Anna Beckers on Contractualization of CSR Guidelines: How do private regimes and national law interact?

Anna Beckers, a PhD Researcher at the Hague Institute for the Internationalisation of Law (HiiL) and the Maastricht European Private Law Institute (M-EPLI) has been doing excellent work in the area of corporate social responsibility, especially in its transnational aspects.  

Since June 2010, Anna has worked as a junior researcher at the Faculty of Law at Maastricht University. Her research project focuses on the legal and constitutional quality of rules set by multinational Enterprises, NGOs and other civil actors regarding labour and environmental standards (Codes of Conduct, Compliance Initiatives). Based on the concept of law within postmodern legal theory, e.g. theory of legal pluralism and system theory, Anna aims to prove whether these Codes of Conduct can be defined not only as law, but also as a part of a new transnational societal constitutionalism. It will particularly be analysed how this new form of constitutionalism will influence the structures of the formal legal system.

With Gunther Teubner, Anna recently helped organize the International Conference, "Transnational Societal Constitutionalism,"  17-19 May 2012, at the Collegio Carlo Alberto, Moncalieri, Torino, Italy, hosted by the Hague Institute for the Internationalisation of Law (HiiL), The International University College of Turin (IUC) and the Collegio Carlo Alberto.  

For the Conference, Anna produced an excellent poster that she has graciously allowed me to post here:

  
Contractualization of CSR Guidelines: How do private regimes and national law interact?

General Background

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.

Theses

(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.

Introduction

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)


Discussion

(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.

Outlook

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.


Selected References

K. Abbott / D. Snidal, Strengthening International Regulation through Transnational New Governance: Overcoming the Orchestration Deficit, in: 42 (2009) Vanderbilt Journal of Transnational Law, p. 501-571. O. Dilling / M. Herberg / G. Winter (eds.), Responsible Business. Self-Governance in Transnational Economic Transactions. Oxford: Hart 2008.
C. Glinski, Die rechtliche Bedeutung der privaten Regulierung globaler Produktionsstandards. Baden-Baden: Nomos 2010.
S. Joseph, Transnational Corporations and Human Rights Litigation. Oxford: Hart 2004.
D. McBarnet / A. Voiculescu / T. Campbell (eds.), The New Corporate Accountability. Corporate Social Responsibility and the Law. Cambridge: CUP 2007.
P. Muchlinski, Multinational Enterprises and the Law. Oxford: OUP 2007.
G. Teubner, The Corporate Codes of Multinationals: Company Constitutions beyond Corporate Governance and Co-Determination, in: ARENA Repo