from soft law to hard code - the juridification of global governance

8/13/2019 From Soft Law to Hard Code - The Juridification of Global Governance

1/26Electronic copy available at: http://ssrn.com/abstract=1030526Electronic copy available at: http://ssrn.com/abstract=1030526

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Gralf-Peter Calliess & Moritz Renner, Bremen*

FROM SOFT LAW TO HARD CODE:

THE JURIDIFICATION OF GLOBAL GOVERNANCE**

I. Introduction

In the context of globalisation legal doctrine remains relatively speechless.1This is sur-

prising as globalisation processes directly influence law in various ways. On the one

hand, it seems that in the ambit of global governance - understood as the ensemble of

all forms of regulation that are oriented towards social values and have cross-border

effects2 - there is a trend towards non-legal forms of regulation. It is evidenced e.g. by

the rise of Alternative Dispute Resolution (ADR)3and the birth of new trust-based regu-

lation models in e-commerce contexts4. On the other hand, however, we can witness the

evolution of legal and semi-legal forms of regulation beyond the state which are often

referred to as private5or hybrid regimes6. While both these developments are readily

conceptualised by predominantly economics-based theories such as governance

* Gralf-Peter Calliess is Professor of Law at the University of Bremen and leads a project on NewForms of Legal Certainty in Globalized Exchange Processes at the Collaborative Research CenterTransformations of the State (http://state.uni-bremen.de). Moritz Renner is a Ph.D. candidate at theUniversity of Bremen and works as a research fellow in the said project.

** This paper is based on a presentation given at the workshop Law after Luhmann: Critical Reflectionson Niklas Luhmann's Contribution to Legal Doctrine and Theory in Oati (Spain), July 5-6, 2007. The

authors would like to thank Oren Perez and Peer Zumbansen for organizing the conference and allthe participants for their helpful comments.

1 Twining, W, Globalisation and Legal Theory (London, Butterworths 2000), at 50.

2 Zrn, M, Global Governance, in Schuppert, GF (ed), Governance-Forschung (Baden-Baden, Nomos

2005) 121, at 127.3 For the case of Online Dispute Resolution (ODR) see Calliess, G, Online Dispute Resolution: Con-

sumer Redress in a Global Market Place (2006), 7 German Law Journal No. 8.4 See Calliess, G, Transnational Consumer Law: Co-Regulation of B2C-E-Commerce, in O Dilling, M

Herberg and G Winter (eds), Responsible Business: Self-governance in transnational economictransactions(Oxford, Hart Publishing [forthcoming]).

5 Bernstein, L, Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Indus-

try (1992), 21 Journal of Legal Studies 138.


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where they assume the function that law fulfils towards society as a whole: the stabilisa-

tion of normative expectations.

In our conclusion, we can then shed some light on the relation of law and social norms

in the context of global governance (IV). If our hypotheses that (1) legal and non-legal

governance mechanisms compete in terms of dispute resolution and behavioural con-

trol, that (2) the social function of law lies in the stabilisation of normative expectations

and that (3) global governance regimes that take on this function can develop into legal

systems hold true, then we will be able to point out both the differences and the interre-

latedness of legal and non-legal forms of regulation, of law and social norms, on the

global level.

II. Law and Social Norms: A Functional Approach

The question what is law is persistent in legal theory.

9

Although the question obviously

also persists on the global level we have no intent to reopen this debate. Our goal is

much less ambitious and at the same time much more pragmatic. Instead of contrasting

e.g. positivist with legal-pluralist conceptions of law we want to approach the problem

from a different angle. Borrowing from both Law and Economics and Systems Theory

we want to outline elements for a functional analysis of different regulatory mechanisms

that allow us to better describe global governance regimes in their oscillation between

law and social norms.

8 Dixit, AK, Economic Governance, in Durlauf, S, and Blume, L (eds), The New Palgrave Dictionary of

Economics (London, Palgrave Macmillan, 2nd ed. 2007).9 Hart, HLA, The Concept of Law (Oxford, Clarendon Press 1961), at 1.


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Taking into account an initial situation of incomplete information, Posner introduces a

signalling model13

: Those players of the game that are willing to act cooperatively, he

argues, have an interest in signalling this attitude towards other players by engaging in

symbolic behaviour. The signalling is successful as long as the signal has the right cost

structure to distinguish good cooperators from bad cooperators, the most striking ex-

ample being the activity of gift-giving. Possible signals, i.e. social norms ascribing a

meaning to a certain conduct, are introduced by public or private norm entrepreneurs

i.e. the state as well as individuals or corporations. Thereby, norms are generated in a

fundamentally heterarchical process:

many people--including politicians, academics, novelists, journalists, and other cul-tural players--compete to be a successful norm entrepreneur (...). They proposesignals; cooperators use the signal that seems most likely to create a separatingequilibrium. There will be conflict and confusion, but pooling around a single signalmay emerge, with benefits redounding to the norm entrepreneur(s) who proposedit.14

This rather trivial model of two-party social interaction can be further developed by intro-

ducing informal (reputation-based) and formalized (organisational) third-party control

mechanisms,15but all of these models share a common feature: They define as norms

any type of symbolical behaviour that induces cooperation.

This leads Law and Social Norms-influenced authors to emphasize the interrelatedness

or even interchangeability of legal and social norms. Not only do social norms form the

implicit basis of many commercial contracts:

13 This model is a deliberate attempt to overcome the assumption made by earlier authors such as El-

lickson that individuals comply with social norms just because they are internalised. Cf. Posner, E,Law and Social Norms: The Case of Tax Compliance (2000), 86 Virginia Law Review 1781, at 1818f.

14 Posner, n 12, at 774.

15 Ellickson, n 10, at 131; Cf. Calliess, G, Grenzberschreitende Verbrauchervertrge(Tbingen, Mohr

Siebeck 2006), at 196.


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in many contexts, transactors approach the task of reaching an agreement with anidea of how similar transactions are usually structured; they have in their minds animplicit form contract made up of clauses such as prices that are commonly negoti-

ated, boilerplate provisions, and legal default rules. A party may be wary of sug-gesting too many deviations from the implicit form contract since these might be in-terpreted as a signal that he is a less reliable or more contentious trading partnerthan the average market participant.16

Often parties might also rely on social sanctions rather than the state legal system when

it comes to the enforcement of their mutual commitments.17

To give an example, a party

might terminate an ongoing business relationship and, thus, invoke damage to the repu-

tation of the other party.18The role that law can play in this context is very limited: its

symbolic mechanisms will sometimes enhance co-operation and sometimes interfere

with it.19And as the chances of winning a breach of contract suit are pretty much ran-

dom20, there are good reasons to stick with non-legal enforcement mechanisms.

This leaves us with a mixed picture of the theorys usefulness with a view to global gov-

ernance regimes. On the one hand it aptly explains how the regulation of behaviour can

work in the absence of state law. On the other hand, it does not distinguish between the

function of law and non-legal norms. For its proponents, on the one hand legal rules can

16 Bernstein, LE, Social Norms and Default Rules Analysis (1993), 3 Southern California Interdiscipli-

nary Law Journal 59 at 71 f.17

Charny, D, Nonlegal Sanctions in Commercial Relationships (1990), 104 Harvard Law Review 391;

Posner, E, A Theory of Contract Law Under Conditions of Radical Judicial Error (2000), 94 North-western University Law Review 749; Bernstein, LE, Private Commercial Law in the Cotton Industry:Creating Cooperation through Rules, Norms, and Institutions (2001), 99 Michigan Law Review 1724,at 1786: ... the stability of this and other cooperative-based commercial systems may also be due, inwhole or in part, to the fact that social norms of honor, particularly when reinforced through group ac-tivity, and a basic human desire to think of ones self as trustworthy are more powerful motivators oftransactional behavior than economic models of behavior typically assume.

18 Dietz, T and Nieswandt, H, The Meaning of Cognitive and Normative Expectations for the Emergence

of Global Research and Development Cooperation (2007), TranState Working Paper No. 49, avail-able at http://www.sfb597.uni-bremen.de/pages/pubApBeschreibung.php?SPRACHE=en&ID=59, at19.

19 Posner, n 11, at 148.

20 Posner, n 11, at 161.


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be and often are considered to be social norms21and on the other hand governmental

provision of legal institutions is not strictly necessary for achieving reasonably good out-

comes from markets.22

2. Norms and the Legal System

The reason why Law and Social Norms fails to uphold the analytical distinction of law

and non-legal forms of regulation is that it reduces law to its usefulness for the coordina-

tion of economic actors.23

From this point of view, law is just a means, but not the only

means, of securing commitment between commercial actors24

. Law then is simply de-

fined by the public status of the regulator involved in the performance of the coordinative

function. In the context of global governance, however, for the absence of a world state

the public or private status of regulators often remains unclear. Instead, States, industry,

and civil society compete, intermingle, and work together in their regulatory efforts.

Thus, the question arises how the analytical distinction between law and non-law can be

upheld where transnational regulators have a hybrid status.

We suggest to shift the focus from laws function for social actors to its function as a so-

cial system of communication. On the basis of systems theory, we will assume that law

is a system of communications which are marked by the binary code legal/illegal,25

and

that this code is handled on the level of the second-order observations of the legal sys-

21

Eisenberg, MA, Corporate Law and Social Norms (1999), 99 Columbia Law Review 1253 at 1256.22

Dixit, A, Lawlessness and Economics(Princeton, Princeton University Press 2004), at 4.23

For a critical account see e.g. Hetcher, SA, Comments on Eric Posners Law and Social Norms: Cy-berian Signals, 36 University of Richmond Law Review 327 at 365 f.

24 Hadfield, GK, Privatizing Commercial Law (2001), 24 Regulation 40 at 43.

25 Luhmann, N, Law as a Social System(Hawkins ed; Oxford, Oxford University Press 2004), at 93.


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tem.26We can then analyse the interaction of this communicative system with different

social sub-systems as well as its interaction with society as a whole, i.e. the totality of all

social communications.

In order to do so we shall, following Luhmann, distinguish between theperformanceand

the function of law in modern societies.27 The function of law is given by reference to

society as a whole, whereas performance describes laws relation to other functional

subsystems of society like the economy, politics, etc.28

a) Performance

The possible performances of law towards other social systems are mainly constituted

by behavioural control and dispute resolution. At this point there is a considerable over-

lap of a systems theory approach and the conceptions of Law and Social Norms we

have discussed above. When analysing law as providing dispute resolution services and

a certain level of behavioural control e.g. to the economic system, a plethora of func-

tional equivalents to law comes into mind. The performances of law, that means, are not

necessarily fulfilled by reference to the legal code. Instead, the behaviour of economic

actors might as well (or even more efficiently) be regulated by social norms and ADR

provides a good example for the resolution of social conflicts outside the legal system.

b) Function

The specific societal function of law, therefore, must be found on a different level. And in

fact, when we turn to its relation to society as a whole, law fulfils only one function: the

26 Luhmann, n 25, at 70.



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stabilization of normative expectations, i.e. expectations that are upheld even in case of

disappointment.29

This function is what, on the one hand, distinguishes law from every

other functional subsystem and, on the other hand, determines the way in which legal

communications are processed. Because [i]f law has the function of stabilizing norma-

tive expectations in the face of an unorganized growth of normative expectations (...),

this can be achieved only by a selection of those expectations that are worth protect-

ing.30

We shall thus have a brief look at the mechanisms which provide for this selec-

tion.

From a constructivist perspective, the process in which law decides which norms to pro-

tect is necessarily a recursive one:

Whether a norm is a legal one or not can only be ascertained through observationof the recursive network that produces legal norms; that is, through an observationof the context of production which becomes a differentiated system through its op-erations31

The counterfactual stability of normative expectations is thus guaranteed by the opera-

tive closure32 of law in a legal system, i.e. the network of legal communications per-

petually referencing to other legal communications.33This implies a new understanding

of the relationship between structure and operation (process) which can be subsumed

under the concept of autopoiesis:34the legal system produces and at the same time is a

product of legal communications. This, in turn, presupposes the legal systems capability

28 Luhmann, N, Die Gesellschaft der Gesellschaft (Frankfurt, Suhrkamp 1998), 757 f.


30 Luhmann, n. 25, at 152.

31 Ibid.

32 Luhmann, n. 25, at 106 ff.

33 Ibid.

34 Luhmann, n. 25, at 81.


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of second-order observation because the autopoietic legal system [i]n order to specify

its operations as legal ones, (...) has to ascertain what it has done so far35

. At this point

it establishes its very own logics of remembering and forgetting providing that those

norms that are referred to in an institutionalised linkage of episodes36are condensed

and confirmed, while others just fall into oblivion.37

In common law systems this institutionalised memory is guaranteed by the reliance on

judicial precedents and the doctrine of stare decisis. The doctrine acts as the invisible

hand of the system by making sure that adjudication orients itself along the lines of a

few leading cases that act as points of reference for later decisions.38What is law and

what is not is then defined by the legal system itself, all law is valid by decision only. 39At

the same time, the selective reference to earlier judgements evokes the impression that

each decision is but the product of earlier decisions.40The social function of law is thus

guaranteed through the self-referentiality of legal communications. By observing its own

operations the legal system selects those expectations that can be normatively upheld

while at the same time making sure that it is normatively expected to expect norma-

tively41.

This insight provides us with the basic elements of a terminological framework for ana-

lysing the respective role of law and social norms in the context of global governance.

35 Luhmann, n. 25, at 90.

36 Teubner, G, Global Bukowina: Legal Pluralism in the World Society in G Teubner (ed), Global Law

Without a State(Dartmouth, Aldershot 1997), 3 at 16.37

Calliess, G, Reflexive Transnational Law. The Privatisation of Civil Law and the Civilisation of PrivateLaw (2002), 23 Zeitschrift fr Rechtssoziologie 185 at 196.

38 Shapiro, M, Toward A Theory of Stare Decisis (1972), 1 Journal of Legal Studies 125, at 133.

39 Calliess, n 37 at 195.


41 Luhmann, n. 25, at 157 f.


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The performances of law, we can conclude, might be equally fulfilled outside the legal

system, which explains the rise of non-legal forms of regulation and dispute resolution

on the global scale. The function of law, however, defined as the stabilisation of norma-

tive expectations, can only be fulfilled within the self-referential structures of a legal sys-

tem. This will help us analyse whether and to what extent global governance regimes

might develop into legal systems.

III. Global Governance: An Evolutionary Perspective

After having identified the function of stabilising normative expectation as the crossing

line between legal and non-legal forms of regulation, we can lay out the conditions under

which global governance regimes might cross this line. This evolutionary process can be

described against the background of a competition in terms of performance and function

between different forms of regulation.

1. Crossing the Line: From Soft Law to Hard Code

As we have seen, the function of law is fulfilled where a legal system establishes selec-

tive mechanisms for the temporal stabilisation of normative expectations by observing its

own operations. These mechanisms of remembering and forgetting, however, are only

triggered where normative expectations are contested, where there are conflicts to be

decided. Because only then there is occasion for a communication in terms of le-

gal/illegal:


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The departure point for the evolution of law is the initially barely marked distinctionbetween uncontested and contested cases of disappointment. Only if conflicts canbe verbalized (...) can a second-order observation arise, because only then is one

obliged to decide who is in a legal position and who is in an illegal position.42

The first enabling condition for the evolution of a legal system can thus be found in the

verbalisation of conflicts. We can define this verbalisation as the communication of a

social conflict in terms of legal/illegal and vis--vis a third party. Any governance

mechanism can fulfil this condition where it provides for a third-party dispute-resolution

procedure that is legalised in the sense that it effectively suppresses ad hoc and ad

hominem arguments.43

The second enabling condition for the evolution of a legal system we find by looking at

the mechanisms of remembering and forgetting we have described above. This kind of

second-order observation can only arise where there are points of reference for the in-

terlinkage and mutual referencing of legal communications. These points of reference

are most often constituted by precedents or, less likely, a doctrinal elaboration of legal

principles.44 In any case, these points of reference can only be reflected in legal com-

munications if they are accessible for later communications, i.e. if they are made public.

Therefore, the second condition is fulfilled where legal communications are published,

most likely in the form of judicial decisions, but also in the form of textualized norms.

42 Luhmann, n. 25, at 246.

43 Cf. Luhmann, n 25, 248 ff.

44 This mode of operating may well be regarded as the constructivist surrogate for the generation of

secondary rules as laid out in Hart, n 9, at 77 ff.


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A global governance regime, we can thus conclude, might develop into a legal system at

least under the conditions that (a) it provides for an impartial dispute resolution proce-

dure in the above-mentioned sense and that (b) past decisions are published.45

2. Performance vs. Function

At which point this line is crossed, however, is also determined by the interdependence

of laws performances and its function. As we have seen, the decision of contentious

cases is crucial to the development of a governance regime into a legal system. Any

such mechanism, however, will only be able to attract cases if it is regarded by potential

claimants as performing satisfactorily in terms of dispute resolution and possibly be-

havioural control. Performance with regard to conflict-resolution can be measured

against a number of different factors: accessibility (standing), speed (rules of proce-

dure), affordability, and - most importantly attractive remedies.46

Yet while enhancing its performance these factors might at the same time impair the

regimes function as a legal system. There is a perpetual conflict between the capability

to attract conflicts and the capability to resolve these conflicts in a way that contributes

to the stabilisation of normative expectations with regard to society as a whole. From the

perspective of legal discourse, this conflict is described in the categories of fairness vs.

legal certainty. It is well illustrated by a brief look at legal history that shows how and

with which consequences dispute resolution is performed inside and outside the legal

system.


46 Calliess, Billigkeit und effektiver Rechtsschutz (2005), 26 Zeitschrift fr Rechtssoziologie 35, at 41 ff.


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At various stages of their evolution, European legal orders have been in need of devel-

opment aid from outside the law.47

In classical Roman jurisprudence, aequitas as a

maxim in adjudication helped overcome the formalism of the ius civileby providing for

principles of conflict-resolution that were explicitly not based in positive law.48In praeto-

rian judicature this led to a parallel development of the traditional ius civile and an

emerging ius honorarium as jurist-made law.49And, many centuries later yet in a similar

way, Equity as a supplementary body of rules began developing in the 15th century

alongside the English common law. It was mainly the lack of attractive remedies in

common law (providing for damages only) as well as the need for more flexible forms of

actions that led to the rise of this supplementary system of adjudication in other words:

it was its ability to attract and verbalise conflicts.50

But after having been administered by the Court of Chancery until the end of the 19 th

century, Equity was re-integrated into the common law by the 1873-75 Judicature Acts

just as the rapid development of aequitas in Roman law seems to have come to a halt

around the 3rd

century:

Each of them tended, and all such systems tend, to exactly the same state inwhich the old common law was when Equity first interfered with it. A time alwayscomes at which the moral principles originally adopted have been carried out to alltheir legitimate consequences, and then the system founded on them becomes asrigid, as unexpansive, and as liable to fall behind moral progress as the sternestcode of rules avowedly legal.51

47 Calliess, Billigkeit und effektiver Rechtsschutz (2005), 26 Zeitschrift fr Rechtssoziologie 35, at 46.

48 Wieacker F, Rmische Rechtsgeschichte(JG Wolf ed, Mnchen, Beck 2006), vol 2, at 89 f.

49 Waldstein, W and Rainer, M, Rmische Rechtsgeschichte(Mnchen, Beck 10

thed 2003), 121 and

136.50

See e.g. Hanburj, H and Martin J, Modern Equity(J Martin ed., London, Sweet & Maxwell 14thed.

1994), at 44 f.51

Maine, HS,Ancient Law (1861), chapter 3, available athttp://socserv.mcmaster.ca/econ/ugcm/3ll3/maine/anclaw/chap03.


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The tension between (single case) aequitas/Equity as deciding each case on its own

merits and (systemic) justice as treating like cases alike, it seems, has in both instances

been gradually resolved in favour of an all-encompassing legalisation of formerly non-

legal adjudication principles. Having started off as alternatives to the legal system in

terms ofperformance, it seems that both aequitas and Equity became less and less ca-

pable of outperforming the legal system as they also took on its stabilising function.

While it is obvious that these insights cannot easily be translated to todays regulatory

mechanisms it demonstrates very well which factors fairness and case-orientation on

the one hand, legal certainty on the other hand determine the oscillation of conflict-

resolution between legal and non-legal forms of governance.

3. Global Governance: Three examples

In order to examine whether we can describe similar mechanisms in the context of

global governance, we shall now very briefly present three examples for regulatory re-

gimes on the global level.

a) lex mercatoria

In contemporary jurisprudence the most-discussed example of a global regulatory re-

gime is definitely that of lex mercatoria or the New Law Merchant. Yet even its exis-

tence is subject to a heated discussion.52 While some authors try to talk this body of

norms into existence and even speak of a creeping codification53

, others see nothing

52 Teubner, G, Global Bukowina: Legal Pluralism in the World Society in G Teubner (ed), Global Law

Without a State(Dartmouth, Aldershot 1997), 3 at 7: war of faith.53

Berger, KP, The Creeping Codification of the Lex Mercatoria (Leiden, Kluwer Law International 1999).


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more than a phantom conjured up by a few speculative Sorbonne professors.54Sub-

stantially, lex mercatoria claims to rely on the rules and usages of the international

trademanship, thereby, alluding to the medieval law merchant.55Hard evidence for the

reality of an emerging New Law Merchant, however, is only to be found in the refer-

ences made to it in arbitral awards.56In fact, lex mercatoriais best categorised as a cer-

tain procedural setting in the context of ADR mechanisms and as the adjudication of

conflicts according to general fairness-oriented principles.

b) ICANN UDRP

Our second example relates to the context of internet regulation, where the arbitration of

disputes is provided for by the Uniform Domain Name Dispute Resolution Policy (UDRP)

of the Internet Corporation for Assigned Names and Numbers (ICANN). The ICANN is a

private non-profit organisation, responsible inter alia for the management of the domain

name system, i.e. the global addressing system of the internet. In 1999, it adopted the

UDRP as a quick, efficient, and cost-effective on-line dispute resolution procedure for

domain name disputes.57Its primary goal is to deal with the practice of cybersquatting,

i.e. the pre-emptive registration of trademarks by third parties as domain names. All reg-

istration service providers accredited with ICANN as registrars of the generic top-level

54 Cf Teubner n 52, at 12 ff for an in-depth account of the discussion.

55 Yet it is already debatable whether the medieval law merchant has ever been more than a set of pro-

cedural rules, a privileged daughter of the common law rather than a body of material norms. SeeLerch, K, Vom Kerbholz zur Konzernbilanz (2004), 5 Rechtsgeschichte 107, criticizing inter alia thefurther-going approach by Berman, HJ, Law and Revolution(Cambridge, Harvard University Press2004); similarly Cordes, A, The search for a medieval Lex mercatoria (2003), Oxford UniversityComparative Law Forum 5 (ouclf.iuscomp.org).

56 For the different meanings of the term reflexive in this context see Calliess, G, Reflexive Transna-

tional Law. The Privatisation of Civil Law and the Civilisation of Private Law (2002), 23 Zeitschrift frRechtssoziologie 185, at 193 f..

57 For details see Calliess, n 56, at 202 ff.


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domains .com, .org etc. have incorporated by reference the UDRP in the registration

agreements with their customers, the individual domain name holders.

c) CSR

Our third example is constituted by a governance mechanism that is much discussed in

both corporate and (public) international law: Corporate Social Responsibility (CSR).

CSR refers to voluntarily adopted codes of conduct laying down the social and environ-

mental policies of transnational corporations (TNCs). Increasingly, TNCs are also co-

operating to adopt common standards for CSR. These collective efforts are reflected in

initiatives like the OECD Guidelines for Multinational Enterprises58, the UN-sponsored

Global Compact59 and, most recently, the UN Draft Norms on the Responsibilities of

Transnational Corporations and other Business Enterprises with regard to Human

Rights60. CSR basically works as governance by self-commitment: it is not about recip-

rocal obligations but about the unilateral setting of standards in the fields of human

rights, anti-corruption, labour conditions etc.

4. Performance Competition

With a view to their performance, global governance regimes compete to domestic legal

systems and international law in various regards. They are predominantly used as a way

of resolving disputes outside domestic legal systems such as in the case of ADR

mechanisms, but they can also step in the place of international law by regulating the

behaviour of transnational actors the way CSR does.

58 Available at http://www.oecd.org/dataoecd/56/36/1922428.pdf.

59 Available at http://www.unglobalcompact.org.


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panel, while the applicable law is restricted to a single substantive norm: the UDRP defi-

nition of cybersquatting. The performance of ICANN UDRP, thus, is very much compa-

rable to that of other ADR mechanisms in that it provides dispute-resolution services to

the business community. The most notable difference as compared to other ADR

mechanisms is to be seen in the fact that with regard to its scope ICANN UDRP has a

de facto monopoly: due to the centralised structure of the domain name system the

transfer and deletion of domain names simply cannot be performed by any competitor.

It is considerably more difficult to discern the specific performance with regard to our

third example. As CSR guidelines are not directly legally binding, they are not intended

be used in the adjudication of conflicts.62They rather serve as a means for building up

social pressure:

Even if transnational corporations and other business enterprises are not legally

bound by the [UN Draft] Norms, there will be considerable pressure to comply withthe Norms, since individual companies will be exposed to world public opinion -their customers in the respected forum of the UN.63

The performance of CSR thus does not lie in providing dispute resolution to businesses

or consumers but in a benefit to the global economic system: the regulation of (corpo-

rate) behaviour which levels the playing field for economic actors in terms of production

standards. The example illustrates very well how corporations can act as private norm

national Chamber of Commerce by one or more arbitrators appointed in accordance with the saidRules..

62 However, they may become legally binding indirectly in various forms: see the contributions to Olaf

Dilling, Martin Herberg & Gerd Winter (eds.), Responsible Business: Self-governance in transnationaleconomic transactions, Oxford: Hart Publishing (forthcoming 2007)

63 Hillemanns, C, UN Norms on the Responsibilities of Transnational Corporations and Other Business

Enterprises with regard to Human Rights (2003), 4 German Law Journal 1065; similarly Weissbrodt Dand Kruger M, Norms on the Responsibilites of Transnational Corporations and Other Business En-terprises with regard to Human Rights, 97American Journal of International Law 901.


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entrepreneurs and use CSR standards for signalling their reliability towards other eco-

nomic actors, i.e. their consumers. Again, this is a performance that cannot be achieved

by domestic legal systems as their reach is territorially limited. Nor can this be achieved

by (public) international law as TNCs commonly are not regarded as having international

legal personality.64

From a performance perspective, however, it is impossible to characterise governance

regimes as being based on either law or social norms because the performances we

have outlined above dispute resolution as well as behavioural control can be

achieved by both legal and non-legal means.

5. Functional Competition

The interesting question, then, is whether out of this mere performance competition

could also evolve a functional competition with domestic legal systems and international

law. Both ICANN UDRP and arbitral practice referring to lex mercatoria are conceived of

asAlternativeDispute Resolution, as a way of consciously settling conflicts outside the

law. And CSR characterises itself as mere soft law, thus also locating itself outside the

boundaries of legal discourse. Yet, as our historical examples show, the border lines of

legal discourse are all but impermeable. Whether they are crossed or not depends, as

we have seen, on the two basic preconditions that conflicts are verbalised in terms of

legal communications vis--vis a third party and that these communications are pub-

lished to serve as a starting point for second-order observation in other legal communi-

cations.

64 Brownlie, I, Principles of Public International Law (Oxford, Oxford University Press 6

thed. 2003), at 65


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With regard to the verbalisation of conflicts, transnational legal systems thus must pro-

vide for a procedure of third-party conflict-resolution.65

Such a procedure is easy to

make out with regard to transnational commercial arbitration as well as the ICANN

UDRP. They both institute arbitral panels assuming the role of the alter ego, the gener-

alised other, in the settlement of a dispute.66 With regard to (self-)regulation by CSR

standards, however, there is so far no court or other forum that provides for third-

party dispute resolution. But this might rapidly change if e.g. domestic courts were to

rely on collective codes of conduct when concretising (domestic or international) law

standards regarding corporate behaviour. Already today, it can be observed that CSR is

more and more becoming an issue to legal discourse. This development is mainly due to

a rising tide of human rights litigation in the United States. Since the seminal district

court decision in Filrtiga v. Pea-Irala67, U.S. courts are increasingly accepting civil

damages actions for human rights violations under the 1789 Alien Tort Claims Act

(ATCA). Also, recent US decisions, relying on language in the well-known Supreme

Court ruling in Sosa v. Alvarez-Machain68, have held that corporations are legally capa-

ble of violating customary international law and may be subject to jurisdiction under the

ATCA.69Against this background, it does not seem too far-fetched to assume that future

decisions of domestic courts might refer to CSR standards when concretising human

f.65

Calliess, G, Billigkeit und effektiver Rechtsschutz (2005), 26 Zeitschrift fr Rechtssoziologie 35, at53.

66 Calliess, n 56, at 195.

67 630 F.2d 876 (2d Cir. 1980).

68 124 S. Ct. 2739 (2004).

69 For a critical account of the jurisdictional bases of these decisions see Shaw, C, Uncertain Justice:

Liability of Multinationals under the Alien Tort Claims Act (2002), 54 Stanford Law Review 1359; seeas well for a recent example The Presbyterian Church of Sudan, et al., v. Talisman Energy, Inc.(June 13, 2005), summary available under http://www.asil.org/ilib/2005/06/ilib050628.htm.


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rights standards in customary international law70or general clauses in domestic private

law71

, even if - as for now - no domestic court has made explicit reference to CSR codes

such as the UN Draft Norms.

In addition, new dispute settlement procedures might be created in the context of CSR.

The OECD Guidelines for Multinational Enterprises, for instance, are supported by a

unique implementation mechanism: through their specific instances facility, National

Contact Points (NCP), government agencies responsible for the guidelines, offer to help

parties resolve disputes. Since 2000 some 130 specific instances have been brought

to the NCPs' attention. Most of them concerned the employment and industrial relations

chapter of the guidelines and were related to business operations in developing coun-

tries.72 The mediation and conciliation of these cases constitutes another instance of

performance competition between law and ADR mechanisms.

With regard to the second functional prerequisite for the emergence of a legal system

we have to examine whether global governance regimes are capable of selecting the

normative expectations that can be normatively expected. It is only through an institu-

tionalised logic of remembering and forgetting that this can be achieved. Once a dispute

resolution mechanism can observe, and refer to, its own decisions it guarantees legal

certainty in its most basic form: by treating like cases alike. This goal is achieved by le-

70

At least to the extent that e.g. the UN Draft Norms on the Responsibilities of Transnational Corpora-tions and other Business Enterprises with regard to Human Rights can be considered a reflection ofalready existing customary international law.

71 As it is already practiced for international treaties, see e.g. AG Tauberbischofsheim, Neue Juristische

Wochenschrift Rechtsprechungsreport 1992, 1098, holding that like the fundamental rights guaran-teed by the Basic law, the rights embodied in the European Convention on Human Rights affect pri-vate law relations by virtue of the general clauses by the German private law.

72 OECD, The Contribution of the OECD Guidelines for Multinational Enterprises to Managing Globalisa-

tion, Paper prepared for distribution at the meeting of G8 Labour and Employment Ministers, 6-8 May2007, Dresden, Germany, 2007, available at http://www.oecd.org/dataoecd/5/34/38543990.pdf.


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gal reasoning which describes the stabilisation of legal norms as a problem of consis-

tency:73

Every decision has to expressly integrate itself into the continuum of other deci-

sions. It can be observed that arbitral tribunals, as soon as they publish their decisions,

engage in this kind of discourse. This is most obvious with regard to ICANN UDRP tri-

bunals: even though the UDRP Rules do not provide for the binding nature of precedent,

there hardly is a web-published74 panel decisions that does not refer to earlier cases

employing the well known common law techniques of analogical reasoning. As a ran-

dom example we might take the following reasoning of a UDRP Panel in the mcdonald-

slovesjesus.com75case:

The Panel notes that in theprincipal case relied upon by Respondent in support ofits "noncommercial" use argument, Bridgestone Firestone, Inc. et al. v. Myers, No.D2000-0190 (WIPO July 6, 2000), the domain name registrant was a former em-ployee of Bridgestone-Firestone and developed a website under the domain name in order to offer constructive criticism of his former em-ployer. The instant case is distinguishable in that, as noted above, Respondent isnot engaged in any criticism of Complainant.76

But the evolution of second-order observation mechanisms is even more important with

regard to lex mercatoriawhich impossible reality is measurable [only] by the number of

references made to it77. The very existence of lex mercatoria principles, this means, is

validated only to the extent that they are referenced in a choice of law clause by the par-

ties to a commercial contract and subsequently adjudicated by an independent tribunal.

73 Luhmann, n. 25, at 257 f.

74 Available at http://www.icann.org/udrp/udrp.htm.

75 McDonald's Corporation v. The Holy See, Claim Number: FA0304000155458, available at

http://www.arbforum.com/domains/decisions/155458.htm.76

Emphasis added.77

Calliess, n 56, at 201.


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Adjudication can in this context be regarded as performative speech acts,78that literally

talk into existence79

lex mercatoria.These speech acts, however, gain their performa-

tive quality only by the linkage of episodes80 that especially the doctrine of precedent

provides for. But so far, there is only an inchoate practice of precedent and stare decisis

in commercial arbitration81 which, together with the lack of any institutionalised court

hierarchy,82at least slows down the development of an autonomous legal system of lex

mercatoria.

We can thus conclude that with regard to the ICANN UDRP and, to a lesser extent, lex

mercatoria the enabling conditions for the evolution of a legal system are met. Arbitral

tribunals thus enter into a functional competition with domestic courts. Other private or

hybrid governance regimes such as CSR standards still lack even those basic features

and have so far failed to initiate the communicative process of generating legal norms. A

comparison of the three regimes we have described is given below, with different

shades of grey signifying the respective degree of legalisation:

78 Cf. Dunn, PH, How Judges Overrule: Speech Act Theory and the Doctrine of Stare Decisis (2003),

113 Yale Law Journal, 493 at 498.79

Calliess, n 56, at 207.80

It is dubitable, however, whether this linkage can be described as a chain of narratives as suggestedby Dworkin, R, Law as Interpretation (1982), 9 Critical Inquiry 179 or, more recently, Yoshin, K,Whats Past Is Prologue: Precedent in Literature and Law (1994), 104 Yale Law Journal 471; for apointed criticism of this kind of approach see Fish, S, Working on the Chain Gang: Interpretation inLaw and Literature (1982), 9 Critical Inquiry 201.

81 Teubner, n 36, at 18.

82 The lack of institutional hierarchy might possibly be replaced by different forms of reputational hierar-

chy, though, ibid.


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PerformanceFunction

Behavioural control /dispute resolution Verbalisation of conflicts Second-order observa-tion mechanisms

CSR Yes No No

lex mercatoria Yes Yes Partial

ICANN UDRP Yes Yes Yes

IV. Conclusion: Evolutionary Anomaly or Survival of the Hybrid?

The evolution of legal systems in the ambit of global governance can thus be described

as a permanent reconfiguration of the conflict between performance and function.

Where legal systems fail to perform satisfactorily and escape into legal formalism, alter-

native ways of dispute resolution will take their place just as the proponents of Law and

Social Norms suggest. While many ADR solutions do not fulfil the function of guarantee-

ing legal certainty and thus stabilising normative expectations, they might develop to-

wards formalised legal systems. The latter phenomenon is well illustrated by the exam-

ples of lex mercatoriaand ICANN UDRP.

Looking at this oscillation of global governance mechanism between law and social

norms, the preceding paragraphs have already hinted at a possible answer to the more

general question whether the central role of law in European societies should be re-

garded as an evolutionary anomaly as Niklas Luhmann predicted or whether law in the

ambit of global governance might survive in new hybrid forms as Gunther Teubner

suggests. Based on our brief tour dhorizon of various forms of private and hybrid order-

ing on the global scale, there are basically two concluding statements that can be made


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from soft law to hard code - the juridification of global governance

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