Protecting Orangutans and Holding High the Banner of Anti-Corruption: The Norges Bank Places Petrofac Ltd (Petrofac) (UK) Under Observation and Excludes Power Construction Group of China Ltd (PowerChina)

 

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 On 6 July 2023, the Norges Bank announced two decisions with respect to its management of the Norway Pension Find Global. 

In Power Construction Corp China Ltd, those who decide such things at Norges Bank adopted the recommendation of the Ethics Council which determined that the company's involvement in the construction of the hydropower project in Batang Toru "will have a destructive and permanent impact on the environment, which will pose a serious threat to the survival of [an identified] orangutan species as well as other critically endangered species." (here). 

In  Petrofac Ltd (Petrofac) NOrges Bank officials also adopted the Ethics Council's recommendation, this time that the company be placed under observation. The issue here is one with respect to which the Ethics Council and Norges Bank have dealt with often, and with European companies--allegations or suspicions of corruption-sometimes corroborated through judicial or administrative process; sometimes not. corruption and the construction and operation of systems of prevention, mitigation., and remedy, once corruption is exposed and the  company promises reform.  In this case, the Ethics Council determined that they could not fully trust either the development of the system that the company put in place to mitigate corruption, nor the likelihood that it would be effectively operated, nor perhaps, the intent of the company with respect to either.  In this atmosphere of mistrust (something quite common after the 1990s with respect to governance in economic entities), the  Council and the Bank (here the irony is profound) decided that they ought to place the company under observation fora while. (here)

In both cases the standard was one of unacceptable risk (to the Pension Find Global and its profit making operations). In the case of PowerChina due to an unacceptable risk that the company is contributing to, or is itself responsible for, serious environmental damage; in the case of Petrofac, due to an unacceptable risk that the company is contributing to or is itself responsible for gross corruption. The sensibilities remain administrative; the operating mode academic and detached; the core of decision making the embrace of a very specific approach to the nature and consequences of risk and risk taking ion economic activity. But all for a good cause. In the context of environmental risk, both Council and Bank continue to harden international law and norms within its private law based environment and to transpose both into operation within domestic legal orders in particular ways--in ways that might not be legally cognizable within its home state (in this case the UN Convention on Biological Diversity (CBD) and the Kunming-Montreal Global Biodiversity Framework, from 2022, which establishes an international commitment to the preservation of biodiversity.).  Not that this is bad, but it appears to further what might be seen as the Ethics Council's long term mission to produce law one exclusion at a time. From a systems coherence perspective this might be an unfortunate, if stubborn, pathway to change in transnational private space with public characteristics.  

In the case of Petrofac, on the other hand, the issue became more intimately administrative and centered on the application of the judgment of the members of the Ethics Council with respect to the company's anti-corruption efforts on the the basis of the company's ability to conform to a set of standards developed for framing analysis. Again, this involved a process of hardening international norms into the operative rules conformity to which might be viewed as a predicate to more favorable exercises of discretion by the Ethics Council and the Bank. 

Internationally recognised guides and principles for the design of anti-corruption programmes may, for example, be found in: ISO 37001:2016: Anti-bribery managementçsystems – Requirements with guidance for use; UNODC. 2013. An Anti-Corruption Ethics and Compliance Programme for Business: A Practical Guide, available at https://www.unodc.org/documents/corruption/Publications/2013/13-84498_Ebook.pdf; U.S. Department of Justice (DOJ) and U.S. Securities and Exchange Commission (SEC). 2012. A Resource Guide to the U.S. Foreign Corrupt Practices Act, available at https://www.justice.gov/sites/default/files/criminal-fraud/legacy/2015/01/16/guide.pdf; OECD. 2010. Good Practice Guidance on Internal Controls, Ethics and Compliance, available at https://www.oecd.org/daf/anti-bribery/44884389.pdf; Transparency International (TI). 2013. Business Principles for Countering Bribery, available at http://www.transparency.org/whatwedo/publication /business_principles_for_countering_bribery. (here)

Yet these guides could be used, weighed and applied in ways with respect to which there is little legal certainty.  This is ironic in the context of a state that has been in the forefront of pressing cultures of legality and legalization. In this case legality merely provides a framework for the episodic recourse to contextually hardened frameworks. Good for the administrative apparatus, less good for companies seeking to conform conduct.  At the same time, virtue signalling (what thew Council was correctly sensitive to) in the face of a paucity of details of programmatic development, operation, and accountability, would make any assessor suspicious. It is the structuring of the analytics of suspicions that remains a challenge for both Council and Bank.

The Ethics Council's recommendation in Petrofac may be found here.

The  Ethics Council's recommendation in PowerChina here.