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Globalization and Institutions

Globalization and Institutions

Redefining the Rules of the Economic Game

New Horizons in Institutional and Evolutionary Economics series

Edited by Marie-Laure Djelic and Sigrid Quack

This volume investigates the relationship between economic globalization and institutions, or global governance, challenging the common assumption that globalization and institutionalization are essentially processes which exclude each other. Instead, the contributors to this book show that globalization is better perceived as a dual process of institutional change at the national level, and institution building at the transnational level. Rich, supporting empirical evidence is provided along with a theoretical conceptualization of the main actors, mechanisms and conditions involved in trickle-up and trickle-down trajectories through which national institutional systems are being transformed and transnational rules emerge.

Chapter 11: Structuring Dispute Resolution in Transnational Trade: Competition and Coevolution of Public and Private Institutions

Dirk Lehmkuhl

Subjects: economics and finance, institutional economics


Dirk Lehmkuhl INTRODUCTION1 Social life is replete with controversies, grievances and conflicts. One is actually tempted to say that the more people interact, the higher the probability that conflict will emerge and, as a consequence, the more important the existence of institutions for the settlement of disputes becomes. Generally, economic interactions are no exception to this general rule. Yet, insofar as economic exchanges are transnational interactions, they face peculiar challenges. In contrast to intra-national economic exchanges, which take place within a national framework with well-defined legal norms and rules, at the international level such a framework is largely missing. Although states have committed themselves to the liberal framework of the World Trade Organisation, crossborder transactions are still largely subject to national laws. These laws often vary significantly, thus conflicts between laws inevitably arise in transnational contracts. The claim that territorially restricted laws inevitably lead to constitutional uncertainty in transnational2 trade is anything but new (Schmidtchen and Schmidt-Trenz 1995). However, today as in the past, the absence of an international regulatory framework that guarantees rights as they are guaranteed in the national legal framework has not prevented economic actors from crossing borders. A long-range view shows that throughout ‘recorded history new forms of trade have disturbed the established political order’ (Condliffe 1951, p. 832). And ‘[i]t would be wrong to believe that trade awaited the restoration of law and order’ (Condliffe 1951, p. 42) to flourish and develop. The historical explanation lies in a two-dimensional solution to the problems of...

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