International Legal Aspects of Sovereign Wealth Funds: Reconciling International Economic Law and the Law of State Immunities with a New Role of the State
37 Pages Posted: 3 Dec 2008 Last revised: 19 Feb 2009
Date Written: November 3, 2008
This contribution addresses the international legal framework for SWFs. The prominence of the State as an investor challenges the existing rules of international economic law and of the law of State immunities. With regard to international economic law, the focus is on the General Agreement on Trade in Services ('GATS'), since this is the only multilateral agreement that has binding rules for investment. The GATS allows the receiving States to adopt preventive measures that restrict investments by SWFs, provided specific conditions are complied with. However, it does not impose restrictions on the activities of the States that make investment by means of SWFs. Moreover, while preventive measures are definitely useful, the real challenge occurs at the moment investments that passed preventive scrutiny turn out to be problematic. When these investments run counter prudential rules or endanger the national security interests of the State, the receiving State may want to intervene. However, the possibility for intervention may be constrained by rules on State immunity.
Keywords: Sovereign Wealth Funds, GATS, Santiago Principles, State Immunities
JEL Classification: K33, K22
Suggested Citation: Suggested Citation