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: Law at the End of the Day

Developing a Coherent Transnational Jurisprudence of Ethical Investing: The Norwegian Sovereign Wealth Fund Ethics Council Model Part I

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This Blog Essay site devotes every February to a series of integrated but short essays on a single theme. The Ruminations Series in 2009 produced a series of aphoristic (?????????) essays, meant to provoke thought rather than explain it. The hope was that, built up on each other, the series would provide a matrix of thoughts that together might lead the reader in new directions. Ruminations continue to be produced form time to time. For 2010, this site introduced a new series--Business and Human Rights. The series took as its starting point the issues and questions raised by John Ruggie, the United Nations Special Representative of the Secretary-General (SRSG) on business and human rights, in a global online forum.

Part I: Introduction of the Series Theme and Thesis

For 2011, this site introduces a new series of integrated essays--Developing a Coherent Transnational Jurisprudence of Ethical Investing: The Norwegian Sovereign Wealth Fund Ethics Council Model. The object of this series to to consider the work of the Ethics Council of the Norwegian Sovereign Wealth Fund. The thesis of this series is this: The Norwegian Sovereign Wealth Fund (NSWF) )investment program is grounded in the application of a set of Ethical Guidelines adopted by the Norwegian Legislature and enforced through an Ethics Council charged with determining whether a company should be excluded from investment by the NSWF. The work of the Ethics Council has produced the beginnings of a coherent jurisprudence of ethics for corporate investment. That jurisprudence may contribute significantly both to the development of transnational social norm standards and affect the way domestic corporate law is understood.

Ethics Council Members

It is now a commonplace that globalization of governance bodies has been accompanied by a trend toward juridification. Lars Bilchner and Anders Molander suggest five dimensions of juridificaiton:

First, constitutive juridification is a process where norms constitutive for a political order are established or changed to the effect of adding to the competencies of the legal system. Second, juridification is a process through which law comes to regulate an increasing number of different activities. Third, juridification is a process whereby conflicts increasingly are being solved by or with reference to law. Fourth, juridification is a process by which the legal system and the legal profession get more power as contrasted with formal authority. Finally, juridification as legal framing is the process by which people increasingly tend to think of themselves and others as legal subjects. (From Lars Chr. Blichner and Anders Molander, What is Juridification?, Arena, Centre for European Studies University of Oslo Working Paper No. 14, March 2005).

Whether or not exercised by a conventionally denominated judicial body, juridification also suggests the adoption of the traditional forms and methodologies of judicial decision making. That is, juridification suggests governance through a process of determining the extent of regulation through a process of constant application of rules to fully developed controversies that bind specific parties and that then serve as a basis for extracting the character of the law through a process of deductive reasoning from the cases. The move toward juridification has also long extended to non-judicial bodies within states. In administrative law, the quasi-judicial function of bureaucracies is both well known and well established. The governance functions of commercial activities has also moved toward the adoption of judicial models. Within governance models of sovereign wealth funds, the move toward regulation of the investment decisions of the fund through the application of an ethics code by a disinterested panel of experts designated for that purpose, provides a variant of the juridification model applied to the commercial activities of the state.

The Ethics Council of the NSWF has begun to develop a coherent system of jurisprudence grounded in their application of the Ethical Guidelines to the investment decisions of the Fund. In the process, the Ethics Council is developing a law of ethical investment that may influence not just the legal framework for investment in Norway and the transnational soft law framework for SWF governance generally, but also international customary standards for ethical behavior of corporations. These may become incorporated into instruments from the developing United Nations Protect-Respect-Remedy Framework, to the soft law governance systems from the OECD's Guidelines for Multinational Corporations and the ISO 26,000 standard.

Norway is investing the proceeds of its oil and gas operations in its fund. (From Steve Schifferes, Lifting the Lid on Sovereign Wealth Funds, BBC News Online, June 3, 2008).

These essays start with a description of the legal and regulatory framework within which the NSWF is organized. It then turns to the decisions made to date. these will be organized by the substantive issues considered. An analysis of the aggregate of decisions will then be attempted. Lastly, the framework constructed and its consequences will be explored. I hope you will find some of this of use in work on international regulations, the regulatory context of sovereign wealth funds, the development of transnational standards for corporate social responsibility and the emergence of substantive standards for corporate behavior consonant with emerging human rights standards.

Full post as published by Law at the End of the Day on February 01, 2011 (boomark / email).