The 'Santiago Principles' and the International Forum of Sovereign Wealth Funds: Evolving Components of the New Bretton Woods II Post-Global Financial Crisis Architecture and Another Example of Ad Hoc Global Administrative Networking and Related 'Soft' Rulemaking?

Abstract

Beginning in the latter part of 2007, the proposed establishment of Chinese and Russian Sovereign Wealth Funds ('SWFs') sparked considerable governmental, intergovernmental and private financial and business sector interest in, and countervailing concerns as to, SWFs. This concern evolved into a growing realization that the cumulative asset size of SWFs was beginning to represent an increasingly significant (though not yet systemically significant) component of the international capital markets. This significance became further magnified when one considered the separate but related proliferation of other state-owned entities operating and investing globally. In addition, in the latter part of 2007, the U.S. and global financial sectors began to generate heightened investment interest in these SWFs because they helped to shore-up fragile global financial institutions, when the current Global Financial Crisis ('GFC') began to rear its head. Even intergovernmental development institutions came to see SWFs as possible engines for selective economic development financings. Yet, this positive interest in SWFs also precipitated corresponding political ambivalence and outright concerns in various countries over possible untoward geopolitical, national foreign investment and national security implications to which a fundamental shift in global financial and economic markets (i.e., a perceived rise in 'Global State Capitalism') might give rise.

This article critiques the ad hoc processes (international, domestic and industry-based) surrounding the establishment of the International Working Group of Sovereign Wealth Funds ('IWG') of twenty-six IMF member countries having SWFs for the purpose of formulating the SWF-related 'Generally Accepted Principles and Practices' (Santiago Principles or 'GAPP'). The article likewise critiques the subsequent creation in April 2009 of a permanent standing group under the so-called Kuwait Declaration, the International Forum of Sovereign Wealth Funds ('ISWF Forum') for continuing and expanding upon the IWG-ISWF Forum process. The primary objective of this critique is to explore how this IWG-ISWF Forum process (1) can be made more 'administratively sound' in terms of legitimacy, transparency and accountability, and (2) can be made more relevant to the current reconfiguration of the global financial system that is underway under the guidance of the Group of 7 ('G7') Finance Ministers, the Group of 20 ('G20') Finance Ministers and the Heads of State ('Leaders'). In effect, this article addresses the subject matter of SWFs from the vantage point of the proliferation of 'global administrative networks' in the international economic and financial law area.