Darling says sovereign funds need to follow rules

By Sumeet Desai

WASHINGTON (Reuters) - Britain is open for business to sovereign wealth funds as long as they don't threaten national security or act for political purposes, Chancellor Alistair Darling said on Friday.

Group of Seven policy-makers will meet with counterparts from countries like Saudi Arabia and China for dinner in Washington on how they should handle the giant state-owned funds as concerns grow that they will go on a shopping spree for Western companies.

Darling said he hoped that all countries would welcome these funds, which now control more than $2 trillion (975 billion pounds) between them, but said trade was a two-way process and investments should be made for commercial, not political reasons.

Protectionism is not the answer, he told reporters.

"It would send the wrong signals across the world. I intend to make the point that we welcome that investment but I think crucially, people, companies and sovereign wealth funds have to act on a commercial basis."

His comments come as French President Nicolas Sarkozy told reporters at a European Union summit in Lisbon the EU would "not be sold down the river" by such funds, which have raised hackles in European capitals and Washington over their acquisitions.

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A draft of the G7 statement seen by Reuters said the rich nations club would task the International Monetary Fund, World Bank and the Organization for Economic Cooperation and Development to examine the issues put forward by the sovereign funds.