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The International Regulation of Sovereign Wealth Funds. Which Role for the European Union?

Article by Michele Barbieri, 2009

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The object of this paper is to review the existing international instruments providing for standards and principles applicable to SWFs, to their investments and to the policies adopted by recipient States. The analyse will be carried out from the point of view of the European Union (EU), i. e. paying particular attention to the participation of the EU in the works of the IMF and the OECD in the elaboration of such instruments.

The international regulation of Sovereign Wealth Funds. Which role for the European Union?


AUTHOR: Michele Barbieri1

KEYWORDS: Sovereign Wealth Funds; European Union; Investments


Contents


Introduction. p. 1

1.The rise of SWFs and of their investments in Europep. 2

2. The Communication of the Commission. “A common European approach to Sovereign Wealth Funds”p. 6

3.The work of the IMF and the OECD on SWFsp. 9

4.The legal framework applicable to the participation of the EU institutions in the IMF

and the OECDp.11

5. The contribution of the EU to the work of the IMF and the OECD on SWFs.p.13

Conclusionsp.16

Referencesp.17


Introduction.


In the last years the rise of Sovereign Wealth Funds (SWFs) and the increase of their investments overseas have prompted big concerns in the international community and regulation of the operations of such State-owned investment vehicles has been demanded. International organizations such as the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) have promoted the adoption of some non-binding international instruments which constitute a first step towards the creation of a legal framework governing the operations of SWFs at the global level. Also the European Union (EU), which is one of the main recipients of such investments, is currently dealing with SWFs. The object of this paper is to review the existing international instruments providing for standards and principles applicable to SWFs and this analyse will be carried out from the point of view of the EU, i. e. paying particular attention to the participation of the EU in the works of the IMF and the OECD in the elaboration of such instruments.

The paper will be organised as follows. Chapter 1 will explain why SWFs have become so important in the last three years and it will investigate the size and the main features of their investments in the EU. Chapter 2 will analyse the main document of the EU dealing with SWFs. It is the communication of the Commission titled a “common European approach to Sovereign Wealth Funds, which stresses, inter alia, the need for the EU to support the works of international organizations on SWFs. Therefore, chapter 3 will review the efforts of the G7, the IMF and the OECD to create a legal framework for the investments of SWFs, while chapter 4 and 5 will analyse how and to what extent the EU has contributed to the work of these organizations.


1. The rise of SWFs and of their investments in the EU.


SWFs can be defined as State-owned investment vehicles whose investment strategies include the acquisition of foreign financial assets2. The first SWF to be created was the Kuwait Investment Authority, which was established in 1953; nevertheless SWFs have turned into major players in the international economy only in the last few years. This can be given two main explanations: first, in the last years their size has dramatically increased, second, their investment strategies have become more complex and more proactive.

With respect to the first motivation, it is preliminary necessary to distinguish between commodity SWFs, financed by the proceeds of the sale of commodities, and non commodity SWFs, which are the consequence of big surpluses of the trade balance3.

The growth of commodity SWFs in the last years is related to the rise of commodity prices which occurred since 2002 and in particular since 2004. States rich in natural resources obtained windfall revenues until 2008, i. e. until commodity prices remained high. As commodities are one of the most volatile assets, many States widely relying on the exploitation of their natural resources create State-owned stabilization funds to which they transfer a part of the proceeds from the sale of commodities when prices are high and from which they can withdraw money in case of decreasing prices and therefore in case of a fall of State revenues. In addition, as natural resources are exhaustible, States can also create saving funds, which ensure to future generations the revenues related to the exploitations of natural resources even when such resources are depleted. Therefore, high commodity prices in the last years have caused bigger transfers of resources to stabilization funds and saving funds which invested a quota of the wealth under their management in foreign assets, thus becoming SWFs.

Non commodity SWFs are created when the amount of official reserves held by a State exceeds the level needed to effectively manage its monetary policy. In this case foreign currency in excess is transferred to a Fund controlled and managed directly or indirectly by the government or by the central bank and whose task is to invest such resources in a profitable way. Since the end of the 1990s, many countries, in particular in East Asia, have been able to accumulate relevant foreign exchange reserves thanks to high domestic saving rates and big surpluses of their balance of payments (caused by soaring exportation of manufactured products). A part of such reserves have thus been transferred to SWFs.4

This explains why only in the last decade, and in particular in 2006, 2007 and 2008, many new SWFs have been created and existing SWFs have spectacularly grown in size. While in 1990 SWFs probably held no more than 500 billion USD5 today the value of the assets under their management is estimated to range between 2 and 2.9 trillion USD, with other studies suggesting that it would amount to 4 trillion USD.6

With respect to the second explanation for the increased importance of SWFs in the world economy, it is primary useful to remind that States use to investing their foreign exchange reserves in low-risk, low-return and liquid assets, frequently US treasury bills. In this way reserves are invested in a safe way and they are always ready to be used for the implementation of the monetary policy. Nevertheless, when the amount of foreign currency exceeds what is needed for the purposes of the monetary policy, then the exceeding part must be invested in other assets, even in long-term and riskier ones, in order to ensure higher remuneration. Therefore it can be said that today SWFs are required by the States establishing them to achieve higher returns and more diversification in the management of the foreign exchange reserves which are transferred to them. This explains why SWFs in recent years have increased their investments in foreign sovereign or corporate bonds as well as in foreign equities or alternative assets.7

SWFs investments are generally portfolio investments. Foreign direct investments (FDIs), which involve SWFs taking the control of foreign firms8 , were $10 billions in 2007, accounting for a mere 0.2% of their total assets and only 0.6% of total FDIs carried out in the World in the same period. Nevertheless this might change: in fact, in the last two years there has been a relevant increase even of FDI by SWFs.

North American and European countries have increasingly become the main recipients of SWFs’ investments. Looking at SWFs acquisition of participations in foreign firms since 1995, 37% of the total transaction volume is related to North American enterprises and 32% to Europe-based firms. One possible explanation is that European and North American capital markets traditionally offer the widest selection of investments and a high level of liquidity, and are thus able to absorb the large volumes SWFs typically seek to allocate. The main recipient of SWFs investments in Europe is by far the UK, which has received 26 billion USD between 1995 and mid 2008, probably because of its economic openness and its efficient and dynamic financial market. In the same period Germany and France too have received huge amounts of capitals: 5.1 and 3.8 billion USD respectively. Italy, maybe because of the predominance in its economy of small and unlisted firms, in the beginning has been less attractive, but the recent acquisition of stakes in Unicredit (a leading financial firm) and Eni (an oil giant) by Libyan SWFs might prove that the situation is changing. With respect to the sectors which are the target of SWFs’ investments, financial firms are undeniably the main recipient of SWFs’ capitals (in Europe they have received 26.9 billion USD). While in the US other sectors are practically neglected, in European countries investments have been more diversified, involving services, retail, industry, energy, and real estate as well. 9

In the EU the investments of SWFs have been welcomed in a mixed way10. On one side, they have risen concerns, in particular in relation to the fact that they are State entities and although they are formally created to pursue commercial or business activities, actually they might pursue political objectives as well. When States owning SWFs are regarded by the recipient countries as undemocratic or unfriendly regimes, then such worries are even greater. On the other side, in the economic crisis which started in mid 2007 and which was characterized since its inception by the so called credit crunch, SWFs have proved useful suppliers of capitals to firms under stress because of the sudden scarcity of liquidity.11 For this reason protectionist measures resulting in a de facto prohibition of SWFs’ investments are self-defeating, as they could deprive the same States enacting them of the capitals their firms and their financial markets need. Therefore there is a widespread consensus that the best approach to SWFs in principle consists in accepting the capitals of SWFs and in the meanwhile in retaining the possibility to monitor them and to restrict them when they may represent a threat to the national security.

In any case, as SWFs are a global issue, a national approach could prove inadequate. The international community needs to develop a mutually agreed legal framework for the operations of SWFs. This does not imply that there is a need for creating an overarching set of international binding provisions applicable to any operation of SWFs and to any policy which can be adopted by recipient States with respect to this issue. It simply means, at least so far, to promote a certain degree of predictability and coordination among SWFs in their investment practices and among recipient countries in their domestic regulation of SWFs.

Consistently with the ideas reviewed above, the Commission has adopted a communication titled “A Common European approach to Sovereign Wealth Funds”12, whose content will be studied in depth in chapter 2.



2. The Communication of the Commission. “A common European approach to Sovereign Wealth Funds”


The EU has traditionally pledged itself to be open to foreign investments and favourable to the liberalization of transnational movement of capital. To this extent, the European Community (EC) Treaty prohibits, at art. 56, not only restrictions to free movement of capital and payments between Member States, but also between member States and third countries. Although art 57- 60 provide some limitations to the principle laid down in art. 56, especially with respect to capitals from third countries, the EU is, and means to remain, a favourable environment for investments irrespective of the home State of the investor.13 The Communication of the Commission titled “a common European approach to Sovereign Wealth Funds” repeats these concepts, when it declares that “the commitment to openness to investments and free movement of capital has been a long standing principle of the EU and is key to success in an increasingly globalised international system.” Furthermore, it adds that “as the world's leading trader and the largest source as well as the largest destination of foreign direct investments, the EU is a major beneficiary of an open world economic system. It is committed to ensuring that its markets remain open for investment.”

Then, the communication points out the reasons why SWFs’ investments should be welcomed. They are in general long-term and counter cyclical investors and hence they can “contribute to stability in the international financial system”. Moreover they help to provide liquidity in a period in which liquidity is scarce and the balance sheets of many firms (in particular financial ones) are under stress. This should contribute to “help to strengthen the global banking system and to underpin confidence in the international financial system as a whole.” Finally, as many SWFs chose to invest in the Euro Area, they increase the demand for the European currency, supporting “the international role of the Euro over the medium term”.

Then, the communication turns to analyse the problems that might be related to the investments of SWFs in the EU.

First of all the communication stresses the lack of transparency of some SWFs in particular as regards their organization, management and strategies. Then, it highlights that SWFs might use their investments “for ends other than for maximising return”, in particular to “unduly pursue political advantages”. Moreover, the Commission notes that although in most cases SWFs have been portfolio investors so far, they might change their strategies and seek to acquire controlling stakes in European companies in the future and this could rise additional worries. For all these reasons in certain circumstances they might threaten the national security of recipient countries.14 It is important to note that these ideas about the opportunities and the threats posed by SWFs are similar to those expressed by the majority of the economists, lawyers and by the governments of many recipient States.15 The existence of a shared attitude in the world with respect to SWFs encourages the EU to seek a multilateral approach to the attempt to govern and monitor the operations of SWFs, as it will be analysed below.

The communication of the Commission, also provides a brief review of the studies and the works related to a possible regulation of SWFs which have already been undertaken by international organizations16 and it adds that SWFs currently do not operate in a legal vacuum, as provisions applicable to foreign investments in general may apply to investments of SWFs as well. To this purpose the communication quotes the WTO provisions applicable to investments, implicitly referring to the Trade related Investment measures (TRIMs) and to the provisions of the General agreement on tariffs in services (GATS) about the access and establishment of service providers.17 It also mentions the bilateral investment treaties (BITs) in force between EU member States and third countries owning SWFs.18 As regards the European Community law, it refers to the provisions of the EC Treaty which apply to the free movement of capital (art. 56 seq.) and to mergers and acquisitions (art. 81 seq. as well as secondary legislation as regulation 139/2004).19 Moreover it takes into account that member States are already studying changes in their national legislations to cope with the challenges posed by SWFs. Although the European Commission and the European Court of Justice can monitor that measures unilaterally adopted by member States do not jeopardise the common market, nonetheless it is necessary to promote a common European approach to SWFs in order to ensure their consistency and effectiveness. In fact, according to the communication, “an uncoordinated series of responses [on behalf of each member State] would fragment the internal market and damage the European economy as a whole.” It adds that “in an integrated single market, the advantages of individual measures can be illusory” and can turn into damages for all member States (and even for those enacting them) in the long run. Moreover, as “one of the main goals of EU trade policy is to open third country markets to EU investors, […] these efforts would be more difficult if the EU was seen as imposing barriers within the EU”. What is even more important is that, as “SWFs are a global issue” and as they require a multilateral approach, if Europe speaks with one voice in international meetings, it would be more effective and powerful than single member States acting disparately. Nevertheless, without previously establishing a common European approach, this would be impossible.20

Finally, the communication provides the following five principles which shall underlie the European approach to SWFs.

  1. Commitment to maintain an open investment environment, refraining from adopting unreasonable protectionist attitudes.

  2. Support to international organisations in their efforts to enhance an open dialogue with SWFs owners and to create a multilateral legal framework for the investments of SWFs.

  3. Use of legal instruments already in force at the level of the EU and of the Member States to monitor and regulate the operations of SWFs.

  4. Commitment to avoid that measures taken to monitor and regulate SWFs might result in a breach of the obligations deriving from the EU and the EC Treaty and from international law.

  5. Proportionality and transparency of measures taken by EU States and applicable to SWFs, whose investments should be limited only for public interest reasons (which should be meant in a restricted way).21

The communication of the Commission was endorsed by the Council 22 and by the European Council23 which stressed the need to co-operate in particular with the IMF and the OECD and finally a resolution adopted by the Parliament has welcomed it. 24

In the next chapters, this paper will focus on how EU institutions have implemented principle 2 of the communication. In other words it will study the contribution of EU institutions to the works of international organizations in relation to the establishment of a legal framework not only for the regulation and supervision of the investments of SWFs but also for the monitoring of the policies recipient States may adopt as a response to SWFs. To this purpose, it is preliminary necessary to analyse which are the initiatives on SWFs undertaken by international organizations. This will form the object of chapter 3.


3.The work of the IMF and the OECD on SWFs


An increased attention on behalf of the international community to the operations of SWFs was first urged on the occasion of the G7 of October 2007, when finance ministers of participating countries mandated the IMF and the OECD to examine policy options regarding SWFs. The IMF, and in its International Monetary and Financial Committee which met a few days later, decided that their task would have consisted in identifying the critical issues related to SWFs investments that needed to be discussed. The elaboration of principles or guidelines applicable to such issues would have been left to the States owning SWFs. To this extent, the IMF limited itself to the adoption of a work agenda, which was published on 29th February 200825. Then, the IMF promoted a meeting of countries with SWFs, which took place in Washington D. C. on April 30–May 1, 2008, and which resulted in the creation of the International Working Group of Sovereign Wealth Funds (IWG). The IWG is neither an organ of the IMF nor it can be regarded as an international organization; it is rather a summit of 23 IMF member countries with SWFs 26 trying to identify the best investment practices SWFs can voluntarily promise to follow when they undertake investments overseas. The OECD and the World Bank too participated in the negotiations with the status of observers, together with Saudi Arabia, Oman and Vietnam. The IWG has met on three occasions—in Washington, D.C., Singapore, and Santiago (Chile) and during the last meeting it was able to identify and draft, on October 2008, a set of general accepted principles and practices (GAPP) which have become known as Santiago Principles. As the IWG points out, the GAPP is a voluntary code of conduct “that the members of the IWG support and either have implemented or aspire to implement. The GAPP denotes general practices and principles, which are potentially achievable by countries at all levels of economic development.” It clearly does not provide binding rules and it remains “subject to provisions of intergovernmental agreements, and legal and regulatory requirements” as well as to domestic legislation of the host States or of the State of origin of SWFs.

According to the GAPP, the governance framework, the organization, and the investment strategies of SWFs should be clear and transparent, to the advantage of both the States owning SWFs and the recipient States. The relations between the SWFs and the governments owning them as well as the degree of independence of the management should be specified. SWFs should disclose which are their investment strategies, in particular if they use leverage or financial derivatives and in which way they do so. Moreover they should explain if their decisions are subject to other than financial or economic considerations. They should refrain from taking advantage of privileged information or inappropriate influence they might have in relation to their particular status in competing with private firms. 27

On April 6, 2009 in Kuwait City the IWG reached a consensus to establish the International Forum of Sovereign Wealth Funds. The Kuwait Declaration28 provides that the Forum “will be a voluntary group of SWFs” whose “purpose will be to meet, exchange views on issues of common interest, and facilitate an understanding of the Santiago Principles and SWF activities”. It underlines that “the Forum shall not be a formal supranational authority and its work shall not carry any legal force”.29

The members of the Forum shall be the SWFs of the States which participated in the IWG and endorsed the Santiago Principles. In any case “membership will be open to other Funds” provided they “meet the Santiago Principles definition of a SWF and endorse the Santiago Principles”.30 Members shall meet at least once a year31, in order to discuss and compare their investments practices and strategies.

The other international organization required by the G7 of October 2007 to deal with SWFs is the OECD. While the IMF, acting trough the IWG, has focused on the practices of SWFs, the OECD on the contrary has focused on those of recipient States. On April 2008 a Report by the OECD Investment Committee on SWFs and Recipient Country Policies has been adopted. It is the result of discussions among representatives of thirty OECD countries, ten non-OECD countries adhering to the OECD investment instruments, four other governments participating in the project and the European Commission. On the basis of this report, the OECD adopted, on the occasion of the Ministerial Council Meeting on 4-5 June 2008 in Paris, the “declaration on SWFs and Recipient Country Policies”. The OECD affirms that SWFs bring in general a beneficial contribution to world economy and that they could rise legitimate concerns only when they are not sufficiently transparent, they are not economically motivated and they unduly pursue political objectives. The OECD welcomes the work of the IMF and of the IWG, which are implicitly considered as complementary to those of the OECD itself. Then, the OECD lists a few general principles recipient States should follow when they take measures affecting the investments of SWFs. Recipient countries should not erect protectionist barriers to foreign investment and should not discriminate among investors in like circumstances. Foreign investments should only be restricted when they raise national security or public policy concerns; in any case measures taken to this purpose should be transparent, predictable and proportional to clearly-identified national security risks. It can be noted that such principles are similar to those contained in the communication of the Commission analysed in chapter 2 of this paper and this is a further proof of the existence of a shared attitude towards SWFs, as it has been highlighted above. It is expected that by mid 2009 the OECD will approve a set of guidelines for recipient countries which will be specular to the GAPP adopted by the IMF and which will transpose the general principles contained in the declaration into more detailed (although non-binding) standards.

Moreover the OECD recalls that in the meanwhile other OECD instruments, although they are not specifically devised for the SWFs, can apply to them in the same way they already apply to any other foreign investor. Such instruments are the OECD Code of Liberalisation of Capital Movements, adopted in 1961, and the OECD Declaration on International Investment and Multinational Enterprises of 1976 as revised in 2000, adopted by forty-one OECD and non-OECD country governments 32. Moreover, although SWFs are not exactly State Owned enterprises, the fact that they are owned by States makes it possible to refer to another OECD instrument: the OECD Guidelines on Corporate Governance of State-owned Enterprises, which were adopted in 200533.

A deeper study of all these instruments would fall outside the scope of the present paper. What will be analysed in the next chapters is rather the contribution the EU has given in the adoption of the Santiago Principles and of the OECD declaration on SWFs and Recipient Country Policies. To this purpose, it is first necessary to clarify which are the relations between the EU and the IMF and the OECD.


4. The legal framework applicable to the participation of the EU institutions in the IMF and the OECD.


The EU has traditionally emphasised the importance of multilateralism. This also consists in supporting the activities of international organizations in finding mutually agreed solutions. 34 In spite of this pledging, the EU or rectius, the EC 35 is a member only of the WTO, the European Bank for Reconstruction and Development (EBRD) and the Food and Agriculture Organization (FAO). It is important to stress that even in these cases, it is a mixed membership, which means that the EC is a member of the organization together with its members States. In fact the EC has not all the powers which might enable it to fulfil the obligations deriving from the membership of such organizations and, as a result, it needs to act jointly with its member States. Moreover, it has been argued that direct membership of the EC in an international organization might raise problems. In particular, many international organizations provide membership for States only and admitting the EC or the EU makes amending their institutive treaties needed. Further difficulty might emerge when it is necessary to precisely apportion the powers to be exercised by the EU institutions and by its member States within the international organization and when it must be decided the redistribution of voting rights.36 For these reasons, it has often been preferred to avoid direct membership of the EC or the EU in international organizations in favour of an external cooperation or the grant of the status of observer, which ensure more flexibility.

Art. 302 EC Treaty provides that “It shall be for the Commission to ensure the maintenance of all appropriate relations with the organs of the United Nations and of its specialised agencies.” Moreover “The Commission shall also maintain such relations as are appropriate with all international organisations.” The IMF is a specialized agency of the United Nations and as a result the Commission is entitled to maintain relations with it. The relations between the IMF and the EU have become more important with the establishment of the European Central Bank (ECB) and the introduction of the single currency in the EU. The monetary policy is no more implemented by European States acting separately, but it is enacted by the ECB consistently with art. 105 seq. EC Treaty. This is consistent with art. 4,1 EC Treaty, according to which one of the conferred powers of the Community shall be the “irrevocable fixing of exchange rates leading to the introduction of a single currency, […] and the definition and conduct of a single monetary policy and exchange-rate policy”. It is clear that the IMF, when it exercises its “firm surveillance over the exchange rate policies of members” according to art. IV section 3 of its articles of agreement needs to cooperate not only with single EU member States, but also with the EU and in particular with the ECB. Consistently with these developments, the ECB has been granted the status of observer in the IMF board since 1998. For this reason, although the EC Treaty initially provided that the organ in charge of maintaining the relations with the IMF would have been the Commission , today the ECB too has come to play a very important role in the EU-IMF cooperation.37

After having reviewed the relations between the EU and the IMF, it is necessary to study those between the EU and the OECD. Art 304 of the EC Treaty provides that “the Community shall establish close cooperation with the Organisation for Economic Cooperation and Development, the details of which shall be determined by common accord.” The OECD was founded by States and normally only States can become members. Nevertheless, the Convention of 1960 establishing the OECD provides at article 12(b) the possibility to establish and maintain relations with other international organizations, and Article 12(c) even enables the OECD to invite them to participate in its activities. In addition, the case of the European Communities is explicitly envisaged by Article 13 of the OECD Convention and, more particularly, by its Supplementary Protocol No. 1. It is important to underline that such provisions have not been updated to the recent developments of the EU, nevertheless they are quite flexible and can adapt to the current framework of the EC and the EU as well. They clearly envisage that the EC institution entitled to represent the EC shall be the Commission but they also provide that “representation in the Organization for Economic Cooperation and Development of the European Communities established by the Treaties of Paris and Rome of 18th April, 1951, and 25th March, 1957, shall be determined in accordance with the institutional provisions of those Treaties.” As a result, if there are relevant changes in the institutional provisions of the EC Treaty, new subjects, for instance the ECB, can be entitled to represent the EC and the EU in the OECD.38


5. The contribution of the EU to the work of the IMF and the OECD on SWFs.


After having reviewed which are, in general, the relations between the EU on one side and the OECD and the IMF on the other side, it is finally possible to focus on the contribution the EU has given to such international organizations in their work on SWFs.

The EU, through the communication of the Commission which was analysed in chapter 2 has engaged to support the activities of the IMF and the OECD about SWFs. The actual participation of the EU has been rather informal and it seems it has consisted in taking part in discussions and providing information and advice.

With respect to the cooperation with the IMF, it must be noted that the Santiago principles have been drafted by the IWG which is composed by States owners of SWFs. The EU could have not been a member of the IWG, because it is not a State and because it has not its own SWF. Nevertheless, the World Bank and the OECD have participated in the activities of the IWG as permanent observers. The EU could have had the same status, as the regulation and the monitoring of SWFs is an issue which can fall within its powers. Moreover, as it was explained in chapter 4, the EU has established closed institutional links with the IMF and, given the relations between the IMF and the IWG (The IMF promoted the establishment of the IWG and provides for its secretariat), a participation of the European Commission or of the ECB in the IWG as an observer would have been reasonable. This has not occurred and actually the precise role the EU has had in drafting the Santiago Principles is difficult to assess. In the introduction of the Santiago principles it is only stated that the IWG “has benefited from input from a number of recipient countries […] as well as from the European Commission. […]” Moreover, it specifies that the Commission has acted “on behalf of the European Union, as agreed by the European Council on March 14, 2008”. It is important to remark that the cooperation of the EU with the IWG has not excluded that of its member States. In fact among the recipient countries which have cooperated to the drafting of the Santiago principles (without being members of the IWG) there are also France, Germany, Italy, Spain and the United Kingdom39. This is consistent with the practice of the EU and the EC external relations which has come to be denoted as mixity: it means that relations with third countries or international organizations are dealt with by the EU institutions and its member States acting jointly.40

France, Germany, Italy, Spain and the United Kingdom have the duty to keep the EU institutions and the other EU States informed about their discussions with the IWG. A similar obligation of information and coordination lies upon Ireland too as it is the only EU member State owning a SWF (the National Pensions Reserve Fund41) and therefore it is entitled to be a member of the IWG. It is important to identify the provisions of the EU or of the EC treaties establishing such an obligation. If the EU regarded SWFs as an issue of foreign policy and security, then art. 19 EU Treaty would apply.42 This article provides that “Member States shall coordinate their action in international organisations and at international Conferences” and that they “shall uphold the common positions in such forums”. It specifies that “in international organisations and at international conferences where not all the Member States participate, those which do take part shall uphold the common positions” and they shall keep the others “informed of any matter of common interest.”

No common position (according to art. 12 and 15 EU Treaty) has been adopted in relation to SWFs; in addition, it seems that the EU considers SWFs mainly as an economic issue, thus falling within the scope of the EC i. e. of the first pillar of the EU and not of the common foreign and security policy i. e. of the second pillar of the EU. To this extent the European institutions have so far limited their activities to a communication of the Commission which later has been endorsed by the European Council. Nonetheless, according to art. 10 EC Treaty, “Member States shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community”. In addition, member States are required to “facilitate the achievement of the Community's tasks” and to “abstain from any measure which could jeopardise the attainment of the objectives” of the EC Treaty. This should suffice to affirm that EU member States have a general obligation when they participate in international meeting or in international organizations dealing with SWFs to respect the principles set in the communication of the Commission and to coordinate their actions and finally to behave taking into account the overall interests of the EU.43

With respect to the cooperation between the EU and the OECD on SWFs, the European Commission has worked together with other OECD and non-OECD governments and representatives of business at the drafting of the report on SWFs and Recipient Country Policies issued in April 2008 which, as mentioned in chapter 3 of this paper, has served as the base for the adoption in of the “declaration on SWFs and Recipient Country Policies”. Moreover the Commission, acting on behalf of the EU, remains involved in the Freedom of Investment (FOI) process, launched at the OECD in 2006, whose aim is to help governments to reconcile economic openness to foreign investment with the need to safeguard their essential security interests. The FOI process involves, together with the European Commission, the OECD members, non OECD countries adhering to the OECD Declaration on International Investment and Multinational Enterprises and other major country partners, including China, India, Russia and South Africa. The OECD has invited States owning SWFs and which are not members of the FOI yet, to participate in such a process. In this way the cooperation between the European Commission and the OECD with respect to the SWFs will remain constant. The Commission will participate in FOI roundtables where governments compare and analyse policies and domestic rules adopted in relations to investments of SWFs 44 .


Conclusions


The EU understands the importance SWFs have in the world economy and it believes that measures applicable to them which are taken at the domestic level can prove inadequate, as the best approach to SWFs is the multilateral one. Acting consistently with this principles, the EU promotes a common European approach to SWFs for its member States and it encourages a high level of coordination of their policies related to this subject. In addition the EU supports the works of international organizations on SWFs in order to adopt standards and policies agreed at the international level applicable to SWFs and to recipient countries. So far, the EU cooperation with the IMF and the OECD has been rather informal, but it is not possible to asses if, for this reason, it has been less effective.

Up to now the EU has not adopted in relation to SWFs any of the instruments provided for in art. 12 of the EU Treaty. In particular, the EU has not defined common strategies or “principles of and general guidelines for the common foreign and security policy” (according to art. 13) nor has it adopted joint actions (art. 14) or common positions (art. 15) on this subject. This choice may be interpreted as a way to consider SWFs not as an issue of foreign or security policy but primarily as an economic issue, which would fall within the scope of the “first pillar of the EU” i. e. the EC. In this context the only document adopted has been the communication of the Commission which was analysed in chapter 2. None of the instruments provided for in art. 249 EC Treaty (which can be directives or regulations or decisions) has been approved with respect to SWFs, also consistently with the principle provided for in the abovementioned communication of the Commission according to which current EC provisions applicable to investments (especially those on the free movement of capital and services and those concerning mergers and acquisitions) may apply to SWFs too.

Moreover it must be reminded that the EC has not competences to govern foreign investments tantamount to those it has to regulate foreign trade under art. 133 EC Treaty. This means that the EC, and in particular the Commission, is not entitled to sign bilateral investment treaties (BITs) with third States and which are binding for all EU member States. Today BITs are signed between EU member States and third countries: as a result coordination of the obligations arising from BITs with those deriving from the EU membership sometimes may prove complicated. The emergence of a new kind of investors, the SWFs, can make the situation even more problematic. The Treaty establishing a Constitution for Europe, and later the Lisbon Treaty of 2007, would have given an exclusive competence to the EU on foreign investments, included those of SWFs, and they would have partially solved this problem,45 but they have not entered into force. The lack of an exclusive competence of the EC about foreign investments makes the establishment of an international framework regulating SWFs even more necessary.

Today the legal framework on SWFs is in the early stages and it is composed of non-binding rules and standards whose content remains somehow vague. Nevertheless, existing principles have been agreed and drafted in about one year only and, for this reason, it is possible to hope that further steps towards a more effective and articulated legal framework on SWFs might be taken in the future. It is necessary that the EU, especially until it has not improved its legislation about foreign investments increasing its powers in this domain, maintains its commitment to promote the establishment at the international level of a sound legal framework for the operations of SWFs. To this extent it might use all the instruments provided by the EU and the EC Treaties, which can integrate, but not necessarily substitute, the more informal ways of cooperating with international organizations and with the States owners of SWFs it has followed up to now.

References


BOOKS


Eeckhout, Piet; External relations of the European Union - legal and constitutional foundations; Oxford; Oxford University Press; 2004.


Johnson-Calari, Jennifer and Rieltveld, Malan, ed.; Sovereign wealth management; Central Banking publications; 2007.


Kapteyn, P. J. G; McDonnel, A. M. ; Mortelmans, K. J. M. ; Timmermans, C. W. A. and Geelhoed ; L. A.; ed.; The law of the European union and the European Communities; Kluwer Law International; 2008


Keukeleire, Stephan and MacNaughtan, Jennifer; The foreign policy of the European Union; Palgrave Macmillan, 2008.


Laatikainen, Katie Verlin and Smith, Karen E.; ed.; The European Union at the United Nations : intersecting multilateralisms; Palgrave Macmillan, 2006.


Mariani, Paola; Le relazioni internazionali dell'Unione europea : aspetti giuridici della politica estera, di sicurezza e difesa comune; Milano; Giuffrè; 2005.


Muchlinski, Peter; Ortino, Federico and Schreuer; Christoph; ed.; The Oxford handbook of international investment law; Oxford : Oxford University Press, 2008


Rieltveld, Malan; ed.; New perspectives in sovereign asset management; Central Banking Publication; 2008.


Tesauro, Giuseppe; Diritto Comunitario; cedam; Padova; 2001.


Venturini, Gabriella; ed.; L’organizzazione Mondiale del Commercio; Milano; Giuffré; 2004.


ARTICLES AND PAPERS


Almunia, Joaquín; The EU response to the rise of Sovereign Wealth Funds; Crans Montana Forum;

Brussels; 2008


Audit, Mathias; is the erecting of barriers against foreign sovereign wealth funds compatible with international investment law?; Society of international economic law; Working Paper No. 29/08; 2008


Backer, Larry Catá; The Private Law of Public Law: Public Authorities as Shareholders, Golden Shares, Sovereign Wealth Funds, and the Public Law Element in Private Choice of Law; Tulane Law review; 2008


Bahgat, Gawdat; Sovereign wealth funds: dangers and opportunities; International Affairs; 2008


Beck, Roland and Fidora, Michael; The impact of Sovereign Wealth Funds on global financial markets; Occasional Paper series No 91 / July 2008; European Central Bank


Bestagno Francesco; La prestazione di servizi nella Comunità Europea da parte dei prestatori non comunitari; diritto del commercio internazionale; 2008


Biard, Jean-François; Fonds souverains; Revue de Droit bancaire et financier; 2008


Butt Shams; Shivdasani, Anil; Stendevad, Carsten and Wyman, Ann; Sovereign Wealth Funds: A Growing Global Force in Corporate Finance; Journal of applied corporate finance; 2008


Ceyssens, Jan; Towards a Common Foreign Investment Policy? – Foreign Investment in the European Constitution; Legal Issues of Economic Integration; 2005.


Fernandes, Nuno; Sovereign Wealth Funds: Investment Choices and Implications around the World; IMD working paper series; 2009


Goldstein, Andrea and Subacchi, Paola; I fondi sovrani e gli investimenti internazionali - Salvatori o sovvertitori? In L’Italia nell’economia internazionale. Rapporto ICE 2007-2008; ICE; 2008


Gomes, Tamara; The Impact of Sovereign Wealth Funds on International Financial Stability- Discussion Paper 2008-14; Bank of Canada; 2008


Griffith-Jones, Stephany and Ocampo, José Antonio; Sovereign Wealth funds: a developing country perspective; Columbia University; 2008


Gugler, Philippe and Chaisse, Julien; Sovereign Wealth Funds in the European Union: General trust despite concerns; NCCR TRADE Working Paper No 2009/4; 2009


Horng, Der-Chin; The European Central Bank’s External Relations with Third Countries and the IMF; European Foreign Affairs Review; 2004.


Jen, Stephen; The Definition of a Sovereign Wealth Fund; Morgan Stanley; 2007


Johnson, Simon; The Rise of Sovereign Wealth Funds; Finance and development; 2007


Kern, Steffen; Sovereign Wealth funds; State investments on the rise; Deutsche Bank Research; 2007


Kern, Steffen and Reisen, Helmut; Commodity and non-commodity Sovereign Wealth funds; Deutsche Bank Research; 2008


Kern, Steffen; SWF’s and foreign investment policies - an update; Deutsche Bank Research; 2008


Lossani, Marco ed.; Osservatorio Monetario 3/2008; Laboratorio di Analisi Monetaria – Università Cattolica del S. Cuore; 2008


Mattoo, Aaditya and Subramanian, Arvind; Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization; Policy Research Working Paper 4668; the World Bank development research group; 2008


Radu, Anca; Foreign Investors in the EU—Which ‘Best Treatment’? Interactions Between Bilateral Investment Treaties and EU Law; European Law Journal; 2008


Reisen, Helmut; Fonds souverains et économie du développement; La Vie économique- Revue de politique économique; 2008


Sacerdoti, Giorgio; Bilateral Treaties and Multilateral Instruments on Investment Protection, in Recueil des Cours, Vol. 269; 1997


Segrelles, Jorge; Fondos Soberanos y sector energético: problema o solución?; Real Instituto Elcano; 2008


Shan, Wenhua; Towards a New Legal Framework for EU-China Investment Relations; Journal of World Trade ; 2000.


Siniscalco, Domenico; Governi alle porte. Crisi del credito e fondi sovrani; Mercato, Concorrenza Regole; 2008


Subacchi, Paola Capital flows and emerging market economies: a larger playing field?; Chatham House; 2007


Truman, Edwin; A Blueprint for Sovereign Wealth Fund Best Practices; Peterson institute for international economics; 2008


Truman, Edwin; The Rise of Sovereign Wealth Funds: Impacts on US Foreign Policy and Economic Interests; Peterson Institute for international economics; 2008


Truman, Edwin; Four Myths about Sovereign Wealth Funds; Peterson Institute for international economics ; 2008


Truman, Edwin; Sovereign Wealth Funds: New Challenges from a Changing Landscape;

Peterson Institute for International Economics; 2008


Van der Ploeg, Rick and Venables, Anthony; Harnessing windfall revenues in developing economies; VOX; 2008; available online at http://www.voxeu.org/index.php?q=node/1725


Wessel, Ramses A.; The inside looking out: consistency and delimitation in EU external relations; Common Market Law Review; 2000


Zilioli, Chiara and Selmayr, Martin; The External relations of the euro area: legal aspects; Common Market Law Review; 1999



OFFICIAL DOCUMENTS


Commission of the European Communities; Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the regions -A common European approach to Sovereign Wealth Funds; COM(2008) 115 final; 2008


Council of the European Union, Economic and Financial Affairs, 2857th Council meeting, 7192/08, 4 March 2008


Council of the European Union, revised version of the Presidency Conclusions of the Brussels European Council (13/14 March 2008), 7652/1/08 REV 1, Brussels, 20 May 2008.


Resolution of European Parliament on sovereign wealth funds, P6_TAPROV(2008)0355, Strasbourg, 9 July 2008, point 2.


IMF; Sovereign Wealth Funds—A Work Agenda; IMF; 2008


International working group for sovereign wealth funds; Generally accepted principles and practices - “Santiago Principles”; IMF; 2008


International working group for sovereign wealth funds; sovereign wealth funds - current institutional and operational practices; IMF; 2008


OECD; Sovereign Wealth Funds and recipient countries- Working together to maintain and expand freedom of investment; OECD; 2008


OECD; OECD Guidelines on Corporate Governance of State-owned Enterprises; 2005


WEB SITES


International Monetary Fund:

http://www.imf.org/external/


International Working Group of Sovereign Wealth Funds:

http://www.iwg-swf.org/index.htm


OECD:

http://www.oecd.org/home/0,2987,en_2649_201185_1_1_1_1_1,00.html


Sovereing Wealth Funds institute:

http://www.swfinstitute.org/


Peterson Institute. Page dedicated to SWF’s: http://www.petersoninstitute.org/research/topics/hottopic.cfm?HotTopicID=11


1 PhD candidate, Università Bocconi. Teaching and research assistant, Università degli Studi di Milano. The author welcomes critics and comments. Please send them at: michele.barbieri@phd.unibocconi.it

2 International working group for sovereign wealth funds; Generally accepted principles and practices - “Santiago Principles”; IMF; 2008. Jen, Stephen; The Definition of a Sovereign Wealth Fund; Morgan Stanley; 2007; Kern, Steffen; Sovereign Wealth funds; State investments on the rise; Deutsche Bank Research; 2007; p 2.

3 These non commodity SWFs are also called Forex Funds. Other non commodity funds can be those financed by surpluses deriving from privatization or structural surpluses of the State budget.

4 Johnson-Calari, Jennifer and Rieltveld, Malan, ed.; Sovereign wealth management; Central Banking publications; 2007; Rieltveld, Malan; ed.; New perspectives in sovereign asset management; Central Banking Publication; 2008; p. 67; Goldstein, Andrea and Subacchi, Paola; I fondi sovrani e gli investimenti internazionali - Salvatori o sovvertitori? In L’Italia nell’economia internazionale. Rapporto ICE 2007-2008; ICE; 2008; p. 56; Griffith-Jones, Stephany and Ocampo, José Antonio; Sovereign Wealth funds: a developing country perspective; Columbia University; 2008; Kern, Steffen; Sovereign Wealth funds; State investments on the rise; Deutsche Bank Research; 2007; p. 2; Kern, Steffen and Reisen, Helmut; Commodity and non-commodity Sovereign Wealth funds; Deutsche Bank Research; 2008; p. 3; Reisen, Helmut; Fonds souverains et économie du développement; La Vie économique- Revue de politique économique; 2008; Subacchi, Paola Capital flows and emerging market economies: a larger playing field?; Chatham House; 2007; van der Ploeg, Rick and Venables, Anthony; Harnessing windfall revenues in developing economies; VOX; 2008; available online at http://www.voxeu.org/index.php?q=node/1725; Beck, Roland and Fidora, Michael; The impact of Sovereign Wealth Funds on global financial markets; Occasional Paper series No 91 / July 2008; European Central Bank; Lossani, Marco ed.; Osservatorio Monetario 3/2008; Laboratorio di Analisi Monetaria – Università Cattolica del S. Cuore; 2008; p. 3; Butt Shams; Shivdasani, Anil; Stendevad, Carsten and Wyman, Ann; Sovereign Wealth Funds: A Growing Global Force in Corporate Finance; Journal of applied corporate finance; 2008;

5 Johnson, Simon; The Rise of Sovereign Wealth Funds; Finance and development; 2007.

6 The exact size of SWFs is unknown, as in many cases data available are provided spontaneously by the SWFs themselves and, when they decide not to disclose such information, data are based on unreliable estimates. Moreover, the value of assets held by SWFs can change, in particular in the current period of high volatility of financial markets. Estimates reported are provided by Sovereign Wealth Funds Institute http://www.iwg-swf.org/index.htm and by Truman, Edwin; Sovereign Wealth Funds: New Challenges from a Changing Landscape; Peterson Institute for International Economics; 2008; Fernandes, Nuno; Sovereign Wealth Funds: Investment Choices and Implications around the World; IMD working paper series; 2009. For other estimates see supra note 2.

7 Johnson-Calari, Jennifer and Rieltveld, Malan; cit; Rieltveld, Malan; ed.; cit.; p. 3; Siniscalco, Domenico; Governi alle porte. Crisi del credito e fondi sovrani; Mercato, Concorrenza Regole; 2008; p. 80; Lossani, Marco; ed.; p. 31

8 National law of recipient States establishes when acquiring a stake of a firm involves controlling it. According to the IMF, owning more than 10% of the equity involves the control of the firm and participations of more than 10% are regarded as a FDI.

9 Steffen Kern; SWF’s and foreign investment policies - an update; Deutsche Bank Research; 2008; p. 8; Segrelles, Jorge; Fondos Soberanos y sector energético: problema o solución?; Real Instituto Elcano; 2008.

10 Actually, such an attitude can be found in most recipient States, for instance in the US.

11 Truman, Edwin; A Blueprint for Sovereign Wealth Fund Best Practices; Peterson institute for international economics; 2008; Truman, Edwin; The Rise of Sovereign Wealth Funds: Impacts on US Foreign Policy and Economic Interests; Peterson Institute for international economics; 2008; Truman, Edwin; Four Myths about Sovereign Wealth Funds; Peterson Institute for international economics ; 2008; Truman, Edwin; Sovereign Wealth Funds: New Challenges from a Changing Landscape; Peterson Institute for International Economics; 2008; Siniscalco, Domenico; cit.; p. 82 ; Steffen Kern; Sovereign Wealth funds; State investments on the rise; cit.; p. 14; Goldstein, Andrea and Subacchi, Paola; cit. p. 62 Biard, Jean-François; cit.; Bahgat, Gawdat; Sovereign wealth funds: dangers and opportunities; International Affairs; 2008; p.1201; Malan Rieltveld; ed; cit.; p. 26; Audit, Mathias; is the erecting of barriers against foreign sovereign wealth funds compatible with international investment law?; Society of international economic law; Working Paper No. 29/08; 2008; Lossani, Marco; ed.; p. 33; Backer, Larry Catá; The Private Law of Public Law: Public Authorities as Shareholders, Golden Shares, Sovereign Wealth Funds, and the Public Law Element in Private Choice of Law; Tulane Law review; 2008; p. 56;

12 Commission of the European Communities; Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the regions -A common European approach to Sovereign Wealth Funds; COM(2008) 115 final; 2008. The Communication is a non binding document adopted by the European Commission and its task is to provide guidelines to the other EU institutions and to member States in the application of the EU law and to promote a debate whose outcome might be the adoption of binding instruments.

13 Radu, Anca; Foreign Investors in the EU—Which ‘Best Treatment’? Interactions Between Bilateral Investment Treaties and EU Law; European Law Journal; 2008, p. 253 ; Biard, Jean-François; cit.; Malan Rieltveld; ed; cit.; p. 49; Gugler, Philippe and Chaisse, Julien; Sovereign Wealth Funds in the European Union: General trust despite concerns; NCCR TRADE Working Paper No 2009/4; 2009; p. 21; Kapteyn, P. J. G; McDonnel, A. M. ; Mortelmans, K. J. M. ; Timmermans, C. W. A. and Geelhoed ; L. A.; ed.; The law of the European union and the European Communities; Kluwer Law International; 2008; p. 766.

14 Commission; cit.; p.2

15 See supra, note 8

16 Commission; cit.; p.5 .

17 Venturini, Gabriella; ed.; L’organizzazione Mondiale del Commercio; Milano; Giuffré; 2004; p. 52 ; 65 ; Mattoo, Aaditya and Subramanian, Arvind; Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization; Policy Research Working Paper 4668; the World Bank development research group; 2008; p. 17 ; Shan, Wenhua; Towards a New Legal Framework for EU-China Investment Relations; Journal of World Trade; 2000; p. 149 .

18 Radu, Anca; cit.; p. 237 ; Audit, Mathias; cit.; p. 6; Muchlinski, Peter; Ortino, Federico and Schreuer; Christoph; ed.; The Oxford handbook of international investment law; Oxford : Oxford University Press, 2008; Sacerdoti, Giorgio; Bilateral Treaties and Multilateral Instruments on Investment Protection, in Recueil des Cours, Vol. 269 (1997); p. 261.

19 Radu, Anca; cit.; p. 237 .

20 Commission; cit.; p.6 .

21 Commission; cit.; p.8.; Rieltveld, Malan; ed.; cit.; p. 52

22 Council of the European Union, Economic and Financial Affairs, 2857th Council meeting, 7192/08, 4 March 2008.

23 Council of the European Union, revised version of the Presidency Conclusions of the Brussels European Council (13/14 March 2008), 7652/1/08 REV 1, Brussels, 20 May 2008.

24 Resolution of European Parliament on sovereign wealth funds, P6_TAPROV(2008)0355, Strasbourg, 9 July 2008, point 2.

25 IMF; Sovereign Wealth Funds—A Work Agenda; IMF; 2008; Audit, Mathias; cit.; Kern, Steffen; 2008; cit.; p 17

26 These countries are: Australia, Azerbaijan, Bahrain, Botswana, Canada, Chile, China, Equatorial Guinea, Iran, Ireland, Korea, Kuwait, Libya, Mexico, New Zealand, Norway, Qatar, Russia, Singapore, Timor-Leste, Trinidad & Tobago, the United Arab Emirates, the United States.

27 IMF; Sovereign Wealth Funds—A Work Agenda; IMF; 2008; p. 3; International working group for sovereign wealth funds; Generally accepted principles and practices - “Santiago Principles”; IMF; 2008; p. 3 ; Kern, Steffen; 2008; cit.; p. 18 ; Rieltveld, Malan; ed.; cit.; p. 55; Audit, Mathias; cit..

28 International Working Group of Sovereign Wealth Funds; “Kuwait Declaration”: Establishment of the International Forum of Sovereign Wealth Funds; April 6, 2009 available online at: http://www.iwg-swf.org/mis/kuwaitdec.htm

29 Kuwait Declaration; cit.; par A

30 Kuwait Declaration; cit.; par. C

31 Kuwait Declaration; cit.; par. E

32 OECD; Sovereign Wealth Funds and recipient countries- Working together to maintain and expand freedom of investment; OECD; 2008; Rieltveld, Malan; ed.; cit.; p. 55 .

33 OECD Guidelines on Corporate Governance of State-owned Enterprises: OECD; 2005.

34 Laatikainen, Katie Verlin and Smith, Karen E.; ed.; The European Union at the United Nations : intersecting multilateralisms; Palgrave Macmillan, 2006; p. 199; Keukeleire, Stephan and MacNaughtan, Jennifer; The foreign policy of the European Union; Palgrave Macmillan, 2008; p. 298 .

35 In this paper I will not deal with the issue of the international legal personality of the European Union and of the European Community. Hence, I will not discuss if it is more correct to talk about the relations of the EC or of the EU with international organizations and with third States. In this paper I will mainly use the term EU, except when it is the EC which is a member of international organizations, although this decision is somehow an arbitrary simplification which can be criticised. These complications derive from the particular “three pillar” structure of the EU, according to which the EC is comprised in the framework of the EU and constitutes its first pillar, but the institutions of the EU are the same of the EC, with the exception represented by the European Council which is mentioned in the EU Treaty but not in the EC Treaty. The other two pillars of the EU are the “common foreign and security policy” and the “police and judicial cooperation in criminal matters”. The Lisbon treaty of 2007 would have brought to an end this distinction between the EU and the EC, but it has not entered into force yet. For a more detailed analysis of the issues mentioned in this note, see: Mariani, Paola; Le relazioni internazionali dell'Unione europea : aspetti giuridici della politica estera, di sicurezza e difesa comune; Milano; Giuffrè; 2005; Eeckhout, Piet; External relations of the European Union - legal and constitutional foundations; Oxford; Oxford University Press; 2004; p. 138; Wessel, Ramses A.; The inside looking out: consistency and delimitation in EU external relations; Common Market Law Review; 2000; p. 1136; Kapteyn, P. J. G; McDonnel, A. M. ; Mortelmans, K. J. M. ; Timmermans, C. W. A. and Geelhoed ; L. A.; ed.; cit.; p. 1276.

36 Eeckhout, Piet; cit.; p. 199 .

37 Horng, Der-Chin; The European Central Bank’s External Relations with Third Countries and the IMF; European Foreign Affairs Review 9: 323–346; 2004; p. 330 ; Zilioli, Chiara and Selmayr, Martin; The External relations of the euro area: legal aspects; Common Market Law Review 1999; p. 273 . Keukeleire, Stephan and MacNaughtan, Jennifer; cit.; p. 307 .

38 Horng, Der-Chin; cit.; p. 331 ; Zilioli, Chiara and Selmayr, Martin; cit.; p. 340 .

39 International working group for sovereign wealth funds; Generally accepted principles and practices - “Santiago Principles”; IMF; 2008; p. 2; 30.

40 Eeckhout, Piet; cit.; p. 190 .

41 The origin and the financing of this fund is quite different from those of the commodity and the non commodity SWFs studied in chapter 1, nevertheless it falls within the definition of SWFs provided for in this paper and in the GAPP.

42 This article falls within the second pillar of the EU, called common foreign and security policy. See supra note 34 for the three pillar structure of the EU.

43 Eeckhout, Piet; cit.; p. 210 ; Mariani, Paola; cit.; p. 76 ; Tesauro, Giuseppe; cit.; p. 106; Kapteyn, P. J. G; McDonnel, A. M. ; Mortelmans, K. J. M. ; Timmermans, C. W. A. and Geelhoed ; L. A.; ed.; cit.; p. 147.

44 OECD; Sovereign Wealth Funds and recipient countries- Working together to maintain and expand freedom of investment; OECD; 2008; p. 2 ; Almunia, Joaquín; The EU response to the rise of Sovereign Wealth Funds; Crans Montana Forum; Brussels; 2008; Mandelson, Peter; Putting sovereign wealth in perspective - Speech by Peter Mandelson at the OECD Conference - Paris, 28 March 2008; Rieltveld, Malan; ed.; cit.; p. 55

45 Ceyssens, Jan; Towards a Common Foreign Investment Policy? – Foreign Investment in the European Constitution; Legal Issues of Economic Integration; 2005; p. 259 ; Radu, Anca; cit.; p. 240 .

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