Protectionism and Sovereign Investment Post Global Recession

Abstract

Sovereign Wealth Funds (“SWFs”) have attracted significant attention over the past few years, as a result of their increasing role in global economy and their controversial minority investments in distressed financial and infrastructure companies in Western economies. Although SWFs provide important benefits to home, host, and global markets, they have been perceived by the Western mind as a growing threat to economic supremacy and national security. These mixed feelings, frequently driven by national protectionism, have prompted various Western attempts to block SWF cross-border investments through legislative reforms or ad-hoc protectionism of the executive branch. These governmental policies frequently violate international commitments in the international economic law arena and call for a closer look at the nature of such commitments and their respective implementation in the SWF environment. The paper will look at recent practices in Western countries that aim to block SWF investments in the context of the recent global recession and growing protectionism in trade and investment activity. It will propose ways to confront this protectionism by joint efforts of the funds, governments, the media, and the legal community.

Keywords: international economic law, protectionism, investment law, sovereign wealth funds, investment arbitration

JEL Classification: K33