Abstract (summary)
Global governance is more and more needed. The recent financial crisis has demonstrated that the interlinkages between financial institutions and markets within and across borders are even more distinct than previously assumed and that disturbances in the financial sector of one country have the potential to culminate in global financial turmoil threatening international financial stability. In fall of 2008, politicians reacted to the financial crisis and to the lack of global governance by incorporating the G20 body. This body does not correspond to the traditional understanding of an international institution. The G20's composition, scope of activities and competences are rather unclear. Not surprisingly, therefore, doctrine questions the legitimacy of the G20 and raises concerns about its composition. So far, the most critical analyses stem mainly from economists. Therefore, since there has been less discussion of the legitimacy of the G20 in the context of legal doctrine, the present paper attempts to shed light on the rule-oriented aspects of the G20's composition and task fulfillment.
Headnote
Increasingly, the G20 is playing an important political role without having an appropriate foundation of legitimacy; therefore, from a legal and economic perspective, a framework needs to be developed that improves the G20's legitimacy. Informal lawmaking concepts seem apt to broaden the consensus-building amongst the persons and organizations concerned; the article analyzes the possible legal elements in this context.
INTRODUCTION
During the past few decades, financial markets have become increasingly international in scope. As a result, global governance is more and more needed. The recent financial crisis has demonstrated that the interlinkages between financial institutions and markets within and across borders are even more distinct than previously assumed and that disturbances in the financial sector of one country have the potential to culminate in global financial turmoil threatening international financial stability.1
With good reason, legal doctrine has addressed the notion of global governance with increased attention, defining this notion as "order", characterized in part by porous borders and power-sharing amongst states, non-state actors and new geographic and/or functional entities.2 Global governance encompasses collective ef* forts that enable the parties concerned to identify, understand and address worldwide problems that extend beyond the capacity of single states to solve.3
While the elements that define global governance seem diffuse, some core themes can be distilled:4 (i) By their nature, future regulatory problems will require broader and more collective decision-making than traditional state affairs, (ii) The absence of hierarchical structures and the fact that responses to the new problems are complex at the international level should be acknowledged, leading to flat structures on different sub-levels, (iii) Global governance is not simply a new way of understanding the operation of society, (iv) The ongoing processes of globalization and integration necessarily lead to altered perceptions and notions of state sovereignty and, at least partly, to the reduction of its importance in favour of numerous other authorities and actors.5
In fall of 2008, politicians reacted to the financial crisis and to the lack of global governance by incorporating the G20 body. This body does not correspond to the traditional understanding of an international institution. The G20's composition, scope of activities and competences are rather unclear. Not surprisingly, therefore, doctrine questions the legitimacy of the G20 and raises concerns about its composition. So far, the most critical analyses stem mainly from economists.6 Therefore, since there has been less discussion of the legitimacy of the G20 in the context of legal doctrine, the present paper attempts to shed light on the rule-oriented aspects of the G20's composition and task fulfillment.
1. LEGITIMACY IN INTERNATIONAL LAW
(a) Notions of Legitimacy
Legitimacy has to do with authority. Generally, the concept may be framed as offering the governed the feeling that their own values are represented in a decision-making context, i.e., as establishing an authority's "right to rule". Legitimacy is linguistically rooted in the Latin word "legitimus", meaning "lawful, according to law".7
Therefore, legitimacy is based on the notion of enabling "real consensus" among the very many who are governed; procedures have to be established that give bargaining power to all of the potential participants in a given matter and thus ensure equal opportunities.8
(b) Concepts of Legitimacy
Scholars from different disciplines have considered different concepts of legitimacy. Taking a sociological perspective, Max Weber analyzed the reasons why state authority is accepted and distinguished three ideal types of governance: the rational or legal, the traditional and the charismatic authority.9 Legitimacy may be further understood in a wider sense, as encompassing an ethical-philosophical dimension that places legitimacy above positive law.10 A similar differentiation has been adopted by scholars distinguishing between "normative theories" on legitimacy, which set out general criteria for evaluating the right to rule, and "empirical theories", which focus on the belief systems of those subject to government. In other words, legitimacy can be justified either by formal ideas as the rule of law (legality) or by substantial value rationality based on morality and justice.11
The legitimacy of policy-making decisions made on global issues may be enhanced by procedural aspects within the different governing entities. This comprehension of legitimacy can be traced back to Niklas Luhmann, who founded the doctrine of gaining legitimacy through adequate procedures.12 Similarly, Thomas M. Franck described legitimacy as the "aspect of governance that validates institutional decisions as emanating from a right process. What constitutes right process is described in a society's adjectival constitution or rules of order, or is pedigreed by tradition and historic custom".13
The procedural approach is complemented by a result-oriented type of legitimacy, i.e., a substantive conception that looks at the outcome of the legitimizing procedures. This result-oriented approach depends not least on the values deemed as "right" by the stakeholders concerned, in part leading back to questions about sources of legitimacy. The problem with this approach is that it relies on subjective perceptions of legitimate values, which depend on cultural and societal differences and evolve over time.14
Therefore, in view of the difficulty of operationalizing result-oriented legitimacy, Jürgen Habermas tried to link the procedural aspects with specific notions derived from the "discourse principle". He assumed that only those norms that receive the approval of potentially affected people can claim validity, insofar as those people participate in a free rational discourse.15
(c) Legitimacy and Democracy
Conduct directed towards legitimacy must further be measured in light of constitutional values and principles. Indeed, Ian Clark specifies "three cognate concepts - legality, morality, and constitutionality", which are said to "mark out the terrain within which the practice of legitimacy tends to take place".16 Legitimacy is thereby perceived as a reconciling norm, enabling consensus on how these three elements can be accommodated alongside each other.17
In this sense, legitimacy provides for valuable elements of democratic order. According to a source-oriented perception of legitimacy, for example, an authority may qualify as legitimate when referring to democratic governing bodies that base their authority on the "demos", the public.18
These perceptions of legitimacy as primarily applicable to nation states emphasize the concept's origin in the political sciences. The idea that legitimacy at an international level and in markets that are not legally well-structured (such as the Internet or global financial product distribution) is a particular field of international policies is in fact challenged by the role it plays in international law. Therefore, with international law gaining importance, questions of legitimacy become more significant not only for international society in general, but also for the stability of the international order.19
Consequently, legitimacy must be complemented by democratic elements, (i) According to the source-oriented perception of legitimacy, an authority may qualify as legitimate if it is founded in the "demos", the people, (ii) The procedural approach of governance encompasses aspects that validate institutional decisions as emanating from a fair and participatory process, (iii) The result-oriented type of legitimacy is a substantive conception that looks at the outcome of the legitimizing procedures, trying to get all potentially affected people involved in a rational discourse.20
In summarizing the above thoughts on legitimacy, we cannot overlook the fact that a clear-cut understanding of legitimacy does not exist and that it depends on the political and social environment. However, notwithstanding these challenges, issues of legitimacy should be addressed in the field of international financial markets. The governance of these markets, which encompass parties including nation states, international organizations, non-governmental organizations and private actors, must be built on legitimate structures. Since the term "legitimacy" is so ample, it becomes imperative to find ways of intertwining the different stakeholders concerned.
2. THE G20 AS A NEW INTERNATIONAL BODY
(a) The Establishment and Composition of the G20
The Group of Twenty (G20) was established in reaction to the Asian financial crisis of 1998/99. The new body held its inaugural meeting in Berlin in 1999 and was introduced as a forum for finance ministers and central bank governors to have informal dialogue within the framework of the Bretton Woods system.21 In subsequent years, the activities of the G20 were relatively limited. As a reaction to the outbreak of the financial crisis in 2007/08, this forum was "duplicated" by creating a new body, the G20 leaders.22
In fact, the G20 was not designed to replace any existing institution, but rather to enable informal discussions and as a forum for debates where opinions could be exchanged between the formal international organizations. Its key purpose can be seen in the attempt to offer opportunities for dialogue on international cooperation.23
The G20 comprises 19 countries, namely Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, the Republic of Korea, Turkey, the United Kingdom, and the United States of America. The 20th member is the European Union, represented by the rotating Council Presidency and the European Central Bank (ECB).24 Representatives of the IMF and World Bank participate in the G20 meetings on an ex officio basis, but without voting rights.25
The first meeting at which the leaders of the G20 countries gathered was the Summit on Financial Markets and the World Economy, held in Washington, DC, in November 2008. The subsequent London Summit of April 2009 produced the "Global Plan for Recovery and Reform" and discussed the strengthening of the Financial Stability Board (FSB). Thereafter, further summits were convened on a half-yearly or yearly basis.26
The leaders of the G20 do not pass legislation and do not create laws, but instead issue declarations, communiqués and other documents that express objectives in view of a political perception, not of a legal framework. Nevertheless, with the change in G20 representation from finance ministers to leaders in 2008, the importance of the body's declarations and documents has also undergone a certain change. From a mere coordination instrument, the G20 has become a "soft decision-making body" issuing statements that fall into the category of "output informality".27 In part, the increased influence can be seen in the stronger wording used in G20 documents; as well, specific resolutions and concrete actions are agreed upon by the G20 leaders. Therefore, the question arises as to what legal quality can be attributed to documents released by an international body that is de jure not an international organization with delegated state authority.
(b) Regulatory Topics of the G20 Summits
During the first seven G20 summits, many action plans, recommendations and resolutions covering a wide range of topics have been adopted, partly in the form of general commitments and partly in the form of specific actions. The following overview shows the substantive topics addressed.
Relevant topics of the Washington Summit of November 20082S
The first G20 summit released the basic G20 Action Plan encompassing a general regulatory framework for international financial markets, including:
* Transparency and accountability
* Sound regulation
* Oversight
* Risk management
* Integrity in financial markets
* International cooperation
* Reforming international financial institutions
Relevant topics of the London Summit of April 200929
* Financial Stability Board (FSB)
* Extended scope of regulation and oversight
* Principles on pay and compensation
* Tax transparency
* Credit-rating agencies
* Additional resources for the IMF
Relevant topics of the Pittsburgh Summit of September 200930
* Framework for strong, sustainable and balanced global growth
* Coordinated exit from state support
* Strengthening the international financial regulatory system
* Modernizing global institutions (IMF and Multilateral Development Banks)
* The G20 as the premier forum for international economic cooperation
Relevant topics of the Toronto Summit of June 201031
* Recovery from the ongoing global recession and the European debt crisis
* Evaluating the progress of financial reform
* Developing sustainable stimulus measures
* Debating global bank tax
* Promoting open markets
* Different approaches for different economies
* EU: Focus on austerity to cut the deficits
* US: Maintain economic stimulus spending to encourage growth
Relevant topics of the Seoul Summit of November 201032
* Several mid- and long-term policy issues
* Ensuring global economic recovery
* Framework for strong, sustainable and balanced global growth
* Strengthening the international financial regulatory system
* Global financial safety nets
* Risk of a currency war
* Outcome: only limited progress
* Intention to work on indicative guidelines to set maximum limits for current account surpluses and deficits
* Seoul Development Consensus
Relevant topics of the Cannes Summit of November 201 i33
* Reform of international monetary system
* More representative
* More stable
* More resilient
* Action plan for growth and jobs
* Further topics
* Guiding the management of capital flows
* Cooperation between IMF and regional financial arrangements
* Global governance
* Poverty mitigation
* Eurozone crisis
Relevant topics of the Los Cabos, Mexico, Summit of June 201234
* Supporting economic stabilization and the global recovery
* Employment and social protection (e.g., 'The Los Cabos Growth and Jobs Action Plan")
* Strengthening the international financial architecture
* Reforming the financial sector and fostering financial inclusion
* Enhancing food security and addressing commodity price volatility
* Promoting longer-term prosperity through inclusive green growth
* Intensifying the fight against corruption
This presentation of the manifold topics addressed by the G20 shows quite a clear development from the financial-markets issues dealt with at the Washington and London Summits to general concerns of economic stability as well as topics of employment, social and environment protection and of food security. This development also leads to adapted regulatory trends.
(c) Particular Regulatory Trends
As far as regulating financial markets is concerned, the G20 has partly adjusted its policies to reflect the aforementioned developments (tackling more general economic issues), leading to new regulatory perspectives that must be considered.
(i) From Microeconomic to Macroeconomic Regulation
Financial regulation has traditionally been based on microeconomic elements, such as capital adequacy rules, liquidity rules, fit and proper principles or risk management provisions. The financial crisis of 2007/08 has shown that macroeconomic elements must play a more important role.35 For example, relevant issues include the general cooperation on economic policies, the interest rate policies of central banks, the fiscal provisions stimulating economic growth (including fiscal sustainability and infrastructure spending), and the proper mitigation of the social consequences of the financial crisis.36 Consequently, macroeconomic policy has become a new issue in the regulatory discussion influencing the legal framework of financial markets.37
In this context, the G20 has involved itself in the ongoing efforts to improve economic cooperation; examples are the "Framework for Strong, Sustainable and Balanced Growth"38 and the charter "Core Values for Sustainable Economic Activity".39 The Pittsburgh Summit declaration referred to avoiding "fragmentation of markets, protectionism, and regulatory arbitrage".40
One specific aspect of macroeconomic regulation leads to the involvement of the Financial Stability Board (FSB) in the IMF's periodic peer review processes related to the maintenance of financial stability by member states. To this end, a new instrument has been created, namely the early warning exercises that are to be conducted jointly by the FSB and IMF, with the results reported to the G20 leaders.41
(ii) Reform of International Organizations
The G20 has been the main forum addressing the reform of the IMF and the World Bank Group. In this context, specific topics are:42
* Increasing the resources available to the IMF, and new policies in the lending field (New Arrangements to Borrow [NAB]);
* Coordinating the reform of IMF quota and voting rights by supporting the respective amendments to the Articles of Association of the IMF;
* Protecting the voting share of the poorest countries in the IMF, encompassing (i) the size of increases in IMF quotas, (ii) the composition of the Executive Board, (iii) the improvement of the Board's effectiveness and (iv) the strategic oversight of the IMF activities.
In the meantime, some reforms are on the way to being implemented, even while it cannot be overlooked that the realization of new approaches requires time and political efforts to convince a large number of countries. Nevertheless, the roles of the IMF and World Bank during the last three years have been interpreted more broadly than during the first 50 years of their existence.43 Obviously, the appropriateness of some requests directly made by the G20 of the Bretton Woods institutions remains contested, and the legitimacy aspects need further attention.44
An additional element concerns the better coordination of the policies implemented by the Bretton Woods institutions on the one hand and the World Trade Organization (WTO) on the other hand.45 A key issue is not introducing new trade barriers for the protection of domestic producers; both the Washington and London Summit declarations say that the states "will refrain from raising new barriers to investment or to trade in goods and services, imposing new expert restrictions".46 (iii) Regulatory Cooperation
As in financial markets, cooperation and coordination are important characteristics of decentred governance regimes and may be considered to constitute the core of their existence; therefore, standards for supervisory cooperation have been a regulatory topic for years.47 The ongoing fragmentation of legal rules in global markets constituting the existing system of decentred governance makes it necessary for all parties to better work together in order to ensure the functioning of the system as a whole (coordination of activities, exchange of information, etc.).48
Already at the Washington Summit in November 2008, the G20 advocated for better regulatory cooperation between the supervisory authorities of the nation states by adopting "Common Principles for Reform of Financial Markets". These state that:
our financial markets are global in scope, therefore, intensified international cooperation among regulators and strengthening of international standards, where necessary, and their consistent implementation is necessary to protect against adverse cross-border, regional and global development affecting international financial stability 49
From an organizational point of view, at the London Summit in April 2009, the G20 established the Financial Stability Board (FSB) as the successor to the Financial Stability Forum (FSF). The FSB has an expanded membership and a broadened mandate, including the promotion of financial stability, the elaboration of criteria for compensation schemes, the establishment of a framework for the resolution of financial institutions, etc.50 Furthermore, global financial governance also means that the different institutions entrusted with different roles in the financial markets must improve their cooperation. Financial supervisory authorities need to strengthen collaboration and the exchange of information, particularly regarding the supervision of financial conglomerates. A good discussion of the possible instruments of cooperation can be seen in the consultative document of the Joint Forum of the Basel Committee on Banking Supervision, "Principles for the Supervision of Financial Conglomerates", dated December 2011.51
3. LEGITIMACY ASSESSMENT OF THE G20'S COMPOSITION AND DECISION-MAKING
(a) Composition
Many studies by economists and political scientists question the legitimacy of the G20 from various angles. Foremost, good arguments can be presented that the ad hoc self-appointment body does not correspond to the economic and political reality.52 From the outset, it should be said that the G20 is in reality a "Gl9 + 1", since the European Union (EU) is represented in addition to 19 countries. In response to criticism that other regional organizations are not members of the G20, Asian and South American regional organizations are now invited to the G20 Summits as observers.
Furthermore, from a political perspective, countries with a low GDP are not represented at all; for example, of the whole continent of Africa only South Africa has a seat.53 From an economic perspective, the 19 chosen countries are not in fact the countries with the highest GDP; otherwise, Nigeria would be in the "club" instead of Argentina.54 Moreover, the G20 permanently excludes 90 percent of the almost 200 Member States of the United Nations.55 In response, several proposals have been developed that try to overcome the representation deficit.56
(b) Decision-Making
Apart from its discretionary composition, the G20 also leads to so-called "elite multilateralism".57 Another criticism is that the G20 is just a "talk shop".58 Furthermore, the self-elevated G20 takes upon itself the role of "the premier global economic forum" and thereby weakens the existing system of multilateral cooperation in other organizations.59 In fact, given the performance of the G20 in terms of responding to different crisis situations, many authors question its effectiveness and suggest that the relationship of the G20 with other informal and formal governance institutions is not resolved, but that significant controversies prevail.60 Therefore, they consider the G20 to have failed to exercise a substantial political impact on any of the key problems affecting the global economy.61
Economists and political scientists do not overlook that interactions between formal and informal processes facilitate a "variable geometry" of informal dialogues, but they also correctly acknowledge that informal bodies generate serious problems of legitimacy, since they tend to amplify the inequalities in decision-making power among constituent members and since they may actually end up delegitimizing formal institutional structures.62 Consequently, the argument has been made that the G20 needs formal authority, processes and institutions if it is to be an important decision-making mechanism.63
(c) Governance Deficits
The above discussion shows that the G20 as presently organized and acting suffers from major governance deficits. Therefore, that the situation must be remedied is obvious. Principles of a good system of global governance from an economic perspective should encompass:64
* Leadership: In a healthy multilateral system, leadership involves delegating functions; permanent appropriation of those functions is not adequate.65
* Effectiveness: Cooperation is to be structured in such a way that the envisioned results can be adequately achieved.
* Representation: Inclusiveness is a basic source of legitimacy; in the context of the G20, the tension between legitimacy and effectiveness requires mixing participation in decision-making by systemically important countries with representation of all members of the international community.
* Structured system: Global governance requires clear structures that avoid "spillovers".
* Independent secretariat: This secretariat should provide neutral technical support and have the capacity to implement and independently monitor the approved decisions.
These economic and political requirements are to be mirrored against the background of an appropriate legal framework providing sufficient legitimacy to the governing bodies.
4. NEW CONCEPTS OF INTERNATIONAL LAW
The traditional principles of international law - in particular the notion of sovereignty known since the Peace of Westphalia - are no longer suitable to cope with the present needs of an international order.66 Nation states can no longer exclusively regulate legal issues on a territorial basis, since the cross-border effects of businesses require increased cooperation. Furthermore, the often-cited phrase that "almost all nations observe almost all principles of international law and almost all of their obligations almost all of the time"67 hardly seems a convincing assertion anymore. Moreover, the increasingly dense framework of rules with different legal qualities leads to uncertainties in respect of the compliance with rules by their addressees.68 Therefore, the development of new legislative concepts becomes imperative.
(a) Informal Lawmaking
Over the past few decades, legal doctrine has been looking at the possibilities and the concretization of different forms of "informal" lawmaking. "Soft law" is often used as an overarching term;69 however, other terms are also available. "Informal" lawmaking means that rules are elaborated and implemented by bodies not having sovereign power in the traditional sense. Examples can be found in many areas, particularly in fields created by fast technological developments.70
Informal lawmaking is on the rise, thereby challenging traditional mechanisms of democratic accountability. Informal international lawmaking encompasses three main features, namely: (i) process informality leading to norms developed not in treaty-based forms, but in networks, forums or G-groups that often lack international legal personality; (ii) actor informality encompassing private actors, industry associations, civil society and other organizations or networks; and (iii) output informality leading to norms that are not formal hard law sources, but standards, nonbinding guidelines or indicators most of which are outside of the remit of the traditional legal order.71 The challenge of informal lawmaking consists in maintaining the law's neutrality and protective force and in balancing the informality that may be needed to enable effective cooperation to avoid traditional strictures.72 Such an approach will require a shift in international law from being a value-free instrument enabling state-to-state cooperation to a genuine regulatory order as well as a process balancing effectiveness with democratic accountability.73
The dichotomy between the law and practical habitudes caused by information technology developments, including the socio-economic problems, can also be analyzed under the perspective of a framework of "Internet-ional" legal principles based on the history of customs as a source of law.74 This approach underlines the suitability of customary international rules as a template for formulating Internet lawmaking rules by adapting customary rules to develop a set of determinants for Internet law.75
(b) Incorporation of Norms through Informal Processes
Informal lawmaking as such does not suffice; the declarations, statements, undertakings, etc., need to be implemented within some kind of legal framework. The most traditional way would involve having the informal norms be taken up by an established formal body; for example, certain aspects of the G20 propositions have led to an amendment of the Articles of Association of the IMF.76
Usually, however, informal lawmaking is implemented through informal means not directly related to law; for example, reputation, reciprocity or retaliation.77 The most important element is reputation, relying on "naming and shaming"; nevertheless, the risk should not be overlooked that wrong or asymmetric information could lead to a statement that does not properly reflect the real situation.78 Another problem involves the potential double function of an entity providing the information and being judged according to this information; this problem can be seen in the fact that information gained by IMF surveillance efforts may only be published with the permission of the inspected country.79
A further issue concerns the appropriate dissemination of norms based on informal lawmaking. The "legislative" body might prefer not to disclose the entire background of a regulation's inception. Therefore, depending on the domestic political situation, sensible tradeoffs out of the realm of politics and without the necessary political deliberation cannot be excluded.80
(c) Elements of Legitimacy in Informal Processes
The problem with declarations and action plans released by the G20 leaders having a morally "binding" effect is not only the fact that 20 states are implementing rules that are relevant for 200 states. There is also the fact that the actors do not necessarily have a formal delegation of authority.81 Experience has shown that the G20 transnational network, partly legitimized with reference to the recently developed approach of "trans-governmentalism",82 may exercise a "norm entrepreneur" function. At least the network can boost and enable formal treaty-making and influence the development of both hard law and soft law.83 However, further efforts need to be applied in strengthening the authorities' right to rule and in helping countries that do not yet participate take advantage of the network's activities. The G20 will only be credible in the long term when it succeeds in adapting governance rules relating to voice and representing to the political and economic realities.84
Legally, the G20 is not based on a stable foundation reflecting the rule of law and the "demos";85 moreover, from a political angle, it was discretionally composed of some countries with the objective of tackling some important financial and economic issues. However, its increasing role leading to a partial constituency86 is associated with some "sovereignty costs" of formal international law.87 Particularly in view of the fact that the traditional sovereignty concept needs to be adjusted to the requirements of a modern world, the consequences of such "sovereignty costs" should be clearly assessed, not least due to the problem that the political foundation of authority could be undermined by decision-making bodies without democratic legitimacy.88
Legitimacy is a relational concept that is institutionally and discursively constituted.89 Regulatory regimes evolve in view of the societal and political context; therefore, private autonomous regimes can also be legitimate if they are developed with the objective of increasing institutionalization, thereby based on broad initiation, building support and political legitimacy.90 Other elements include the significance of the institutional environment, the dynamics of legitimacy relationships and the way non-sovereign bodies respond to multiple legitimacy claims in complex and dynamic regulatory situations.91 In relation to non-state or private networks and organizations, emphasis should not be put on normative validity based on value legitimacy; moreover, the trend towards efficiency and interest maximization as a source of legitimacy92 should be supported, since efficiency and legitimacy are deeply intertwined.
Further important criteria are accountability93 or control and enforcement. Insofar as the acceptance of informal lawmaking by market participants and civil society is of major importance, gaining the support of the "governed" is a key task, since failing to do so will undermine the legitimacy of the norms enacted.94 An institutionalized interface between the informal lawmaking bodies and the addressees in markets and civil society may help with adopting better adapted and accepted norms that increase the degree of accountability and facilitate enforcement.
5. OUTLOOK: IMPROVEMENT OF THE G20'S LEGITIMACY
As we have seen, the factual power of the G20 does not have a stable legal foundation based on traditional concepts of legitimacy. Looking from the angle of factual acceptance, while the G20 governance cannot be justified with legal authority, perhaps it may be using power-oriented arguments, since legitimacy must be rooted in the acceptance of the rules by civil society.95 Furthermore, while the normative theory of legitimacy cannot provide a reasoning for assuming the G20's legitimacy, it is possible that the empirical theory focusing on the belief systems of those subject to governmental authority is suitable.96
A result-oriented model for legitimacy considerations does not adequately fit the G20 system. A procedural approach seems to be more appropriate, assuming that those action plans and declarations of the G20 that receive the approval of potentially affected people can claim legitimacy, if the people participate in a free rational discourse. This procedural approach should be further developed within the G20 framework in order to improve democratic requirements and adequate governance principles.97
The recent attempts to develop new concepts of informal law can point in the appropriate direction and help to overcome weaknesses of existing models or approaches. Informal lawmaking is apt to broaden the consensus-building amongst the concerned persons, organizations and other bodies. Different models of informal lawmaking are available that encompass several aspects, validating institutional decisions as emanating from a right process. Consequently, the G20 leaders should rely more on such informal processes, including elements of reputation and retaliation.98
As outlined, networks like the G20 have certain inherent advantages as they tend to empower the actors who are part of the networks; however, some actors are usually excluded since they are not part of a specific "regime."99 Networks are often efficient in conceiving new policy ideas and realizing them, but they may also impede a democratic process and not look for the aggregate interest, the common will.100 In view of the democratic weaknesses of such a network approach, the relation of the G20 to international organizations must be defined in a proper way:101
* Complementary effect: The G20 can generate political support for the decision-making process in international organizations, thereby accelerating their initiatives.
* Competitive effect: If statements of the G20 are directly implemented (for example, in national legislation, or in parallel to recommendations of the IMF and the World Bank), the G20 gains authority on these matters.
* Rebalancing effect: The G20 can be a catalyst for reform of international organizations and drive global governance in a specific direction.
These effects are to be coordinated with the activities of other organizations and bodies, allowing them to produce coherent policies in the interest of all concerned stakeholders. If such coordination takes place, awareness of problem-solving is increased and trust in the cooperation can grow.
The more the "governed" do have trust in a participative consensus-building process, the more they will accept the released rules. Such a participative consensus-building could be enhanced if the G20 leaders would better cooperate with the competent bodies of international organizations encompassing a higher number of members, in particular the International Monetary Fund (IMF)AVorld Bank Group, the World Trade Organization (WTO), the International Labour Organization (ILO) and other UN bodies. These organizations cover the major fields of international business, namely finance, trade and labour; furthermore, cooperation arrangements already exist between these entities. If the IMF/World Bank and WTO are involved in the decision-making processes of the G20 leaders, countries and civil society not represented in the small, "exclusive" group could more easily accept complying with declarations and statements released by the G20.
An important element for improving the G20's legitimacy is the realization of a higher degree of transparency102 and accountability: Since the G20 is not a global regulator but issues recommendations and declarations being applied (almost) globally, accountability mechanisms should be implemented to the benefit of those voices that are not present at the table.103 Generally, accountability has become an important topic in the governance discussion, since formal structures are weakened and informal organizations gain importance.104 As far as the G20 is concerned, it seems to be imperative that the invitation extended to several international organizations and in particular to the UN Secretary-General to participate in the group's summits must be institutionalized.105 In this way, meeting legitimacy requirements could lead to a G20 framework that encompasses global governance concepts.
Footnote
1 Rolf H. Weber, "Multilayered Governance in International Financial Regulation and Supervision" (2010) 13:3 JEEL 683.
2 N. Brian Winchester, "Emerging Global Environmental Governance" (2009) 16:1 Indiana Journal of Global Legal Studies 7 at 22.
Footnote
3 Weber, supra, η. 1 at 691 with further references.
4 Timothy William Waters, "The Momentous Gravity of the State of Things Now Obtaining: Annoying Westphalian Objections to the Idea of Global Governance" (2009) 16:1 Indiana Journal of Global Legal Studies 25 at 33.
5 For further details, see Weber, supra, η. 1 at 692.
6 See, for example, Juha Jokela, The G-20: A Pathway to Effective Multilateralism? Chaillot Papers No. 125 (Paris: Institute for Security Studies, 2011); Jakob Vestergaard, The G20 and Beyond, Towards Effective Global Economic Governance, Report 2011 (Copenhagen: Danish Institute for International Studies, 2011); Jakob Vestergaard & Robert H. Wade, "The G20 has Served its Purpose and Should be Replaced" (2011) 2:2 Journal of Globalization and Development (article 10) 1; José Antonio Ocampo & Joseph E. Stiglitz, "From the G-20 to a Global Economic Coordination Council" (2011) 2:2 Journal of Globalization and Development (article 9) 1; Colin I. Bradford & Wonhyuk Lim, "Introduction: Toward the Consolidation of the G20: From Crisis Committee to Global Steering Committee" in Colin I. Bradford & Wonhyuk Lim, eds., Global Leadership in Transition (Seoul/Washington: Brookings Institution Press with the Korean Development Institute, 2011) 1; Jan Wouters & Dylan Geraets, The G20 and Informal International Law Making, Working Paper No. 86 (Leuven: Leuven Centre for Global Governance Studies, 2012); Jan Wouters & Thomas Ramopoulos, "The G20 and Global Economic Governance: Lessons from Multilevel European Governance?" (2012) 15:1 Journal of International Economic Law 1 at 12 et seq.
Footnote
7 Rolf H. Weber, Shaping Internet Governance: Regulatory Challenges (Zurich: Schulthess Verlag, 2009) at 109.
8 Ibid., at 118.
9 Max Weber, Wirtschaft und Gesellschaft, Grundriss der verstehenden Soziologie, 5th ed. (Tübingen: Mohr Siebeck, 1976) at 122-142.
10 Weber, supra, η. 7 at 110.
11 Ian Clark, Legitimacy in International Society (New York: Oxford University Press, 2005) at 18 and 19.
12 Niklas Luhmann, Legitimation durch Verfahren, 2nd ed. (Darmstadt/Neuwied: Suhrkamp, 1975) at 9-53.
13 Thomas M. Franck, Fairness in International Law and Institutions (Oxford: Clarendon Press, 1995) at 1.
Footnote
14 Weber, supra, n. 7 at 110/11.
15 Jürgen Habermas, Faktizität und Geltung, Beiträge zur Diskurstheorie des Rechts und des demokratischen Rechtsstaats (Frankfurt am Main: Suhrkamp, 1992) at 161.
16 Clark, supra, η. 11 at 19.
17 Ibid., at 20.
18 Weber, supra, η. 7 at 112.
19 Clark, supra, η. 11 at 12-17.
Footnote
20 See also Weber, supra, n. 7 at 109-111 and 120 with further references.
21 See Jukela, supra, n. 6 at 12 et seq.·, see also Communiqué Meeting of the G20 Finance Ministers and Central Bank Governors, Berlin 15-16 December 1999, online: .
22 Ibid., at 23 et seq.
23 Vestergaard, supra, n. 6 at 38 refers to "shuttle diplomacy".
24 Regarding the EU representation at the G20, see Jan Wouters, Sven Van Kerckhoven & Jed Odermatt, The EU and the G20's Impact on the EU, Working Paper No. 93 (Leuven: Leuven Center for Global Governance Studies, 2012) at 4 et seq.
25 See Vestergaard, supra, n. 6 at 19 and 20; Wouters & Ramopoulos, supra, n. 6 at 13.
Footnote
26 For further details, see section 2(b) below.
27 See Wouters & Geraets, supra, n. 6 at 15; regarding the functioning of the G20, see also Wouters & Ramopoulos, supra, n. 6 at 14-18.
28 See Declaration G20 Leaders Summit, Washington 2008, online: .
29 See Declaration G20 Leaders Summit, London 2009, online: .
Footnote
30 See Declaration G20 Leaders Summit, Pittsburgh 2009, online .
31 See Declaration G20 Leaders Summit, Toronto 2009, online .
32 See Declaration G20 Leaders Summit, Seoul 2009, online .
Footnote
33 See Declaration G20 Leaders Summit, Cannes 2011, online: ; see also Wonhyuk Lim & Françoise Nicolas, The G20 from Seoul to Cannes: Towards a Global Governance Committee (Paris: Ifri & Center for Asian Studies, 2011).
34 See Declaration G20 Leaders Summit, Los Cabos, Mexico, 2012, online: .
Footnote
35 See, for example, the various contributions in Mathias Dewatripont, Xavier Freixas & Richard Portes, eds., Macroeconomic Stability and Financial Regulation: Key Issues for the G20, VoxEU.Org Report (London: Centre for Economic Policy Research, 2011).
36 See Declaration G20 Leaders Summit, Los Cabos, Mexico, 2012, online: , no. 20.
37 See Oliver Blanchard, Giovanni DeH'Ariccia & Paolo Mauro, "Rethinking Macroeconomic Policy" (2010) 42 Journal of Money, Credit and Banking at 199 et seq.
38 See Declaration G20 Leaders Summit, Pittsburgh 2009, online: , no. 1 et seq.
39 See Declaration G20 Leaders Summit, Pittsburgh 2009, online: .
40 See Declaration G20 Leaders Summit, Pittsburgh 2009, online: , a Framework for Strong, Sustainable, and Balanced Growth, no. 12.
Footnote
41 See Declaration G20 Leaders Summit, Washington 2008, online: , Reforming International Financial Institutions, 2nd bullet point; see also online: .
42 See Declaration G20 Leaders Summit, London 2009, online: , Strengthening our Global Financial Institutions, no. 17 et seq.
43 For an overview, see Barry Eichengreen, "A Blueprint for IMF Reform: More than just a Lender" (2007) 10:2 International Finance at 153 et seq.
44 See Thomas A. Bernes, "IMF Legitimacy and Governance Reform: Will the G20 Help or Hinder?" in Bradford & Lim, eds., supra, n. 6 at 219 et seq.
45 See Declaration G20 Leaders Summit, London 2009, online: , Resisting Protectionism and Promoting Global Trade Investment, no. 22 et seq.
46 See Declaration G20 Leaders Summit, Washington 2008, online: , Commitment to an Open Global Economy, no. 13; see also Declaration G20 Leaders Summit, London 2009, online: , Resisting Protectionism and Promoting Global Trade and Investment, no. 22.
Footnote
47 See Valérie Menoud, The Supervision of Financial Conglomerates (Zurich: Schulthess, 2010) at 122 et seq.
48 See Declaration G20 Leaders Summit, Los Cabos, Mexico, 2012, online: , no. 47.
49 See Declaration G20 Leaders Summit, Washington 2008, online: , Common Principles for Reform of Financial Markets, no. 8.
50 See Declaration G20 Leaders Summit, London 2009, online: , Strengthening Financial Supervision and Regulation, no. 15.
51 Joint Forum, "Principles for the Supervision of Financial Conglomerates, Consultative Document" (Basel Committee on Banking Supervision (Bank for International Settlements), December 2011).
Footnote
52 See in detail Vestergaard, supra, n. 6 at 18 et seq.
53 For a critical assessment, see ibid., at 20 and 21; Wouters & Ramopoulos, supra, n. 6 at 19.
54 See Vestergaard, supra, n. 6 at 21 and 22.
55 Vestergaard & Wade, supra, n. 6 at 2.
56 This issue cannot be dealt with further in the present context; for further details, see ibid., at 5 et seq. with additional references.
57 Ocampo & Stiglitz, supra, n. 6 at 3.
58 Vestergaard & Wade, supra, n. 6 at 2; for a slightly less pessimistic view, see Wouters & Ramopoulos, supra, n. 6 at 15 and 16.
59 See Wouters & Geraets, supra, n. 6 at 13; Vestergaard & Wade, supra, n. 6 at 2; Ngaire Woods, "The Impact of the G20 on Global Governance: A History and Perspective" in Bradford & Lim, eds., supra, n. 6 at 36, 42 and 43.
60 Jukela, supra, n. 6 at 45.
Footnote
61 Vestergaard, supra, n. 6 at 29.
62 Ocampo & Stiglitz, supra, n. 6 at 4.
63 Lan Xue & Yanbing Zhang, 'Turning the G20 into a New Mechanism" in Bradford & Lim, eds., supra, n. 6 at 55 and 58; see also Wouters & Geraets, supra, n. 6 at 11.
64 Ocampo & Stiglitz, supra, n. 6 at 7-9.
65 Bradford & Lim, supra, n. 5 at 4-9 mention strategic, political, integrative, institutional reform and pragmatic and inclusive leadership.
Footnote
66 Rolf H. Weber, "New Sovereignty Concepts in the Age of Internet?" (2010) 14:8 Journal of Internet Law 12.
67 Louis Henkin, How Nations Behave, 2nd ed. (New York: Pall Mall, 1979) at 47.
68 See also Robert Howse & Ruti Teitel, "Beyond Compliance: Rethinking Why International Law Really Matters" (2010) 1 Global Policy at 127 et seq.
69 For a general overview, see Chris Brummer's extensive study, Soft Law and the Global Financial System. Rule Making in the 21st Century (Cambridge: Cambridge University Press, 2012).
70 Rolf H. Weber, "New Rule-Making Elements for Financial Architectures Reform" (2010) 25 Journal of International Banking Law and Regulation at 512.
71 Joost Pauwelyn, "The Rise and Challenges of 'Informal' International Law-Making" in Sam Muller, Stavros Zouridis, Morly Frishman & Laura Kistemaker, eds., The Law of the Future and the Future of Law (Oslo: Torkel Opsahl Academic EPublisher, 2011) at 125.
72 Rolf H. Weber, Design Elements for the Law of Cyberspace, forthcoming.
Footnote
73 Pauwelyn, supra, n. 71 at 512.
74 Warren B. Chik, "Customary Internet-ional Law: Creating Body for Customary Law for Cyberspace" (2010) 26 Computer Law & Security Review 3.
75 Ibid., at 3.
76 See section 2(c)(ii) above.
77 Andrew T. Guzman & Timothy L. Meyer, "International Soft Law" (2010) 2 Journal of Legal Analysis 171.
78 In this context, the fact that countries not being represented in the G20 might suffer from incomplete information should not be underestimated.
79 See Chris Brummer, "Why Soft Law Dominates International Finance - and Not Trade" (2010) 13:3 Journal of International Economic Law 623.
80 Regarding the transparency problem, see Christine Kaufmann & Rolf H. Weber, "The Role of Transparency in Financial Regulation" (2010) 13:3 Journal of International Economic Law 779.
Footnote
81 Even if the G20 exercises the biggest role in the agenda-setting process (Wouters & Geraets, supra, n. 6 at 10).
82 Anne-Marie Slaughter & David Zaring, "Networking Goes International, An Update" (2006) Annual Review of Law and Social Science 211 at 215; Anne-Marie Slaughter, A New World Order (Princeton/Oxford: Princeton University Press, 2004); Kai R. Raustiala, "The Architecture of International Cooperation: Transgovernmental Networks and the Future of International Law" (2002) 43 Virginia Journal of International Law 1; David Zaring, "International Law by Other Means: The Twilight Existence of International Financial Regulatory Organizations" (1998) 33 Texas International Law Journal 281.
83 For a general overview, see Eric Posner, Law and Social Norms (Cambridge, Mass.: Harvard University Press, 2000).
84 Jan Wouters, Steven Sterkx & Tim Corthaut, The International Financial Crisis, Global Financial Governance and the European Union, Working Paper No. 52 (Leuven: Leuven Center for Global Governance Studies, 2010) at 8.
85 The remark is made that the G20 is an organization with 20 hubs and no headquarters (see Wouters & Geraets, supra, n. 6 at 9; Parag Khanna, How to Run the World (New York: Random House, 2011) at 54).
86 Vestergaard, supra, n. 6 at 33.
87 Kenneth W. Abbott & Duncan Snidal, "Hard and Soft Law in International Governance" (2000) 54 International Organization at 429.
88 Weber, supra, n. 7 at 115 et seq.
Footnote
89 Myriam Senn, Non-State Regulatory Regimes. Understanding Institutional Transformation (Heidelberg/Berlin: Springer 2011) at 258.
90 Steven Bernstein & Benjamin Cashore, "Can Non-State Global Governance Be Legitimate? An Analytical Framework" (2007) 1 Regulation & Governance at 347 et seq.
91 Julia Black, "Constructing and Contesting Legitimacy and Accountability in Polycentric Regulatory Regimes" (2008) 2 Regulation & Governance at 137.
92 Senn, supra, n. 89 at 239 and 240.
93 For an overview, see Wouters & Geraets, supra, n. 6 at 10 et seq.
94 See also Senn, supra, n. 89 at 170.
95 See ibid., at 260.
96 See section 1(b) above.
Footnote
97 See also Wouters & Geraets, supra, n. 6 at 19 et seq.
98 See section 4(a) above.
99 Wouters & Geraets, supra, n. 6 at 19.
100 Anne Mette Kjaer, Governance (Cambridge: Polity, 2004) at 57.
101 Wouters & Geraets, supra, n. 6 at 14.
Footnote
102 Regarding the "mixed transparency records" of the G20, see Wouters & Ramopoulos, supra, n. 6 at 20 and 21.
103 Wouters & Geraets, supra, n. 6 at 25.
104 See Ruth W. Grant & Robert O. Keohane, "Accountability and Abuses of Power in World Politics" (2005) 99:1 American Political Science Review 29; Rolf H. Weber, "Accountability in the Internet of Things" (2011) 27 Computer Law & Security Review 133; Senn, supra, n. 89 at 262/63.
105 See Paul Heinbecker, "The United Nations and the G20: Synergy or Dissonance?" in Bradford & Lim, eds., supra, n. 6 at 236 et seq.
AuthorAffiliation
Rolf H. Weber*
AuthorAffiliation
* H. Weber is Professor of International Business Law at the University of Zurich, Switzerland, and Visiting Professor at Hong Kong University, Hong Kong. This article is based on a presentation given at the biannual conference of the Society of International Economic Law (SEEL) in Singapore on July 4, 2012.
Word count: 7660
Copyright Carswell Publishing Aug 2013
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