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The Governance of Global Economic Activity: The Emerging Role of Private Law and Legal Agents.

Edward S. Cohen Associate Professor of Political Science Westminster College New Wilmington, PA 16172 [email protected]

Paper prepared for meeting of the Research Section on the Structure and Organization of Governance, IPSA, University of Oklahoma, Norman, OK, March 30-31, 2001

As the initial flurry of claims about the “end of sovereignty” or the “end of the state” has died down, many analysts of globalization have begun to turn their attention to the evolving patterns of “governance” in modern states (Prakash and Hart, 1999). Among the topics that have become central in this literature, the recognition of the growing role of non-state actors in the making and implementation of authoritative rules for social relationships is particularly important (Cutler, et al., 1999; Higgott, et al., 2000). If states are indeed partially “unbundling” aspects of sovereignty and allowing and/or encouraging “private” agents and institutions to act in the name of the state, our understanding of the authority and legitimacy of the modern state may be facing some radical challenges. Moreover, the literature suggests that the growing role of non-state actors is occurring at both the domestic and international level, and these two dimensions of the process are closely connected. The study of this process, then, may be central as well to our understanding of the changing relationship between states and the international environment, and thus to one of the core issues in the study of governance. My purpose in this paper is to outline the rudiments of an argument and research plan which aims to help further our understanding of the role of non-state actors in emerging patterns of governance. The focus of my analysis is on the governance of the increasingly global economic order, and in particular on the role of private international law and the legal agents – especially large Anglo-American law firms – that are the links between the “law” itself and the choices and strategies of economic actors. The role of private law and lawyers seems to me a woefully understudied but especially important aspect of the governance of economic activity. While scholars have begun to look at the

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role of such actors as credit rating agencies, accounting firms, and the insurance industry in structuring the arena of global economic activity, there is little more than intriguing suggestions in this literature concerning the role of lawyers.1 But legal systems and agents play a central role in all aspects of contemporary business life, and are crucial in the intermediation between state policy and economic activity. If we want to develop a nuanced sense of the emerging patterns of interaction between the state and non-state actors in the process of governance, it seems to me, we need to know what is happening in the area of private law and what the lawyers are up to. The following sections attempt to outline the shape of the problem of role of private actors in governance, and to place the role of law and lawyers in context. This discussion is primarily a review of the literature that proceeds from the broader issues, especially the study of global and domestic governance, through the analysis of the exercise of authority by non-state actors, to specific questions and dimensions of the role of law and lawyers in the contemporary economy. As such, the paper lays out the direction for research and tentative hypotheses, rather than presenting any polished findings. It is an attempt to put my plans on paper, and to solicit any suggestions and clarifications from the readers. Globalization and Governance. Of all the literatures relevant to this study, the work on the emergence of global forms of governance is the most extensive. The main inspiration for this work has been the sense that the globalization of economic activity – including technological change, corporate organization, patterns of production and investment, and capital flows – and of

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The essays in Cutler, et al., 1999 provide an excellent review of these developments. 3

the consequences of this activity have posed a severe strain on the capabilities of states. Increasingly, individual states have found themselves unable to exert significant regulation or control over economic activity, as the policy tools they have at their disposal are ineffective in grappling with patterns of behavior beyond their borders. As a result, states have been looking for new approaches and tools to cope with the impact of these global patterns on their interests and societies.2 To this point, the focus of most studies of these responses has been on the attempts to create multi-lateral or international bodies and agreements with the scope of authority and the policy tools necessary to oversee/regulate globally-organized economic activity. This is the usual meaning of discussions of “global governance,” and interest in these bodies and agreements has deep roots in the international relations literature on international regimes. In areas such as the environment, the regulation and settlement of disputes regarding trade policy, and the control of global financial markets, scholars have explored in great deal the attempts by states to pool elements of their sovereign authority to create institutions that can provide the scope, expertise, and authority necessary to assert some control over the direction and effects of shifting patterns of production, trade, and investment. At the same time, we have seen more studies of the emerging politics of global governance, and both the economic agents subject to these bodies and organizations that aim at changing their behavior increasingly work to influence the policy choices made at regional and global levels. Throughout these analyses, the relative balance between the power of individual states and these global institutions,

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For good examples of the current state of the literature, see Held, et al., 1999, Prakash and Hart, 1999, Reinicke, 1998, and Scholte, 2000. 4

and/or the ability of these institutions to survive and act effectively, remain central sources of debate. The analysis of global governance raises some issues closely related to this study. The treaties and rules through which international institutions are constituted and operate form part of the world of international law, and it is perhaps not an accident that students of globalization, global governance, and international law have begun to take a great deal of interest in each other’s work. There now exist a number of significant attempts to lay out systematically the relationships between the fields of international relations and law (Slaughter, et al., 1998). On the whole, the existing work in this area tends to focus on traditional themes such as the evolution of human rights law and policy, the regulation and settlement of armed conflicts, and the status of international and regional institutions (i.e. the European Union (EU)). But the creation of the World Trade Organization (WTO) and the attempts to create the elements of a new international monetary order are now spurring on studies of the ways in which international law serves to structure global economic activity. The focus of most of this work is on public international law – the rules generated and enforced by states and by the institutions created by states – and like other work on global governance tends to center on the question of the relative power and autonomy of this law in the face of the continuing autonomy of individual states. In both the political science and international legal literatures on global governance, then, the question of “sovereignty” emerges as central to grappling with the problem of globalization. As states and multilateral/international institutions attempt to develop new ways to control the global environment, the former seem to be ceding a certain amount of the traditional elements of sovereign authority to the latter. The aim of

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states is to promote and protect their own interests and aims, and this often leads to tensions among individual states and between them and the institutions they create. While the literatures I have discussed often focus on this tension and attempt to assess the remaining autonomy of states, their more lasting contribution comes from the questioning of the unitary and fixed notions of sovereign authority long dominant in the respective fields of scholarship. By recognizing the “bundled” character of sovereign authority, and exploring the ways in which the elements of this bundle can be reorganized, new doors are open for understanding the evolving relationships between the state and its environment (Ruggie, 1993). This kind of theorizing is crucial to the study of the role of private law and lawyers in the governance of economic activity. As Cutler (1999) has emphasized, in order to gain a handle on the way the contemporary global economy is structured and regulated we need to break with the notion that all authority is of a piece and is clearly located in the hands of the territorial state. On the whole, however, the global governance literature does not provide all the tools necessary to deal with the role of private law and lawyers in the governance of the global economy, and indeed their role in shaping the activities of states and international institutions. The Role of Non-State Actors and Institutions. The literature on the role of non-state or “private” agents in the governance of economic activity is more recent and less extensive, but is fundamental to analyzing the significance of private law and lawyers. (evidence of limited role in most works on globalization.) This work also centers on the ways in which globalization challenges the position of the sovereign state, but shifts the focus to the growing role of associations,

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institutions, and other agents that are legally and practically “private,” not part of the institutions of public power in regulating and organizing social life. In these accounts, the emerging role of private agents can be seen as emerging outside of the cognizance of states, as the result of specific decisions to delegate parts of state authority to such agents, or as a combination of these processes when states ratify emergence of forms of governance that they had little or no role in creating. There are a number of important influences on this scholarship, but to my mind Susan Strange’s The Retreat of the State remains the most fundamental work. In this book, Strange traced what she called “the diffusion of power in the world economy,” which she believed is rooted in the economic and technological changes associated with globalization. While emphasizing the way these changes undermined the traditional tools by which states controlled economic activity, Strange shifted the focus away from the global public institutions to the emergence of a variety of private “regimes” as vehicles for the organization and structuring of global economic life. Her account reviewed the role of multinational corporations, accounting firms, the insurance industry, organized crime, and other kinds of private agents in giving direction to processes of change without much control on the part of states or international institutions. In the process, Strange made important progress in conceptualizing authority as a kind of social and political practice that is not exclusive to the public sphere of the modern state and the institutions it has created. Inspired by these kinds of insights and questions, there is now a rapidly developing scholarship on the role of non-state actors and private authority in the global political economy.3 This includes substantial articles and monographs on the ways global
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See Cutler, et al., 1999, Higgott, et al., 2000, and Ronit and Schneider, 2000. 7

corporations structure the norms and practices of business generally as well as their particular industries, the role of credit-rating agencies and accounting firms as “coordination services” agents in the allocation of investment resources, and the role of privately created organizations in the management of the internet and on-line commerce. A survey of this literature makes it clear that a great deal of the management of contemporary economic activity is in the hands of private actors, who have found ways to overcome immediate competitive pressures to develop common standards of business activity and common practices that sustain their long-term interests in stability, profitability, and in freedom from “outside” or public regulation. Moreover, many of these strategies bring with them the aspects of authoritative decision-making and enforcement that are hallmarks of any understanding of “governance.” All told, the initial work in this area seems to support Strange’s insight that a good deal of the authority that exists in the world of contemporary economic life is devolving into the hands of the major agents and institutions in the global economy. The contributions to this literature have also uncovered important aspects of the process of global governance often overlooked in the literature discussed above. This is the activity of key private agents in shaping policy-making and implementation in the world of multilateral and international institutions (see Sell, 1999). Among global governance specialists, the activities of international environmental and human rights activist groups – such as Greenpeace and Amnesty International – in shaping international law and policy is well known. The scholarship on private authority in the global economy, however, is pointing us to the role of corporations, business associations, and key intermediaries in the business world in working with, through, and

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sometimes against institutions such as the WTO and the International Monetary Fund (IMF) to shape the body of public law and regulation directed at the global economy. A picture is emerging in which there is a constant process of negotiation between public and private authorities to allocate authority over the rules and practices of the global economy. In this process, private agents work to protect their authority in many cases, and in others to gain the sanction and protection of public authorities to attain certain goals. In some cases, indeed, there is evidence that business/corporate actors are attempting to work with their critics in environmental, human rights, and labor organizations to resolve disputes and modify rules via direct negotiations outside the sphere of public authority. The importance of these kinds of developments for governing economic activity is clear when we remember that exactly the same kinds of trends have been widely observed within advanced industrial states. As Pierre and Peters (2000) have shown in their recent work, the shifting of a good deal of responsibility for regulating the activity of “private” agents onto those agents themselves is a central part of the changing roles of states in society, and the changing structure of the state itself, since the 1970’s. Under the rubrics of privatization, deregulation, the new public management, etc., states have been actively abandoning formerly public functions and shifting responsibility onto “markets,” which in practice means the major private actors in those markets. In the process, both states and non-state actors are engaging in a process of continuing negotiation and bargaining to figure out the division of power and authority most appropriate to the new relationship between public and private spheres (see Campbell, et al., 1991).

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It is not likely a coincidence that we can observe similar patterns in the domestic and international realms. As this division becomes less and less relevant to the operation of the contemporary economy, it is becoming less relevant to understanding the ways in which economic activity is governed. The question of the delegation of authority to nonstate actors, then, is at the very center of the process through which the outlines of a framework of authority in the global economy is articulated. The political processes and conflicts that shape this delegation form a crucial context in which boundary between public and private and the boundary between the national and the international are being established in the contemporary global political economy. It is this part of the story of “global governance” the has generally been ignored in the literature on this topic, and that the work on non-state actors is increasingly bringing to light. The relevance of all of this to the study of the role of private law and lawyers should be clear. In modern capitalist economies, and particularly in the Anglo-American world, private law – the law of contract, property, torts and the litigation through which this law is developed and applied – has always played a central role in structuring economic activity, allocating authority and wealth among economic actors, and in managing conflicts among these actors. As the guardians and shapers of this law, the modern corporate law firms, their leading partners, and corporate in-house counsel play a pivotal role in shaping the strategies of the major economic actors and in developing common rules and standards of behavior for particular industries and areas of economic life. Moreover, private lawyers are playing an ever more important role as intermediaries between the world of economic exchange and the world of the state and public law. Lawyers are at the same time the representatives of private clients and officially-

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sanctioned interpreters of public law, and play a major role in shaping the boundary between the public and private spheres, both within societies and at the international level. Simply put, private law and lawyers are at a crucial nexus in the process whereby the governance of economic activity is established, enforced, and modified. It is therefore all the more surprising that private law and lawyers are almost totally absent from the literature on the role of the state and non-state actors in contemporary governance.4 While there is substantial scholarship on the activities of corporations themselves in structuring markets, and a growing interest in the role of accountants, bond and credit-rating agents, and insurance firms, lawyers are generally ignored in the social science literature on governance. My sense is that this ignorance is a product of both a sense of our inadequate knowledge of the whole world of private law and of a general disposition to think of lawyers as simply agents for the interests in whose name they act. But we need to begin the process of overcoming this ignorance, even if it means taking a plunge into unfamiliar waters and risking the resistance of legal specialists. And we can draw on the beginnings of a literature that approaches lawyers as active players in the shaping of their environment. In the rest of this paper, I will try to sketch a picture of this literature and what it tells us so far, and to provide some direction for future research.

Private Law and Lawyers as Agents of Governance.

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This is evident both in the literature on non-state actors or private authority already cited, and in the best general works on globalization, such as Held, et al., 1999 and Scholte, 2000 11

My discussion in the following three sections will work outward from the American context, a direction dictated by the importance of American economic and political power in shaping the globalizing economy and by the limits of my current knowledge. I begin with the role of the legal community in the history of the American political economy, and then turn to look at the transformations in that role over the past three decades. In the final section, I turn to the growing international role of American law and lawyers as an entrée into the role of private international law and lawyers in the global political economy. 1) Private Law and Lawyers in American History. It was Alexis de Tocqueville who first emphasized the central role of lawyers and the legal system in the American polity. Writing in the 1830’s, Tocqueville identified lawyers as forming the political and social elite in the new country, easily moving between and linking the private world of commerce and the public world of legislation. In this time, there was little of the current professionalism in legal education or practice, a fact which facilitated the ability of lawyers to perform these tasks. During the same period, as historians following John R. Commons (1957) and J. Willard Hurst (1982) have emphasized, the American legal order at the state and national levels played a crucial role in facilitating the settlement and exploitation of the continent, and thus in providing the means and direction for rapidly expanding economic growth. The judiciary played a central role in molding law for this purpose, via constitutional interpretation and the application of the doctrines and rules of the common private law. By the 1880’s, the world of American law was undergoing fundamental changes. As bar associations began pushing for greater professionalization, the completion of a

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law degree was becoming a requirement for the practice of law, and law schools sprung up around the country. The most prestigious of these schools quickly adopted the “case method” of teaching law, which had been pioneered at Harvard. This approach, in which students develop the ability to articulate and apply legal doctrines through the analysis of the evolution of case law, was well adapted to the skills necessary in a common law system. Legal education, in turn, was focused on the traditional areas of private law – property, torts, contract, and civil procedure – and emphasized the role of the lawyer in the world of commerce and business. Whatever might have been the ideology of the profession, this kind of education served (and still serves) the aim of developing individuals who are active in creating and manipulating rules to promote the interests of their clients, and thus in advising clients in the pursuit of their business. It was in this same period that the corporate law firm emerged as a form of practice that would come to be seen as the elite of the profession.5 This kind of firm combined the contacts, reputation, and ability of a number of partners with a large group of associates among whom the detailed work of legal research and writing could be divided. In turn, the firm combined a number of specialties associated with business law – corporation law, litigation, the management of trusts, employee relations, etc. – in one place. Together, these qualities made the corporate law firm an essential ally and resource for the large national corporations coming to dominate economic life. Over time, corporations would develop close relationships with one major law firm, and this firm would handle much of the work of advising the corporation on the legal constraints surrounding its activity, while serving as a key actor in promoting and defending the

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For the history and evolution of the large American law firm, I rely primarily on Galanter and Palay, 1991. 13

corporation’s interests in relation to other economic actors and with the legal system more generally. This latter role would be a crucial venue for the corporate law firm to emerge as a central player in the governance of the new industrial economy. As Morton Horwitz (1992) has shown, corporate lawyers and law firms were crucial players in developing the legal framework for the recognition and protection of the industrial corporation, a framework that dominated the American political economy until the 1930’s. Law firms accomplished this in a variety of ways – as the training ground for future members of the state and federal judiciary, as the vehicle for translating emerging academic legal doctrines concerning property and business organization into established precedent for interpreting statutory and constitutional law, and as influential lobbyists who shaped the process of drafting and implementing legislation. Between their role as business advisors and strategists, and their role in shaping the personnel and doctrines of the judiciary, American corporate law firms of the early 20th century provide a paradigm for understanding how non-state actors can play a crucial role in the governance of economic activity. The New Deal era in American politics brought with it a new role for lawyers in shaping the political economy. The Roosevelt administration brought a new generation of lawyers into public life, many with more public than private experience and often critical of existing patterns of corporate power. These lawyers were important agents in the conception, development, and implementation of the new structure of regulatory authorities designed to reign in the abuses and power of the private corporation in the political economy. While the relations between the New Deal lawyers and their

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counterparts in private practice were often hostile, the key role of the former in the emerging regulatory state helped ensure a continued close relationship between the legal establishment and the state, and worked to ensure that “the law” as a set of doctrines and habit of operation would be central to the administration of the regulatory state in the U.S. By the 1950’s, though, the relationship between the legal community, the corporate economy, and the state would go through a further transformation. As the New Deal evolved into a moderate program of reform, and as large corporations became the accepted vehicle for economic power and prosperity, a new corps of corporate lawyers emerged as central figures linking the state and the governance of the economy. Throughout the post-war years, the leading figures in the most prestigious New York, Boston, and Washington law firms would circulate between government posts and private practice, serving to bridge the gap between the interests of their corporate clients and the priorities of the state. The corporate law firm re-emerged as a central player in managing relationships between corporations, shaping the development and interpretation of private law on their own and via their close ties to the highest levels of state and federal judiciaries, and as key players in shaping public policy regarding the economy. 2) Law as a Governance Mechanism in the Competition State. The turbulence and transformation in the U.S. economy since the 1970’s, in turn, has brought about substantial changes in the role of private law and lawyers in the governance.6 As we know, in the past three decades the identity of the major industries and firms in the U.S., the relationships between corporations, labor, and the state, and the

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Once again, Galanter and Palay, 1991 remains the best source on the following material, but there are good accounts as well in Dezalay and Garth, 1996 and Trubek, et al., 1994. 15

ways in which firms manage their relationships with each other have all undergone substantial changes. The impact on private law and the corporate law firm has been multifaceted, but some crucial developments stand out. • First, long-established relationships between corporations and particular law firms have been strained, as these firms either disappear, develop more sophisticated in-house legal offices, and/or shop around for outside legal advice. As a result, corporate law firms have become more aggressively entrepreneurial in searching out business opportunities, and have focused on offering unparalleled skills in large-scale litigation. • Second, corporations themselves have been increasingly attracted to the idea of litigation as a regular aspect of business strategy for managing relations with competitors. As the scope of government regulation has grown and the relationships among corporations has become more competitive, the processes and doctrines of civil litigation have come to play an ever more important role in the governance of American economic life. • Third, the growing emphasis on litigation as a way of attracting clients and the growing demand for it among clients have shifted the balance of power within corporate law firms away from the “corporate lawyers” – who functioned as the key advisors to corporations in the past – toward the litigation division. Rather than promoting the quiet resolution of disputes in the name of continuity, then, large law firms now offer aggressive competitive strategies and the proper model for business success.

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• Finally, as the world of private law has come to be dominated by aggressive business competition and litigation, both judges and the leading law firms have increasingly become advocates of the ideas associated with the “law and economics” movement. From this perspective, the purpose of the system of civil law is to create the conditions necessary for the kind of competition conducive to the promotion of economic efficiency in the larger society. Corporate law firms and key elements of the American judiciary have become important advocates for this version of law in their own arguments and decisions, and in political debates over the regulation of the economy. Of course, many of the changes in the structure of the economy and in the nature of civil law had their origin in attempts by policy-makers to promote a more marketoriented and competitive economic order (see Dethrick and Quirk, 1985 and Eisner, 1993). But this quick survey should help indicate the central role that private law and the legal community have played in reorganizing the American economic system, a role very similar to that played by these same forces a century ago. Moreover, the dominant orientation of policy-makers towards deregulation and the reliance on market mechanisms will only enhance the role of lawyers as key players in the management and governance of economy, and as intermediaries between the major economic players and the public sector. To be sure, this account is only a beginning sketch of a complex phenomenon. But it seems clear to me that the role of lawyers in governing the emerging economic order fits well with the pattern of the delegation of authority to non-state actors scholars have begun to identify in the contemporary political economy.
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3) Private Law and Lawyers in the Global Economy. The study of the role of private law and lawyers in the U.S. economy would seem a natural basis for an examination of their role in the globalizing economy. After all, it is widely acknowledged that American firms have been central to the process of globalization, and that the spread of American models of business organization and commercial practice is a central aspect of globalization. On the whole, though, we have little scholarship to go on in this area. Even in the literature on the law, international law and lawyers is a quite specialized and arcane field and its study has yielded much less of general use to this project, as far as I am currently aware. Therefore, in this area of the project – which I hope to be the focus of my work – we have the least to go on initially. Nonetheless, it does seem possible to present an initial overview and set of hunches. For the first three decades after 1945, the regulation and governance of international economic activity was very much a matter of public international law. Markets were only gradually re-opened to trade and investment, and much of this activity was carried out under the rubric of the General Agreement on Tariffs and Trade (GATT) and its various amendments and extensions. Governments played a central role in the negotiation, interpretation, and application of these agreements, and the bulk of the attempts of private corporations to influence this process occurred through lobbying and consultation with national governments. Indeed, this kind of activity still represents the bulk (most likely) of corporate activity to shape the governance of international trade. Important changes began to occur in this area in the 1970’s, however. In their pioneering work on this issue, Dezalay and Garth (1996) show how the changing patterns of domestic and global economic relationships during this time contributed to a shift in

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the role of private law and lawyers in the global economy. First, the emergence of a whole new set of problems surrounding the transformation of the global oil industry – especially the issue of nationalizations – created a new “field” of legal conflicts. Given the propensity of the parties concerned to resolve these conflicts “privately,” much of the resulting negotiations took place under the rubric of the agencies for international commercial arbitration in Europe, and especially in Paris. Here, a long established but insular community of lawyers, judges, and arbitrators was faced with the challenge of providing an effective forum to which the parties to such disputes could be lured to bring their disputes. But the disputes over the oil and energy industries were of a new and more adversarial nature than the arbitration regime had been accustomed to. This proved an extremely promising opportunity for new players, and it was the largest and most prestigious members of the American corporate law community that took advantage. The new entrepreneurial approach of these firms, combined with their new emphasis and expertise in large and aggressive civil litigation, proved attractive to the many players in these disputes who either distrusted the insular world of European arbitration or had become used to more aggressive approaches to defending their interests. In sum, the emergence of an arena of large and complex global litigation problems provided a crucial opening for the expansion of American law firms and legal methods and conceptions into the global arena, and was central to the first real steps to the internationalization of the practice of American (and to some degree British) corporate law firms.

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At the same time, though, other opportunities were opening for the same firms.7 As U.S.-based corporations adopted more competitive business strategies in Europe and elsewhere, and became more comfortable with the use of aggressive litigation as part of these strategies, they began demanding similar sorts of representation abroad. Naturally enough, they turned to their familiar allies in the U.S. legal community, who used this route as well to strengthen their presence in Europe and to some degree in Asia as well. But the demand for their services did not come exclusively from U.S.-based clients. As Trubek, et al. (1994) emphasize, the process of deepening of the European Union associated with the 1992 project was central to the expansion of American legal expertise. With the reduction of barriers to investment and trade across borders, European firms were increasingly confronted with an uncertain legal and regulatory context in which they had to manage operations subject simultaneously to quite varying regulatory environments. In contrast to the relatively insular national bias of most European law practice, American firms had extensive expertise in the problems of managing business activity in diverse and competing jurisdictions, a product of federalism at home and the longer history of multinational activity in large U.S. corporations. Thus, European firms began enlisting the services of American firms in this new context, further deepening the presence of American lawyers abroad. American firms could also offer another kind of expertise. As Giandomenico Majone (1999, 1997) has shown, the growth of the common European market went along with substantial attempts to replace old models of economic management with a framework of independent regulatory agencies. In essence, this framework was modeled

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This discussion relies upon Abel, 1994, Roorda, 1993, Shapiro, 1994, and Trubek, et al., 1994. 20

on the approach to business regulation developed in the U.S. during the first half of the century. American firms had long practice in helping businesses adapt their strategies to this kind of regulatory framework and work with regulators to shape the rules and their application in ways conducive to business interests. As the European Union began relying more on law and legal agents to govern activity, American lawyers were successful in selling their expertise to European firms. Moreover, the scholarship in which this process is traced suggests, if only anecdotally, that American lawyers at the same provided models and concepts of law that increasingly shaped the emerging field of European law. As the E.U. and its member states encouraged the delegation of authority over economic activity to public and private legal and corporate agents, they created a context into which American lawyers and legal models could flow easily. In my own work, I have found evidence of a similar process emerging in Eastern Europe.8 In the 1990’s, American lawyers – in cooperation with U.S. government agencies and international institutions such as the World Bank – streamed into the former communist states offering advice and models for legal reform. At the same time, American and European firms began entering newly opened markets, and some local firms began to adapt themselves for participating in the global economy. While the official, “top-down” reform efforts have had little success, the integration of these local areas into the global economy has proven a powerful force in creating demand for European and American legal services, among both foreign corporations and local firms who want to be players in the international realm. The expansion of American lawyers, firms, and legal practices into these new markets, as in the more significant case of the

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See Cohen, 2000; my discussion there relies heavily on de Lisle, 1999. 21

EU, has been based on emergence of an indigenous demand for the kind of legal practice and advice now seen as necessary for success in the global arena. Of course, the current framework for governing international economic life has now been reshaped by the creation of the World Trade Organization (WTO) in 1994. On one level, the WTO amounts to the creation of a substantial new framework of public international law and legal practice. But it has also further stimulated the evolution of private international law and provided new opportunities for lawyers to actively shape its direction. To begin with, new work on the negotiation of the Uruguay Round of GATT and the creation of the WTO indicates that global corporations and their legal representatives played a crucial role in shaping the structure of this new order, most clearly in the area of intellectual property law. At the same time, though, it appears that the WTO itself works to encourage and require corporations and other “private” actors to take a more active role in interpreting trade law and in resolving disputes under that law. In the words of P. K. Vandevert, the International Trade Counsel for Delphi Automotive Systems Corporation (a division of General Motors), In the WTO environment, importers, exporters, multinational corporations, or any business engaged in the movement of goods across international borders (collectively referred to here as “traders”) will be required to restructure the ways in which the engage in cross-border transactions. In the WTO environment, trades will have an increased responsibility because they will be charged with making initial legal determinations as to the admissibility, tariff classification, and dutible value of the goods they import and export, instead of the largely passive role of merely reporting to the Customs authorities the facts of the transactions these traders have enjoyed in the past. This increased responsibility will require traders to acquire or develop knowledge, expertise, and policies that actively manage their respective international trade flows. (1999: 108-09) All of this suggests that the emerging regime governing global economic activity, like those developed at the domestic level, will place heavy emphasis on delegating the
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authority and responsibility for “governing” to the major non-state actors involved in that activity. Given the growing reliance of global economic actors on legal specialists, and the increasing “legalization” of the management of the global economy, it seems clear that private law and lawyers will play a more and more crucial role in governing the global economy. This brings us back to the beginning of the paper, and highlights the necessity for research into the ways in which private law and lawyers help govern contemporary economic life, and the implications of this role for the future of political life in a globalized economy. Conclusions: A Research Agenda. Should we care about the role of American law and lawyers in shaping the structure of private governance in the global economy? On the basis of the review of the theoretical literature and emerging research, it seems to me imperative that we should. International private law has and will play a crucial role in the organization of global economic power and activity, and American legal models and lawyers have already played an important role in shaping this legal structure. In the pursuit of this research agenda, it seems that there are a number of central questions I will need to address, which can be organized tentatively into the following four categories. • What is the best way to conceptualize the development of a private legal order, especially at the international level? The previous account makes it clear that private law emerges out of a close interaction between the practices of business and existing and emerging legal ideas. Is the resulting set of doctrines simply a codification of existing business practices, or are the latter significantly influenced by the independent development of legal doctrine, and statutory law? Are private lawyers
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today simply aggressive agents of the strategic goals of their clients, or do they bring their own intellectual and normative outlook to bear on the ways these goals and strategies are developed? If the latter is the case, what are the sources of this outlook, and how is it related to developments in the larger political and intellectual context? What, if anything, is distinctive of the outlook and sociology of the international private legal order and those agents who practice primarily in this area? • How is the development of a private legal system related to the sphere of public law, both domestically and internationally? This is especially important if we are going to think of the private legal order as having been delegated a degree of public authority over the governance of economic activity. After all, the legal institutions of private law are created and sustained by the public authorities, lawyers practicing in this area are licensed by these authorities, and all evidence suggests that there is a constant interaction between legal agents in the private and public arenas. How does this interaction shape the unique role of lawyers in their role as agents of private interests? Does this process help sustain a level of independence and autonomy for private law and lawyers? As a result of this private-public nexus, are lawyers in a significantly different position from other “non-state” agents who exercise authority over economic activity? • How is the development of a private international legal order related to the evolution of domestic/national legal systems? International legal practice, after all, does not exist in a fully independent arena, but involves the continual movement between national and global institutions and norms, and between different national systems. Moreover, as my research into legal change in the former communist states indicates,
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there is now intensive competition between American and European lawyers and legal models for influence in shaping international legal norms. Moreover, individual states – and especially the U.S. - have been aggressive in promoting the spread of their own legal models, often through the use of extra-territorial jurisdiction. How does this competition between legal models, and process of negotiating between domestic legal systems, shape the development of international private law? If the international legal system develops unique and widely shared approaches to particular legal problems, do these in turn rebound to shape domestic legal systems through the border-crossing activities and interests of corporations and legal agents? How are the rules governing economic activity influence by similar processes in other areas – i.e. international criminal or environmental law? • Finally, what are the implications of these questions for understanding the evolution of the state’s role in the globalizing political economy? Much of the work in the area of international law to this point reinforces the sense emerging from the theoretical literature that states and their sovereignty are not going away, but are being reconfigured. What light does the emergence of international private legal authority shed on the process of the delegation of parts of sovereign authority? How does the exercise of that authority shape the priorities and purposes of states? What can we learn about the increasing importance of the exercise of sovereign authority beyond national borders, both within and outside international organizations? Where does this leave the state’s obligation to protect the interests of its constituency, and what is that constituency in a more globalized world?

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This is a challenging set of questions, but they are familiar to all who are working on the problem of the governance, global and national, of contemporary economic activity. The analysis of the changing world of private international law and the agents who make it work promises to make important contributions to these larger questions, and hopefully to ground the discussion more firmly in day to day context in which economic agents pursue their interests and objectives. Political scientists have long been aware of the fundamental role of the legal framework in shaping the evolution of capitalist economies. It seems clear that, in order to gain a handle on the increasingly international and/or global context of capitalism, we will need to extend and deepen this awareness via the analysis of the increasingly important international dimensions of this legal framework.

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