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 XVII of the series.
2. Other Forms of Interventions by the Ethics Council
1. Letter dated September 7, 2009, on the exclusion of Poongsan Corp.
Other Review Determinations:
The Ethics Council was also asked to review its investment in Israel. It is unclear whether the action requested was part of a coordinated global effort, popular at the time among some religious and non-governmental organizations, to seek divestment in Israeli companies and companies that provided assistance to Israel. The Ethics Council declined to proceed with exclusion proceedings on the basis of information it had then. The letter is important as an expression of the Ethics Council's efforts to focus specifically on company action rather than on the political situation that provides context. The letter is also important for its application of precedent. In 20087, the Ethics Council considered a request to exclude the Israel Electric Corporation for its part in reducing the electricity supply to Gaza. The consideration is important for a number fo reasons. First, it evidences the growing importance of Ethics Council determinations--the investigation included the participation of governmental officials form Israel and Palestine, and the growing use of the Fund as an important source of Norwegian foreign policy projection.
Another entry from 2006 comes from Ethics Council Chair Gro Nystuen specifically and was written in response to allegations of poor performance by the Council and that the Council was not doing enough to fully implement the Guidelines of the Ethics Council. Similar to the Aracruz cases, and having some of the same characteristics of the recommendation on Israel, the Council is responding directly to pressures from the outside (i.e. media, NGO’s, Norwegian press and public). In October 2007 the Council makes a formal assessment of investments in Burma. This follows the 2005 recommendation of Total SA in which the company was not excluded for aiding the government in atrocities. The stance of the Council is not to exclude companies that deal in or with Burma, but to only exclude companies on the basis that they directly contribute money, resources, weapons, or other items that are used by the government of Burma to commit human rights violations against the people of the country. Additionally the Council made the distinction that companies that aid the government solely through commerce and tax revenues are not excludable on those grounds. The only company that was excluded for involvement with the Burmese Government was Dongfeng Motors in 2008 for supplying the government with armored trucks and other equipment used by the military. The final part of the Others section dealt with the reorganization of Poongsan Corp., the company through its subsidiaries was still found to be in violation of the Ethical Guidelines and should remain excluded.
1. Letter dated March 22, 2006, on investments in Aracruz Celulose SA
1. Company subject to investigation
a. Name: Aracruz Cellulose SA http://www.aracruz.com.br/invest.do?lang=2
b. form of organization (corporation, Partnership, etc.): Public company
c. home country: Brazil
d. countries (exchanges) where shares are traded: Unknown
e. largest shareholders (individual, state owned enterprise: Unknown
f. form of investment by the Norway SWF fund: Equity
a. Date complaint filed: 23 August 2005
b. Date complaint resolved by the Ethics Council: 22 March 2006
a. If the state, the office from which the reference was made: First of its kind. The problem was not brought to the attention of the Council by any part of the government. “Reference is made to the Ministry of Finance’s letter of 23 August 2005 in which the ministry forwards a request from five Brazilian organisations to exclude Aracruz Cellulose SA from the investment universe” (Para. 1 Pg. 1)
a. Action constituting violation: “Aracruz is alleged to have unlawfully acquired lands traditionally belonging to the Indian peoples in the area” (Para. 3 Pg. 1)
b. “Legal” basis of violation:
a. Council recommendation (for example divest, retain, wait): Wait
b. Legal basis for the determination (reference to the section of the Ethics Standard invoked): “The land conflict goes back to 1979. Since then a process has been under way involving the authorities in the shape of the Ministry of Justice along with Brazil’s National Indian Foundation (FUNAI), representatives of Indian communities and Aracruz” (Para. 4 Pg. 1)
c. Underlying legal basis: It appears to be looking at domestic Brazilian law and international customary law.
6. Basis of Determination
a. standard of decision (rule or test etc.): New, 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: NONE, the recommendation does not cite any sources, just saying there were five organizations that brought up the complaint with no evidence cited.
e. Rationale: Through the company’s operations in Brazil it has not properly compensated of consulted local inhabitants for land used. In all of this nothing is cited and there are numerous questions left out such as why this was excluded on the basis of human rights, why no sources were cited, location of the problem, any mention of domestic laws broken, and the source of the Council’s ruling, among others
2. Letter dated October 11, 2007, on the Council's assessment of companies with operations in Burma
3. Letter dated April 18, 2008, on the Council's assessment of investments in Israel Electric Corp.
5. Response to Criticism Concerning the Exclusion of Companies from the Norwegian Government Pension Fund: Unofficial English translation of article published in Dagens Næringsliv, Sept. 11, 2006 (pdf)
The Council has come under fire domestically from the media for what companies they choose to exclude and possibly more important what companies they choose to include. The Council reiterates that they do not have a bias in the decisions and recommendations that they produce and that all companies in the Fund are continuously inspected to see if they should still be included or excluded from the Fund.
It has also been alleged that even if a company responds to the communications from the6. Letter dated September 7, 2009, on the exclusion of Poongsan Corp.
Council on Ethics, this has no effect; companies that have answered have still been excluded. The latter claim is correct. To answer is not necessarily the same as not being excluded; we obviously have to assess the content of the answer. The Ethical Guidelines were, however, drafted with a view to securing a fair process and giving companies real possibilities for contradicting allegations. This was seen as important both with regard to the companies’ interests and with regard to the quality of the recommendations. We find it appropriate to point out that the system works as intended: because of their responses to the Council on Ethics, several companies that were assessed for exclusion were not excluded.
"On September 6, 2006, the Council on Ethics submitted a recommendation to exclude the company Poongsan Corp. because of its involvement in production of cluster munitions. The company has been restructured and is now organized as a holding company with several subsidiaries. The production of cluster munitions takes place in the subsidiary Poongsan Corp – New (Sedol: B3BDFS1KR). The Council’s recommendation to exclude should be applied to this company.