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

Abstract

This Article examines the development of a European framework for considering the law applicable to state private interventions in the market, both their own and those of other states through direct investment or through sovereign wealth funds. For this purpose, it closely analyzes the so-called golden share decisions of the European Court of Justice delivered between 2002 and 2007, through which the ECJ sought to apply the free movement of capital provisions of the European Treaties to vestigial issues of the construction of a post-socialist political economy in Europe. The Article then applies those insights in three distinct cases of sovereign participation in private market activity: the purchase of shares of a domestic company by a state; the purchase of shares of a foreign corporation by a state; and the purchase of shares by a multi-state sovereign wealth fund. It suggests the importance of the state aids jurisprudence of European Competition Law, a different result under American law, and the tensions inherent in the rising European jurisprudence with the parallel development of principles of foreign sovereign immunity.

The central point of the Article is this: Traditional choice of law analysis is grounded in a stubborn belief in the separability of public and private law, and positing issues of conflicts (and choice) of law as a central problem of private law for transactions among several jurisdictions. This grounding misses an important new development in conflicts (and choice) of law as well as the substantive consequences of those choices. That development, in turn, is founded on the growth of a new phenomenon, the increasing tendency of states to behave like private actors (participating in markets) rather than as sovereigns (regulating markets).

The general framework of the analysis has been choice of law related, but not in the traditional sense. Traditionally, the activities of sovereigns, either as regulators or participants did not raise issues of either choice or conflict of laws. But all that is changing. Modern globalization has effectively introduced a global advance toward free movement of capital and to greater protection of private activity from regulation. At the same time, states have sought to act more energetically as private as well as public actors. In a global legal order in which the value of state sovereignty has diminished and the cross border element of transactions has increased, states can extend their authority as private actors to an extent difficult when they seek to regulate as sovereigns. States privatize their traditional activities or seek to regulate indirectly by acting in markets.

It is in this emerging jurisprudential milieu that issues of choice of law arise - when states seek to participate in markets, does private or public law apply?; and whose law applies in any case? The essay offers no answers to these questions. It suggests that the European Court of Justice's golden share cases provides an excellent window on a difficult issue of choice of law, and a revolutionary one. The transnationalization of corporate law norms provides an opportunity not only to examine the changing landscape of choice of law in private law, but also the creation of a new set of vertical choice of law questions, and the substantive consequences of their adoption.

Keywords: golden shares, sovereign wealth funds, state aids, privatization, sovereign immunity

JEL Classification: D40, F30, H87, K19, K21, L49, P16