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4th Feb 2023

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MEP pension fund invested in cluster munition arms industry

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Monthly allowances given to MEPs to pay for office supplies were used to purchase shares in the arms, tobacco, mining and fossil-fuels industries to finance a heavily-indebted European Parliament pension scheme.

This included tens of thousands of shares in a US-arms industry that manufactured cluster munitions, banned by a 2008 international convention signed by EU states.

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Cluster munitions contain multiple explosive bomblets that carpet a large area and can kill unsuspecting civilians possibly weeks later.

Among those that had manufactured them in the past are Raytheon, Honeywell International, and Textron Inc. The European Parliament's voluntary pension scheme invested in all three.

In 2008, it owned 14,900 shares in Raytheon with a market value of $547,000 and 27,000 shares in Honeywell International with a market value of $637,000. In 2007, it held 7,600 shares in Textron Inc with a market value of $370,000.

Textron Inc stopped the production of large cluster munitions in 2016 after evidence emerged that the Saudis had used them against civilians in Yemen.

And Norway's sovereign wealth fund had in 2005 blacklisted Raytheon and Honeywell International for producing and selling cluster munitions. So too did KBC Bank in Belgium 2006 given the controversy surrounding the weapons.

Along with Aerojet General, Honeywell International developed the CBU-87 combined effects munition, which was widely used in US Desert Storm in the early 1990s to devastating effect.

Human Rights Watch estimates 60 percent of those killed from cluster munitions dropped by US and UK forces during the first Gulf War were under the age of 15. Raytheon and Honeywell International no longer manufacture cluster bombs, they say.

Around 11,800 shares were also owned in Northrop Grumman corporation and with a 2008 market value of $382,000. And it held another 79,000 shares in BAE Systems, a British multinational arms, security, and aerospace company, with a £311,000 market value.

It has held shares in BAE Systems since the 1990s, when it was known as British Aerospace. It is unclear if the pension still holds the above mentioned shares given the historical information on investments was only disclosed up until 2010.

Aside from the ethical questions of using European taxpayer money to invest in the arms industry to finance an MEP pension fund, the European Parliament will likely have to squeeze some €400m from the public for its bailout.

The fund is set to go bust between 2024, the year of the European elections, and 2026.

The parliament has been unable to find a solution, raising alarm from MEPs overseeing budgets.

"It's a disgrace. I think the biggest question is what happens with the deficit of the fund," said German Green MEP Daniel Freund. "Is there going to be additional taxpayer money thrown into this? I think not a cent should go into this," he said.

Monika Hohlmeier, a German MEP and Johan van Overtveldt, a former Belgian finance minister, issued similar statements in a joint letter to the EU parliament president Roberta Metsola last year.

They said that the fund poses "potential devastating reputational risks for the European Parliament".

'Not in the public interest'

The parliament, and its former investment advisor, Credit Agricole Luxembourg Private Bank, have also refused to disclose the investments.

In a letter to EUobserver, the European Parliament claimed disclosure would undermine the protection of commercial interests, brushing away public interest arguments.

An appeal made by this website was also rejected in December 2022 for similar reasons by conservative European Parliament vice-president Roberts Zile, who oversees document-access requests.

Credit Agricole Luxembourg Private Bank also refused and then declined to explain why when pressed.

But EUobserver then obtained a detailed breakdown of the investments dating from 1994 until 2010 after downloading annual statements from a public register.

Those statements were produced by the administrators of the pension scheme, a non-profit known as the "Pension Fund of the Members of the European Parliament."

The non-profit is currently registered at the European Parliament building in Luxembourg and was initially administered by active and later former MEPs.

The scheme came under a Luxembourg investment fund known as a 'SICAV-FIS'.

First set up in the early 1990s and open to MEPs until 2009, the voluntary pension fund is bleeding large amounts of cash because of the number of people hitting retirement age.

Among them is the EU's foreign policy chief, Josep Borrell, who is currently drawing a pension from the controversial fund.

Others include Miguel Arias Canete when he was European commissioner for climate. Canete was also among the MEPs who sat as an administrator of the scheme.

Asked for a comment when presented with the investments, the European Parliament said it was not a liberty to a make statement.

"The voluntary pension fund is a non-profit association governed by Luxembourgish law. It is a third party distinct from the European Parliament that can therefore not comment on the requested elements," said a EU parliament spokesperson, in an email.

MEPs only had to pay into the fund for two years to get a pension. For every €1,000 paid into it, the EU parliament contributed €2,000.

The MEP share was deducted from their monthly office allowance of several thousand euros, itself shrouded in secrecy given the lack of transparency on the how the money is spent.

Among the biggest defenders of the secrecy behind the monthly allowance is European Parliament vice-president Rainer Wieland who told this website that its lack of transparency is a non-issue.

Other investments made on behalf of the voluntary pension scheme include big tobacco, mining, fossil fuels, and major pharmaceuticals.

Others still were made in offshore tax havens like Bermuda and the Cayman Islands.

EUobserver will soon be revealing the details behind those as part of on-going series into a broken MEP pension fund that the European Parliament's leadership has been unable or unwilling to resolve.

This article is the first in a series about the questionable investments made by the MEP pension fund, and its deficit.

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