C. Fragmentation of law

International financial institutions as well as business associations have been very active in adopting regulatory rules in the past few decades. Their number is growing, implying a risk of incoherent rulemaking in the financial markets.[1] This risk is amplified by the fact that some regulatory institutions have expanded their activities far beyond their original mandates. In particular, the mandates of the Bretton Woods Institutions no longer reflect their actual scope of operation.[2]

The increasing role of different stakeholders in international law, such as crossborder financial organizations, companies, and professional associations, inevitably leads to a certain fragmentation of regulation since societal processes and contradictions are necessarily reflected.[3] As a result of fragmentation of knowledge, power, and control,[4] increased specialization and diversification occur and lead to multiple variations of regulatory types or regimes of relationships and arrange- ments.[5] If epistemic communities and networks are involved in the rulemaking processes, different actors start to play a role not only as decision-makers but also as intermediaries and brokers.[6]

In the meantime, international legal scholars have developed theories about the process of fragmentation and constitution of autonomous regimes: (i) Ruggie analyzed the functions of the manifold epistemic communities and their role in the rulemaking processes, arguing that collective awareness and attention may be mutually beneficial.[7] Epistemic communities are created when no state goes out of its way to construct international collective arrangements.[8] The processes of international regime formation result from the interactions between science and politics on the one hand and collective response on the other hand.[9] However, these procedures leading to disintermediation could Balkanize public discourse.[10] (ii) Koskenniemi highlighted the structural conflicts between various regimes and addressed possible approaches for a harmonization of the rulemaking processes.[11] In particular, although states may be prepared to participate in hybrid forms of regimes (possibly through delegated experts or by exercising their influence otherwise), they are often also inclined to transpose transnational rules into their legal framework.

Nevertheless, the multiplicity of regulatory regimes does not per se cause incoherence but is an inherent characteristic of the global governance of financial systems. What must be mitigated, however, are substantial conflicts oflaw resulting from the fragmentation; this is the basic notion of several new theoretical concepts which emphasize the necessity of inclusive and coherent regulatory processes at all levels of global governance.

  • [1] See Weber, above n 3, at 682.
  • [2] See Weber and Arner, above n 8, at 393—404.
  • [3] Martti Koskenniemi, ‘Fragmentation of International Law: Difficulties Arising from the Diversification and Expansion of International Law’, United Nations Report of the Study Group of theInternational Law Commission, A-CN.4/L682, 13 April 2006, at 11—12.
  • [4] Myriam Senn, ‘Decentralisation of Economic Law—An Oxymoron?’, 5(2) Journal of CorporateLaw Studies 427 (2005), at 442.
  • [5] See Koskenniemi, above n 15,at 30—4; see also Rolf H. Weber, ‘NewRule-Making Elements forFinancial Architecture’s Reform’, 10 Journal of International Banking Law and Regulation 512 (2010),at 515.
  • [6] Peter N. Grabosky, ‘Using Non-Governmental Resources to Foster Regulatory Compliance’,8(4) Governance 527 (1995), at 545.
  • [7] John Gerard Ruggie, ‘International Responses to Technology: Concepts and Trends’, 29(3)International Organization 557 (1975), at 562.
  • [8] Ibid, at 570.
  • [9] Ibid, at 559.
  • [10] See also Rolf H. Weber, Shaping Internet Governance: Regulatory Challenges (Zurich: Schulthess,2009) 92-3.
  • [11] See Koskenniemi, above n 15, at 30-67 and 99-101.
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