The RSPO Grievance panel in forming its views and arriving at the suggestions below, has taken into consideration:

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1 June 17, 2011 To: IOI To: communities of Long Teran Kanan and other complainants cc. RSPO Executive Board RSPO has received the IOI Corporation Berhad ( IOI ) proposal via letter dated 29th April RSPO also received views from Migros on 17th May 2011, from Lah Anyie Ngau (on behalf of the Long Teran Kanan Community) on 18th May 2011 and from the remaining complainants on 18th May We refer to your kind invitation through Hidde van Kersen s telephone call to Johan Verburg on June 16th, to share the panel s views and suggestions in order for IOI to progress the resolution of the case. The RSPO Grievance panel in forming its views and arriving at the suggestions below, has taken into consideration: The contents of IOI s proposal; IOI efforts so far and representations in their proposed solution plan to the issues in dispute; Views of the complainants, notably the views of the affected communities; Incentives and processes that are consistent with RSPO s ways of working, i.e. constructive engagement of the many stakeholders; Incentives which are suitable for reinforcing IOI commitment to RSPO, continuous improvement of IOI sustainability performance, and positive impacts in the field, rather than alienating an RSPO member by negative sanctions and missing an opportunity to establish positive change; The need to provide clarity to markets for certified sustainable palm oil and IOI clients in particular; The need to protect the credibility of RSPO, in addressing issues in a timely, effective, constructive and balanced manner; The complexity of the case and likelihood of resolving it; Work in progress on some relevant RSPO system elements. The suggestions should in no way be seen to be the final panel s view on the case but a reflection of the panel s current thinking which we would like to share with the disputing parties. Sarawak The ongoing RSPO certification processes were suspended because IOI was viewed as not meeting the requirement of constructive engagement (Item 2.3 of the RSPO Code of Conduct) and partial certification (Item (c ) of the RSPO Certification Systems document), as elaborated below. This has lead to prerequisites considered by the panel for lifting the suspension and for preventing escalation to other measures. Item 2.3 of the RSPO Code of Conduct states: Members will commit to open and transparent engagement with interested

2 parties, and actively seek resolution of conflict. It has always been the intention of RSPO to encourage engagement with all stakeholders, not just RSPO members. It was the RSPO view that IOI s own systems have been insufficiently responsive to complaints. Where the complaint was initially left to IOI s own initiative the results have not yielded effective resolution. RSPO does not want to interfere with Court decisions. However, it notes the fact that IOI s continuation with the court appeal is interpreted by the community as a lack of willingness to engage and settle out of court. The RSPO Grievance Panel is aware of the fact that IOI considers this court appeal as the second best option and is willing to withdraw the appeal as soon as a settlement can be reached out of court. RSPO is further aware that IOI does not want to withdraw the appeal, to cater for the possible scenario where an out of court settlement cannot be reached. However, it appears to be the single most significant difference between the IOI proposed action plan and the complainants conditions on progressing the case. The panel fears that the rationale behind the appeal may become a self-fulfilling prophecy. The Panel urges IOI to consider the costbenefit of this appeal, most importantly, the longer term impacts towards achieving a lasting resolution with the communities. Facilitated dispute settlement services to resolve the issues between the parties is an alternative to a litigation process. We feel it is a positive step and should enjoy the support of all parties. However we need to ensure the pending appeal should not jeopardise the settlement process. We would therefore appreciate if IOI could request the other parties and the Court for a stay of the appeal hearing for the duration of such a process. It is hard to believe that the Court would not agree to a delay, provided all parties agree, pending attempts at facilitated dispute settlement. RSPO is concerned that the pending appeal may provide for an inauspicious backdrop to such a settlement process. RSPO suspects that the complainants would see a move by IOI to request the Court for a stay of the appeal hearing for the duration of the process, as a signal of good faith. And therefore place the facilitated dispute settlement process in a more optimally auspicious environment. Item of the Certification Systems document states: Organisations with more than one management unit and/or that have a controlling holding in more than one autonomous company will be permitted to certify individual management units and/or subsidiary companies only if: [ ] (c) there are no significant land conflicts, no replacement of primary forest or any area containing HCVs since November 2005, no labour disputes that are not being resolved through an agreed process and no evidence of non-compliance with the law in any of the non-certified holdings. New acquisitions which have not replaced primary forests or HCVs are required to comply with these requirements within three years. Certificates for all of the company s holdings shall be suspended if there is noncompliance with any of these requirements. The implication of (c ), is that there can be no certification in any land holding, within the group holdings, if there are significant land conflicts. Meeting the suggested requirements (1) to (7) below are considered sufficient to achieve an agreed resolution roadmap. When a resolution roadmap has been agreed between the parties involved in a land conflict, the conflict no longer classifies as a significant land conflict. The Grievance Panel believes it is feasible to achieve this roadmap within a foreseeable timeframe. RSPOs current suspension of IOI s pending certification processes with regards to the Sarawak case would be lifted as soon as all 7 requirements are met. In the event of not meeting the suggested requirements and in particular in the event that the review in (6) below would lead to a conclusion to discontinue an out of court approach, the Grievance Panel will need to decide whether or not no significant land conflict exists. The RSPO Grievance Panel fears that certification processes may have to remain suspended for as long as such conflicts are ongoing, i.e. no agreement is reached with the community on addressing the conflict. This decision would also apply even if these substantial issues are submitted to legal processes. This, in itself, is a process that may take an unpredictable length of time. Based on the IOI proposal and its review, the Panel suggests IOI to modify and add to its proposed action plan as listed below.

3 1) Confirm commitment to all requirements (2) to (13) below, including the commitment to fairly resource these activities in terms of time, finance and authority level. 2) Actively seek agreement with the LTK community on engaging (preferably through the RSPO Dispute Settlement Facility which RSPO is willing to mobilize at a fair cost distribution to be agreed with IOI for the first time in support of this case to work with the disputing parties at the field level) a mutually acceptable lead facilitator for the conflict resolution, possibly assisted by additional facilitators and,; 3) Agree on the purpose of the conflict resolution process (as suggested in the box below), including but not limited to reaching agreement on compensating for environmental, social and financial impacts. Compensation arrangements may be financial or otherwise; Suggested purpose of the resolution process and Terms of Reference for the facilitator: a) To provide evidence that IOI and the Long Teran communities have reached agreement/solutions to the issues, which can lead to a lasting resolution of conflicts with the communities and may be used and also be referred to the court Registrar in helping to determine a amicable settlement as per the court judgement in March b) Or if the above is not forthcoming, the facilitator should recommend to all parties including RSPO whether to cease or to continue with facilitation. 4) Agree on the scope of the conflict resolution process, including but not limited to all possible land conflicts related to the plantation that potentially affect RSPO certification, irrespective of their inclusion in the legal processes; 5) Agree on rules of engagement, including but not limited to transparency, information sharing, minuting, participation of legal representatives of all parties concerned [this implies the dialogue is not only between the legal reps], and spokes persons freely chosen by the relevant parties, observers, [check Dispute Settlement Facility draft protocols for more elements] 6) Agree on a timeline, including necessary intervals to prepare for meetings, and a point in time to review with the LTK community and with the RSPO Grievance Panel whether to continue or discontinue the out of court approach; 7) Agree to take all necessary steps by both sides to avoid escalation and violent conflict in the field, including temporary arrangements with regards to harvesting and access; In addition to the minimum requirements to lift the suspension, the following elements are suggested for implementation and monitoring until complete and final close out the complaint case: 8) Conducting a joint activity, e.g. field survey or participatory mapping, to arrive at a jointly agreed list of disputed lands and their owners and users that potentially need to compensated; 9) Arriving at a negotiated set of compensation measures, including but not limited to financial compensation (formula, price per unit), social and environmental corrective measures; 10) Arriving at a final list of lands that need to be compensated. The list would need to contain lands both in respect to the court case as well as any other lands relevant for the purposes of RSPO compliance and certification; 11) Addressing social and environmental issues identified in Moody International s report in an ongoing consultation with the community; 12) Addressing any additional issues over and above Moody International s report, agreed with the community and in ongoing consultation with the community; 13) Monthly progress reporting, until agreed with RSPO that a lower frequency can be applied;

4 Ketapang Item (c), of the RSPO Certification Systems document states that there can be no certification in any land holding, within the group holdings, if there are significant land conflicts or if replacement of primary forest or any area containing HCVs since November 2005 has taken place, or there are labour disputes that are not being resolved through an agreed process and/or there is evidence of non-compliance with law in any of the non-certified holdings. RSPO has decided on a suspension of IOI s certification processes based on the above-mentioned rule. The following suggestions are provided for consideration by IOI to amend or complement their proposed action plan accordingly: 14) IOI to confirm commitment to all requirements (15) to (20) below. 15) Confirm how discrepancies between the SGS report and the WWF report have been resolved; 16) Identify if and to what extent principles 2 and 7 were not adhered to, by making a historic assessment of all instances of clearance after 2005 without prior HCV assessment, and if so to commit to compensation; 17) Provide evidence to the grievance panel that IOI will commit to sufficient on-the- ground and institutional capacity that will help IOI adhere more closely to the spirit of the RSPO P&C, especially in new developments (the New Plantings Procedure) and prevent similar non-compliances from occurring again in future, including actions to prevent (repetition of) failure to meet requirements for SEIA, HCV assessment, FPIC; Meeting the above suggested requirements (14) to (17) would be considered sufficient to achieve an agreed resolution roadmap for the Ketapang case and provided that at the same time adequate measures are in hand in Sarawak, as above would mean an immediate lifting of the current suspension to IOI s certification processes. In addition to the minimum requirements to lift the suspension, the following elements are suggested for implementation and monitoring until complete and final close out the complaint case: 18) A reviewed time-bound plan for certification of all IOI majority owned or managed units; 19) Arriving at an agreed remediation plan in relation to (16) above; 20) Awareness raising, implementation and monitoring (of operations/systems and in the field) as suggested by SGS and IOI. RSPO Moreover, the Grievance Panel recommends to the RSPO Executive Board and Secretariat the following measures, mostly in response to more general issues raised by the complainants in relation to this case, to strengthen and complete the RSPO systems and prevent future complaint cases: Since both IOI and RSPO are continuously facing questions about the extent and meaning of the suspension, communicate more clearly the status of IOI s certification to RSPO stakeholders in particular markets, i.e. IOI continues to be certified and can trade certified oil and certificates, however certification processes for additional mills and plantations are put on hold until agreement is reached with RSPO on a roadmap to resolve the two complaint cases; and once a roadmap is agreed for implementation, IOI continued certifications will be resumed to be handled by the RSPO systems; Publicize improved rules and guidance for partial / phased certification; Continue to strengthen accountability safeguards such as RSPO grievance systems, annual progress reporting;

5 Assure continued monitoring of CBs (including their own grievance procedures), while establishing independent accreditation systems through Accreditation Services International (now in pilot phase); Resource the RSPO Dispute Settlement Facility; Endeavour to communicate more effectively the requirements of the RSPO s New Planting Procedure. Recommendations for investigating and addressing any structural weaknesses that may exist in the local authorities systems for mapping and land use planning which in the Ketapang case seem to have lead to different interpretations by different agencies, provoking HCV clearance. Johan Verburg Oxfam Novib