The Minister for Commerce Paul Goldsmith has received advice this morning that gives "some indications" that laws banning cluster bombs have been breached by KiwiSaver providers investing in companies making the controversial weapons.
In Parliament this afternoon Goldsmith faced questions from Green Party MP Julie Anne-Genter over revelations this morning that hundreds of thousands of New Zealander had unwittingly invested in companies making cluster bombs.
"I've asked for advice on that and there is some indication that the law may apply but that's for the appropriate enforcement authority to decide whether there's been a breach of the law," Goldsmith said.
Goldsmith drew a contrast between issues of ethics and law. "We expect KiwiSaver providers to follow the law, but we believe individual investors are best placed to make moral judgements," he said.
Concern over cluster munitions - bombs which scatter hundreds of bomblets to more effectively saturate an area with lethal shrapnel - catalysed in 2008 with an international agreement to ban their use.
The chief problem with the weapons is the persistence of unexploded bomblets that remain a lethal hazard for civilians long after conflicts have finished
New Zealand signed up to the convention banning their use, and also passed enabling legislation in 2009 including specific provisions forbidding investments in cluster-bomb makers.
Auckland University associate professor Treasa Dunworth said the findings KiwiSaver providers were making such investments were "really shocking" as the law was unambiguous.
"It definitely breaches the language of the Act," she said.
Wellington lawyer Graeme Edgeler was more blunt about the legal questions the investments raised.
"This isn't a question about being a good corporate citizen. Investing in companies that manufacture cigarettes, or nuclear weapons systems might raise moral questions, but it's not illegal. Knowingly investing in companies that manufacture cluster munitions is a serious criminal offence, that has a maximum penalty of seven years' imprisonment, or a fine of up to $500,000," he said.
A Herald investigation has found funds run by three KiwiSaver providers, who collectively have more than 400,000 members, have investments in companies making cluster munitions.
A number of Westpac-managed funds - including the balanced, conservative, growth and moderate funds and the CPP Funds numbered one through five - were listed as holding shares in eneral Dynamics and Textron worth a total of $1,552,660.
AMP disclosed investments worth $572,703 in the two companies held by its aggressive, default, growth, moderate, balanced, moderate balanced, cash and conservative funds.
Aon's Russell LifePoints funds - including balance, conservative, growth, and target dates 2015 through 2055 - disclosed $192,136 worth of investments in General Dynamics.
These two companies have been identified by the New Zealand Superannuation Fund as producing cluster weapons. The NZSF decided to exclude such companies from their investment portfolio in 2008, even before the 2009 Act made such investments illegal.
Asked about the Act, a spokesperson for Westpac said: "We are not aware of any non-compliance with any legislation as a result of the funds' holdings."
Questions sent this morning to Aon and AMP over compliance with the Cluster Munitions Prohibition Act, have yet to be answered.
Ole Solvang, the deputy direct of the emergencies division for Human Right Watch, told the Herald earlier this week that the weapons were still being used in conflicts around the world and were extremely controversial.
Solvang was part of a team observing the ongoing conflict in Yemen that has seen heavy bombing campaigns, including the use of cluster bombs manufactured by the companies invested in by New Zealand KiwiSaver providers.
"One of the problems we found in Yemen is with the sandy soil that sand would shift. One farmer wanted to take us to the field to show us one he'd seen, but we couldn't find it. Then we almost stepped on another one which had almost been completely buried under the sand," he said.
We will be asking the Government how many of the default Kiwisaver provider options are invested in cluster munitions.
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Solvang said there were reports of a number of farmers in this area were injured by buried submunitions, putting livelihoods and lives at risk.
Solvang said he found evidence in Yemen to dispute claims by manufacturers that 99 per cent of munitions would explode immediately and not pose ongoing dangers, and assurances they would not be used over populated areas.
"What we found on the ground it seemed that more than that had malfunctioned -we found quite a number of this type which had malfunctioned," he said.
Following the HRW reports, in May the United states government suspended exports of the bombs to Saudi Arabia.
Green Party MP Julie Anne Genter said it was "completely immoral" to profit from the production of cluster munitions, land mines and nuclear weapons.
"Isn't it the Government's responsibility to ensure the default providers are investing funds legally and ethically," she said.