The Business of Facilitation and the Presumption of Corporate Untrustworthiness; The Norwegian "Guiding Cases" in Delek Group, Sumitomo, and KDDI

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It is always interesting to see how the apparatus of the Norwegian Pension Fund Global dribbles out its parameters for investment that aligns Norwegian national policy with a Norwegian interpretive universe of those portions of international law and norms that suit it to develop and apply to its own investment universe. In some respects the operative model of the Ethics Council Recommendations along with fial action by the Norges Bank--only later distributed to a  group of interested outsiders suggests a convergence with Leninist judicial models for developing frameworks for interpretation. Chinese Guiding Cases (指导性案例) are part of a system (Susan Finder, How 'Case Law' Works in the Chinese Courts) developed for rationalizing the use of prior judicial determinations in the administration of litigation in Chinese courts, and should be referred to by courts at all levels when hearing similar cases (here; and here). For our purposes ere, what makes Guiding Cases so interesting in the Norwegian context is the way that specific investigations are undertaken, the recommendations and decisions of which, now broadly publicized, can serve  to leverage the determination among the relevant community of stakeholders for whom decisions o and actions of the Norwegian Pension Fund Global are important.  More specifically, it suggests, like the development of Guiding Cases, the way that judicial ad quasi-judicial bodies within formal or informal (public or private) administrative organs can more explicitly use their "specific" decisions as quasi legislative devices (at east within the scope of the judicial or administrative authority of those organs).  The idea of the Norwegian Pension Fund Global apparatus as a lawmaker is not new (e.g., here, here), though it may be soft peddled by influencers. 

Critically now, presuppositions of corporate untrustworthiness appear to serve as an unspoken parameter guiding the scope and application of the analytical project of quasi state organs like the Norwegian Pension Fund Global Trustworthiness has become, indeed, an important principle that has been a key element in the constitution of Chinese "Social credit" systems.  But in liberal democracies, it is meant to reflect, in jurisprudential analytics and interpretation, an ideological belief in the character, motives and behavioral compulsions of economic enterprises--at least when measures against the desires and lusts of states and non-governmental organs.  All of this is fair--except to the extent that it is done in secret, or without any sort of exposed engagement with public constituencies--constituencies that might prefer to debate the presumptions that organs like the Ethics Council adopt as a matter of their own internal self-actualization. On trust in corporate governance, see, e.g.,   Larry Catá Backer, "Trust Platforms: The Digitalization of Corporate Governance and the Transformation of Trust in Polycentric Space."

None of this matters except where, as here, these presumptions play a critical role in the evolution and application of concepts of facilitation as an extension of the legal/normative principle of complicity.  It is in this interplay that the Ethics Council might find itself succumbing its own own last temptation--the idea that an ideal state can exist in which pain and suffering can be effortlessly transposed onto the Luciferian enterprise in its relentless amorality in search of profit or advantage. That temptation is much on display in the decisions recently circulated by the Norges Bank and its staff.

Recently, following a recommendation from the Council on Ethics, Norges Bank announced its decision to exclude the company Delek Group Ltd from the Government Pension Fund Global. "Delek Group is an Israeli company, listed on the Tel Aviv stock exchange. Delek Group’s wholly owned subsidiary NewMed Energy is involved in exploration, extraction and production of natural gas and condensate." (Ethics Council Recommendation). The basis for that decision was a determination that the company is responsible for a serious violation of fundamental ethical norms relating to its connection to the company’s petroleum prospecting offshore Western Sahara. The decision was based on Norway's political determination of the consequences of its policy respecting the sovereignty of  Western Sahara, to which the Kingdom of Morocco has asserted claims:  "The company has entered into an agreement with Moroccan authorities for petroleum exploration offshore Western Sahara. Morocco does not have legal, sovereign rights over this area’s natural resources." (Delek Group Norges Bank Decision). In the process the Ethics Council produced clarifying language about the Norwegian position respecting exploitation of the natural resources of disputed territory. The Council on Ethics Recommendation may be accessed here; Delek Group Council Recommendation.

Also, in June 2023, the Council on Ethics recommended to exclude the company Sumitomo Corp from investment by the Norwegian Government Pension Fund Global (GPFG) due to an unacceptable risk that the company is contributing to serious violation of the rights of individuals in situations of war and conflict. "Sumitomo is a Japanese conglomerate with one of its business areas being digital services. The company is partner in a joint venture which has a Joint Operation Agreement with Myanma Posts and Telecommunications (MPT). Sumitomo provides expertise and advice relating to sales and marketing and the expansion of MPT’s network." (Sumitomo Norges Bank Decision). Nonetheless, rather than exclusion, the Norges Bank placed Sumitomo Corp under observation, requesting that the Council to follow developments in the case. The central issue is one around facilitation of the perpetuation of a government that the Norwegian Kingdom opposes as an expression of its own application of what it perceives to be international consensus. These decisions add to the growing corpus of privatized public law around the emerging cluster of presumptions that together constitute the norm of facilitation, a close companion to but not the same thing, as complicity, especially respecting the current government in Myanmar (Burma). See, e.g., here, here, here.

Again, what makes this of interest beyond the small circle of people interested in whatever it is that the apparatus of the pension Fund Global has to say about anything important, is that it has actually been wrestling, unlike other bureaucracies that ought to know better, with the issue of the scope of activity that ought to be subsumed within the scope of activities that ought to constitute actionable complicity like conduct. The idea of facilitation as a standard of complicity has important consequences. (Human Rights Goes to War in Myanmar)

More specifically the issue revolved around the use by other institutions of government of data generated by or through MPT (Ethics Council Recommendation, pp. 8-9).  The Ethics Council took an absolutist approach grounded in the consequences of presumption (along the analytical lines it tends to follow and nicely illustrated in the Delek reasoning). 

Based on the information available concerning surveillance of the telecoms network in Myanmar, the Council presumes that MPT, which is subject to the authority of the government in Myanmar, has installed technology which enables the surveillance of civilians, that the surveillance has been ramped up after the coup, and that police and military units have access to the surveillance data generated by MPT. (Sumitomo Ethics Council Recommendation, p. 11). 

As it did in Delek, the Council effectively gave almost no weight to the efforts of the company to identify mitigate, and remedy.  

In its dialogue with the Council, Sumitomo said that it performs due diligence assessments in order to identify and mitigate negative human rights impacts related to its operations, that it has attempted to use its influence to address the risk of human rights abuses relating to surveillance, and that it has called on MPT to take account of human rights. Although this is positive, the Council considers that the steps the
company has taken to prevent its contribution to human rights violations have produced very few tangible results.

In its dialogue with the Council, Sumitomo said that it performs due diligence assessments in order to identify and mitigate negative human rights impacts related to its operations, that it has attempted to use its influence to address the risk of human rights abuses relating to surveillance, and that it has called on MPT to take account of human rights. Although this is positive, the Council considers that the steps the company has taken to prevent its contribution to human rights violations have produced very few tangible results.  (Sumitomo Ethics Council Recommendation, p. 12). 

Compare Delek:

The Council can give no weight to the company’s assertion that, if viable discoveries are made in the area, it would seek to conduct its operations such that its continued activities would comply with applicable international regulations and standards. In the Council’s view, if viable discoveries are made in the area, the damage would already have been done, in the sense that the chances of reaching a negotiated solution to the area’s future would be further diminished. (Delek Group Council Recommendation , p. 11)

There is an underlying presumption that is worthy of some interrogation-that companies cannot be trusted but states can; or put differently that public institutions are more trustworthy, legitimate, and authoritative than private. Not that this presumption is irrational--but at the same time it is a presumption that eviscerates context and that drives a number of important European initiatives, including the so called Business and Human Rights Treaty and the legalization of the UN Guiding Principles 2nd Pillar.  As political choices those are as good as any other.  Bit their justification might not be as sturdy as the rhetoric on which those presumptions are built. 

In the case of Sumitomo, Norges Bank chose to avoid the presumption and placed Sumitomo under observation. Effectively, Sumitomo will have a form of due diligence reporting to undertake  in addition to other diligence obligations. That leaves the issue of coordination and conflict for another day--and a different body.

Lastly, and also in June 2023, the Council on Ethics recommended to exclude the company KDDI from investment by the Norwegian Government Pension Fund Global (GPFG) (KDDI Council Recommendation) due to an unacceptable risk that the company is contributing to serious violation of the rights of individuals in situations of war and conflict. The recommendation relates to the company’s telecom operations in Myanmar. In this case, "KDDI is a Japanese integrated provider of telecommunication. The company is partner in a joint venture which has a Joint Operation Agreement with Myanma Posts and Telecommunications (MPT). KDDI provides technology and engineering capacity to MPT." (KDDI Norges Bank Decision). As in Sumitomo, Norges Bank declined the invitation and instead placed KDDI under observation (KDDI Norges Bank Decision) and  asked the Council to follow developments in KDDI's operational due diligence.

And again, the Ethics Council applied a set of presumptions about corporate trustworthiness. Its risk parameters guided is analysis:

It has been reported that MPT and other telecoms operators in Myanmar have been ordered to install and activate spyware and surveillance software that enable the regime to monitor customers’ phone and internet use in real time. In this way, the regime can listen into conversations, read text messages, monitor internet and email traffic, and track the location of users. The level of surveillance has intensified since the coup. (KDDI Ethics Council Recommendation, Summary)

Like the rest of us, the Ethics Council gets its news from Reuters and other press organs. And like the rest of us, those organs reporting are given weight. On the other hand, company assertions are given less weight, and the sense of untrustworthiness is suggested.

Although KDDI plays no direct role in the surveillance, the Council attaches importance to the fact that KDDI must know that MPT has installed and activated tools which enable the regime to monitor human rights activists, political opponents and other individuals, and that MPT is thereby enabling serious human rights violations. In its dialogue with the Council, KDDI said that it has performed a human rights impact assessment in order to identify and mitigate negative human rights impacts related to its operations, that it has attempted to use its influence to address the risk of human rights abuses relating to surveillance, and that it has called on MPT to take account of human rights. The Council also notes that the company so far, has elected to remain in Myanmar to help maintain the telecoms infrastructure that is also vital for the civilian population. In the Council’s opinion, the steps the company has taken to prevent its contribution to human rights violations through its partnership with MPT have produced very few tangible results. (KDDI Ethics Council Recommendation, Summary)

KDDI's discussion of its human rights risk balancing is also given short shrift (Ibid., 10). That is a balancing that appears to trouble less when the issue revolves around enterprises remaining is Russia after the start of its Ukrainian adventurism (discussed here). 

All in all, an interesting set of decisions.  The development of principles of facilitation ought to be encouraged, and taken up elsewhere; the issue of principles of trustworthiness, especially in the context of complex balancing analytics with human rights implications requires substantially more work.