Thursday, August 18, 2011

Complex Networks: Chinese Soevereign Wealth Funds and the Western Service Sector

It is not uncommon to think of the "issues" of sovereign wealth funds as one that is essentially binary--sovereign wealth funds as sources of sovereign wealth coming into the private markets of host states and investing in their equities.  The issue then, as now endlessly reiterated, becomes one of whether this is a "good" or "bad" thing--the answer to which continues to defy consensus.    

But reality, of course, provides material for a substantially more nuanced picture.  One element of that nuance is sometimes overlooked--the value of sovereign wealth fund activities to powerfully positions economic actors in home states.  This is particularly the case with respect to law firms.  Consider the following news story:

Vinson & Elkins and Linklaters are advising on a $4.2 billion sale of a stake in French gas and electricity utility GDF Suez to Chinese sovereign wealth fund China Investment Corp. (CIC).
As part of the proposed deal, CIC will pay $3.2 billion for 30 percent of GDF Suez's exploration and production division. It will also pay $1 billion to acquire GDF Suez's 10 percent share in an Atlantic liquefied natural gas plant located in Trinidad and Tobago.
* * * * *
Vinson & Elkins is advising CIC. The firm previously acted for CIC on its $939 million investment in Kazakhstan-listed gas company JSC KazMunaiGas Exploration Production in 2009. The firm did not respond to request for comments.
Linklaters is acting as co-counsel, along with Paris-based firm Bredin Prat, to GDF Suez. The Linklaters team is being led by its corporate partner Marc Loy. In February, both firms also advised GDF Suez on its $17.1 billion investment in International Power PLC, a London-based power company. (From Jessica Seah, Vinson, Linklaters Advise on $4 Billion China-France Gas Deal, The Asian Lawyer, Aug. 12, 2011).

Reality, then, is more complex.  Sovereign wealth funds do not merely project power into host states through investments in host state markets.  Sovereign wealth funds also begin to assert influence through their increasingly important ability to hire (and profit from the knowledge transfer-purchase) of host state gatekeepers and market transaction facilitators--like lawyers. But the complication is not merely the fairly obvious one of knowledge transfer (or rental) for penetration into foreign markets. It also affects the conversation of about these activities within the host state itself.  Law firms, accounting firms, public relations firms and the like, hired to represent SWF interests within domestic conversations about investment can have a substantial effect on the quality of conversation and its flow.  It can provide the appearance of an indigenous conversation when it might be better characterized as something else.  And of course, especially when in the pay of clients, it provides an altogether ironic complexion to Linklaters web site statement--"shared values across 19 countries and 27 offices."   For Linklaters view of this transaction, see HERE.

 (Vinson and Elkins lawyers in court, From Great Companies to Work for in Austin, TX (AP, Dennis Cook))

This is not to suggest either nefarious conspiracy or craven willingness to do anything for money.  No such thing is intimated here.  But the realities of lawyer-client relationships ion this context does provide a wrinkle that is important in analyzing the development of opinion in host states about SWF activity, and suggests a policy issue about the insinuation of foreign elements within indigenous political discourse.  This is made all the more important in the advent of judicial interpretations of the American constitution extending constitutionally protected speech rights to corporations.  This reality ought to complicate any analysis of sovereign wealth funds, and especially the evolution of policy with respect to these entities in host states. 

1 comment:

Anonymous said...

Your point is valueble for me. Thanks!

My site:
dsl anbieter klick hier