Sovereign wealth funds: A definition and classification

Chapter 2 illustrates and briefly comments on the definitions elaborated by scholars, and posits a new overall one, also clarifying whether and to what extent public pension funds can be considered as SWFs and what effect the definition posited may have on the implementation of codes of conduct, or national investment rules, and on international investment treaties. The author also lists and comments on classifications elaborated by scholars, and posits a new one, explaining both the reasons why classifying SWFs is so critical, and why and how SWFs differ from SOEs, investigating the consequences of the classification proposed as well. An SWF definition and classification is crucial, for according to the growing discussion on competitive neutrality, any issues under international investment law – some of which are investigated in other chapters in the volume – would presumably apply to both SWFs and SOEs. Both definitions and classifications take due account of concerns raised by the recent growth of SWFs. The author also investigates SWFs’ structure, function and governance from a legal perspective. The governance design of an SWF is relevant for SWF scoring purposes, for setting SWF standards and best practices, for applying host states’ security measures (subject to certain conditions), and for assessing whether sovereign immunity or Bilateral Investment Treaties clauses apply. But, first of all, the governance structure is relevant for classifying SWFs. Classification is relevant, in turn, for foreseeing and understanding their behaviour, assessing what it is reasonable to expect from them in terms of transparency, accountability, investment and strategies, also considering SWFs’ different regional practices, political or religious constraints, relations with their home state, purposes (intergenerational equity and/or ethical objectives or stabilization purposes etc.). Many scholars focus on specific aspects of governance design (Clark, Dixon, Monk, Gelpren, Baker, Truman, Gilson, Milhaupt, Bassan); in this chapter the author deepens the research on the legal profiles, in order to better understand how SWFs operate.