Trend Report Rulejungling When lawmaking goes private, international and informal Based on nine projects with leading researchers on multilevel rulemaking Trend Report Rulejungling When lawmaking goes private, international and informal Facilitated by HiiL Maurits Barendrecht, David Raič, Ronald Janse, Sam Muller This report is based on the following research projects commissioned by HiiL: The Internationalisation of the Rule of Law: Changing Contexts and New Challenges, Project Leaders: Professor André Nollkaemper, Professor Randy Peerenboom, Professor Michael Zürn Informal International Lawmaking, Project leaders: Professor Joost Pauwelyn, Professor Jan Wouters, Professor Ramses Wessel Convergence and Divergence of Legal Systems, Project leaders: Professor Pierre Larouche National Constitutional Law in a Globalising World, Project leader: Professor Leonard Besselink Private Transnational Regulation: Constitutional Foundations and Governance Design, Project leaders: Professor Fabrizio Cafaggi, Professor Linda Senden, Professor Colin Scott General Rules and Principles of International Criminal Procedure, Project leader: Professor Göran Sluiter Harmonizing Private Law in Europe: A Mission Impossible? National Resistance against the Europeanisation of Private Law, Project leaders: Professor Jan Smits, Professor Martijn Hesselink National Judges as European Community Judges, Project leaders: Professor Mark Wissink, Professor Fabian Ambtenbrink, Professor Marc Hertogh Judicial dialogue leads to a more coherent transnational legal system, The Changing Role of Highest Courts in an Internationalising World, Project leaders: Professor Ton Hol, Professor John Bell, Professor Andrea Lollini The project leaders have commented on drafts, but HiiL is solely responsible for the content of this report. HiiL Trend Report Rulejungling 1 Table of Contents Executive Summary 3 1. Every Body Makes Rules 9 1.1 Introduction 10 1.2 Trends and Triggers 13 1.3 Aims of this Report 22 1.4 Data Used and Methodology 25 2. How to Assess Multilevel Rulemaking? 27 2.1 Rule of law safeguards 28 2.2 Economic analysis of rulemaking failure 31 2.3 Assessing impacts and outcomes 32 3. Opportunities and Coping with Challenges 34 3.1 More rules, more protection, generally 35 3.2 Participation hard to achieve 37 3.3 Transparency of processes: Not easy to practice what you preach 41 3.4 Accountability spread thinly 46 3.5 Litigation and access to justice coping with all these rules 48 3.6 Avoiding bureaucracy by smart compliance 52 3.7 Rather effective? 56 4. Changing Roles of Professionals 60 4.1 Rule makers in parliaments see their jobs change 61 4.2 Legislation professionals need new strategies 62 4.3 Corporate lawyers leading the way 65 4.4 Judges and lawyers cope if they specialise 68 4.5 Justices in highest courts: change is coming 70 5. The Future of Rulemaking 74 5.1 Can we Trust Multilevel Rulemaking? 75 5.2 Fundamental New Roles for the State 78 5.3 Looking for trustees: the future of the rulemaking profession 79 List of Contributors 81 List of Abbreviations 82 HiiL Trend Report Rulejungling 2 Executive Summary Rulejungling and trust For most of the 20th century, the power to set rules was concentrated in the nation state. This changed when international organisations started to appear on the scene; it changed even more dramatically in the age of globalisation, where private, informal and international rulemaking is becoming more and more prevalent. Now, all you need to create rules is a well-organised group of people and a website. Such a body can set rules for others and try to gain legitimacy, often with rather minimal control by national lawmakers. Although many of these new rules clearly benefit our safety and our prosperity, the new ways of making rules also cause widespread distrust. Communities want to govern themselves and ever more rules coming in from the outside sharply contrasts with this desire. One way we have learned to anchor trust is through rule of law, a set of governance principles on accountability, transparency, and access to justice. These principles developed alongside the nation state, which is closely connected to centralised rulemaking: a nation, living within set borders, who makes and enforces the rules that govern its members within those borders. Even if rulemaking power is in the hands of a small elite, where it resides is at least clear. But what happens if the rules are not set primarily within that nation state? Can international or transnational institutions also bind and connect communities to shared values and rules they recognise as their own? Or are invisible elites from abroad now calling the shots? For many people in the world, the new rulemaking processes are hidden, creating fear that the others “out there” will grab the biggest slice of the pie, with rules and lawyers merely dressing the windows. How can we trust the private, informal and international rule making processes? What do we need from those involved in guarding these processes? That is what we explore in this report. Trends Nowadays, rules come from many directions. Norms and guidelines that enable a safe flight from Paris to Buenos Aires are produced in national parliaments, in Brussels, at the UN, but also by companies, non-governmental organisations (NGOs), trade organisations, at meetings of the world’s leaders or by other informal mechanisms. Standards regarding emissions or child labour are set at local, national, regional and international levels. Courts, arbitration tribunals, regulatory agencies, complaint commissions, supervisory bodies, experts and media all play their part in ensuring compliance with standards for financial services, the quality of coffee and the trade in diamonds. Companies increasingly commit themselves by unilateral policies on their websites, setting rules for themselves, instead of waiting to be regulated. In general, state-based legislation is becoming less prominent and rulemaking by multilateral treaties between states is in retreat. But we don’t see fewer rules. Overall, rulemaking is becoming less formal, more private, less hierarchical, more competitive and more contractual. Guidelines, aimed at achieving clearly stated goals, are now more frequent than binding rules. What triggers this development? It can be partly explained by an ever-increasing need for effective coordination. We need quality standards, safety requirements and ways to deal with the possible impact of activities on other persons. The new rulemaking approaches have gradually become more attractive because the most relevant stakeholders can be invited to participate in them and the best expertise can be mobilized. Rulemaking in these networks does not require formal consent from participants, making it easier to achieve results. These open networks can learn more quickly about effects. In this way, private rules gain a competitive advantage. Formal laws and enforcement by regulators, police, forced sale of assets and detention are still needed. HiiL Trend Report Rulejungling 3 But they are increasingly used as an option to create incentives for adequate private rulemaking: “You solve the problem together or be legislated”. Usually, stakeholders prefer a private, negotiated solution to the one imposed from above. Private, negotiated rulemaking seems to be less attractive when interests are not aligned. When distributive issues dominate, bargaining can easily fail, and the more powerful interests may prevail. Informal rulemaking networks are now also being set up to issue standards for the relations between states and citizens. Unemployment benefits for those losing their jobs because of globalisation, smart tax collection, preventing police corruption, child support after divorce and adequate responses to domestic violence; for each of these issues there are guidelines by the Organisation for Economic Co-operation and Development (OECD), protocols suggested by experts or standards developed by international groups of academics. Every state is now pressured by other states, companies and citizen groups to change its rules in the direction of these best practices. Many people experience this as losing autonomy and being pushed around by Brussels or Washington, or even worse, by the powerful interests that are well- represented over there. Approach in this report This report explores the benefits, the challenges and the emerging best practices of multilevel rulemaking. We focus on transnational private rulemaking by networks of companies, national regulators and other stakeholders and on informal rulemaking by government agents. This is where most innovation took place during the past 20 years. At this stage, there are no tools to evaluate the vast worldwide rulemaking activity in any comprehensive way. Based on a review of the literature, on 10 major research projects and on the knowledge embedded in HiiL’s own international rule of law networks, we used three perspectives for evaluating the new rulemaking environment. Are rule of law values guaranteed? Do the new forms of rulemaking decrease or increase the probability of what economists call regulatory failure and regulatory capture? And what can we say about impacts and fairness of outcomes? The benefits: Better collective brains Rules are our collective brains. They are a repository of knowledge about how to do things together. More links and more nodes between rule makers increase our capacity to generate guidelines for cooperation. Generally, citizens and businesses benefit