Archive for December, 2009

Conditions in a globally fragmented world 

Globalisation has been described as the intensification of social relations worldwide in a way that links distant localities and making sure that local activities are shaped by events occurring many miles away (Giddens, A [1990]). At the same time as globalisation, as part of a process called fragmentation, decision taking and lawmaking is becoming more localised (Picciotto, S [1997]). 


Intuitively, both processes, fragmentation and globalisation, are connected, but the nature of the interconnection is unclear. Fragmentation may be a dialectical reaction to globalisation – having decisions taken remotely causes communities to require a larger say in their immediate environment. Alternatively, fragmentation could be a complementary reaction to globalisation – where decisions requiring shared solutions are taken at the supranational level, while decisions with local consequences are taken at the local level. Regardless of the relationship between globalisation and fragmentation – either as a relic, dialectical reaction or complimentary phenomenon – one of the primary effects of both processes is their influence on the regulation of transnational conduct.


Regulatory arbitrage – exploiting cracks in the system

There are particular features of the interplay between globalisation and fragmentation that accentuate the difficulties with the regulation of conduct that cuts across national boundaries. Concerning the exercise of regulatory power, the interaction between globalisation and fragmentation has regulatory consequences of which the subjects of regulation are cognisant, and which influence the regulatory choices taken by states. Arbitrage in the context of transnational regulation suggests that the subjects of regulations may be able to take advantage of inconsistencies or differences the between the regulatory regime in two or more states to achieve a favourable result than would have been possible if their actions were regulated by one state.


It is not only the subjects of international regulation that exploit loopholes in the rules. States are also complicit as they compete by lowering their regulatory regimes to attract investment. The classic exposition of competition between states suggests that where there are two or more regulatory regimes and no barriers to mobility, regulatory subjects will choose to move their activities to the least restrictive regulatory regime. Therefore, to forestall the possible loss of investment, States interested in maintaining of increasing investment will reduce the regulatory burden on individuals. This model of regulatory arbitrage is hardly of universal application and once other variables that determine the location of corporations are taken into account, it is clear that there are other factors that determine the decision to move to an alternative state.


Solutions to regulatory arbitrage and their limitations

There are at least three theoretical solutions to the problems of regulatory arbitrage. The first option is to deal with transnational problems through the unilateral application of domestic laws. Although a potential solution to the problem of regulatory arbitrage, the unilateral application of domestic laws tends to exacerbate conflicts between States that have overlapping regulatory regimes over the conduct of regulatory subjects. Furthermore, some transnational legal problems, the bribery of foreign public officials being a classic example, are not amenable to unilateral solutions. The second alternative is to expand bilateral and regional cooperative arrangements. The limitation of use of these cooperative arrangements is that they only apply to the direct participants, which would often not include the states with whom cooperation agreements would be the most beneficial.


A third option, which happens to be the option favoured in the international community, is to harmonise national regulations through the establishment of unified international rules. This approach has several flaws, but I will list two obvious problems with this approach. The first problem is that even in instances where States are successful in their attempts to harmonise regulations, the fact that regulatory outcomes are dependent on a myriad of not only substantive but procedural rules, the right regulatory outcome cannot always be guaranteed. This problem is not unique to the regulation of transnational conduct and applies to any attempt to harmonise the regulatory regimes in disparate legal systems. The second problem concerns the effect of selective enforcement on transparency and predictability of legal rules. The harmonisation of regulatory regimes with disparate levels of enforcement by states is less transparent and predictable to the subjects of regulations than different regulatory laws. Thus, the harmonisation of rules may be less effective than the application of inconsistent regulations.


Rethinking transnational regulatory convergence

From a pragmatic point of view, the current framework for transnational regulation is structurally flawed and that the discourse around the effectiveness of the regulatory regimes only serves to distract from the actions required to bring about fundamental changes in the system. In other words, the discourse advocates for more less or no regulation and ignores the way in which multiple channels of interaction within our systems shape and sometimes undermine the very goals that they seek to achieve. In many respects, the challenge in getting diverse States with different cultures and interests revolves around not just differences in moral values, but also differences in what are considered the appropriate strategies and in the ultimate policy outcomes desired.


Over the last twenty years, the articulation of shared norms on transnational problems have intensified, moving rapidly (although not uniformly) towards a shared vision of the appropriate solutions. In most instances, given the diverse cultures and histories of players in the international community, reaching broad agreement on some fundamental issues has been difficult. The process of negotiating areas of disagreement attests to some degree of convergence in perspectives in attitudes across cultures. The convergence of perspectives could be attributed to the fact that in the international arena as elsewhere, shared problems often result in similar solutions. Equally as important as the agreement on these shared norms are the influences these shared norms are now likely to exert on the development of solutions in the domestic arena. In principle, the ideal would be the encouragement of the development of transnational principles, while permitting local communities to tailor the solutions that best fit their individual circumstances.

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In recent years, the issue of transnational bribery has received considerable attention as a problem in the relationship between the developed and developing countries. In these discussions, the relationship, if any, between corruption and culture has invariably affected the arguments regarding the justification for the regulation of corruption in the transnational context. So that we are working of the information, rather than speaking about the broader concept of corruption, I will limit this particular discussion to bribery that occurs in the transnational context. Transnational bribery occurs when a person (legal or juristic) from one country bribes a public official of another country. It is impossible to determine the precise level of transnational bribery that occurs. It is therefore debatable whether the recent awareness about transnational bribery reflects an increase in the incidence of transnational bribery or is a reflection of the growing awareness of a situation that already existed. Notwithstanding, a 1997 World Bank estimate placed the total corruption involved in international trade at about $80 billion per year. A more recent estimate by the World Bank of the amount of bribes paid suggested a figure of more than $1 trillion dollars (US$1,000 billion) each year.


Even without a proper estimate of the levels of transnational bribery that occur, there is consensus on the fact that it is a problem that requires some form of regulation. This however is the extent of the consensus and the arguments justifying the regulation of corruption vary with some commentators attempting to justify the regulation of corruption by arguing that corruption is morally wrong and causes harm to others and the society as a whole. By contrast, others argue that there is no requirement to demonstrate harm because corruption conflicts with societal norms of fair play. Further, it is precisely because of the conflict between corruption and these societal norms that the criminal law is used to enforce societal standards by prohibiting corruption. What however happens when the incidences of corruption transcend societal barriers with differing standards, as is the case with transnational bribery?


Within this context of the efforts to regulate transnational bribery in general has been an informative debate about the relationship between domestic morality and transnational policy. This debate centres around the curbing of transnational bribery whilst ensuring that transnational legal prescriptions are not imposed on developing countries. Professors Salbu and Nichols, in a debate spanning over 10 articles, have each articulated extremes of the controversy over global moral community building.


Regulating transnational corruption – new age moral imperialism?

Salbu cautions against the imposition of values through extra-territorial prescriptions against transnational bribery because these prescription seek to make judgements regarding the appropriateness of gift giving in various cultures. Salbu’s argument is predicated on what he styles the premature attempt to create a global community, which evokes the kind of virtue-inculcating lessons that inspire a person to refrain from accepting or offering bribes. This premature attempt, he cautions, risks moral imperialism. Salbu accepts that a unified agenda and value convergence in the regulation of transnational bribery could emerge in the future, but argues that multilateral policies or extra-territorial application of unilateral policy should not precede such convergence. His general condition is that, when laws are imposed across borders, there should be considerable transnational value consensus. Otherwise, the imposition threatens to deny respect for legitimate regional value variance.


While Salbu’s critical appraisal of the premature attempt to evoke a normative global village might ring true, he however fails to mention when or how the value convergence on the regulation of transnational bribery should take place. More importantly, he fails to signify how one would appreciate that the value convergence has occurred.


New age moral imperialism? Rubbish, we all agree

Nichols, on the other hand, notes that all countries prohibit bribery of their public officials and that all cultures condemn the practice both legally and religiously ensuring that the risks of imperialism cautioned by Salbu are virtually non-existent. Nichols skilfully uses the fact that all countries prohibit bribery to emphasise the argument that the value convergence alluded to by Salbu does in fact exist. Nichols concludes that given such cross-cultural agreement and the fact that national legal systems determine whether a particular transaction constitutes bribery, the extra-territorial and transnational prohibition of the practice of bribery is the logical step in the regulation of transnational bribery.


Anti, the anti corruption campaign – a third way

In reviewing the two arguments, I recognize the necessity for the transnational regulation of bribery, but caution that the justification for the extra-territorial regulation of transnational bribery needs to be excised from its foundations in morality and based instead on notions of the overall benefits to society. This cautionary note is echoed by Kennedy who has characterised arguments such as Nichols’ call for the transnational regulation of bribery using extra-territorial prohibitions, as the foundation for the anti-corruption campaign currently being waged by the international community. Kennedy’s analysis seeks to answer the question whether one should, in the end, favour or oppose the campaign against corruption currently being waged by the assortment of institutions, policy-makers, and intellectuals.


In response to this question, Kennedy points to the lack of clear arguments among those who oppose the anti-corruption campaign and attributes this to the fact that opposition to the anti-corruption campaign might easily be construed as support for corruption. Likening the opposition to corruption to the opposition to terrorism, Kennedy maintains that to oppose any of these practices places one uneasily outside the common sense of the international community. He posits that although it is widely recognised that ‘one person’s terrorist is another’s freedom fighter’, one is not permitted to speak in favour of terrorism, and likewise, despite the difficulty in defining corruption, in polite society one must be opposed to it. Kennedy, in his analysis has rightly recast the question whether one should or should not have an anti-corruption campaign into the different question – whether a campaign against corruption could have procedural or definitional excesses.


In Kennedy’s view, the anti-corruption campaign may have gone too far, for instance by disrupting too much of the local economic fabric of developing countries too quickly. With respect to definitional limitations, the anti-corruption campaign may have over extended definitional boundaries by being extended to the point that it is no longer plausible to claim that the practices being opposed are corrupt.


Bringing it all together

Despite the poignancy of Kennedy’s observation, he does not make much of the underlying ideological struggle that characterises the current anti-corruption campaign. Such ideological concerns of necessity often mar many promising initiatives as well as provide creative tensions that underpin the pursuit of these anti-corruption campaigns. Kennedy does however observe that the current anti-corruption campaign clearly taps into a widespread sense of illegitimacy. However, when one begins to define the object of this quite general condemnation not just in moral terms, but also in terms of the rule of law, and to specify its link to retarded economic development, quite familiar difficulties emerge.


Kennedy rightly surmises that these familiar difficulties relate to the fact that the efforts to battle corruption suddenly become an effort to stigmatise some economic policies and some legal regimes at the expense of others precisely without analyzing their distributional or social consequences in any specific detail. It is in this sense, Kennedy maintains, that the anti-corruption campaign, even at its most reasonable core, remains an ideological project, an effort to leverage the rhetorical advantages of a shared moral opprobrium for a series of specific legal or institutional changes without having to specify who will win and who will lose as a consequence.


The deeper issue in the debate betrays the danger of stereotyping complex phenomena such as corruption through the emphasis on one particular aspect at the cost of a fuller understanding of the whole phenomenon. More importantly, the rhetoric of the anti-corruption campaign casts the problem of corruption as a domestic problem in which developing countries bear the cost of the corruption through stunted development. The rhetoric ignores the fact that corruption owes its current salience in the international arena to the concerns regarding the effects of corruption on foreign investors. Once the anti-corruption campaign is viewed in the context of its impact on foreign investors, the arguments against corruption lose their retardation of development rationale and become primarily a question of redistribution between foreign and local investors.

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