In complex contexts such as these, business enterprises should ensure that they do not exacerbate the situation. In assessing how best to respond, they will often be well advised to draw on not only expertise and cross-functional consultation within the enterprise, but also to consult externally with credible, independent experts, including from Governments, civil society, national human rights institutions and relevant multi-stakeholder initiatives. U.N. Guiding Principles on Business and Human Rights ¶ 23 (Official Comment)
The UNGP make it clear that the obligations of Norway, as the controlling state of the Pension Fund Global, and those of San Leon, as the corporation whose activities are at issue should have been focused on the people directly affected first, and then on the needs and politics of Morocco and the Polisario. The Ethics Council did an excellent job of marshaling evidence that San Leon was interested only in pleasing its Moroccan friends. It showed an antipathy to Polisario. But those political choices ran counter to San Leon's responsibility to respect the human rights of those people in whose territories (irrespective of which actor claimed overall political control). It was certainly not enough for San Leon to suggest that its responsibilities ends when it makes a political choice about recognizing potential sovereigns of a territory. Its responsibilities only starts there. And it is no answer to San Leon's breach of its responsibilities to respect human rights for Norway to effectively say it will pick up its investment toys and play somewhere else. Indeed, Norway's duty to respect human rights through its investments might well in this case compel the Pension Fund Global to put San Leon under observation and to extract concessions, as a shareholder, for substantial consultation with and payments/accommodations to the people affected in the territory.
Instead, the approach of the Ethics Council seemed to make the obligations of both dependent on the politics of the state of international policy on the sovereignty of Western Morocco--that de-centers the human rights elements of the decision in a lamentable way. It might have been better for the Ethics Council to have recommended observation and transparent compliance with human rights responsible conduct. Otherwise the Pension Fund Global again is reduced to little more than an instrument for the expression of the political foreign policy of Norway (and one that is oblivious even to the value maximizing objectives of the Pension Fund, a state of affairs that led to the reform of the Ethics Council system in 2014) rather than as an instrument of norms based responsible investing. One might hope that the Norges Bank considers the Ethics Council's otherwise excellent recommendations in this light.
1 Introduction 3
1.1 What the Council has considered 3
1.2 Sources 4
2 Background 4
2.1 Previous cases 4
2.2 The situation in Western Sahara 4
2.3 International rules of law 6
2.4 The Council's meetings with Moroccan authorities 8
2.5 The Council's meetings with Polisario 9
3 Information from the company 9
4 The Council's assessment 11
5 Recommendation 13
• It could not be satisfied that the activities took place in accordance with the wishes and interests of the people in the area.
• The activities contributed to maintain an unresolved situation in the area.
2.2 The situation in Western Sahara
The Council has described the situation in Western Sahara in previous recommendations (2005, 2010 and 2014) to the Ministry of Finance. The fundamental conditions in the area have not changed since these recommendations were made.
Morocco has de facto control over most of the territory of Western Sahara. However, no UN body has recognised either Morocco’s sovereignty over Western Sahara or Morocco as the lawful administering power in the area. No states recognise Moroccan sovereignty over Western Sahara. Nonetheless, Morocco refers to Western Sahara as a Moroccan province, claiming sovereignty over most of the area.
«[...] the Sahara will remain part of Morocco until the end of time. [...] The fact that Morocco chose to cooperate in good faith with all parties should not be interpreted as a sign of weakness; nor should it be used as a means to ask formore concessions. [...] The autonomy initiative is the maximum Morocco canoffer to achieve a final solution to this regional conflict.»9
2.3 International rules of law
Article 73 of the UN Charter
Article 73 stipulates that the economic and political developments in such areas are to take place in accordance wishes and interests of the people in the area. As regards Western Sahara, this principle has been confirmed in a number of UN resolutions.12
Legal opinion from the UN's legal advisor («2002 UN Legal Opinion»)
This legal opinion issued in 2002 thus states that the extraction of mineral resources in non-self-governing territories is only acceptable if it takes place in accordance with the wishes and«In recognizing the inalienable rights of the peoples of Non-Self-Governing Territories to the natural resources of their territories, the General Assembly has consistently condemned the exploitation and plundering of natural resources and any economic activities which are detrimental to the interests of the peoples of those Territories and deprive them of their legitimate rights over their natural resources. The Assembly recognized, however, the value of economic activities which are undertaken in accordance with the wishes of the peoples of those Territories, and their contribution tothe development of such Territories.»13
interests of the people of the area.
The Geneva Conventions«Any exploration and exploitation of natural resources by Morocco is illegal as it violates international law and resolutions of the UN and the AU relating to the right to self-determination and permanent sovereignty of the people of Western Sahara over their natural resources. In addition, the exploration and exploitation seriously undermines the efforts and negotiations for a just and peaceful settlement over Western Sahara.»14
Court decision by the General Court, the court of first instance, of the European Court of Justice, December 2015
2.4 The Council's meetings with Moroccan authorities
2.5 The Council's meetings withPolisario
The Council met Polisario's Nordic envoy in May of this year and met representatives of Polisario's leadership in October.
3 Information from the company
Letters from the company
The company particularly emphasises the following wording in the 2002 UN legal opinion:
«[...] where resource exploitation activities are conducted in Non-Self-Governing Territories for the benefit of the peoples of those territories, on their behalf or in consultation with their representatives, they are considered compatible with the Charter obligations of the administering Power [...]»
exploration activity does not in itself generate value or remove resources from the area.
The company also refers to Morocco's autonomy proposal in 2007 and the fact that this proposal has formed the basis for further negotiations since 2007. In conclusion, the company writes:
After the company had been provided with a draft of the recommendation to exclude the company, the Council received a new letter from the company in August 2012 in which the company states«In the meantime we as an exploration company operating in Morocco support the general principles outlined in the Corell opinion21 that if a recoverable production as result of an exploration recovery was made, we shall not exploit such resources in total disregard of the interests of the people living in the Sahara region and will act responsibly within the framework of our petroleum agreements signed with the government of the Kingdom of Morocco.»
that it believes the conclusion of the recommendation not only to be erroneous but also to contravene the interests of the local population and the desire to arrive at a negotiated solution to the conflict in the area.
The company's website provides information on the exploration activity in the area.22 The company also refers to a joint declaration («Joint Declaration of Principles») dated July 2015 by San Leon and the Moroccan state-owned oil company ONHYM.23 This declaration states that exploration for and the production of oil resources in the area will take place in accordance with the 2002 UN Legal Opinion, that the local population's representatives in this connection are to be consulted and that the local population are to benefit from the proceeds of this activity.
4 The Council's assessment
The Council takes as its point of departure that Morocco has no legal, sovereign rights over the natural resources in Western Sahara. It is not the task of the Council to conclude on the legality off Morocco's exploration activities in Western Sahara or on the future status that the disputed area should have.
In its assessment of this case, the Council will not distinguish between exploration and exploitation activities. No such distinction can easily be deduced from article 73 of the UN Charter. Under the framework of international law States may not freely initiate petroleum exploration outside their own sovereign territory. Morocco’s aim for its exploration activities is undoubtedly the extraction of petroleum deposits and San Leon contributes to this future aim, irrespective of whether the company itself will only carry out exploration activity or will also take part in future production activity in the area. Although exploration activity does not in itself entail the removal of resources, the mapping the natural resources and the result of this mapping may to a large extent contribute to maintain unresolved situations or to escalate conflicts in disputed areas.
The situation in Western Sahara is unique in the sense that it is the only non-self-governing territory without a recognised administering power. There are no clear rules on the utilisation of natural resources in such areas. Under the framework of international law administering powers of non-self-governing territories are under an obligation to manage the territories in accordance with the wishes and interests of the people of the area . Since the UN does not recognise Morocco as the lawful administering power for Western Sahara, it can be argued that these obligations do not apply to this situation. The legal opinion issued by the UN legal advisor in 2002 is based on an analogy of the obligations of administering powers of non-self-governing territories. An alternative approach would be an assessment based on international humanitarian law. This would probably impose even stricter limitations on companies' operations in the area, as the legal opinion from the African Union concludes.
are safeguarded, as, inter alia, the UN legal advisor assumed in the 2002 legal opinion. San Leon seems to share this view. It will primarily be the responsibility of the authorities to ensure that the people of an area has given its consent. The Council assumes that the measures which a company can implement on its own to ensure such consent are limited.
In the Kerr McGee case (2005), the Council on Ethics attached weight to the fact that the company's exploration activities were not in accordance with wishes and interests of the people of the area, and that they contributed to maintain an unresolved situation in the area. The Council considers the same factors to be of importance in its assessment of this case. The fact that Kerr McGee conducted off shore exploration activities and San Leon is prospecting on shore has little bearing on the Council’s assessment.
In 2012 the company stated that Morocco's autonomy proposal formed the basis for continued negotiations on the area. To the Council’s knowledge, the negotiations had stopped at that time and since then only informal talks have taken place between the parties. In any case, Morocco's proposal does not in itself alter the status of the area. The natural resources of Western Sahara can therefore currently not be mapped as if the autonomy proposal had been accepted and the areas were under legal Moroccan sovereignty, with Moroccan sovereign rights over its natural resources.
Owing to the fact that that no other state recognises Moroccan sovereignty over Western Sahara and that the area is a non-self-governing territory subject to the provisions of he UN Charter, strict limitations apply to the exploration and extraction of its natural resources. It is on this basis the Council will proceed to consider whether it can be regarded as grossly unethical of the company to carry out oil exploration activity in the territory on behalf of Moroccan authorities.
The company has published a joint declaration («Joint Declaration of Principles») with Moroccan authorities. The declaration refers to the 2002 UN Legal Opinion regarding the right of the people of the are a to be consulted. This declaration must be interpreted in light of the fact that Morocco regards the area as its own and that it is consequently the Moroccan authorities who safeguard the local population's wishes and interests, decide on the exploration and the extraction of resources, invite applications for licences, allocate potential oil revenues, etc. This is a fait accompli and not an expression of a consultative process with the people of the area in the sense assumed by the 2002 UN Legal Opinion.
The company has made clear that nodialogue has taken place with Polisario, claiming that Polisario cannot be regarded as the legitimate representative of the people in the area. However, the UN regards Polisario as the representative of the people of the area. Moreover, Morocco negotiates with Polisario when talks on the future status of the area are occasionally held. The company has consulted with some local stakeholders. It nevertheless appears difficult to draw conclusions about the wishes and interests of the people in the area when their recognised representative has not been consulted. On the other hand, it is publicly known that Polisario considers San Leon's activities in the area to be unlawful.
The UN Charter stipulates that the utilisation of natural resources in non-self-governing territories can only take place in cooperation with the people of the area. This is precisely due to the conflict potential inherent in access to natural resources. As long as there is no political solution for the area and one of the parties is expressly opposing the exploration activity, warning that it may lead to an escalation of the conflict, it is reasonable to assume that this activity contributes to maintain the unresolved situation in the area and may even cause it to deteriorate.
In the Council's view, San Leon's exploration activity in Western Sahara must be regarded as a serious violation of ethical norms because the wishes and interests of the people of the areais not given due regard, and it contributes to maintain an unresolved situation in the area.
The Council recommends excluding San Leon Energy Plc. from the Government Pension Fund Global due to the unacceptable risk of the company contributing to particularly serious violations of fundamental ethical norms.
Johan H. Andresen
Hans Chr. Bugge
1 The company has the Issuer ID: 15213136.
2 The company's press release dated 30 September 2015: http://sanleonenergy.com/media-centre/news-releases/2015/september/30/interim-results-2015.aspx.
3 Guidelines for observation and exclusion of Companies from the Government Pension Fund Global: http://etikkradet.no/en/guidelines/.
4 Government White Paper (NOU) 2003: 22, page 92 (Norwegian language only):https://www.regjeringen.no/no/dokumenter/nou-2003-22/id118914/.
5 Polisario was appointed by the UN as the representative of the population in Western Sahara by UN Resolution 34/37 (1978):«The General Assembly [...] recommends to that end that the Frente Popular para la Liberacion de Saguia el-Hamra y de Rio de Orom [ie. Polisario], the representative of the people of Western Sahara, should participate fully in any search for a just, lasting and definitive lasting solution of the question of Western Sahara [...]»,http://www.un.org/documents/ga/res/34/a34res37.pdf.
6 Recommendation to exclude the Kerr McGee Corp, April 2005:http://etikkradet.no/files/2014/12/KMG-12-apri-2005-norsk.pdf.
7 Recommendations in 2010 and 2011 regarding the exclusion of the FMC Corporation and Potash Corporation of Saskatchewan: http://etikkradet.no/en/tilradninger-og-dokumenter/recommendations/other-particular-serious-violation-of-fundamental-ethical-norms/recommendations-2010-and-2011-on-the-exclusion-of-the-companies-fmc-corporation-and-potash-corporation-of-saskatchewan/. Recommendation dated 26 September 2014 regarding the exclusion of Innophos Holdings Inc: http://etikkradet.no/en/recommendation-26-september-2014-to-exclude-innophos-holdings-inc/
8 UN list of non-self-governing territories:http://www.un.org/en/events/nonselfgoverning/nonselfgoverning.shtml
9 Quoted in the «Report of the Secretary-General on the situation concerning Western Sahara», 10 April 2015 (S2015/246), http://www.un.org/en/ga/search/view_doc.asp?symbol=S/2015/246.
10 UNHCR, 2015: «The Sahrawi refugees in Algeria are settled in five camps near Tindouf. Owing to the remoteness of the area, they remain dependent on humanitarian assistance with little prospect of self-reliance as income-generating activities are scarce. The Government estimates that there are 165,000 refugees in the camps.» http://www.unhcr.org/pages/49e4861f6.html.
11 UN Charter, Chapter XI: Declaration Regarding Non-Self-Governing Territories: http://www.un.org/en/sections/un-charter/chapter-xi/index.html.
12 I.a. General Assembly RES 3458 (XXV) of 10 December 1975 which states «the right of the people of the Spanish Sahara to self-determination, in accordance with General Assembly Resolution 1514 (XV) »: http://daccess-dds-ny.un.org/doc/RESOLUTION/GEN/NR0/001/71/IMG/NR000171.pdf?OpenElement. Western Sahara has otherwise been the subject of a number of other resolutions over the past few years, including A/RES/50/33, 6 December 1995, A/RES/52/72, 10 December 1997, A/RES/53/61, 3 December 1998, A/RES/54/84, 6 December 1999, A/RES/55/138, 8 December 2000, A/RES/56/66, 10 December 2001, and in Security Council resolutions, i.a.1754 (2007), 1783 (2007), 1813 (2008), 1871 (2009), 1920 (2010), 1979 (2011), 2044 (2012), 2099 (2013), and 2152 (2014).
13 A letter from the UN's legal office to the UN Security Council (S/2002/161), 12 February 2002, is often referred to as the «2002 UN Legal Opinion»: http://daccess-dds-ny.un.org/doc/UNDOC/GEN/N02/249/87/PDF/N0224987.pdf?OpenElement
14Legal Opinion, the Office of the Legal Counsel and Directorate for Legal Affairs of the African Union Commission. This document is undated but was published on 14
October 2015: http://legal.au.int/en/sites/default/files/The%20Legal%20Opinion%20%28final%20for%20posting%20on%20the%20website%29.pdf
15 Switzerland is the depositary state for the Geneva Conventions. Notification from the Swiss foreign-affairs authorities 23 June 2015: https://www.eda.admin.ch/content/dam/eda/fr/documents/aussenpolitik/voelkerrecht/geneve/150626-GENEVE_en.pdf
16 ICRC: https://www.icrc.org/applic/ihl/ihl.nsf/vwTreaties1949.xsp
17 «The authority representing a people engaged against a High Contracting Party in an armed conflict of the type referred to in Article 1, paragraph 4, may undertake to apply the Conventions and this Protocol in relation to that conflict by means of a unilateral declaration addressed to the depositary. Such declaration shall, upon its receipt by the depositary, have in relation to that con
flict the following effects: (a) the Conventions and this Protocol are brought into force for the said authority as a Party to the conflict with immediate effect; (b) the said authority assumes the same rights and obligations as those which have been assumed by a High Contracting Party to the Conventions and this Protocol; and (c) the Conventions and this Protocol are equally binding upon all Parties to the conflict.» https://www.icrc.org/applic/ihl/ihl.nsf/Article.xsp?action=openDocument&documentId=4B3EBFB356E8FA04C12563CD0051E2FC
18 Morocco's letter to the Swiss foreign-affairs authorities, 30 June 2015: https://www.eda.admin.ch/content/dam/eda/fr/documents/aussenpolitik/voelkerrecht/geneve/150709-GENEVE-avec-ann_e.pdf
19 Ruling of the General Court, 11 December 2015: http://curia.europa.eu/juris/document/document.jsf?text=&docid=172870&pageIndex=0&doclang=FR&mode=lst&dir=&occ=first&part=1&cid=164110
20 UN Security Council, document S/2015/ 804 http://www.un.org/en/ga/search/view_doc.asp?symbol=S/2015/804.
22The company's website:http://www.sanleonenergy.com/operations-and-assets.aspx#morocco/onshore.
23Joint Declaration of Principles:«[...] The exploration and production of hydrocarbon natural resources will be in accordance with the principles enshrined in the Kingdom of Morocco Constitution and international standards, including those from the United Nations Charter stipulated in letter S/2002/161 dated January 29, 2002, addressed to the President of the UN Security Council, signed by the Under-Secretary General for Legal Affairs, and guidelines recommended by the «New model of development of the Conseil Economique, Social et Environnemental (CESE), from November 2013, namely that local populations and their representatives are involved and consulted and that they will benefit equitably and effectively therefrom.[...]» http://www.sanleonenergy.com/media/1796453/joint-declaration-of-principles-of-onhym-and-sle.pdf.