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Sovereignty, Accountability, and the Wealth Fund Governance Conundrum

Published online by Cambridge University Press:  12 May 2011

Anna GELPERN
Anna GELPERN*
Affiliation:
American University Washington College of Law, United States of America
*
[email protected]
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Abstract

Sovereign wealth funds—state-controlled transnational portfolio investment vehicles—began as an externally imposed category in search of a definition. SWFs from different countries had little in common and no desire to collaborate. This article elaborates the implications of diverse public, private, domestic, and external demands on SWFs, and describes how their apparently artificial grouping became a site for innovation in international law-making.

Type
Symposium: Sovereign Wealth Funds
Information
Asian Journal of International Law , Volume 1 , Issue 2 , 14 June 2011 , pp. 289 - 320
Copyright
Copyright © Asian Journal of International Law 2011

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Footnotes

*

Associate Professor, American University Washington College of Law, Visiting Associate Professor, University of Pennsylvania Law School. Many thanks to Francine Barber, Chris Brummer, Kevin Davis, Rashmi Dyal-Chand, Victor Fleischer, Michael Froomkin, Mary Gardner, Tom Ginsburg, Eric Helleiner, Kara Karlson, Patrick Keenan, Thomas Laryea, Clay Lowery, Ralf Michaels, Christiana Ochoa, Brad Setser, Sean Sherlock, Brian Stewart, Kelly Targett, Edwin M. Truman, Matthew Tubin, Martin Weiss, two anonymous reviewers for the Asian Journal of International Law, and participants in conferences and workshops at the University of Chicago Law School, Georgetown University Law School, the National University of Singapore, American University Washington College of Law, Cardozo Law School, and Columbia University for helpful insights. The editors of this volume were beyond gracious in supporting this project.

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131. IWG-SWF, supra note 89.

132. IWG-SWF, “Santiago Principles”, supra note 1, Principle 5.

133. Ibid., Principles 6–10.

134. Ibid., Principle 15. A recent press report went so far as to designate compliance with host country disclosure laws as “the most significant of the 24 guidelines” in the Santiago Principles. “Cash in Hand” Economist (17 June 2010). This characterization is somewhat puzzling since, unlike some of the other GAPP items, this non-binding exhortation to abide by already binding legal rules yields no new content.

135. Ibid., Principles 2, 17, 19.

136. Ibid., Principle 5.

137. Truman, supra note 18 at 27.

138. IWG-SWF, “Santiago Principles”, supra note 1, Principle 2.

139. Ibid., Principle 19.

140. Ibid., Principle 21. See also Principles 6 and 16.

141. Ibid., Principle 3.

142. Ibid., Principle 24.

143. Before the Santiago Principles were unveiled, some members of the US Congress suggested using CFIUS review to encourage SWF compliance with best practices. See Committee on Financial Services, Press Release, “Frank, Maloney, Gutierrez Call on Treasury to Address Sovereign Wealth Funds in FINSA Regulations” (13 March 2008).

144. “Sovereign Wealth Funds: Current Institutional and Operational Practices” (15 September 2008), online: IWG-SWF 〈http://iwg-swf.org/pubs/swfsurvey.pdf〉.

145. “ ‘Kuwait Declaration’: Establishment of the International Forum of Sovereign Wealth Funds” (6 April 2009), online: IWG-SWF 〈www.iwg-swf.org/mis/kuwaitdec.htm〉.

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153. Compare US Department of the Treasury, “Major Foreign Holders of Treasury Securities” (March 2010), online: US Treasury 〈www.ustreas.gov〉; and US Department of the Treasury, “Historical Major Foreign Holders of Treasury Securities” (April 2010), online: US Treasury 〈www.ustreas.gov〉 (table showing China's holdings increase from US$60 billion in 2000 to about US$900 billion in 2009).

154. See PRASAD, Eswar, RAJAN, Raghuram, and SUBRAMANIAN, Arvind, “The Paradox of Capital” (2007) 44 Finance and Development 1 at 1Google Scholar.

155. See Olivier BLANCHARD and Gian Maria MILESI-FERRETTI, “Global Imbalances: In Midstream?” IMF Staff Position Note SPN/09/29, 22 December 2009. For prominent warnings, see OBSTFELD, Maurice and ROGOFF, Kenneth, “The Unsustainable US Current Account Position Revisited” in Richard H. CLARIDA, ed., G7 Current Account Imbalances: Sustainability and Adjustment (Chicago/London: University of Chicago Press, 2007), 339Google Scholar; ROUBINI, Nouriel and SETSER, Brad, “The US as a Net Debtor: The Sustainability of the US External Imbalances”, Draft Paper, November 2004, online: NYU 〈http://pages.stern.nyu.edu〉Google Scholar.

156. See also DUNAWAY, Steven, “Global Imbalances and the Financial Crisis”, Council on Foreign Relations Special Report No. 44, March 2009, at 7−10Google Scholar. See generally HELLEINER, Eric, “International Payments Imbalances and Global Governance”, CIGI Policy Brief No. 8, November 2008, at 2Google Scholar.

157. AIZENMAN, Joshua and GLICK, Reuven, “Sovereign Wealth Funds, Governance, and Reserve Accumulation” VOX (16 January 2009)Google Scholar. See also AIZENMAN, Joshua and GLICK, Reuven, “Sovereign Wealth Funds: Stylized Facts About Their Determinants and Governance”, National Bureau of Economic Research Working Paper No. 14562, 2008, at 27Google Scholar. For an example of prominent advocacy of reserve diversification, see SUMMERS, Lawrence H., “Reflections on Global Account Imbalances and Emerging Markets Reserve Accumulation”, L.K. Jha Memorial Lecture at the Reserve Bank of India, Mumbai, India, 24 March 2006Google Scholar.

158. See MICHAELS, Ralf, “Global Legal Pluralism” (2009) 5 Annual Review of Law & Social Science 243CrossRefGoogle Scholar.

159. FORD, Cristie L., “New Governance, Compliance, and Principles-Based Securities Regulation” (2008) 45 Business Law Journal 1 at 5Google Scholar; SABEL, Charles F. and SIMON, William H., “Epilogue: Accountability Without Sovereignty” in Gráinne DE BÚRCA and Joanne SCOTT, eds., Law and New Governance in the EU and the US (Oxford/Portland, OR: Hart Publishing, 2006), 395Google Scholar.

160. BRUMMER, Chris, “How International Financial Law Works (and How It Doesn't)” Georgetown Law Journal (forthcoming 2011), online: SSRN 〈http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1542829〉Google Scholar; ARNER, Douglas W. and TAYLOR, Michael, “The Global Financial Crisis and the Financial Stability Board: Hardening the Soft Law of International Financial Regulation?” (2009) 32 University of New South Wales Law Journal 488Google Scholar.

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162. ABBOTT, Kenneth W. and SNIDAL, Duncan, “Hard and Soft Law in International Governance” (2000) 54 International Organization 421CrossRefGoogle Scholar.