Sovereign Wealth Funds in International Economic Law

Sovereign Wealth Funds in International Economic Law Michail Dekastros Thesis submitted for assessment with a view to obtaining the degree of Doctor of Laws of the European University Institute Florence, 24 June 2016 European University Institute Department of Law Sovereign Wealth Funds in International Economic Law Michail Dekastros Thesis submitted for assessment with a view to obtaining the degree of Doctor of Laws of the European University Institute Examining Board Professor Petros C Mavroidis, Professor of Global and Regional Economic Law, EUI (Supervisor) Professor Bernard Hoekman, Professor of Global Economics, EUI Professor Philip Sands QC, Professor of Law, University College London Dr Gaëtan Verhoosel, Partner, Three Crowns LLP © Michail Dekastros No part of this thesis may be copied, reproduced or transmitted without prior permission of the author iii Researcher declaration to accompany the submission of written work Department of Law – LL.M. and Ph.D. Programmes I Michail Dekastros certify that I am the author of the work ‘Sovereign Wealth Funds in International Economic Law’ I have presented for examination for the Ph.D. at the European University Institute. I also certify that this is solely my own original work, other than where I have clearly indicated, in this declaration and in the thesis, that it is the work of others. I warrant that I have obtained all the permissions required for using any material from other copyrighted publications. I certify that this work complies with the Code of Ethics in Academic Research issued by the European University Institute (IUE 332/2/10 (CA 297). The copyright of this work rests with its author. Quotation from this thesis is permitted, provided that full acknowledgement is made. This work may not be reproduced without my prior written consent. This authorisation does not, to the best of my knowledge, infringe the rights of any third party. I declare that this work consists of 105,415 words. Statement of inclusion of previous work (if applicable): Not applicable. Statement of language correction (if applicable): Not applicable. Signature and date: 24 March 2016 v SOVEREIGN WEALTH FUNDS IN INTERNATIONAL ECONOMIC LAW Sovereign Wealth Funds have been the new ‘rising star’ of the global economy for a few years. Host States have reacted to their rise cautiously and have quite frequently cited ‘national security’ as a justification for maintaining an absolute degree of freedom in regulating their entry into their markets. This thesis is arguing that a substantial proportion of regulatory concerns that surround the operation of SWFs are actually not of a national security nature—at least as perceived by the relevant instruments regulating investment in International Economic Law. As a consequence, the current regulatory framework screening SWFs investments a priori is both legally and normatively problematic and, in fact, it constitutes a form of protectionism. As an alternative, this thesis suggests that SWFs ought to be primarily regulated after their entry into Host States’ markets. In that context, a proper conceptualisation of the principle of non-discrimination that takes into account the ‘regulatory unlikeness’ between SWFs and other market suppliers/investors will allow the Host States to properly regulate them after their entry into their markets. Such a conceptualisation – contrary to usual analyses – draws heavily from International Investment law in order to interpret the relevant provisions of the GATS. vii Στους γονείς μου, Μαρία και Ηλία, και στην αδελφή μου, Ηλιάνα To my parents, Maria and Elias, and to my sister, Iliana ix ACKNOWLEDGEMENTS First and foremost, I would like to express my deepest gratitude to Professor Petros C Mavroidis, the supervisor of my thesis. I am deeply indebted to him for guiding my research, inspiring my thoughts and for always making time for me. Being your student has been a pleasure, an honour and a privilege. I am also grateful to the members of my defence panel, Professor Philippe Sands QC, Professor Bernard Hoekman, and Dr Gaëtan Verhoosel, for their insightful comments and succinct suggestions for this thesis. I would further like to thank Maria Gavouneli, Photeini Pazartzis, Michael Waibel, and Markus Gehring, my Professors in Athens and Cambridge, who have encouraged me to pursue a PhD and have always been supporting me ever since. A special thanks is owed to Professor Anastasios Gourgourinis in Athens, who at various stages has taken the time to discuss my thesis at length and has taught me valuable lessons about being a legal researcher. It would be remiss not to give especial thanks to Dr Georgios Petrochilos. I have benefitted greatly from my time at Three Crowns in Paris and from working closely with him. His relentless commitment to clarity, precision and perfection has been a source of inspiration during the final stages of this thesis. I am immensely grateful to the Greek State Scholarship Foundation and the Foundation for Education and European Culture in Athens for providing me with ample financial assistance throughout the course of this degree—without their support, this thesis would not have been possible. Special thanks are owed to the Law Department and the Library of the European University Institute, for their continuous support. I am especially grateful to Professor Dennis Patterson, who offered me a great deal of support at the initial stages of this thesis. Florence, la culla del Rinascimento, could not have been a better environment for the fruition of this project. I will remember with great fondness my days at the EUI. Of course, I owe special thanks to my colleagues and friends, without whose support my time in Florence would have been much diminished. Stavros Pantazopoulos, Stavros xi Makris, Anna Pitaraki, Ríán Tuathal Derrig, Colm Booth, Theodosia Stavroulaki, Jonathan Chevry and Johann Leiß have been an indispensable part of my life in Florence. A substantial part of this project was completed in the United States, under the auspices of Harvard Law School. Professor Mark Wu, my research advisor there, offered invaluable insights into my work. Reminiscing of my days at Cambridge, MA, my time was made so much the better with the support of many colleagues, who are now my friends, and especially Utkarsh Saxena, Christof Burri, Lukas Wetzel, Zahra Aboutalebi, and Alexandros Sarris. I would also like to especially thank my closest friends from Athens, Cambridge, Florence, Paris, and beyond for making my life so much better and easier; Manolis Metaxas, Antonis Kouroutakis, Androniki Nikolaou, Berk Demirkol, Iro Mantzourou, Dimitris Andreakis and Athena Arbes. Above all, I would like to thank Simon Paul, Michalis Risvas and Rónán Condon. These three men have been paragons of stability, encouragement and support in my life. Their friendship has made this journey all the more worthy. This thesis could not possibly have been written without the unconditional love and encouragement of my family, Maria, Elias, and Iliana. This thesis is dedicated to them. xii CONTENTS Abstract………………………………………………………….............….....….page vii Acknowledgements…………………………………………………..…......…..…....…..xi Table of Contents……………………………………………….…..………………….xiii Abbreviations………………...………...……………………...................................…xvii List of Cases…………….……………………………….………....…......…..........…..xix Lists of Legal Texts………………………..………………………...….…...........….xxvii Lists of Documents…………….………………………………….....…....…........…..xxxi I. INTRODUCTION .................................................................................................... 1 A. The Regulation of SWFs in IEL ......................................................................... 1 B. The Scope, Structure and Methodology of the Thesis ........................................ 5 II. THE RISE OF SFWS AND REGULATORY CHALLENGES ........................... 9 A. Foundations ......................................................................................................... 9 1. The Contemporary Phenomenon of SWFs .................................................. 9 2. The Origins of SWFs ................................................................................. 12 3. Defining SWFs .......................................................................................... 14 B. The Rationale for Regulating SWFs in Host States .......................................... 20 1. Introduction ................................................................................................ 20 2. Economic Efficiency Concerns ................................................................. 22 3. Financial Stability Concerns ...................................................................... 25 4. Competition Policy Concerns .................................................................... 27 5. Transparency Concerns.............................................................................. 28 6. National Security Concerns ....................................................................... 30 C. Regulatory Responses to the Challenges Posed by SWFs ................................ 32 1. Introduction ................................................................................................ 32 2. Host State Regulation of SWFs’ Investments............................................ 34 (i) European Union and its Member States .............................................. 35 (ii) United States of America ...................................................................

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