Thinking out loud: sovereign wealth funds, China, and international litigation

There's been a lot of talk in the press, the blogosphere, and in Congress concerning sovereign wealth funds and their potential impact upon foreign policy, geopolitical stability, and the financial markets. [h/t: Conglomerate]

But a thought occurred to me this morning with regards to litigation against Chinese companies. U.S. entities often complain about intellectual property infringements in China, the lack of adequate remedies in Chinese courts due to local protectionism, and the difficulties involved in enforcing judgments against Chinese companies in the United States because of a lack of assets in the United States that would be subject to seizure.

But if we assume that state-owned enterprises (SOEs) are responsible for a lot of these unsatisfied judgments, then what is to prevent U.S. companies from attacking the local investments of sovereign wealth funds like the CIC? That is, if SOEs qualify as agents of the Chinese government under principles of agency law, and the sovereign wealth funds constitute Chinese government assets, then why can't someone attach a judgment lien to a sovereign wealth fund investment, like China's 9.9% ownership of Morgan Stanley?

I understand, of course, that evidentiary issues might preclude proof that a particular investment ties to a particular level of the Chinese government, particularly with respect to establishing an agency relationship. I also understand that sovereign wealth fund deals have probably been structured with this eventuality in mind.(Or have they? I'm not really sure...) But what's to prevent an enterprising legislator from introducing a bill that would remove such barriers, making a tenuous relationship under the law less tenuous? Or an enterprising lawyer from figuring out a way around these issues?

Maybe ALM will have some answers for me in April, but I'd be interested to hear the thoughts of our readers, if they have any.