EU presses state funds on good conduct code[fr][de] 

Under the new proposals, presented on 27 February, sovereign wealth funds would be asked to make public their investment objectives and relationship with government authorities, as well as the size and source of their assets, the currencies in which they are held and the rules under which they are operating.

The code of conduct, which the EU wants agreed globally, would be voluntary, but the Commission reserved the right to propose legislative measures to "protect the public interest" if breaches become apparent. 

Sovereign wealth funds have existed since the 1950s, constituting an important source of liquidity in financial markets, Commission President José Manuel Barroso noted, insisting that Europe must remain open to such inward investments. "Sovereign wealth funds are not a big bad wolf at the door. They have injected liquidity and helped stabilise financial markets," he said. 

However, a recent boom in the size and number of states using these funds and a certain opacity in the way they are operated has prompted concerns in recipient states. They fear that the investments could be used for industrial and technological espionage or to further governments' strategic interests, rather than for commercial purposes, "thus both distorting markets and posing potential security problems for the EU and its member states". Russia and China were singled out as "countries with major strategic and political interests". 

"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 explore applying exceptions to the free movement of capital and establishment. This pressure can only be increased by SWFs future expected growth in size and importance," states the Communication, stressing that a common EU approach to these threats is essential. "Europe must avoid any uncoordinated responses that give the wrong message about the EU stepping back from its commitment to be a welcoming environment for investment," it stressed. 

While Internal Market Commissioner Charlie McCreevy downplayed the risks related to SWFs, saying "as far as I'm aware, there is no known instance of a sovereign wealth fund acting in any other than a responsible matter until now," he acknowledged that "some people are afraid of what might happen in the future". 

Economic and Monetary Affairs Commissioner Joaquin Almunia stressed that a global code of conduct represented a "win-win game" for both investors and recipients. 

The proposals will be discussed by European leaders at a summit on 13-14 March and would feed into international efforts, both at OECD and IMF level, to draft a code of conduct by the end of 2008. 

The Commission said it also expects member states to use the summit meeting to send a strong signal regarding their readiness to take joint action to avoid a repeat of the financial turmoil that hit the global economy since the US mortgage crisis in summer 2007. It urged them to give backing to a roadmap on strengthening European financial market transparency, agreed by finance ministers in October 2007 (EurActiv 10/10/07).