The Commission adopted a communication on sovereign wealth funds to contribute to the Spring European Council on March 13-14. The communication proposes to EU leaders a balanced and proportionate common EU approach, to protect legitimate policy interests without falling into the trap of protectionism.
The overall aim is to maintain an open investment environment while enhancing the transparency, predictability and accountability of SWFs' investments. This requires obtaining greater clarity and insight into the governance of SWFs and improving the quality of information they provide to markets on their size, investment objectives, strategies and source of resources.
The communication sets out five principles:
- commitment to an open investment environment both in the EU and elsewhere, including in third countries that operate SWFs;
- support of multilateral work, in international organisations such as the IMF and OECD;
- use of existing instruments at EU and Member State level;
- respect of EC Treaty obligations and international commitments, for example in the WTO framework;
- proportionality and transparency.
The Communication goes on to spell out some basic governance and transparency standards that should be included in a voluntary code of conduct for SWFs to be agreed at international level, building on the current work done by the IMF. An internationally agreed voluntary code of conduct is the most effective and proportionate way to address concerns over possible risks that the cross-border operations of some SWFs could interfere with the normal functioning of market economies.
The Commission asks the European Council to endorse this approach and make it the basis to encourage recipient countries to keep their market open and provide clear guidelines towards access to investment and SWF owners to reach agreement on a code of conduct, preferably by end 2008.
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© Graham Bishop
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