Abstract
In international law a recurrent issue is how to ensure compliance with treaties and agreements in the absence of effective enforcement (see for an overview: Stephan 2016). This chapter starts from the observation that the vast majority of GFAs establish procedures for international dispute resolution in MNCs (see Chap. 3). However, does a pull for increased compliance fully answer the question as to why in the large majority of agreements the bargaining partners decide to include international dispute resolution mechanisms? This chapter asks:
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Notes
- 1.
Chapter 3 of this book found that in 85% of the GFAs in the research sample the bargaining partners agree on the creation of a dispute resolution body usually consisting of several senior representatives of the bargaining partners and which has the highest authority to cooperatively find a mutual solution to breaches of the agreement. Moreover, Chap. 3 presents the procedures for dispute resolution mechanisms, showing that many agreements follow the principle of subsidiarity for dispute resolution. However, it does not answer the question as to why in the large majority of agreements the bargaining partners decide to include international dispute resolution mechanisms. Therefore, this chapter examines the rationale for including dispute resolutions regimes in GFAs.
- 2.
This book argues in Chap. 4 that legal enforcement in national courts is not the endeavored solution of the bargaining partners for disputes arising from GFAs. Therefore, the bargaining partners have to develop their own institutions to ensure compliance.
- 3.
Professor Brewster presented her research in the Hamburg Lectures on Law and Economics (17.12.2014) and during the Summer School in Law and Economics at the University of Hamburg in 2014.
- 4.
Chapter 5 identifies four groups of incentives as to why companies sign GFAs. The opportunity to reduce and privatize disputes is one of the identified incentives. With the conclusion of GFAs international institutions of social dialogue are created, which provide additional dispute resolution arenas in MNCs that help to privatize conflicts and avoid trade union campaigns.
- 5.
Cooter (1984) introduced an analytical distinction between prices and sanctions (Cooter 1984). Fines “price” breach, and, if paid, the fine eliminates or at least decreases the reputational costs of a breach. In contrast, sanctions punish breach and do not excuse it. According to Cooter (1984), a “price” is a license to engage in a deviating behavior at a certain cost. As long as the price is paid—to reinstate a compliant behavior—the breaching party does not suffer a reputational loss.
- 6.
- 7.
Less-than-compensatory damages are not uncommon in international law. Brewster (2011) provides an example from the World Trade Organization (WTO). Under the rules of the WTO Appellate Body, breaching states have to compensate the victim states only for losses after the Appellate Body has issued a ruling making defection before a ruling of the Appellate Body effectively the dominant strategy (Brewster 2011).
- 8.
See Chap. 7 for a detailed overview of the case studies.
- 9.
However, it has to be emphasized that the two categories of deviations from GFAs paired with two types of remedies—“breach” = reinstate compliant behavior and “violation” = sanctions—are used as simplifications to show how these agreements work. In a more realistic setting, these two pairs will be intertwined to a certain degree. In non-judicial enforcement, the seriousness and frequency of the breaches impacts the choice of sanctions (Cafaggi 2012a, p. 106). While first breaches of the GFA may not be sanctioned at all or only mildly, aiming to ensure further cooperation, repeated breaches are likely to lead to sanctions including ceased cooperation, negative publicity campaigns and resulting market sanctions.
- 10.
For example, in the GFA signed by the French company Sodexo it is agreed that “[t]he parties acknowledge that Sodexo operates in a highly competitive environment and is facing, in numerous countries, competition by enterprises that disregard national law and practice with respect to the principles set forth in this Agreement” (Sodexo 2011, p. 1). In the agreement signed by Securitas it is agreed that “the local union and company management will develop a joint strategy and action plan to monitor and raise standards among all key companies in the market, or submarket, to attempt to create an environment in which Securitas will be able to raise standards without compromising its competitive position” (Securitas 2012, p. 4).
- 11.
See Chap. 4 for more details.
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Hadwiger, F. (2018). Creating Institutions for International Dispute Resolution. In: Contracting International Employee Participation. International Law and Economics. Springer, Cham. https://doi.org/10.1007/978-3-319-71099-0_8
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