Research On The Legal Issues Of Foreign Investment By Sovereign Wealth Funds

Sovereign wealth funds are institutional investors established by governments through public wealth held.As an emerging model of government participation in the economic market,they are essentially owned by the governments.but in the financial market they are operated as private entities.Although sovereign wealth funds are not new,they have become the focus of the international financial market until the global financial crisis broke out in 2008.The reasons can be summarized as the rapid growth of the number of them and the rapid rise of the scale of assets under their management.The more important reason is that sovereign wealth funds are separated from the traditional financial system,and their investment strategies reflect large differences with other private investors,especially the home countries can exert a great influence on the investment behavior of sovereign wealth funds.Therefore,the "sovereignty"factors of such investments have caused concerns and accusations by the host countries.Due to concerns about the“sovereignty" factor of the investment and national security,the host countries have strengthened regulation and review of such investments,and to a certain extent triggered the rise of national investment protectionism.In response to the restrictive investment measures adopted by the host countries,the key of this thesis will focus on how can sovereign wealth funds and their home countries using existing international investment rules to safeguard their legitimate investment interests and properly resolving investment disputes with host countries,and at the same time how China's sovereign wealth funds can further improve their governance structure.This thesis is divided into five chapters.The key points of each chapter are as follows:The first chapter expounds overview of sovereign wealth fund foreign investments and legal issues.This chapter first introduces investment trends of sovereign wealth funds in recent years and the role conversion of sovereign wealth funds in the investment field.From the beginning of their establishment to the present,sovereign wealth funds have changed from the role of social stability funds to the important investment tools of the home countries,and their influence on the global financial economy has gradually increased.The newly established sovereign wealth funds have also become more sophisticated in terms of organizational design,transparency,and professional management.At the end of this chapter,it analyzes the legal issues between the host countries and sovereign wealth funds.The above legal issues partly stem from the host countries' concerns that such investments may imply the intention to advance the political goals of the home country,partly originate from concerns that sovereign wealth funds may invoke sovereign immunity as state-controlled investment vehicles,and may also involve the resolution of investment disputes and the commitment of social responsibility.The remaining chapters of this thesis will start with several important legal issues arising from the investments by sovereign wealth funds listed at the end of this chapter.Therefore,the first chapter lays the foundation for further discussion of follow-up issues.The second chapter discusses the legal supervision of sovereign wealth fund investments by host countries.The global financial crisis in 2008 exacerbated the supervision of sovereign wealth funds in various countries,and even some measures taken by these countries exceeded the appropriately prudential standards and constituted investment protectionism.This chapter explores several typical supervisory measures adopted by host countries in this context,including investment review system,temporary suspension of voting rights,setting investment limit,restricting the free flow of funds,etc.In addition to the supervision of host countries,sovereign wealth funds have been exploring self-regulatory models,and the most successful in the field of self-regulatory practice is the achievement of the Santiago Principles.This chapter also elaborates on the main content and internal defects of the principles,which comprehensively regulates the transparency and governance of sovereign wealth funds,but also exposes the limited determination of reform.mainly reflected in the lack of the enforceability.In order to make up for the above-mentioned shortcomings,the Santiago Principles can be indirectly transformed into a binding or at least deterrent rule from the host country and the international level.The conversion path includes that the host country can combine the assessment rules with the Santiago Principles,or the Santiago Principles can be used as a benchmark for bilateral investment treaties and thus indirectly embedded in bilateral investment treaties.At the end of this chapter,the problems of the host countries' regulatory measures and the coping strategies for sovereign wealth funds are elaborated.The third chapter mainly discusses the protection of sovereign wealth fund investments.For sovereign wealth funds.regulation and protection are two sides of a coin.The two are mutual achievements and mutual constraints,and also are the venue where the host countries and the sovereign wealth funds and their home countries compete.This chapter begins with the protection of sovereign wealth funds under bilateral investment treaties(BITs).Although the purpose of BITs to protect foreign investments has continued,they have shown differences and new developments in content The new issues related to the protection of sovereign wealth funds are mainly reflected in the expansion of the scope of the“investor" and "investment".the standard of investment treatment.the right of imposing compensation,and the exception clause.The importance of BITs in protecting sovereign investments is obvious,but they still face many challenges if they seek the help of BITs.The most fundamental problem lies in the determination of the identity of sovereign wealth fund investors.Whether and to what extent that host countries' regulatory measures can be classified as indirect expropriation according to BITs.it will determine whether sovereign wealth funds can receive host countries' compensation for the implementation of restrictive measures.It's also far from certain whether new national security exceptions or other general exceptions in BITs apply to sovereign wealth fund investments and may exempt the host countries' treaty obligations in cases involving the important interests.Whether the appropriateness of existing BITs in resolving investment disputes should be re-measured is still an open question.The above mentioned uncertainty problems will challenge the adequacy of the application of the BITs.The chapter concludes with an overview of the WTO multilateral agreements,OECD documents and EU laws,which can provide supplementary protection for sovereign wealth funds,especially can provide a diversified legal basis for the treatment of investment and the settlement of investment disputes.The fourth chapter focuses on and discusses in detail the settlement of sovereign wealth fund investment disputes.This chapter begins with the background of investment disputes arising from the expansion of sovereign wealth fund investments and the disputes resolution status,and leads the question that whether the sovereign wealth fund investment disputes can invoke the investor-state investment dispute settlement mechanism remains uncertain.At present,the determination of the identity of the“investor" for sovereign wealth funds and the concept of "investment" in most international investment agreements are still ambiguous,but these investment agreements often contain some typical terms,and the interpretation of such terms gives the possibility that sovereign wealth funds can be recognized as "investors".Therefore,in determining the identity of a sovereign wealth fund investor.it is necessary to explain the specific provisions in the investment agreements and combine the purposes and objects of the treaties.Another issue involved in the sovereign wealth funds invoking the Investor-State Investment Dispute Resolution Mechanism is the determination of the jurisdiction of the ICSID arbitration tribunal.The key to solving this problem is to interpret the relevant provisions of the ICSID Convention to determine the sovereign wealth fund investment is '"private investment" or "public investment".In addition to the settlement of disputes under the framework of BITs.special dispute settlement mechanisms have also been established under the multilateral trade framework centered on WTO agreements.If the investment disputes between the sovereign wealth funds and the host countries can be resolved under this mechanism,it will undoubtedly provide a more comprehensive and diffeerent protection for its investment rights.At the end of the chapter,the author also plans to use the WTO dispute settlement mechanism to indirectly solve the disputes over sovereign wealth fund investments,analyzes the feasibility of the application of alternative dispute resolution mechanism.The fifth chapter looks forward to how China's sovereign wealth funds can cope with the investment challenges brought by "going out",under the background of reform and opening up and "the Belt and Road" initiative.This chapter takes the investment profile of the officially recognized and unrecognized sovereign wealth funds in China and the investment concerns of other countries as the entry point,in order to lead to the discussion of the role orientation and development path of China,s sovereign wealth funds.When positioning the role of China's sovereign wealth funds,public-private differentiation is a key issue surrounding the identification of the funds and is also the root cause of the impact on the investment treatment of funds.The funds themselves need the identity of "private investors",but it is impossible for investment recipient countries to regard them as pure "private investors".The nature of China's sovereign wealth funds also determines that they are the public entity engaged in activities in the private sector.Therefore,China's sovereign wealth funds should not deliberately pursue the status of private investors,but should improve the external perception of the funds'operation and self-requirements from the aspects of legal structure,governance and supervision,so as to win fair and reasonable treatment for themselves.When discussing the development path of China's sovereign wealth funds,it puts forward feasible suggestions from two levels of the funds and the country.including the recommendations of sovereign wealth funds to improve their governance mechanisms and how to prevent and resolve risks before,during and after investing.It also proposes reasonable suggestions to the Chinese government on how to protect the legitimate rights and interests of the funds in the formulation of the supervision rules and international investment treaties.