Sovereign wealth funds and national security - three purposes of regulations and beyond

Abstract

In light of the fact that the international investments made by state investors have tremendously expanded since the 19th century, there is a heated debate concerning the regulatory issues and challenges raised by sovereign wealth funds (‘SWFs’). This paper seeks to identify the obscure purposes regulating SWFs. It provides an alternative perspective of national security through its impact of autonomy, disclosure requirement, and continuous development of International Law from the investor-state made to the host-state. It is illustrated through comparative studies of the SWF related rules of the United Kingdom, the United States and the European Union, where most of these SWFs from around the world are established. This paper hopes to raise these three questions for further research and provide a new angle to understand national security beyond the ordinary sense of physical harm but on top of its how its citizen's property is being protected and could not be deprived. This deprivation is different in the sense that the control is taken over through the operation of contracts and treaties, which are totally legitimate but could not be regarded as an integrity channel because of the potential political influence behind, its ability to be used for political purposes and interfere investment decisions if it contradicts with government interest. Even if these are not the intention to invest through SWFs, it could impose an invisible hand that creates fear of SWFs as there is a channel for economic retaliation or other forms of support that endanger national security. We believe the international legal community should expand existing rules and regulations to protect country autonomy, the confined scope for disclosure and reduce public worries over national security through promoting financial and economic national security.