LENS Essay Series: “Sovereign Investment as a Tool of War: Can International Law Address Financial Aggression by State Actors?”

In today’s post we have a new addition to our online “Essays on Law, Ethics and National Security – A LENS Center Series.”  This initiative, as you may recall, is aimed at filling the scholarship gap between timely blogposts and weighty (but oft-delayed) articles found in traditional academic publications.

The Series leverages the speed of online availability to get you fresh and sophisticated thinking on topics of current interest. It’s also meant to introduce and highlight the work of a wider range of interesting voices, including especially those of emerging scholars.

In her superb and truly cutting-edge essay, “Sovereign Investment as a Tool of War: Can International Law Address Financial Aggression by State Actors?“, Ms. Kristen Casey, a Duke Law 2L (bio below), addresses an extremely vital aspect of national security: the role of business and finance. 

She unpacks in a cogent way (accessible to the non-expert!) the nature of large, publicly-owned investment funds developed by nations around the globe, and then assesses their potential as coercive financial tools that could implicate national security interests for many countries. 

In her proposal as to how the U.S. and the international community ought to analyze the hostile use of such investments, she draws upon contemporary thinking about the legal aspects of cyberwar.  Her innovative, fact-based construct would examine actions by a sovereign investor with a view towards determining whether or not they could amount to a prohibited use of force under international law. 

In essence, Ms. Casey provocatively challenges conventional wisdom (built upon rather dated notions of global finance that do not account for the emergence of today’s powerful and influential sovereign wealth funds and other sophisticated financial instruments) that typically holds that coercive economic measures cannot be considered a use of force as understood in Article 2(4) of the UN Charter.  By suggesting that in certain circumstances financial ‘aggression’ might add up to a prohibited use of force, she exhibits the kind of fresh thinking the Essay Series is designed to provide.

Although not a purpose of her essay, I think Ms. Casey also shows students and others how an interest in sophisticated finance and complex international business endeavors is something that very much relates to national security and, indeed, global security; it isn’t all about bombs and bullets. 

My bet is that we’ll see in both the public and private sectors increasing scrutiny as to how governments choose to wield their investment funds as the world economy struggles to recover from the COVID-19 pandemic.  If (when?) some countries improperly use financial tools as – for all practical purposes – ‘weapons’ of 21st century aggression, Ms. Casey’s prescient essay gives all nations, but especially the United States, a starting point as to how to address (and, hopefully, prevent) such abuses.

Anyway, Ms. Casey provides us with this outline of the discussion in her essay:


Advanced economies have, for the most part, spent the last several decades pushing for the liberalization of international markets for goods and capital. Free capital movement has created a particular set of anxieties for those working in national security, especially in countries with sophisticated financial markets. The free flow of goods and capital has armed some countries with large, publicly owned investment funds, turning sovereign governments into major financial players. As this diverse group of sovereign investors become powerful forces in global capital markets, questions emerge as to what their financial power has purchased on the geopolitical market.

This paper examines the possibility that sovereign investments might be used to intentionally weaken host financial markets and, by extension, the government regimes accountable for those markets’ maintenance and health. The 2007–08 crisis revealed the instability of even the most sophisticated financial market, and highlighted the influence sovereign investors can have on market stability and global economic health.

Despite these persistent concerns, host countries that are recipients of large amounts of foreign direct investment, such as the United States, have benefited greatly from the growing pool of global investment capital and are legally compelled to maintain their longstanding commitment to open capital markets.  The tradeoff between productive international financial markets and national security colors every discussion of the regulation of sovereign investment.

After providing an overview of the primary forms of sovereign investment and outlining the associated national security questions, the paper discusses the existing international legal and regulatory landscape regarding foreign direct investment. By applying familiar and established national security legal paradigms to potential national security challenges of sovereign investment, the essay attempts to shine light on pertinent international law and frame a potential response by the United States.

It can be tempting to view sovereign investment national security concerns through the same legal lens one would view economic sanctions. However, it seems instead more helpful to consider potential hostile uses of sovereign investment through a new model, influenced significantly by the use of force approach in the Tallinn Manual on the International Law Applicable to Cyber Warfare. This essay suggests a fact-based analysis of an action by a sovereign investor, pairing financial considerations with Tallinn factors like severity, state involvement, and military character, is the best method for evaluating whether an action by a sovereign investor is a prohibited use of force under international law.

Again, I urge you to read the full essay found here.  Also, take a few moments to learn a bit about Ms. Casey (a name you’ll want to remember!):


Kristen Casey (J.D. 2021) is a second-year law student at Duke University School of Law. She grew up in San Diego, CA, and graduated cum laude from Harvard University with a B.A. in Government in 2015. Kristen was a business strategy consultant at PricewaterhouseCoopers before coming to Duke Law and interned with Warner Bros. Entertainment in Los Angeles during her 1L summer. She is Co-Director of the Veterans Assistance Project and a Staff Editor for Duke’s Law and Contemporary Problems journal.

The views expressed in the Essays on Law, Ethics and National Security Series  do not necessarily reflect the views of the Center on Law, Ethics and National Security, or Duke University.

Remember what we like to say on Lawfire®: gather the facts, examine the law, evaluate the arguments – and then decide for yourself!

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