A national pension fund in New Zealand was judged to have acted properly by including Western Sahara phosphate-related investments in its portfolio.
Rabat – A New Zealand court has issued a ruling in a landmark case that could shift perceptions on exports from the Western Sahara region in southern Morocco.
On Wednesday, March 15, the Auckland High Court of New Zealand ruled in favor of Moroccan phosphate exports from the Western Sahara region in the country’s south.
One year ago on March 15, 2020, Polisario operative Mohamed Kamal Fadel was joined by local activist and avid MWN-critic Michael Barton in a lawsuit against the supervising body of a national pension fund in New Zealand.
Court documents that Morocco World News obtained reveal a landmark ruling that can inspire hesitant investors and open the door to new economic activity in Morocco’s southern provinces.
A landmark court case
At the time, Fadel stated that, “this legal action is a message to all who are involved in the exploitation of Sahrawi natural resources that they face legal action, reputational risks and investor withdrawal.”
Instead, the lawsuit makes the case for the legality of exports from Western Sahara that many potential investors might have been looking for.
The fund in question, the “New Zealand Superannuation,” is a $45 billion national pension fund governed through the “New Zealand Superannuation and Retirement Income Act” that the country’s Parliament approved in 2001.
The suit accused the fund’s management, known in the legal filings as the “guardians,” of acting unethically by investing in companies that rely on phosphate from Morocco’s Western Sahara region.
According to the case’s applicants, the pension fund was “exposed to Western Sahara” by having held bonds of Morocco’s OCP Group, by making equity investments in local companies that use its phosphates and by supporting importers of Western Sahara phosphates for use in local dairy farms.
The case involved seven separate issues. Two of these determined whether the court was not inadvertently ruling on Moroccan sovereign affairs while the remaining five claimed the fund had mismanaged its decision to be “exposed” to Western Sahara phosphate exports.
Reputation & ethics
The court case at New Zealand’s high court in Auckland concerned several issues.
The first three revolved around whether the New Zealand Superannuation fund had complied with its own governing act.
The New Zealand Superannuation and Retirement Income Act that governs the fund’s actions calls on the fund to ensure certain ethical and reputational issues are addressed as well as periodically monitored and reviewed.
According to its governing act, the fund’s actions must avoid “prejudice to New Zealand’s reputation as a responsible member of the world community.” Furthermore the fund must ensure “ethical investment, including policies, standards, or procedures for avoiding prejudice to New Zealand’s reputation as a responsible member of the world community.”
In effect, Fadel and Barton claimed that the fund was both not being ethical and not taking into account NZ reputation by investing in Western Sahara-related organizations.
In response to these claims, the fund’s Head of Responsible Investment Anne-Maree O’Connor defended its actions in an affidavit.
O’Connor stated that the fund’s practices were “consistent with international practice, our responsible investment approach involves considering and giving effect to ESG [environmental, social, and governance] factors.” The effort, she added, “assists in managing reputational risk and is in line with best practice portfolio management.”
O’Connor argued that the interconnectivity of global markets meant that “very few businesses … cannot be linked in some way to undesirable ESG practice or impacts, often through supply or customer chains.”
“Widely accepted international standards”
The court agreed, and ruled that the fund did not misapply the law. It stated that the fund made its decision through expert opinions within the fund’s discretion and based on “widely accepted international standards.”
Furthermore the high court emphasized that the fund’s practices complied with New Zealand’s “Statement of Investment Policies & Procedures” (SIPSP) as well the fund’s Responsible Investment Framework (RIF). The SIPSP is in turn based on the UN Principles for Responsible Investment (UNPRI) and the UN Global Compact (UNGC).
The court ruled that through adherence to RIF and SIPSP, the fund acted in a manner “consistent with avoiding prejudice to New Zealand’s reputation as a responsible member of the world community.”
Additionally, Auckland’s high court ruled that Western Sahara investments are consistent with the fund’s obligations. The case’s legal documents highlighted that even if there is a willingness to divest, “there is no cogent evidence of an immediately available alternative.”
With only the US officially recognizing Morocco’s sovereignty over Western Sahara, the court acknowledges that amid the status quo, “a reputational risk to wider New Zealand interests remains. There is, however, no suggestion that the risk is due to management and administration of the Fund.” With the momentum of having over 20 countries establish consulates in Western Sahara, that “risk” will likely only diminish over time.
Applicants’ standing and the doctrine of state immunity
Part of the court case aimed to establish whether Barton and Fadel had a sufficient interest in the matter to constitute legal standing. The court also had to determine that its rulings would not impede on Morocco’s sovereign decisions in violation of the act of state doctrine.
Barton and Fadel’s lawyers had stated that the use of Western Sahara phosphates meant “the removal of phosphate from the ‘patrimony of the Saharawi people.’” Additionally they had alleged that the fund’s investments “effectively sustain Morocco’s ‘occupation’ of Western Sahara.”
The fund in turn accused the applicants of “lawfare,” by using New Zealand’s court for its activism. Its representatives argued that “the application has been brought for collateral purposes, namely to promote Saharawi rights and independence.”
Furthermore, the fund’s representatives argued that the court could potentially violate Morocco’s state immunity regarding domestic policy. The court did not agree and ruled that “the state of Morocco is not impleaded, whether directly or indirectly.”
Regarding Barton and Fadel’s claim of legal standing, the court disagreed with their assertions and described the matter as “academic.”
“The applicants have failed on the substantive issues,” the court wrote in its ruling. It emphasized that New Zealand’s Parliament endorses the responsibility of the fund’s guardians, “which seeks a balance between ethical constraints and commercial independence and freedom.”
In the end, the high court ruled that the fund had acted ethically and responsibly while dealing with companies that use phosphates from Western Sahara. Furthermore it ruled that Barton and Fadel did not have legal standing and dismissed an application for judicial review.
Despite the court’s ability to rule on the issue without violating Morocco’s state rights, Barton and Fadel left empty-handed. The two activists appear to have inadvertently started a case that provides evidence that the use of exports from the Western Sahara region can be both ethical and legal.
The landmark court case is likely to provide the confidence many investors need to consider the region as a new source of investment and exports.
Investors that have been reluctant to invest in Western Sahara or use Moroccan exports from the region can take confidence that if a country like New Zealand does not see an issue with the matter, they have no need to.
The New Zealand pension fund has complied with both domestic and UN principles and guidelines while providing much-needed phosphate fertilizers to the country’s agricultural sector.
The opinion of the Fertiliser Association’s Chief Executive Veronica Power could spur new investment in and exports from Morocco’s southern provinces. She told the court that by doing business with Morocco’s OCP Group she had witnessed positive progress, citing “many examples of visits, meetings and changes made.”
Additionally, the court documents describe how New Zealand’s Ministry of Foreign Affairs and Trade (MFAT) provided informal advice on the matter. MFAT advised that “to its knowledge OCP’s operations in Western Sahara comply with the wishes of the community and do benefit the community, as required by UN Charter obligations.”
While Wednesday’s ruling is likely to discourage local pro-Polisario activists, the case could spur renewed investments in and demand for exports from the Western Sahara region. This new economic activity would in turn produce more economic opportunities for locals, fostering a win-win situation for international farmers, locals, and Morocco as a whole.
While undoubtedly not the result the applicants hoped for, increased economic activity in the region can only spur other countries to recognize Morocco’s sovereignty over the region and support its Autonomy Plan.
Today’s ruling could be a positive step towards peace in Western Sahara, and a step towards true autonomy for its inhabitants.