Thursday, January 26, 2023

The Costs of Financing Arms Sales--Norway Pension Fund Global Excludes AviChina Industry & Technology Co and Bharat Electronics Ltd.

 

Pix Credit here

In a recent press release, the Norwegian Pension Fund Global announced two interesting exclusions from their investment universe:
Following recommendations by the Council on Ethics, Norges Bank today announced the exclusion of the companies AviChina Industry & Technology Co and Bharat Electronics Ltd.
The companies were excluded due to an unacceptable risk that the companies sell arms to a state that uses them in ways that constitute serious and systematic violations of international humanitarian law.
The background for this recommendation is the companies’ sale of arms to the Government of Myanmar.
Please find the Council’s recommendation below.

Council’s recommendation to exclude AviChina Industry & Technology Co
Council’s recommendation to exclude Bharat Electronics Ltd.

In both cases the Council (and thereafter Norges Bank) drew a red line that they actually refused to cross: "the Council takes the position that anyone selling weapons to Myanmar since 2018 should have understood that they could be used in violation of international law." (Bharat Electronics Ltd.; AviChina Industry & Technology Co).

AviChina is a Chinese company that engages in the development and sale of aircraft and aviation products. In December 2021, several light combat aircrafts, of the type K-8, were delivered to the armed forced in Myanmar. The aircrafts are thought to have been produced by a company AviChina controls. It has been reported that such aircrafts have previously been used in combat in Myanmar.

BEL is an Indian producer of aviation and defence electronics. In July 2021, BEL delivered a remote-controlled weapons station to Myanmar. This weapons station has been developed to remotely control weapons from inside an armoured vehicle. It is reported that such vehicles are used in attacks on civilians in Myanmar.

The Council continues to apply a broad foreseeability standard that is grounded on their own interpretation of conclusions that can be gleaned from their investigation and assessed against their "reasonable company" standard: " With respect to the company’s knowledge of the weapons’ use, the Ethics Commission’s report states that it must be possible “with a reasonable degree of certainty to substantiate that the company had knowledge of or should have been able to foresee use that constitutes a violation of international humanitarian law” (Recommendation to exclude Bharat Electronics Ltd from investment by the Norwegian Government Pension Fund Global (GPFG), p. 3). The rationale for this standard is also equally straightforward and grounded in the policy choices that the Norwegian state has made as implemented through their global financing instrumentality: "In keeping with the ethical guidelines as a whole, exclusion under this criterion is not intended to punish companies but to sever the GPFG’s association with unacceptable conditions that are ongoing or may occur in the future. In other words, the decisive factor is the risk of norm violations forward in time." (Recommendation to exclude AviChina Industry & Technology Co Ltd from investment by the Norwegian Government Pension Fund Global (GPFG), p. 3).

Also interesting is the categorical analysis; assessment is based on the potential for a particular class of product to be used militarily, rather than based on an assessment either of intent or of effect (actual use)

The first question in this case is whether the K-8 aircraft is a weapon encompassed by the criterion. Since such aircraft can be used in combat and it has been reported that such planes have previously been used in this way, the Council concludes that the aircraft does fall within the scope of the criterion. The damage potential is substantial and attacks made using this type of aircraft could impact civilians. (Recommendation to exclude AviChina Industry & Technology Co Ltd from investment by the Norwegian Government Pension Fund Global (GPFG), p. 6).

The first question in this case is whether a remote-controlled weapons station (RCWS) is a weapon encompassed by the criterion. The product is not, in and of itself, a weapon. However, it is an item of military equipment that is also encompassed by the criterion. The RCWS may be installed in armoured vehicles, which are known to be used against civilians in Myanmar. The Council notes that this was a one-off delivery. (Recommendation to exclude Bharat Electronics Ltd from investment by the Norwegian Government Pension Fund Global (GPFG), p. 6)

No comments: