This Blog Essay site devotes every February to a series of integrated but short essays on a single theme. The Ruminations Series in 2009 produced a series of aphoristic (ἀφορισμός) essays, meant to provoke thought rather than explain it. The hope was that, built up on each other, the series would provide a matrix of thoughts that together might lead the reader in new directions. Ruminations continue to be produced form time to time. For 2010, this site introduced a new series--Business and Human Rights. The series took as its starting point the issues and questions raised by John Ruggie, the United Nations Special Representative of the Secretary-General (SRSG) on business and human rights, in a global online forum.
For 2011, this site introduces a new series of integrated essays--Developing a Coherent Transnational Jurisprudence of Ethical Investing: The Norwegian Sovereign Wealth Fund Ethics Council Model. The object of this series to to consider the work of the Ethics Council of the Norwegian Sovereign Wealth Fund. The thesis of this series is this: The Norwegian Sovereign Wealth Fund (NSWF) )investment program is grounded in the application of a set of Ethical Guidelines adopted by the Storting (the Norwegian Legislature) and enforced through an Ethics Council charged with determining whether a company should be excluded from investment by the NSWF. The work of the Ethics Council has produced the beginnings of a coherent jurisprudence of ethics for corporate investment. That jurisprudence may contribute significantly both to the development of transnational social norm standards and affect the way domestic corporate law is understood. This is Part VII of the series.
Part VII: Ethics and a Jurisprudence of Responsible Investment: The Cases--
I. Products
1. Weapons production
b. cluster munitions
1. Weapons production
b. cluster munitions
There are four principle determinations.
1. Recommendation on Exclusion of ClusterWeapons from the Government Petroleum Fund. Letter to the Finance Ministry from the Advisory Council on Ethics for the Norwegian Government Petroleum Fund, Oslo [02.09.2005] (Alliant Techsystems Inc.; EADS Co (European Aeronautic Defence and Space Company); EADS Finance BV; General Dynamics Corporation; L3 Communications Holdings Inc.; Lockheed Martin Corp.; Raytheon Co.; Thales SA). The press release from the Ministry of Finance
2. Poongsan Corporation, Recommendation of 6 September 2006 To the Ministry of Finance From the Council on Ethics. The press release from the Ministry of Finance
3. Hanwha Corporation, Rheinmetall AG, Recommendation of 15 May 2007 to the Ministry of Finance frrom the Council on Ethics. The press release from the Ministry of Finance
4. Textron Corporation, Recommendation of 26 August 2008 from the Finance Ministry to the Council on Ethics. The press release from the Ministry of Finance
Norwegian Cluster Munitions Soon to be History 04/05/2009 (Norway has internationally been an advocate against the use of cluster munitions. On April 29, a contented Secretary of State Espen Barth Heide pushed the button that destroyed the first batch of the Norwegian stockpile of cluster munitions).
Summary: Exclusion from the Fund based on cluster munitions is possibly the most changing exclusion over time. With the first companies being excluded in June 2005 under the guidelines that the Council itself created followed by later assessments made in 2009/09, the Council has a different set of criteria of exclusion bending to shape with the Convention on Cluster Munitions (2008, also known as the Oslo Convention). In the first case of exclusion based on the grounds of the production of cluster munitions (16 June 2005) seven companies were excluded because the weapons they produced closely matched that of what the Council considered to be cluster munitions. The Council set criteria for what cluster munitions are, but are careful to note that its recommendations are not exhaustive and are open to direct possibilities of weapons systems, all systems should be taken into account on a case by case basis. For the first seven companies that were excluded the main rational for exclusion was based on the type of armament that each system had including the number of anticipated duds when the system was used, the accuracy rate of hitting military versus civilian targets, and most of all whether through their normal use these weapons violate fundamental human rights.
For cases that were reviewed in 2008 and 2009 (no exclusion reviews in 2010 involving this type of activity), the Council based its determination on its interpretation of international law binding on Norway, in this case the Oslo Convention (2008) as grounds for exclusion. The key difference in the use of the Convention deal with the number and size of the "bomblettes" in each monition as well as the previously mentioned accuracy and dud rate. Further though Thales SA (France) was initially excluded along with the other companies, the exclusion determination was revoked after the company reacted just prior to France’s signature as a party to the Convention. Since the ratification of the Oslo Convention there have been few cases of exclusion grounded in the public obligations of the Norwegian state extended to cover the private market and commercial activities of its SWF. But it is important to note that for states that have neither ratified nor implemented the Convention into their domestic law, the public obligations of the state and the legal obligations of corporations operating thereunder will be distinct. The U.S. is not a party to the Convention. Finally the type of law that the Council uses for exclusion can be divided into two parts: before the Oslo Convention and then in the months prior to and following ratification. Before the ratification of the Convention the principle source of law was the Ethics Council's interpretation of what it determined to be the Storting's approach to the application of international law principles with respect to violations of ‘fundamental humanitarian principles’ with legal effect in Norway, a reasoning process that with respect to munitions, was vague and not exhaustive. Following the ratification of the treaty the Ethics Council applied international law ratified by Norway directly. In doing so, it developed and applied its own reading of the Convention, its applicability to the investments of the Fund and the legal basis in the Convention as grounds for exclusion. The Ethics Council also expressly declared that it will use the Convention for examining any future recommendations.
Case Summaries:
1. Recommendation on Exclusion of ClusterWeapons from the Government Petroleum Fund. Letter to the Finance Ministry from the Advisory Council on Ethics for the Norwegian Government Petroleum Fund, Oslo [02.09.2005] (Alliant Techsystems Inc.; EADS Co (European Aeronautic Defence and Space Company); EADS Finance BV; General Dynamics Corporation; L3 Communications Holdings Inc.; Lockheed Martin Corp.; Raytheon Co.; Thales SA). The press release from the Ministry of Finance.
1. Companies subject to investigation
I. Company subject to investigation
a. Name: Alliant Techsystems http://www.atk.com/
b. form of organization (corporation, Partnership, etc.): Public company
c. home country: USA
d. countries (exchanges) where shares are traded: NYSE
e. largest shareholders (individual, state owned enterprise: First Eagle Investment Management, LLC, FMR LLC, BlackRock Institutional Trust Company, N.A., NEUBERGER BERMAN GROUP, LLC, GOLDMAN SACHS GROUP INC
f. form of investment by the Norway SWF fund: UnknownII. Company subject to investigation
a. Name: EADS http://www.eads.com/eads/int/en.html
b. form of organization (corporation, Partnership, etc.): Public company
c. home country: The Netherlands
d. countries (exchanges) where shares are traded: PAR, HAM, GER, PNK, MUN, FRA, MCE, TLO, HAN, DUS, EuroNext, EUX, BER, STU
e. largest shareholders (individual, state owned enterprise: Unknown
f. form of investment by the Norway SWF fund: UnknownIII. Company subject to investigation
a. Name: General Dynamics Corp. http://www.generaldynamics.com/
b. form of organization (corporation, Partnership, etc.): Public
c. home country: USA
d. countries (exchanges) where shares are traded: NYSE
e. largest shareholders (individual, state owned enterprise: Longview Asset Management, LLC, Capital Research Global Investors, Capital World Investors, VANGUARD GROUP, INC. (THE), STATE STREET CORPORATION
f. form of investment by the Norway SWF fund: UnknownIV. Company subject to investigation
a. Name: L3 Communications www.l-3com.com
b. form of organization (corporation, Partnership, etc.): Public company
c. home country: USA
d. countries (exchanges) where shares are traded: NYSE
e. largest shareholders (individual, state owned enterprise: Clearbridge Advisors, LLC, HARRIS ASSOCIATES L.P., Bank of New York Mellon Corporation, VANGUARD GROUP, INC. (THE), STATE STREET CORPORATION.
f. form of investment by the Norway SWF fund: UnknownV. Company subject to investigation
a. Name: Lockheed Martin http://www.lockheedmartin.com/
b. form of organization (corporation, Partnership, etc.): Public company
c. home country: USA
d. countries (exchanges) where shares are traded: NYSE
e. largest shareholders (individual, state owned enterprise: STATE STREET CORPORATION, Capital World Investors, MASSACHUSETTS FINANCIAL SERVICES CO – OTHER, Capital Research Global Investors, VANGUARD GROUP, INC. (THE)
f. form of investment by the Norway SWF fund: UnknownVI. Company subject to investigation
a. Name: Raytheon http://www.raytheon.com/
b. form of organization (corporation, Partnership, etc.): Public company
c. home country: USA
d. countries (exchanges) where shares are traded: NYSE
e. largest shareholders (individual, state owned enterprise: BARROW, HANLEY MEWHINNEY & STRAUSS, INC. STATE STREET CORPORATIONVANGUARD GROUP, INC. (THE)., BlackRock Institutional Trust Company, N.A., Blackrock Investment Management LLC
f. form of investment by the Norway SWF fund: Unknown
2. Chronology
a. Date complaint filed: None, new type of complaint, not previously filed
b. Date complaint resolved by the Ethics Council: 16 June 2005
3. Complainant
a. If the state, the office from which the reference was made: : “The Advisory Council shall issue recommendations on negative screening of one or several companies on the basis of production of weapons that through normal use may violate fundamental humanitarian principles (Point 4.4)… In the Government whitepaper on ethical guidelines (NOU 22: 2003), and through the subsequent treatment of the guidelines in Parliament, it was decided that cluster weapons would be considered to be within this category of weapons/ammunition. The reason for this was that although cluster weapons are not subject to specific restrictions under international law, it can nevertheless be seen as unethical to use such weapons as this may constitute a violation of ‘fundamental humanitarian principles’” (Para. 4 Pg. 1).
4. Complaint
a. Action constituting violation: “cluster bombs of the type CBU-87/B, which contain 202 pieces of BLU-97 explosive devices. This is one of the most commonly used air-delivered cluster weapons. This information is verified by Jane’s Information Group (Para. 5 Pg. 5).
b. “Legal” basis of violation: The Fund shall not invest in any company that produces weapons that in their normal use violates fundamental human rights .
5 Determination
a. Council recommendation (for example divest, retain, wait): Divest
b. Legal basis for the determination (reference to the section of the Ethics Standard invoked): None, the Council even goes as far to state that the decision was done independently of IO’s and the general consensus of many states, but does go as far to say that dozens of states condemn the use of cluster munitions.
c. Underlying legal basis: None
6. Basis of Determination
a. standard of decision (rule or test etc.): First of its kind
b. Use of prior Ethics Council recommendations as precedent or as persuasive: None.
c. Use of case law of other courts or bodies: None.
d. Reliance on other materials: : In the Council making the decision it made it is important to look at the sources of data and accusations that the Council provided. In addition to our own research, we have obtained information through the database of Jane’s Information Group, from the Norwegian People’s Aid landmine division, the Human Rights Watch’s Arms Division, the International Campaign to Ban Landmines (ICBL), the Norwegian Defense Research Establishment (FFI) and the British screening company EIRIS (Ethical Investment Research Service) (Para. 1 Pg. 4).
e. Rationale: Divest in companies that produce cluster munitions even if the production of these munitions is limited or if they just produce components to these weapons. The Council has no desire to make an exhaustible list of what these munitions are, just simply what the Council states they are once they are produced.
2. Poongsan Corporation, Recommendation of 6 September 2006 To the Ministry of Finance From the Council on Ethics. The press release from the Ministry of Finance.
3. Hanwha Corporation, Rheinmetall AG, Recommendation of 15 May 2007 to the Ministry of Finance frrom the Council on Ethics. The press release from the Ministry of Finance.
4. Textron Corporation, Recommendation of 26 August 2008 from the Finance Ministry to the Council on Ethics. The press release from the Ministry of Finance.
1. Company subject to investigation
a. Name: Poongsan Corp. http://www.poongsan.co.kr/eng/main/
b. form of organization (corporation, Partnership, etc.): Corporation with subsidiaries
c. home country: South Korea
d. countries (exchanges) where shares are traded: None
e. largest shareholders (individual, state owned enterprise: Unknown
f. form of investment by the Norway SWF fund: Unknown
2. Chronology
a. Date complaint filed: Unknown
b. Date complaint resolved by the Ethics Council: 6 September 2006
c. Date reevaluated: 7 September 2009
3. Complainant
a. If the state, the office from which the reference was made: : Unlike other judgments the Council does not cite NGO’s, IO’s, or the Minister of Finance as the source of the complaint.
4. Complaint
a. Action constituting violation The company was accused of manufacturing 155mm artillery shells for Howitzer Tanks which contain 88 bombletts each. While not listed as being illegal under the Council, it was the judgment of the Council that under their normal uses violated fundamental human rights (this was prior to the Oslo Convention).
b. “Legal” basis of violation: International norms and the opinions of the Council.
5 Determination
a. Council recommendation (for example divest, retain, wait): Divest, also exclusion is still valid under the 2009 reevaluation.
b. Legal basis for the determination (reference to the section of the Ethics Standard invoked): None, the Council even goes as far to state that the decision was done independently of IO’s and the general consensus of many states, but does go as far to say that dozens of states condemn the use of cluster munitions. The later reevaluation does mention the Oslo Convention
c. Underlying legal basis: None
6. Basis of Determination
a. standard of decision (rule or test etc.): The primary decision used for cluster munitions coming from the 16 June 2005 case.
b. Use of prior Ethics Council recommendations as precedent or as persuasive: 16 June 2005
c. Use of case law of other courts or bodies: None.
d. Reliance on other materials: Not listed, does mention the Poongsan website as a direct source.
3. Hanwha Corporation, Rheinmetall AG, Recommendation of 15 May 2007 to the Ministry of Finance frrom the Council on Ethics. The press release from the Ministry of Finance.
1. Companies subject to investigation:
I. Company subject to investigation
a. Name: Hanwha Corp. http://english.hanwhacorp.co.kr/
b. form of organization (corporation, Partnership, etc.): Public Company
c. home country: South Korea
d. countries (exchanges) where shares are traded: KOSPI
e. largest shareholders (individual, state owned enterprise: Unknown
f. form of investment by the Norway SWF fund: Equities
II. Company subject to investigation
a. Name: Rheinmetall AG http://www.rheinmetall.com/
b. form of organization (corporation, Partnership, etc.): Public Company
c. home country: Germany
d. countries (exchanges) where shares are traded: FWB
e. largest shareholders (individual, state owned enterprise: Unknown
f. form of investment by the Norway SWF fund: Bonds
2. Chronology
a. Date complaint filed: Unknown
b. Date complaint resolved by the Ethics Council: 15 May 2007
3. Complainant
a. If the state, the office from which the reference was made: “The Council has information that two companies (Rheinmetall and Hanwha) in the Fund’s portfolio produce cluster munitions. The Fund’s investments in these companies should be suspended in order to avoid inconsistency with the Fund’s ethical guidelines” (Para. 3 Pg. 1).
4. Complaint
a. Action constituting violation: : “On the company’s website a picture and description of a so-called “Scattering Bomb” is given. The term “scattering bomb” is not a commonly used designation for weapons. From its context it must be assumed that the “scattering” refers to bomblets which are scattered over the target area, which is characteristic of cluster munitions. In the company’s description of the weapon, it is stated that its intended use is to “destroy massed enemy positions”, which is
the most common usage of cluster munitions” (Para. 3 Pg. 3).
b. “Legal” basis of violation: International norms and the opinions of the Council.
5 Determination
a. Council recommendation (for example divest, retain, wait): Divest
b. Legal basis for the determination (reference to the section of the Ethics Standard invoked): None
c. Underlying legal basis: None
6. Basis of Determination
a. standard of decision (rule or test etc.): The primary decision used for cluster munitions coming from the 16 June 2005 case.
b. Use of prior Ethics Council recommendations as precedent or as persuasive: 16 June 2005
c. Use of case law of other courts or bodies: None.
d. Reliance on other materials: The Hanwha website and Jane’s Missiles and Rockets database.
*The decisions for Rheinmetall and Hanwha came from the same report.
4. Textron Corporation, Recommendation of 26 August 2008 from the Finance Ministry to the Council on Ethics. The press release from the Ministry of Finance.
1. Company subject to investigation
a. Name: Textron http://www.textron.com/
b. form of organization (corporation, Partnership, etc.): Public Company
c. home country: U.S.
d. countries (exchanges) where shares are traded: NYSE
e. largest shareholders (individual, state owned enterprise: FMR LLC, Bank of New York Mellon Corporation, WELLINGTON MANAGEMENT COMPANY, LLP, VANGUARD GROUP, INC. (THE), PRICE (T.ROWE) ASSOCIATES INC.
f. form of investment by the Norway SWF fund: Unknown
2. Chronology
a. Date complaint filed: 15 June 2008
b. Date complaint resolved by the Ethics Council: 26 August 2008
3. Complainant
a. If the state, the office from which the reference was made: Using the grounds of the new Oslo Convention the company Textron was found to be producing weapons that were in violation of the Convention and the Council used the validation of the Convention for exclusion from the Fund, the source of the complaint is not listed
4. Complaint
a. Action constituting violation: Producing the cluster munitions CBU-97 / CBU 105 which have submuntions that weigh over 4Kg each, which is in violation of the Oslo Convention
b. “Legal” basis of violation: International norms, mainly that of the Oslo Convention
5 Determination
a. Council recommendation (for example divest, retain, wait): Divest
b. Legal basis for the determination (reference to the section of the Ethics Standard invoked): Oslo
c. Underlying legal basis: International principles
6. Basis of Determination
a. standard of decision (rule or test etc.): The primary decision used for cluster munitions coming from the 16 June 2005 case.
b. Use of prior Ethics Council recommendations as precedent or as persuasive: 16 June 2005
c. Use of case law of other courts or bodies: None.
d. Reliance on other materials: Textron’s website and clusterconvention.org
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