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Sovereignty, Accountability, and the Wealth Fund Governance Conundrum

  • Anna GELPERN (a1)

Sovereign wealth funds—state-controlled transnational portfolio investment vehicles—began as an externally imposed category in search of a definition. SWFs from different countries had little in common and no desire to collaborate. This article elaborates the implications of diverse public, private, domestic, and external demands on SWFs, and describes how their apparently artificial grouping became a site for innovation in international law-making.

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Associate Professor, American University Washington College of Law, Visiting Associate Professor, University of Pennsylvania Law School. Many thanks to Francine Barber, Chris Brummer, Kevin Davis, Rashmi Dyal-Chand, Victor Fleischer, Michael Froomkin, Mary Gardner, Tom Ginsburg, Eric Helleiner, Kara Karlson, Patrick Keenan, Thomas Laryea, Clay Lowery, Ralf Michaels, Christiana Ochoa, Brad Setser, Sean Sherlock, Brian Stewart, Kelly Targett, Edwin M. Truman, Matthew Tubin, Martin Weiss, two anonymous reviewers for the Asian Journal of International Law, and participants in conferences and workshops at the University of Chicago Law School, Georgetown University Law School, the National University of Singapore, American University Washington College of Law, Cardozo Law School, and Columbia University for helpful insights. The editors of this volume were beyond gracious in supporting this project.

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1. International Working Group of Sovereign Wealth Funds (IWG-SWF), “Generally Accepted Principles and Practices—Santiago Principles” (October 2008), online: IWG-SWF 〈 [IWG-SWF, “Santiago Principles”].

2. IWG-SWF, “International Working Group of Sovereign Wealth Funds, Working Group Announces Creation of International Forum of Sovereign Wealth Funds”, Press Release No. 09/01, 6 April 2009.

3. ROZANOV Andrew, “Who Holds the Wealth of Nations?” (2005) 15 Central Banking Journal 52.

4. TRUMAN Edwin M., Sovereign Wealth Funds: Threat or Salvation? (Washington, DC: Peterson Institute, 2010).

5. Monitor Group and Fondazione Eni Enrico Mattei (FEEM), Weathering the Storm: Sovereign Wealth Funds in the Global Economic Crisis of 2008 (USA/Italy: Monitor Group and Fondazione Eni Enrico Mattei, 2009).

6. US Treasury, “CFIUS and the Protection of the National Security in the Dubai Ports World Bid for Port Operations”, Press Release, 24 February 2006.

7. “Documents Show Conditions for Dubai Deal” MSNBC (22 February 2006), online: MSNBC 〈〉.

8. “Is CNOOC's Bid for Unocal a Threat to America?” Knowledge@Wharton (21 November 2005).

9. US Treasury, “President's Working Group Releases Common Approach to Private Pools of Capital”, Press Release, 22 February 2007; SIEGER Ashley, “Germany Pledges Code to Regulate Hedge Fund ‘Locusts’ ” Guardian (19 May 2007).

10. US President's Working Group on Financial Markets, “Hedge Funds, Leverage, and the Lessons of Long-Term Capital Management” (April 1999), online: US Treasury 〈〉.

11. EL-ERIAN Mohamed, “Towards a Better Understanding of Sovereign Wealth Funds” (19 October 2007), online: PIIE 〈〉, at 7.

12. SCHWARTZMAN Steven, “Reject Sovereign Wealth Funds at Your Peril” Financial Times (20 June 2008).

13. Rozanov, supra note 3 at 1.

14. Ibid., at 1, 4.

15. “International Monetary Fund, Sovereign Wealth Funds—A Work Agenda” (February 2008), online: IMF 〈〉.

16. See JEN Stephen, “Currencies: The Definition of Sovereign Wealth Fund” (25 October 2007), online: Morgan Stanley 〈〉; Rozanov, supra note 3.

17. US Treasury, “Report to Congress on International Economic and Exchange Rate Policies” (June and December 2007), online: US Treasury 〈〉; LOWERY Clay, “Remarks on Sovereign Wealth Funds and the International Financial System” (21 June 2007), online: US Treasury 〈

18. TRUMAN Edwin M., “A Blueprint for Sovereign Wealth Fund Best Practices”, Peterson Institute for International Economics (PIIE) Policy Brief, April 2008.

19. Jen, supra note 16.

20. KIMMITT Robert M., “Public Footprints in Private Markets: Sovereign Wealth Funds and the World Economy” (2008) 87 Foreign Affairs 119; LOWERY Clay, “The Role of Sovereign Wealth Funds in the Global Economy” (12 February 2008), online: US Treasury 〈

21. Truman, supra note 18; BEHRENDT Sven and KODMANI Bassma, eds., “Managing Arab Sovereign Wealth in Turbulent Times—and Beyond”, Carnegie Papers No. 16, April 2009.

22. SUKUMAR Nandini, “Sovereign Wealth Fund Assets Could Triple by 2013” Bloomberg (23 July 2008).

23. SETSER Brad and ZIEMBA Rachel, “GCC Sovereign Wealth Funds: Reversal of Fortune”, Council on Foreign Relations CGS Working Paper, January 2009; ZIEMBA Rachel, “Are Sovereign Wealth Funds Back? A Roundup” Roubini (8 October 2009). But see McKinsey Global Institute, The New Power Brokers: How Oil, Asia, Hedge Funds and Private Equity Are Faring in the Financial Crisis (San Francisco: McKinsey Global Institute, 2009) (citing no decline in SWF assets under management, at $3.2 trillion for 2008, and projecting continued albeit slower growth).

24. MONK Ashby H.B., “Recasting the Sovereign Wealth Fund Debate: Trust, Legitimacy, and Governance” (2009) 14 New Political Economy 451.

25. LIPSKY John, “Sovereign Wealth Funds: Their Role and Significance” (3 September 2008), online: IMF 〈

26. POPOVA Arina, “Sovereign Wealth Funds: To Be or Not To Be Is Not the Question; Which One To Choose, Is” (2009) 40 Georgetown Journal of International Law 1191 at 1198.

27. Rozanov, supra note 3 at 1.

28. IWG-SWF, “Santiago Principles”, supra note 1 at 27.

29. LAWDER David and BRYANSKI Gleb, “Putin—No Sovereign Wealth Fund in Russia Yet” Reuters (30 June 2008).

30. Ibid.

31. ASLUND Anders, “The Truth about Sovereign Wealth Funds” Foreign Policy (3 December 2007), online: Foreign Policy 〈〉.

32. IMF, “Staff Report—Russian Federation: 2003 Article IV Consultation”, IMF Country Report No. 03/144, April 2003, at 15−16.

33. IMF, “Russian Federation: 2004 Article IV Consultation”, Public Information Notice, IMF Country Report No. 04/112, September 2004.

34. Popova, supra note 26.

35. IMF, “Russian Federation”, supra note 32.

36. Popova, supra note 26.

37. Ibid. Ministry of Finance of the Russian Federation, “Fund for National Well-Being: Mission”, online: Russian MinFin 〈〉.

38. Popova, supra note 26 at 11.

39. Ziemba, supra note 23, reports a decline from US$157 billion in December 2007 to US$76 billion in September 2009, based on official figures; however, the 2007 baseline includes the US$32 billion that became the Fund for National Well-Being.

40. Russian Ministry of Finance, “ inline-graphicinline-graphic ” [The Cumulative Amount of the National Welfare Fund] (2010), online: Russian MinFin 〈〉, table.

41. Popova, supra note 26 at 13−14.

42. See Truman, supra note 18 at 9.

43. Cf. POPOVA Arina, “We Don't Want to Conquer You, We Have Enough to Worry About: The Russian Sovereign Wealth Fund” (2008) 118 Yale Law Journal Pocket Part 109, online: YLJPP 〈〉 [Popova, “Russian SWF”] (suggesting that Russian SWFs’ formal structure precludes their use as political weapons).

44. MURPHY Kim, “$5-Billion Loss Riles Even Oil-Rich Kuwaitis; Scandal: Parliament's Probe of Public Funds Poses the Most Serious Challenge Ever to the Ruling Family's Power” Los Angeles Times (10 February 1993); FINEMAN Mark, “Rough-and-Tumble Democracy Has Kuwait Edgy” Los Angeles Times (10 April 1993).

45. AL SA'AD Bader M., “Overview on the Kuwait Investment Authority and Issues Related to Sovereign Wealth Funds” (9 April 2008), online: KIA 〈〉.

46. KIA, Transparency and Disclosure of Information”, online: KIA 〈〉.

47. Ibid.

48. Murphy, supra note 44.

49. Ibid. (estimating half of the pre-war value lost).

50. COHEN Roger, “Missing Millions—Kuwait's Bad Bet—A Special Report: Big Wallets and Little Supervision” New York Times (28 September 1993).

51. Murphy, supra note 44.

52. AL JARALLAH Ahmed, “KIO Investments Lost in Politics” Arab Times (20 September 1993).

53. TAYLOR Bree A., “Grupo Torras SA & Anor v. Royal Bank of Scotland International & Others” (2001) 7 Trusts & Trustees 25.

54. GIC, “Corporate Governance”, online: GIC 〈〉.

55. Mubadala, “Annual Report” (2009), online: Mubadala 〈〉; Temasek, “Temasek Review” (2009), online: Temasek 〈〉.

56. Truman, supra note 18.

57. “Abu Dhabi Wealth Fund Unveils First-ever Strategy” Middle East Online (15 March 2010), online: MEO 〈〉.

58. Abu Dhabi Investment Authority (ADIA), “Annual Review” (2009), online: ADIA 〈〉.

59. Mubadala homepage, online: Mubadala 〈〉.

60. WIGGLESWORTH Robin, “Higher Revenue and Fair Value Boost Mubadala” Financial Times (22 March 2010).

61. Truman, supra note 18.

62. GIC, “About Us”, online: GIC 〈〉.

63. Temasek, “Temasek at 35”, online: Temasek 〈〉.

64. SWF Institute, “Mubadala”, online: SWFI 〈〉; “Temasek Says It Is Not a Sovereign Wealth Fund” Straits Times (22 March 2008). Nevertheless, Temasek participates in the newly established International Forum of Sovereign Wealth Funds; at this writing Mubadala does not.

65. EL-ERIAN Mohamed A., “Sovereign Wealth Funds in the New Normal” (2010) 47 Finance and Development 44.

66. Mubadala, “Corporate Social Responsibility”, online: Mubadala 〈〉; “Community Care”, online: Temasek 〈〉; “Governance”, online: ADIA 〈〉; GIC, “Corporate Governance”, supra note 54.

67. Temasek Holdings, “Investing in Value: Temasek Review” (2004), online: Temasek 〈〉.

68. Mubadala, Investor Relations”, online: Mubadala 〈〉.

69. WIGGLESWORTH Robin, ENGLAND Andrew, and KERR Simeon, “Sovereign Wealth Funds Open Up Books” Financial Times (17 March 2010).

70. Both issuers have taken advantage of exemptions from the US Securities and Exchange Commission registration requirements under the Securities Act of 1933. See supra notes 67–8. They remain subject to anti-fraud rules under the Securities Exchange Act of 1934, 15 U.S.C.A. § 10(b) (2010); 17 C.F.R. § 240.10b-5 (2010).

71. ABDELAL Rawi, “Sovereign Wealth in Abu Dhabi” (2009) 14 Geopolitics 317 at 322323.

72. Norges Bank Investment Management (NBIM), “Market Value”, online: NBIM 〈

73. KIA, “Transparency”, supra note 46. See also US Government Accountability Office, “Sovereign Wealth Funds: Publicly Available Data on Sizes and Investments for Some Funds Are Limited”, Report No. GAO-08-946, September 2008, at 13–14.

74. For a good overview of GPFG's legal form and operation, see BACKER Larry Catá, “Sovereign Wealth Funds as Regulatory Chameleons: The Norwegian Sovereign Wealth Funds and Public Global Governance Through Private Global Investment” (2010) 41 Georgetown Journal of International Law 425.

75. NBIM, “GIPS Mandated Performance Results of Norges Bank Investment Management” (28 May 2010), online: NBIM 〈〉, at 3–4.

76. See Norway Ministry of Finance, “Council on Ethics for the Government Pension Fund—Global”, online: 〈〉.

77. See Norway Ministry of Finance, “Corporate Governance”, online: Norway MinFin 〈〉.

78. Norway Ministry of Finance, “Report No. 20 to the Storting (2008−2009) on the Management of the Government Pension Fund in 2008” (4 April 2009), online: Norway MinFin 〈〉, at 4.

79. CLARK Gordon L. and MONK Ashby H.B., “The Legitimacy and Governance of Norway's Sovereign Wealth Fund: The Ethics of Global Investment”, SSRN Working Paper (15 September 2009), online: SSRN 〈

80. UN Global Compact, “The Ten Principles of the Global Compact”, online: UNGC 〈

81. CHESTERMAN Simon, “The Turn to Ethics: Disinvestment from Multinational Corporations for Human Rights Violations—The Case of Norway's Sovereign Wealth Fund” (2007) 23 American University International Law Review 577 at 590; Norway Ministry of Finance, “The Report from the Graver Committee” (11 July 2003), online: Norway MinFin 〈〉, section 2.1 (unofficial English translation).

82. Chesterman, ibid., at 591; HALVORSEN Kristin, “Sovereign Wealth Funds” (3 June 2008), online: OECD 〈〉, at 2–3.

83. See Chesterman, supra note 81 at 607.

84. See IWG-SWF, supra note 1; Norges Bank, “Norges Bank Contributes to UN Principles on Investments”, Press Release, 27 April 2006.

85. LANDLER Mark, “Norway Keeps Nest Egg from Some US Companies” New York Times (4 May 2007).

86. For example, when Norwegian SWF managers revealed that they were among the earliest in the market to bet against Icelandic banks using derivatives, some in Iceland suggested that it was an ethical failure on Norway's part “to invest in a little-regulated market against the financial system of a neighbouring country”. “Norwegian Oil Fund Betted Against Icelandic Economy” Iceland Review (23 May 2010).

87. KEENAN Patrick J. and OCHOA Christiana, “The Human Rights Potential of Sovereign Wealth Funds”, Illinois Public Law Research Paper No. 08-27/Indiana Legal Studies Research Paper No. 132, 8 April 2009, online: SSRN 〈

88. EL-ERIAN Mohamed, Op-ed, “Foreign Capital Must Not Be Blocked” Financial Times (3 October 2007).

89. IWG-SWF, “Press Briefing on the International Working Group of Sovereign Wealth Funds by Co-Chairs, Mr Hamad al Suwaidi of the Abu Dhabi Investment Authority, and Mr Jaime Caruana of the International Monetary Fund, with David Murray of the Australia Future Fund and Chair of the IWG's Drafting Group” (11 October 2008), online: IWG-SWF 〈〉. See also Halvorsen, supra note 82 at 1−2.

90. 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; FLEISCHER Victor, “A Theory of Taxing Sovereign Wealth” (2009) 84 New York University Law Review 440; Chairman Christopher COX, US Securities and Exchange Commission, “The Role of Governments in Markets” (Keynote Address and Robert B. Glauber Lecture at the John F. Kennedy School of Government, Harvard University, 24 October 2007), online: SEC 〈〉.

91. ANDERLINI Jamil and DYER Geoff, “US Delays Licences for China's Biggest Banks” Financial Times (17 June 2008).

92. Federal Reserve Board, “Order Approving Establishment of a Branch” (5 August 2008), online: the Fed 〈〉; Robert FRIERSON, “Letter to H. Rodgin Cohen (5 August 2008) [“Letter from Frierson”]. CIC, established in September 2007 with US$200 billion from central bank reserves, reports directly to the State Council of the People's Republic of China. Its board is made up of officials from powerful government agencies. SETSER Brad W., “What to Do with over Half a Trillion a Year? Understanding the Changes in the Management of China's Foreign Assets”, online: CFR 〈

93. Bank Holding Company Act of 1956, 12 U.S.C. §§ 1841-50 (2006) [BHC Act].

94. CIC appears to have at least two public missions: to reform the Chinese banking sector and to boost returns on foreign exchange reserves. The reorganization implicating Huijin complicated CIC's mandate. “A Simmering CIC-Huijin Separation” ChinaStakes (8 July 2008). Ashby H.B. MONK, Scott MOORE, and Xunyi ‘Jane’ XU, “A Review of Chinese Language Literature on Sovereign Wealth Funds”, Oxford International Review Sovereign Wealth Funds Team, Working Paper No. SWF001(2008), at 11−12.

95. ALVAREZ Scott G., “Testimony Before the Subcommittee on Domestic and International Monetary Policy, Trade, and Technology, and the Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, Committee on Financial Services, US House of Representatives” (5 March 2008), online: The Fed 〈〉. MALAS Nour and SLEIMAN Mirna, “Have Money, Will Travel” Wall Street Journal (15 March 2010). See also PISTOR Katharina, “Global Network Finance Reassessing Linkages between Sovereign Wealth Funds and Western Banks”, American Law & Economics Association 18th Annual Meetings, Working Paper No. 54, 2008, online: ALEA 〈

96. See Order Approving Formation of Bank Holding Company, 68 Federal Reserve Bulletin No. 7 (July 1982); William WILES, Letter to Patricia Skigen and John Cairns (19 August 1988).

97. “Letter from Wiles”, ibid. The Italian holding company, like Huijin, had been formed to recapitalize and reform domestic banks. Compare this with “Letter from Frierson”, supra note 91.

98. “Letter from Wiles”, supra note 95; BHC Act, 12 U.S.C. § 1843(c)(9) (2006).

99. “Letter from Frierson”, supra note 91.

100. See Order Approving Formation, supra note 95.

101. CUI Carolyn, “China Finds New Market for Loans: US” Wall Street Journal (2 June 2010).

102. EPSTEIN Richard A. and ROSE Amanda M., “The Regulation of Sovereign Wealth Funds: The Virtues of Going Slow” (2009) 76 University of Chicago Law Review 111.

103. LOWERY Clay, “Remarks at Barclays Capital's 12th Annual Global Inflation-Linked Conference”, 25 February 2008, online: US Treasury 〈; US Treasury, “Treasury Reaches Agreement on Principles for Sovereign Wealth Fund Investment with Singapore and Abu Dhabi”, Press Release, 20 March 2008, online: US Treasury 〈〉.

104. McKinsey, supra note 23; Monitor Group-Fondazione Eni Enrico Mattei, supra note 5.

105. “Committee on Foreign Investment in the United States”, online: US Treasury 〈〉.

106. Supra notes 6−7 and accompanying text.

107. MARCHICK David and SLAUGHTER Matthew, “Global FDI Policy: Correcting a Protectionist Drift”, CFR Special Report No. 34, June 2008 (describing a global protectionist trend in investment regulation).

108. Foreign Investment and National Security Act of 2007 (FINSA), Pub. L. No. 110-49, 121 Stat. 246 (amending § 721 of the Defense Production Act of 1950 including stricter requirements for state-controlled investments). For an overview of US legislative perspectives on SWFs, see WEISS Martin, “Sovereign Wealth Funds and the United States Congress”, in Malan RIETVELD, ed., New Perspectives on Sovereign Asset Management (London: Central Banking Publications, 2008), 33.

109. Marchick and Slaughter , supra note 106 at 7−12.

110. G20 Working Group Meeting Proceedings, online: G20 〈〉.

111. G8 Summit Declaration, “Growth and Responsibility in the World Economy” (7 June 2007), online: G8 〈〉, at 4–8; US Treasury, “Statement of the G7 Finance Ministers and Central Bank Governors” (19 October 2007), online: US Treasury 〈〉.

112. See Lowery, supra note 20; Kimmitt, supra note 20.

113. US Department of the Treasury, Press Release “Treasury Reaches Agreement on Principles for Sovereign Wealth Fund Investment with Singapore and Abu Dhabi” (20 March 2008), online: US Treasury 〈〉 [US Department of the Treasury, “Agreement on Principles”].

114. TRUMAN Edwin M., “Sovereign Wealth Fund Acquisitions and Other Foreign Government Investments in the United States: Assessing the Economic and National Security Implications” (14 November 2007), online: PIIE 〈〉, at 4–7, 9.

115. TRUMAN Edwin M., “Sovereign Wealth Funds: The Need for Greater Transparency and Accountability”, Peterson Institute for International Economics Policy Brief PB07-6, August 2007 at 8.

116. Ibid., Appendix A, Table A1.

117. SWF Institute, “Linaburg-Maduell Transparency Index”, online: SWFI 〈〉.

118. Norway Ministry of Finance, “The Management of the Government Pension Fund in 2009”, Report No. 10 (2009–10), online: Norway MinFin 〈〉; “SOFAZ Ranks High in Linaburg-Maduell Transparency Index” (4 November 2009).

119. Compare with SWF Institute, “Linaburg-Maduell Transparency Index 1st Quarter 2008”, online: SWF 〈〉; SWF Institute, “3rd Quarter 2008 LMTI”, online: SWF 〈〉.

120. GREENE Edward F. and YEAGER Brian A., “Sovereign Wealth Funds: A Measured Assessment” (2008) 3 Capital Markets Law Journal 247; ROSE Paul, “Sovereigns as Shareholders” (2008) 83 North Carolina Law Review 102.

121. MARKHEIM Daniella, “Sovereign Wealth Funds and US National Security” Heritage Foundation (6 May 2008), online: Heritage Foundation 〈〉; RAAGAS DE RAMOS Rita, “Crisis Reshapes Role of Sovereign Wealth Funds” Business Week (21 August 2009).

122. FRASER Ian, “Sovereign Funds Chastened” QFinance (29 September 2009).

123. “OECD Codes of Liberalisation: User's Guide 2008”, online: OECD 〈〉, at 10–12, 34.

124. GURRIA Angel, “Global Capital—Threat or Salvation?” (23 November 2007), online: OECD 〈

125. “OECD Roundtables on Freedom of Investment”, online: OECD 〈〉.

126. “Guidelines for Recipient Country Investment Policies Relating to National Security” (May 2009); OECD, “OECD Declaration on Sovereign Wealth Funds and Recipient Country Policies” (June 2008), both online: OECD 〈〉.

127. WOODS Ngaire, The Globalizers: The IMF, the World Bank and Their Borrowers (Ithaca/London: Cornell University Press, 2006) at 4.

128. Ibid.

129. “Communiqué of the International Monetary and Financial Committee of the Board of Governors of the IMF”, IMF Press Release No. 08/78, 12 April 2008.

130. “International Working Group of Sovereign Wealth Funds Is Established to Facilitate Work on Voluntary Principles” (1 May 2008), online: IWG-SWF 〈〉.

131. IWG-SWF, supra note 89.

132. IWG-SWF, “Santiago Principles”, supra note 1, Principle 5.

133. Ibid., Principles 6–10.

134. Ibid., Principle 15. A recent press report went so far as to designate compliance with host country disclosure laws as “the most significant of the 24 guidelines” in the Santiago Principles. “Cash in Hand” Economist (17 June 2010). This characterization is somewhat puzzling since, unlike some of the other GAPP items, this non-binding exhortation to abide by already binding legal rules yields no new content.

135. Ibid., Principles 2, 17, 19.

136. Ibid., Principle 5.

137. Truman, supra note 18 at 27.

138. IWG-SWF, “Santiago Principles”, supra note 1, Principle 2.

139. Ibid., Principle 19.

140. Ibid., Principle 21. See also Principles 6 and 16.

141. Ibid., Principle 3.

142. Ibid., Principle 24.

143. Before the Santiago Principles were unveiled, some members of the US Congress suggested using CFIUS review to encourage SWF compliance with best practices. See Committee on Financial Services, Press Release, “Frank, Maloney, Gutierrez Call on Treasury to Address Sovereign Wealth Funds in FINSA Regulations” (13 March 2008).

144. “Sovereign Wealth Funds: Current Institutional and Operational Practices” (15 September 2008), online: IWG-SWF 〈〉.

145. “ ‘Kuwait Declaration’: Establishment of the International Forum of Sovereign Wealth Funds” (6 April 2009), online: IWG-SWF 〈〉.

146. International Forum of Sovereign Wealth Funds, “Sovereign Wealth Funds Issue ‘Baku Statement’ Reaffirming the Need for Maintaining Open Investment Environment” (9 October 2009), online: IFSWF 〈〉.

147. G20, “Declaration Summit on Financial Markets and the World Economy” (15 November 2008), online: G20 〈〉; “Declaration on Strengthening the Financial System” (2 April 2009), online: G20 〈〉.

148. GOLD Joseph, Legal and Institutional Aspects of the International Monetary System (Washington, DC: IMF, 1981) at 259260.

149. Ibid., at 260. Also, according to Keynes, quoted in ibid., at 260, “[t]he object is that the creditor should not be allowed to remain entirely passive. For if he is, an intolerably heavy task may be laid on the debtor country, which is already for that very reason in the weaker position.” See HORSEFIELD J. Keith, Annals of the Fund, 1945−1965 (Washington, DC: IMF, 1969) at 15, 31, 38, 40.

150. Horsefield, ibid. at 23, 45, 65; Gold, supra note 148 at 296−97.

151. See e.g., CLINE William R., The United States as a Debtor Nation (Washington, DC: Institute for International Economics, 2005) at xi; IMF, Global Financial Stability Report: Meeting New Challenges to Stability and Building a Safer System (Washington, DC: IMF, 2010) at 161, Figure 1.

152. See e.g., BERGSTEN C. Fred and HENNING C. Randall, Global Economic Leadership and the Group of Seven (Washington, DC: Peterson Institute, 1996) at 6061, 64.

153. Compare US Department of the Treasury, “Major Foreign Holders of Treasury Securities” (March 2010), online: US Treasury 〈〉; and US Department of the Treasury, “Historical Major Foreign Holders of Treasury Securities” (April 2010), online: US Treasury 〈〉 (table showing China's holdings increase from US$60 billion in 2000 to about US$900 billion in 2009).

154. See PRASAD Eswar, RAJAN Raghuram, and SUBRAMANIAN Arvind, “The Paradox of Capital” (2007) 44 Finance and Development 1 at 1.

155. See Olivier BLANCHARD and Gian Maria MILESI-FERRETTI, “Global Imbalances: In Midstream?” IMF Staff Position Note SPN/09/29, 22 December 2009. For prominent warnings, see OBSTFELD Maurice and ROGOFF Kenneth, “The Unsustainable US Current Account Position Revisited” in Richard H. CLARIDA, ed., G7 Current Account Imbalances: Sustainability and Adjustment (Chicago/London: University of Chicago Press, 2007), 339; ROUBINI Nouriel and SETSER Brad, “The US as a Net Debtor: The Sustainability of the US External Imbalances”, Draft Paper, November 2004, online: NYU 〈

156. See also DUNAWAY Steven, “Global Imbalances and the Financial Crisis”, Council on Foreign Relations Special Report No. 44, March 2009, at 7−10. See generally HELLEINER Eric, “International Payments Imbalances and Global Governance”, CIGI Policy Brief No. 8, November 2008, at 2.

157. AIZENMAN Joshua and GLICK Reuven, “Sovereign Wealth Funds, Governance, and Reserve Accumulation” VOX (16 January 2009). See also AIZENMAN Joshua and GLICK Reuven, “Sovereign Wealth Funds: Stylized Facts About Their Determinants and Governance”, National Bureau of Economic Research Working Paper No. 14562, 2008, at 27. For an example of prominent advocacy of reserve diversification, see SUMMERS Lawrence H., “Reflections on Global Account Imbalances and Emerging Markets Reserve Accumulation”, L.K. Jha Memorial Lecture at the Reserve Bank of India, Mumbai, India, 24 March 2006.

158. See MICHAELS Ralf, “Global Legal Pluralism” (2009) 5 Annual Review of Law & Social Science 243.

159. FORD Cristie L., “New Governance, Compliance, and Principles-Based Securities Regulation” (2008) 45 Business Law Journal 1 at 5; SABEL Charles F. and SIMON William H., “Epilogue: Accountability Without Sovereignty” in Gráinne DE BÚRCA and Joanne SCOTT, eds., Law and New Governance in the EU and the US (Oxford/Portland, OR: Hart Publishing, 2006), 395.

160. BRUMMER Chris, “How International Financial Law Works (and How It Doesn't)” Georgetown Law Journal (forthcoming 2011), online: SSRN 〈; ARNER Douglas W. and TAYLOR Michael, “The Global Financial Crisis and the Financial Stability Board: Hardening the Soft Law of International Financial Regulation?” (2009) 32 University of New South Wales Law Journal 488.

161. “Cash in Hand”, supra note 134 at 68.

162. ABBOTT Kenneth W. and SNIDAL Duncan, “Hard and Soft Law in International Governance” (2000) 54 International Organization 421.

* Associate Professor, American University Washington College of Law, Visiting Associate Professor, University of Pennsylvania Law School. Many thanks to Francine Barber, Chris Brummer, Kevin Davis, Rashmi Dyal-Chand, Victor Fleischer, Michael Froomkin, Mary Gardner, Tom Ginsburg, Eric Helleiner, Kara Karlson, Patrick Keenan, Thomas Laryea, Clay Lowery, Ralf Michaels, Christiana Ochoa, Brad Setser, Sean Sherlock, Brian Stewart, Kelly Targett, Edwin M. Truman, Matthew Tubin, Martin Weiss, two anonymous reviewers for the Asian Journal of International Law, and participants in conferences and workshops at the University of Chicago Law School, Georgetown University Law School, the National University of Singapore, American University Washington College of Law, Cardozo Law School, and Columbia University for helpful insights. The editors of this volume were beyond gracious in supporting this project.

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