II. Towards Multilevel Governance
Whether and how financial and monetary affairs should be addressed on the international level calls, in our view, for an analytical and normative framework which allows to answer these questions in a more convincing manner than mere recourse to economic interests of operators. A strong conceptual divide between international and domestic law facilitates an equally strong divide between domestic and international regulation in finance, discussed by Tietje and Lehmann in this volume. It equally allowed stressing sovereignty and national monopolies in monetary affairs as the chapter by Baltensperger and Cottier shows.
We submit that the matter should henceforth taking recourse to the emerging doctrines of multilevel or multilayered governance, expounded in this volume by Rolf H. Weber as well as Christian Tietje and Matthias Lehmann. This doctrine essentially argues that all layers of governance—both domestic and international— are not fundamentally different and share common values and goals of public governance. This is equally and perhaps particularly true in finance and monetary affairs. Weber highlights financial stability, trust and market integrity as public goods shared on all levels of governance. Financial stability emerges, as Trachtman expounds, as a new and hitherto often neglected prime goal and public good. It has to be pursued and achieved on all levels of governance alike. It forms a common foundation for coordinated and concerted efforts on all levels of governance alike.
The financial and debt crisis recalls that financial stability, transparency, trust and market integrity are of key importance. These values underlying the regulatory framework of financial and monetary affairs are goals and principles at the same time. They define what overall should be achieved in combining different layers of governance and they inform, as principles, the details and implementation of regulation on all these layers. They in return depend upon transparency of operations as a mainstay in implementing these principles on all levels of governance alike, whether local, domestic, regional or global. There is no fundamental difference and divide between different levels of governance when it comes to underlying goals and principles. The fact that financial services have been mainly regulated, so far, in domestic law and was largely ignored beyond soft law in international affairs stems from a combination of national sovereignty and powerful influences in the banking sector expounding neo-liberal beliefs, both of which kept the matter from effective international control and monitoring up to today. The same holds true for monetary affairs albeit the level of regulation generally is much less prominent and policies are largely left to economists both in domestic and international fora. The financial and debt crisis shows that the overall framework largely based upon competing domestic regulations and largely absent of effective international disciplines is deficient and unable to achieve the overall goals and principles described above. International or global law is bound to play a stronger role in these fields. The question is where and how.
Allocation of regulatory powers to different levels of governance in the pursuit of shared goals and principles should take place in response to the question of how and where best public goods and goals can be achieved. While local public goods are best addressed locally, regional and global goods need regulation on the regional and global level respectively. The need for international law in finance is advocated by many of the contributions to this volume. However, this does not simply imply wholesale international harmonization to the detriment of domestic law. Tietje and Lehmann argue that a uniform global financial regime increases the risk of global failures and—based upon Multilevel Governance—suggest that there are times when competition between legal regimes is desirable:
The relationship between international harmonization and regulatory competition cannot be an ‘either/or’ one: it has to be an ‘at the same time’ one. (...) The question is not whether we need international cooperation—we certainly do—but what is the optimal degree.
They then go on to elaborate in which areas harmonization is needed (e.g. with regard to restructuring rules for banks and bail-out regimes) and in which other areas different regimes provide a better answer (where they controversially include capital rules).
In conclusion, there is no single answer as to how financial stability, transparency, trust and market integration can best be achieved; it much depends on the regulatory context and the details of the subject matter. It is a matter of assessing and deciding how and by which instrument this can best be achieved. It calls both for harmonization and regulatory competition, and a combination thereof. The question entails both the level of governance and the legal nature of measures which should be adopted in pursuit of the public good addressed. It also assists in revisiting the prevailing view that soft law is most suitable in international financial and monetary affairs.
We first turn to financial stability. We then address proper normative forms of regulation and the phenomenon of soft law widely discussed in this book.
-  See Christian Tietje and Matthias Lehmann in this volume at Chapter 7.
-  See Ernst Baltensperger and Thomas Cottier in this volume at Chapter 20.
-  See Rolf H. Weber in this volume at Chapter 8.
-  See above n 4.
-  See above n 6.
-  See Joel P. Trachtman in this volume at Chapter 10.
-  See above n 4.