UC Irvine Journal of International, Transnational, and Comparative Law

In 2013, over a thousand workers were killed when the Rana Plaza factory building collapsed in Bangladesh, one housing several garment factories producing goods for global consumer markets. The collapse, and its consequences, exposed both the complex interweaving of national law, international standards, and private governance standards that together might be understood as a transnational legal order that has some effects on business behavior. This essay engages in a close examination of the Rana Plaza factory building collapse and its aftermath as the starting point for theorizing systemicity in the emerging interlocking systems of national, private and international governance orders. At one level, the governance architectures around the Rana Plaza building collapse suggests bits and pieces of governance and lawmaking that may point to the development of distinct governance orders that bump into each other serendipitously. Yet it is also possible to theorize systemicity from out of these bits, pieces, and bumps that may suggest the nature and forms that are emerging as a distinct class of transnational legal order. Starting from the governance response to the Rana Plaza building collapse facts, this article examines the way that the collective actions of states, international organizations, enterprises, civil society, and affected groups evidence a robust transnational legal order. That transnational order has a normative structure, operationalizes a legal process, and structures a framework within which international organizations, and state and non-state private actors strive toward building functional coherence within formally polycentric governance orders. Alternatively, Rana Plaza might suggest polycentric governance ordering or the new face of old hierarchical relations between developed and developing states. The essay concludes that the reality of the context in which governance arises may continue to defy a single robust theorization. Theories may be chasing facts, but the complexity of the legal ordering reflected in the arc of the story of the Rana Plaza factory building collapse also suggest that facts may soon turn on and reshape theory.

In this essay, the Author provides an overview in Part I of some initiatives to require or encourage companies to produce specific ESG data, authored both by governments and by private standard-setters. In Part II, one disclosure initiative in particular will be discussed as an example of a transnational legal order (TLO), as defined by Professors Shaffer and Halliday,13 and that is the Global Reporting Initiative, which has become the benchmark corporate social disclosure framework. Part III identifies a number of significant questions about our knowledge of the real power of information strategies to change corporate behavior, as the GRI seeks to do, as well as questions about the efficacy of self-regulation generally.
Part IV then asserts that the “legality” aspect is a centrally-important element of the TLO framework advanced by Shaffer and Halliday. Particularly regarding transnational corporate responsibility, reliance has been placed almost exclusively on “new governance” initiatives, which are generally non-binding, voluntary, collaboratively developed standards for responsible behavior. New governance standards have fascinated academics from a wide range of fields, including this author, leading to an explosion of literature on the cognate topics over the last ten to fifteen years. Yet, during this same period of time, Bi-lateral Investment Treaties (BITs) and free-trade agreements, such as the North American Free Trade Agreement (NAFTA), have been negotiated throughout the world. These treaties generally permit private companies to challenge any government action—legislative, regulatory, or judicial—that is alleged to reduce the company’s future profits. These challenges are heard by private arbitrators and are not subject to judicial review.
The contrast is stark between new governance forms of collaborative, often industry-led, voluntary standards for responsible action, and the limits on sovereign regulatory authority being developed as a result of the expansion of the investorstate system for arbitration pursuant to BITs and trade agreements, leading this author to remember the line in the movie the Wizard of Oz: “pay no attention to the man behind the curtain.” To badly mix literary references, we may have fixed our collective attention on the construction of a transnational regulatory Potemkin village even as the man behind the curtain progressively undermines the capacity of the strong form of regulation, that of sovereign domestic law. It is in emphasizing the importance of legality and how transnational norms “touch down” in binding processes, court proceedings, contracts, or public proceedings that Shaffer and Halliday’s theory of Transnational Legal Orders reorients our thinking in a productive, and important, direction. Part V concludes.

This paper is about the theory and practice of transnational legal ordering. It seeks to gain insight into how transnational legal orders (TLOs) advance by examining one particular problem: the regulation of over-the-counter (OTC) derivative securities. It focuses on events following the global financial crisis, which exposed the deficiencies of the existing regulatory order in identifying and containing the risks created by trading in those securities. In the aftermath of the crisis, the cross-border systemic risk created by OTC derivatives trading was characterized as a problem of global dimension that necessitated a global response. A wide array of actors and institutions, both domestic and international, mobilized quickly to craft a legislative and regulatory response. Given the catastrophic nature of the crisis, and the general manifestation of political will to address the problem, one might have predicted the successful development and institutionalization of shared norms regulating derivatives trading. That move, however, has been limited.

By allocating governance authority among nations, conflict of laws— also known as private international law—helps bring order to transnational activity in a globalized world that lacks centralized legal institutions. In this way, conflict of laws is a distinct form of global governance. Yet conflictof- laws rules are predominantly national rules; these rules remain crossnationally diverse; and there is little international agreement on the rules to apply to solve conflict-of-laws problems. Thus, conflict of laws contributes to transnational legal order, but conflict of laws is itself transnationally disordered. Nevertheless, in at least two regions (Europe and Latin America) and two specialized areas of law (family law and commercial law), conflict of laws is increasingly ordered at the transnational level. These developments raise interesting questions about how conflict of laws contributes to transnational legal ordering and about how conflict of laws itself becomes transnationally ordered.

If transnational law is defined as different from national law, then state law cannot be a transnational legal order (TLO). And yet, state law is in many ways as transnational as it ever has been. In presenting state law as a TLO, I present then a critique of the dichotomy between TLOs and the state, albeit a friendly one. I find, essentially, that states qualify as TLOs. If that is so then it follows that a theory of transnational orders should, in order to be defensible, be generalized as a theory of legal orders.

[T]he recent proposal made by Terence Halliday and Gregory Shaffer for a concept of “transnational legal ordering” emerges in the here described, contested realm of transnational law debates, which are, as we saw, part of a much larger investigation into law’s relationship to globalization. In the following pages, I will attempt to draw out the implications of these debates for a project such as Halliday’s and Shaffer’s by showing how proposals of transnational legalpolitical order design require us to critically interrogate the underlying assumptions that inform our model building. I will argue that one of the most pertinent assumptions in the transnational legal order (TLO) model is the idea of the state not only as a still relatively stable institutional environment but also as a reliable guarantor of public good delivery. In light of the state’s historical and symbolic prominence in the Western legal and political imagination in both these respects, there is a need to engage with the significance of the state, first, by revisiting a well-known story about the erosion of the welfare state under the conditions of globalization from the perspectives of both public and private law (II), before calling into question the alleged universality of the underlying assumptions regarding the state in that account (III). The next section will address concerns about the dominance of Rule of Law stories as they have been voiced by post-colonial scholars, before exploring the ways in which we trace the fragility of global law’s “intimations” in the emerging spaces of global legal imagination, and intervention (IV). In the concluding section, we will engage with the methodological consequences of the foregoing analysis of transnational regulatory arrangements. Understanding transnational law less as a neatly demarcated field of law, but rather as a methodological framework through which it might be possible to keep the historical (however parochial) stories in play without universalizing them and with a view to drawing on diverse sources and backgrounds in the categorization and classification of emerging transnational governance structures, the article will suggest the triad of actors, norms and processes as a robust and promising conceptual framework to capture the institutional and normative challenges arising from the transnationalization of law (V).