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8 Governance in Cyberspace: Mulli-Leve! and Mulli-Actor Constitutionalism 8.1 INTRODUCTION This report has identified a number of specific social, political, and economic values, and has explored the ways in which global networks may challenge them or shift the traditional balances between them. The report is by no means exhaustive, but it does illustrate the kinds of prob- lems that may arise as global networks expand even further. The question is how to deal with these problems. When is it appropri- ate to intervene? Which regulatory tools are likely to be most effective and which ones less so? Should global networks be governed and, if so, in what way? That is, what are the appropriate goals and functions of global-network governance? How should it be structured? And which actors should be involved in its design and its operation? 8.2 GOVERNANCE In general, stable governance require commonly accepted operating principles, structures, and responsibilities, and sometimes authorities or agencies. At the very least in an Internet context, some authority (or au- thorities) must oversee certain technical operations such as address as- signment and domain-name administration. But for political, commer- cial, and social issues, what is the relevance of traditional means of iSee OECD, 1997, Internet Domain Names: Allocation Policies, OECD Document GD(97~207, Paris. See also Chapter 7. 190

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GOVERNANCE IN CYBERSPACE 191 regulation? What role might commercial law play in governing certain aspects of the Internet? What new approaches to governance should be considered? Note that the issue is not whether governance is relevant to the Internet, but rather how such governance should be conducted, with what scope, and at what cost. 8.2.1 Is Regulation Necessary? Technical Solutions, Intermediaries, and Self-help Prior chapters have pointed out that technical solutions can be found to help deal with some of the problems created by global networks. For example, filtering systems can help end users to separate desired from undesired information. New methods for identification (e.g., electronic signatures), electronic payments (e.g., digital cash), and privacy protec- tion (e.g., encryption) can strengthen the safety and reliability of network- based commercial transactions. Regulations may be necessary to facilitate the use of these tools or to monitor their effectiveness, but the regulations can be designed to build on and enhance the technical tools rather than to replace or impede them. In addition, the market creates incentives for intermediaries in the electronic marketplace to offer services that protect the interests of its cus- tomers both content providers and users. Users, for example, can choose an Internet provider that offers a selection of Web sites suiting the user's tastes while blocking sites the user would prefer not to see.2 Users can, of course, help themselves rather than depend on interme- diaries. For example, an avalanche of organized e-mail protests to a spammer's address can effectively shut down the spammer's e-mail ser- vice.3 Global networks themselves, as an efficient source of information distribution and of group organization, help like-minded individuals to find and help one another. Consumers can exchange opinions on prod- ucts and services, warn others of unfair practices by merchants on the Net, and organize groups to take action to protect their interests. 2For example, AOL blocked its gateway for e-mails from a company called "Cyberpromotions" because the majority of its users disliked getting the direct advertising of that company via e-mail. 3Spam is unsolicited and unwanted e-mail. Spammers are broadcasters of such messages, which are usually advertisements. For more information on organized technically based approaches to prevent spam, see .

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92 GLOBAL NETWORKS AND LOCAL VALUES 8.2.2 Informal Rules In the world of global networks, informal sets of rules of behavior, such as "Netiquette," are common. They can exist as an explicit code of conduct in a certain community or as an implicit agreement about behavior. None of these rules, whether explicit or not, is binding in a legal sense, and they are weak tools for compelling behavior in a person unwilling to submit to them voluntarily. There are, of course, social means of enforce- ment that can be effective in relatively closed groups, where the threat of excluding the individual might be a significant one. Such groups might be virtual communities of hackers, people who share special interests, and even some Internet businesses. But these are very special cases in a net- worked world with millions of users, which is expanding at a rapid rate. For most cases in which rules are necessary, legal tools of one sort or an- other will oftenperhaps even usually prove more effective. 8.2.3 The Limited Power of Traditional National Regulation The Internet and some other global networks allow anyone to transfer information-based material, easily and at minimal cost, from one country to another. They even allow a person to move in a virtual sense from one country to another without a passport, visa, or work permit. These new exit options reduce the regulatory power of the individual nation-state because its traditional tool for regulation public law generally applies only within its own borders. Although extraterritorial enforcement of na- tional laws is possible in principle, this generally presupposes that the nation-state can exercise jurisdiction over some element of the trans- national activity e.g., by seizing local property or by restricting access to its market. But although the power of the nation state to regulate is reduced, it is not eliminated, even in the Internet world. The fact that the network is global does not mean that all communications and transactions on it are between people in different countries. The end points for many exchanges are within the same country. Chat room users often wish to communicate with partners in the same national community, especially for language reasons and because of the increased likelihood of meeting in real life. E- commerce, especially retail purchases, largely takes place within one country. These kinds of activities can still be regulated by a single nation- state, even though the bits may travel anywhere in the world on the way from sender to receiver. And even when one or more of the parties involved in an Internet exchange is outside the territory of a particular state, the state's power is

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GOVERNANCE IN CYBERSPACE 193 not necessarily as limited as it may seem at first glance.4 The behavior of the party who is within the country can certainly be regulated; for ex- ample, such a person might be prosecuted for downloading illegal con- tent from the Net. More importantly, Internet traffic usually goes through the hands of local intermediaries such as Internet service providers or credit-card agencies. These intermediaries are prime targets for national regulation. They can be required by law to block, or at least provide no support for, an activity in cyberspace that is illegal in the particular coun- try. Still, this is an imperfect and a costly solution. It is imperfect in that the creation of new uncontrolled intermediaries is often technically and economically easy. And it is costly in that disempowering the intermedi- aries risks slowing the national penetration rate of the Internet, with all of the attendant economic and social consequences. 8.2.4 International Legal Harmonization Some analysts regard the international harmonization of laws as the only way to meet the challenges of global networks.5 International coop- eration in implementing and enforcing rules can be accomplished through agreements that assign responsibility for regulation, or through harmoni- zation of the regulations themselves. The problem is that states tend to balk at cooperating when their own laws and attitudes toward a particu- lar issue differ from those of the state whose laws they are asked to en- force. Therefore, only when there is consensus about an issue is interna- tional cooperation likely to be achieved quickly and effectively. That reality is illustrated by the fields in which the G-8 states consider coordinated action. For example, the Conference of the G-8 Ministers of Justice and Interior held in Milan on February 26-27, 2001, issued a communique in which pedophilia and sexual exploitation, money laun- dering, and corruption were identified as areas of common concern.6 In these subjects, the underlying attitudes are similar in all industrialized countries, and the need for regulation is obvious. But even when there is agreement in principle, regulation will not be a high priority for some nation states if there is no perceived potential harm to their economic development. Consequently, few nation-states 4A more detailed discussion of these issues can be found in Jack Goldsmith, 2000, "The Internet, Conflicts of Regulation, and International Harmonization," Understanding the Im- pact of Global Networks on Local Social, Political and Cultural Values, Engel and Keller, eds. 5Willem Calkoen uses drastic imagery in his plea for harmonization: "The issue is rapidly becoming one of whether we choose to have laws or live in a lawless society" (in "Harmoni- zation of Laws and the Internet," International Business Lawyer, April 1998, pp. 146 et sew. 6See .

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94 GLOBAL NETWORKS AND LOCAL VALUES will invest any significant resources in cooperative enforcement, and some may want to use cooperation as a lever to extract concessions from the international community on completely separate matters that are of politi- cal or economic importance to them. The problem is that even a single noncooperating state can be a serious challenge to a consistent interna- tional regulatory framework where the Internet is concerned. That coun- try can create a "regulation leak" that enables highly mobile content pro- viders to evade international regulation; or, if the country includes a significant enough group of network participants, it can, de facto, force its own regulatory structure on the international community. 8.2.5 The Use of Internationally Coordinated Commercial Laws To what extent might commercial law, rather than public law, be used to regulate global networks? The central actors in commercial law are pri- vate parties freely shaping their own legal relationships through contracts and, when necessary, suing each other in the courts. The state takes an auxiliary role by offering the legal protection of the courts, which inter- pret and judge the validity of contracts, protect people's interests in the contracting process, and help them in the enforcement of legal titles. But even these limited roles provide the state with mechanisms that can be used to protect local values in a networked world. Contracts have, in fact, become popular tools for the governance of Internet transactions. Access to a Web site is often made conditional on clicking an "I agree" button, which is taken to indicate that the site visitor has agreed to, though has not necessarily read, a long list of terms and conditions to which the statement refers. If the participating computers are appropriately programmed, the actual agreement can even be con- cluded by the two machines without any explicit action by humans. More- over, the first contract can be made conditional on holding to these same conditions any other parties to which the digital good is later sold. The private laws of the United States and Germany both start from the principle that individuals should be free to conclude a contract with anyone they wish, and to decide on its terms. Basically, the role of con- tract law is limited to giving these contracts legal validity. The normative argument is that if the two parties have agreed to the contract, the law has no reason to intervene. At most, it offers to fill in details, using "default rules" that supplement the wording of the contract, if the parties have not explicitly or implicitly ruled them out.7 7German law is much more active in this respect, resulting in complex transactions being contracted on no more than a few pages, whereas similar U.S. contracts can have hundreds of pages.

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GOVERNANCE IN CYBERSPACE 195 This restraint on the part of the legal system does not extend to situa- tions in which the fact of consent is in doubt, or where systematic power differences are likely to unbalance the outcome. This is why contract laws in both countries also have mandatory rules, which contracting parties cannot waive. To the extent that those rules differ between countries, they add complexity to the enforcement of contracts in which the parties are in different jurisdictions, but many of those have been dealt with in the past. Online transactions raise a number of additional questions that have and will continue to challenge specific mandatory rules, as well as their coordination across national boundaries. Is a simple click enough for con- sent on unusual or highly burdensome contract provisions? Must the substance of the provisions to which the click refers be controlled by the courts? Should some provisions, such as an anti-reverse-engineering clause, be prohibited when they are actually legal under patent law? Default rules also offer a way in which contract law can insert local values into the governance of international commercial activity. Although default rules, unlike mandatory rules, can be changed, both parties to the contract must explicitly agree to do so. This has two governance effects: changing a default rule is costly, and it is revealing. A party who asks for a change signals the other that the change has some particular value. The other party will then wonder why such a change might be rational for the first party, leading to a more explicit focus on the underlying values (and value differences) that gave rise to the default rules in the first place.8 Last, but not least, there is tort law, which offers opportunities to regu- late by establishing liability for damage caused by certain kinds of conduct. This allows the state to establish a financial incentive for a private entity to refrain from such conduct. The weakness in the approach, of course, is that the behavior is not proscribed but merely made costly, so that the person contemplating some socially undesirable enterprise can decide whether or not to proceed by first doing a cost-benefit calculation. Therefore tort law cannot, in any absolute sense, protect vulnerable people. Procedural law offers other opportunities to influence the legal rela- tionship between private parties. In effect, the state can use this instru- ment to establish a right of action by a third party, or by a class or group; in fact, the state could authorize itself to act on behalf of a third party, as it often does in protecting the rights of minors. Procedural law can also be used effectively in a trial to establish rules on accessing information rel- evant to the trial, to ascertain facts, or to specify the burden of proof to be used in reaching judgments. This idea plays a prominent role in what economists call mechanism design. See Douglas G. Baird, Robert H. Gertner, and Randal C. Picker, 1994, Game Theory and the Law, Cam- bridge, 147-153 passim.

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196 GLOBAL NETWORKS AND LOCAL VALUES The central advantage of regulation by commercial law lies in the re- ality that national commercial legal systems are much better coordinated internationally than are systems of public law. In commercial international law, there are conflicts-of-law rules that determine the applicable national law. The rules of the international law of civil procedure regulate the au- thority to adjudicate on national jurisdiction, and they regulate the recog- nition and enforcement of foreign judgments as well. In contrast to public laws and regulations, which have essentially no effect beyond a state's borders, commercial law's role in accepting foreign legal action (e.g., in enforcing foreign judgments) is no peculiarity; rather, it is an everyday process in civil courts.9 That is not to say that rules governing conflict of laws are neutral or totally balanced in their effect. In fact, negotiation of those rules is another point at which the state can indirectly extend its regulatory intervention. Jurisdictional rules can be established that give an advantage to either plaintiffs or defendants, that favor content providers over users (or vice versa), or that extend a state's regulatory power by giving its residents or citizens no choice about jurisdictional venues. On the other hand, rules can be constructed to give the greatest influence to states with the least regulatory restrictions by allowing parties to a dispute to "forum shop." Some of the commercial-law conflict rules currently used in the offline world may not be suitable In Weir current form for a global virtual arena like Me Internet, and some rethinking will be necessary. The process of adaptation will require a certain flexibility in me application of existing conflict rules in order to fit me kinds of cases that are likely to arise in me context of the ~ternet.~ For example, rules based on the location of the plaintiff or me defendant are much less meaningful In the Internet world, 9Cf. Wolf Osthaus, 2000, "Local Values, Global Networks and the Return of Private Law. On the Function of Civil Law and Private International Law in Cyberspace," in Christoph Engel and Kenneth H. Keller, eds., Governance of Global Networks in the Light of Differing Local Values, Baden-Baden, p. 209-236. iThis may be easier in the traditionally more flexible Anglo-American system than in the fixed-connection system of Continental-European design. But the tendency to a more open approach in the continental Conflict of Laws system can already be ascertained. A good example is provided by the rules of the Rome Convention on the legal order governing contractual relations. According to Art. 4 of the Convention, as a rule, the law of the nation to which the contract has "the strongest connection" is to be applied. A list of assumptions in par. 2 intends to fill out this term for the regular case. But if there is any closer connection to the law of another state, the judge is free to apply this law (Art. 4 par. 5~. iiSee Matthew Burnstein, 1998, "A Global Network in a Compartmentalized Legal Envi- ronment," in Katharina Boele-Woelki and Catherine Kessedjian eds., Internet, Which Court Decides? Which Law Applies? Kluwer Academic Publishers, Dordrecht, the Netherlands, pp. 23, 27 et seq.

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GOVERNANCE IN CYBERSPACE 197 and a rigid adherence to notions of location would provide easy opportuni- ties for people to evade the law by adjusting their virtual location. There may well be a temptation to find convenient but inappropriate analogies to Internet cases in existing commercial law, not least because particular interpretations may serve perceived national interests. With each nation-state making such interpretations in its own interest, the re- sult could be an unraveling of the carefully developed commercial-law coordination regime and an accumulation of inconsistent regulations, comparable to what exists in the area of public law. Indeed, it could result in a loss of international willingness to recognize and enforce foreign judg- ments in civil-law matters. It would be far better at the moment to con- sider Internet cases individually and de nova, accumulating experience that might ultimately be used to identify valid abstract norms. As promising as it is, the potential of commercial international law should not be overestimated. Regulation by commercial-law systems can lead to practical problems in which the individual actors are not able to defend their rights. The most important restriction relates to money: the commercial law system requires the parties to pay the costs of litigation, a serious financial burden to those involved. Even if litigants ultimately obtain a favorable judgment and are reimbursed for the cost of litigation- no certainty in any event the up-front costs can be enormous. )3 Gather- ing evidence, prosecuting the case, and dealing with delays all take time and money. Furthermore, these costs multiply with every appeal and even more when judgments must be legitimized and executed in another state.~4 In many cases, the cost and uncertainty discourage a person from ever pursuing a legal remedy, though in the American system, class- action suits have been one answer to this problem. On the other hand, it is also true that defendants, particularly those without "deep pockets," are disadvantaged by a costly legal system and i2Here in particular, the U.S.-wide "governmental interest approach" could undergo an undesired renaissance. i3Here, the national costs associated with litigation are important. The German solution, that all costs follow the event, is advantageous providing one wins. But a victory in court is never sure. The American system, by which everyone bears their own costs, harbors the danger that the party has to split an award with his or her lawyers. This is not always compensated for by the high levels of compensation for pain and suffering, structured settle- ments, or punitive damages. Therefore lawyers find themselves hunting cases and are con- tent with being remunerated only with a share of the amount awarded (contingency fee). i4According to an investigation carried out by the E.U. Commission, the costs for lawyers and courts for the enforcement of a judgment worth 4,000 marks, even within the common market, amounts to 5,000 marks. See Enquete Commission, "Future of the Media in the Economy and Society: Germany's Way in the Information Society: Fifth Report on Con- sumer Protection in the Information Society" (Bundestags-Drucksache 13/11003), p. 26 (with further references).

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98 GLOBAL NETWORKS AND LOCAL VALUES therefore more likely to settle claims regardless of their merit. No equiva- lent to class action suits exists in this case, and an unfortunate consequence of excessive dependence on commercial law may be that certain content providers or intermediaries will adopt a protective strategy to avoid li- ability, with a resultant chilling effect on freedom of expression. An addi- tional interesting problem in the application of commercial law to the Internet is the difficulty of identifying a defendant with some certainty and establishing his or her location. One cannot sue a domain name or an IP address per se. (There is an exception, however, where trademark pro- tection is concerned. The U.S. Anticybersquatting Consumer Protection Act gives the trademark owner the option to sue "in rem." In practical terms, this means that he or she can sue the domain name without even knowing who has registered it.~5) Of course, even if a defendant has been identified, enforcing a judg- ment may be quite difficult because of the high mobility of persons and capital. In the physical world, and where parties are subject to the juris- diction of the same government, those who win judgments against clearly identifiable parties often have available such enforcement mechanisms as attaching a person's property or garnishing wages. It may well be that the Internet world will require new mechanisms (for example, withdrawing a domain name, or striking the IP addresses from domain servers and rout- ers) for enforcing judgments that relate to important assets in this new technological setting.~7 8.2.6 Self-regulation Without State Intervention Many have argued that the state should refrain completely from at- tempting to regulate the Internet and instead allow network participants to regulate themselves. Indeed, many claim that this kind of self-regula- tion is already occurring, and that there is a workable set of rules in place for cyberspace, quite independent of national borders. Variously called "cyberlaw," "lex informatica,"~8 or "common law of the Internet," its pro- i5In this regard, the EU directive on distance selling also is a (weaker) step in the right direction. It stipulates that a consumer, even before concluding a contract, needs to be in- formed about the (real) identity of his contracting partner (Art. 4 I lit. a). i6Peter Swire. 1998. "Of Elephants, Mice, and Privacy: International Choice of Law and the Internet," The International Lawyer 32:991, 1024. i7Henry H. Perritt, Jr. 1998. "Will the Judgement-Proof Own Cyberspace?," The Interna- tional Lawyer 32:1123, 1132 et seq., 1139 et seq. i8Joel Reidenberg. 1996. "Governing Networks and Rule-Making in Cyberspace," Emory Law Journal 45: 911-929; Aron Mefford, 1997, "Lex Informatica: Foundations of Law on the Internet" available online at .

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GOVERNANCE IN CYBERSPACE 199 portents point to "lex mercatoria" (the law of the marketplace in interna- tional business) as an example.~9 Although these are technically not laws, they are rules that have evolved through a process of self-regulation that was essential in the development of the Internet precisely because its ac- tivities transcended national boundaries. The effectiveness of such self- regulation, what might be called "soft law," depends on such social pres- sures to conform as the threat of exclusion from membership in a group where membership confers benefits. As valuable as soft law can be in many areas, it does raise certain problems. First, and obviously, private enforcement measures are not al- ways effective. If the issue is sufficiently important or the inappropriate behavior sufficiently disruptive, people whose rights are threatened may try to call on formal state-based institutions to enforce the soft law. But states' willingness to act may depend on whether the self-regulatory struc- ture exists within the context of some legal framework. If not, the soft law may be seen as an ad hoc agreement among Net participants that is not a matter for legal authorities.20 Some might argue that the nation-state should enforce the self-regu- lation rules as it would a contract. That may work in certain circumstances, but not if the "contract" contains provisions that are inconsistent with mandatory rules i.e., nonwaivable rules of national law. Furthermore, there is a question as to whether all participants have contractually accepted the pertinent rules of cyberlaw merely because they are using the Internet. In principle, one possible approach to giving con- tractual status to a given set of rules associated, perhaps, with a particu- lar Web site or service would be to require all users, at the time of log- ging in,22 to declare their willingness to accept the rules. But it is highly questionable whether such a vague commitment concerning future, hy- pothetical actions could have legal validity. An even larger question in a self-regulatory scheme is how to avoid a tyranny of the majority that violates the interests of the minority. How would a party with much weaker bargaining power be protected against rules imposed by a party with much greater power?23 How would due i9Cf. Burnstein, 1998 (supra note 11~; David Johnson and David Post, 1996, "Law and Borders: The Rise of Law in Cyberspace," Stanford Law Review 48:1367 et seq. (especially pp. 1387 et seq.~. 20In German law, for instance, Art. 4 II EGBGB, which only refers to the choice of the"law of a state," provides a clear answer: mandatory rules of national law that would be appli- cable according to the general Conflict of Laws rules cannot be avoided by reference to nongovernmental rules. 2iGoldsmith (supra note 4) 1200. 22Burnstein (supra note 11), pp. 31 et seq., suggests such a negotiation. Following the expression shrink-wrap, he calls for "click-wrap-contracts." 23Goldsmith (supra note 4) 1200.

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200 GLOBAL NETWORKS AND LOCAL VALUES process be ensured? The notion of self-regulation arose at a time when Internet users were a relatively homogeneous group with strongly shared ideals. Informal rules had as much, or even more, effect on behavior as legally binding rules. Such an "Internet community" would be a mere illusion today, given not only the commercialization of the Net but also its burgeoning use for many social, political, and cultural purposes. The pro- tection of local values quite often amounts to nothing more (or less) than the recognition and protection of the differing ideas of many small groups that are unable to have any significant influence on the rules in a self- regulatory regime. For Europeans and others, the majoritarian nature of a self-regulatory scheme raises the concern that American legal concepts and American cultural values will dominate the Internet, and further, that American in- terests will be served by its orientation. This has been characterized as "Americanization by the back door."24 As people from other cultures seek their own opportunities to participate in the Internet, the concern about "Americanization" may well be broadened to a concern about "Western- ization" or even the specter of "neocolonialism." Interestingly, some proponents of self-regulation may find themselves having second thoughts if commercialization of the Internet leads to the creation of powerful economic interests that can exercise a very strong influence on the direction of the informal or de facto rules. Where eco- nomic transactions take place between equally strong partners, self-regu- lation can be a usefully flexible and effective tool. But when stronger and weaker participants come together on the Net, self-regulation cannot guar- antee a desirable result. Similarly, if self-regulation leads to greater influ- ence for market-driven processes, local values can lose out. In these cases, some participation by the state seems necessary. 8.2.7 Hybrid Regulation As noted in other chapters of this report, a number of experts have suggested that the best approach to governing the Internet is to combine a number of different regulatory and policy tools, selecting those that work best for particular purposes and in particular circumstances. Obviously, this leads to a rather complex system of governance, but the fact is that the globally networked world is itself complex, which is why no single regu- latory approach seems adequate. This use of a panoply of tools and ac- tors, formal and informal, governmental and nongovernmental, national and international, is labeled hybrid regulation. 24Very clear on that point is Peter Mankowski, 1999, "Wider ein transnationals Cyberlaw," Archivfur Presserecht, p. 138 (140~.

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GOVERNANCE IN CYBERSPACE What Does Hybrid Regulation Mean? 201 In a sense, hybrid regulation is a misleading term. It is not so much regulation as a broader concept of governance, taken to mean the system of institutions and processes used to influence the conduct of individuals and groups. Governance, from this perspective, is about the allocation of power not only in a public setting but within private associations as well and exercised by a multitude of actors at different levels of author- ity and operation. This system of governance involves a number of challenges: coordi- nating the legal and political actions of national governments; adding and integrating new forms of transnational institutions such as the European Union; making use of diplomatic conferences or permanent international organizations such as the ITU or WTO, when appropriate; and recogniz- ing and facilitating voluntary self-regulatory mechanisms involving in- dustry, labor, public interest, and other community interest groups. Applied to cyberspace, with its multitude of activities and many con- stituencies, governance may basically serve an "umbrella" function, as- serting certain normative principles, explicitly recognizing the set of agreements and arrangements that deal with the subjects of public inter- national law, and providing some level of legitimacy to the principles and self-regulatory schemes that govern, respectively, business, civil society and other nongovernmental entities. Put differently, one can envision a hybrid regulatory regime in which government provides a framework for private self-ordering that meets certain minimum requirements estab- lished by the framework.25 Over time, this might well lead to an even more limited role for the nation-state, as new actors appear who assume regulatory powers that have traditionally been state responsibilities. Public institutions also share authority at the level of global gover- nance. New nongovernmental actors with transborder reach, such as mul- tinational or transnational enterprises,26 internationally organized pub- lic-interest groups, and other nongovernmental organizations (NGOs), increasingly exercise influence and assume responsibilities complemen- tary to, or in cooperation with, established public actors in the interna- tional legal community.27 Global networks, of course, play an important 25See Henry H. Perritt, Jr., 2000, "The Internet Is Changing the Public International Legal System," Kentucky Law Journal, 88:885-955. 26Klaus W. Grewlich. 1988. Transnational Enterprises in a New International System, Alphen aan den Rijn. 27James Rosenau and Ernst-Otto Czempiel, eds. 1992. Governance Without Government. Cambridge.

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202 GLOBAL NETWORKS AND LOCAL VALUES role in helping these new entities evolve positions on various issues and in empowering them to act. Developing a public international-law structure that enables the inte- gration of binding public international law, "soft law," self-regulatory ar- rangements, and nonbinding self-policing measures might, in the long run, change the nature of international law itself. Gradually, a scheme of governance that was originally designed to achieve some sort of workable coexistence among sovereign actors might develop its own normative demands, along with procedures for new institutions to address them. Interest in Hybrid Regulation Hybrid regulation is not a new concept. Indeed, governance in both the United States and Germany relies on several levels of federalism, in- cluding national, state, local, and district law and regulation. Further, trade associations often make their own rules on competition and anti- trust, and various interest groups such as NGOs lobby, draft regulations, and get them approved by legislative or administrative bodies. Against this background, hybrid regulation just adds another international- level. Governments on both sides of the Atlantic appear to be willing to consider hybrid forms of governance in a number of domains, though they generally speak in terms of opening markets and minimizing gov- ernment interference. For instance, at the G-7 Conference in Brussels in February 1995, the following policy principles were endorsed by the con- ferees: promoting dynamic competition; encouraging private investment; defining an adaptable regulatory framework; providing open access to networks; ensuring universal provision of, and access to, services; pro- moting equality of opportunity to the citizen; promoting diversity of con- tent, including cultural and linguistic diversity; and recognizing the ne- cessity of worldwide cooperation, with particular attention to less-developed countries. These principles have been refined in statements and reports emerg- ing from a number of international governmental meetings, such as the 1997 Ministerial Conference on Global Information Networks in Bonn and the 1998 Organization for Economic Cooperation and Development (OECD) Ministerial Conference, "A Borderless World: Realizing the Po- tential of Global Electronic Commerce," in Ottawa. The Ministerial Decla- ration issued after the Bonn Conference, as well as a parallel "Industrial Declaration" put forward by the private sector, asserted that if there was to be further expansion in electronic commerce, a number of key strate- gies would have to be adopted. For example, regulation would have to be as light-handed and flexible as possible; legal rules applicable to global

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GOVERNANCE IN CYBERSPACE 203 information networks would have to be consistent across borders; and telecommunications markets would have to be opened up to effective competition. It would also be necessary to allow market forces to drive the development of open technical standards; to avoid discriminatory taxes on the use of information networks; and to provide a high level of intellectual-property-rights protection for the creation, storage, and dis- tribution of cyber-content. Businesses also seem to be open to self-regulation under a govern- mental umbrella. For example, at the 1998 OECD Ottawa Conference, business spokespersons proposed a set of fundamental principles "to shape the policies that govern electronic commerce, if the promises of elec- tronic commerce are to be fulfilled."28 It included the following: The development of electronic commerce should be led primarily by the private sector in response to market forces. Government intervention, when required, should promote a stable, international legal environment, allow a rational allocation of scarce re- sources, and protect the general interest. Such intervention should be no more than is essential and should be clear, transparent, objective, nondis- criminatory, proportional, flexible, and technology-neutral. Mechanisms for private-sector input and involvement in policy- making should be promoted and widely used in all countries. Regulation of the underlying telecommunications infrastructure, where necessary, should reduce impediments to competition, enabling new services and new entrants to compete globally in an open and fair market. A high level of trust should be pursued by mutual agreement, edu- cation, further technological innovations to enhance security and reliabil- ity, the adoption of adequate dispute-resolution mechanisms, and private- sector self-regulation. Business should make available to users the means to exercise choice with respect to privacy, confidentiality, content control, and, under appropriate circumstances, anonymity. The apparent enthusiasm for new governance approaches should not, however, obscure two realities. First, the more important that telecommu- nications, information services, electronic commerce, and global informa- tion networks become to national societies and economies, the less likely 280ECD Ministerial Conference. 1998. "A Borderless World: Realizing the Potential of Global Electronic Commerce," A Global Action Plan for Electronic Commerce Prepared by Business, with Recommendations from Governments, 7-9 October 1998, Ottawa, Canada, OECD Document SG/EC(98~11/REV2, 5 October 1998.

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204 GLOBAL NETWORKS AND LOCAL VALUES it is that governments will relinquish all controls. Second, on the flip side, withdrawal of controls i.e., liberalization and deregulation will only work if international cooperation becomes more stable and reliable and the right balance is struck between subsidiarily, harmonization, and the transfer of some authority to new entities international or private. Constitutionalizing Public International Law to Facilitate Hybrid Regulation Effectively managing the changes inherent in the global evolution to- wards an information society is a challenge involving many constituen- cies and rules at once. It would appear more effective and appropriate to explicitly engage all of these constituencies, rather than to rely on the tra- ditional monolithic concept of national sovereignty. This approach would be tantamount to "constitutionalizing" public international law that in the past has served little more than a coordinative function for sovereign governments. Public authority would become the joint and separate re- sponsibility of a multiplicity of coordinated authorities, with nation states being but one of the elements of this system.29 In addition to multilevel authority, the system would have a multi- plicity of actors.30 In its umbrella function, this constitutionalized inter- national legal systems might establish normative principles, agreements, and procedures pertaining not only to subjects appropriate for public in- ternational law but also to self-regulatory schemes that would apply to business, labor, civil society, and other nongovernmental entities. In the most optimistic scenario, this umbrella function, at first little more than a compilation of arrangements, might ultimately lead to integration of the public and private, the traditional and newly emerging, and regulation by law and the process of self-regulation. 29See, in this context, Ingolf Pernice, 1999, "Multilevel Constitutionalism and the Treaty of Amsterdam: European Constitution-Making Revisited?," Common Market Law Review 36 :703 (709~. 30Klaus W. Grewlich, 1999, Governance in Cyberspace Access and Public Interest in Global Communications, Den Haag/London/Boston (Chapter Ten). 3iErnst U. Petersmann, 1999, "How to Constitutionalize International Law and Foreign Policy for the Benefit of Civil Society?," Michigan Journal of International Law 20; Hannes L. Schloemann and Stefan Ohlhoff, 1999, "'Constitutionalization' and Dispute Settlement in the WTO National Security as an Issue of Competence," American Journal of International Law 93:424.