CYIL vol. 11 (2020)

HALIL RAHMAN BASARAN CYIL 11 (2020) To assuage the fears of recipient countries, a group of countries owning SWFs and the International Monetary Fund (IMF) – an intergovernmental organization – declared the Santiago Principles, a set of principles that aim to project the image of “commercial” SWFs to the international community. 10 The Santiago Principles maintain that SWFs carry out investments with a view to financial profitability without any political motivation or agenda. In the case of political motivations existing, this is to be disclosed by the SWF to the recipient country. Yet, the obvious fact remains that the Santiago Principles have still not been transformed into general principles of law, in the sense of Article 38(1)(c) of the Statute of the International Court of Justice. 11 Rather, they constitute soft law, in the form of non-binding guidelines, standards and recommendations. Formal public international law – treaty, custom and general principles of law – is still lacking when it comes to SWFs. States have not committed themselves in respect of SWFs, which is noteworthy as it is public international law that regulates international trade 12 and SWF activities are definitely part of international trade. This article’s main argument is that, to the extent it is subject to law, the SWF is a matter for national law, not international law. SWFs do not act in a legal vacuum; they do not operate in a lawless field. Nevertheless, the law to be applied to SWFs is limited by national borders, by the borders of countries; every nation itself decides for itself the way it regulates SWFs. There has been no serious effort to regulate SWFs at the international level, nor does public international law give us any guidance on how to approach SWFs. This is all the more interesting as SWFs have become a crucial actor in inter-state relations in the 21 st century. Public international law cannot avoid SWFs for much longer. To justify the aforementioned argument, the article proceeds as follows: the second section defines the SWF, The third section explores the political economy background of SWFs, namely, state capitalism, and the following section discusses the politics of the SWF. This section is then followed by an exploration of the idea of public law in the fifth section, whilst the sixth section completes the discussion of public law in respect of SWFs by looking at public international law. The seventh section, via a discussion of the Santiago principles , further clarifies the current status of SWFs. 2. What is a Sovereign Wealth Fund? A sovereign wealth fund (SWF) is a state-owned investment fund that invests in real and financial assets. The SWF differs from traditional reserve management by national central banks 13 in that, first of all, the SWF is managed separately from a central bank’s official reserves. 14 That is understandable as SWF operations cover a wide range of activities, such as 10 Accessible at https://www.ifswf.org/santiago-principles-landing/santiago-principles (accessed on 02/04/2020). 11 Statute of the International Court of Justice, Article 38(1): The Court, whose function is to decide in accordance with international law such disputes as are submitted to it, shall apply (c) the general principles of law recognized by civilized nations. 12 LOWE, Vaughan, International Law, Oxford University Press, New York, 2007, p. 18. 13 ROZANOV, Andrew, Definitional Challenges of Dealing with Sovereign Wealth Funds , Asian Journal of International Law , I, 2011, p. 252. 14 GHAHRAMANI, Salar, Sovereign Wealth Funds, Transnational Law, and The New Paradigms of International Financial Relations , Yale Journal of International Affairs , Summer 2013, vol.8, no. 2, p. 54. ROZANOV, Andrew Definitional Challenges of Dealing with Sovereign Wealth Funds , Asian Journal of International Law , I, 2011, p. 255. CATA BACKER, Larry, The Norwegian Sovereign Wealth Fund: Between Private and Public , Georgetown Journal of International Law, 2009, 40(4), p. 1273.

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