At another end of the ideological spectrum, state actors have been channeling their market activities through separately constituted or maintained sovereign funds. These are meant to serve as a basis for competition with largely private global markets on substantially the same terms as private actors. In return, states into which such economic activity is projected are more amenable to avoiding protectionist measures against sovereign inbound investment. That, of course, is the core presumption of global soft law regulatory efforts like the Santiago Principles. I provide a more detailed analysis of the Santiago Principles elsewhere. See, Larry Catá Backer, Sovereign Wealth Funds as Regulatory Chameleons: The Norwegian Sovereign Wealth Funds and Public Global Governance Through Private Global Investment, 41(2) GEORGETOWN JOURNAL OF INTERNATIONAL LAW – (forthcoming 2009).
More interesting still, of course, is the possibility of blending both political policies and the traditional economic purpose orientation of separately constituted economic enterprises. China has become a pioneer in fashioning these hybrid collectives--sovereign wealth funds and controlled state owned enterprises that are private in form and fundamental operation, but subject to maximizing the political interests of the state owner. Larry Catá Backer, Sovereign Investing in Times of Crisis: Global Regulation of Sovereign Wealth Funds, State Owned Enterprises and the Chinese Experience, Transnational Law & Contemporary Problems, Vol. 19, No. 1, 2009 >The Chinese efforts to coordinate sovereign investing directly by the China Investment Corporation and its principal subsidiaries, and indirectly through its subsidiaries and supported SOEs investing abroad, suggest the more complex organization of sovereign investing in which profit maximization is blended with a pronounced set of political objectives, grounded in development goals. This presents a potentially substantial advance in the integration of programs of sovereign investing, public policy and private markets. A responsive regulatory framework has not followed. ").
What happens if you put all three trends together. The answer to that may become clearer soon. The Chinese media is reporting (in Spanish) that Cuba is in negotiations with a sovereign wealth fund for the revitalization of its ports. "El gobierno de Cuba invitó a Emiratos Arabes Unidos a que participe en el proceso de inversiones en marcha en el puerto de Mariel, en el occidente de la isla. El ofrecimiento fue hecho por el vicepresidente cubano Ricardo Cabrisas, al dialogar con el ministro de Asuntos Exteriores de Emiratos Arabes Unidos, Abdullah bin Zayed al Nahyan, quien visita la isla. " Cuba invita a invertir a Emiratos Árabes Unidos, Spanish News.cn (October 4, 2009) (from Xinhua News) ("The Cuban givernment invited the United Arab Emirates to participate in the ongoing development of the port of Mariel, in the Western part of the Island. The offer was made by the Cuban Vice President, Ricardo Cabrisas, in talks with the UAE foreign minister Abdullah bin Zayed al Nayyan, who is on a visit to the Island"). Sheikh Abdullah bin Zayed al Nahyan, of course, isthe brother fo the Crown prince of Abu Dhabi. His visit was part of a Latin American trip to bring home additional enhanced "peace and friendship" agreements from the region. Abdullah bin Zayed meets Mexican President, officials Emirates News Agency, Oct. 2, 2009.
The potential deal has been criticized for political reasons. For an excellent example, see, ¿El Puerto del Mariel?, Lealtad 3 Once, Oct. 3, 2009. The solicitation also serves to provide a window onto the recent geopolitical decision by the Cuban state apparatus to enhance closer ties with Middle East nations, not the least among them Iran. While the relationship with Persian Gulf states appears to be substantially economic (the UAE representative traveled to Cuba to sign a "closer ties" agreement, apparently the first since relations were established in 2002, Cuba invita a invertir a Emiratos Árabes Unidos, supra.), those with Iran have for some time been more comprehensive, and focused on those states' mutual obsession with the United States. "He (Castro) once again agreed with Ayatollah Khameneh’i on the point that Iran and Cuba can hand in hand defeat America, the official Iranian news agency IRNA quoted the Cuban leader, after he was assured by his host that Iran and Cuba can achieve that goal, "hand in hand". In the meeting, both leaders denounced the Western hegemony and agreed that the US is extremely weak today and stressed that they are not scared of America today."The Cuban nation is stronger than ever in the past, forty years after the victory of its revolution", Mr. Castro assured Mr. Khamenehe'i." Cuba and Iran to Fight Jointly the United States, Iran Press Service, May 10, 2001. Moreover, as with many things Cuban, there is some perverse and conscious irony here. Cuba is suggesting that it is more than happy to become involved with the people whose ownership of Dubai Ports World caused such a furor in 2006 when they seemed poised to assume management of key American ports.
Yet, there are other wrinkles as well that touch on the regulatory and conceptual space where collectivist state theory, sovereign investing and private market regulation meet. From the Cuban perspective, of course, engaging in deals for the reconstruction of the port of Mariel appears comfortably political. A transaction with the UAE will likely be seen as a state to state transaction in which Cuban collectivist approaches to economic management are most compatible. Yet, the transaction would likely involve either a state owned enterprise--perhaps some part of the Dubai World group, or some other similar entity within the UAE structure. It might also involve financing or other participation, perhaps by the Abu Dhabi Investment Authority.
UAE officials have long insisted that the Abu Dhabi fund is run strictly as a business and bristle at critics who worry they might misuse their massive financial clout, but the government refuses to speak publicly about the fund's operations. . . .The UAE is particularly sensitive to the potential for political backlash in the business world. A 2006 deal for DP World, one of the world's largest and most successful port operators, to take over running several U.S. ports triggered a firestorm that forced the Dubai-based firm to sell its newly acquired U.S. operations.Indeed, The UAE has a number of different SWFs, along with SOEs, through which to develop business arrangements. These include: UAE - Abu Dhabi Investment Authority; UAE - Dubai World; UAE - Emirates Investment Authority; UAE - IPIC; UAE - Investment Corporation of Dubai; UAE - Mubadala Development Company; and UAE - RAK Investment Authority. The suggestion here is that, at some level, what might appear to be one thing--private investment in the operation of a state facility--may actually be another, a hybrid public sector investment deal organized through public actors and privately organized public enterprises. Non-state actors may appear in form, but not in substance, in these transactions, at least as the principles. But private sector governance regimes will likely be invoked, at least to some extent, to mark the rules of engagement between the parties.
While the Abu Dhabi Investment Authority is a passive investment house, Mubadala is a more active development and management firm. "We are in the business of building businesses," says Waleed al Mokarrab al-Muhairi, the chief operating officer of Mubadala. Beyond Ferrari and the Carlyle Group, many of its investments have a major infrastructure component aimed at helping build Abu Dhabi into a world-class city. Kevin Whitelaw, Abu Dhabi's Buying Binge, U.S. News & World Report, June 5, 2008.
The consequences for systems grounded in a fundamental public-private divide are significant. Transactions like these tend to suggest that the Cubans have a point when they suggest that public sector private enterprises cannot be understood apart from the political motivations of their owners. But the Cubans, of course, go further, suggesting that even Western style multinationals are in some sense, state directed agents. There is some support for this notion, or at least the idea of a public/political aspect of transnational enterprise activity. That support has most recently been evidenced in litigation, for example, attempted so far unsuccessfully against multinational enterprise under the American Alien Tort Claims Act against Talisman Energy for the actions of a subsidiary with a 25% stake in a joint venture operating in the Sudan. See, Presbyterian Church of Sudan et al v. Talisman Energy, Inc., 07-0016-cv, -- F.3d -- (2nd Cir, slip op, Oct. 2, 2009). But it is also evident in the development of notions of complicity under supranational soft law instruments, such as the OECD's Guidelines for Multinational Enterprises. The notion, bound up in the emergence of notions of due diligence obligations and the regulatory effects of social norms, is that private actors might be bound by the actions of the public law actors with whom they deal, or in whose territories they operate, when they might be viewed as complicit. And complicity could include any action that might serve to advance the violations of international norms, rules and obligations by state actors. That is the essence of the OECD's Risk Awareness Tool for Multinational Enterprises in Weak Governance Zones.
But there remains a large gap between legal definitions of complicity, including responsibility of non-governmental entities for violations of international law, and political, soft law, or moral definitions of complicity. That was most recently brought out in the recent opinion in Presbyterian Church of Sudan et al v. Talisman Energy, Inc., 07-0016-cv, -- F.3d -- (2nd Cir, slip op, Oct. 2, 2009). in which a non-governmental organization sought to hold a non-governmental economic enterprise liable for the consequences of Sudanese violations of human rights and humanitarian law through ownership of an enterprise with a 25% stake in a joint venture operating in the Sudan. The couyrt took a very narrow view of the extent of complicity and substantially tightened the legal standard for its proof under the Alien Tort Claims Act. Plaintiffs will now have the burden of showing a positive intent to violate international humanitarian law in order for an ATS case to go forward (a sufficient facts or circumstances to suggest that a defendant "acted with the purpose to advance violations of international humanitarian law." Slip Opinion at 55). The critical language follows: "But if ATS liability could be established by knowledge of those abuses coupled only with such commercial activities as resource development, the statute would act as a vehicle for private parties to impose embargoes or international sanctions through civil actions in US courts. Such measures are not the province of private parties, but are, instead, properly reserved to governments and multinational organizations." (Id., slip op. at 55-56). Of course, the international soft aw standard is moving precisely in that direction. Indeed, it is possible to understand the governance framework advanced by the Special Representative toi the United Nations Secretary General on Multinational Enterprises and Human Rights, especially in the context of corporate obligations to "respect human rights" to effectively impose an obligation on the company to ensure that they would not be contributing even through the most innocuous activity. See, "Business and human rights: Towards operationalizing the “protect, respect and remedy” framework" [PDF], But that suggests a public purpose beyond that which American (and perhaps other) courts are unlikely to embrace, if the Talisman litigation is any indication.
Yet it also presents another question: what result if Talisman had been a state owned enterprise. My guess then would be that the courts might then have ignored the "private" character of the organizational form and its purported autonomy and imposed liability on individual managers or the state party (if no protection under the Foreign Sovereign Immunities Act, a complicated problem), or dismissed as indistinguishable from Talisman. But issues of jurisdiction might have made asserting jurisdiction against the other members of Greater Nile (the Chinese SOE or the Malaysians that owned collectively 70% of the offending enterprise by my count). But any of these might be thought a strange result. It suggests that courts might be willing to disregard the corporate character of state owned enterprises (and sovereign wealth funds) and conflate state and state enterprise where international legal obligations are at issue, but impose a harder standard on liability incurred by non-governmental economic enterprises. Or it suggests that states might be better off spinning politically motivated economic activity off into sovereign investment vehicles to take advantage of the greater protection these entities might have under laws designed to punish complicity. Yet that horizontal equity among economic enterprises effectively shields the state from liability, unless governance regimes mean to apply a harsher standard for complicity by non-state actors than on the state actors principally responsible for the violation.
Thus conundrums: National legal orders move to preserve the distinctions between state and non-state actors for political activity, while transnational governance systems appear to be moving in the opposite direction. Yet at the same time, such transnational systems are seeking to preserve the distinction between non-governmental and governmental actors by reference to the motivation for their actions, positing a conceptual distinction between economic and political motivation as a grounding for preserving regimes of free movement of capital, irrespective of their sources. At the same time, states are moving to the use of economic power as an supplement to traditional forms of projections of political power abroad at the same time that some in the state sector are seeking to revivify the notion of a separable class of economic activity in the form of state to state transactions. And so on. The implications are important, of course. They affect considerations of everything from sovereign immunity, to rules for inbound investment, to the liability of these economic actors, directly or indirectly, for violations of human rights and other international norms. Global actors have been busy constructing governance regimes designed for a world in which it was relatively easy to segregate public from private transactions, economic from political activity, sovereign regulatory from participatory actions by states and non-state actors. It is becoming more difficult to tell actors apart now, and governance regimes grounded in separation might well become less than useful in a world in which blended actors with blended motives become more common. In that context, what makes sovereignty and politics so special--and protected, may also suffer substantial changes. Under emerging principles of global economic governance, the sovereign, like the non-state actor, may find themselves being treated alike. While that might increase the obligations of non-sate actors, it will surely also diminish the special dignity of the state as a legal construct apart.