Currently market economy and capitalism are dominant global economic paradigms and it seems nothing will change in the foreseeable future. However states continue to play an important role in the economy not only at the national level but also and increasingly at the international level. State’s involvement in the economy causes perpetual tensions between scholars that will enhance the ideological, theoretical and practical, economic and legal debate on its benefits and drawbacks.
In the previous century, in some countries, states were involved in trying to control the market, totally or partially. When doing so they distorted the efficient allocation of goods and limited basic freedoms. However, on the other hand, state’s participation sometimes is required in order to correct market inefficiencies, to run or to support long-term projects that needs huge investments which often are unable to generate profit or in specific cases in order to increase the country’s wealth to ensure the welfare of the country’s citizens and future generations. For these activities states use State Owned Enterprises (SOEs) and Sovereign Wealth Funds (SWFs) which are both State Controlled Entities (SCEs). The participation of states in the global market economy through the SCEs shows a general alignment to and acceptance of the capitalistic model.
This activism of SCEs has been a common practice at a national level but in the last ten years we have seen a sharp increase of the participation of these entities in foreign direct investment (FDI). Sovereign foreign direct investment (SFDI) creates many legal issues and pushes the SCEs and the host state to face many regulatory challenges.
This blog aims to be a forum for the analysis of legal developments and issues related to the activity of SCEs with a special focus on the activity of SWFs due to the increasing economic relevance of these investment vehicles.
Copyright © 2014 Dini Sejko