Contractualization of CSR Guidelines: How do private regimes and national law interact?
Recent scandals involving transnational corporations have triggered an intense discussion on how to deal with corporate conduct that has negative effects on society. While the legal debate may be roughly divided into those emphasizing the merits of self-regulation and those calling for a new corporate accountability, this project seeks to overcome this distinction. It is devoted to signposting the future regulatory landscape of CSR by including both, mechanisms of social ordering by non-state actors as well as the system of positive law as a still pivotal part of the legal discourse.
(1) The prevailing assumption that CSR guidelines are voluntary and accordingly irrelevant from a legal perspective is contested. In fact, CSR guidelines when introduced by corporations in form of a code of conduct or a public commitment become genuine contractual obligations.
(2) The problematic aspect is rather how CSR guidelines are transformed into contractual obligations. It is argued that the central attributes of CSR guidelines do not match with certain underlying assumptions of contract law and therefore lead to uncertainties and inconsistencies.
Although social responsibilities of corporations were formerly legally codified (interest/nature of the company, company structure, mandatory rules), they are currently predominantly laid down in CSR guidelines enacted by NGOs, IGOs and business associations. These CSR guidelines are defined as (1) self-regulatory and (2) transnational rules that create (3) direct social obligations for corporations with the intention of also (4) protecting and binding others than those organizationally or contractually connected with a company.
Since corporations frequently include these guidelines into contractual agreements with business partners (supplier codes of conduct) or commit themselves to do so, the codes may find their way into contract law.
Research Questions and Methods
The research analyzes and evaluates the private law concepts affected when corporations increasingly include CSR guidelines into their contracts. It contains a legal analysis of the way CSR guidelines are presently regulated by contract law followed by a theoretical analysis that investigates how the interaction between CSR guidelines and formal law should be normatively framed. This allows drawing conclusions on how private law may deal with the social reality of CSR guidelines more adequately. The here presented legal analysis was conducted on the basis of two selected jurisdictions (Germany and England) with respect to the following areas:
Questions on self-regulation and transnationality: conflict of laws (primarily Rome I and II)
Questions on social obligations of contractual partners and effect on third parties: consumer/commercial contract law (national contract laws, European consumer acquis)
(1) CSR guidelines may become legally binding:
Frequent party choice (and public policy corrections in consumer contracts) may render applicable the national law of the large corporation.As the CSR guideline is either an explicit part of the agreement, referred to during the negotiation procedure or introduced within an already existing long-term relation, it can be interpreted as part of the contract.
In consumer – corporation contracts the guideline may become binding even in the absence of any pre-contractual contact if the corporation has publicly (unilaterally) declared to comply with it.
(2) Fundamental conflicts occur because
Conflict of laws recognizes choice between state orders, which conceals
the factual choice for the self-regulatory order of CSR guidelines. Conflict of laws is based on the distinction territorial/extraterritorial,
which renders it difficult to capture their transnational character.
Substantive contract law constitutes contractual rights, obligations and remedies on the basis of what serves the private interests of contract parties whereas CSR guidelines introduce social obligations.
In substantive contract law contractual duties have limited reach (relativity/privity of contracts), which prevents contract law from comprehensively capturing extra-contractual effects on third parties.
Given these uncertainties and inconsistencies, how does contract law need to be reconciled in order to adequately deal with CSR guidelines?
Does the self-regulatory character require establishing mechanisms of recognition as to the non-state enforcement of CSR guidelines?
Does the transnational character require giving up or adjusting the territorial/extraterritorial distinction in conflict of laws?
Does the contractualization of public interest obligations require introducing “public interest enforcement” as a mechanism in contract law?
Do the extra-contractual effects call for constituting network responsibilities between non-contractual partners by means of either extending contractual rights/obligations to third parties or widening the scope of liability in tort?
These questions will be leading for the theoretical analysis that draws upon insights from sociologically inspired legal theory.
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