This excerpt taken from the ICI 20-F filed Mar 31, 2006.
Legal or Arbitration Proceedings.
Certain companies in the Group are the subject of various claims and proceedings which, if successfully asserted against them, could have an adverse effect on the Groups results of operations, cash flow and financial condition.
The Glidden Company (Glidden), a wholly owned subsidiary of ICI, is a defendant, along with former producers of lead pigment and former producers of lead pigment based paint, as well as other lead product manufacturers and their trade associations, in a number of law suits in the United States. These law suits seek damages for alleged personal injury caused by lead pigment based paint or the costs of removing lead pigment based paint. An alleged predecessor of Glidden manufactured lead pigments until the 1950s and lead pigment based consumer paint until the 1960s. Glidden is currently a defendant in three active suits (The City of New York v. Lead Industries Association, Inc, et al. (1989), Smith v. Lead Industries Association, Inc, et al. (1999) and Hurkmans v. Salczenco, et al. (2005)) and is also named in one unserved case. Glidden continues to believe that it has strong defences to all of the pending cases, has denied all liability and will continue to defend all such actions.
In 1986, a subsidiary of ICI purchased a newly formed company, now Glidden, from a predecessor of Millennium Holdings LLC (the Seller), now a subsidiary of Lyondell Chemical Company. Under the sale agreement, the Seller agreed to indemnify Glidden against certain claims relating to certain pre-completion liabilities, and Glidden also gave certain indemnities to the Seller. Whilst Glidden did not acquire any assets or liabilities for the manufacture or sale of lead pigments, the Seller, however, has previously asserted that it is entitled to indemnification under the sale agreement for certain liabilities it may have relating to lead pigment and/or lead pigment based paint litigation. Glidden, which has assumed all of the purchasers rights and obligations under the sale agreement, believes that it has no such obligation to indemnify the Seller. The above indemnity claims have not been ruled on by any court.
In July 2004, ICI received a request for information from the European Commission relating to alleged cartel activity in the European Methacrylates market. In ICIs case, the allegations concern a period starting in 1995 and ending when it sold its Acrylics business in 1999. During 2005, the Commission issued a statement of objections, alleging that ICIs former Acrylics business was involved in breaches of European competition law and, during the fourth quarter, ICI provided a written response to the Commission and attended an oral hearing. ICI's policy is to conduct its business in full compliance with the applicable competition laws. ICI will continue to assist the European Commission with this matter. Their decision is expected in 2006.
During January and February 2006, a number of purported class action lawsuits were filed, currently in the US District Court for the Eastern District of Pennsylvania and the US District Court for the District of New Jersey, on behalf of purchasers of methyl methacrylate who claim to have suffered anti-trust injury as a result of alleged cartel activity referred to in the paragraph above. Along with other parties, ICI has been named as a defendant.
With respect to each of the claims and proceedings described in the four paragraphs above, ICI is unable to make estimates within a reasonable range of outcomes of the loss to which the claims or proceedings may give rise. Disclosure of the amount sought by claimants and plaintiffs (where known) is not considered meaningful with respect to these claims and proceedings, however, an unfavourable outcome of one or more of these matters could have a material effect on the Groups results of operations, cash flow or financial position.
The Group is also subject to various other claims or legal proceedings, principally in the United Kingdom and United States, including the following:
In May 2003, the Kanagawa City Health and Medical Bureau in Japan required Quest Japan to recall flavours containing an ingredient known as WS3. The Japanese health authorities acknowledged that WS3 posed no risk to human health, but nevertheless argued that technically it was not approved for use in Japan. Quest has settled its dispute, without admission of liability, with two of the affected customers. It remains possible that the third affected customer may commence proceedings seeking to recover alleged damages.
From the early 1970s until 1999 ICI Americas Inc (ICIA), a subsidiary, operated and maintained, on behalf of the US Army, two manufacturing facilities. Employees at each facility were employed by ICIA and were members of ICIA pension schemes. The US Army reimbursed to ICIA the cost of contributions to each pension scheme. Upon termination of the contract in 1999 each of the schemes carried a surplus. In September 2004 the US Army Contracting Officer issued a final determination holding that termination of the contract triggered a refund to the US Government of an amount equal to the value of the 1999 pension surplus. ICIA is appealing the final determination to the Armed Services Board of Contract Appeals.
Following ICIs trading statement on March 25, 2003, three purported class action lawsuits were filed in the US Federal District Court for the Southern District of New York on behalf of ICI shareholders who purchased ICI ADRs and Ordinary Shares between August 2002 and March 2003. The lawsuits, which have now been consolidated into a single action, allege that prior to the trading statement ICI failed to disclose properly the extent of customer service problems at Quest following the implementation of new enterprise resource planning systems in 2002. In September 2004 the court dismissed a number of the plaintiffs claims. ICI continues to contest the remaining claims.
On April 30, 2004 ICI sold its Quest Food Ingredients Business to Kerry Group PLC (Kerry) for $440 million. Kerry has raised a number of issues regarding potential claims under the sale and purchase agreement. No proceedings have been commenced.
The Directors do not believe that the outcome of the matters described in the four paragraphs above will have a material effect on the Groups financial position.
The ultimate outcome of the matters described above is subject to many uncertainties, including future events and the uncertainties inherent in litigation. The Group has made provision in its financial statements for such matters to the extent that losses are presently considered probable and estimable. However, these matters involve substantial sums, and an unfavourable outcome of one or more of these matters could have a material effect on the Groups results of operations, cash flow or financial position.
Policy on Dividend Distributions.
The Companys dividend policy links growth in profit with growth in dividends and, at the same time, seeks to ensure that sufficient funds are available to the Group for investment in future profitable growth.
The Board continues to believe that this approach is appropriate, and therefore confirms that, following the introduction of IFRS, ICIs continued intent will be to grow dividends at about the same rate as the growth in net profit before special items attributable to equity holders of the parent.