Sovereign wealth funds (“SWFs”) have been greeted with both enthusiasm and suspicion. In one respect, they have been called “white knights,” where they step in to inject financing to troubled entities. In others, they have been called “Trojan horses” and “chameleons.”
The prospect of having a friendly foreign government-owned entity invest in one’s businesses is a natural extension of the notion of “state capitalism”—after all, governments all over the world need to invest reserves and other legitimate revenues in order to raise reasonable returns for their citizens. The suspicion arises when a recipient country’s government views a foreign government’s investment as raising sensitive issues, such as national security, and when the investment consists of acquiring control of critical state infrastructure or technology. Nationalist sentiments can also play a role in recipient countries, contributing to public outcry at particular investments. Finally, SWF investors, through their articulated investment policies, may also embrace certain sociopolitical objectives as they make their economic investment decisions.
Due to their government ownership, SWFs also fall into the group of business entities known as state-owned enterprises (“SOEs”), although SWFs’ missions are typically different from SOEs, which engage primarily in commercial dealing in goods and services. In a previous work, this author had suggested that SWFs are creatures in search of a legal identity. This remains the case today, particularly in the context of existing and emerging investment agreements and national investment approval regulations. This Article examines SWF developments through the lens of trade and investment law, as a contribution to the international discussion on the legal (and other) status of SWFs.
