November 24, 2016

The Implications of the Ethical Guidelines for the Norwegian Petroleum Fund for the Application of International Humanitarian Law to Nuclear Weapons

In 2005, seven international companies were excluded from the portfolio of the Norwegian Petroleum Fund, on the ground that they produced key components for nuclear weapons. The Ethical Guidelines on which the decision was based specify that the Fund should not be invested in companies producing weapons that may violate fundamental humanitarian principles. This article explains the background for the Guidelines and how they were implemented with regard to nuclear weapons.

The Fund

Norway has a long-standing and well-developed offshore petroleum industry. In 1990, the Norwegian government established the Government Petroleum Fund. The purpose of the Fund, now renamed the Government Pension Fund – Global, is to facilitate the government savings necessary to meet the rapid rise in public pension expenditures in the coming years, and to support the long-term management of petroleum revenues. The current value of the Fund is in excess of 3000 billion NOK, or 400 billion EUR, making it one of the world‘s largest publicly-owned funds. The Fund‘s asset classes are equities, bonds and real estate, and the Fund is invested in more than 8000 companies in over 50 states.

Background for the Ethical Guidelines

As the value of the Fund increased during the 1990s, a public debate arose about whether the Fund‘s management ought to be subject to ethical standards. One particular incident in 1999 gave momentum to this debate when it was revealed that the Fund was invested in a Singaporean company that produced anti-personnel landmines. Norway had been a keen supporter of the Ottawa process that resulted in the Mine Ban Convention, to which Norway became a party. The questions raised by this apparent inconsistency were among the political discussions leading to the establishment of an Advisory Commission on International Law for the Fund. The mandate of this commission was to determine the extent to which any of the Fund‘s investments could constitute a breach of Norway‘s international obligations.

The Advisory Commission concluded that it could not be excluded that even modest investments in a company that produced antipersonnel landmines might imply a violation of the prohibition against assistance in Article 1 (c) of the Mine Ban Convention. Based on this advice, the Ministry of Finance decided to exclude the relevant company from the Fund. This decision served as a precautionary measure; it was not considered an uncontested clear-cut legal obligation to disinvest, as it is not explicitly stated in Article 1 (c) that such investments actually do constitute a breach of the Convention.

Very few international treaties have provisions that ban purely financial investments in companies involved in prohibited activities. The mandate of the Advisory Commission on International Law was thus relatively narrow, and soon politicians, nongovernmental organizations and other civil society actors in Norway began to demand guidelines for the Fund that would cover more than just investments constituting breaches of international law. It was argued that investments in questionable companies or activities should be scrutinized on ethical grounds, not just legal ones.

In 2002, a governmental commission (the Graver Commission) was established, with a mandate to propose a set of ethical guidelines for the Fund. Based on the Graver Commission‘s report and the ensuing discussions in Norway‘s Parliament, the Ethical Guidelines for the Fund were adopted by the Government in November 2004. This led to the establishment of the Council on Ethics for the Government Pension Fund (“the Council”), replacing the Advisory Commission on International Law.

The criteria in the Ethical Guidelines for exclusion of companies from the Fund

The criteria contained in the Ethical Guidelines require that the Fund shall not be invested in companies which themselves or through entities they control produce certain kinds of weapons, produce tobacco, or sell weapons or military material to Burma. Moreover, the Ministry of Finance may, on the advice of the Council of Ethics, exclude companies from the Fund if there is an unacceptable risk that the company contributes to or is responsible for: a) serious or systematic human rights violations, b) serious violations of the rights of individuals in situations of war or conflict, c) severe environmental damage, d) gross corruption, or e) other particularly serious violations of fundamental ethical norms.

The Ministry of Finance makes the final decisions on exclusion of companies according to these criteria, based on Recommendations from the Council on Ethics. All of the Recommendations must be publicized, whether or not the Ministry follows the Council‘s advice.1All recommendations, as well as other relevant documents, are available in Norwegian and English at the website: www.etikkradet.no

The weapons criterion

Among the provisions of the Guidelines is the provision that the Fund should not be invested in companies that produce certain weapons, more specifically; weapons that through their normal use may violate fundamental humanitarian principles. The Guidelines‘ preparatory work refers in this connection to, for example, the principle of proportionality and the principle of distinction.

These principles refer to inter alia weapons that through their intended use may lead to unnecessary suffering or superfluous injury, or weapons that do not distinguish between military objectives and civilians. Various types of weapons, munitions and means of warfare are prohibited under international law with reference to these principles.

The effects from the use of nuclear weapons are of a nature that makes it difficult to envisage that their use could discriminate between military targets and civilians. Use of such weapons will in any case cause long-term environmental damage, and it can also be argued that it will lead to unnecessary suffering and superfluous injury. It is not controversial, therefore, to argue that the use of nuclear weapons generally will violate fundamental humanitarian principles.

The preparatory work thus concluded that the Fund should not be invested in companies that “develop and produce key components for nuclear weapons.” In addition, the list of weapons under this criterion of the Guidelines encompasses: chemical and biological weapons, anti-personnel mines, cluster munitions, incendiary weapons, non-detectable fragments and blinding laser weapons. This approach to certain weapons as an exclusion criterion was seconded by the Parliament in subsequent discussions, and hence the Fund‘s criterion regarding weapons pertains to the above-mentioned categories.

The preparatory work specifically pointed to the discussions in the US, during the G.W. Bush era, on possible future production of “mini-nukes,” stating that: “The idea is to use such weapons in warfare and not only as a deterrent. Such a strategy will necessarily lead to the collapse of the non-proliferation regime, and rapid global use of nuclear weapons. If the proposal receives political and financial support, the production of such weapons could start in a few years. The […] Fund could therefore provide a signal effect by limiting its investment possibilities with regard to the development and production of such small nuclear weapons.”

The preparatory work thus indicates clearly that the development and production of small tactical nuclear weapons, including “bunker busters,” would fall within the criterion.

How the term “key components to nuclear weapons” was defined

In its interpretation of the Ethical Guidelines, the Council assumed that “development and production” of nuclear weapons encompasses more than just the actual production of nuclear warheads. The term includes, for example, the missile carrying the warhead. In the Council‘s view, certain forms of testing of new weapons and the maintenance of existing weapons also fall within the scope of the exclusion criterion. It was assumed that the production of material that can be used in warheads and the production of the warheads themselves would only take place at government-owned facilities, and would thus not be within the Fund‘s portfolio of companies. Such companies, however, may be directly involved in the development and testing of nuclear warheads. Companies that provide services related to the operation and maintenance of general infrastructure at facilities that may produce nuclear warheads, but take no other part in the actual production, were not considered for exclusion.

The Council moreover found that the development or production of products or materials or other activities that may be categorized as being of a “dual use” nature were, as a point of departure, not covered by the Guidelines. This could for example be the production or enrichment of uranium for other purposes than nuclear weapons. Likewise, the production and maintenance of delivery platforms (aircraft, surface ships, submarines, missiles) that could also be used to deliver conventional weapons would also fall outside of the scope. Moreover, nuclear-powered submarines were considered to fall outside the criterion. Although they are propelled by means of nuclear energy, such submarines can carry both conventional and nuclear weapons. The same applies to other naval vessels.

Missiles that serve no purpose other than to deliver nuclear warheads, however, were not considered to fall under the category of “dual use”. Such missiles would be intercontinental ballistic missiles launched from land or sea, and were regarded as key components to nuclear weapons. The Council also regarded upgrade- and renewal- programmes as a continuous production process and equaled this to the initial production of key components for nuclear weapons. Once the Council had arrived at a delimitation of what would be covered by the criterion on nuclear weapons, it started to collect information on which companies would be candidates for exclusion.

These discussions in the Council on Ethics resulted in a recommendation to the Ministry of Finance on September 19, 2005, on the exclusion of companies developing and producing nuclear weapons, in which the Council recommended that seven companies be excluded from the Fund. The Ministry followed the recommendation and the Fund‘s investments in those companies were sold. In the years following 2005, subsequent recommendations have been submitted on the same topic.

The recommendations on nuclear weapons and IHL

The transformation of the disinvestment instrument for the Fund from an Advisory Commission on International Law to the Council on Ethics entails that the exclusion of companies does not have to be based on international law considerations. On the contrary, it was seen as unnecessary restrictive to base exclusions only on violations of international law. The Council on Ethics –in its deliberations on nuclear weapons– referred to the assumption, shared by many, that it is difficult to envisage use of nuclear weapons that would not violate international humanitarian law. The Council has not, however, made any legal assumptions regarding for example the conclusions in the 1996 International Court of Justice advisory opinion on nuclear weapons of 1996. It is not necessary for the Council to assert that a weapon is subject to an international ban; it is sufficient that the weapon is listed as a weapon that through normal use may violate fundamental humanitarian principles.

Concluding remarks

When assessing the potential effects of the Ethical Guidelines for investment policies, it seems important to also acknowledge the limitations of such policies. Public disinvestment policies hardly constitute very effective foreign policy instruments. At the same time, it seems clear that the publicity generated by a decision to disinvest on ethical grounds does have an impact. Although the Ethical Guidelines cannot take much of the credit for the stigmatization of, for example, nuclear weapons in the international public opinion, its criteria and concrete exclusions hopefully contribute to an increased awareness concerning these issues among investors, both private and public.

 

ABOUT THE AUTHOR

  • PROF. GRO NYSTUEN is Senior Partner at International Law and Policy Institute (ILPI) in Oslo, Associate Professor at the University of Oslo and at the Defence Staff University College in Oslo. She worked in the Norwegian Ministry for Foreign Affairs (MFA) from 1991 to 2005, on issues such as public international law, human rights, international humanitarian law and arms and disarmament issues, including the Mine Ban Convention and the Convention on Cluster Munitions. As from 2005, she has also been Chair of the Council on Ethics for the Norwegian Government Pension Fund – Global.

References   [ + ]

1. All recommendations, as well as other relevant documents, are available in Norwegian and English at the website: www.etikkradet.no
Gro Nystuen

About Gro Nystuen

Prof. Gro Nystuen is Senior Partner at International Law and Policy Institute (ILPI) in Oslo, Associate Professor at the University of Oslo and at the Defence Staff University College in Oslo. She worked in the Norwegian Ministry for Foreign Affairs (MFA) from 1991 to 2005, on issues such as public international law, human rights, international humanitarian law and arms and disarmament issues, including the Mine Ban Convention and the Convention on Cluster Munitions. As from 2005, she has also been Chair of the Council on Ethics for the Norwegian Government Pension Fund – Global.

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