGY, SU-
DAN—THE GREATER NILE OIL PROJECT: BACKGROUND PAPER 10 (1998).
44. GAGNON ET AL., supra note 19, at 15. R
45. See, e.g., HUMAN RIGHTS WATCH, supra note 19, at 8, 116-19, 133-36, R
143-53, 178-86 (2003) (detailing the activities of various militias operating in
Sudan throughout the 1990s).
46. See Martin, supra note 22, at 117. R
47. GAGNON ET AL., supra note 19, at 15-16; see also Martin, supra note 22, R
at 117-18.
48. See, e.g., HUMAN RIGHTS WATCH, supra note 19, at 36, 50-59 (2003); R
Question of the Violation of Human Rights and Fundamental Freedoms in any Part
of the World, supra note 18.
est.49 Chevron and Shell eventually spent $1 billion in Sudan,

drilling 52 wells, including 34 “suspended wells” capable of
completion at a later date.50 By 1982, Chevron had made a
number of significant discoveries, and operations in Sudan ap-
peared to have considerable potential.51
However, in February 1984, a rebel group kidnapped and
killed three expatriate Chevron employees, and the company
suspended its operations and withdrew from Sudan.52 Chev-
ron attempted to resume its activities in 1988, but finally left
the country in 1990, relinquishing its concessions.53 State Pe-
troleum then entered into a production-sharing agreement
with the government of Sudan in 1993, acquiring a large part
of what had been Chevron’s concession.54 One year later,
Arakis Energy Corporation, a Canadian independent oil com-
pany, undertook a “reverse takeover” of State, becoming the
overall owner of the concession.55 At this point, the project
involved exploration, development, and production, and the
construction of a pipeline to transport oil to Port Sudan on
the Red Sea.
Arakis found it was not able to finance exploration, devel-
opment, and construction of the pipeline on its own, and in
December 1996 it entered into a consortium, the Greater Nile
Petroleum Operating Company (GNPOC), in which it held a
25% share and was the field operator.56 The China National
Petroleum Company held 40%, Petronas of Malaysia held
30%, and Sudapet, the Sudanese national firm, held 5%.57
Arakis’ concessions were in the conflict area, and the SPLA
49. Talisman Focuses Growth Strategy on E&P Outside Canadian Core, OIL &
GAS J., May 31, 1999, at 21.
50. TALISMAN ENERGY, supra note 43, at 4. R
51. HARKER, supra note 33, at 53; SUDAN UPDATE, supra note 31, at 16. R
52. GAGNON ET AL., supra note 19, at 18-19. R
53. SUDAN UPDATE, supra note 31, at 18-19. R
54. See Industry Briefs, OIL & GAS J., Sept. 20, 1993, at 32; Plans for First Oil
Exploration Revived in Two Sudanese Fields, OIL & GAS J., May 3, 1993, at 48.
55. See Arakis Energy Corp., Notice of Special Meeting of Securityholders
To Be Held October 7, 1998, Notice of Petition, and Management Informa-
tion Circular, Concerning an Arrangement Involving Arakis Energy Corpo-
ration and Talisman Energy Inc. 31 (Sept. 3, 1998); SUDAN UPDATE, supra
note 31, at 84; Stephen Chase, Talisman Bids for Arakis Energy (Aug. 18, R
1998), at http://www.vitrade.com/talisman/980818_globe_and_mail.htm.
56. SUDAN UPDATE, supra note 31, at 87-88. R
57. Id.
threatened to attack their operations.58 It was alleged that

Arakis hired the South African mercenary firm Executive Out-
comes to protect its fields.59
Arakis encountered significant political and business
problems in its struggle to develop its Sudanese operations.
During 1997, the Canadian government, concerned about the
situation in Sudan, asked Arakis to reconsider its participation
in the project.60 In November, President Clinton signed an
executive order freezing all Sudanese assets in the United
States and imposing a ban on all financial and trade relations
with Sudan.61 The sanctions prevented any U.S. citizen from
doing business in Sudan and ruled out American participation
in Sudanese oil.62
The major problem, however, was that Arakis was not able
to raise the $200 million or more necessary to fund its share of
the $1.4 billion project. The project was too large an under-
taking for Arakis, which was a relatively small Canadian inde-
pendent.63 The company was also hampered by American
sanctions, which prevented it from attempting to raise funds in
the U.S. bond market.64 Last, the company went to the mar-
kets in the midst of an eight quarter decline in oil prices, from
$23 per barrel to a low of $13 in the summer of 1998. As a
result of its difficulties, Arakis encouraged offers from other
companies.65
Talisman Energy originated as a spin-off of the Canadian
subsidiary of British Petroleum.66 In 1998 it was the second
largest Canadian independent oil company;67 that is, it had
only “upstream” operations (exploration, development, and
production) and did not refine petroleum or own retail out-
58. See id. at 86.

59. Id. at 87.
60. Id. at 89.
61. Exec. Order No. 13,067, 62 Fed. Reg. 59989 (Nov. 5, 1997).
62. Id.; GAGNON ET AL., supra note 19, at 19; SUDAN UPDATE, supra note R
31, at 89-90. R
63. See Chris Varcoe & Stephen Ewart, Talisman Buys Arakis, CALGARY
HERALD, Aug. 18, 1998, at D1.
64. Jeffrey Jones, Cash Crunch May Force Sale of Canada’s Arakis Energy, J.
COM., July 9, 1998, at 9A.
65. See Claudia Cattaneo, Talisman Has Resources, Experience to Tackle Su-
dan, FIN. POST, Aug. 26, 1998, at 25; Jones, supra note 64, at 9A. R
66. Canada: The Human Factor, 66 PETROLEUM ECONOMIST 48, 48 (1999).
67. Cattaneo, supra note 65, at 25. R
lets. On August 17, 1998, Talisman and Arakis agreed to a

friendly take-over: Talisman acquired the outstanding shares
of Arakis, and in doing so it acquired the latter’s 25% interest
in the GNPOC in Sudan.68 The deal, which was to be com-
pleted on October 8, provided a 10-1 exchange of Talisman
for Arakis shares and a loan of up to $54 million to Arakis to
fund State Petroleum’s share of the project’s capital require-
ments.69
Only a few days later, Talisman received a rude jolt about
the realities of doing business in Sudan when the United
States launched a missile attack on the al-Shifa plant in Khar-
toum, claming it was producing chemical weapons.70 Talis-
man CEO Buckee noted that “[c]ertainly, not one of the
things we had contemplated was a bombing of Khartoum by
the Americans.”71 Nevertheless, the takeover took place as
planned in October.72
Talisman acquired a 25% share of five oil fields under de-
velopment, with estimated production of 150,000 bbls/day
starting in late 1999 (37,500 to Talisman), and the 932 mile
pipeline to Port Sudan which had an initial capacity of 150,000
bbls/day.73 The pipeline and a marine oil terminal were ex-
pected to be completed by the third quarter of 1999.74
Talisman took over Arakis on what were regarded as
favorable terms for a number of reasons. First, Arakis was in
obvious difficulty, unable to either fund the project satisfacto-
rily or meet its obligations to its partners. Second, the dra-
matic fall in oil prices reduced the value of all oil companies’
stocks. (The slide reversed in the same quarter the takeover
was announced.) Third, American sanctions reduced poten-
tial competition, as U.S. firms could not participate in the Su-
danese oil industry. Last, the fact that Talisman participated
only in upstream operations—it did not own refineries or gas
68. Id.
69. TALISMAN ENERGY, supra note 43, at 2; see also SUDAN UPDATE, supra R
note 31, at 91-92; Cattaneo, supra note 65, at 25. R
70. SUDAN UPDATE, supra note 31, at 58, 91. R
71. Jeffrey Jones, Talisman Chief Gets Quick Lesson in Risks of Sudan Oil, J.
COM., Aug. 26, 1998, at 7A.
72. HUMAN RIGHTS WATCH, supra note 19, at 168. R
73. TALISMAN ENERGY, supra note 43, at 2-3; Cattaneo, supra note 65, at R
25; see also SUDAN UPDATE, supra note 31, at 41, 45, 55. R
74. TALISMAN ENERGY, supra note 43, at 8. R
stations—appeared to reduce the potential impact of con-

sumer boycotts or other protests related to the human rights
situation in Sudan.
Nonetheless, Talisman’s share price fell after the agree-
ment, slipping 11% in the first few weeks after the deal was
announced.75 Investors were concerned about dilution of the
stock resulting from the additional shares issued to Arakis in-
vestors, as well as the very real political risks in Sudan and the
controversy surrounding operations in that country because of
the brutality of government operations and American sanc-
tions.76
Some analysts, however, saw the project as a high risk-high
return operation with a great deal of upside potential that
made sense for Talisman. Robert Hinkley of Merrill Lynch,
for example, discounted the political risk and noted that Talis-
man’s development of Sudan is “going to generate a lot of
cash flow, and its going to be a very economic project, with a
lot of exploratory upside.”77 There was general agreement
that oil exploration was a risky business and that the Sudanese
fields and pipeline, which were scheduled to come on-stream
within a year, were a good investment for Talisman.78
Talisman’s CEO, Buckee, discounted the risk and argued
that the share price would recover as investors realized the
long-term potential in the project.79 He characterized the se-
curity situation as satisfactory, with the site protected by the
Sudanese government, and argued that media coverage had
overplayed the dangers in that country—that “[A] lot of the
stories have been made lurid and exaggerated.”80
IV. A TIDAL WAVE OF PROTEST

While Buckee may well have been correct to discount the
in-country risk to his operations, the very negative media cov-
erage of the war in Sudan was but a harbinger of things to
come. Within a few months of Talisman’s takeover of Arakis, a

76. Edward Alden, Talisman in $196m Purchase of Arakis, FIN. TIMES, Aug.
18, 1998, at 21; Cattaneo, supra note 65, at 25. R
78. Id.
79. See Alden, supra note 76, at 21; Chase, supra note 55. R
80. Alden, supra note 76, at 21; see also Chase, supra note 55. R
coalition of civil society advocacy groups launched a massive

campaign aimed at Canadian and American political authori-
ties, Talisman’s shareholders, and institutional investors hold-
ing or contemplating purchase of the company’s stock.
NGOs such as Amnesty International, the American Anti-
Slavery Group, the Canadian Inter-Church Coalition, and
many others used the internet very effectively to publicize both
the brutal human rights violations occurring as a result of the
war in Sudan and what they felt was Talisman’s complicity in
the process.81 Using both electronic and more conventional
methods, they lobbied the executives and legislatures in both
the U.S. and Canada to take action against both Sudan in gen-
eral and Talisman in particular, attempted to convince the
company’s shareholders to force the company to withdraw
from the GNPOC, and perhaps most effectively, waged what
has been called one of the largest divestment campaigns since
the efforts against the apartheid regime in South Africa.82
The divestment campaign, which was spearheaded by the
American Anti-Slavery Group, was aimed directly at the major
institutional investors holding Talisman stock.83 That organi-
zation, and many others, mobilized activists who brought pres-
sure on investors directly by linking them publicly to the bru-
tality and slave trade in Sudan through their ownership of Tal-
isman stock. They also lobbied legislators in both the U.S. and
Canada to bring pressure on investors through their respective
regulatory authorities.
At least one financial journalist was sympathetic to these
activists’ claims. SmartMoney.com ran a story asking if the mu-
81. See, e.g., AM. ANTI-SLAVERY GROUP, supra note 16; AMNESTY INT’L, supra R
note 16; Press Release, Inter-Church Coalition on Africa, Sudan Urgent Ac- R
tion Updates and Bulletin 1999 #3: Sudan, Oil, Crimes Against Humanity
. . . and Canada (Sept. 20, 1999), at http://www.web.net/~iccaf/
humanrights/sudaninfo/urgact3sudan.htm.
82. Michael Scherer, Gas War (June 21, 2001), at http://www.mother
jones.com/news/feature/2001/06/sudan.html.
83. See, e.g., AM. ANTI-SLAVERY GROUP, supra note 16; Press Release, Am. R
Anti-Slavery Group, American Anti-Slavery Group Urges Fidelity and Van-
guard to Dump Talisman Stock (Jul. 23, 1999) available at http://www.sudan
update.org/REPORTS/Oil/19sum.html; Associated Press, Group Calls for
Stock Boycott to Prevent Slavery (July 28, 1999), available at http://www.anti-
slavery.org/pages/updates/ap-oil.html.
tual funds owning Talisman were supporting genocide.84 The

article detailed the charges against the company, noted that
most of the mutual funds contacted either would not talk to
the reporter or argued that divestment would not be produc-
tive, and then provided a list of the ten funds holding the larg-
est amounts of Talisman stock, suggesting that rather than wait
for the funds to move readers might want to adjust their own
portfolios.85
The campaign was successful. During 1999 and 2000, at
least six U.S. pension funds sold millions of Talisman shares as
a result of activist pressure.86 TIAA-CREF, the Texas Teachers
Retirement Fund, CALPERS (California), the New Jersey Em-
ployees Retirement Fund, and the New York City Pension
Fund were among those divesting.87 Advocacy groups also
mounted coordinated campaigns against mutual funds hold-
ing Talisman stock. For example, a “Fidelity Awareness Week”
was declared in March, 2001, during which a large number of
protest letters were sent to Fidelity Investments asking them to
divest.88 Similar efforts were directed against Vanguard and
other mutual funds.89 It is difficult to gauge their success:
While Fidelity did sell a large block of its Talisman stock, it
appears to have bought most of it back.90 It is reasonable to
assume that the activists’ campaigns had some discernable ef-
fect on purchases and sales of Talisman stock.91
As noted above, legislatures in both Canada and the U.S.
were also targets of the NGOs’ campaign. Their efforts were
successful in the United States as the House of Representatives
84. Lewis Braham, Are These Funds Bankrolling Genocide?, at http://

smartmoney.com/fundwatch/index.cfm?story=19990722 (July 22, 1999).
85. Id.
86. See, e.g., Charles Gillis, U.S. Pension Fund Dumps Its Stake in Talisman,
FIN. POST, Dec. 9, 1999, available at http://www.vitrade.com/talisman/
991209_right_time_to_sell.htm; David B. Ottaway, Chinese Fought on NYSE
Listing: Groups Cite Oil Firm’s Role in Sudan, WASH. POST, Jan. 27, 2000, at E1.
87. Canada: The Human Factor, supra note 66, at 48; Gillis, supra note 86; R
Ottaway, supra note 86, at E1. R
88. Elizabeth Neuffer, Critics Decry Oil Investors’ Link to Sudan War, BOS-
TON GLOBE, Mar. 26, 2001, at A1.
89. Associated Press, Group Calls for Stock Boycott to Prevent Slavery, supra
note 83. R
90. Scherer, supra note 82. R
91. Id.
and the Senate passed the Sudan Peace Act in 2002.92 The
original House version would have prevented firms investing
in Sudanese oil from raising money in U.S. capital markets or
trading on American exchanges absent public disclosure
about the nature and extent of its commercial activity in Su-
dan, the relationship of the commercial activity to any viola-
tions of religious freedom and other human rights in Sudan,
and the contribution that the proceeds raised in the capital
markets in the U.S. would make to the entity’s commercial ac-
tivity in Sudan. That provision was dropped in the final ver-
sion of the legislation.93 I will return to the question of Ameri-
can sanctions and U.S.-Canadian interaction below.
While my purpose here is to use the Talisman case to in-
form a discussion of the dramatic changes in the politics of the
oil industry rather than to undertake a detailed analysis of the
situation in Sudan, it is important to note that a wide spectrum
of observers agree that oil discoveries and production by the
GNPOC, combined with the opening of the pipeline, have had
a direct effect on the war and have exacerbated human rights
violations. The Harker Report, prepared at the request of the
Canadian Minister of Foreign Affairs, concluded that oil has
become a key factor in the war: “[T]he evidence we gathered,
including the testimony of those directly involved directs us to
conclude that oil is exacerbating the conflict in Sudan.”94
Similarly, Martin argues that “[N]othing has contributed as
much to the conflict’s sustainability as the opening of Sudan’s
oil pipeline.”95
A Center for Strategic and International Studies report on
U.S. efforts to end the war concluded that “[o]il is fundamen-
tally changing Sudan’s war.”96 It argued that oil shifted the
balance of military power to the government in Khartoum and
prompted the regime to focus its military efforts on oil opera-
tions, resulting in the “forced mass displacement of civil-
ians.”97
92. Sudan Peace Act, Pub. L. No. 107-245, 116 Stat. 1504 (2002).
93. See id.; H.R. 2052, 107th Cong. (1st Sess. 2001), Sec. 8.
94. HARKER, supra note 33, at 15. R
96. FRANCIS M. DENG & J. STEPHEN MORRISON, CENTER FOR STRATEGIC AND
INT’L STUDIES, U.S. POLICY TO END SUDAN’S WAR 4 (2001), available at http://
csis.org/africa/sudan.pdf.
97. Id.
Petroleum operations affect the war and the civilians

caught in the war zone in a number of ways. First, the motiva-
tions of the contending parties have been transformed by the
discovery of oil. To a significant extent, the war is no longer
simply about control of territory, but rather about control of a
valuable resource.98 Second, and perhaps more important, oil
has provided a steady stream of significant revenues to a coun-
try that was among the poorest in Africa, an “economic basket
case.”99
The start of significant oil production in late 1999 trans-
formed Sudan from a poor oil-importing country to a signifi-
cant exporter, and both revenues and economic growth have
been up sharply since that time. Oil revenues increased by al-
most 900% in three years, from $61 million in 1999 to almost
$600 million in 2001.100 The dramatic increase in resources
available to the government in Khartoum resulted in a very
significant increase in military expenditure101 and the
purchase of modern weapons, including helicopter gunships.
Sudan can now manufacture its own light arms and munitions
and is planning to build its own tanks and artillery.102
Third, given the revenues they produce and the impact of
those revenues on the balance of power in the country, oil op-
erations including the pipeline are a natural target of rebel
groups. The SPLA’s operations against Talisman’s facilities
have resulted in increased government efforts to protect oil
production, which includes attacks upon and displacement of
civilian groups. As the Economist notes, prior to the end of
1999 much of the war effort involved the government in Khar-
toum arming Arab militia groups and encouraging them to
raid the tribes in the south for cattle and slaves.103 The gov-
ernment now takes direct action to protect oil operations, in-
cluding displacement of civilians: “Now the government wants
the southerners out.”104 Last, there is agreement, including
98. INT’L CRISIS GROUP, supra note 21, at 99-106. R

99. Id. at 101.
100. GAGNON & RYLE, supra note 31, at 35; see also ENERGY INFO. ADMIN., R
supra note 5. R
101. The cost of war per day in 2001 was more than $1 million. INT’L
CRISIS GROUP, supra note 21, at 102. R
102. See Martin, supra note 22, at 118-19. R
103. War, Famine and Oil in Sudan, ECONOMIST, Apr. 15, 2001, at 41.
104. Id.
that of the company itself, that Talisman’s facilities have been

used as a base for military operations against rebel groups and
civilians in the south.105
The last issue aside, there is disagreement about whether
Talisman was directly complicit in human rights violations;
there is, however, widespread agreement that its involvement
was, at least in part, responsible for an exacerbation of the
conflict and an increase in the violations of the rights of civil-
ians in the area, including their displacement.106 Arguably,
Talisman’s direct complicity stems from its decision to request
protection from a regime with the Khartoum government’s
history.107 While Talisman Energy was only one of four part-
ners in the GNPOC, it is clear that its participation was critical
to the project’s success. It provided funding and, more impor-
tantly, technical know-how and a great deal of expertise and
experience in exploration and development.108
Needless to say, the company disagrees with this assess-
ment. Aside from the issue of whether the intensity and na-
ture of the conflict has been exaggerated by the press, it ar-
gues that in the longer run constructive engagement is the
best course of action in Sudan.109 In the company’s 2001 So-
cial Responsibility Report, CEO Buckee noted that some peo-
ple argue that Talisman should leave Sudan. His response was
that “many people we speak to believe that the appropriate
moral response is to stay and use our corporate resources in a
broad and responsible manner to encourage peace, provide
economic opportunities and support the communities in
which we operate. We share this view . . . .”110
105. GAGNON & RYLE, supra note 31, at 42; HARKER, supra note 33, at 16. R
In its 2000 Social Responsibility report, Talisman noted that despite their
stated position and advocacy efforts there were at least four instances of non-
defensive use of their Heglig airstrip in 2000. TALISMAN ENERGY, CORPORATE
SOCIAL RESPONSIBILITY 2000 16, available at http://www.talisman-energy.
com/pdfs/csr2000_report.pdf (last visited Apr. 15, 2004).
106. See, e.g., GAGNON ET AL., supra note 19, at 3 passim; HARKER, supra note R
33, at 12-16, 26, 60-66; HUMAN RIGHTS WATCH, supra note 19, at 385-437. R
107. See HUMAN RIGHTS WATCH, supra note 19, at 388-397. R
108. See GAGNON & RYLE, supra note 31, at 6, 27, 40. R
109. TALISMAN ENERGY INC., CORPORATE SOCIAL RESPONSIBILITY 2001 5,
available at http://www.talisman-energy.com/pdfs/csr2001_report.pdf (last
visited Apr. 15, 2004).
110. Id.
A second prong of Talisman’s response was to add the In-

ternational Code of Ethics for Canadian Business to its busi-
ness code and engage PriceWaterhouse Coopers to help verify
compliance.111 Last, the company engaged in extensive com-
munity development efforts, including building hospitals, clin-
ics, schools, and wells in their area of operations.112
All of that said, it is clear that the activities of the advocacy
groups had a significant effect on Talisman’s share price and
enterprise value. While it is impossible to disentangle the im-
pact of the risk within Sudan, American sanctions, shareholder
activism, and the divestment campaign, it is reasonable to as-
sume that the impact of the latter has been significant.
In Table 1,113 Talisman Energy’s enterprise valuation is
compared with that of four other comparable Canadian in-
dependents: Alberta Energy Corporation (AEC), Canadian
Natural Resources, Nexen, and PanCanadian Petroleum. Two
metrics are shown, enterprise value/operational cash flow and
enterprise value/earnings before interest, taxes, depreciation,
amortization, and exploration (ev/ebitdax). The comparisons
of the five-company averages are of interest. Talisman out-
performs its competition on both metrics in both 1997 and
1998. (The agreement with Arakis was announced in August
1998.114) During 1999 and 2000, the years when the protests
and divestment campaigns were in full swing, Talisman un-
derperformed compared to its competition. On the other
hand, AEC, one of its primary competitors which had avoided
involvement in Sudan, outperformed competitive firms on
both metrics in 1999 and 2000. Again, while it is impossible to
link the decline in valuation to the divestment campaign with
any degree of certainty, it is clear that Talisman’s stock price
fell despite the success of its oil operations in Sudan. It is rea-
sonable to assume that the decline in valuation of the com-
pany reflected the negative publicity and pressure on investors
to sell resulting from the efforts of the advocacy groups.
111. Jacqueline Sheppard & Reg Manhas, Sudan Experience Offers Corporate-
Responsibility Lessons, Opportunities, OIL & GAS J., Nov. 13, 2000, at 70.
112. Id. at 72-73.
113. Located at the end of the Essay. Compiled by the author, with per-
mission, from data supplied by Evaluate Energy, a research company provid-
ing proprietary data to the oil industry.
V. AMERICAN AND CANADIAN POLITICS

In a message to a summit on Sudan on November 9, 1999,
U.S. Secretary of State Madeleine Albright articulated the Clin-
ton Administration’s stance toward the regime in that country:
“[O]ur policy is to isolate the Government of Sudan; to
counter the threat it poses to the United States, its neighbors
and its own people; and to press for fundamental change in its
policies.”115 She noted that the National Islamic Front had
seized power from a democratically elected government, ac-
tively supported terrorist organizations, compiled an appalling
human rights record, and prolonged a vicious and inhumane
war.116
The United Nations first condemned Sudan for gross vio-
lations of human rights in 1992, and in 1996 the Security
Council imposed diplomatic sanctions on the government in
Khartoum for its involvement in terrorism.117 U.S. actions
against Sudan began in 1993, when that country was added to
the list of states sponsoring terrorism.118 In April 1996, Presi-
dent Clinton signed the Anti-Terrorism Act, which barred
Americans from engaging in financial transactions with gov-
ernments on the list, including Sudan.119
More comprehensive sanctions were enacted in Novem-
ber 1997, when President Clinton’s executive order (under
the International Emergency Powers Act) froze all Sudanese
assets in the United States and imposed a ban on all bank
loans, investments, and trade with that country.120 Clinton
cited Sudan’s sponsorship of terror, its efforts to destabilize
neighboring countries, and its human rights violations in an-
nouncing the sanctions.121 As noted above, the U.S. sanctions
115. Secretary of State Madeleine K. Albright, Message from Secretary Al-

bright to the Sudan Summit (Nov. 9, 1999), available at http://secre-
tary.state.gov/www/statements/1999/991109.html.
116. Id.
117. See S.C. Res. 1054, U.N. SCOR, 51st Sess., 3660th mtg. at 2, U.N. Doc.
S/RES/1054 (1996); SUDAN UPDATE, supra note 31, at 79-80, 86. R
118. TED DAGNE, CONG. RES. SERV., ORDER CODE IB98043, ISSUE BRIEF FOR
CONGRESS, SUDAN: HUMANITARIAN CRISIS, PEACE TALKS, TERRORISM, AND U.S.
POLICY at CRS-9 (2003).
119. SUDAN UPDATE, supra note 31, at 86. R
120. DAGNE, supra note 118, at CRS-13; SUDAN UPDATE, supra note 31, at R
89-90.
121. DAGNE, supra note 118, at CRS-13. R
in place in 1997 and 1998 both made it difficult, if not impossi-

ble, for Arakis to raise funds in U.S. markets and limited Talis-
man’s competition in bidding for that company as U.S. oil
firms were barred from operations in Sudan.
Secretary Albright had very strong feelings about the re-
gime in Sudan; when she was the American ambassador to the
United Nations she called the country a “viper’s nest of terror-
ism.”122 During a trip to Africa in October 1999, she met with
Sudanese rebels and then, in Nairobi, announced that she
planned to talk to the Canadian government about Talisman’s
involvement in Sudan.123 She did so shortly thereafter in an
apparently strong letter to the Canadian Foreign Affairs Minis-
ter, Lloyd Axworthy, urging him to force Talisman to withdraw
from Sudan.124
As the Financial Times noted, “Canadians are not used to
such bad publicity.”125 While Mr. Axworthy’s initial response
was apparently some degree of anger over U.S. interference in
Canadian affairs, within days he had expressed strong reserva-
tions about Talisman’s involvement in Sudan, called CEO Jim
Buckee in for consultations, and launched a very high-profile
investigation of the role of oil operations in the civil war.126
He quickly sent a fact-finding team to Sudan headed by John
Harker, a former director of affairs for the Canadian Labor
Congress, to investigate Talisman’s involvement in the con-
flict.127 Axworthy threatened sanctions if the investigation
122. Id.
123. Madelaine Drohan, Sudan Play Bad Timing for Talisman, GLOBE &
MAIL, Oct. 27, 1999, at B2.
124. Steven Frank, Crude Pressures: A Canadian Oil Company Operating in
Sudan Gets Targeted by Rebels, the U.S. State Department and Its Own Foreign Af-
fairs Ministry, TIME CANADA, Nov. 22, 1999, at 36 (LEXIS, Magazine Stories,
Combined Library); cf. HUMAN RIGHTS WATCH, supra note 19, at 414 (discuss- R
ing U.S. criticism of Canada for not sanctioning Talisman); Gary Park, Ca-
nada Appoints Envoy to Investigate Talisman’s E&P Project in Sudan, PLATT’S
OILGRAM NEWS, Oct. 27, 1999, at 1 (LEXIS, Newsletter Database) (noting
that Albright requested Canada match U.S. trade and investment sanctions
against Sudan).
125. Graham Bowley, Talisman May Not Find Good Fortune from Sudan Oil,
FIN. TIMES, Nov. 19, 1999, at 14.
126. Id.; Peter Foster, Editorial, Talisman in Ethical No Man’s Land, FIN.
POST, Nov. 12, 1999, at C1; Drohan, supra note 123, at B2. R
127. Sheldon Alberts, Ottawa Not Ready to Put Sanctions On Talisman:
Axworthy, NAT’L POST (Toronto), Nov. 23, 1999, available at www.vitrade.
com/talisman/991123_ottawa_not_ready_to_put_sanction.htm; Frank, supra
found that oil money was either perpetuating the conflict or

contributing to human rights abuses.128
The Harker Report concluded that while the war in Su-
dan was not fundamentally about oil, it had become a key fac-
tor—that “oil is exacerbating the conflict in Sudan.”129 It ar-
gued that it “is difficult to imagine a cease-fire while oil extrac-
tion continues, and almost impossible to do so if revenues
keep flowing to GNPOC partners and the GOS [government
of Sudan] as currently arranged.”130 Last, while noting that
there are limits to the ability of a government to compel ethi-
cal behavior on the part of a corporation, it argued that Talis-
man’s owners had both the opportunity and the responsibility
to do so.131
The Report stopped short of explicitly recommending
that Talisman be sanctioned, and the Canadian government
eventually decided not to take action.132 However, the open
nature of the Albright-Axworthy interchange and the very pub-
lic scolding of Talisman by Mr. Axworthy certainly increased
awareness of the issue among the Canadian public at large and
provided at least moral support to the advocacy groups oppos-
ing Talisman’s operations in Sudan. It may also have sup-
ported, at least indirectly, some of the shareholder actions re-
garding operations in Sudan.
Toward the end of its term, the Clinton Administration
attempted to move away from its policy of strict isolation of
Sudan and attempted to engage the government in Khartoum
in an effort to find a negotiated end to the civil war.133 Rela-
note 124, at 36; Andrew Nikiforuk, Oil Patch Pariah, CANADIAN BUS., Dec. 10, R
1999, at 69.
128. See Alberts, supra note 127; Canada: The Human Factor, supra note 66, R
at 48; Foster, supra note 126, at C1; Frank, supra note 124, at 36; Nikiforuk, R
supra note 127, at 69. R
129. HARKER, supra note 33, at 15. R
130. Id. at 17.
131. Id. at 18.
132. Canada Opts Not to Sanction Talisman Operations in Sudan, OIL & GAS J.,
Feb. 21, 2000, at 22. At least one journalist argued that Axworthy wanted to
sanction Talisman but was prevented from doing so by business pressure on
his ministry, which dealt with both foreign affairs and trade. Aileen McCabe,
Canadian Business Interests Trump Human Rights, OTTAWA CITIZEN, Oct. 26,
2000, at A5.
tions between the United States and Sudan became much

more complex under President Bush, for a number of reasons.
Sudan became more salient in the United States because
of pressure from Christian groups who formed some of the
administration’s core support.134 These groups tend to see
the conflict in straightforward terms—as the oppression of
Christians in the south by the Islamic government in the
North—and their actions both raised the profile of the Suda-
nese civil war in the United States and increased pressure on
the administration and Congress to further sanction Sudan.135
Ultimately, both the Senate and the House passed the Sudan
Peace Act in 2002, which threatens further sanctions against
the Sudanese government if it does not negotiate in good faith
to end the conflict.136 A very controversial provision that
would have prevented foreign oil companies with operations
in Sudan from accessing U.S. capital markets was dropped as a
result of administration pressure.137
The situation was further complicated by the September
11, 2001, attacks on the World Trade Center and the advent of
the War on Terrorism. Although Sudan was under U.N. and
U.S. sanctions because of its support for terrorist organizations
(indeed, it provided a haven for Osama bin Laden for a pe-
riod),138 it immediately condemned the 9/11 attacks and of-
fered to cooperate in the fight against terrorism, provide un-
restricted access to its records, and even hand over some
wanted terrorists to American authorities.139 As a result, U.S.-
Sudan relations improved considerably, and the U.S. did not
object to the lifting of United Nations sanctions later that
year.140
Coincidentally, the Administration began an effort to
bring a negotiated end to the conflict in Sudan, appointing
134. See Mark Turner, U.S. Evangelists Focus on Sudan to Declare a Holy War of
Words, FIN. TIMES (U.S. ed.), Apr. 11, 2001, at 18.
135. See id.
136. Sudan Peace Act, supra note 92, at 1507-08. R
137. See DAGNE, supra note 118, at CRS-10; ENERGY INFO. ADMIN., supra R
note 5; Martin, supra note 22, at 124. R
138. See Ruth West, The Price of a Barrel of Oil? A Few Lives: In Sudan, West-
ern Companies Are Bankrolling a Vicious Civil War, NEW STATESMAN, Jan. 14,
2002, at 36.
139. DAGNE, supra note 118, at CRS-4 to -5. R
140. West, supra note 138, at 36; see ENERGY INFO. ADMIN., supra note 5. R
former Senator John Danforth as an “envoy for peace” in early

September 2001.141 (It is of interest that President Bush spe-
cifically mentioned that Danforth was “an ordained minister”
in his announcement.142) While there were considerable set-
backs during 2002, including helicopter gunship attacks on a
U.N. food distribution center,143 rebel military successes in the
south,144 and the Khartoum government’s negative reaction to
passage of the Sudan Peace Act,145 the Danforth initiative con-
cluded that it was clear that the war was not winnable by either
side and that “this is the time for a major push for a compro-
mise settlement.”146 Danforth negotiated a number of agree-
ments between the government and the SPLA/M in the
months following his appointment in September 2001.147
The Machhakos protocol, negotiated during 2002, pro-
vided for the continuation of Islamic law in the north for an
additional six years by the SPLA/M in exchange for six years
of southern autonomy ending with a referendum on the
south’s independence.148 By early 2004, the conflict in south-
ern Sudan had eased to a much lower level of intensity, and a
final accord between the warring parties appeared possible.149
VI. TALISMAN IN COURT

In November 2001, an attorney who is a board member of
the American Anti-Slavery Group filed a $1 billion class-action
lawsuit against Talisman, on behalf of the Presbyterian Church
141. See Press Release, Office of the Press Secretary, Danforth to Lead
Search for Peace as Special Envoy (Sept. 6, 2001), at http://www.
whitehouse.gov/news/releases/2001/09/20010906-9; Alan Sipress, Danforth
Tapped for Sudan, WASH. POST, Sept. 7, 2001, at A18.
142. See Office of the Press Secretary, supra note 141. R
143. John C. Danforth, Special Envoy for Peace, Report to the President of the
United States on the Outlook for Peace in Sudan, at 8 (Apr. 26, 2002), available at
http://www.state.gov/p/af/rls/rpt/10150.htm.
144. See HUMAN RIGHTS WATCH, supra note 19, at 292-95, 506. R
145. Id. at 506-07.
146. Danforth, supra note 143, at 19. R
147. Press Release, Human Rights Watch, Sudan: Danforth Peace Intia-
tive Process (May 15, 2002), at http://www.hrw.org/press/2002/05/su-
dan0515.htm.
148. William Wallis, Sudan Peace Talks Reach Critical Point, FIN. TIMES, Aug.
8, 2003, at 9.
149. Id.; Mark Lacey, Rebels, Many in Teens, Disarm in Sudan’s South, N.Y.
TIMES, Jan. 27, 2004, at A10.
of Sudan and a number of individual plaintiffs, in the U.S. Dis-

trict Court for the Southern District of New York.150 The suit,
which was amended in February 2002 to add the Islamic Gov-
ernment of Sudan as a co-defendant,151 charges Talisman with
violating the human rights of Christian and other non-Muslim
minorities in Sudan by conducting a campaign of ethnic
cleansing to clear the land for oil exploration.152
The case was brought under the Alien Tort Claims Act,153
which allows foreigners to sue in U.S. courts for acts commit-
ted in other countries that violate “the law of nations.”154 In
cases to date, courts have held that gross violations of human
rights such as summary execution, torture, cruel, inhuman, or
degrading treatment, genocide, war crimes, and forced labor,
among others, violate the “law of nations.”155 The Talisman
case is one of a number of recent suits brought against mul-
tinational firms for alleged violations of human rights abroad.
The increased use of the Alien Tort Claims Act in American
courts is a reflection of the difficulty of sanctioning multina-
tional firms for human rights violations. In this case, as is true
generally, the home country (Canada) was unwilling to sanc-
tion Talisman for acts committed outside of its jurisdiction,
the host country (Sudan) had little interest in doing so, and
the reach of international organizations and/or international
law does not encompass the acts of a private firm.156
Although Talisman sought to have the case dismissed on
several grounds, including that it was improperly brought in
the United States, in March 2003 a federal district judge ruled
that the case was properly brought in the Manhattan federal
150. See Presbyterian Church of Sudan, 244 F. Supp. 2d 289.

151. See Press Release, iAbolish, Amended Complaint Filed in Talisman
Suit (Feb. 25, 2002), at http://www.iabolish.com/news/global/2002/talis-
man02-25-02.htm.
152. Presbyterian Church of Sudan, 244 F. Supp. 2d at 296, 299; Press Re-
lease, iAbolish, supra note 151. R
153. 28 U.S.C. § 1350 (2000); Presbyterian Church of Sudan, 244 F. Supp. 2d
at 303; see also Filartiga v. Pena-Irala, 630 F. 2d 876 (2d Cir. 1980).
154. 28 U.S.C. § 1350 (2000).
155. Developments in the Law—International Criminal Law: Corporate Liability
for Violations of International Human Rights Law, 114 HARV. L. REV. 2025, 2037
(2001).
156. See id. at 2025.
court.157 The judge rejected arguments that the case might

hinder the foreign relations of the United States, noting that
the American government had declared Sudan a sponsor of
state terrorism and that President Bush had signed the Sudan
Peace Act.158
VII. OIL AND POLITICS

I have argued elsewhere that the modern interstate politi-
cal system is in the throes of change. It is evolving from a sys-
tem rooted in territorial sovereignty—characterized by dis-
crete and meaningful borders, a clear separation between do-
mestic and international affairs, a marked distinction between
the public and private spheres, and states as the only meaning-
ful actors (and only subjects of international law)—to one in
which sovereignty and geographic jurisdiction are compro-
mised, borders are less meaningful, the sharp separation be-
tween domestic and foreign is diffuse and blurred, multiple
actors are politically significant, and the public-private distinc-
tion is confused.159
All of these changes directly affect the political environ-
ment of the oil industry and the political risks faced by oil
firms. More generally, we are in the midst of a period of major
systemic change and transformation—characterized by very
high levels of uncertainty and turmoil—which in itself affects
the magnitude and nature of risks faced by multinational
firms.
Talisman’s CEO, Jim Buckee, has a reputation as a risk-
taker. As discussed earlier, upstream oil operations are inher-
ently risky in terms of geology, politics, and security. The
irony of this case is that Talisman handled what would conven-
157. See Presbyterian Church of Sudan, 244 F. Supp. 2d at 335-41 (seeking

dismissal on the basis of “lack of subject matter jurisdiction, lack of personal
jurisdiction, lack of plaintiffs’ standing, forum non conveniens, international
comity, act of state doctrine, political question doctrine, failure to join neces-
sary and indispensable parties, and because equity does not require a useless
act”).
158. Larry Neumeister, Talisman Can Be Held Liable for Genocide: Judge, GA-
ZETTE (Montreal), Mar. 20, 2003, at A14.
159. See generally Stephen J. Kobrin, The Architecture of Globalization: State
Sovereignty in a Networked Global Economy, in GOVERNMENTS, GLOBALIZATION
AND INTERNATIONAL BUSINESS 146, 148 passim (John H. Dunning ed., 1997);
Kobrin, Back to the Future, supra note 14, at 362 passim. R
tionally be assumed to be the political risks of its operations

well. It operated very successfully in a politically unstable and
war-torn environment, increasing output and delivering crude
oil through the pipeline in the midst of a violent civil war.
While the “political risks” that drove it out of Sudan are a con-
sequence of its operations in that country, they did not arise
within its borders.
U.N. Secretary-General Kofi Annan, in the context of Ko-
sovo, argued that strictly traditional notions of sovereignty
could no longer do justice to people’s aspirations to funda-
mental freedom.160 As noted earlier, he said that nothing in
the U.N. Charter “precludes a recognition that there are rights
beyond borders.”161 It is of interest that none of the actors in
the Talisman case argued that Sudan’s civil war was a domestic
affair or that events within that country’s borders should not
be subject to outside intervention. While Sudan’s support for
terrorism certainly played a role in the U.S. sanctions, so did
the regime’s gross violations of human rights. Sovereignty is
no longer an acceptable defense. Human rights have become
a significant international issue, and human rights violations
within countries are now deemed to be the responsibility of
the international community.
The advocacy groups that played a major role in this case
are political actors who command significant political power in
the international system. In a traditional state-centric interna-
tional system, all of Talisman’s significant political interactions
would have been limited to the host and home governments—
Sudan and Canada. While I will return to the issue of inter-
state politics shortly, in this case the company was forced to
deal with a third country—the United States—as well as the
NGOs.
Talisman was a means rather than an end for the NGOs.
Their objective was to effect change in Sudan—to end the
slave trade and protect the human rights of the people in the
south. It is of interest here to note how much of the responsi-
bility for human rights—for monitoring, advocating, publiciz-
ing violations, and even enforcement—has shifted to civil soci-
ety groups. They, rather than governments, are the significant
160. Michael Littlejohns & David Buchan, Annan Backs ‘Rights Beyond Bor-
ders,’ FIN. TIMES, Sept. 21, 1999, at 5.
161. Id.
political actors in this case. While there is no doubt that many

of the groups involved were concerned about the morality of
Talisman’s entry into Sudan, their primary objective was to
bring about change in that country’s policies. While American
sanctions and Canadian pressure certainly played a role, at the
end of the day it was the civil society organizations that forced
Talisman’s withdrawal from Sudan.
Talisman was an attractive target both because of its pre-
sumed leverage over the National Islamic Front and because of
its vulnerability in North America. While the NGOs had little
direct leverage with the Sudanese government, they were able
to exert considerable pressure on the company through share-
holders and investors. It is also clear that the ability of advo-
cacy groups to coordinate their activities, inform and mobilize
public opinion, and bring pressure to bear on target groups
has been exponentially increased by the emergence of the in-
ternet.
Multinational firms have been caught in interstate politics
for a long time, and there is nothing startlingly new about Tal-
isman’s problems in that regard. However, the situation in
which Talisman found itself was unusually complex and re-
flects the internationalization and increased salience of
human rights. While Talisman is a Canadian company, events
in the United States were crucial to the outcome of this case.
Arakis’ inability to tap into American capital markets because
of the sanctions in place certainly played a role in its demise.
Similarly, Talisman’s entry was facilitated by the absence of
competition from U.S. oil firms.
The complex domestic politics in the United States vis-à-
vis Sudan certainly affected the company. The increased
power of Christian groups after the Bush Administration took
power and the response of the Sudanese government to the 9/
11 attacks led in opposite directions and created a climate of
uncertainty in American-Sudanese relations. The very high
degree of economic integration between the U.S. and Canada
was a major factor in Axworthy’s rapid decision to respond to
Albright’s concerns. It is clear that it was the expressed con-
cern of the U.S. government that led ultimately to the Cana-
dian government’s decision to mount an investigation of Talis-
man’s operations in Sudan and bring pressure to bear on the
company.
One of the characteristics of a system in transition is the

presence of asymmetries or incongruities. In the current state
of affairs, there is a geographic incongruity between an econ-
omy which is global and political authority which is still prima-
rily national and local.162 One result is incomplete govern-
ance: international phenomena and international actors sub-
ject to fragmented, geographically-rooted political and
regulatory authority.163
Thus, while human rights violations have become an in-
ternational issue, and the monitoring and enforcement of
human rights standards a responsibility of the “international
community,” in practice effective governance is a problem.
Sanctions which are imposed unilaterally by one or more na-
tional authorities are unlikely to be effective, as compliance
will always be an issue.164 Leaving aside the question of Talis-
man’s culpability for the moment, the company was unlikely to
be sanctioned for its role—direct or indirect—in human rights
violations by either host or home country. Sudan did not have
any interest whatsoever in doing so, and while Talisman is a
corporate citizen of Canada, the actions in question occurred
far beyond that country’s borders. Even if there were agree-
ment on a standard or code of behavior for multinational
firms relative to human rights, it is far from clear who would
enforce it.
At this point many of the actions of multinational firms
are beyond the reach of either international institutions or
public international law. The United Nations Global Compact
attempts to bring together companies, U.N. agencies, and civil
society groups to support a set of principles dealing with
human rights, labor, and the environment, but participation is
voluntary and the Compact does not have enforcement capa-
bilities.165 Even though human rights may be an international
problem, there are no international institutions with the
power to monitor and enforce corporate violations.
162. See Kobrin, Back to the Future, supra note 14, at 361 passim. R
163. See id. at 369-75.
164. See id. at 382.
165. United Nations Global Compact, What is the Global Compact, at http://
www.unglobalcompact.org/content/aboutthegc/overview_about.htm (last
visited Feb. 9, 2004).
In this case, the incomplete and fragmented governance

structures increased both the uncertainty of the political envi-
ronment in which Talisman operated and the political risks
faced by that company. Attempts at “international govern-
ance” took the form of the campaign by civil society groups
and the court case brought in New York under the Alien Tort
Claims Act. While the NGO campaign was successful in terms
of its objective of forcing Talisman to withdraw from Sudan, it
and the court case are poor substitutes for effective and legiti-
mate international governance. The international oil indus-
try, and multinational firms in general, are left without any
clear set of standards or any agreed upon monitoring and en-
forcement mechanism.
Regardless of what one thinks of Talisman’s entry into
and operations in Sudan, it is hard to disagree with Buckee’s
observation that “[c]orporations . . . are increasingly being
asked to step into roles that were once the domain of govern-
ments or international bodies such as the United Nations. De-
fining what is properly expected of a company needs to be
more clearly articulated and more rigorously debated.”166
Governance is incomplete, and the line separating private ac-
tors from public responsibilities has become blurred and dif-
fuse.
During the late 1990s, Sudan was a very difficult and risky
operating environment. However, the problems that Talisman
faced in Sudan were well within the bounds of the industry’s,
and that company’s, experience and expectations. They were
well within the parameters established by an international po-
litical system rooted in mutually exclusive territorial jurisdic-
tion, a system—from a multinational company’s point of
view—comprised of sovereign home and host countries with
discrete and meaningful borders.
The political problems that drove Talisman from Sudan
reflect a much more uncertain, rapidly evolving, and complex
global political system—a system characterized by multiple ac-
tors, a lack of fixed geographic coordinates, deep transna-
tional integration, complex networked interconnectedness,
and incomplete systems of governance. The evolution of the
system has affected the magnitude and quality of the political
166. TALISMAN ENERGY INC., CORPORATE SOCIAL RESPONSIBILITY 2001, supra

note 109, at 5. R
risks faced by oil firms. In a very real sense they are more sys-
temic and less determinate than in the past; they are certainly
more difficult to forecast and manage than ever before.
TABLE 1: CORPORATE VALUATION COMPARISONS167

1997 1998 1999 2000
AEC
ev/op.cash flow 8.7 13.7 13.5 7.6
ev/EBITDAX 5.7 10.5 8.6 5.7
Talisman
ev/op.cash flow 8.5 9 8.5 3.5
ev/EBITDAX 8.4 14.1 6.7 3.6
CNR
ev/op.cash flow 7.8 8.3 9.3 3.2
ev/EBITDAX 7.6 6.9 7.6 2.8
Nexen
ev/op.cash flow 7.3 6.1 8.6 5
ev/EBITDAX 6.6 5.5 6.7 3.7
PanCanadian
ev/op.cash flow 5.8 7.6 6.9 5.4
ev/EBITDAX 6.4 6.3 6 4.7
avg. ev/op.cash fl. 7.6 8.9 9.4 4.9
avg. ev/EDITDAX 6.9 8.7 7.1 4.1
Talisman
vs. av ev/op cash fl. 112 101 91 71
vs. av. Ev/EDITDAX 121 163 94 88
AEC
vs. av ev/op cash fl. 114 153 144 154
vs. av. Ev/EDITDAX 82 121 121 139
167. Compiled by the author from data supplied by Evaluate Energy, a

research company providing proprietary data to the oil industry.

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txt unknown Seq: 1 18-NOV-04 16:30

OIL AND POLITICS: TALISMAN ENERGY

On March 9, 2003, Talisman Energy, a large Canadian in-

* Stephen J. Kobrin is the William H. Wurster Professor of Multina-

426 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

barrels per day (bbls/d) in 2003, and the project’s pipeline to

5. See ENERGY INFO. ADMIN., U.S. DEP’T OF ENERGY, COUNTRY ANALYSIS

2004] OIL AND POLITICS 427

ing environments, and are in politically unstable or violent

9. NEIL H. JACOBY, MULTINATIONAL OIL: A STUDY IN INDUSTRIAL DYNAM-

428 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

within the host country that could compromise ownership

13. See JACOBY, supra note 9, at 17. R

2004] OIL AND POLITICS 429

The Talisman case illustrates both these changes in inter-

430 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

cludes a recognition that there are rights beyond borders.”17

2004] OIL AND POLITICS 431

II. CIVIL WAR IN SUDAN

432 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

resulted in General Nimeiri becoming President in 1969.29 Af-

29. Id. at 10.

2004] OIL AND POLITICS 433

throughout the country.36 Southerners mobilized around the

434 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

III. OIL AND THE ENTRY OF TALISMAN

43. In a background paper, Talisman Energy attributed the conflict to

2004] OIL AND POLITICS 435

est.49 Chevron and Shell eventually spent $1 billion in Sudan,

436 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

threatened to attack their operations.58 It was alleged that

58. See id. at 86.

2004] OIL AND POLITICS 437

lets. On August 17, 1998, Talisman and Arakis agreed to a

438 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

stations—appeared to reduce the potential impact of con-

IV. A TIDAL WAVE OF PROTEST

75. Cattaneo, supra note 65, at 25. R

2004] OIL AND POLITICS 439

coalition of civil society advocacy groups launched a massive

440 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

tual funds owning Talisman were supporting genocide.84 The

84. Lewis Braham, Are These Funds Bankrolling Genocide?, at http://

2004] OIL AND POLITICS 441

442 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

Petroleum operations affect the war and the civilians

98. INT’L CRISIS GROUP, supra note 21, at 99-106. R

2004] OIL AND POLITICS 443

that of the company itself, that Talisman’s facilities have been

444 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

A second prong of Talisman’s response was to add the In-

2004] OIL AND POLITICS 445

V. AMERICAN AND CANADIAN POLITICS

115. Secretary of State Madeleine K. Albright, Message from Secretary Al-

446 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

in place in 1997 and 1998 both made it difficult, if not impossi-

2004] OIL AND POLITICS 447

found that oil money was either perpetuating the conflict or

448 INTERNATIONAL LAW AND POLITICS [Vol. 36:425

tions between the United States and Sudan became much

2004] OIL AND POLITICS 449