Forskning

Private actors have always had considerable room for regulating market activity. However, in recent decades, different societal developments seem to have further expanded the room for private actors’ activity, not only with regard to traditional commercial activities but also with regard to the supply of a variety of goods and services of critical importance to markets, welfare and society at large. The development is partly state driven. Thus, budgetary constraints and general ideological and political movements have led many welfare states to liberalization of markets and privatization either through asset privatization or through public procuring and contracting out of what they previously considered ‘public tasks’, such as for instance the provision of universal and welfare services. The development is also market driven. Supported by globalization and digitalization, an increasing number of private actors operate as powerful, transnational entities who for various reasons, including societal expectations and reputational concerns, voluntarily choose to pursue public interest goals such as the protection of human rights, health, workers’ rights, the environment and climate inter alia through CSR and sustainability commitments. This “public” role of private actors is a matter of increasing public interest. Terminologically, one could speak of “public interest private governance” or – as a shorthand expression - just ‘private governance’ as covering the types of situations just mentioned.

Today, the phenomenon of private governance is so widespread that – from a constitutional perspective – the activities of private actors can be seen as mirroring all of the traditional state governance functions in the forms of rulemaking, implementation and dispute resolution.

Private actors as regulators. Private actors play a significant role as regulators for instance as standard setting bodies with regard to technical product requirements but also socially responsible and climate friendly production mode methods that in reality define market access requirements. At the global level, private actors may also by way of corporate or contractual network organization in combination with choice of law rules and jurisdiction clauses evade unwanted regulation and choose what regulatory framework is to govern their relations.

Private actors as implementers. Private actors implement public policy as providers of welfare services, universal services and even security and military services, just as they carry out control and supervisory functions as private certifiers with regard to safety and security issues in such diverse sectors as the food and agricultural sector, the health sector, the financial sector and the maritime- and transportation sector. Also contracting with a public entity may be a way of implementing public policy goals if the transaction is based on sustainable public procurement principles. Likewise, by the use of public contracts as an alternative to administrative acts, the power to implement public policy goals is to some extent transferred from the administrative entity to the private actor. The same mechanism is reflected in the tendency to encourage law suits by private actors to enforce public law regulation, for instance in the areas of competition law, environmental law and international investment law.

Private actors as dispute resolution bodies. In civil dispute resolution, the right to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law is a fundamental aspect of safeguarding access to justice under the rule of law. In recent decades, we have witnessed an increasing use of consensual arbitration and mediation as private and usually confidential alternatives to civil litigation in public courts. Recent research even suggests that arbitration (instead of civil litigation) should become the default mode of dispute resolution in transnational commercial disputes.

Private governance occurs both at the national level, the EU level and the global level, and may have different characteristics at these three levels. Thus, at the national level, private governance is characterized by the fact that the state interference will potentially be stronger than at the other levels. At the EU level, private governance is supported by the efforts to create the internal market through inter alia liberalization of markets but at the same time the question arises whether the strong focus on market logics may create barriers to the pursuance of public goals and interests by private actors or – to the contrary – whether private actor pursuance of these goals can compensate for the so called ‘social deficit’ in the EU. At the global level, private actors will often to some extent (de jure or de facto) need to or be able to operate private governance systems outside the reach of the national states, for instance in areas ungoverned by state law or international law such as certain areas in the polar regions. In other regions, trade law agreements as those embedded in the WTO, may indirectly support the pursuance of public interests by private actors rather than by states and make possible the creation of more or less self-enclosed private governance systems. Such systems may in reality replace public governance functions with regard to both regulation, implementation and dispute resolution and from a democratic perspective raise basic questions of the legitimacy and accountability of private actors and their ability to safeguard public policy and the rule of law.

It is the overall purpose of CEPRI to identify and analyze the legal aspects of the phenomenon of Private Governance in its different shapes and at different levels. To start with, CEPRI will focus on the following two overall research questions:

1. What is the potential of private law as a regulator of private governance?
   As private actors in various respects take over the role of public entities, legitimacy, accountability and the observance of the rule of law can no longer be fully safeguarded by public law principles aimed at regulating public entities. This raises the question whether private law can take over that role. For example can contract serve as a legitimizing factor and can tort law be used for creating accountability? A basic tension in this regard is the fact that whereas private governance entails private actors pursuing public goals and safeguarding public values, classical contract law is based on such principles as private autonomy and freedom of contract aimed at regulating commercial activities. As a starting point it is not aimed at protecting interests that are external to the private parties. Also tort law only aims at protecting certain but not all public values and interests and company law takes as a starting point the economic interests of its shareholders, as opposed to societal interests. Thus, the new “public role” of private actors may challenge the basic principles of private law and call for a rethinking of these principles in a “public law perspective”.
   
   
2. What is the role of public law with regard to private governance?
   Under a traditional view, public law has been seen as an important tool to regulate and delimit the commercial activities of private actors and to secure the safeguarding of public interests and values by public entities. However, as the role of private actors changes and increasingly also includes the pursuance and safeguarding of public interests and values, so also the role of public law must change. A basic question in this regard is whether the new role entails not only controlling and limiting private actor activity but also supporting and making room for private governance. Under this research question several areas of public law will be investigated, including constitutional law (to what extent does it allow for state driven and market driven private governance), administrative law (to what extent can administrative law support, control or limit private governance?) and procedural law (how does private governance affect access to justice, and how can courts and procedural law support, control and restrict private governance in order to safeguard public values and interests?). Furthermore, it will be essential to investigate the role of statutory regulatory law and its instrumental use of private regulation in safeguarding public values and interests in private governance, and how this role affects private law (per research question 1).