by Alberto Mazzoni - Professor of Commercial Law, Catholic University, Milan

 

The “Lecce Framework” of June 13, 2009 has once more confirmed the common intention to overcome the regulatory deficit showed by the actual financial crisis by way of setting or reinforcing common principles and standards on conduct of international business and finance. This intention must be supported by new ideas and proposals but must also build on existing initiatives, since a number of international standards and standard-setting bodies do already exist, and shall mainly focus on five sectors: a) corporate governance, b) market integrity, c) financial regulation and supervision, d) tax cooperation, and e) transparency of macroeconomic policy and data.

 

The general approach of reinforcing governance by starting from the recognition of a wider and more influential role of soft law is to be shared. However, there are a number of issues that need to be carefully evaluated, since the real question seems to be what kind of governance we are ultimately aiming at.

 

In the first place, it is well-known that the reason why the Financial Stability Forum (FSF) – now transformed into the Financial Stability Board (FSB) – was created was exactly to reinforce international standards and coordinate standard-setting bodies under the same umbrella, so as to have a consistent implementation system. Indeed, the FSF selected a list of existing standards which were thought to be of key importance for the prevention of international crises, promoted their implementation and mechanisms for review, and also required the IMF and the World Bank to sit together in a joint exercise to assess whether States would adequately consider these as precondition for development and stability. In short: we had already attempted to go the way we are now re-advocating, but the attempt has proven to be unsatisfactory, or at least not sufficient.

 

In the second place, the five selected sectors of intervention all require different tools and governance mechanisms. They indeed touch upon very diversified matters and require involvement of different actors. For each of them a distinct analysis of what governance should mean may be required. Anti-money laundering schemes, for instance, might require a combination of soft and hard law, cooperation among tax authorities but also banks and supervisory authorities. On a quite different level, corporate governance would involve analysis of companies structures and the interaction between corporate law and the law of the market, involving not only different authorities but also different economic and legal approaches.

 

Finally, macroeconomic data and objectives do inevitably share a common ground with some aspects of financial regulation, but we should never forget that macroeconomic policies of States require to be coordinated under different parameters than regulation of behaviour of private actors. In these contexts, the role of international organizations such as the IMF and the World Bank may have to be more political and more conscious of the need of global cooperation among States than that of a mere warden or custodian of the respect of international standards.

 

The main purpose of these brief and heterogeneous comments is to stress that in fact, behind the label of “international standards”, “regulation” and even “governance”, lay a number of articulated alternatives that need to be carefully weighed. What I am saying is that it is not the mechanism as such which has to be discussed – after all, the mechanism or the panoply of mechanism as such has been in place since long -, but rather the oil that we intend to pour into such mechanism.

 

For this, I would spend a few considerations on what “soft law” exactly is: standards are not simply “non-binding” instruments. They should be the result of a bottom-up formation of rules, made out of general agreement among all relevant actors. They should be so generally shared that their force reside in their inherent capability to persuade rather than to be imposed. Assuming that this quick definition of the essence of soft law is shared, it implies that standards can only work if they are perceived by all relevant stakeholders as their-own, and as representing a common set of values that deserve to be shared.

 

This is not an easy task in such a complex world as the one we live in. However, a full involvement of certain communities that may be effective conscience builders at the international level may lead to results easier to accept. This might mean to start reconsidering a larger involvement of international organizations and a diversification of tasks.

 

For instance, there are international organizations or bodies having as their main scope the unification of law. These can produce international conventions but also model laws and principles. They already have strong partnerships with civil society, although their products are political in essence and pass through the Cabinets of States. Unquestionably, these institutions should be directly and intensely involved in the process of setting standards.

 

In parallel, judges, whether in national courts or in international contexts, should increasingly inject in their interpretation of the rules the awareness of the legal importance of commonly accepted legal standards.  The law has (and must resume full awareness of having) ethical foundations. The common standards are, in substance, a conscious compilation of a number of ethical foundations of the law.  As history tells us, judge-made law is often a better promoter of the socialization of ethical rules than the legislative attempt to crystallize them in technical rules.

 

Finally, a number of organizations, including the OECD, the IMF and the World Bank, provide technical assistance to States: this activity could and should be a powerful vehicle for the spreading of common principles and their absorption and appropriation by each addressee State, if only they could be better inserted in a consistent frame and gain a better reputation.

 

Indeed, the Lecce Framework declares to lay on three focal concepts: property, integrity and transparency. Each of these is a prism containing a plurality of meanings. A way to overcome the difficulties of the past could be to start asking what we exactly mean with each of these, what we mean to protect, how people could believe these are relevant to our living together, whereafter the task of shaping common standards and ultimately of identifying by whom they should be shaped in the different areas would be greatly clarified and facilitated in implementation.