When United Nations Sanctions Impact International Financial Governance: Lessons from the Libyan Sovereign Wealth Fund

Sejko, Dini and Birkett, Daley (2018) When United Nations Sanctions Impact International Financial Governance: Lessons from the Libyan Sovereign Wealth Fund. American University International Law Review, 34 (2). pp. 387-427. ISSN 1520-460X

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Abstract

This article examines the interaction between United Nations Security Council sanctions and the transnational governance of sovereign wealth funds through the lens of the experience of the Libyan Investment Authority, the sovereign wealth fund of Libya. The fund is a member of the International Forum of Sovereign Wealth Funds, a group of sovereign wealth funds whose members endorse the Santiago Principles, a set of guiding principles aimed at improving the governance, independence, and transparency of such entities. In early 2011, the United Nations Security Council requested States to freeze the assets of the Libyan Investment Authority because of their potential utility to then Libyan leader, Muammar Gaddafi, as a source of funding for his regime, which was engaged in a civil war with rebel forces. These assets remain frozen, seven years after Gaddafi's death in October 2011. This article critically analyses the establishment and governance of the Libyan Investment Authority, The article questions the contemporary validity of the narrative summary of reasons provided by the Libya Sanctions Committee for the fund’s present listing, arguing instead that the latter stems from the threat of potential misappropriation as a result of governance issues. The article proposes that engagement by the fund with international financial institutions such as the International Monetary Fund, the World Bank, and the International Forum of Sovereign Wealth Funds and adherence to the Santiago Principles are vital for its better governance and could equally help to address longstanding problems related to transparency and risk management. At the same time, such institutional engagement will help the fund to meet its objectives as laid out in its constituent law and to operate for the benefit of the people of Libya, for whom it was established.

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