Sovereign Investing and Markets-Based Transnational Legislative Power: The Norwegian Sovereign Wealth Fund in Global Markets
Larry Catá Backer
Abstract: States, like non-state actors, are increasingly participating in markets. In the form of sovereign wealth funds (SWFs), states have project economic power beyond their borders. But some states are also using private market activities abroad to transform the way they can project their own legal regimes power beyond their territories, and in the process, are contributing to a fundamental re-orientation of the relationship between state, market and law. This study considers the way in which sovereign wealth funds seek to govern (rather than the way in which they may be regulated), by closely examines one of the most comprehensive of such projects—the use of the Norwegian sovereign wealth fund (NSWF) to project economic, policy and governance power abroad, and in the process shape the national law of states chartering companies in which they invest, private corporate governance culture globally, and the development of international law and norms for the conduct of economic activity within globalization. Part I provides an introduction, suggesting the context of the study, the premises of complexity on sovereign investing, and its implications for coordinated governance between traditionally public and private regulatory (and market) zones. Part II turns to a description of the legal and regulatory framework within which the NSWF is organized. The concept of responsible investing is introduced, and the principal of “active ownership” is then considered. Part III turns to the more formally structured institutional mechanisms for advancing its governance policies around responsible investing, focusing on the NSWF Ethics Guidelines and the Ethics Council constituted to interpret and apply it. The emerging jurisprudence of the Ethics Council is then considered as a reflection of the juridification of responsible investing. Part IV then considers the governance implications of the market activities of the NSWF. Norway has provided an architecture of governance that sits astride the borders of market and state, of public and private and of national and international. Undertaken through its sovereign wealth fund, Norway is seeking not merely to project public wealth into private global markets, but also to construct a complex rule-of-law centered framework that blends the imperatives of a state based public policy with a rules based governance system that incorporates domestic and international norms. To this Norway adds a policy-oriented use of traditional shareholder power to affect the behavior and governance of companies in which the Fund has invested. The object is not merely to maximize the welfare of the funds ultimate investors, the people of Norway (through its state apparatus), but also to use the fund to advance Norwegian public policy in the international sphere and within the domestic legal systems of other states to achieve a greater measure of inter-systemic harmonization of socially responsibly corporate governance. Private power is deployed toward the ends of public governance; public power is deployed in turn toward the ends of private governance across the global marketplace for corporate ownership; markets become sites for legislation.
 W. Richard and Mary Eshelman Faculty Scholar & Professor of Law, Professor of International Affairs, Pennsylvania State University, University Park, PA 16802 (814.863.3640 (direct) (email: lcb911
me.com. This paper was first presented at the conference: “A Market is a Market is a Market: Financial Regulation and the Role of Law in an Era of Globalization,” International Conference hosted by the University of Ferrara, Italy, Nov. 9-10, 2012. My great thanks to Alessandro Somma (Ferrara), Bertram Keller (Rostock/Berlin), and Peer Zumbansen (Osggode Hall) for the organization of an excellent conference event. Thanks also to my research assistant, Joseph Henry (SIA MIA 2012) for his exemplary work on this project. This study builds on Larry Catá Backer, Sovereign Wealth Funds, Global Markets and Coordinated Regulatory Regimes: Maximizing Returns and Legislating in Financial Markets in A Market is a Market is a Market (Alessandro Somma, Peer Zumbansen and Bertram Keller, eds, forthcoming 2013).