- Adopted in 2017, the Treaty on the Prohibition of Nuclear Weapons comes into force in January 2021. Work on the Treaty earned the International Campaign to Abolish Nuclear Weapons the Nobel Peace Prize.
- The treaty goes one step further than the more broadly accepted Treaty on the Non-Proliferation of Nuclear Weapons in that it seeks to ban the weapons altogether, rather than simply halt their spread.
- From an investor perspective, the new treaty does not explicitly ban the financing of nuclear weapons, although it has similar clauses to those that have been interpreted by some states as banning the finance of controversial weapons.
On Saturday, October 24, 2020, the United Nations announced that “the conditions for the entry into force of the Treaty on the Prohibition of Nuclear Weapons were met further to the deposit with the Secretary-General of the 50th instrument of ratification or accession of the Treaty,” adding that “the Treaty shall enter into force on January 22, 2021.”
The Treaty on the Prohibition of Nuclear Weapons (TPNW) prohibits a broad range of nuclear weapon-related activities. According to its provisions, all states party to the treaty commit themselves to never “Develop, test, produce, manufacture, otherwise acquire, possess or stockpile nuclear weapons or other nuclear explosive devices.” The treaty similarly requires a commitment that states not “use or threaten to use nuclear weapons,” or transfer, station, install or deploy nuclear weapons on states parties’ territories.
The TPNW is the first global arms control instrument that prohibits nuclear weapons entirely. However, to date the Treaty on the Non-Proliferation of Nuclear Weapons (NPT), in effect since March 1970, remains the main international treaty regulating nuclear weapons. The NPT is intended to prevent the further spread of nuclear weapons, rather than to prohibit them outright. None of the five nuclear weapon states that are recognized under the NPT – China, France, Russia, the United Kingdom and the United States – have signed the TPNW. Furthermore, neither these countries’ key allies, including all NATO members, nor non-states parties to the NPT that are understood or alleged to possess nuclear weapons – India, Israel, North Korea and Pakistan – have signed the new treaty. Only TPNW states parties are bound by its provisions.
The History of the Treaty
The 2017 adoption of the treaty resulted in mixed responses. According to a UN press release, the spokesperson for UN Secretary-General António Guterres said: “The treaty represents an important step and contribution towards the common aspirations of a world without nuclear weapons.” Praise for the treaty was also voiced by members of the civil society that have continuously worked towards its realization. For instance, the International Campaign to Abolish Nuclear Weapons (ICAN) stated: “This treaty is a clear indication that the majority of the world no longer accepts nuclear weapons and does not consider them legitimate tools of war.” ICAN was awarded the 2017 Nobel Peace Prize for its work on eliminating nuclear weapons, that year culminating in the adoption of the TPNW.
However, critics of the treaty, including nuclear weapon states and their allies, claim that a treaty prohibiting nuclear weapons is premature given the current international security environment. In a joint press release, the United States, the United Kingdom, and France stated the following: “We do not intend to sign, ratify or ever become party to [the treaty]. Therefore, there will be no change in the legal obligations on our countries with respect to nuclear weapons.” The statement further adds: “This treaty offers no solution to the grave threat posed by North Korea’s nuclear program, nor does it address other security challenges that make nuclear deterrence necessary. A ban treaty also risks undermining the existing international security architecture which contributes to the maintenance of international peace and security.”
Despite the criticism, proponents of the TPNW expect that the treaty will create similar dynamics as previous international efforts to ban controversial weapons, such as the bans on anti-personnel mines, cluster munitions, and biological and chemical weapons. Proponents argue that the treaty will reinforce the stigma of nuclear weapons and create a strong social norm against them, which will eventually lead to their elimination. Taking into consideration that nuclear weapons are significantly more important for countries’ individual security and their strategic alliances than any other type of controversial weapon, it remains to be seen whether the new treaty can create the disarmament dynamic many human rights stakeholders are hoping for.
Implications for Investors
During TPNW negotiations, various proposals were made to include an explicit provision that would prohibit the financing of nuclear weapons. In March 2017, the Dutch NGO PAX argued in a submission to the UN that such a provision would “limit the flow of financing to the companies involved in nuclear arsenals and thereby have a concrete impact beyond the countries that initially accede to the treaty.” However, the final treaty text does not contain such an explicit financing provision. Instead, the treaty contains a so called “assistance clause.” According to this clause, TPNW state parties are not allowed to “assist, encourage or induce, in any way, anyone to engage in any activity prohibited to a State Party under this Treaty.” While this phrasing does not explicitly prohibit financing, it opens the possibility for state parties to individually interpret what activities are covered by it.
National legal prohibitions on the financing of controversial weapons typically originate from an interpretation of the “assistance clause,” which is included in other arms control instruments banning anti-personnel mines, chemical weapons and cluster munitions. Currently, legislation that explicitly restricts the financing of controversial weapons is in place in a dozen countries. In addition to including explicit language on a financing prohibition in their national treaty ratification laws, officials from a number of states party to the Mine Ban Treaty and/or the Convention on Cluster Munitions have made interpretative statements in which they clarified their view that the assistance clause is a de facto prohibition on financing.
“Don’t Bank on the Bomb,” a project by Dutch NGO PAX in collaboration with the International Campaign to Abolish Nuclear Weapons (ICAN) that focuses on links between financial institutions and companies involved in nuclear weapons, states the following concerning the TPNW’s potential implications for investors:
“There is a growing shared understanding that financing is a form of prohibited assistance. This is shown by state practice around the Convention on Cluster Munitions, the rationale behind the International Convention for the Suppression of the Financing of Terrorism and the practice of financial institutions from countries that have joined Nuclear Weapon Free Zone treaties. Just as with Chemical Weapons, the treaty prohibits any form of assistance. In the Oxford Public International Law commentary on the Chemical Weapons Convention, assistance is understood to include the provision of ‘through financial resources…. to anyone who is resolved to engage in such prohibited activity’ and anyone that could be ‘not only be a State, irrespective of whether or not it is a Party to the Convention, but also an organization, an enterprise, a person, or a group of persons, regardless of Citizenship.’ Many countries raised concerns with financing the production, testing, development and manufacture of nuclear weapons during the treaty negotiations. And Cuba, when it ratified the treaty, made it explicitly clear: ‘The financing of any activity prohibited to a State Party under this Treaty is also a prohibited activity according to the provisions of Article 1(e).’ While the financial sector cannot sign or ratify the treaty, divestment activities and policy changes send a clear signal that nuclear weapons are unacceptable, and that clears the path towards their total elimination.”
As of today, only three countries with significant financial markets have become state parties to the TPNW: Austria, Ireland and New Zealand. These countries have neither included explicit financing restrictions in national legislation as part of their TPNW ratification, nor have they made official statements confirming that they interpret the “assistance clause” to cover financing.
By Henning Weber, Lawrence Dermody and Verena Simmel, ISS ESG