Arianna Campanelli
IR/PS 423 Winter 2012	  BANKS AND CLUSTER BOMBS FUNDING:A LETHAL BUSINESSINTRODUCTION
The global banking and finance industry long felt to be released from any fundamental
responsibility toward shareholders and depositors other than produce strong financial
results and profits. In the 1990s, activists have tried to link environmental issues tofinancial markets, and only from 2000 to 2003 the banking sector actively started toaddress issues regarding social standards.1
The CSR issue analyzed in the following paper takes into consideration some of thelargest and well known financial institutions worldwide that are responsible to fundthrough loans and credit facilities producers of cluster bombs, weapons that maim and kill
particularly civilians in developing countries. Connected to this issue there are two main
aspects to investigate; one is the legislative aspect, and the other one is ethical. The former
has to deal with the presence of a Convention prohibiting any use or support to producers
of cluster bombs. This treaty has recently become binding international law, and it has beensigned by some of the countries where several of the banks come from. Yet, due to thepresence of a legislative ‘loophole’ in the text of the Convention the banks are able to claimthat their activities are officially ‘‘not illegal’’. Implications linked to this such as why theloophole has not been corrected and who is hampering the improvement process will be
therefore examined.
The ethical aspect is expressed by the nature, or the ‘non-nature’, of cluster munitions:specifically designed to hit populated areas and to be confused with humanitarian aids or
innocuous objects, these weapons kill and maim civilians and a high number of children. It
is simply inadmissible the support that directly or indirectly some financial institutions giveto this non-conventional type of weapon that is the cluster bomb. Some 107 countries signed
the Convention, but there are many others, and among them the biggest like United States,
Russia, China and India, that are not part of the treaty yet. The complete ban of cluster
munitions cannot become real until all the countries recognize the immorality of this weaponand decide to take a decisive step toward its elimination.
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
1

	
  

Conroy, M. E. (2007), Branded! New Society Publishers, Canada	
  Lastly, will be analyzed and evaluated the role of the Cluster Munition Coalition(CMC), the NGO that aims at the eradication of cluster bombs, and the Amnesty
International’s media campaign to raise awareness on the CSR issue. It is interesting to
see what are the responses and reactions of the banks accused of funding the cluster bombs
market, and also to estimate the effects of the NGOs activities on public opinion andpolitical decisions.
OVERVIEW
What are cluster bombs?
Clusters bombs are missile like devices that upon being released fragment into
multiple smaller explosives, or ‘bomblets’. Since the bombs break apart before detonation,
controlling where they land is impossible, thus, 98% of all cluster bomb victims arecivilians, and one third of those are children.2 Air-dropped or ground-launched, theycause two major humanitarian problems and risks to civilians. First, their widespreaddispersal means that it cannot be made a distinction between military targets and civilians
so the humanitarian impact can be extreme, especially when the weapon is used in or near
populated areas, in blatant violation of Art.51 of the Geneva Convention.3 Second, many
sub-munitions fail to detonate on impact and become de facto antipersonnel mines killingand maiming people long after the conflict has ended, thus causing widespread harm
among the population.

The construction companies say that the ‘missing explosions’ are at most equal to 5% of thecluster run. However, it has been estimated that the percentage of lost bursts due to various
technical inefficiencies and/or environmentally reasons is not less than 15-20%, to reacheven 40-45% as found in some localities Afghanistan. Every dispenser contains submunitions in the variable number of 200-250 unites that when randomly dispersed cover
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
2

Cluster Munition Coalition website, http://www.stopclustermunitions.org/the-problem/
Protocol Additional to the Geneva Convention (12 August 1949), Part IV Civilian Population, Article
51: Protection of the Civilian Population. In International Committee of the Red Cross:
http://www.icrc.org/ihl.nsf/WebART/470-750065

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large diameters areas.4 Thus about 20 sub-munitions fail to explode and remain on the
ground. Considering the number of bombs that are normally used during a period of war, it
is easy to conclude that unexploded sub-munitions can reach very high numbers.
That is one of the reasons why 60% of cluster bomb casualties are injured while
undertaking their normal activities. The ‘special design’ of some sub-munitions makes themvery similar for shape and colors to the typical humanitarian aid launched by airplanes inpoor areas. Thus not only children, but also fathers and mothers searching for food, waterand medicines for their family often pick the bombs from the ground unaware of their realnature. Cluster bombs result in the contamination of former war zones and their immediate
vicinity, making it nearly impossible for local communities to begin a post-conflictreconstruction, to cultivate fields, and to access pastures and wells; it also make fatally
unsafe roads, schools and even homes.5
The use of these weapons continues therefore to defy established principles ofinternational humanitarian law. Nonetheless, 35 countries have produced or are still
producing cluster bombs; among others: Argentina, Australia, Brazil, China, Egypt,
India, South Korea, Turkey, United Kingdom, United States. 19 countries have used or
still use cluster munitions, such as Colombia, France, Russia, Saudi Arabia, South
Africa, Serbia, United Kingdom, United States. And 37 countries and territories are
known to be affected by cluster munitions from use in armed conflict; only few examples are:Afghanistan, Albania, Eritrea, Ethiopia, Iraq, Lao PDR, Lebanon and Vietnam.6

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
4

http://www.campagnamine.org/	  http://www.campagnamine.org/
6
http://www.stopclustermunitions.org/the-problem/history-harm/	
  
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The Oslo Process and the Convention on Cluster Munitions
In February 2007, 46 governments met in Oslo to endorse a call by Norwegian
Foreign Minister Jonas Gahr Støre to conclude a new legally binding instrument in2008. The Convention’s aims are to prohibit the use, production, transfer and stockpilingof cluster munitions, as well as to destroy existing stockpiles of the weapons, clear
contaminated areas, and assist survivors and affected communities. SubsequentInternational Oslo Process meetings were held in Peru (May 2007), Austria(December 2007), and New Zealand (February 2008).
The Convention on Cluster Munitions was signed by 94 states when it opened forsignature in Oslo, Norway on 3 December 2008. On 1 August 2010 the Convention
entered into force as binding international law, and since April 2011, 108 countries havesigned the Convention, and 57 ratified. Other signatory states must still ratify theConvention in order to become a State Party bound by the Convention’s provisions.7

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
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CMC Report (May 2011), Worldwide Investments in Cluster Munitions, a shared responsibility	  The Cluster Munition Coalition (CMC)The Cluster Munition Coalition is a global network of more than 350 civil society
organizations working in some 90 countries to end the harm caused by cluster bombs.
The CMC was launched in November 2003 and founding members include Human
Rights Watch, Handicap International and other leaders from the Nobel Peace Prizewinning International Campaign to Ban Landmines, which secured the 1997 Mine Ban
Treaty. Since the signing of the Convention on Cluster Munitions, the CMC mobilized an
intensive global ratification campaign. The Coalition says to work through its members tochange the policy and practice of governments and organizations, and to raise awarenessof the problem amongst the public.
On the official website of the Cluster Munition Coalition, it is stated that since theConvention has taken effect and become law, States Parties are bound by all of its terms.8
Is this confirmed by facts? If yes, how to explain the funding coming from several
financial institutions of countries that have signed and ratified the Convention towardindustries producing cluster bombs?
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
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http://www.stopclustermunitions.org/the-solution/the-treaty/?id=84

	  THE CSR ISSUE“Each State Party undertakes never under any circumstances to assist,encourage or induce anyone to engage in any activity prohibited to a State
Party under this Convention.”(Art. 1(1) c of the Convention on Cluster
Munitions)
Despite this quite clear statement from the treaty that bans the weapons and that has
recently become international law, some of the world’s top financial institutions undermine
this commitment to ban cluster bombs by continuing to finance the following seven leading
producers of the weapons and their components: Alliant Techsystems ATK (USA),
Hanwha (South Korea), L-3 Communications (USA), Lockheed Martin (USA)Poongsan (South Korea), Singapore Technologies Engineering (Singapore) and
Textron (USA). Since May 2007, financial institutions provided these companies with:•investment banking services worth more than US$6,712.15 million;•loans amounting to at least US$3,190.26 million;•

owned or managed shares and bonds for at least US$33,116.1 million.9

To help monitor and curtail the flow of funds to corporations that still manufacture
cluster bombs, the Cluster Munition Coalition set up the Stop Explosive Investments
Campaign in October 2009 with the release of a report on investment in cluster munitions
by financial institutions, called Worldwide Investments in Cluster Munitions: A Shared
Responsability. The goals of the campaign were to raise public awareness about thefinancial institutions investing in cluster bomb production, to encourage financial
institutions to articulate clearer guidelines on ethical investment with respect to cluster
munitions, and to urge governments to adopt legislation banning investment in cluster
munitions.10
What the CMC in the report has called the ‘‘Hall of Shame’’ contains 166 financial
institutions from fifteen different countries. The majority of these financial institutions(128) are from countries that have not yet signed the Convention on Cluster Munitions,
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
9

http://www.ikvpaxchristi.nl/files/Documenten/wap%20cluster%20munitie/CMC%20rapport%2025%20mei%202011/Worldwide%20Investments%20in%20Cluster%20Munitions.pdf;%20a%20shared%20responsibili
ty%20-%202011.pdf
10
http://www.stopexplosiveinvestments.org/report	
  

	
  

	
  

and that consequently can define themselves as being not restricted in their activities by
this particular treaty. The other 38 financial institutions are from nine states that havesigned the Convention. Seven financial institutions are from three countries that havesigned but not yet ratified the Convention. 31 financial institutions are from six countries
that have both signed and ratified the Convention, and this is what defines the mostimproper situation. Of the 166 financial institutions, 73 financial institutions are from theUnited States so that US-based financial institutions account for 44 percent of the total.
However the USA has not signed the Convention on Cluster Munitions; but 26 financial
institutions investing in producers of cluster munitions are from EU member countries, ofwhich 24 are signatory states.11
Based upon these research findings, one may conclude that the Convention on cluster
munitions is not that much a binding law as it is supposed to be, or it is not reallyrespected by the member states. Is this a reflection of a more general problem connectedto the fact that international treaties are often considered as a ‘second-class’ law? Or is thereason to be found in the text and content itself of the treaty? The response would not bewrong if one answers: both. Certainly the general attitude toward international
agreements and organizations that are seen as weak and stripped of a real authority
plays an important role. Though, the focus here is on the content of this particular treaty
that is the Convention on cluster munitions. The main problem, as briefly mentioned in the
introduction, is the presence of a loophole that allows banks of countries that ratified theConvention to invest in producers of cluster bombs. In fact the text of the treaty does not
explicitly mention also the prohibition for member states to indirectly financing theweapon. This leads to a situation where the governments that implement the internationallaw in their national legislation just ‘‘copy’’ the omission; whether this is intentional or not,it’s not easy to determine. Anyway banks are very conscious of this ‘‘escape’’ and some ofthem do not hesitate to take advantage of it.
There are however countries that made clear the interdiction also of indirect
investments and financial loans to the cluster bombs industry. For instance, the Frenchgovernment gave an interpretative statement specifying that they understand investments incluster munitions as being banned under the prohibition on assistance. On 6 July 2010, theDeputy Minister of Defense at the National Assembly said: ‘‘Any knowingly financial
assistance, directly or indirectly, in the production or trading of cluster munitions would beconsidered as assistance, encouragement or inducement falling within the scope of the law
under criminal complicity or commission of offenses under this bill. If the monitoring of theimplementation of the law by the National Commission for the Elimination of
Antipersonnel Mines (CNEMA) shows a failure on this point, the Government would
draw the appropriate conclusions, proposing to Parliament the necessary legislative
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
11

	
  CMC Report (May 2011), Worldwide Investments in Cluster Munitions, a shared responsibility	
  

	
  

	
  

changes.’’12 On an opposite side is the United Kingdom: The UK Cluster Munition
Prohibition Bill received Royal Assent on 25 March 2010. In both Houses, debates on
the Bill questioned whether the financing of cluster munition production was prohibited
under the legislation. The text of the legislation in fact did not even include a generalprohibition on investment in, or provision of financial services to, companies involved in the
production of cluster munitions. Later, in response to parliamentary questions theGovernment issued a Ministerial Statement on 7 December 2009 confirming that “under
the current provisions of the Bill, which have been modeled upon the definitions andrequirements of the Convention, the direct financing of cluster munitions would beprohibited. The provision of funds directly contributing to the manufacture of theseweapons would therefore become illegal.”13 Hence the legislation does not prohibit indirect
financing of cluster munitions.
The government claimed to work with the financial sector, non-governmentalorganizations and other interested parties, to promote a voluntary code of conduct toprevent indirect financing, and if necessary would use their right to initiate legislation.14
This statement can be challenged just reading the British news: the newspaper The
Independent in an article of August 2011 writes that in October 2010, RBS was still partof a banking syndicate that provided the American arms manufacturer Alliant
Techsystems with a $1 billion five-year credit facility, with RBS itself loaning $80 million.
It has also underwritten $110.1 million in bonds to Alliant Techsystems and Lockheed
Martin.15 In addition some other big British banks like HSBC, Lyods TSB and
Barclays continue to have financial relationships with those companies, making shamefulprofits on peoples’ life.
If the main problem is this legislative loophole that allows the banks to deny theillegality of their activities, why the necessary correction has not be done yet? Who has theinterest of keeping the law ‘imperfect’? Amnesty International launched a campaign on thisproblematic issue, focusing on Uk financial institutions.

AMNESTY
INTERNATIONALANALYIZING THE STRATEGIES

AWARENESSCAMPAIGN:

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
12

http://www.stopexplosiveinvestments.org/legislation
Ministerial Statement (December 2009) The Financing of Cluster Munitions Production; Foreign andCommonwealth
Office;http://www.stopexplosiveinvestments.org/uploads/pdf/UK%20Ministerial%20statement.pdf	
  14
http://www.stopexplosiveinvestments.org/legislation
15
Taylor, J. (August 16, 2011) Uk Banks Fund Deadly Cluster-Bomb Industry
http://www.independent.co.uk/news/uk/home-news/uk-banks-fund-deadly-clusterbomb-industry-2338168.html
13

	
  

	
  

Britain became an active participant in the Convention on Cluster Munitions in 2010,
year in which Amnesty International UK launched a media and e-petition campaign thatmainly targeted the Royal Bank of Scotland (RBS), Barclays, HSBC, and Lyods
TBS.
Amnesty International is a non-governmental organization focused on human rights
with over 3 million members and supporters around the world. On its official website theyclaim to be effective in stopping human rights abuses by ‘‘mobilizing the public to put
pressure on governments, armed political groups, companies and intergovernmental bodies’’
via strategies such as public demonstrations, letter writing campaigns, awareness-raising
events, petitions, cooperation with students groups, and so on.16 It therefore seems thatAmnesty’s activities main goal is to spread public consciousness in order to stimulate andcall people to action. The audience of the organization is made first of all of its long-time
supporters, people of various ages sustaining the causes ,and students from colleges anduniversities that started to follow the NGO’s activities and calls since its beginning in the
1960s. Later on, when Amnesty will become one of the most well-known organizations in
defense of human rights, its base of supporters and activists rose higher, as well as theworking-team of ‘campaigners’ in charge of coordinating actions. Not only young people
and students compose the audience of the organization, but also professionals, scholars,
journalists, politicians and famous personalities sign Amnesty’s petitions and become
bearers of its messages.
Calling the attention of a vast public and have media coverage is the tool that the NGO
used also in the case of the campaign Booming Business: British Banks and Cluster
Bombs. The information sharing started from the Cluster Munition Coalition, aninternational civil society campaign that opposes the use of the devices, and from its
members IKV Pax Christi and Netwerk Vlaanderen. These organizations all together
launched a report called Worldwide investments in cluster munitions: a shared
responsibility, which is the most comprehensive study to date on the subject.17 Amnesty thenentrusted to national and international media the task of sharing knowledge: after having
interviewed the President and the chief members of the Cluster Munition Coalition, it
created a video of 12 minutes in which briefly explained the problems connected to cluster
bombs, and denounced some of the main UK banks of funding the producers of this type of
weapon. In addition, big British newspapers like The Independent and The Guardian
published articles and started to investigate and ‘monitor’ the financial institutions.
Meanwhile, an opinion poll commissioned by Amnesty found that nearly eight out of ten
people in Britain (78%) said RBS should not be allowed to provide loans to clustermunitions producing companies. In the poll more than one in three (35%) thought thatinvestment in companies which produce cluster bombs was just as damaging to the
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
16
17

	
  

http://www.amnesty.org/en/who-we-are/faq#is-ai-effective
CMS website, Report http://www.stopexplosiveinvestments.org/report	  reputation of high street banks as its bonus culture and the effect it had on the global
economy. More than two out of three (67%) said they would support a law to ban any
investment in companies that produce cluster bombs.18
When Amnesty’s campaign was launched, more than 12,000 people emailed Stephen
Hester, the Chief Executive Officer of RBS, to demand that the company stop investing incluster munitions producing companies. Amnesty also invited public donation to fund an
advertising campaign to reveal RBS’s investment in companies which produced the bannedcluster munitions, which seems to have received overwhelming public support. Besides thisparticipation described in enthusiastic terms by Amnesty International’s Arms Program
Director Oliver Sprague, the doubt that awareness campaign do not commonly generate
profound changes still remains.
This consideration opens the debate on how efficacious can be to raise publicawareness, and whether awareness is enough to reach concrete goals. Amnesty has beenusing the ‘‘raising awareness’’ strategy since its beginning, and can boast today aconsiderable amount of visibility and influence. There is undoubtedly the positive aspect of
informing people on global and national interest issues, making them more conscious andactive citizens. At the same time, there is no guarantee that at least half of the citizens that
the NGO informed and warned will actually do something concrete to help the cause. Firstof all a reason could be that society and its citizens/consumers are exposed to several
different issues every day. They are therefore so overwhelmed by the number of informationthat cannot handle it, and it becomes easier just to ignore them all. The other element isthat even when people are asked to change small habits in their lifestyle, as in not buying aparticular type of paper because it is known to be made cutting hundreds of trees, themajority of consumers would probably not stop using it either because it is cheaper, because
it looks nicer than others, or simply because the safety of a forest is not their priority.
Thus, spreading consciousness alone may not be enough to interrupt a negative attitude. It
can rather be a starting point to extend the base of supporters and to directing the eyes of
the civil society on institutions, groups, or companies responsible for violation of someforms of social responsibility.
Related to civil society’s power, there are factors that extend this capability. One is the
improvement in global communications technology: internet in particular has allowed
activists and campaigners around the world to form coalitions and organize collective
activities whose impact is emphasized right because of its global aspect. Secondly, eventransnational campaigns are not excessively expensive thank to the high number ofvolunteers working, rather than average paid employees.19 However, the civil society andNGOs’ potentialities are softened by other factors: they rarely have a coherent
transnational agenda; the NGOs remain powerful as long as they retain their credibility;
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
18
19

	
  

Amnesty International Uk; News section August 2011	
  Conroy, M. E. (2007) Branded! New Society Publishers, Canada	  and the power that they have is already ‘soft’ and indirect. As the distinguished Professor
and Economist Michael Conroy explains in his book Branded: ‘‘NGOs gain influence byconvincing others to take action’’.20
Two of the instruments that seemed to be effective in Amnesty’s campaign at least inconvincing some of the banks to open a discussion table and to promise to change practices
were those playing on current and potential costumers of the British banks involved.
Amnesty’s activists were sent to campuses of colleges and universities to talk to students
and persuade them to take action for example boycotting those banks. Campaigners went
to workplaces, offices, and in the street asking people if they liked the idea of giving money
to a financial institution that is known to make profits on a terrible industry of death. The
message was clear and strong. Acting directly on banks’ clients and threatening theirprofits brought to a change of some financial institutions, as they wanted to avoid negative
advertisement. For instance RBS had repeatedly insisted that it did not invest in cluster
munitions manufacturers. An extract from the initial response issued by RBS to enquiries
by Amnesty supporters and concerned RBS customers reported: ‘‘We do not invest incompanies who produce cluster munitions and do not recognize the claims made in the IKVPax Christie report. This is a serious issue and we have engaged with the writers of thereport to understand these allegations.’’21 Nevertheless, a few weeks after the launch of theintense Amnesty’s campaign, the Royal Bank of Scotland committed to issue a new policy
on investments in cluster munitions. An extract from the new response issued by RBS in
September 2011 stated: ‘‘After discussions with various NGO groups we have identified
some defense sector clients whose activities could be considered to be outside the spirit of theConvention. As a result, we will be suspending all further services to any client where wecannot be certain that they are in compliance with our policy. We will seek to work withboth the UK Government and NGO groups to create clarity on this issue, and encourageother banks to do the same.’’22
The big announced RBS U-turn made positively hope for a radical change, and forother banks to do the same. Nonetheless, that was not precisely the case since manyfinancial institutions continued to strenuously defend their investments. The biggest problem
in fact remains: the loophole in the legislation has still to be corrected, and the actor in
charge of this is the British government. Searching information about the disinvestment
campaign and the accusations toward the mentioned banks, an interesting fact emerges:
RBS, the Royal Bank of Scotland that together with Barclays and others was in the
middle of the controversy, is majority-owned by the UK government that came in thisfinancial position in 2008. The government currently own 67% of ordinary shares.23 Sucha tight monetary link between the UK government that is the one able to make the expected
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
20

As AboveAmnesty International Uk; News section September 201122
Amnesty International Uk; News section September 201123
http://www.investors.rbs.com/equity_statistics
21

	
  

	
  

legislative correction, and the bank that more than others took advantage of the ‘mistake’ inthe law, could lead to suspect a precise political will of the highest institution of the State to
not interrupt the lucrative funding activities.
This would explain the slowness in correcting the loophole in the national legislation,and the attitude of the bank that feels well protected. If such is the case, Amnesty and theother NGOs could enter the controversy from a stronger position and having more leverageover banks and the government. A direct interest of the British government in maintaining
financial activities because of their high profitability ignoring the violation of fundamental
human rights and of a binding international law, would be quite a big affair.

THE BANKS’ RESPONSE
The role of banks in the international arms trade is not merely secondary oraccessory.
Corporate social responsibility commit the banks to assume management and operationalrules that must respond not only to national and international laws- in other words to acriterion of legality and legitimacy- but also to the broader question of responsibility
toward social and ethical issues. Specifically this means for banks to focus attention not on
the financial gain that may result from investments in financing military industry and thearms trade, but on the expectations of peace, security and social sustainability advancedby civil society.
Regarding the specific CSR issue previously discussed, the reactions and responses ofthe banks, at least of the British ones taken into consideration, can be summarized in aprocess that starts from a total deny, to the opening of a discussion with the NGOs, andthat leads some financial institutions to attempt various types of ‘greenwahsing’. Eventually,
the banks either promise a change in their investment policy, or they let the time ‘sweep
away’ the campaign and the issue from the attention of the media and the people, ignoring
the invitation to change their practices. All the UK banks avoided any confrontation with
the NGOs and refused to make a camera interview for the video that Amnesty TV
recorded as part of its media campaign. However, it is interesting to consider few
individual responses of each of them.
HSBC claims to be sustainable in its profits, to build long-lasting relationships withcustomers based on trust, to respect environmental limits and to invest in communities.24
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
24

	
  

HSBC, http://www.hsbc.com/1/2//sustainability	
  This is the same bank that underwrote £14.6 million bonds of Textron, a U.S.
manufacturer of cluster bombs. Barclays stated to work in accordance with theInternational Declaration of Human Rights and to be directly responsible of promoting
the Declaration itself through their employment policy and practice that requires highprofessional ethical standards.25 On the official website it is currently said that Barclays is
helping disadvantaged people when the bank actually contributed $54.38 million to an
ongoing $1.5 billion credit facility for Lockheed Martin, manufacturer of cluster bombs.
RBS had repeatedly insisted that it did not invest in cluster munitions manufacturers; but
after Amnesty campaign threatening the bank’s reputation, the bank stated that it would
improve the control over companies where it is unclear if they are not complying with thespirit of the Convention to ban cluster bombs. However, we have seen that this was more amere statement rather than an actual change, since still in 2010 RBS was one of the main
funders of cluster bombs producers. Furthermore, the interest of the UK government
behind the banks’ activities is still shady and this does not help a process of ‘trust building’.
Trust seems to be the ‘key word’ for NGOs to leverage over financial institutions:confidence is in fact needed for banks to operate and to bring clients to open accounts withthem, but it is also fragile, it can be lost and very hard to regain. Therefore, internationalorganizations that monitor on the respect of corporate social responsibilities and humanrights, could insist on calling attention on negative and irresponsible practices, to stimulate
criticism and public pressure.26 The banks should be instead more transparent about thenature of their investments, and in order to prevent criticism they could take a clear andunequivocal position against cluster bombs.

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
25
26

	
  

Barclays, http://group.barclays.com/Home	
  Conroy, M. E. (2007)

	
  CONCLUSIONS AND RECOMMENDATIONS
From a moral perspective banks should not need a treaty to terminate theirinvestments in companies producing cluster munitions. Yet, financial appealing profits, andpoints of weakness in the text of the Convention itself, do not help the correct and fair
implementation of the international law. Moreover, the governmental position of countries
that have signed and ratified the Treaty, such as the United Kingdom, has to be clarified,
and the States’ ‘good intentions’ verified. Some of the main improvements that could bemade are related to the producing of more transparent systems with third-party
verification of each bank’s compliance with public commitment and social responsibilities.
This would bring greater credibility both to the activities of the NGOs, and to the financial
system.
Regarding Amnesty International’s strategy, the campaign has been more effective interms of public awareness than in reaching an actual change in financial institutions’practices and investments. The collaboration with other NGOs is important for ‘logistic
reasons’ such as information sharing but it’s not yet aimed at taking strong actions
together. However, while Amnesty has taken care of the awareness aspect and has
initiated a large media campaign, the Cluster Munition Coalition is the one that has been
continuously working with the clear and precise aim of banning cluster bombs. Its reporton banks’ investments toward producers of cluster munitions and its daily commitment were
essential to Amnesty to get information on the issue and to launch the campaign in UK.
The CMC is collaborating with governments worldwide and has already reached the resultof bringing 98 countries in the Treaty, with consequent implementation of an internationallaw. The fact that this law does not specifically refer to indirect funding to cluster bombs,
does not mean that the organization has not been working well. In addition, the Treaty
was not thought to be on financial matters, and it is now responsibility of the internal
institutions of the states members to interpret in the clearest and most honest way possible
the content of the Convention. Certainly the CMC will continue to monitor the process. It
can be suggested to the CMC also to take advantage and to find an example in theInternational Campaign to Ban Landmines, a Nobel Prize awarded NGO that was able
to build a strong credibility system worldwide thank to its ground-experience in mineinfested countries. The main tool responsible for this success is the presence of national
campaigns that work at the same time for the country in which they are based, andcollectively at an international level. The CMC does not have this sub-system, but maybe it
	
  

	
  

could consider the possibility to adopt a similar one, playing on the potentiality and thecredibility of the already existent national campaigns on the issue of landmines.
Generally speaking, it must be recognized that non-governmental advocacy groups
acquired in recent years a greater power and influence. The explanation is probably also
connected to the trust that people around the world has placed in some of theseorganizations, especially if compared to the fall of trust toward governments and businesssectors. Professor Conroy underlines an important point: ‘‘legitimacy often comes fromsuperior knowledge.’’27 There are however elements that could be improved, such as abetter formation of local expertise, through a deeper and more equal collaboration with
their communities; academic and international expertise, for a question of ‘prestige’, and of
confidence-building through the voice of important personalities who ‘‘lend their faces’’ forthe cause; improvement regarding the document and certification system; and finally a focus
on consumers’ deeply concerns.

	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
   	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
27

	
  

Conroy, M. E. (2007)

	
  BIBLIOGRAPHY & SITOGRAPHY

Amnesty International Uk; News section August 2011
Barclays, http://group.barclays.com/Home
Cluster Munition Coalition website, http://www.stopclustermunitions.org/the-problem/
CMC Report (May 2011), Worldwide Investments in Cluster Munitions, a shared
responsibility
Conroy, M. E. (2007), Branded! New Society Publishers, Canada
HSBC, http://www.hsbc.com/1/2//sustainability
http://www.amnesty.org/en/who-we-are/faq#is-ai-effective
http://www.campagnamine.org/
http://www.ikvpaxchristi.nl/files/Documenten/wap%20cluster%20munitie/CMC%20rappor
t%2025%20mei%202011/Worldwide%20Investments%20in%20Cluster%20Munitions.pdf;%20a%20shared%20responsibility%20-%202011.pdf
http://www.independent.co.uk/news/uk/home-news/uk-banks-fund-deadly-clusterbombindustry-2338168.html
http://www.investors.rbs.com/equity_statistics

	
  

	
  

http://www.stopclustermunitions.org/the-problem/history-harm/
http://www.stopclustermunitions.org/the-solution/the-treaty/?id=84
http://www.stopexplosiveinvestments.org/legislation
http://www.stopexplosiveinvestments.org/report
Ministerial Statement (December 2009) The Financing of Cluster Munitions Production;
Foreign and Commonwealth Office;http://www.stopexplosiveinvestments.org/uploads/pdf/UK%20Ministerial%20statement.pdf	  Protocol Additional to the Geneva Convention (12 August 1949), Part IV Civilian
Population, Article 51: Protection of the Civilian Population. In International
Committee of the Red Cross: http://www.icrc.org/ihl.nsf/WebART/470-750065
Taylor, J. (August 16, 2011) Uk Banks Fund Deadly Cluster-Bomb Industry
http://www.independent.co.uk/news/uk/home-news/uk-banks-fund-deadly-clusterbombindustry-2338168.html