Friday, April 24, 2009

Sovereign Wealth Funds and Public Power: The Case of Norway Part I

This is the first of a series of five (5) essays in which the nature and character of sovereign wealth funds are considered. Specifically the essays explore whether a sovereign wealth find can form itself to the ideals expressed in emerging regulatory regimes, like the Santiago Principles, one based on the idea that states may be treated like private entities with respect to their enterprises, formally sovereign but functionally private, as long as they conform to a set of behavior expectations which are said to distinguish sovereign from private behavior. The focus of that study is the "socially responsible" SWF, using as its model the Norwegian SWF, proffered by many as the model an an ideal form of sovereign wealth fund.

Part I provides an introduction to the issues to be considered and a framework for analysis. Part II explores the conceptual and regulatory framework currently arising for the transnational regulation of SWF grounded in the idea of a critical distinction between public actors and private action for constructing a system of SWF regulation. Part III focuses on the Norwegian Funds themselves: history, legal structure, and investment principles. It looks particularly at the role of the Ethics Council in SWF investment decisions. Part IV examines the Norwegian Funds in action. It explores the nature of the Norwegian SWF's engagement with corporate social responsibility through its investments, as well as its engagement with two political situations: the Israel-Palestine conflict, and the political situation in Myanmar. Lastly it examines the use of the Norwegian Fund for purposes of promoting development and its application to issues of Norwegian macroeconomic policy in the face of the economic crisis of 2008, especially with respect to investment in India. Part V looks to the regulatory implications of the relationship between the idealized framework within which regulation is constructed and the reality of the operation of the Norwegian SWF. In particular, the following are examined: (1) The role of investment and the utility of the idealized private investor model; (2) the importance of approaches in conceptualization of regulatory options; and (3) participation versus regulation as an alternative to the Public/private model.

The entire work can be accessed by clicking HERE.

Sovereign Wealth Funds as Regulatory Chameleons: The Norwegian Sovereign Wealth Funds and Public Global Governance Through Private Global Investment
Larry Catá Backer*

Abstract:The character of global regulation has changed dramatically over the last decade. Today, multinational corporations sometimes assert substantial regulatory power across borders, and states sometimes enter markets as participants rather than as regulators— especially when they engage in economic activity outside their borders through sovereign wealth funds (SWFs). In both cases the current transnational ordering has settled on voluntary principles based approaches to regulation. SWFs are controlled by states but seek to participate in private markets in the same way as private investment vehicles. But the difficulty has been the need to overcome the inherent sovereign character of state investment, central to the definition of SWFs. SWFs thus proceed from definition to conundrum. If SWFs are grounded in the reality of their formal connection to states, and if states are deemed sovereign in their actions, then it might be reasonable to assume that such funds could not be treated like private investment funds. To bridge that gap, it was necessary to find a way to disconnect SWFs from the state and sovereign activity, and to model private activity in a way that made it possible to construct a set of behavior principles that might produce an equivalence between SWFs and private investment vehicles. The first was accomplished by creating a functional distinction between state and SWF, a distinction unnecessary for traditional sovereign investment. The second was grounded in the presumption that there is a way of distilling the essence of private investment behaviors sufficiently precisely to distinguish those behaviors from sovereign conduct. Both are nicely captured in the Santiago Principles. Both are problematic as either as concept or in application. This paper looks closely at one example of this rising phenomenon—the socially responsible sovereign wealth fund. It focuses on a close review of one of the most influential funds, the Norwegian Government Pension Fund—Global (Statens pensjonsfond - Utland). It is among the largest and most influential SWF in the world, and the largest in Europe. The Norwegian SWF provides a particularly useful case study of the issues that are now at the center of reconceptualizations of the relationships between state and corporation, between economic and political regulation,between national and transnational legal frameworks, and between public and private legal regimes. The paper first describes conceptual and regulatory frameworks on which current policy discussions of sovereign wealth funds are undertaken. It then turns to the Norwegian funds, focusing on the history of the Norwegian fund, its legal structure and the development of its investment principles. It then looks to the way those principles were used in two distinct areas—the creation of incentives to produce changes in the behavior and culture of corporations and the response to the global financial crisis of 2008. The Norwegian SWF suggests that the rising model of SWF governance, grounded on an assumption that a state organization formally public but functionally private, acting like an idealized private investor does not work either for private investors who seek to use investment for political ends or state investment entities that purport to refrain from that sort of activity.



I. Introduction

II. Conceptual and Regulatory Framework: Public Actors, Private Action

III. The Norwegian Funds
A. History
B. Legal Structure
C. Investment Principles
IV. The Norwegian Funds in Action
A. Corporate Social Responsibility
B. Development and Use in Macroeconomic Policy: the 2008 Financial Crisis
V. Regulatory Implications
A. The role of Investment and the Utility of the Idealized Private investor Model.
B. The importance of approaches in conceptualization of regulatory options:
C. Participation versus regulation as an alternative to the Public/private model.
VI. Conclusion.


For much of the end of the last century, legislatures and courts have been grappling with the problems of state participation in private markets1 and private market actors participating in governance activities within and between states.2 These issues have become acute in the first decade of the 21st century as a number of forces intersect—an increasing willingness of states to invest their wealth abroad in instruments other than the debt securities of other nations, the rise of transnational normative frameworks for global market and business behavior, the development of a severe economic collapse in the last years of the decade, and an increasing understanding of the public role of private actors, especially in places where state authority is weak. Among the more visible manifestations of these tectonic changes in the way in which the global order is organized are sovereign wealth funds.3 Over the last decade they have been transformed from a simple and relatively benign sovereign vehicle for the investment of excess wealth in a discrete way,4 to an important force in global finance.5 According to Congressional Research Service, such SWFs currently manage between $1.9 and $2.9 trillion, and they are expected to grow to over $12 trillion by 20156. Similarly, the International Monetary Fund indicates that the expected growth of SWFs’ assets will be over $10 trillion in the next 5 to 10 years.7 And thus an irony, though they are creatures of states, they also tend to challenge state power to order its internal relations, and the legal systems under which these arrangements are maintained.

At the international level there have been public and private efforts to create either voluntary codes of behavior for such funds, including collective efforts backed by states with important sovereign wealth funds.8 These tend to privilege transparency, disclosure and equivalent treatment with private funds similarly operated.9 On the other hand, host states have been tending toward a jurisprudential position that significantly narrows the circumstances under which a state ought to be treated like a private entity, at least for purposes of applying the obligations the European Union’s treaty framework.10 The United States, in contrast, has tended to avoid direct regulation.11 Sovereign wealth funds can fall within a variety of regulatory fields depending, for example, on the object of investment,12 the form of investment,13 and the relation to sovereign activity.14 Essentially, however, sovereign wealth funds in the United States are treated as sovereign for tax purposes, and when used to invest in those instruments traditionally used by sovereigns to manage their currencies and reserves.15 Otherwise, sovereign wealth funds will be treated as private entities for purposes of immunity from suit,investment suitability as a foreigner and obligation to comply with generally applicable law.16

At the root of these various approaches is both fear and desire—especially among host states. As Gerard Lyons recently noted, these states have come to understand three crucial implications of sovereign wealth funds—first, that their influence in growing in all financial markets and across all financial products; second, that host and home states will clash over that SWFs can buy and where; and third, that the first two implications are powerful evidence of a great shift in the world economy, one not necessarily to the benefit of Western investment host states, now more dependent on direct foreign investment.17 Yet that fear and desire reflects a deeper ambivalence in approach to regulation, one that touches on the complexity of the sovereign wealth fund entity and its use. From a perspective of the formalities of law and organization these entities appear to be creatures of the state that funds them, and controls them—a public purpose public owned entity. But from a functionalist perspective, these entities appear to behave like other private investment entities similarly constituted. They participate rather than regulate.

Yet, from this ambivalence something approaching a consensus of views has emerged on the approach to regulating sovereign wealth funds.18 That approach is grounded on a measure of transparency, some minimum amount of institutionalization of funds and their activities, so that they exist separate from the political and administrative ministries of a state, and a strict limit on objectives of investment. 19 This consensus is nicely evidenced in the Santiago Principles.20 The objectives are to ensure that host states do not feel threatened by these investment vehicles, and can approach their governance (and acceptability) in the same way that they approach the regulation of private aggregations of investment capital. For that purpose, the objectives of investment take on an important role. Critical to that role is an understanding that sovereign wealth funds ought to strive to adhere to a private investor model of investment. The object of SWFs should not be to project state power. Rather, it is to “maximize risk-adjusted financial returns in a manner consistent with its investment policy, and based on economic and financial grounds.”21 If investment decisions deviate form that model, those deviations ought to be disclosed,22 suggesting that such deviation might openthat fund to special regulation. SWF management “should be consistent with what is generally accepted as sound asset management principles,”23 and it should not take “advantage of privileged information or inappropriate influence by the broader government.”24 Lastly, SWF should exercise ownership rights “in a manner that is consistent with its investment policy and protects the financial value of its investment.”25 Effectively, if a sovereign wealth funds acts like a private investor, if it ceases to exercise its authority as a regulator rather than a participant, then it ought to be viewed as a benign instrument useful to the development of global financial markets, and regulated as such.26

This consensus makes two important assumptions. The first is that private funds have no regulatory effect—they do not project political power as states do, or for the same ends. The second is that it is possible to model those private behaviors and use it as a benchmark for distinguishing between benign sovereign wealth fund activities—activities that ought not to be specially regulated—from political sovereign wealth fund activities that might be specially regulated. As a result, if a model of private investment activity could be understood and constructed, then there would be no reason to treat funds differently merely because one type is owned by a state and the other is not. And that, essentially, has been the thrust of discourse and activity.27 Whether in the form of soft law or hard law at the municipal or supra-national levels, the idea is substantially stable—sovereign wealth funds that adopt the behaviors of private investment fund can be treated no worse than private funds in host states. As a consequence, special or disabling regulation is unnecessary, and these funds can contribute to the integrity of global private financial markets.28 Thus understood the challenge for domestic and international regulatory responses to the SWF phenomenon is, while important, conceptually manageable.29

Yet if these assumptions are not valid, then the current project of regulatory reform and its conceptions of both sovereign wealth funds and private investment funds might be misdirected at best and cause some harm at worst. Every powerful private actor affects social perceptions and behavior by their conduct and their diffusion of knowledge and outlook.30 Americans have long feared the expression of public power by private entities either through interventions in private markets,31 or in the electoral process.32 And increasingly there is a recognition that policy can be as easily effected through imposition of obligations on entities as on states.33 That has been the thrust of the efforts through the Organization for Economic Cooperation and Development (OECD)34 to impose a soft law framework for the regulation of multinational enterprises.35 In recent statements through its administrative bodies, it has become increasingly clear that such enterprises are increasingly expected to exercise something approaching governance responsibilities under a number of circumstances.36 The ideal of a strict separation between the public obligations of states and the private obligations of economic actors has essentially disappeared in some of these contexts.37

But more precisely relevant is the example of the socially conscious private investment fund. These funds have no connection with a state, yet are organized around investment grounded not merely in wealth maximizing, but in creating incentives to promote certain corporate behaviors through investment decisions.38 To some extent, that private fund seeks to project governance power to the objects of its investments. And they engage in this activity not merely to maximize wealth but for the importance the members of those funds attach to reforming the behaviors of the targets of their investment activities. And in any case, such activity suggests that the model of private investment activity at the heart of SWF regulatory discourse is at best incomplete.

On a more general level of theory, the regulatory private fund and the participatory sovereign wealth fund also suggests that the simple categories on which an understanding of these entities is based—that states and private entities act differently in measurable and quite separable ways—is false. Both sovereign and private funds appear to present private means to accomplish public acts, and private ends as well. In this respect they provide significant evidence of a further erosion of the public/private divide in lawmaking and governance. When states seek to be treated like private entities with respect to certain of their activities, and when private funds seek to assert a regulatory authority with respect to certain of their activities, the old jurisdictional divides between the state and the private sector, between public and private law regimes, must be substantially weakened. In this respect sovereign wealth fund regulation issues mirror the larger debates about governance without government39 and the transformation of the jurisprudential expression of sovereignty.40

Sovereign wealth funds, then, represent another wave in the assault on the traditional public private divide. As corporations assume a greater regulatory role,41 states appear to be assuming a greater private role.42 Sovereign wealth funds are an important manifestation of those new forms of public/private conflation through instrumentalities and actions that are neither fish nor fowl under the traditional regulatory divisions. Sovereign wealth funds thus serve to show the growing irrelevance of that distinction, and the rise of a new set of questions for law, politics and governance. And in that context, the current thrust of regulatory reform—grounded in the assumptions that private and public actors are distinct, that those distinctions can be modeled, and that state investment vehicles might be treated as benign when they adopt the behaviors of this ideal model of private behavior just does not work. And it doers not work precisely because public actors cannot wholly escape their character as sovereigns, and private entities engage in regulatory activities through private markets.

All of these trends and challenges are nicely exposed in the form of one type of emerging sovereign wealth fund, the socially responsible sovereign wealth fund. This article focuses on a close review of one of the most influential of this type of sovereign wealth fund, the Norwegian sovereign wealth funds.43 Together they are among the largest and most influential sovereign wealth funds (SWF) in the world, and the largest in Europe. The International Monetary Fund indicates that Norway’s Government Pension Fund – Global is one of the largest and fastest growing SWF in the world with total assets amounting to $373 billion at the end of 2007, which represents nearly 100 percent of Norway’s GDP.44

The article first describes conceptual and regulatory frameworks on which current policy discussions of sovereign wealth funds are undertaken.45 It develops the context in which the public private distinction is elaborated and used as a framework for rules that permit access of sovereign wealth funds to private markets as long as they restrict their activities to those that mimic a certain set of idealized private market behaviors. Section II then turns to the Norwegian funds themselves, focusing on the history of these funds, its legal structure and the development of its investment principles.46 This review fleshes out the contours of a model sovereign wealth fund that appears to conform to the emerging consensus—sovereign in form and private in practice. And it contextualizes the ethical component of investment within this framework. Section IV then examines the Fund in action.47 This examination concentrates on the investment effects of the fund in two principal areas—corporate social responsibility/ethics, and development and use of the fund to advance state macroeconomic policy, especially in the aftermath of the global economic crisis after 2008.48

This examination of fund behavior evidences a substantial ambiguity—it operates like a private investment fund to the extent that it seeks to maximize shareholder value, but the maximization of shareholder value in this case requires the Fund be used to effect the global governance goals of the Norwegian state, the consideration of which the article turns to in Section V.49 Norway’s investment portfolios reflect both private participatory behaviors, consonant with private funds, from socially conscious to more politically directed wealth management funds. But the funds’ activities do more than that as well. They are used quite consciously meant to serve as an instrument of Norwegian state policy in its intervention in issues of regulation of transnational corporations and in the fashioning of governance and behavior norms for economic entities generally.50

And this suggests the limits of regulatory policies represented by current approaches to governing SWFs. sovereign wealth funds like that of Norway are strong examples of the character of these entities as regulatory chameleons. Current regulation is based on a formally public/functionally private model. The touchstone for the model is an "idealized private investor" that can be distinguished from others. The idealized private investor standard at the heart of sovereign wealth fund soft regulation does not work. But it also does not work for private investment funds from which they are in part derived. For that purpose, the Norwegian Fund is considered against private socially responsible funds. Sovereign wealth funds may mimic private investment as much because private funds engage in regulatory/sovereign investment strategies as because the public fund mimics wealth or benefit maximizing participatory private commercial activity. The Norwegian funds in action evidence this nicely and point to the need for a different regulatory framework.



* Professor of Law, Pennsylvania State University, founding director, Coalition for Peace & Ethics, Washington, D.C. He may be reached at My thanks to the sponsors of the Georgetown Journal of International Law Symposium 2009, Sovereign Wealth Funds, held March 30, 2009, and especially to the Symposium editor, Kevin B. Goldstein, and the GJIL editor in chief, Ahmed S. Mousa. Special thanks to my research assistants, Augusto Molina (Penn State Law ’09), Sandra Gonzalez de Del Pilar (PSU Sch. Int’l Affrs. ’10), and Siyu Zai (Penn State Law ‘11) for exceptional work on this article.

1 The European Union has been the most thoughtfully engaged in this issue. See, e.g., Larry Catá Backer, 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, 82(5) TULANE LAW REVIEW 1801 (2008)(from a conflicts perspective).

2 See, e.g., Larry Catá Backer, Multinational Corporations as Objects and Sources of Transnational Regulation, 14 ILSA JOURNAL OF INTERNATIONAL & COMPARATIVE LAW 499 (2008); Larry Catá Backer, Multinational Corporations, Transnational Law: The United Nation’s Norms on the Responsibilities of Transnational Corporations as a Harbinger of Corporate Social Responsibility as International Law, 37 COLUMBIA HUMAN RIGHTS LAW REVIEW 287 (2006).

3 We start with a simple definition, one proposed by Clay Lowery, Undersecretary for International Affairs in the second Bush administration: “a government investment vehicle which is funded by foreign exchange assets, and which manages these assets separately from official reserves.” Stephen Jen, The definition of Sovereign Wealth Fund, Morgan Stanley, Global Economic Forum (Oct. 26, 2007) (Quoting Undersecretary Lowery). Mr. Jens suggests a more market participatory, though slightly wary, definition: “a SWF needs to have five ingredients: 1. Sovereign; 2. High foreign currency exposure; 3. No explicit liabilities; 4. High risk tolerance; 5. Long investment horizon.” Id. He would distinguish among sovereign wealth funds, sovereign pension funds and reserves. Id. The difficulties of definition and its regulatory consequences are discussed at Section II, infra.

4 “In 1953, eight years before its independence form the United Kingdom, Kuwait established the Kuwait Investment Board to invest its surplus oil revenue. That was perhaps the first ever ‘sovereign wealth fund’ (SWF), although the term would not exist for another 50 years.” Robert M. Kimmett, Public Footprints in Private Markets: Sovereign Wealth Funds and the World Economy, 87(1) FOREIGN AFFAIRS 119 (2008). Sovereign wealth funds are typically the result of national budget surpluses, often accumulated over the years due to favorable macroeconomic, trade and fiscal positions, coupled with long-term budget planning and spending restraint. Usually, these funds are set up with one or more of the following objectives: “insulate the budget and economy from excess volatility in revenues, help monetary authorities sterilize unwanted liquidity, build up savings for future generations, or use the money for economic and social development.” Rozanov, Andrew, Who holds the wealth of nations?, State Street Global Advisors, August 2005.

5 See, Gerard Lyons, State Capitalism: The Rise of Sovereign Wealth Funds, 14 L. & BUS. REV. AM. 179, 202-238 (2008) (providing data on the largest funds). As the organizers of the Georgetown Journal of Internal Law 2009 Conference astutely described it, Controlling vast pools of capital and investing globally, sovereign wealth funds often operate without full regulatory supervision and with objectives other than maximizing return on investment. These powerful funds raise legal, economic, and strategic security issues that private investors do not. As the number and size of sovereign funds continue to grow, the global legal community is confronted by novel issues of both public and private international law. Georgetown Journal of International Law, Featured Symposia, 2009 Symposium.

6 Congressional Research Service, Sovereign Wealth Funds: Background and Policy Issues for Congress, September 3, 2008.

7 International Monetary Fund, Norway’s Oil Fund Shows the Way for Wealth Funds, IMF Survey Magazine: Policy, July 9, 2008.

8 See, International Working Group of Sovereign Wealth Funds, Sovereign Wealth Funds: Generally Accepted Principles and Practices; “Santiago Principles, (October 2008), (hereafter the “Santiago Principles”).

9 See discussion, supra, at text and notes --. See also G. L. Clark, G. L. and R. Urwin, Best-Practice Pension Fund Governance, 9(1) JOURNAL OF ASSET MANAGEMENT 12-21 (2008).

10 This evolution is discussed in Larry Catá Backer, 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, 82(5) TULANE LAW REVIEW 1801 (2008). See also, Peer Zumbansen, The ECJ, Volkswagon and European Corporate Law: Reshaping the European Varieties of Capitalism, 8 GERMAN L.J. 1027 (2007); Johannes Adolff, Turn of the Tide?: The ‘Golden Share’ Judgments of the European Court of Justice and the Liberalization of the European Capital Markets, 3 GERMAN L.J. (2002).

11 This approach is discussed in Larry Catá Backer, Sovereign Wealth Funds and Regulatory Responses to the Financial Markets Crisis, 19:1 TRANSNATIONAL LAW & CONTEMPORARY PROBLEMS – (forthcoming 2009).

12 Thus, for example, sovereign wealth funds can be treated like other foreign investors in connection with investment activities that touch on national security concerns. In that regard, the American Committee on Foreign Investment in the United States was established by executive order in 1975 for the purpose of reviewing inbound foreign investments. See, Exec. Order No. 11858(b), 40 Fed. Reg. 20263 (May 7, 1975). This regulatory system was strengthened in 2007 but remains otherwise unchanged. See Mark E. Plotkin, Foreign Direct Investment by Sovereign Wealth Funds: Using the Market and the Committee on Foreign Investment in the United States Together to Make the United States More Secure, 118 YALE L.J. POCKET PART 88 (2008).In addition, the President has the authority to block a foreign acquisition under the Defense Production Act (commonly known as the Exon-Florio provision) where there is a credible threat to national security and no other recourse at law. See Defense Production Act § 721(a)(3), Pub. L. No. 110-49, 121 Stat. 246 (2007) (to be codified at 50 U.S.C. app. §2170). See Christopher M. Weimer, Foreign Direct Investment and National Security Post FINSA 2007, 87 TEX. L. REV. 663 (2009).

13 See, e.g., Scott G. Alvarez (General Counsel Board of Governors Federal Reserve System), Sovereign Wealth Funds, Testimony Before the Committee on Banking, Housing and Urban Affairs, U.S. Senate, April 24, 2008 ("As a general matter, the same statutory and regulatory thresholds for review by the federal banking agencies apply to investments by sovereign wealth funds as apply to investments by other domestic and foreign investors in U.S. banks and bank holding companies.").

14 Thus, for example, income of foreign governments received from investments is generally treated as exempt from taxation. See, Section 892 of the Internal Revenue Code of 1986 at (a)(1). Under the Bank Holding Company Act, there is a distinction between states and the corporations through which states may operate in the banking sector. See, e.g., Bank Holding Company Act of 1956 as amended, 12 U.S.C. § 1841, et seq., Banca Commerciale Italiana, 68 Fed. Res. Bull. 423 (1982). For discussion, see Michael Gruson, and Uwe H. Schneider, The German Landsbanken, 1995 COLUM. BUS. L. REV. 337 428-30 (1995). Yet, sovereign immunity rules in the United States subjects sovereign activity in or connected with the United States to liability in American courts. See Foreign Sovereign Immunity Act of 1976, codified at Title 28, U.S.C. §§ 1330, 1332, 1391(f), 1441(d), and 1602-1611; Republic of Argentina v. Weltover, 504 U.S. 607 (1992).

15 See, Edward F. Greene & Brian A. Yeager, Sovereign Wealth Funds--A Measured Assessment, 3(3) CAPITAL MARKETS LAW JOURNAL 247, 248 (Advance Access Publication 10 June 2008)

16 See, e.g., Matthew Melone, Should the United States Tax Sovereign Wealth Funds?, 26 B.U. INT’L L.J. 143 (2008).

17 Gerard Lyons, State Capitalism: The Rise of Sovereign Wealth Funds, 14 L. & BUS. REV. AM. 179, 179-180 (2008). For a discussion from the perspective of a former American administration official, see, Robert M. Kimmett, Public Footprints in Private Markets: Sovereign Wealth Funds and the World Economy, 87(1) FOREIGN AFFAIRS 119 (2008).

18 For an articulation of the premises of this consensus, see, e.g., Robert M. Kimmett, Public Footprints in Private Markets: Sovereign Wealth Funds and the World Economy, 87(1) FOREIGN AFFAIRS 119 (2008). 19 Sovereign Wealth Fund Institute, Linaburg-Maduell Transparency Index.

20 See Santiago Principles, supra note 8.

21 Santiago Principles, supra note 9, GAPP Principle 19.

22 Id., at GAPP 19.1 Subprinciple (identifying legally binding international sanctions, social, environmental and other factors; id., GAPP 19.1 Subprinciple (explanation and commentary)).

23 Santiago Principles, supra note 9, at GAPP 19.2 Subprinciple

24 Id., at GAPP 20 Principle.

25 Id., at GAPP 21 Principle. On this point, see also Paul Rose, Sovereigns as Shareholders, 87 N.C. L. REV. 83 (2008) (arguing that this approach works best in states with strong regulatory traditions and institutions).

26 See, Organization for Economic Cooperation and Development, OECD Investment Committee Report on Sovereign Wealth Funds, April 4, 2008 (“The resulting framework will foster mutually beneficial situations where SWFs enjoy fair treatment in the markets of recipient countries and these countries can confidently resist protectionism pressures.”). This is essentially the idea expressed in any number of scholarly explorations of the problem. See, e.g., Edwin M. Truman, Four Myths About Sovereign Wealth Funds, Vox (Aug. 14, 2008); Steven J. Pacini, The Effect of Sovereign Wealth Funds, 27 REV. BANKING & FIN. L. 356 (2008). Yet, it is important to remember as well that in places like the United States, the result might in some cases be no regulation at all. See, e.g., Tamar Frankel, Private Investment Funds: Hedge Fund Regulation by Size, 39 RUTGERS L.J. 657 (2008).

27 For this idea see the aptly titled article, Arina V. Popova, We Don’t Want to Conquer You; We Have Enough to Worry About: The Russian Sovereign Wealth Fund, 118 YALE L.J. POCLET PART 109 (2008).

28 “SWF investments are both beneficial and critical to international markets. For that purpose, it will be important to continue to demonstrate—to home and recipient countries, and the international financial markets—that SWF arrangements are properly set up and investments are made on an economic and financial basis.” Santiago Principles, supra note 9, at 4. International Monetary Fund, Sovereign Wealth Funds—A Work Agenda, February 29, 2009 (approved by Mark Allen and Jaime Caruana) (“SWFs can mitigate market stress.”).

29 For an example of the form this manageability takes, see, e.g., Ronald L. Gilson and Curtis J. Milhaupt, Sovereign Wealth Funds and Corporate Governance: A Minimalist Response to the New Mercantilism, 60 STANFORD L. REV. 1345 (2008).

30 The classic focus of study has been non governmental organizations. See, e.g., Bob Reinalda, Private in Form, Public in Purpose: NGOs in International Relations Theory, in NON-STATE ACTORS IN INTERNATIONAL RELATIONS 11 (Bas Arts, Math Noortmann and Bob Reinalda, eds., Aldershot, Eng: Ashgate, 2001).

31 For the classic expression of that fear in the American courts, see, Louis K. Liggett Co. v. Comptroller of the State of Florida, 288 U.S. 517 (1933) (Brandeis, J. dissenting in part).

32 For the tensions in public perceptions about the extent of private entity interventions in national politics, compare, First National Bank of Boston v. Bellotti, 435 U.S. 765 (1978) (constitutional right of corporations ot participate in political activity affecting their interests), with Austin v. Michigan Chamber of Commerce, 494 U.S. 652 (1990) (no corporate constitutional right to use corporate funds to support candidates in elections for pubic office).

33 See, e.g., Patrick J. Keenan, Financial Globalization and Human Rights, 46 COLUM. J. TRANSNAT’L L. 509 (2008).

34 The Organization for Economic Co-operation and Development (OECD) brings together the governments of countries committed to democracy and the market economy from around the world for a variety of development regulatory and harmonization purposes. See OECD, About OECD (accessed Jan. 12, 2009). Thirty three nations are currently members of the OECD, including Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States. See Id. (last visited February 28, 2009). Eleven other states are not members but have adhered to the OECD Guidelines, including Argentina, Brazil, Chile, Estonia, Egypt, Israel, Latvia, Lithuania, Peru, Romania & Slovenia.

35 See OECD Guidelines for Multinational Enterprises (2000) (accessed Feb. 1, 2009). The relevant provisions are discussed infra at Section II. Following the adoption of the Revised OECD Guidelines for Multinational Enterprises on the occasion of the OECD's annual Council meeting at ministerial level in Paris on 27 June 2000, the OECD published a booklet which comprises the following elements: revised text and commentary, implementation procedures and the Declaration on International Investment and Multinational Enterprises.

36 This is discussed in Larry Catá Backer, Case Note: Rights And Accountability In Development (Raid) V Das Air (21?July 2008) & Global Witness v Afrimex (28 August 2008): Small Steps Toward An Autonomous Transnational Legal System For The Regulation Of Multinational Corporations, 10(1) MELBOURNE J. INT’L L. – (forthcoming 2009).

37 See, e.g., Statement By The United Kingdom National Contact Point (NCP) For OECD Guidelines For Multinational Enterprises (NCP): Das Air; Final statement by the UK national contact point for the OECD guidelines for multinational enterprises: Afrimex (UK) Ltd, (Global Witness v Afrimex (28 August 2008).

38 Consider in that regards funds like TIAA-CREEF social choice fund. Socially responsible investing has become quite prominent in the retail sector of the investment industry. For a description of the funds available, grounded in a variety of frameworks, see, e.g., Social Funds (an on line service devoted to socially responsible investing);, Finances, available (Christian oriented social investing) (accessed April 25, 2009). These have been collected together in Best Socially Responsible Investment Sites, Sensible Investor.

39 See, e.g., B. Guy Peters and John Pierce, Governance Without Government?: Rethinking Public Administration, 8(2) J. PUB. ADMIN. RESEARCH & THEORY 223-243 (1998).

40 See, e.g., Mark W. Zacher, The Decaying Pillars of the Westphalian Temple: Implications for International Order and Governance, in GOVERNANCE WITHOUT GOVERNMENT: ORDER AND CHANGE IN WORLD POLITICS 58-101 (James N. Rosenau and Ernst Otto Czempiel, eds., Cambridge: Cambridge University Press, 1992); Paul Schiff Berman, International Law to Law and Globalization, 43 COLUMBIA JOURNAL OF TRANSNATIONAL LAW 485 (2005).

41 See, e.g., Errol Meidinger, Multi-Interest Self Governance Through Global Product Certification Programs. Legal Studies Research Paper Series, Paper No. 2006-016, University of Buffalo Law School Baldy Center for Law and Social Policy; Larry Catá Backer, Multinational Corporations as Objects and Sources of Transnational Regulation, 14 ILSA Journal of International and Comparative Law499 (2008).

42 See, e.g., Jean-Philippe Robe Multinational Enterprises: The Constitution of a Pluralistic Legal Order, in GLOBAL LAW WITHOUT A STATE, 45, 45-47, 52-56 (Gunther Teubner ed., 1997).

43 The fund actually consists of two funds with distinct investment obligations. One, the Norwegian Government Pension Fund—Global (Statens pensjonsfond - Utland), more commonly known as the Oljefondetalong, is directed to outbound investment. Ministry of Finance-Norway, The Government Pension Fund. The other, the Statens pensjonsfond – Norge, (formerly the Folketrygdfondet) is directed to domestic investment, and holds much of the government’s interests in Norwegian businesses. Id. The organization and functioning of these entities is discussed, infra, at Part III. “The objective for the coming four year period is to become acknowledged as one of the world’s most prominent and professional active owners. This is in line with the Government’s objective that the Government Pension Fund shall be the best managed fund in the world, also in terms of ethics and exercise of ownership rights.” Norwegian Ministry of Finance, On the Management of the Government Pension Fund in 2006, Report No. 24 (2006-2007) to the Storting at 71.

44 International Monetary Fund, Norway’s Oil Fund Shows the Way for Wealth Funds, IMF Survey Magazine: Policy, July 9, 2008.

45 See Section II, Conceptual and Regulatory Framework: Public Actors and Private Action, infra.

46 See Section III, The Norway Sovereign Wealth Funds in Form, infra.

47 See Section IV, The Norwegian Funds in Action, infra.

48 See Section IV, infra. For this purpose, the actions of the Fund will be examined as it developed with respect to shareholder activism in the context of corporate governance norms, and the response of fund managers to calls for divestment of certain entities engaged in activity in Israel and in Myanmar. Also examined are changes to the Fund’s investment strategy after the start of the global economic crisis in 2008.

49 See SectionV, Regulatory Implications, infra.

50 See id.

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