Norway SWF and Jewish Building Activity in East Jerusalem: Excluding Shikun & Binui Ltd. from the Investment Universe of the Government Pension Fund Global (GPFG)

Acting on the earlier recommendation of the Council of Ethics, the Norwegian Ministry of Finance has just announced that the Norwegian Sovereign Wealth Fund, the Government Pension Fund (Global), will exclude Shikun & Binui Ltd. from its investment universe. Norway, Ministry of Finance, Press Release:  Exclusion of a company from the Government Pension Fund, June 15, 2012.

 (From Shikun & Binui Company Profile)

The role of the Council on Ethics for the Government Pension Fund Global is to provide evaluation on whether or not investment in specified companies is inconsistent with the established ethical guidelines. The Ministry of Finance makes decisions on the exclusion of companies from the Fund's investment universe based on the Council's recommendations. Both the Ministry's decisions and the Council's recommendations will be made publicly available on this website. The Council has it's own secretariat which provides research for the Council.  (From Council on Ethics Norwegian Government Pension Fund Global)

The Finance Ministry Press Release and the Ethics Council Recommendation: Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd. at set out below.

The Finance Ministry announcement provided:

The Ministry of Finance has excluded the company Shikun & Binui Ltd. from the investment universe of the Government Pension Fund Global (GPFG).

The decision to exclude the company follows an exclusion reccommendation from the Council on Ethics to the GPFG. The company is a construction company involved in the building of settlements in breach of international humanitarian law in East-Jerusalem.

Council emphasises that the construction of such settlements on occupied territory represents a violation of the Fourth Geneva Convention, the convention for the protection of civilian persons in time of war. The Convention shall protect civilians in situations of war or occupation. The exclusion is based on an evaluation of the future risk that the company will contribute to serious violations of the rights of individuals in war or conflict. The The Ministry of Finance has earlier excuded the companies Africa Israel Investments and Danya Cebus on the basis of similar activities on occupied territory. The divestment from the company has been concluded.

The GPFG owned shares worth some NOK 8.5 million in Shikun & Binui Ltd. on 31.12.2011.

The Ministry's final decision on whether or not to divest from a company is made on the basis of the Council's recommendation. The Ministry has not made an independent assessment of every aspect of the the Council's recommendation but is satisfied that the recommendation document establishes with reasonable certainty that an investment in the company represents an unacceptable risk of violating the Ethical Guidelines.

Read more:
The Council on Ethic's recommendation
The Council on Ethics to the GPFG on www.etikkradet.no

(From Shikun and Binui, Ramat Rachel Dreams, Jerusalem, "*20%upon signature & the rest at delivery; Not far from the Old City, the Wailing Wall and the U.S. Consulate, the neighborhood of Arnona is one of the most desirable neighborhoods in Jerusalem with an harmonious mixture of old and new.  "Ramat Rachel Dreams" includes five beautiful buildings of eight floors with outstanding architecture and very high standard. The last part of the complex built by Shikun & Binui Real-Estate offers a wide selection of luxurious apartments of 2.5, 3, 3.5, 4 and 5 rooms, as well as 4.5 and 6 room penthouses.")

Shikun and Binui  describes itself a bit differently:

The veteran companies in the Shikun & Binui Group (Solel Boneh and Shikun & Binui Real Estate – formerly Shikun Ovdim) have been active since the 1920s, before the establishment of the State, and since then have been leading players in the fields of construction, real estate initiatives and infrastructures in Israel, fulfilling national and public missions alongside their commercial activity.

Today, Shikun & Binui is Israel’s leading infrastructure and real estate group. The Group’s companies are involved in large-scale projects in Israel and abroad, and have proven achievements in the construction of residential neighborhoods and commercial and public buildings, as well as in the establishment, financing and operation of huge ventures in the fields of transportation infrastructure, ecology, water purification and desalination, and international project development.

The Group’s success in Israel and worldwide, including in developing countries, and the rich experience it has accumulated, enable it to expand its activity beyond the traditional fields in which it formerly operated. Against the background of the global village and increased competition in the multinational contracting market, the Group is in a process of continuous renewal, offering its range of services and exceptional capabilities to new markets. The reputation and experience acquired by the Group in project implementation have enabled it to win various international tenders, many of which are funded by the World Bank and by other international financial institutions.  (From Shikun & Binui Company Profile)

The Ethics Council painted a different picture still.   For the Ethics Council the matter was easy.  It is also a brilliant exercise in the semiotics of meaning and the way in which symbolization of objects, and their interpretation, can substantially shape realities that are in the end little more than layering of interpretation directed toward a result. (e.g., Jan M. Broekman & Francis J. Mootz III (Eds): The Semiotics of Law in Legal Education, Springer Publishers 2011).  This is not to suggest that the Ethics Council was wrong.  But it is to suggest that it was right only within the framework it constructed and within the logic of which it acted.  But that framework is not the only one.  The Israeli's have another.  And global consensus appears to be, for the Norwegians, the basis for breaking this Gordian knot. 

1. The Shikun and Binum erect structures for human habitation.  

 Shikun & Binui Ltd.5 is one of the largest companies in Israel’s construction industry. It has several subsidiaries whose activities include the construction of roads and houses as well as property sales. The company operates both in Israel and abroad. Its wholly owned subsidiaries include Shikun & Binui Real Estate Development and Solel Boneh. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 3).

2. The habitations are built on land  which is called in Jerusalem. Popular global consensus currently labels this land "East Jerusalem." As a consequence, the structures are labelled settlements--to suggest the alien element in the relationship of the people engaging in the construction and others.

 The residential project Ramat Rachel Dreams in the East Talpiyyot area of East Jerusalem is included in the list of ongoing and completed projects on Shikun & Binui Real Estate Development’s website. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 3).

 

3. Shikun and Binui and its related entities also engage in other activities on  land labelled "West Bank" and "East Jerusalem."

The construction of 102 dwellings in the Israeli settlement of Ma’aleh Edumim by Shikun & Binui Real Estate Development’s in 1994 as detailed in documents concerning legal proceedings against the authorities on a tax issue. Ma’aleh Edumim is one of the largest Israeli settlements on the West Bank. Solel Boneh has been lead contractor for several settlements on the West Bank. In 2006, interest groups approached the Ministry of Housing and Construction with a query under the Israeli Freedom of Information Law as to which companies have been awarded contracts for the construction of settlements. In the Ministry’s response, Solel Boneh is given as, inter alia, main contractor for the construction of the Homat Shmuel settlement in Har Homa in East Jerusalem.
Solel Boneh has a factory for the production of ready-mixed concrete in Kyriat Sefer, adjacent to the Israeli settlement of Modi’in Illit on the West Bank. The company refers to this itself on its website.8
In 2004 the Israeli authorities also announced that Solel Boneh had won the tender for a split contract to erect the West Bank separation barrier. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 3).

4.  Reference is made to a set of global norms (global in the sense that many states have acceded to its terms, but not all). That text is then interpreted by bodies with varying degrees of jurisdictional power as prohibiting  the building activity. 

The main purpose of the IV Geneva Convention is to protect civilians during war and occupation. The convention determines, amongst other things, the rights and obligations of the occupying power in an occupied territory.
The convention entered into force in 1950. Israel became party to the convention without reservations in 1951. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 4).

5.  Global consensus has concluded that the nature of the relationship of the people responsible for the building and the land is one of occupation (of course all land is occupied, but in this case occupied without permission or better the acquiescence of the global community) and that as a consequence this activity is illegitimate. 

 Regarding the legality of the settlements, the Council makes reference to statements by the International Court of Justice (ICJ) in The Hague, the UN Security Council and the International Committee of the Red Cross (ICRC), all of which establish that the building of Israeli settlements on the West Bank and in East Jerusalem is in breach of the IV Geneva Convention. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 4.2).

6.  The interpretation is both political (in the sense of representing the political desires of those who control the governmental apparatus of a large number of states (however those desires are manufactured)) and judicial (invoking the legitimation of the judicial form; e.g.,   Larry Catá Backer,  “Retaining Judicial Authority: A Preliminary Inquiry on the Dominion of Judges,” 12 William & Mary Bill of Rights Journal 117 (2003)). 

Security Council resolutions
The UN Security Council has adopted a string of resolutions which establish that the settlements are illegal, including resolutions 446 (1979), 452 (1979), 465 (1980), 471 (1980) and 476 (1980).
UN Security Council resolution 465, which was adopted unanimously on 1 March 1980, establishes among other things that Israel’s policy and practices of building settlements on occupied territory, including East Jerusalem, have no legal validity and “constitute a flagrant violation” of the IV Geneva Convention.
The ICJ’s advisory opinion
In its 2004 advisory opinion on the legality of Israel’s separation barrier on the West Bank, the ICJ also considered the legality of the settlements:
“The Court concludes that the Israeli settlements in the Occupied Palestinian Territory (including East Jerusalem) have been established in breach of international law.”
Here, the ICJ found that Israel’s establishment of settlements on the West Bank and in East Jerusalem is illegal.
Statements by the International Committee of the Red Cross (ICRC)
The ICRC has on several occasions made statements about the legality of the Israeli settlements.
A statement in 2001 says, inter alia, that the ICRC has repeatedly pointed to the fact that the Israeli settlements have been established in breach of international humanitarian law. The ICRC emphasises that in connection with the settlements, the Israeli state has introduced laws and administrative guidelines which contravene the IV Geneva Convention in a number of respects.
Statement by the UN Secretary-General
In August 2011, the UN Secretary-General commented on plans to build further settlements in East Jerusalem as follows:
“The Secretary-General is deeply disappointed by the recent approval by the Government of Israel to build more than 900 housing units in East Jerusalem. He reiterates that settlement activity in the West Bank, including East Jerusalem, is contrary to international law, and he is concerned by provocative actions on the ground.” (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 4.2).

 7.  This interpretive layering is rejected by some.  

Israel asserts that East Jerusalem has a different status to the rest of the West Bank. Israel resolved to annex East Jerusalem in 1980 by adopting the “Basic Law: Jerusalem, Capital of Israel”.16 In 1980 the UN Security Council adopted Resolution 478 which establishes, among other things, that Israel’s annexure of East Jerusalem is illegal and does not change the area’s status as an occupied territory. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 4.3).

8. But the logic of structures of decision make participation irrelevant.  And thus, like Charles I before his judges Shikun and Binui refuses to participate, and in doing so appears to solidify its position as "out-law" that is, as committing the second offense of refusal to consent to the application of the rule framework within it is being judged.

The Council has written to Shikun & Binui Ltd. asking whether it, or any of its subsidiaries or the companies it controls, are involved in or have future plans to participate in the construction of Israeli settlements on the West Bank (Judea and Samaria) or in East Jerusalem, and, if so, what the nature of these activities is and what plans the company has for future activity in said areas.
The Council has also sent the company a draft of this recommendation with an invitation to make any comments it may have.
The company has not responded to any of the Council’s approaches. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 5).

 As discussed in previous recommendations, the Council on Ethics’ role is to assess the GPFG’s investments in companies under the Fund’s Ethical Guidelines. The Council bases its assessment on the company’s activities and conduct, not on possible violations committed by states or other parties. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 6).

9.  But weight is given to consensus, with no margin of appreciation for alternative interpretation.  This embraced, consensus is then internalized as an operative obligation of the Norwegian State. 

 There is wide international consensus that Israel’s building of settlements on the West Bank and in East Jerusalem is illegal. In the view of the Council, companies that build such settlements may be excluded from the GPFG. In its deliberations of such cases, the Council does not distinguish between the building of settlements in East Jerusalem and in the rest of the West Bank. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 6).

10.  Shikun and Binui engage in prohibited activity. 

 The Council finds that Shikun & Binui Ltd. has been, and probably still is, involved in the construction of settlements in the occupied territories. As the company has not responded to the Council’s approaches, it is not possible for the Council to provide the exact status of the company’s current and future construction projects in the occupied territories, except to the extent that, according to its sales prospectus, the Ramat Rachel Dreams project is due to be completed in 2013.
On the basis of the information available about the company’s earlier and current construction projects on the West Bank and in East Jerusalem, the Council finds that there is an unacceptable risk that the company will participate in future violations of ethical norms by undertaking the construction of Israeli settlements there. The Council on Ethics believes that this risk will remain as long as such activities are permitted or until the company makes it clear that such activity has ceased. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 6).

 9. On that foundation, and applying its logic, decision is easy: The Ministry of Finance may exclude a company on the advice of the Council of Ethics.  The Council of Ethics must base its recommendations on both its internal governance structures and norms, as well as on the governance structures and norms of the Norwegian state.These Guidelines have been augmented by Norwegian Government White Papers and by prior recommendations of the Ethics Council (Africa Israel Ltd. and Danya Cebus Ltd., 16 November 2009, and the subsequent letter from the Council of Ethics to the Ministry of Finance, 9 March 2010).

The GPFG's Ethical Guidelines section 2.3(b) states that:

“The Ministry of Finance may, on the advice of the Council on Ethics, exclude companies from the investment universe of the fund if there is an unacceptable risk that the company contributes to or is itself responsible for: […] serious violations of the rights of individuals in situations of war or conflict”

The Geneva Conventions are specifically referred to in the preparatory documents of the GPFG’s Ethical Guidelines as part of the basis for an evaluation of companies’ activities in situations of war or conflict.3 The purpose of the IV Geneva Convention is to protect civilians during war and occupation. The Council has previously found that the participation of companies in government’s breaches of the Geneva Conventions may constitute grounds for their exclusion from the Fund. In this regard the Council has previously recommended the exclusion of companies that build Israeli settlements on the West Bank and in East Jerusalem. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 6).

10.  Combining its own governance framework with the overarching legal/political structure within which its decisions must be made, the decision follows.  The fund is prohibited from investing in companies that engage in certain prohibited activities.  Activities labelled settlements on land labelled East Jerusalem constitute such prohibited activity. 

 The Council on Ethics recommends that the company Shikun & Binui Ltd. be excluded from the Norwegian Government Pension Fund Global on the basis that there is an unacceptable risk that the company will contribute to serious violations of the rights of individuals in situations of war or conflict. (From Recommendation of December 21st, 2011, on the exclusion of the company Shikun & Binui Ltd., supra., Section 2.1).

And in one stroke, Norway has brilliantly continued its efforts to engage polycentrically in the development of governance.  It has continued to develop a basis for naturalizing international norms (as they chose to receive them) within the domestic legal order of Norway; it translate that domesticated international norm system into private activity (the framework within which it is project economic power outward through markets and securities investments).  These efforts have acquired something of a judicial character, proceeding from a rule system, interpreted and applied by a neutral board which makes a recommendation which is then applied or not by the political authorities (the Ministry of Finance).   In this way private decisions, with a judicial character are transposed again into state policy--in this case the Norwegian state using economic power to attempt to pressure the Israeli government through the political application of policy.  Domestic law, international norm, investment in private markets, investor power and political calculation, then are all bound up in a simple decision; the boundaries between public and private spheres, between the law system of states and the governance machinery of the international public organization sphere are made more permeable and the role of the state becomes more complex. There is a lesson here for smaller states seeking to leverage global influence here in a world in which states tend to be de-centered within  the logics of economic globalization.