Global Law's Toolbox: Private Regulation by Standards

Abstract

The idea to conceive of "law as a product" is usually linked to regulatory competition among states that strive to make their legal systems more responsive to the needs of private actors. From a societal perspective, however, the regulatory activities of the nation states themselves seem to be driven by the logics of globally operating social systems. If societal differentiation is regarded as the ultimate driving force of legal evolution, the distinction between public and private lawmaking loses its relevance. There is no reason then to exclude private regulation from an analysis of how well a normative order reflects the preferences of parties. Privately crafted legal regimes often build on models of standard contract terms (SCT) that are highly responsive to the specific rationality of whole sectors of business. The public dimension of such multifirm contract standardization is significant as it substitutes for either inflexible or parochial state law, regulates markets instead of being regulated by markets, and quite often affects third parties. As these private normative orders continue to rely on linking to national legal systems, they face diverging national conditions for recognition. In consequence, we should develop a comparative law of the public rules of recognition for private regimes. Such an approach is specifically interested in the linking performance of different jurisdictions in relation to private regimes. It has to proceed stereoscopic, i.e., it has to take into account both the territorially and the functional differentiation of law. On one side, it has to look at different social sectors developing their specific functional rationalities and their specific normativities. On the other side, it has to analyze differences between national laws in their capacity and flexibility to recognize those private regimes. This Article exemplifies a "comparative law squared" by analyzing privately crafted regimes in the fields of construction law, financial law, and intellectual property (IP) law. One of the main conclusions is that the legal order of the state itself becomes transformed in contact with collectively applied private rules, and vice versa. To the extent private legal regimes internally provide for diversity of perspectives and impartiality of rulemaking state law has reason to reconsider its own standards of recognition for such forms of private lawmaking. With a view to the issue of regulatory competition it follows that the attractiveness of a forum depends, inter alia, on a state's flexibility to accommodate private regulation based on model SCT. From a broader perspective, the Article argues that the public side of private legal regimes has to be taken seriously.

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