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| Issues in International Governance |
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January-March 2006 |
International governance has long been a matter for States to deal with. Typically, sovereign actors establish their own domestic laws and institutions, and then enter into international agreements. The international order that emerged after World War II was the most coherent and comprehensive illustration of this model.
States are now being overwhelmed by market forces and the micro-foundations of this fluid order are only poorly or partially known. This raises an elementary problem of regulation. Private conflicts may of course be settled bilaterally, in an amicable way. But if this fails, as often happens, the next step is to call for the intervention of a neutral third-party, the most remarkable one being international private arbitration. When two large companies cannot settle a dispute, they basically each choose an arbiter who will agree on a third one. The parties will then proceed with hearings, etc. In principle, the “award” then produced is binding on the parties. If there is a dispute either on the argument or the procedure, the parties shift to a public, official tribunal, that will act as a court of appeal or will confirm the arbiters’ decision. Then the court brings to bear its own guarantees of execution – i.e. those of the sovereign state under which the discrete umbrella arbitration took place. This highly efficient and largely unknown institution plays a major role today in the regulation of globalised markets. At first sight, it operates as a purely global institution, in which the parties choose both the law and the judges they prefer; but the strength of the sovereign is still there, as a distant though decisive enforcer. Hence it may be asked whether this is a model with a possible, much larger future. Is it possible to imagine a globalised world in which regulation could be based much more consistently on such a mechanism?
At least two alternative institutions should in fact be brought into the picture, which will not actually be superseded, as far as can be foreseen. One is, again, the sovereign States, which may for instance contest arbitration and oppose its sentences – as some developing countries sometimes do. An alternative case arises when private actors – say American multinationals – opt for, and impose on their partners their own law and domestic jurisdiction (the New York court, for instance). De facto, there is today clear competition between US law and courts on the one hand, and international arbitration on the other, as a more transnational principle of governance.
On the macroeconomic side, the most striking feature is the scrapping of the so-called Washington Consensus. In addition, drawing on the lessons of the Asian and Russian crises, emerging market countries have massively rejected foreign indebtedness denominated in dollars. They have become surplus countries and they have accumulated foreign exchange reserves. They have been busy repaying their debts and they have been keen not to depend on the IMF any longer. It follows that the function of the IMF as the watchdog of the solvency of sovereign debts and as the provider of guidance for “correct” economic policies of debtor countries has nearly disappeared. The attempts to reform IMF's status have failed both in granting it a lender-of-last-resort role and in adopting the sovereign debt restructuring mechanism. The latter is no longer timely with the change in the international financial position of emerging market countries. Because of the oncoming structural changes in the global economy, the IMF needs a complete overhaul that acknowledges the final demise of the Bretton Woods order.
Multilateral institutions are now relatively weakened. However, the emergence of better-quality, international public goods still depends upon them, and upon the willingness of their members to co-operate. National sovereignties and private self-regulation are strong principles affecting collective action, and they do a lot to support the day-to-day operations of globalised markets. But they certainly will not solve the most pressing issues of the time – development, public health and global warming for instance. A fair guess is that the performance of international governance in the years to come will very much depend upon the division of labour that will emerge between these three principles – private self-regulation, sovereign action, and multilateralism. |
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AGLIETTA, M. "Architecture financière internationale : au-delà des institutions de Bretton Woods" Economie Internationale N°100, 4Q 2004.
GARAPON, A. & ALLARD, J.“Les juges dans la mondialisation : La nouvelle révolution du droit”, Le Seuil-La République des Idées, Paris, 2005.
SGARD, J. “Argentina’s Debt and the Decline of the IMF”, La Lettre du CEPII N°241, January 2005.
SGARD, J. “IMF in Theory: Sovereign Debts, Judicialisation and Multilateralism”, CEPII Working Paper N°2004-21, December 2004.
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STONE SWEET, A. "Judicialization and the Construction of Governance", Comparative Political Studies, Volume 32, No. 2, 147-184, April 1999. |
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