Following today’s communication from the European Council on Sovereign Wealth Funds, international law firm Freshfields Bruckhaus Deringer welcomed the constructive approach taken by the European Council in supporting a co-ordinated international approach to future guidelines.
‘The European Council has signalled that the EU will continue to remain open to investment and will not be pressured into a protectionist approach.’ said Jenny Connolly, a partner in Freshfields’ Antitrust Competition and Trade practice.
Thanks to their flexibility in making long term investments, Sovereign Wealth Funds have increasingly become an important source of capital for the financial markets, playing an important stabilising influence in the face of recent adverse financial conditions triggered by the credit crunch.
‘Greater transparency over Sovereign Wealth Fund funding would increase confidence in their activities, but we should be careful not to discourage their valuable investment. Unnecessary regulations could harm the European economy,’ continued Connolly.
Freshfields is particularly pleased the EU has recognised that a Code of Conduct for Sovereign Wealth Funds should be established following an international co-operative effort between recipient countries, Sovereign Wealth Funds and sponsor countries.’
It is clear that good governance and investment transparency will be a central tenet of any new measures. ‘Sovereign Wealth Funds already come under the same scrutiny and are subject to the same takeover and merger control rules as any other investor. In acting for our clients, we have seen both the European Commission and national regulators clear Sovereign Wealth Fund investments in European companies.’
Freshfields is actively helping its Sovereign Wealth Fund clients in this area. We are confident that they will welcome the EU’s approach and will be keen to feed experience and ideas into the ongoing discussion at international level,’ said Connolly.
‘Sovereign Wealth Fund investments are increasingly supporting multi-national companies across Europe and the US, a clear signal of their commitment to global finance. With their expanding investment portfolios in European companies, we expect to see a progression towards international standards of governance and investment transparency.’
‘What Europe and indeed global markets do not need is a fragmented policy towards Sovereign Wealth Funds which could deter future investment. The Council’s recognition that a co-ordinated European and international approach is the best way to address any individual national concerns about Sovereign Wealth Funds, is not only very encouraging but also the best way to ensure European markets remain open to foreign investment,’ she concluded.