Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - A common European approach to Sovereign Wealth Funds
Date: 2008-02-27
Institutions: European Commission
Subjects: financial instrument, financial management, financial market, free movement of capital, investment policy, public investment

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 27.2.2008 
COM(2008) 115 final 

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

A common European approach to Sovereign Wealth Funds 

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COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

A common European approach to Sovereign Wealth Funds 

(Text with EEA relevance) 

I. 

INTRODUCTION 

Sovereign  Wealth  Funds  (SWFs)  are  generally  defined  as  state-owned  investment  vehicles, 
which  manage  a  diversified  portfolio  of  domestic  and  international  financial  assets.  Their 
origin dates back to the 1950s, when some major commodity exporting countries, particularly 
oil-rich  countries,  were  looking  for  a  way  to  invest  funds  originated  by  foreign  exchange 
assets.  While  they  have  existed  for  more  than  fifty  years,  over  the  past  decade  they  have 
rapidly expanded to become a source of investment of systemic importance. They can offer a 
source  of  investment  and  market  liquidity  at  a  time  of  real  pressure.  Yet,  as  state-owned 
investment  vehicles,  some  can  raise  questions  about  the  risk  that  these  investments  may 
interfere  with  the  normal  functioning  of  market  economies.  All  projections  expect  SWFs  to 
continue  growing  fast  in  size  and  number:  a  rapid  growth  that  intensifies  both  the 
opportunities they offer and the concerns they inspire.  

It is therefore not surprising that the rise of SWFs has attracted attention in several developed 
economies and triggered a debate within international fora. Within the EU, several Member 
States are looking at whether to make their own policy response. 

The  commitment  to  openness  to  investments  and  free  movement  of  capital  has  been  a  long 
standing principle of the EU and is key to success in an increasingly globalised international 
system. As the world's leading trader and the largest source as well as the largest destination 
of  foreign  direct  investments,  the  EU  is  a  major  beneficiary  of  an  open  world  economic 
system. It is committed to ensuring that its markets remain open for investment1. 

The legitimate interests of citizens and market operators in Europe, as well as the benefits of 
certainty to the SWFs themselves, point to the need for increased transparency, predictability 
and coherence in this area. As a leading global player, the EU has both the capacity and the 
incentive to promote a common response to the challenges posed by SWFs and to play in full 
its role in the ongoing debate within global economic fora. This common approach should be 
seen  as  a  complement  to  the  prerogatives  of  Member  States  regarding  the  use  of  national 
legislation in conformity with the Treaty.  

This  communication  addresses  the  issues  posed  by  SWFs  as  a  specific  category  of  cross-
border  investments.  It  shows  how  a  common  approach  can  strike  the  right  balance  between 
addressing concerns about SWFs and maintaining the shared benefits of an open investment 
environment.  

1 

This case is set out in detail in "Global Europe: competing in the world" - COM(2006) 567, 4.10.2006 - 
and in "The European Interest: Succeeding in the age of globalisation" - COM(2007) 581, 3.10.2007. 

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II. 

SWF INVESTMENTS: DEFINING AND ADDRESSING THE ISSUES 

2.1. 

Setting the scene: the rapid rise of SWFs in the international financial system 

Over the past decade SWFs have grown rapidly. Originally, they were confined to a limited 
number of countries. Today, more than thirty countries have SWFs2, with twenty new SWFs 
created since 2000. Sustained surpluses for the oil producing and Asian economies have led to 
reserves well beyond the needs of  exchange rate  management.  Some  of  these  reserves  have 
been channelled into SWFs. The assets managed by SWFs are estimated at $ 1.5–2.5 trillion – 
equivalent to about half of global official reserves, or the combined assets of all hedge funds 
and private equity firms. This makes SWFs a small but significant share of the global equity 
market capitalisation of $ 50 trillion. Even if estimates of the SWFs future scale differ, it is 
clear that the growth trend will continue 3. 

The  distinguishing  feature  of  SWFs  from  other  investment  vehicles  is  that  they  are  state-
funded.  In  general,  SWFs  are  funded  from  accumulated  foreign-exchange  reserves  in  their 
sponsor  countries,  but  are  managed  separately  from  the  official  reserves.  Typically,  SWFs 
have a diversified investment strategy, with a higher level of risk accepted in search of higher 
returns.  SWF  portfolios  include  a  wider  range  of  financial  assets,  including  fixed-income 
securities but also equities, real estate and alternative investments. 

2.2. 

Issues relating to SWF investments 

SWF investments offer opportunities to recipient economies… 

While much of the investment undertaken by SWFs is targeted at the domestic economies of 
their  sponsor  countries,  they  are  also  active  internationally.  In  this  way,  they  benefit  the 
functioning  of  the  global  capital  market  and  provide  funding  for  global  investment.  The 
generally  longer-term  strategic  outlook  of  SWFs  can  also  contribute  to  stability  in  the 
international financial system.  

The  current  financial  situation  has  helped  to  underline  the  potential  benefits  of  SWFs  as  a 
stabilising  force.  Problems  in  credit  markets  since  mid-2007  have  squeezed  liquidity  in 
several  key  financial  markets  and  increased  pressure  on  the  capital  base  of  financial 
institutions. Several of these institutions have recapitalised with the help of investment from 
SWFs.  SWF  investment  has  thus  helped  to  strengthen  the  global  banking  system  and  to 
underpin confidence in the international financial system as a whole.  

Another potential benefit associated with the SWFs, which is of specific relevance to the EU, 
relates  to  the  euro.  Given  the  tendency  towards  a  diverse  range  of  investment,  SWF 
investment could support the international role of the euro over the medium term. For foreign 
exchange  reserves,  the  goal  is  liquid  and  safe  assets  denominated  in  a  currency  with  low 
foreign exchange conversion costs – which tends to favour the US dollar. SWFs have more 
freedom to choose their investments. This is likely to mean a higher share of the euro assets 
than  now  is  the  case  for  reserves.  While  an  increased  international  use  of  the  euro  would 

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The  biggest  funds  are  sponsored  by  the  United  Arab  Emirates  (two  funds),  Norway,  Russia,  Saudi 
Arabia, Kuwait, China and Singapore (two funds). 
Some forecasts predict a fourfold increase in the next decade, putting the possible scale of SWFs at $ 12 
trillion by 2015.  

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definitely bring benefits, an abrupt shift towards the European currency by SWFs could put 
unwelcome upward pressure on the euro and should be avoided. 

But they also raise concerns… 

Notwithstanding the recognised benefits of SWF investment, some concerns have been raised 
by  recipient  countries,  including  in  the  EU.  At  the  macroeconomic  level,  the  rise  of  SWFs 
illustrates the seriousness of current-account imbalances in the global economy that have their 
origin  in  the  managed  exchange  rates  operated  by  some  of  the  countries  in  surplus.  The 
accumulation of reserves for investment by SWFs should not become an end in itself. SWF 
owners  need  to  show  that  they  are  not  holding  back  appreciation  in  their  currencies  to 
accumulate more foreign assets for their SWFs.  

A more specific concern raised by SWF investment in equities relates to the opaque way in 
which some  SWFsfunction and their possible use as an instrument to gain strategic control. 
This concern sets them apart from other types of investment funds. More specifically, there is 
unease that – whatever the original motivation – SWF investment in certain sectors could be 
used for ends other than for maximising return. For example, investment targets may reflect a 
desire  to  obtain  technology  and  expertise  to  benefit  national  strategic  interests,  rather  than 
being driven by normal commercial interests in expansion to new products and markets. By 
the  same  token,  holdings  could  influence  decisions  by  companies  operating  in  area  of 
strategic interest or governing distribution channels of interest to the sponsor countries. More 
generally,  business  and  investment  decisions  could  be  influenced  in  the  political  interest  of 
the  SWFs  owners.  Although  in  most  cases,  SWFs  are  portfolio  investors  and  have  avoided 
taking controlling stakes or seeking a formal role in decision-making in companies, concerns 
have  been  raised  about  the  possibility  of  SWFs  seeking  to  acquire  controlling  stakes  in 
companies. National security considerations have been acknowledged by some SWFs owners, 
who request clarity and certainty about investments that can be made and which areas might 
be "off-limits" to SWFs.  

2.3. 

The international debate on SWFs: launching the search for common principles 

SWF investments are not an issue limited to Europe. They are by their very nature a matter of 
international interest. Their role in the international financial system has been the subject of 
discussion among both SWFs owners and recipient countries.  

Recipient countries have stressed that SWFs should base their investment decisions strictly on 
economic objectives, and should compete on fair terms with private-sector investors. To this 
end, recipient countries have called for greater transparency on the part of SWFs. This implies 
issues  like  disclosure  standards  for  the  value  of  assets  under  management,  investment 
objectives  and  strategies,  target  portfolio  allocations,  risk  management  systems  and  internal 
controls.  Increased  transparency  is  also  important  to  ensure  SWFs  are  included  in  global 
surveillance of financial markets. In addition, recipient countries have called for appropriate 
governance  structures  in  SWFs,  such  as  guaranteeing  a  clear  division  of  rights  and 
responsibilities between sponsoring governments and SWF managers, as well as an effective 
system  of  checks  and  balances  in  respect  of  investment  decisions.  In  return,  recipient 
countries have acknowledged that any constraints on SWF investments should be based on an 
objective appraisal of facts within a stable framework of rules and procedures. 

Some recipient countries have already examined or have indicated their intention to examine 
SWF investments to protect their legitimate national interests. The US revised its legislation 

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concerning  the  scrutiny  of  certain  transactions  involving  foreign  government  control  and 
affecting  national  security.  The  US  has  emphasized  the  responsibilities  of  both  sponsor 
countries  and  recipient  countries  and  has  outlined  principles  that  it  expects  investors  to 
follow.  In  October  2007,  the  G7  Finance  Ministers  invited  major  multilateral  organisations, 
such  as  the  IMF,  and  the  OECD,  to  launch  a  reflection  on  the  role  of  SWFs  and  on  the 
mechanisms to address the challenges they pose. 

code 

cover 

could 

governance/institutional 

The IMF is now developing a code of conduct for SWFs in cooperation with SWFs owners. 
risk  management, 
This 
transparency/disclosure of information, and accountability. Some SWFs owners are sensitive 
to the concerns expressed and have backed the idea of a code of conduct or best practice. An 
IMF  Roundtable  of  Sovereign  Asset  and  Reserve  Managers  took  place  in  November  2007, 
focusing  primarily  on  issues  of  SWF  transparency.  It  is  conducting  a  survey  of  existing 
practices  in  SWFs  and  will  prepare  a  paper  on  best  practices.  In  the  OECD  too,  work  is 
underway among recipient countries to identify best practices with respect to SWF investment 
frameworks,  building  on  principles  of  non-discrimination,  transparency,  predictability  and 
accountability.  

structure, 

III. 

IMPROVING THE FRAMEWORK FOR SWF INVESTMENTS 

3.1. 

International rules and European framework applying to SWF investments  

The  recent  new  focus  on  improved  SWF  governance  does  not  however  mean  that  SWFs 
operate  in  a  legal  vacuum  today.  In  Europe,  between  the  EU  and  the  Member  State  level, 
there exists a comprehensive regime to regulate the establishment and the actions of foreign 
investors, which covers SWFs in exactly the same way as any other foreign investor. As soon 
as  they  invest  in  European  assets,  SWFs  have  to  comply  with  the  same  EU  and  national 
economic and social legislation that any other investors have to respect. 

The international legal framework is not fully developed, but a combination of WTO and 
OECD rules, bilateral and sectoral agreements provides a number of international obligations 
framing what the EU can do.  

The EC and its Member States are bound by these obligations when considering measures on 
investment  by  SWFs  as  for  measures  pertaining  to  any  other  investment.  At  the  same  time, 
both the WTO and the EC bilateral agreements foresee exceptions for reasons of public order 
or of public security, which allow measures to be taken for genuine national security reasons.  

With regard to the EU legal framework, investments by SWFs in the EU are subject to the 
same rules and controls as any other form of investment, either foreign or domestic, where the 
principles of free movement of capital between Member States, and between Member States 
and third countries stipulated in Article 56 EC apply.  

The free movement of capital is not absolute. As a fundamental principle of the Treaty, it may 
be  regulated  in  two  respects  at  the  European  level  under  Article  57  (2)  EC:  first,  the 
Community may adopt by qualified majority measures on the movement of capital from third 
countries  involving  direct  investment  Second,  it  is  not  excluded  that  the  Community  can 
introduce – by a unanimous decision - measures that restrict direct investments.  

The  Merger  Regulation  allows  Member  States  to  take  appropriate  measures  to  protect 
legitimate  interests  other  than  competition.  Such  measures  must  be  necessary,  non- 

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discriminatory and proportionate as well as compatible with other provisions of Community 
law.  Public  security,  plurality  of  the  media  and  prudential  rules  are  regarded  as  legitimate 
interests,  whilst  other  interests  can  be  considered  legitimate  on  a  case  by  case  basis  on 
notification to the Commission.  

Turning  to  national  legislation,  Member  States  have  national  instruments  which  could  be 
used  to  control  and  condition  SWF  investments  or  any  other  investors  and  they  can  also 
develop  new  measures  suitable  to  tackle  specific  needs  if  these  arise,  as  long  as  those 
measures  are  compatible  with  the  Treaty,  are  proportionate  and  non-discriminatory,  and  do 
not contradict international obligations. 

The European Court of Justice has provided further guidance on how Member States can take 
these national measures in full compatibility with the Treaty, stressing that purely economic 
grounds  can  never  justify  obstacles  prohibited  by  the  Treaty4.  The  Court  has  also  provided 
criteria to assess the proportionality of authorisation systems: these must aim at the protection 
of  a  legitimate  general  interest  and  foresee  strict  time  limits  for  the  exercise  of  opposition 
powers, assets or management decisions targeted must be specifically listed, and the system’s 
objective and stable criteria must be subject to an effective review by the courts5. 

Lastly,  there  is  scope  to  monitor  and  control  the  behaviour  of  SWFs  as  investors  on  an 
ongoing basis via the regulatory framework, which offers an effective tool to protect public 
interests irrespective of ownership. This is particularly the case in network industries. 

3.2. 

The case for a common approach  

The  EU  therefore  has  tools  to  address  problems  which  may  result  from  the  operations  of 
SWFs. Likewise, Member States have adequate powers under the Treaty to deal with public 
order and public security considerations. Furthermore, SWFs have behaved so far as reliable 
investors and their activities have not resulted in problems for the functioning of the internal 
market.  However,  recent  experience  shows  that  the  opacity  of  some  SWFs  risks  prompting 
defensive  reactions.  Indeed,  in  recent  months,  several  Member  States  have  been  under 
pressure to update national legislation and to explore applying exceptions to the application of 
the  principles  of  free  movement  of  capital  and  establishment.  This  pressure  can  only  be 
increased by SWFs future expected growth in size and importance. There is therefore a case 
for enhancing the transparency, predictability and accountability of SWF operations. Clearing 
away unnecessary concerns makes it easier to maintain an open investment environment that 
allows the EU and its Member States to continue reap the benefits of SWF investments.  

There are three reasons that require a common EU approach to SWFs. 

•  First,  as  SWFs  are  a  global  issue,  multilateral  solutions  offer  greater  advantages  than 
individual  national  responses.  An  international  approach  can  bring  a  degree  of  certainty, 
and allow SWFs to take investment decisions against the backdrop of a common approach. 
The  initiatives  now  under  way  at  the  multilateral  level  will  promote  common 
understanding  of  the  challenges  raised  by  SWFs  and  the  possible  mechanisms  through 
which  these  can  be  addressed.  A  common  EU  approach  would  maximise  European 

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In addition, as required by Article 58(3) EC, the measures taken by Member States shall not constitute a 
means of arbitrary discrimination or a disguised restriction on the free movement of capital, Article 56 
EC. 
See e.g. Judgment of 4 June 2002, case C-503/99, Commission v. Belgium, paras. 48-52. 

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influence  in  these  wider  discussions.  The  same  is  true  of  further  dialogue  with  third 
countries, including those that own and/or operate SWFs. 

•  Second,  the  imperative  of  maintaining  a  well-functioning  internal  market  based  on  open 
and  non-discriminatory  rules  requires  that  a  common  approach  is  followed.  An  un-
coordinated  series  of  responses  would  fragment  the  internal  market  and  damage  the 
European economy as a whole. In an integrated single market, the advantages of individual 
measures can be illusory. Diversity of interpretation and approach risk creating new ways 
to by-pass the rules and steering investment away from Europe – a disincentive effect that 
could spread from SWFs to other potential investors. Such risks are real if Member States 
were  to  act  alone,  and  in  an  uncoordinated  way,  and  develop  burdensome  and  binding 
mechanisms to control or condition investment. By applying the provisions of the Treaty, 
we guard against this. 

•  Finally, one of the main goals of EU trade policy is to open third country markets to EU 
investors,  on  the  basis  of  the  same  principles  used  to  govern  the  internal  market.  These 
efforts would be more difficult if the EU was seen as imposing barriers within the EU. 

IV. 

MOVING FORWARD: PRINCIPLES FOR AN EU POLICY RESPONSE TO SWF ISSUES 

4.1. 

Options for a common EU approach to SWF issues 

The  EU  approach  aims  at  maintaining  a  clear,  predictable  and  reliable  legal  environment, 
fostering open capital markets and investment worldwide. The EU and its Member States can 
and  should  be  able  to  protect  legitimate  policy  objectives  without  falling  into  the  trap  of 
protectionism. At the same time, the EU has to keep the balance between measures taken vis-
à-vis third countries investments and actions taken in the context of the internal market with 
respect to EU investments. 

Various  suggestions  have  emerged  in  the  public  debate  as  possible  avenues  to  step  up  the 
European response to SWFs. These have included an EU committee on foreign investments to 
mirror  arrangements  in  the  US,  an  EU-wide  screening  mechanism  or  some  "golden  shares" 
mechanism  for  non-EU  foreign  investment.  All  these  suggestions  run  the  risk  of  sending  a 
misleading signal – that the EU is stepping back from its commitment to an open investment 
regime. They would also be difficult to reconcile with EU law and international obligations.  

Instead, the Commission considers that the right approach is to promote a cooperative effort 
between  recipient  countries  and  SWFs  and  their  sponsor  countries  to  establish  a  set  of 
principles ensuring the transparency, predictability and accountability of SWFs investments. 
It is essential that all relevant actors are actively involved and have ownership in the creation 
of a balanced and stable framework covering SWF investments.  

There are two dimensions to this approach. The EC expects SWFs to voluntarily commit to 
certain standards with regard to transparency and governance – to provide sufficient clarity to 
assuage public concerns. In this respect, the efforts already undertaken by the IMF to design a 
code of conduct for SWFs and by the OECD to identify best practices for SWF investments in 
recipient countries should be fully supported. The EU should be a driving force to furthering 
international  work  in  that  regard.  At  the  same  time,  the  SWFs  adherence  to  these  standards 
will help guaranteeing investor countries a clear, predictable and stable investment framework 
in the EU and its Member States, as well as in other recipient countries.  

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The  Commission  therefore  proposes  a  common  approach,  which  should  be  the  EU 
contribution to efforts at international level to establish a framework to improve transparency, 
predictability, and accountability of SWFs.  

4.2. 

Principles for a common EU approach to the treatment of SWFs as investors 

The  common  EU  approach  to  the  treatment  of  SWFs  as  investors  should  be  based  on  the 
following principles: 

•  Commitment to an open investment environment: in line with the Lisbon Strategy for 
growth  and  jobs,  the  EU  should  reaffirm  its  commitment  to  open  markets  for  foreign 
capital and to an investor-friendly investment climate. Any protectionist move or any move 
perceived as such may inspire third countries to follow suit and trigger a negative spiral of 
protectionism. The EU prospers from its openness to the rest of the world – and from its 
investments abroad – and hence would be among the first to suffer from a trend towards 
protectionism. At the same time, the EU should endeavour to open SWFs owners' countries 
to EU investors and secure a fair and equitable treatment for them, notably through FTA 
negotiations. 

•  Support of multilateral work: the EU should actively drive forward work carried out by 
international  organisations,  in  particular  the  IMF  and  the  OECD.  The  EU  welcomes  an 
open  dialogue  with  SWFs  owners  and  recognises  the  benefits  of  a  global  approach  to  a 
common framework for SWF investment.  

•  Use  of  existing  instruments:  the  EU  and  the  Member  States  already  have  specific 
instruments  that  enable  them  to  formulate  appropriate  responses  to  risks  or  challenges 
raised by cross-border investments, including investments by SWFs, for reasons of public 
policy and public security.  

•  Respect  of  EC  Treaty  obligations  and  international  commitments:  the  EU  and  its 
Member States will continue to act in a way fully compatible with the principles laid down 
in the Treaty establishing the EC and with international obligations of the EU. 

•  Proportionality  and  transparency:  measures  taken  for  public  interest  reasons  on 
investment  should  not  go  beyond  what  is  necessary  to  achieve  the  justified  goal,  in  line 
with  the  principle  of  proportionality,  and  the  legal  framework  should  be  predictable  and 
transparent. 

These basic principles should define the common EU approach which should be proposed as 
the  basis  for  an  understanding  between  recipient  countries  on  the  treatment  of  SWFs 
investments.  Transposed  at  international  level,  this  common  approach  should  draw  on  the 
above  principles  of  openness  to  cross-border  investments,  preference  for  multilateral 
solutions,  respect  of  existing  international  obligations,  proportionality  and  predictability  of 
rules.  

4.3. 

Building confidence in the operation of SWFs: the European contribution to a 
code of conduct for sponsor countries and for SWFs  

There  are  two  keys  to  effectively  addressing  concerns  about  the  uncertainty  and 
unpredictability  of  SWFs,  and  they  should  be  at  the  heart  of  the  European  contribution  to 
global  work  on  a  common  framework  for  SWF  investment.  The  first  is  to  obtain  greater 

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clarity and insight into the governance of SWFs. The second is to deliver greater transparency 
on their activities and investments. These two elements need to be addressed by the sponsor 
countries and the sovereign funds.  

(a)  Governance 

Clarity  about  the  degree  of  possible  political  interference  in  the  operation  of  a  SWF  is  a 
prerequisite for addressing concerns about the existence of political and other non-commercial 
considerations  in  the  operation  of  a  fund.  The  2001  IMF  Guidelines  for  Foreign  Exchange 
Reserve  Management6  lay  down  important  principles  which  could  be  extended  to  SWF. 
Equally,  the  OECD  Guidelines  on  Corporate  Governance  of  State-Owned  Enterprises7  put 
forward principles relevant for SWFs that undertake cross-border investments.  

Principles of good governance include: 

•  The clear allocation and separation of responsibilities in the internal governance structure 

of a SWF;  

•  The development and issuance of an investment policy that defines the overall objectives 

of SWF investment; 

•  The existence of operational autonomy for the entity to achieve its defined objectives; 

•  Public  disclosure  of  the  general  principles  governing  a  SWF's  relationship  with 

governmental authority; 

•  The disclosure of the general principles of internal governance that provide assurances of 

integrity;  

•  The development and issuance of risk-management policies.  

(b) 

Transparency  

Transparency  provides  a  disciplinary  effect  on  the  management  of  sovereign  assets,  as 
relevant stakeholders can exercise some degree of oversight on the activities of investors, and 
monitor  whether  or  not  funds  deviate  from  their  stated  objectives.  As  such,  transparency 
promotes accountability. In the case of SWFs, transparency not only serves to foster market 
discipline,  but  also  reduces  the  incentives  for  any  government  intervention.  It  is  therefore  a 
critical factor in offering the confidence that underlies an open investment environment. 

Since SWFs are managed independently from a country's foreign exchange reserves, they are 
excluded  from  transparency  mechanisms  such  as  the  IMF  maintains  for  foreign  exchange 
reserves  (IMF  Special  Data  Dissemination  Standard,  SDDS).  The  extension  of  specific 
transparency  standards  to  SWFs  should  be  considered.  Existing  IMF  and  OECD  guidelines 
already contain such standards, and some SWFs, such as those of Norway and Singapore are 
governed  by  principles  which  could  be  seen  as  a  reference.  However,  SWFs  should  not  be 
expected to follow transparency practices going beyond those developed by the IMF and the 
OECD and already applicable to similar state-owned investors. 

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7 

http://www.imf.org/external/np/mae/ferm/eng/index.htm 
http://www.oecd.org/dataoecd/46/51/34803211.pdf 

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Transparency practices that could be considered would include: 

•  Annual  disclosure  of  investment  positions  and  asset  allocation,  in  particular  for 

investments for which there is majority ownership; 

•  Exercise of ownership rights; 

•  Disclosure of the use of leverage and of the currency composition; 

•  Size and source of an entity's resources; 

•  Disclosure of the home country regulation and oversight governing the SWF. 

V. 

CONCLUSION 

The  Spring  European  Council  offers  an  opportunity  for  the  Member  States  to  endorse  a 
coherent approach to SWF investments in response to emerging concerns. Such a coordinated 
approach does not impinge on national prerogatives and existing powers to protect legitimate 
public policy objective and interests. It aims at setting out shared expectations for increased 
transparency,  predictability  and  accountability  of  SWF  operations  and  to  bring  additional 
influence to the European contribution to the global search for solutions to this challenge. 

In  line  with  its  Treaty  principles  and  the  renewed  Lisbon  Strategy,  Europe  must  remain 
committed  to  its  tradition  of  openness  to  capital  investments,  as  they  are  a  vital  source  of 
strength  for  the  European  economies  in  a  globalised  world.  At  the  same  time,  the  case  for 
openness  must  be  sustained  by  engaging  SWFs  in  a  cooperative  effort  to  enhance  their 
governance standards and the quality of information they provide to markets. This is not only 
to the benefit of the EU, but is in the mutual interest of all recipient countries as well as of 
sponsor countries. 

The EU common approach should serve as a contribution to the IMF efforts to set up a code 
of conduct for SWFs and for their owners and to the OECD work to define principles applied 
by  recipient  countries  when  dealing  with  SWFs.  It  should  help  to  reach  an  agreement, 
preferably by the end of 2008, on a set of guidelines that will build the necessary confidence 
in the fair and transparent operation of SWFs. 

EN 

10 

   EN