Sovereign Wealth Funds (SWFs) are currently under increased scrutiny. This article aims at identifying the features and likely impact of the Generally Accepted Principles and Practices (GAPP), using two lenses, both well known to legal scholars, especially within global administrative law (GAL) studies: global standards and transparency. On the one hand, contrasting the GAPP with other types of global financial standards can help identify the most powerful incentives to foster compliance. On the other hand, even though the transparency provisions requesting SWFs to provide public information concerning their legal basis, structure, and financing decisions appear to be a step in the right direction, they need further clarification so that a proper balance between disclosure and the need to avoid unnecessary costs can be struck. Moreover, this article claims that the effectiveness of disclosure provisions in fostering the accountability of the funds depends also on the existence of structural elements.
Tenured Assistant Professor, University of Rome “Tor Vergata”; Global Research Fellow, New York University.
1. Among the latest ones to emphasize such a role, see ROUGHNEEN, Simon and IONESCU, Diana, “Sovereign Wealth Funds: White Knights to Ride Again?” World Politics Review (24 February 2009), online: World Politics Review <http://www.worldpoliticsreview.com/article.aspx?id=3345>.
2. See EPSTEIN, Richard A. and ROSE, Amanda M., “The Regulation of Sovereign Wealth Funds: The Virtues of Going Slow” (2009) 76 The University of Chicago Law Review 111.
4. For a general overview of the functioning of CFIUS, see ROSE, Paul, “Sovereigns as Shareholders” (2008) 87 North Carolina Law Review 102 at 126–137. See also COOKE, Jennifer, “Finding the Right Balance for Sovereign Wealth Fund Regulation: Open Investment vs. National Security” (2009) 2 Columbia Business Law Review 728 at 748–765.
5. The roots of the EU approach to SWFs can be found in the Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions. See Commission of the European Communities, A Common European Approach to Sovereign Wealth Funds, Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee, and the Committee of the Regions, COM(2008) 115 final (27 February 2008), online: Commission of the European Communities <http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0115:FIN:EN:PDF>. The Council of the EU shared the Commission’s view in a meeting held in March 2008. See Council of the European Union, Presidency Conclusions, 7652/1/08 (20 May 2008), online: Council of the European Union <http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/99410.pdf> at para. 36. The European Parliament shared those same views. See European Parliament Resolution of 9 July 2008 on Sovereign Wealth Funds, European Parliament, online: <http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P6-TA-2008-0355+0+DOC+XML+V0//EN&language=EN>. For a comment on the EU regulatory framework for SWFs, see GUGLER, Philippe and CHAISSE, Julien, Sovereign Wealth Funds in the European Union—General Trust Despite Concerns, Swiss National Centre of Competence in Research, NCCR Trade Regulation Working Paper No. 2009/04, 2009.
6. For a comparative study on national responses, see SAXON, Matthew, “It's Just Business, or Is It?: How Business and Politics Collide with Sovereign Wealth Funds” (2009) 32 Hastings International and Comparative Law Review 693.
7. See Sovereign Wealth Funds; Generally Accepted Principles and Practices; “Santiago Principles” (October 2008), online: International Working Group of Sovereign Wealth Funds <http://www.iwg-swf.org/pubs/eng/santiagoprinciples.pdf> [Santiago Principles].
8. See GELPERN, Anna, Sovereign Wealth and Hybrid Governance in International Finance, National University of Singapore-Asian Society of International Law Working Paper 2009/2, 2009, at 13 and 24.
9. Rose, supra note 4 at 147.
10. WONG, Anthony, “Sovereign Wealth Funds and the Problem of Asymmetric Information: The Santiago Principles and International Regulations” (2009) 34 Brooklyn Journal of International Law 1081 at 1106.
11. For a fuller discussion of the point, see below, section III.C.
12. Among the first sets of papers about GAL there are three journal symposia. See KINGSBURY, Benedict, KRISCH, Nico, and STEWART, Richard B., “The Emergence of Global Administrative Law” (2005) 68 Law and Contemporary Problems 15 [Emergence of GAL]; KINGSBURY, Benedict and KRISCH, Nico, “Introduction: Global Governance and Global Administrative Law in the International Legal Order” (2006) 17 European Journal of International Law 1 [Global Governance and GAL]; KINGSBURY, Benedict, KRISCH, Nico, and STEWART, Richard B., eds. (2005) 37 New York University Journal of International Law and Politics 1. Subsequent publications include sets of papers from conferences convened by the New York University School of Law Institute for International Law and Justice (IILJ) and its partner institutions: a substantial series of working papers and extensive bibliographies as well as links to papers from other scholars around the world can be found on the website. See website of the Global Administrative Law Project, online: IILJ <www.iilj.org/GAL>. See Istituto di Ricerche Sulla Pubblica Amministrazione (IRPA), What is Global Administrative Law (GAL)?, online: IRPA <http://www.irpa.eu/index.asp?idA=161>. See also CASSESE, S., CAROTTI, B., CASINI, L., MACCHIA, M., MACDONALD, E.SAVINO, and M., eds., Global Administrative Law: Cases, Materials, Issues, 2nd ed. (New York: IILJ, NYU, 2008). This point is fully discussed below, in section III.B.
13. JOHNSON, Simon, “The Rise of Sovereign Wealth Funds” (September 2007) 44 Finance and Development, online: Finance and Development <http://www.imf.org/external/pubs/ft/fandd/2007/09/straight.htm>.
14. Andrew Rozanov is widely credited for being the first person to use this term. See ROZANOV, Andrew, “Who Holds the Wealth of Nations?” (2005) 15 Central Banking Journal 4.
15. BALIN, Bryan J., “Sovereign Wealth Funds: A Critical Analysis” (2009), online: SSRN <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1477725>, at 2.
16. DREZNER, Daniel W., “Sovereign Wealth Funds and the (In)security of Global Finance” (2008) 62 Journal of International Affairs 115 at 116.
17. China Investment Corporation (CIC) was established in 2007. The Russian National Welfare Fund, the French Strategic Investment Fund, and the Saudi Arabia Public Investment Fund date back to 2008, while the newest fund is the Sovereign Fund of Brazil. See Sovereign Wealth Fund Institute, Sovereign Wealth Fund Rankings, online: SWFI <http://www.swfinstitute.org/funds.php>.
18. See MAK, Liz, “India Considers Launching Sovereign Wealth Fund” BusinessWeek (16 April 2008), online: BusinessWeek <http://www.businessweek.com/globalbiz/content/apr2008/gb20080416_065494.htm>.
19. In February 2008, just a few months before the release of the Santiago Principles, the IMF listed as many as eight selected definitions of SWFs. See IMF, Monetary and Capital Markets and Policy Development and Review Departments, Sovereign Wealth Funds—A Work Agenda (2008), online: IMF <http://www.swfinstitute.org/research/imfswfreport.pdf> at 37–8. Yet, as the Santiago Principles incorporated a commonly shared definition, disputes on the matter between scholars and practitioners in the field are likely to diminish.
20. Santiago Principles, supra note 7 at appendix 1, para. 2.
21. ROZANOV, Andrew, What is “Sovereign Wealth” Anyway? (National University of Singapore-Asian Society of International Law Working Paper 2009/1).
22. The SWF Institute is an organization designed to study SWFs and their impact on global economics and financial markets. See Sovereign Wealth Fund Institute, About Us, online: SWFI <http://www.swfinstitute.org/aboutus.php>. The consequences on the number of SWFs, according to the chosen definition, have been explored by Andrew Rozanov. See Rozanov, supra note 21 at 6–15.
23. TRUMAN, Edwin, “Prepared Statement of Edwin Truman, PhD, Senior Fellow, Peterson Institute for International Economics” in United States House of Representatives, Committee on Foreign Affairs, The Rise of Sovereign Wealth Funds: Impacts on US Foreign Policy and Economic Interests, 2nd Sess., Serial No. 110-190 (21 May 2008), 20 at 21.
24. Drezner, supra note 16 at 116.
25. See IMF, supra note 19 at 6.
26. SETSER, Brad and ZIEMBA, Rachel, GCC Sovereign Funds—Reversal of Fortune (Council on Foreign Relations, Working Paper, 2009) at 2.
27. KERN, Steffen, “Sovereign Wealth Funds—State Investments During the Financial Crisis”, online: Deutsche Bank Research <http://www.dbresearch.com/PROD/DBR_INTERNET_DE-PROD/PROD0000000000244283.PDF>.
28. Kern, ibid., at 5 and 10. See also AIZENMAN, Joshua and GLICK, Reuven, Sovereign Wealth Funds: Stylized Facts About Their Determinants and Governance (National Bureau of Economic Research, NBER Working Paper 14562, 2008), online: NBER <http://www.nber.org/papers/w14562>, at 2.
29. The most recent data are in Kern, supra note 27, and Aizenman and Glick, supra note 28.
30. Rozanov, supra note 21 at 6.
31. Aizenman and Glick, supra note 28 at 6. For the most recent ranking of the SWFs, see SWFI, supra note 17.
32. For example, Asian countries, such as China and Korea, “benefit from the low-exchange rate of their currency, making their goods attractive for export”. DE MEESTER, Bart, “International Legal Aspects of Sovereign Wealth Funds: Reconciling International Economic Law and the Law of State Immunities with a New Role of the State” (2008), online: SSRN <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1308542>, at 4. The existence of such a surplus is thus a precondition for the creation of an SWF: that is why the idea of establishing European SWFs, while many European countries—such as the UK, Italy, Spain, and most countries of Central and Eastern Europe—are running large account deficits, seems unfeasible to many commentators. See SINGH, Kavaljit, Europe Doesn’t Need Sovereign Wealth Funds (2008), online: VOX <http://www.voxeu.org/index.php?q=node/2585>.
33. See IMF, supra note 19 at 7.
34. The IMF draws an even more precise distinction, between five types of SWFs: “(i) stabilization funds, where the primary objective is to insulate the budget and the economy against commodity … price swings; (ii) savings funds for future generations, which aim to convert nonrenewable assets into a more diversified portfolio of assets … ; (iii) reserve investment corporations, whose assets are often still counted as reserve assets; (iv) development funds, which typically help fund socio-economic projects or promote industrial policies that might raise a country’s potential output growth; and (v) contingent pension reserve funds, which provide (from sources other than individual pension contributions) for contingent unspecified pension liabilities on the government’s balance sheet.” Ibid., at 5.
35. See TRUMAN, Edwin M., “Sovereign Wealth Funds: The Need for Greater Transparency and Accountability” (2007) PB07-6 Policy Brief of the Peterson Institute for International Economics, online: Peterson Institute for International Economics <http://www.iie.com/publications/interstitial.cfm?ResearchID=783> at 4. See also IMF, ibid., at 5–6.
36. PISTOR, Katharina, “Sovereign Wealth Funds, Banks and Governments in the Global Crisis: Towards a New Governance of Global Finance?” (2009) 10 European Business Organization Law Review 333 at 336.
37. ALLAYANNIS, George S., “The Case of Sovereign Wealth Funds: A New (Old) Force in Capital Markets” (2009), online: SSRN <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1418910>.
38. SUN, Tao and HESSE, Heiko, Sovereign Wealth Funds and Financial Stability (2009), online: VOX <http://www.voxeu.org/index.php?q=node/3360>.
39. Kern, supra note 27 at 26 (Chinese CIC holds a 9.9% share in Morgan Stanley; Singapore holds 11.1% in Citigroup, 9.9% in Merrill Lynch, and 9% in UBS; the South Korean KIC 7.4% in Merrill Lynch; Abu Dhabi’s ADIA 4.9% in Citigroup; and Kuwait KIA 6% in Citigroup and 5.7% in Merrill Lynch). It is apparent that financial firms dominate the list of recent SWF deals. See Balin, supra note 15 at 7.
40. GILSON, Ronald J. and MILHAUPT, Curtis J., “Sovereign Wealth Funds and Corporate Governance: A Minimalist Response to the New Mercantilism” (2008) 60 Stanford Law Review 1345 at 1346.
42. See PISTOR, Katharina, Global Network Finance—Reassessing Linkages Between Sovereign Wealth Funds and Western Banks, American Law & Economics Association Annual Meetings, Working Paper 54, 2008, at 8.
43. See AIZENMAN, Joshua and GLICK, Reuven, Sovereign Wealth Funds, Governance, and Reserve Accumulation (2009), online: VOX <http://www.voxeu.org/index.php?q=node/2799>.
44. About the variety of different legal status of SWFs, see de Meester, supra note 32 at 4. About the Norwegian GPFG, see HALVORSSEN, Anita M., The Norwegian Sovereign Wealth Fund Addresses the Interrelated Challenges of Climate Change and Sustainable Development—A Model for Regulating Other Sovereign Wealth Funds (SWF), National University of Singapore-Asian Society of International Law Working Paper 2009/7.
45. For example, the Norwegian Ministry of Finance is responsible for GPFG’s investment strategy, but the operational management has been delegated to the Norwegian Central Bank and is being carried on by the Norges Bank Investment Management (NBIM), strictly separated from the Central Bank itself. See Halvorssen, ibid., at 18–19. A similar division of competences (but with a slightly stronger role of the government) takes place with regard to Singapore’s GIC and Temasek Holdings: the daily activity falls within the competence of the management of the funds, but the financial statements and proposed budgets must be submitted to the President for approval. See LEE, Yvonne, Overlapping Regimes of Governance and Regulation: A Case Study of Singapore “Sovereign Wealth Funds”, National University of Singapore-Asian Society of International Law Working Paper 2009/8, at 31. In other cases (such as Brunei, Oman, Qatar, Sudan, and Abu Dhabi), the role of the government is not defined at all. See TRUMAN, Edwin M., “A Blueprint for Sovereign Wealth Fund Best Practices” (2008) PB08-3 Policy Brief of the Peterson Institute for International Economics, online: Peterson Institute for International Economics <http://www.petersoninstitute.org/publications/interstitial.cfm?ResearchID=902>, at 9 and 19.
46. According to the aforementioned review, the top ranking SWFs from the point of view of transparency at the time were the Alaska Permanent Fund and Norway’s GPFG, which have provided extensive information on their investment strategies and investment returns (even through the publication of quarterly reports) for a long time; see Truman, supra note 45 at 20.
47. Ibid., at 11. The review was conducted by Edwin M. Truman and Doug Dowson in April 2008, just a few months before the Santiago Principles were drafted (and as the drafting process was about to start).
48. Represented geographical areas are very diverse: there are advanced economies such as Norway and the United States (with the Alaska Permanent Reserve Fund); Islamic countries such as Saudi Arabia, Kuwait, and Iran; Asian and Pacific countries (such as Australia, China, Korea, and Singapore, which hold more than half of these assets); together with small insular states such as Trinidad and Tobago or huge ones such as Russia. See Johnson, supra note 13. However, some have pointed out that industrial countries hold more than 40 percent of SWF international assets (with the US leading with US$800bn in SWF international assets). See Truman, supra note 45.
49. More sophisticated distinctions have been suggested. “The risks associated with SWFs can be usefully broken into three core areas: the risk of financial contagion; the exercise of soft political power; and national security considerations.” O’BRIEN, Justin, “Barriers to Entry: Foreign Direct Investment and the Regulation of Sovereign Wealth Funds” (2008) 42 International Lawyer 1231 at 1237. Anthony Wong names the following concerns: lack of transparency, economic protectionism, market distortions, conflicts of interest, strategic positioning, and national security. See Wong, supra note 10 at 1090–8.
50. Rose, supra note 4 at 111–12.
51. Epstein and Rose, supra note 2 at 116.
52. Rose, supra note 4 at 111–12. See also Cooke, supra note 4 at 736–40.
53. de Meester, supra note 32 at 5.
54. Wong, supra note 10 at 1098. Moreover, there is potential for abuse of informational disparities, such as the risk that the government would use information gained through national intelligence services in market activities, to the disadvantage of private investors. See Rose, supra note 4 at 115–16.
55. Rose, supra note 4 at 114.
56. REED, Brendan J., “Sovereign Wealth Funds: The New Barbarians at the Gate? An Analysis of the Legal and Business Implications of their Ascendancy” (2009) 4 Virginia Law and Business Review 97 at 104–105. See also Epstein and Rose, supra note 2 at 116, and Gugler and Chaisse, supra note 5 at 44.
57. O’Brien, supra note 49 at 1237.
58. Opinions about the likely impact of the SWFs’ transparency are in section IV.
59. From the US perspective, see Reed, supra note 56. See also Epstein and Rose, supra note 2.
60. Cooke, supra note 4. See also PLOTKIN, Mark E., “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” (2008) 118 Yale Law Journal Pocket Part 88, online: YLJ Online <http://www.yalelawjournal.org/the-yale-law-journal-pocket-part/scholarship/foreign-direct-investment-by-sovereign-wealth-funds-/>.
61. See CATÁ BACKER, Larry, “Sovereign Investing in Times of Crisis: Global Regulation of Sovereign Wealth Funds, State Owned Enterprises and the Chinese Experience” (2009) 19 Transnational Law and Contemporary Problems 3. See also Pistor, supra note 42.
62. Drezner, supra note 16 at 115. See also Gelpern, supra note 8.
63. Rose, supra note 4 at 145.
64. Wong, supra note 10 at 1098–102. About the shortcomings of national approaches to SWF regulation, see Catá Backer, supra note 61 at 181. See also de Meester, supra note 32 at 18.
65. IWG member countries are: Australia, Azerbaijan, Bahrain, Botswana, Canada, Chile, China, Equatorial Guinea, Iran, Ireland, South Korea, Kuwait, Libya, Mexico, New Zealand, Norway, Qatar, Russia, Singapore, Timor-Leste, Trinidad and Tobago, the United Arab Emirates, the US, and Vietnam. Saudi Arabia, the OECD, and the World Bank participate as permanent observers.
66. See International Monetary Fund, Press Release No. 08/97, “International Working Group of Sovereign Wealth Funds is Established to Facilitate Work on Voluntary Principles” (1 May 2008), online: IMF <http://www.imf.org/external/np/sec/pr/2008/pr0897.htm>.
67. See International Monetary Fund, “Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund” (11 October 2008), online: IMF <http://www.imf.org/external/np/cm/2008/101108a.htm>, at para. 8.
68. As is well documented in the academic literature, the identification of best practices for the funds, in such areas as institutional structure, risk management, transparency, and accountability, was first suggested by the G7 Finance Ministers, which invited both the IMF and the OECD to take the lead during their meeting on 19 October 2007. See G7/8 Finance Ministers Meeting, “Statement of G7 Finance Ministers and Central Bank Governors” (19 October 2007), online: G8 Information Centre <http://www.g7.utoronto.ca/finance/fm071019.htm>. The following day, the International Monetary and Financial Committee of the Board of Governors of the IMF published a Communiqué which shared the view of the G7 about SWFs. See International Monetary Fund, “Communiqué of the International Monetary and Financial Committee of the Board of Governors of the International Monetary Fund” (20 October 2007), online: IMF <http://www.imf.org/external/np/cm/2007/102007a.htm>.
69. The subject of SWFs has been discussed during several public hearings. See United States Senate, Committee on Banking, Housing, and Urban Affairs, “Sovereign Wealth Fund Acquisitions and Other Foreign Government Investments in the U.S.: Assessing the Economic and National Security Implications” (14 November 2007). See also United States Senate, Financial Services Subcommittee on Domestic and International Monetary Policy, Trade and Technology, and the Subcommittee on Capital Markets, Insurance and Government Sponsored Enterprises, “Foreign Government Investment in the U.S. Economy and Financial Sector” (5 March 2008). The work of the IMF has been endorsed by the US Treasury Department: Treasury Secretary Henry Paulson met representatives from the governments of Singapore and Abu Dhabi in March 2008. On that occasion, common support for the initiatives under way at the IMF and OECD to develop best practices for SWFs was expressed and agreement on a common set of principles was reached. See US Treasury, Press Release, “Treasury Reaches Agreement on Principles for Sovereign Wealth Fund Investment with Singapore and Abu Dhabi” (20 March 2008), online: US Treasury <http://ustreas.gov/press/releases/hp881.htm>. See also KIMMITT, Robert M., “Public Footprints in Private Markets” (2008) 87 Foreign Affairs 119. According to Rose, the US Treasury officials informally suggested a framework for best practices on 19 March 2008, and reached agreement with Abu Dhabi and Singapore on this basis. See Rose, supra note 4 at 151–2.
70. The Communication about SWFs, of February 2008, called for an international approach and explicitly supported the then ongoing Santiago process. See Commission of the European Communities, supra note 5 at 6.
71. Reed, supra note 56 at 118.
72. In May 2008, United Arab Emirates’ Central Bank Governor Sultan bin Nasser Al Suwaidi (who, according to an IMF statement, was speaking on behalf of other Arab Central Bank governors, from Bahrain, Egypt, Kuwait, Iraq, Lebanon, Libya, Oman, Syria, and Yemen) criticized the IMF initiative, saying it lacked sufficient experience on the issue of SWFs. See “Suwaidi Critical of IMF Attempt to Monitor SWF Investments in West” Emirates Business (9 May 2008), online: Emirates Business <http://www.business24-7.ae/Articles/2008/5/Pages/05092008_a08c25e733b442e78cefedaeb74ce408.aspx>. On the Chinese criticism and on the significance of both statements for the development of the Santiago process, see Gugler and Chaisse, supra note 5 at 42.
73. The IMF Deputy Managing Director, John Lipsky, declared that “[i]f there were a sense that somehow ‘best practices’ were decided by someone else and dictated to the funds, that could be extremely counterproductive”. DAVIS, Bob, “US Pushes Sovereign Funds to Open to Outside Scrutiny” The Wall Street Journal (26 February 2008), online: Financial News <http://firstname.lastname@example.org>.
74. See International Monetary Fund, Press Release No. 08/97, “International Working Group of Sovereign Wealth Funds is Established to Facilitate Work on Voluntary Principles” (1 May 2008), online: IMF <http://www.imf.org/external/np/sec/pr/2008/pr0897.htm>.
75. See Santiago Principles, supra note 7 at 1.
76. “The IWG also benefited from input from a number of recipient countries—Australia, Brazil, Canada, France, Germany, India, Italy, Japan, South Africa, Spain, the United Kingdom, and the United States—as well as from the European Commission, the OECD and the World Bank.” Santiago Principles, supra note 7 at 2.
77. See International Working Group of Sovereign Wealth Funds, Press Release No. 09/01, “Working Group Announces Creation of International Forum of Sovereign Wealth Funds” (6 April 2009), online: IWG <http://www.iwg-swf.org/pr/swfpr0901.htm>.
78. International Working Group of Sovereign Wealth Funds, “ ‘Kuwait Declaration’: Establishment of the International Forum of Sovereign Wealth Funds” (6 April 2009), online: IWG <http://www.iwg-swf.org/mis/kuwaitdec.htm>.
79. Santiago Principles, supra note 7 at 4.
80. Ibid., at GAPP 2 Principle.
81. Ibid., at GAPP 6 Principle.
82. See Rose, supra note 4 at 138, and Cooke, supra note 4 at 766–8.
83. Santiago Principles, supra note 7 at GAPP 10 Principle.
84. Ibid., at GAPP 12 and 13 Principles.
85. Ibid., at GAPP 18 Principle.
86. Ibid., at GAPP 20 Principle.
87. See below, section IV.A.
88. About BCBS’s origin and structure, see Duncan WOOD, R., Governing Global Banking: The Basel Committee and the Politics of Financial Globalization (Aldershot: Ashgate Publishing, 2005).
89. See KIRTON, John J. and TREBILCOCK, Michael J., “Introduction: Hard Choices and Soft Law in Sustainable Global Governance” in John J. KIRTON and Michael J. TREBILCOCK, eds., Hard Choices, Soft Law: Voluntary Standards in Global Trade, Environment and Social Governance (Aldershot: Ashgate Publishing, 2004), 3 at 4–5.
90. Political scientists have pointed out that there is a political struggle behind the technical appearance of standards. See MATTLI, Walter and BÜTHE, Tim, “Setting International Standards: Technological Rationality or Primacy of Power?” (2004) 56 World Politics 1. Among the recent political sciences studies about international standards, see the essays in “Governance and International Standards Setting” special issue edited by MATTLI, Walter in (2001) 8 Journal of European Public Policy 345. See GOLDSTEIN, Judith, KAHLER, Miles, KEOHANE, Robert O. and SLAUGHTER, Anne-Marie, eds., Legalization and World Politics (Cambridge, MA: MIT Press, 2001). See also BRUNSSON, Nils and JACOBSSON, Bengt, eds., A World of Standards (Oxford: Oxford University Press, 2002). See also KERWER, Dieter, “Rules that Many Use: Standards and Global Regulation” (2005) 18 Governance 611. Legal scholars started studying this subject as well, with a systematic analysis for technical standards. See SCHEPEL, Harm, The Constitution of Private Governance: Product Standards in the Regulation of Integrating Markets (Oxford: Hart, 2005). Examining more specific aspects in other sectors, see CASSESE, Sabino, “Global Standards for National Administrative Procedure” (2005) 68 Law and Contemporary Problems 109 (examining global administrative law issues connected with standards). About the different types of international standards, see MORAIS, Herbert V., “The Quest for International Standards: Global Governance vs. Sovereignty” (2002) 50 University of Kansas Law Review 779. See CHARNOVITZ, Steve, “International Standards and the WTO”, George Washington University Law School, Legal Studies Research Paper No. 133, 2005, online: SSRN <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=694346>. For international standards in the financial services sector, see DELONIS, Robert P., “International Financial Standards and Codes: Mandatory Regulation Without Representation” (2004) 36 New York University Journal of International Law and Politics 563; and ZARING, David, “International Law by Other Means: The Twilight Existence of International Financial Regulatory Organizations” (1998) 33 Texas International Law Journal 281. Economists started studying the impact of international standards on trade, especially of technical standards, as they can work as powerful non-tariff barriers to trade. See BLIND, Knut, The Economics of Standards: Theory, Evidence, Policy (Cheltenham: Edward Elgar Publishing, 2004).
91. After the Asian financial crisis, the stress on the emergence of a new international financial architecture is particularly frequent. See EICHENGREEN, Barry, Toward a New Financial Architecture: A Practical Post-Asia Agenda (Washington DC: Institute for International Economics, 1999); THIRKELL-WHITE, Ben, The IMF and the Politics of Financial Globalization: From the Asian Crisis to a New Financial Architecture? (New York: Palgrave MacMillan, 2005); OCAMPO, José Antonio, “Reforming the International Financial Architecture: Consensus and Divergence” in Deepak NAYYAR, ed., Governing Globalization: Issues and Institutions (Oxford: Oxford University Press, 2002), 287; TARULLO, Daniel K., “Rules, Discretion, and Authority in International Financial Reform” (2001) 4 Journal of International Economic Law 613; KAHLER, Miles, “The New International Financial Architecture and its Limits” in Gregory W. NOBLE and John RAVENHILL, eds., The Asian Financial Crisis and the Architecture of Global Finance (Cambridge: Cambridge University Press, 2000), 235.
92. About the different types of global regulators, Kingsbury, Krisch, and Stewart divide the models of global administration into five types (administration by formal international organizations; administration based on collective action by transnational networks of governmental officials; distributed administration; hybrid intergovernmental/private administration; and administration by private institutions with regulatory functions). See Kingsbury, Krisch, and Stewart, supra note 12 at 20.
93. For a broad discussion about transnational regulatory networks, their role, and significance, see SLAUGHTER, Anne-Marie, A New World Order (Princeton: Princeton University Press, 2004).
94. Along with the establishment of G20, the founding of the FSF in 1999 upon G7’s initiative is part of a wider process of rethinking international financial architecture after the Asian financial crisis of 1997–1998. See GERMAIN, Randall D., “Global Financial Governance and the Problem of Inclusion” (2001) 7 Global Governance 411, and PORTER, Tony, “The Democratic Deficit in the Institutional Arrangements for Regulating Global Finance” (2001) 7 Global Governance 427. The Financial Stability Board (FSB) was established after the G20 London Summit in April 2009. See FSB, Press Release No. 14/2009, “Financial Stability Forum Re-established as the Financial Stability Board” (2 April 2009), online: FSB <http://www.financialstabilityboard.org/press/pr_090402b.pdf>.
95. Founded by the G7.
96. Domestic authorities from the G7 countries and Australia, the Netherlands, Hong Kong, and Singapore were admitted from the very constitution of the FSF, while, after its transformation into the FSB, its membership has also been enhanced, and authorities from all the G20 countries are admitted. See Financial Stability Forum, Press Release No. 10/2009, “Financial Stability Forum Decides to Broaden Its Membership” (12 March 2009), online: FSB <http://www.financialstabilityboard.org/press/pr_090312b.pdf>.
97. See Financial Stability Board, 12 Key Standards for Sound Financial Systems, online: FSB <http://www.financialstabilityboard.org/cos/key_standards.htm>.
98. The criterion of specificity is taken into account, together with those of obligation and delegation, in order to distinguish between hard and soft law. See ABBOTT, Kenneth W., KEOHANE, Robert O., MORAVCSIK, Andrew, SLAUGHTER, Anne-Marie and SNIDAL, Duncan, “The Concept of Legalization” (2000) 54 International Organization 401.
99. See ABBOTT, Kenneth W. and SNIDAL, Duncan, “Hard and Soft Law in International Governance” (2000) 54 International Organization 421 at 436–440. See SHELTON, Dinah, “Introduction: Law, Non-Law and the Problem of ‘Soft Law’” in Dinah SHELTON, ed., Commitment and Compliance: The Role of Non-Binding Norms in the International Legal Systems (Oxford: Oxford University Press, 1999), 1 at 14.
100. Dieter Kerwer accepts the definition of a standard as “any rule based on expertise that can be adopted voluntarily”; Kerwer, supra note 90. The fact that they may be based on competences of a technical nature, however, does not exclude the possibility that such rules have important political consequences. In this sense, see generally Mattli and Büthe, supra note 90. See also Porter, supra note 94 at 428.
101. Slaughter, supra note 93 at 213.
102. MÖRTH, Ulrika, “Introduction” in Ulrika MÖRTH, ed., Soft Law in Governance and Regulation: An Interdisciplinary Analysis (Cheltenham: Edward Elgar Publishing, 2004), 6. See BRUNSSON, Nils and JACOBSSON, Bengt, “The Contemporary Expansion of Standardization” in Nils BRUNSSON and Bengt JACOBSSON, A World of Standards (Oxford: Oxford University Press, 2000), 1 at 4–6.
103. Morais, supra note 90 at 781. For a similar point of view, see Delonis, supra note 90 at 563 (claiming some of the international organizations’ methods to improve implementation of global financial standards “make their adoption essentially mandatory”). For an opposite view, identifying standards as soft law, see GIOVANOLI, Mario, Reflections on International Financial Standards as “Soft Law” (London: London Institute of International Banking, Finance, and Development Law, 2002) at 5.
104. See MOSLEY, Layna, “An End to Global Standards and Codes?” (2009) 15 Global Governance 9.
105. The debate about Basel II and IAS is huge, and remarks and criticisms vary greatly across the different authors. They go far beyond the scope of this article. For a general analysis of their connection with the crisis, see especially “Report of the High-Level Group on Financial Supervision in the EU” (2009) at para. 224. For an overview of the different opinions, see VOX, online: VOX <http://www.voxeu.org/>.
106. The FSF (now FSB) recommended the IOSCO to complete the revision of the Code, its adoption by the agencies, and the monitoring of such adoption by the competent domestic authorities. See Financial Stability Forum, “Report of the Financial Stability Forum on Enhancing Market and Institutional Resilience” (7 April 2008), online: FSB <http://www.financialstabilityboard.org/publications/r_0804.pdf> at 34, recommendations IV.1 and IV.2.
107. See also section III.B.
108. Gelpern, supra note 8 at 28.
109. Central bank governors and heads of supervision from Argentina, Indonesia, Saudi Arabia, South Africa, and Turkey, together with Hong Kong and Singapore are now members of the Committee. See BCBS, Press Release, “Basel Committee Broadens its Membership” (10 June 2009), online: BCBS <http://www.bis.org/press/p090610.htm>. See also IOSCO, Press Release, “IOSCO Technical Committee invites Brazil, China and India to join its membership” (19 February 2009), online: IOSCO <www.iasplus.com/iosco/0902technicalcommittee.pdf>.
110. See FSB, supra note 97.
111. See above, section II.C.
112. Santiago Principles, supra note 7 at 5.
113. Reed, supra note 56 at 111–22 (claiming that “the voluntary nature of the twenty-four Santiago Principles exacerbate their unenforceability”, but finding both the IMF and the WTO ill-suited to enforce them). See BUHI, Jason, “Negocio de China: Building Upon the Santiago Principles to Form an Effective International Approach to Sovereign Wealth Fund Regulation” (2009) 39 Hong Kong Law Journal 197 at 206 and 216.
114. Abbott and Snidal, supra note 99 at 422. See also Shelton, supra note 99 at 10 and Mörth, supra note 102 at 5.
115. Slaughter, supra note 93 at 224.
116. Dinah Shelton spells out the openness of the standard-setting procedure, the content of the standard (the more precise the content, the more probable its implementation, as there will be no uncertainty over which is the required behaviour; in contrast, the higher the implementation costs, the lower the compliance), the institutional context (if there are assessment mechanisms), and the existence of follow-up procedures as driving incentives. See Shelton, supra note 99 at 13. According to Jonathan Charney, the existence of links between a given standard and other soft-law or hard-law rules, the transparency of the rule, the existence of interest groups supporting the implementation, the formal acceptance by the community, and the foreseeable consequences in case of non-compliance can also have an impact on compliance. See CHARNEY, Jonathan L., “Commentary: Compliance with International Soft Law” in Shelton, supra note 99 at 117–118.
117. According to the Financial Stability Forum (FSF), now Financial Stability Board (FSB), there are institutional and market incentives which can enhance compliance with international financial standards. See “Final Report of the Follow-Up Group on Incentives to Foster Implementation of Standards” (Financial Stability Forum, 2001), online: FSB <http://www.financialstabilityboard.org/publications/r_0109a.pdf?noframes=1>. Subsequently, the same distinction has been used by scholars of international financial law and economists. See Giovanoli, supra note 103 at 20. See also WARD, Jonathan, The New Basel Accord and Developing Countries: Problems and Alternatives, Cambridge University Working Paper No. 4, 2002, online: Cambridge University <http://www.g24.org/ward0403.pdf>, at 32.
118. See Directive of the European Parliament and of the Council of 14 June 2006 Relating to the Taking up and Pursuit of the Business of Credit Institutions, European Union  O.J.L. 177/1. See also Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the Capital Adequacy of Investment Firms and Credit Institutions, European Union  O.J.L. 177/201.
119. See Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the Application of International Accounting Standards, European Union  O.J.L. 243/1 [IAS Regulation]. This Regulation has required all publicly traded EU companies to prepare their consolidated accounts using IAS/IFRS, as endorsed in the EU, since 2005. According to IAS Regulation, when deciding on the applicability of IAS/IFRS, the European Commission—assisted by a set of committees—must evaluate if the international standards correspond to the criteria set out in the Regulation itself: in particular, IAS/IFRS can be endorsed only if they are conducive to the European public good, and if they meet the criteria of understandability, relevance, reliability, and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management. In this way, global accounting standards, first established by private entities, gain binding force through European recognition.
120. See LEEBRON, David W., “Linkages” (2002) 96 American Journal of International Law 5.
121. See Agreement on Technical Barriers to Trade, 12 April 1979, 1186 U.N.T.S. 276, 18 I.L.M. 1079 (entered into force 1 January 1980), art. 2.4 (“Where technical regulations are required and relevant international standards exist or their completion is imminent, Members shall use them, or the relevant parts of them, as a basis for their technical regulations”). For a fuller discussion of the point, see HOWSE, Robert L., “A New Device for Creating International Legal Normativity: The WTO Technical Barriers to Trade Agreement and ‘International Standards’” in Christian JOERGES and Ernst-Ulrich PETERSMANN, eds., Constitutionalism, Multilevel Trade Governance and Social Regulation (Portland: Hart Publishing, 2006), 383. Another case is the SPS reference to the Codex Alimentarius Commission standards. See Agreement on the Application of Sanitary and Phytosanitary Measures, 15 April 1994, 1867 U.N.T.S. 493, 33 I.L.M. 1125 (entered into force 1 January 1995), art. 3.1 (“To harmonize sanitary and phytosanitary measures on as wide a basis as possible, Members shall base their sanitary or phytosanitary measures on international standards, guidelines or recommendations, where they exist, except as otherwise provided for in this Agreement, and in particular in paragraph 3”). About SPS reference to other international organizations’ activity, see STEWART, Terence P. and JOHANSON, David S., “The SPS Agreement of the World Trade Organization and International Organizations: The Roles of the Codex Alimentarius Commission, the International Plant Protection Convention, and the International Office of Epizootics” (1998) 26 Syracuse Journal of International Law and Commerce 27.
122. The G20 Washington Communiqué, asking for all G20 states to complete an FSAP, implicitly recognizes the limits of this tool. See G20, “Declaration—Summit on Financial Markets and the World Economy” (15 November 2008), online: G20 <http://www.g20.org/Documents/g20_summit_declaration.pdf> at 2. On the one hand, the compilation of a ROSC is voluntary, as the report’s publication depends on the state’s consent (yet in the past it has been claimed that a state’s refusal to publish an ROSC may negatively affect market operators’ judgements). See Financial Stability Forum, supra note 117 at 9. On the other hand, it has recently been pointed out that some states (for example, the US) were powerful enough to ignore these programmes. See DOBSON, Wendy, “Delivering Change. Together” in Barry EICHENGREEN and Richard BALDWIN, eds., What G20 Leaders Must Do to Stabilise Our Economy and Fix the Financial System (London: Centre for Economic Policy Research and VoxEU.org, 2008), 45 at 46.
123. For a close examination of the cases in which some of the Key Standards have been included in loan packages, see Ward, supra note 117 at 33, and Delonis, supra note 90 at 596.
124. See Financial Stability Forum, supra note 117 at para. 20.
125. See the World Bank and International Monetary Fund Report, “International Standards: Strengthening Surveillance, Domestic Institutions, and International Markets” (The World Bank and International Monetary Fund, March 2003), online: World Bank <http://www.worldbank.org/ifa/intlstandards.pdf> at 12ff., Appendix II.
126. See eStandardsForum, online: <http://estandardsforum.org/>. PricewaterhouseCoopers also publishes an Opacity Index in relation to thirty-five states on its website. See Financial Stability Forum, supra note 117 at para. 23.
127. See Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 162009 on credit rating agencies. For a first comment, see AMTENBRINK, Fabian and DE HAAN, Jakob, “Regulating Credit Ratings in the European Union: A Critical First Assessment of Regulation 1060/2009 on Credit Rating Agencies” (2009) 46 Common Market Law Review 1915.
128. United States House of Representatives, Committee on Foreign Affairs, “The Rise of Sovereign Wealth Funds: Impacts on U.S. Foreign Policy and Economic Interests”, 2nd Sess., Serial No. 110-190 (21 May 2008) at 4.
129. SWFs have stated this purpose very clearly. See Saxon, supra note 6 at 697. See also O'Brien, supra note 49 at 1243.
130. See Epstein and Rose, supra note 2 at 113.
131. See MATTOO, Aaditya and SUBRAMANIAN, Arvind, “Currency Undervaluation and Sovereign Wealth Funds: A New Role for the World Trade Organization” (Peterson Institute for International Economics Working Paper No. 08-2, 2008), online: SSRN <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1086476>. See also Cooke, supra note 4 at 770.
132. See de Meester, supra note 32 at 22–8.
133. About the type of reference to international standards which can be found in the GATS and its difference from the TBT and SPS one, see DE BELLIS, Maurizia and MORLINO, Elisabetta, “Harmonisation and Mutual Recognition in the General Agreement on Trade in Services” in Stefano BATTINI and Giulio VESPERINI, eds., Global and European Constraints Upon National Right to Regulate: The Service Sector (2008), online: SSRN <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1099844>.
134. For a similar point, see Rose, supra note 4 at 130–1. For a different, more arguable critique, suggesting the WTO Dispute Settlement Body may not be well equipped to deal with SWFs, see Reed, supra note 56 at 122.
135. See Dobson, supra note 122 at 46.
136. See International Monetary Fund Report, “Implementation of the Basel Core Principles for Effective Banking Supervision: Experience with Assessments and Implications for Future Work” (2008), online: IMF <http://www.imf.org/external/np/pp/eng/2008/090208.pdf> at 17.
137. See Committee of European Securities Regulators, “CESR’s Report to the European Commission on the Compliance of Credit Rating Agencies with the IOSCO Code” (2006), online: CESR <http://ec.europa.eu/internal_market/securities/docs/agencies/report_en.pdf> at para. 15.
138. Wong, supra note 10 at 1108–9.
139. Ibid., at 1090.
140. Gugler and Chaisse, supra note 5 at 45.
141. Wong, supra note 10 at 1092.
142. Saxon, supra note 6 at 709–10
143. Truman, supra note 45 at 10.
144. A Common European Approach to Sovereign Wealth Funds, supra note 5.
145. About the ambiguity of the term “accountability”, see BLACK, Julia, Constructing and Contesting Legitimacy and Accountability in Polycentric Regulatory Regimes, New York: New York University School of Law, IILJ Working Paper 2007/12, 2007, at 21. See also WEISBRAND, Edward and EBRAHIM, Alnoor, “Introduction: Forging Global Accountabilities” in Alnoor EBRAHIM and Edward WEISBRAND, eds., Global Accountabilities: Participation, Pluralism, and Public Ethics (Cambridge: Cambridge University Press, 2007), 1 at 1; STEGER, Debra P., “Introduction to the Mini-Symposium on Transparency in the WTO” (2008) 11 Journal of International Economic Law 705. See also KAUFMAN, Daniel and BELLVER, Ana, “Transparenting Transparency: Initial Empirics and Policy Applications” (2005), online: SSRN <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=808664> at 4 (stating that there is no commonly agreed definition of transparency).
146. See “Full Disclosure” The Economist (20 February 2009), online: CFO <http://www.cfo.com/article.cfm/13168616/c_2984368/?f=archives>.
147. Rozanov, supra note 21 at 12–14.
148. Rose, supra note 4 at 141.
149. WAKI, Natsuko, “Push for Open SWFs Risks Investment Shift” Reuters (15 September 2009), online: Reuters (UK) <http://uk.reuters.com/article/idUKLNE58E03M20090915>.
150. For an overview, see MITCHELL, Ronald B., “Sources of Transparency: Information Systems in International Regimes” (1998) 42 International Studies Quarterly 109 at 111.
151. See CHARNOVITZ, Steve, “Transparency and Participation in the World Trade Organization” (2004) 56 Rutgers Law Review 927. See also STEWART, Richard B. and SANCHEZ BADIN, Michelle Ratton, The World Trade Organization and Global Administrative Law, New York: New York University School of Law, Public Law Research Paper No. 09-71, 2009. See also BATTINI, Stefano and VESPERINI, Giulio, “Introduction” in Stefano BATTINI and Giulio VESPERINI, eds., Global and European Constraints Upon National Right to Regulate: The Service Sector (2008), online: SSRN <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1099844>, 1 at 2.
152. See BARR, Michael S. and MILLER, Geoffrey P., “Global Administrative Law: The View from Basel” (2006) 17 European Journal of International Law 15.
153. See FUENTES, Carlos Iván, Transparency as a Global Goal: Towards a Unity of Principles in Global Administrative Law (2008), online: SSRN <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1134122>.
154. See KINGSBURY, Benedict, KRISCH, Nico, STEWART, Richard B., and WIENER, Jonathan B., Global Governance as Administration—National and Transnational Approaches to Global Administrative Law, (2005) 68 Law and Contemporary Problems 1 at 2.
155. Kingsbury, Krisch, and Stewart, Emergence of GAL, supra note 12 at 17. See also CASSESE, Sabino, “Administrative Law Without the State? The Challenge of Global Regulation” (2005) 37 New York University Journal of International Law and Politics 663 at 671
156. Kingsbury, Krisch, and Stewart, supra note 12 at 17.
157. Ibid., at 27–9.
158. Steger, supra note 145.
159. Santiago Principles, supra note 7 at GAPP 1.2 Subprinciple.
160. Ibid., GAPP 2 Principle.
161. Ibid., GAPP 4 Principle.
162. Ibid., GAPP 4.1 Subprinciple.
163. Ibid., GAPP 16 Principle.
164. Ibid., GAPP 13 Principle.
165. Ibid., GAPP 11 Principle.
166. Ibid., GAPP 15 Principle.
167. Ibid., GAPP 17 Principle.
168. Ibid., GAPP 18.3 Subprinciple.
169. Ibid., GAPP 22.2 Subprinciple.
170. Ibid., GAPP 19.1 Subprinciple.
171. Ibid., GAPP 21 Principle.
172. Rose, supra note 4 at 144, and Cooke, supra note 4 at 768.
173. Wong, supra note 10 at 1105–6.
174. Commission of the European Communities, supra note 5 at 11.
175. Truman, supra note 45 at 6.
176. Ibid., at 11.
177. Santiago Principles, supra note 7 at GAPP 4.1 Subprinciple and GAPP 21 Principle.
178. Ibid., GAPP 12 Principle.
179. Truman, supra note 45 at 12.
180. Rose, supra note 4 at 144; and Cooke, supra note 4 at 768.
181. Wong, supra note 10 at 1105.
182. Rozanov, supra note 21 at 21.
183. Wong, supra note 10 at 1106.
184. Precision is among the factors which can enhance compliance with international standards. See Shelton, supra note 99.
185. For a similar proposal, see Wong, supra note 10 at 1108.
186. Black, supra note 145 at 21. See also FEREJOHN, John, Accountability in a Global Context, New York University, IILJ Working Paper 2007/05, at 2.
187. See BOVENS, Mark, “Analysing and Assessing Accountability: A Conceptual Framework” (2007) 13 European Law Journal 447 at 457.
188. Truman, supra note 45 at 6.
189. Gelpern, supra note 8 at 15–16 (distinguishing between public internal accountability (with regard to the citizens and governments of the SWF countries); private internal accountability (referring to SWFs’ duties to narrower constituencies, such as shareholders, derived from their charters); public external accountability (implying a duty of state-owned funds to adhere to international norms); private external accountability (referring to SWFs’ duties as creditors and shareholders under host country laws)). In this article, the reference to external/internal accountability is used for different purposes.
190. See GRANT, Ruth W. and KEOHANE, Robert O., “Accountability and Abuses of Power in World Politics” (2005) 99 American Political Science Review 29 at 35–37. See also CHESTERMAN, Simon, “Globalization Rules: Accountability, Power, and the Prospects for Global Administrative Law” (2008) 14 Global Governance 39 at 44–45 (using the same typology).
191. Halvorssen, supra note 44 at 20–1.
192. Rose, supra note 4 at 145.
193. Truman, supra note 45 at 11.
194. For a fuller discussion of the point, see Drezner, supra note 16 at 21.
195. See the typology first suggested by Grant and Keohane, supra note 190 at 36.
196. Ibid., at 37.
197. Santiago Principles, supra note 7 at 18.
198. Ibid., at GAPP 13 Principle.
199. This brings together not only national administrative authorities (such as central banks, supervisory authorities, and treasury departments) in the G20 countries, but also banking, securities, and insurance transnational regulators (BCBS, IOSCO, and IAIS, respectively), intergovernmental international organizations (such as the IMF, the World Bank, and the OECD), and private standard-setting bodies, such as the IASB and the IAASB, one of the IFAC’s technical committees, the BIS together with its committees (the CPSS and the CGFS), and the ECB. See Financial Stability Board, Links to FSB Members, online: FSB <http://www.financialstabilityboard.org/members/links.htm>.
* Tenured Assistant Professor, University of Rome “Tor Vergata”; Global Research Fellow, New York University.
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