Legal Issues Of Cross-border Investments Of Sovereign Wealth Funds

Sovereign Wealth Funds ("SWFs") have greatly increased in their size and are playing a more and more important role in international finance market during recent years. Particularly, SWFs act as so-called salvage in this sub-prime mortgage crisis by their great capital amount and become the focus of the international community. However, some legal issues arise when SWFs exercise international investment. Due to the governmental background and low transparency of SWFs, some western countries as main recipient of SWFs' international investment respectively act unilaterally to restrict their international investment. On international level, IMF and OECD have respectively drafted "GAPP" and Guidelines for supervision on the home and host country of SWFs. It is arguable whether WTO which plays great part in international trade dispute could have legal basis to establish SWFs regulation and deal with the SWFs-related dispute. China has established its own SWFs and actively participated in the international investment, therefore, the above-mentioned domestic restrictions and international legal supervision have great significance on international investment of China's SWFs.Based on a systematical overview on the SWFs, this paper tries to analyze the domestic statutory restrictions and the international supervision on SWFs encounters during its international investment, focusing on the governance and transparency requirement on SWFs by Santiago Principles. To be noticed, although WTO does not react positively about setting rules for SWFs, the author regards WTO has necessity and possibility on supervision of SWFs' international investment. Finally, this paper also illustrates how the domestic statutory restrictions and international supervision enlighten China, after an overall introduction of China's SWFs and their international investment activities.