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.
Part I: Introduction of the Series Theme and Thesis
First, constitutive juridification is a process where norms constitutive for a political order are established or changed to the effect of adding to the competencies of the legal system. Second, juridification is a process through which law comes to regulate an increasing number of different activities. Third, juridification is a process whereby conflicts increasingly are being solved by or with reference to law. Fourth, juridification is a process by which the legal system and the legal profession get more power as contrasted with formal authority. Finally, juridification as legal framing is the process by which people increasingly tend to think of themselves and others as legal subjects. (From Lars Chr. Blichner and Anders Molander, What is Juridification?, Arena, Centre for European Studies University of Oslo Working Paper No. 14, March 2005).
The juridification type represented by the NSWF Ethics Council project represents is not grounded in dispute resolution--the traditional function of courts. Rather its role derives from its gatekeeper authority. It is meant to invoke the mechanics of the judge to determine qualification for entry into the community of actors permitted to participate in the investment activities (the normative universe) of the NSWF. In that process, the Ethics Council is not merely making a decision about fitness for inclusion but also developing a normative foundation for the idea of fitness itself. It is a process-normative construction function that has marked the growth of power of other organizations that, though they lack the formal power of the state, have used their gatekeeper function to develop, or at least contribute to the development, of substantive values in law and governance. The United Nations provides an example--the transformation of the power of the United Nations to determine fitness for membership in accordance with the rules of the U.N. Charter has been transformed into a source of normative framework for defining the idea of the "state" itself (José E. Alvarez, International Organizations as Law-Makers, Oxford University Press, 2006, esp. ch. 3).
NSWF juridification grounded in the construction of a normative governance structure that seeks to extend the regulatory power of the state from its traditional focus on legal norms to the management of social norms through the extraterritorial projection of an internationalized national law. The framework for that effort is the regulation of responsible investment that forms a core of both the management of the NSWF's economic activities in the market and the basis for its engagement in efforts to influence the governance rules of other states. (Cf. Daniel Brooksbank, NBIM outlines misgivings on UK Stewardship Code, Responsible Investor.com, Oct. 20, 2010 ("Norges Bank Investment Management, the manager of Norway’s NOK2.9trn (€360bn) Government Pension Fund, has expressed doubts about the UK’s new Stewardship Code. . . . Kvam’s words will be of interest, not least because Norges owns around 1% of UK listed equities and its Chief Investment Officer Bengt Enge is based in London.")). More importantly, perhaps, it which also serves as a gateway for the projection of state policy directly into the governance of the corporations making up the NSWF's investment pool, and indirectly affecting the general social norm framework within which corporate behavior is managed outside the state. As the Chair of the Ethics Council modestly suggested in 2009:
Capitalism is a function of the way the world is organized and structured financially and politically and so we are not thinking that we are civilizing capitalism. If we are really lucky, we might civilize a couple of companies or maybe more than a couple. And perhaps we may eventually have a positive influence that is more far-reaching than the impact we may have on those companies that we have dealt with concretely. (From Sibylle van der Walt, Bringing human rights into pension finance. Interview with Gro Nystuen, Norway Govt Pension Fund, Responsible Investor.com, April 21, 2009).
The Ethics Council of the NSWF has begun to develop a coherent system of jurisprudence grounded in their application of the Ethical Guidelines to the investment decisions of the NSWF. In the process, the Ethics Council is developing a law of ethical investment that may influence not just the legal framework for investment in Norway and the transnational soft law framework for SWF governance generally, but also international customary standards for ethical behavior of corporations. These may become incorporated into instruments from the developing United Nations Protect-Respect-Remedy Framework, to the soft law governance systems from the OECD's Guidelines for Multinational Corporations and the ISO 26,000 standard.
In this respect the jurisprudence of the Ethics Council will play a significant role in a multi-prong effort by the Norwegian state to advance international public and private corporate governance and corporate social responsibility through its "responsible investment" regulatory framework. That framework consists of state regulation of corporate behavior through direct regulaiton and through investment standards. Those standards in turn incorporate internaitonal soft law standards and require the state to actively participate in internal corporate governance through its active ownership principles. Simultaneously, the state is charged with active participation in the development of international standards (that are then incorporated into domestic law and used as a basis for determining the character of shareholder activism with respect to companies within the Fund's investment universe). The development of a jurisprudence, of a set of approaches to determinations of the application of the Ethical Guidelines, or rules for determining conformity thereto, the Ethics Council begins to develop a jurisprudence whose value as a governance tool becomes significant for setting behavior standards for corporate governance and for contributing to the development of international standards (which will then be memorialized as law within the Norwegian domestic legal order).
This represents the most innovative part of the NSWF framework. Norway's SWF project may provide a window onto governance frameworks for the coming century. It embraces a set of governing parameters incompatible with traditional assumptions of the operation of the law-state system from the last century. Neither the state, now law occupies the central position in this system. The SWF governance regime acknowledges three simultaneously operating governance regimes--the law-state system, the social.norm system of private actors, and the international law-custom system of the community of states (and their partner-constructs). It seeks to both mediate between these governance systems and to actively participate within them. The NSWF is structured by law tied directly to a traditional state operation, it participates in the governance order of economic entities through its shareholding, and it both internalizes and contributes to the development of international law and custom that are then applied to the law or or social-norm systems of the other two governance regimes. The distinctions between law and norm, between public and private spheres, between hierarchy and polycentricity collapses. I am reminded of the vision of the future of governance suggested by Michel Foucault nearly a generation ago: "A right of sovereignty and a mechanics of discipline. It is, I think, between these two limits that power is exercised. The two limits are, however, of such a kind and so heterogeneous that we can never reduce one to the other." (Michel Foucault, "Society Must be Defended": Lectures at the Collège de France 1975-1976 (David Macey, trans., New York: St. Martin's Press (Picador), 2003), 14 Jan. 1976, at 37). The Norwegian experiment, like that of its Chinese counterpart, represents contemporary efforts to institutionalize a sustainable 'normalizing society' compatible with emerging global power systems.
These essays start with a description of the legal and regulatory framework within which the NSWF is organized. The legal organization of the NSWF is first considered, followed by the relationship of the Fund to its manager, the Norges Bank. In that context the framework of responsible investing is introduced. The essays then turn to consideration of the ethical component of responsible investing, examining first the substantive provisions of the Ethical Guidelines, then looking at the structure and operations of the Ethics Council itself. It then turns to the decisions made to date. These will be organized by the substantive issues considered. An analysis of the aggregate of decisions will then be attempted. Lastly, the framework constructed and its consequences will be explored. I hope you will find some of this of use in work on international regulations, the regulatory context of sovereign wealth funds, the development of transnational standards for corporate social responsibility and the emergence of substantive standards for corporate behavior consonant with emerging human rights standards.
Part I: Introduction of the Series Theme and Thesis.
Part II: The Structure of the Norwegian Sovereign Wealth Fund.
Part III: Framing a Operational Structure for Responsible Investing: The NSWF Ethical Guidelines.
Part IV: Operationalizing the Ethics Guidelines--The Structure and Functions of the NSWF Council on Ethics.
Part V: Responsible Investment Through the Ethics Guidelines--Overview of the Exclusion Determinations.
Part VII: Ethics and a Jurisprudence of Responsible Investment: The Cases--I. Products, 1. Weapons production, b. cluster munitions.
Part VIII: Ethics and a Jurisprudence of Responsible Investment: The Cases--I. Products, 1. Weapons production, c. nuclear arms.
Part X: Ethics and a Jurisprudence of Responsible Investment: The Cases--I. Products, 3. Tobacco Production.
Part XI: Ethics and a Jurisprudence of Responsible Investment: The Cases--II. Conduct--Complicity, 1. Serious or systemic human rights violations.
Part XIII: Ethics and a Jurisprudence of Responsible Investment: The Cases--II. Conduct--Complicity, 3. Serious Violations of Ethical Norms .
Part XV: Ethics and a Jurisprudence of Responsible Investment: The Cases-- II. Conduct--Complicity, 5. Corruption.
Part XVI: Ethics and a Jurisprudence of Responsible Investment: The Cases--III. Non-Exclusion Actions, 1. Observation of Companies.
Part XVII: Ethics and a Jurisprudence of Responsible Investment: The Cases--III. Non-Exclusion Actions, 2. Other Forms of Interventions by the Ethics Council .
Part XVIII: Ethics and a Jurisprudence of Responsible Investment: The Cases--II. Conduct--Complicity, 2. Environmental damage (new case).
Part XXI: Ethics and a Jurisprudence of Responsible Investment: First Run at the Characteristics of Companies in the Excluded Universe.
Part XXVII: Ethics and a Jurisprudence of Responsible Investment: The Ethics Guidelines as Quasi-Judicial System--What is Left to be Done.