The Petroleum Fund Advisory Commission on International Law

Oslo 17.06.2003

Memorandum to the Ministry of Finance

Report from CaringCompany-Etikanalytikerna on Exclusion of Companies

Approach to the Problem
The Petroleum Fund Advisory Commission on International Law (the Advisory Commission), in a letter of 13 April 2003, was requested by the Ministry of Finance to consider a report from CaringCompany-Etikanalytikerna (CCEA) which aims at identifying companies which have operations in contradiction to international prohibitions against anti-personnel mines, chemical and biological weapons, sexual exploitation of children and the worst forms of child labour.

The Advisory Commission on International Law interprets this request to mean that the Ministry of Finance wishes to consider firstly CCEA’s method and to what degree the method is conducive for the enlightenment of the relevant approaches to the problem, and secondly, to what degree CCEA’s concrete recommendations are based on valid premises.

The GES-Method
CCEA bases its analyses on its so-called GES-method. GES stands for Global Ethical Standard. According to CCEA this is “a tool for avoiding investments in companies which are documented to conduct business in a manner contrary to well-established international norms”. 1CCEA doc., page 3 The analyses are undertaken, according to CCEA, “on the basis of a systematic screening of selected UN bodies and NGOs with consultative status in the UN”. 2CCEA doc., page 3

Furthermore, it is said that the primary information is analysed and assessed in relation to the international norms that secures human rights and environment. 3“The primary information is analysed and assessed in relation to the international norms that secures human rights and environment.” CCEA doc. page 3 It is not clear how the GES method can be used, for example, when it applies to international norms regarding weapons. CCEA’s reference to “UN conventions” on anti-personnel mines, biological weapons and chemical weapons does not appear to be linked to the general GES method. 4The Mine Ban Convention is not a UN convention. CCEA also does not have the correct reference to the prohibition against sexual exploitation of children. Their reference is to “The Convention of the Rights of the Child on child prostitution and child pornography”, while it should have been to the “Optional Protocol to the Convention on the Rights of the Child on the Sale of Children, Child Prostitution and Child Pornography”.

According to the document, the GES method implies that all companies in the investment universe are subject to search through selected UN and UN-related sources. The document also refers to UN bodies, without specifying to which UN bodies it refers. The Advisory Commission on International Law assumes that it is the references in enclosure 1 to several instances, for example, the UN’s High Commissioner for Human Rights, ILO, UN’s Global Compact, UN Department for Disarmament Affairs, as well as several NGOs and “others”, which constitute UN and UN-related sources.

In the document, CCEA says that this methodological approach secures a continual supply of updated, global comparable information and a “definition” of how the information can relate to the companies. The document does not say how the companies in the investment universe will be monitored against these sources. This makes it difficult to consider the validity in the above-mentioned approach. The Advisory Commission presumes that in order to get the above-mentioned result, one would either have to search via search engines on the Internet, or undertake manual document searches.

“UN sources”
Manual document searching is hardly realistic when it concerns several of the most important UN sources mentioned in the document. The UN’s High Commissioner for Human Rights, for example, is a big secretariat for all the UN’s human rights-related mechanisms and procedures. The documents which stem from the treaty-based mechanisms, such as, for example, the conventions monitoring committees (treaty bodies) and their reports and recommendations to all States’ parties, are not adapted to an electronic search system where it is possible to enter the name of a company and get documents where this company is mentioned. The same applies to the so-called charter-based mechanisms, such as the UN’s Human Rights Commission, or UN Special Rapporteurs or other instances. This is due to the fact that the UN is an interstate organization, which means, that it is the states’ and not companies’ conduct which is regulated. It will therefore be random and rather exceptional if a company is mentioned in a general UN context in connection with human rights. Even if CCEA should have undertaken manual searches in all treaty- or charter-based available documents it would not have yielded much information concerning conduct of companies. Therefore, to the extent that it is based on UN documents, this method does not seem suited as a basis for consideration of companies’ conduct.

Concerning employees’ rights, the above mentioned enclosure in CCEA’s report refers to both ILO (the International Labor Organization) and to ILO’s search website, ILOLEX. The ILO is also an interstate organization which facilitates wide-ranging co-operation between states, employees and employers, but which is also not tasked to monitor or report specifically on the conduct of companies. At these websites, however, it is possible to search for companies, but only if one also enters information about which specific ILO convention that is relevant, which provision of that convention that is allegedly violated, which country the incident is supposed to have taken place in, and the year the incident was alleged to have happened. This means that in these kind of searches one must undertake, to a large extent, a manual search on the basis of the information one already has, unless one has developed one’s own search machine connected to, for example, ILOLEX. CCEA does not, when it concerns this source, explain how the searches are made or how information is collected and updated.

Other UN sources mentioned in the enclosure are UN Global Compact, UN mine Action Center, IAEA (the International Atomic Energy Agency), UN Department for Disarmament Affairs, and UN Institute for Disarmament Research. None of these sources monitors the conduct of companies, nor is it possible to go into their websites and get search results only with the help of the name of a company. How they are actually used in the GES method seems unclear.

“UN-related sources”
As mentioned, it is said in the document that the GES method is based on “a systematic study of selected UN bodies and NGOs with consultative status in the UN.” It is evident from the context that it is these NGOs that are referred to as UN-related sources. The point of departure is that the category NGO with consultative status in the UN, is extremely comprehensive. The most recent obtainable list of such NGOs from ECOSOC fills 63 pages. 5NGOs in consultative status with ECOSOC,1. November 2002. Web address: www.un/org/esa/coordination/ngo In the enclosure, however, CCEA has limited the NGOs to approximately ten organizations, some with high public profiles and high degrees of credibility such as Amnesty International, Human Rights Watch, World Federation of Trade Unions, International Campaign to Ban Landmines, International Save the Children Alliance and Anti Slavery International. In addition, the enclosure mentions other NGOs and several organizations and other instances that are categorized as partly “NGO” and as partly “other” without explaining the distinction between these two.

The Petroleum Fund Advisory Commission presumes that it would be possible to monitor the websites of many of these NGOs, and in this way, at least to a certain degree, keep updated on concrete situations concerning serious human rights violations which are publicised in the press or otherwise known. On the home pages of, for example, Amnesty and Human Rights Watch, a search system has been set up which makes it possible to search in their web-archives for, inter alia, companies. In order to capture all reported human rights violations, however, a comprehensive and systematic monitoring would be necessary. Whether or how such a possible monitoring is undertaken by the CCEA is not explained in the report.

The Advisory Commission wants to point out that it is generally misleading to call NGOs UN-related sources. There is a fundamental difference between an interstate organization (IGO), such as the UN, and a non-governmental organization (NGO). Where some of the latter have consultative status with the UN, it is to promote the views of non-governmental actors which otherwise would not be heard in the UN system. Most NGOs, on this background, would take exception to being referred to as UN-related.

The Method of Evaluation
According to the CCEA document, reported human rights violations are verified against two sets of criteria, the so-called “Reporting Source Criteria” and “Incident Criteria”. These first-mentioned criteria are considered met when one or more of the following occurs:

• the reported violation is being examined by an official source (i.e. UN body)
• the company is being subject to a sanction (“sanctioned”) by a regional or national court of law or another public body
• the company has accepted responsibility for the violation

The last-mentioned criteria (Incident Criteria) are considered met when the company is associated with systematic occurrences that have led to serious negative consequences, when systematic occurrences have led to lesser consequences, and finally when isolated occurrences have led to serious negative consequences. Exclusion is recommended when both Reporting Source Criteria and Incident Criteria are met. 6CCEA doc. Page 5

It is somewhat unclear what the first of the three “Reporting Source Criteria” implies. Firstly, it is unclear what is implied by the term “examined”, and secondly, it is unclear what is meant by “official source (e.g. UN body)”. To the extent that the human rights conventions’ treaty bodies “examine” human rights violations, it is either in the form of consideration of periodic reports from states parties on their implementation on the relevant conventions or in individual complaint cases. In both instances, it is the states that are being “examined”, not companies. The same applies to documents from the Special Rapporteurs. As concerns the central UN organs, such as the General Assembly, the Security Council, ECOSOC or the International Court of Justice, there are neither examinations nor evaluations of companies’ conduct. This is the general point of departure for both the UN as well as ILO.

In an ILO context, however, there are greater possibilities that companies could be mentioned in connection with complaints or reports on violations of employees’ rights. Companies are, however, not subject to “examination” or any other form of authoritative evaluation by an ILO body. The basis for the system is that the states must provide that companies are not allowed to contribute to violations of rights. It should be noted that ILO is not considered as an UN organ, but as a “specialized agency”.

The Advisory Commission on International Law’s Evaluation

The Advisory Commission on International Law finds it difficult to fully evaluate the validity of the GES method from the general description in the document, but if applied as it is described, it is probable that it will provide incomplete information about companies’ conduct and production. The mentioned main sources, namely UN sources and UN-related sources, cannot to a great degree, give information on how companies behave. Furthermore, it is generally unclear what the first “Reporting Source Criterion” implies, and this constitutes a central part of its method. It is therefore difficult to see that the GES method will function satisfactorily in practice.

When there is question of withdrawal of companies from the investment universe because of alleged human rights violations, it ought to be possible to somehow check or confirm the allegations that stem from the sources used. The way the GES method has been described and the way the results have been documented in CCEA’s report, this requirement has not been met.

The Concrete Recommendations

Marriott
CCEA recommends that 14 securities that seem to belong to 4 different companies which are related to Marriott International Inc. should be withdrawn from the investment universe. The grounds given are NGO reports on sexual exploitation of children which has taken place at the Marriott Hotel in Costa Rica, together with a conviction of a person in the Supreme Court of Costa Rica for sexual exploitation of children.

The reports come from two NGOs, Casa Alianza and GMACL (Global March Against Child Labour). 7It may be mentioned that neither of the two mentioned NGOs are found among the NGOs from ECOSOC’s 63-page long list of NGOs with UN consultative status. The CCEA’s document provides references to websites for some of the documents it refers to, but most of them are not accessible on the Internet. 8It is stated that a document is available that constitutes a part of the two mentioned NGOs’ presentation to the UN working group (UN Working Group on Contemporary Forms of Slavery). This document is referred to in the form of two websites neither of which are available, but where it is apparent that this is the year 1999 they are speaking about. In the Working Group’s report for 2000 (in 1999 no report was published) is there nothing of the two NGOs CCEA mentions stated as observers under the working group’s yearly session, see UN document E/CN.4/Sub.2/2000/23, 21 July 2000, Para 12-14, page 5 Through a quick look at these two organizations’ home pages, we found several references to the penal case against the person who was sentenced for promoting prostitution, but none of the references implies that the Marriott chain is guilty as an accessory to this activity. 9The only reference to Marriott was: ”Victims also reported how they had been taken to clients in the Marriott, Presidente, Del Rey and other hotels in San Jose.”

CCEA states in its document that Costa Rica has been “severely criticized in a UN arena for difficulties and weak legislation in terms of sexual exploitation”. Here, the reference is to the website of the World Tourism Organisation, where it is not possible to find this reference to the UN criticism of Costa Rica. 10It appears that CCEA’s understanding is that the World Tourism Organisation is an UN organization, which is incorrect The Advisory Commission points out that if Costa Rica had been criticized by the UN, the sources would, for example, be UN documents about Costa Rica under the treaty-based state reporting system, UN documents under the individual complaint system, resolutions or reports from the UN’s Human Rights Commission, or in the form of a review from one or several of the Special Rapporteurs. Such documents would be accessible in various parts of the database of the UN’s High Commissioner for Human Rights.

CCEA claims that the main source in this instance is a Supreme Court judgement from Costa Rica where a man has been convicted for gross promotion of prostitution and sexual exploitation of minors. It appeared, according to CCEA, that the man had committed several of the crimes at the Marriott Hotel in Costa Rica. The Supreme Court judgement is not enclosed or cited, nor is it referred to with, for example, date and case number. It appears, however, from the available documentation that the hotel or the Marriott hotel chain is neither convicted nor charged in the case.

It is claimed in the document from CCEA that “The hotel Marriott in this case can be held responsible due to the fact that the Supreme Court’s verdict is based on testimony involving illegal activities taking place at the hotel’s premises.” CCEA does not, however, make any attempt to evaluate the verdict and the remaining information in such a way that they, through an analysis of the available information, make it probable that the hotel chain should be considered as jointly responsible for the crimes that have been committed. Normally, there has to be a certain degree of subjective guilt to convict somebody for an act or omission. There is no argumentation in the CCEA report that the hotel was involved or that they even knew what happened. The allegation that the hotel was an accessory is neither documented nor made to seem probable.

The Advisory Commission emphasizes that it cannot be ruled out that such subjective guilt for the hotel exists, but from the particulars and evaluations provided for in the CCEA report, one cannot draw such a conclusion.

Neither UN sources nor UN-related sources have been used in this case. 11Inasmuch as the two mentioned NGOs do not have UN consultative status, they can notwithstanding hardly be called “UN-related” Instances of sexual exploitation of minors have led to a conviction in a national court, but the Marriott Hotel in San Jose or the Marriott chain have not been convicted, or charged. In the GES method’s “Reporting Source Criteria” it appears that unless UN sources have been used or the company has accepted responsibility, the concerned company must be sanctioned in a national or regional court. 12”the company has been sanctioned by a regional/national court of law..” (our emphasis) One can therefore not see that the GES method’s “Reporting Source Criteria” is used on this occasion. The Advisory Commission emphasizes that much of CCEA’s information is not confirmable from the references they use in their document.

The Advisory Commission on International Law’s evaluation

The Advisory Commission on International Law considers CCEA’s recommendation that the Marriott chain be extracted from the investment universe as ill founded.

Singapore Technologies
CCEA recommends withdrawal and exclusion of two companies for reason of being accessory to the production of anti-personnel mines, namely “CHARTERED SEMI CON” and “SINGAPORE TECH ENG” (Chartered Semiconductors Manufacturing Ltd. and Singapore Technologies Engineering Ltd.).

CCEA does not refer to the previous process in the Ministry of Finance regarding these two companies. As is known, the Ministry of Finance withdrew Singapore Technologies Engineering from the investment universe in 2001 after recommendation from the Advisory Commission on International Law. One year later, the company Chartered Semiconductors Manufacturing Ltd, was considered by the Advisory Commission on International Law. It was not recommended to withdraw this company because the connection to the mine-producing company was determined to be too indirect to invoke the prohibition against being accessory in the mine convention. The Advisory Commission on International Law realises that CCEA could have reached another conclusion regarding the company’s degree of being accessory, but this has not been argued in their report. According to information given by CCEA itself, it is the company Singapore Kinetics which is responsible for production of anti-personnel mines. CCEA does not explain why they apparently identify Chartered Semiconductors Manufacturing Ltd with Singapore Kinetics.

The source that CCEA uses in this instance is Land Mine Monitor which is published by Human Rights Watch and ICBL (International Campaign to Ban Landmines). This is an annual report on all states’ relation to and possible compliance with the Mine Ban Convention. 13Landmine Monitor Report, International Campaign to Ban Landmines, 2002 The report has high credibility and is used by both states and NGOs. It is important to emphasize that Land Mine Monitor is not a UN source, but that it has its credibility because it is a pure NGO project. It is therefore inappropriate to call it an “UN-related source”, even though the two above-mentioned NGOs have consultative status in the UN.

CCEA has not found the reference to Chartered Semiconductors Manufacturing in Land Mine Monitor. 14Land Mine Monitor, 2002, pages 742-743 It is not evident on which source the recommendation for exclusion of this company is based.

As concerns the so-called “Reporting Source Criteria”, none of these were fulfilled in this instance. The instance has not been examined by an official source (UN body). It would in fact not be anything to examine since Singapore is not a state party to the Mine Ban Convention. The prohibition against production etc. of anti-personnel mines applies only for the states which have ratified the convention. Neither Singapore nor the actual companies thus do anything illegal in this regard. It would therefore not be a basis for any form of judgement or acknowledgement of responsibility. The so-called “Incident Criteria” are by the same reasoning not fulfilled. An “infringement of an international norm” has not occurred, as the GES method presupposes.

It can thus be ascertained that the GES method has not actually been used in this instance either, and in addition that the method could not be used in this case.

The Advisory Commission on International Law’s Evaluation

The Advisory Commission on International Law considers against this background that the above-mentioned recommendation by the CCEA that Chartered Semiconductors Manufacturing Ltd be withdrawn from the investment universe is without basis.

Concerning CCEA’s recommendation to exclude Singapore Technologies Engineering, this company was withdrawn from the investment universe in 2001.

Companies under observation
CCEA recommends that four companies be subject to observation. The observation is a recommended result of the GES method, inter alia, in incidents where violations of international norms cannot connect both “Reporting Source Criteria” and Incident Criteria” simultaneously. 15Simultaneously it is stated that a company can be the object of observation when the company ”has been associated with reported incident/s which does not meet Reporting Source Criteria or Incident Criteria, but relates to an international norm”. It is from the mentioned context, difficult to understand what this means. The four companies which are recommended for observation are “CHEMRING GROUP; DAIMLERCHRYSLER, RHEINMETALL AG, THALES/THOMSON MULTIMEDIA”. 16CCEA doc. Page 6 The background for the recommendation on observation is the allegation concerning assisting in the production of anti-personnel mines.

Furthermore, six additional companies are recommended for “Observation Class 2”. Here, no description is given of any alleged violations and their connection to the concerned companies.

It will of course always be important to monitor whether companies in the investment universe assist in the production of weapons which can lead to violations of Norway’s international law obligations. The problem in relation to the four companies that are named in connection with anti-personnel mine production is the uncertainty surrounding what is encompassed by the definition of an anti-personnel mine. CCEA has not provided any arguments for why the mines that are mentioned should be included in the prohibition. The Advisory Commission on International Law does not rule out that there can be reasons for regarding these weapons as anti-personnel mines, but in the document we have received for consideration, no such basis is given.

The Advisory Commission on International Law’s Evaluation

The Advisory Commission on International Law does not find that the CCEA document gives basis to conduct separate observations of the four companies that are mentioned. The same applies to the companies that are listed as “Observation Class 2”.

Conclusion

The Petroleum Fund Advisory Commission on International Law cannot, on the basis of the afore-mentioned, see that CCEA has documented that the mentioned companies have conducted activity in violation of the international prohibitions against anti-personnel mines, chemical and biological weapons, sexual exploitation of children or the worst forms of child labour. Furthermore, we cannot see that the GES method is conducive for the disclosing of violations of such prohibitions, and neither does it appear that the GES method, as it is described in CCEA’s report, has actually been used by CCEA in its consideration of the above questions.