Private Legal Transplants: Bright and dark nature of an unnoticed phenomenon

by Tomaso Ferrando | 28 May 2012

The suicide nets installed around a Foxconn factory in China

Only a few months ago, the social image of prominent transnational enterprises such as Apple and HP was threatened by media reporting several violations of labor rights by Foxconn, the main contract manufacturer for electronics companies such as these, and which is located in the People’s Republic of China. In the light of the potential commercial repercussions, Apple and Foxconn invited the Fair Labor Association (the FLA) into the factories where Apple’s products are built, relying on the fact that Apple had just joined the Association on January 13. After more than a month of investigation, the FLA “revealed [instances of] serious and pressing non-compliance with FLA’s Workplace Code of Conduct, as well as Chinese labor law” and claimed that both Apple and Foxconn “have agreed to ongoing assessments by FLA in order to ensure that labor practices meet FLA standards and remain in compliance for the long term.” If respected and enforced, the private agreement concluded between the two enterprises would mean the replacement of the current Chinese working standards with the legal architecture privately defined by the FLA, i.e. the creation of an ad hoc intra-national legal order whose boundaries will be represented by Foxconn’s gates.

More recently, both the Brazilian lower house and Senate approved the ‘Lei Geral da Copa‘, according to which the ban on alcoholic drinks in Brazil’s stadiums introduced in 2003 as part of the Supporters’ Statutes, aimed at preventing violence among hardcore fans at football matches, will be lifted for the occasions of the Confederation Cup and the World Cup. The law signed by President Dilma permits the issue of an ad hoc juridical order that will be applied only in the stadiums that will host the two competitions, and only for the length of the events. Welcomed with great satisfaction by the FIFA secretary general Jerome Valcke, it will create a sub-system of law which will be temporally limited and geographically contained by the doors of the World Cup’s stadiums, but, more importantly, which will be entirely determined by the need for the state to respect the private agreement concluded between the Brazilian Government and the Fédération Internationale de Football Association, with one eye on negative effects on the potential profits of Anheuser-Busch, the FIFA’s beer sponsor. While European supporters may be used to enjoying a beer while watching their sport idols confronting each-other, Brazil had been in the process of following a different path, but it has eventually bowed to the content of the private agreement.

The cases discussed above, apparently dissimilar and unrelated, represent two of the many situations in which a private agreement intervenes to shape and modify national legal orders, both by imposing specific behaviors on one of the contracting parties or by amending the existing law in order to accommodate the interest of private parties. In both cases, I claim, an instrument of private law is utilized as a proxy for legal transplant and the creation of special areas of law, a sort of Special Legal Zone (SLZ), where the applicable law is different from what lies beyond its scope, and the juridical competence is often attributed to alternative mechanisms of dispute. Whether we welcome the effective diffusion of high standards of production that lead to taking parties above existing statutory standards, the same cannot be said about the use of sovereign prerogatives in order to modify and shape national legal orders according to the content of a private agreement. Characterized by a bright and a dark side, the proliferation of private tools of legal transplant and their role in the expansion of a globalized legal order, requires jurists to interrogate the current phenomenon and define its content, and to propose new theories that move beyond the traditional conception of legal transplant as nation-to-nation imitation.

As the Foxconn and FIFA examples demonstrate, globalization is anything but a static and well-defined phenomenon, a complex process that involves a plurality of actors and a multitude of fields. Extremely reluctant to be constrained within defined borders, so much that Anthony Giddens defines it as a ‘term that we use frequently but which is poorly conceptualized’¹, globalization can be decomposed in a plurality of sub-processes, everyone involving and influencing different aspects of life. Therefore, following the scheme traced by Boaventura de Sousa Santos² and Duncan Kennedy³, it appears more appropriate to talk of globalizations rather than of a single globalization, a plurality of phenomena based on the individualization of a model of reference by the main economic and political power which is then expanded beyond its own frontiers in order to become universal⁴. In this sense, globalizations are acts of universalization, where law and culture play a fundamental role as tools and objective of change and standardization, so to have a direct impact on local diversity and autonomy.

After thirty years in which global legal transplant has been defined as a state-to-state relationship based on prestige, power, or imitation, today one new piece seems to be part of the global puzzle of legal standardization, which pushes aside the traditional idea of transplant as the simple moving of a rule or a system of law from one country to another, or from one people to another one’. This reduced perception of legal transplant, in fact, can fit into a global order based on nation states and international organizations, but it cannot be adapted to the current post-modern scenario where global, national and local orders interact with each other, cultural distinctions are becoming blurred, where the private is occupying the space once occupied by the public, and where transnational enterprises (TNEs) cut across continents with little geographical attachment.

Embedded in dogmatic immobility, we tend to remain entrapped in the idea of a private contract as an agreement that only incidentally is touched upon by the public sphere, but certainly does not define its content, so that we miss the process by which production agreements, codes of conduct, and norms of corporate social responsibility are made of norms and means of coercion that are transferred from one legal order to the contract (a different legal context), where they can represent the new term of reference for people’s behaviors. On the other side, only if we abandon the private-public distinction that is presented as an untouchable dogma, can we realize that certain clauses contained in investment contracts concluded between TNEs and national governments, such as ad hoc fiscal agreements, the definition of property or of working hours, the obligations to provide full access to natural resources or to crystallize law at the moment of the deal, we realize that private agreements become the legal tool through which a particular legal narrative, that of private property, individuality, commodification of nature, etc., is expanded and universalized, piercing national boundaries and, beyond, the idea of national legal orders.

The intense network of legal tools that keep together the pieces of transnational enterprises, along with the current modifications in the relationship between states and global enterprises, requires jurists to reconsider the boundaries between legal domains, and to develop a new theory of legal transplants which does not look at the source, but at the distribution of power. We have to abandon the idea of a global community of public legislators that autonomously and independently issue coercive norms that bind their citizens, and shift to a complex picture where coercive measures are the product of the encounter between the private and public, or between private actors more and more integrated on a global level. In the last thirty years, legal forms and narratives produced in core countries according to capitalistic economic needs have been detached from their own background and moved upward to a global scale, so to constitute a new global economic order, a law-non-law with no clear source nor geographical location, which is however territorialized any time it is respected and or coercively enforced.

At first sight, private legal transplant (PLT) appears as a double-faced phenomenon. On its bright side, it takes place when mother corporations or buyers impose their own standards of conduct and internal norms on private counterparts, so much that the latter become internal legal systems governed according to exogenous dispositions. Legal standards are raised and social, environmental or labor guarantees strengthened by means of private agreement, although the provision of alternative dispute mechanism risks counterbalancing the potential of the move and to subtract important aspects of social life from public scrutiny. In its dark aspect, PLT takes the form of investment agreements concluded by global investors and nation states, with or without the legal umbrella of a Bilateral Investment Agreement. Despite its private nature, in fact, the content of the agreement becomes juridically binding for the state as sovereign entity, and often requires it to exercise its prerogatives in a way that respect and does not violate its clauses, even if that means adapting the national legal order and its institutions according to the content of the contractual obligations. Spectacularly for PLT’s bright aspect, it is happening with labor law, environmental prescriptions⁵, access to natural resources and even the conception of private property, and the risks of arbitration and of negative awards certainly represent a sufficient threat to reduce states’ margins of appreciation.

Hence, in a globalized world where transnational corporations conclude deals and investments directly with nation states, legal reforms and adjustments, i.e. modern legal transplants, do not only take place because of the action of public actors, but also as a consequence of a private-to-private interaction and, even more interestingly, when private actors directly interact with the public. While the potential of private-to-private legal transplant has come to be discussed in the frame of Corporate Social Responsibility and global governance, although with little debate on the risks of a complete privatization of the issue⁶, the private-to-public angle appears to be completely overlooked, but extremely important due to its implications for national sovereignty, democracy, legitimacy and participation. In this last scenario, in fact, the contractual codification of a specific legal discourse and norms (including the principles of lex mercatoria, a law/non-law which has long been struggling for legitimation and condemned to the vicious circle of legal autopoiesis), receives a formal investiture and becomes national law, despite its clear private origins.

In conclusion, although the Foxconn and FIFA cases might seem irrelevant or exceptional, they are the evidence of a constant tendency toward the privatization of the content of binding law. As the modern merchants of law, private actors appear as the proxies of legal and cultural transformation, ⁷ producers of a new legal reality that goes beyond mere economic transactions, and whose pervasive effects require to be deeply understood and studied. Therefore, a general theory of PLT has to be proposed, one that provides a platform for a future and analytical application of this new creative thought to other concrete cases of transnational relationships.

1
Giddens A., 2009, Sociology, 6th edition, Polity Press, London
2
De Sousa Santos B., 2009, A Non-Occidentalist West, Theory Culture Society, SAGE, Los Angelese, London, New Delhi, and Singapore, Vol. 26 (7-8): 103-125
3
Kennedy D., 2006, Three Globalizations of Law and Legal Thought: 1850-2000, in The New Law and Economic Development, Trubek D., Santos A. (eds), Cambridge University Press
4
De Sousa Santos B., 2009, Beyond Abyssal Thinking, From global lines to ecologies of knowledges, Eurizine
5
Editor’s Note, an important example of which is the so-called lex petrolea, cf. the seminal paper R. Doak Bishop, “International Arbitration of Petroleum Disputes: The Development of a Lex Petrolea,” XXIII YEARBOOK COMM. ARB’N 1131 (1998).
6
Muir Watt H., 2012, Private International Law as Global Governance: Beyond the Schism, from Closet to Planet, PILAGG launching paper, available from HYPERLINK “http://blogs.sciences-po.fr/pilagg/files/2011/11/HMW-PILAGG-Launching-Paper-Revisited.pdf”http://blogs.sciences-po.fr/pilagg/files/2011/11/HMW-PILAGG-Launching-Paper-Revisited.pdf.
7
Dezalay I., Marchands de droit: la restructuration de l’ordre juridique international par les multinationales du droit, Fayard, 1992