Brussels, 25/02/2008 (Agence Europe) - In the perspective of a discussion at the European Council on 13-14 March, the European Commission will be proposing a communication (expected to be adopted on Wednesday 27 February) for a Community code of conduct for sovereign wealth funds (SWF). It aims to prevent protectionist provisions at a national level provoking retaliation from third countries where these state investments funds come from. Over recent months, Commissioner Peter Mandelson (trade) and his counterpart Charlie McCreevy (internal market) have given several warnings to member states against attempts to protect themselves from SWF (EUROPE 9559). The rise in power of SWF, currently estimated to be worth $3000 billion and which could reach $12000 billion by 2015, has created deep concerns in western capitals. Last October, finance ministers and governors from the G7 central banks called for more transparency about how they work. In an interview to AFP during his visit to Beijing on Monday 25 February, Mr Mandelson said that the EU wanted to see SWF governed by common principles based on transparency. He added that “We in Europe should welcome such investment from China and other wealth funds, and not reject it. We need everyone to agree a code of conduct and principles governing the behaviour of these wealth funds, which provides for transparency and good governance”. Mandelson explained that such a code should be “voluntary” and “international”. The Commission will use Norway, whose SWF is, as president José Manuel Barroso explained in a speech the same day in Oslo, “exemplary in terms of transparency, governance and accountability”. He also added that they would like certain SWF to take an example from the Norwegian funds and adopt strict standards that this system applied. He alluded to the concerns about certain aspects on how certain funds of this kind operated and added, “Europe-based public and private investment funds are subject to stringent rules on governance and disclosure - we cannot allow non-European funds to be run in an opaque manner or used as an implement of geo-political strategy”.
The Commission's aim is clear: to avoid barriers against state funds invested for financial reasons but without a strategic objective and which would therefore be positive for the European economy. The Commission acknowledges that there is a certain opaqueness about the real intentions of certain SWF and whose investments may attempt to exercise control of strategic sectors and obtain technology and expertise, as well as quick financial gains. The Commission believes, however, that it is possible to prevent these threats without having to use risky defence instruments. Several European capitals have raised the prospect of implementing a European assessment mechanism for SWF intervention projects or, as suggested by the German Chancellor, Angela Merkel, the use of golden shares. The Commission believes, nonetheless, that the EU and its member states already have the necessary tools for protection, if needs be, of their legitimate interests. The EU27 could at a majority vote, take ad hoc measures or voting at unanimity, set up a restrictive mechanism. The Commission is therefore encouraging a common European approach that would prevent any distortion on the internal market caused by national responses that are incompatible with the freedom of capital flows. Mr Barroso said that, “We will not propose European legislation. Though we reserve the right to do so if we cannot achieve transparency through voluntary means”. The Commission believes that the common EU approach should help towards a code of conduymet currently being drawn up by the IMF in collaboration with SWF and rules of “good practice” being prepared at the OECE. (E.H.)