Sovereign funds are not really that sovereign

Sir John Kay when arguing “Sovereign wealth investment is a force for stability” February 27 says “the lesson of history is that the problems are for the investor not the investee” and that “Investments across borders binds us together by creating actors with much to lose from political tension”. Both arguments clearly point to the fact that when push comes to shove, once committed to an investment, sovereign wealth funds are not really that sovereign.

These days the International Monetary Fund is drafting good conduct rules for the Sovereign Wealth Funds. I wonder if they should take the opportunity to include some good conduct rules about how the countries receiving the investments should behave… or would that infringe too much on someone’s sovereignty? There are arbitrage procedures to settle investor against country dispute but, do these apply in country against country cases?