Are sovereign wealth funds truly autonomous from government? : a legal analysis of Malta's National Development and Social Fund

Abstract

Sovereign Wealth Funds (SWFs) are public investment vehicles, controlled and managed, directly or indirectly, by a government. They are established to achieve various macroeconomic purposes from acting as stabilisation funds to protect net exports of commodities to savings and development funds that carry out strategic investment much in line with their government’s discretion. The past two decades have witnessed an unprecedented growth in both the number and assets of these unique investors. Nonetheless, their emergence on the global financial landscape has not been without controversy. Consequently, the International Monetary Fund has developed a set of principles known as, the Santiago Principles to promote the good governance and prudent investment practices of SWFs. On 6 January 2015, Malta established its own SWF called the National Development and Social Fund (NDSF). By virtue of the National Development and Social Fund (Establishment as an Agency) Order, the NDSF was set up as a government agency with its own separate legal personality. This dissertation analyses the legal constitution of the NDSF and its degree of autonomy from government. In order to achieve validity and ensure credibility of findings, triangulation of sources was used. The research question aims to explore the legal antecedents required to ensure effective autonomy such as, ‘accountability’ and ‘transparency’. In-depth analysis of the governance of Malta’s SWF was conducted underpinned by primary research via semi-structured interviews with respondents well versed in the operations of Malta’s SWF. For the purposes of comparison, Norway’s SWF was also studied. The results show that despite still being a nascent SWF, the NDSF’s degree of autonomy from government is at arm’s length. Nonetheless, certain potential legal lacunae have been identified. The author concludes by making some recommendations to enhance the NDSF’s degree of autonomy thus, allowing the ongoing sustainable growth of the Fund.