Transnational Law and State Transformation

The Case of Extractive Development in Mongolia

Jennifer Lander

• Publisher: Routledge
• Year: 2019
• ISBN:
  9780429664137
• Edition: 1
• Topic: Business
• Subtopic: Finanza
• Index: Business

This book contributes new theoretical insight and in-depth empirical analysis about the relationship between transnational legality, state change and the globalisation of markets.

The role of transnational economic law in influencing and reorganising national systems of governance evidences the constitutional dimensions of global capitalism: the power to institute new rules and limits for national states. This form of new constitutionalism does not undermine the state but transforms it by eroding national capacities and implanting global alternatives. While leading scholars in the field have emphasised the much-needed value of case studies, there are no studies available which consider the cumulative impact of multiple axes of transnational legal ordering on the national state or its constitution. This monograph addresses this empirical gap, whilst expanding the theoretical scope of the field. Mongolia's recent transformation as a mineral-exporting country provides a rare opportunity to witness economic and legal globalisation in process. Based on careful empirical analysis of national law and policy-making, the book traces the way distinctive processes of transnational legal ordering have reorganised and reframed the governance of Mongolia's mining sector, specifically by redistributing state power in relation to the market, sub-national administrations and civil society. The book investigates the role of international financial institutions, multinational corporations and non-governmental organisations in normative transmission, as well as the critical role of national actors in embedding transnational investment norms within the domestic legal and policy environment. As the book demonstrates, however, the constitutional ramifications of transnational legal ordering extend beyond the mining regime itself into more fundamental questions of the trajectory of state transformation, institutionally and ideologically.

The book will be of interest to scholars of international law, global governance and the political economy of development.

Part I

Theory and summary of the book

Chapter 1

Transnational law, state transformation and global markets

Economic development and material constitutional change

Decoding “development”: a socio-legal approach

Whatever the response, the claim to expertise in optimising the lives of others is a claim to power, one that merits careful scrutiny.

Tania Murray Li, The Will to Improve (2007: 5)

Is law, for example, relatively autonomous, and if so, autonomous of what, and how relatively?

E. P. Thompson, The Poverty of Theory (1978: 288)

The concept of development may be commonplace, but its meaning has proven elusive. Thousands of pages have been written by scholars from different disciplines to define the term in relationship to a particular goal or desired quality: sustainability, freedom, economic growth, human, green. These terms, however well intended, create a mirage over the complex policies and power struggles which imbue any so-called “development” strategy. If we are to get a conceptual grip on its material and normative implications, we must decode the mirage.

This book explores the constitutional significance of extractive development through a socio-legal analysis of Mongolia’s mining regime. Recognising that readers may be coming to this book from a variety of disciplinary backgrounds, a few definitions are in order. Firstly, extractive development refers to an economic model that depends upon the exploration, extraction and export of non-renewable resources, usually with little or very limited processing (Acosta, 2013: 62). These resources are commonly understood to include minerals, oil and gas reserves, and water (i.e. hydropower), which form the raw material base of modern energy systems. The development side of the term refers to the contemporary concept of social progress which has dominated discourses of societal improvement since the end of the Second World War. The concept of “development” is a distinctly modern ‘collective improvement strategy’ (see Li, 2007; Lander, 2019) based upon the normative standards and experiences of industrialised consumer societies in the West (Ferguson, 1990; Craig and Porter, 2006; Li, 2007; Carroll, 2012b). When the terms “developing” and “developed” may be used from time to time in this book, they refer to the mainstream construction of a distinction between countries on the basis of this industrialised concept of development. Recognising the significant debates about the use of these terms, it is important to note that their use in this book refers to a mainstream discursive construction which this book hopes to unpick. The terms Global North and Global South are used to refer to the unequal distribution of resources and power which correlates with the division between countries on the developing/developed continuum.

There are many studies which focus on how countries in the Global South can effectively use natural resources to ‘develop’ (see Auty, 2001; Humphreys et al., 2007). Extractive development strategies are precisely the conglomeration of laws, policies and social institutions which organise extractive production in a manner intended to produce collective improvement along modern sensibilities of progress. This type of scholarship seeks primarily to produce policy prescriptions to improve a country’s developmental trajectory (e.g. to increase economic growth or value in the production process). In contrast, this book takes a broadly sociological approach to extractive development. Instead of the question “how should extractive industries be organised to produce development?” it asks, “what kind of social change is produced in the pursuit of this goal?” Development itself is such a fickle and flimsy concept that starting with the substance of the social change it requires, authorises and justifies seems a good a place as any to start if we are to really get a grip on what it means in reality.

The reorganisation of economies in the name of development since the end of the Second World War has consistently engaged with broad-based processes of institutional change both within national states and at the international scale. While the precise focus of reform has altered and shifted with the re-articulation of the concept of development, a sociological analysis of development cannot escape from the effervescent presence of law. The reorganisation of economies is a distinctly socio-legal task, involving a fairly wholesale transformation of the political and regulatory relations of production (Cox, 1987; Wood, 1995). All organised forms of production, accumulation and redistribution have historically depended upon political-juridical institutions and relations, whether in the family, tribe, federation, empire or national state (ibid.: 251; Polanyi, 1944/2001: 59–70). Consequently, an economy is a distinctively social institution, thoroughly ‘embedded and enmeshed’ (ibid.: 250) within political and juridical relations. The creation of a new economic order in the pursuit of development relies upon the renegotiation of the authoritative rules and relations which governed the pre-existing system.

Socio-legal analysis views law as constitutive of social reality (including the economy). From a socio-legal methodological perspective, the relatively submerged nature of law does not render it any less central to the analysis, because the context and sub-text of law may be given as much if not more analytical emphasis as the legal texts themselves (Frerichs, 2012; Perry-Kessaris, 2013). This is the central distinction between a “socio-legal” and “legal” approach, the latter reading law from the standpoint of doctrinal coherency. As Amanda Perry-Kessaris writes in Approaches to the Study of International Economic Law, ‘socio-legal approaches consider not only legal texts, but also the contexts in which they are created, destroyed, abused, avoided, and so on; and sometimes their sub-texts’ (2013: 6). Citing Sabine Frerichs (2012: 9), Perry-Kessaris (ibid.) goes on to explain what these terms mean:

By text I mean the legal text, that is, the written rules and doctrines, or what can be considered black letter law. By subtext I refer to the moral subtext of a legal text, that is, its implied or deeper meaning. This includes the different notions of justice underlying a legal argument which make it necessary also to read between the lines. By context I refer to the social context of a legal text, that is, its forceful link with reality. In this perspective, law is not a self-contained discourse but a powerful social institution.

This book adopts a socio-legal perspective by seeking to understand how contemporary extractive development strategies necessitate – and are enabled by – transformations in legal and political institutions and relationships. The scale of analysis is simultaneously national and transnational. Through the case study analysis of Mongolia, the book focuses on the national state as the mediating locus of transformation, although it brings a transnational perspective on legal ordering associated with global market-led development to bear on the question of state transformation. Virtually, all “national” economic strategies now revolve around becoming globally competitive, whether in relation to financial services, agriculture and manufacturing, extractive and energy industries, technology and telecommunication, health and education (see Braithwaite and Drahos, 2000). All of these economic sectors are governed by legal rules and norms that are increasingly transnational in their scope, meaning that a body of legality has achieved regulatory resonance and effectiveness across scales of jurisdiction (international, regional, national, sub-national) (ibid.).

It is safe to say that, in general, development strategies premised on finding a competitive niche in the global economy trigger a juggernaut of socio-legal change within national states to mitigate investment risk and effectively build markets (Carroll, 2012a). However, the normative drivers behind domestic governance reform to enable global economic integration have a distinctively transnational flavour. While rules and norms governing aspects of investment protection (e.g. non-discrimination, fair and equitable treatment, protections from expropriation, corporate liability, access to dispute resolution) may originally have their origins in Anglo-American legal systems (Schneiderman, 2008), these “local” norms have become effectively globalised through the multilateral and bilateral regimes governing trade and investment, global governance frameworks, alongside the evolving ‘running code’ (Calliess and Zumbansen, 2010) of private commercial legal practice. To be able to conceptualise the legal complexity associated with market-led development strategies, the traditional distinctions between domestic and international law offer little assistance (Berman, 2005). While national and international laws clearly still exist, the global economy is, in practice, regulated by a much more complex range of legal processes and norms which break down traditional binaries between national/international, public/private and hard law/soft law (Zumbansen, 2012). Soft law norms like “good governance” or benchmarking ratings, for example, as well as private legal mechanisms (e.g. contract law and project finance structures) can have a very concrete regulatory effects within national states, particularly because they tangibly influence perceptions of investment risk (see Perry-Kessaris, 2011; Bhatt, forthcoming)

The concept of transnational law helps to identify the complex ways in which ‘border-crossing regulatory regimes’ (ibid.: 312) operate simultaneously beyond and through national jurisdictions. As Gregory Shaffer (2014: 3) proposes, transnational law refers quite simply to ‘legal norms that apply across borders to parties located in more than one jurisdiction.’ This definition helpfully includes not only public and private international law as separate categories, but also the ‘interaction of publicly and privately made law’ (ibid., emphasis added). A complex array of legal norms regulates the global economy, some public, some private, some binding, some non-binding. According to Shaffer (ibid.: 1–2), viewing global economic integration as a transnational legal process recognises the way that ‘these norms are constructed, carried and conveyed, always confronting national and local processes, which may block, adapt, translate or appropriate a transnational legal norm.’ The emphasis on ordering focuses energy on tracing legal normative diffusion through stages of ‘construction, flow and settlement’ rather than primarily seeking to establish a new category or scale of law (see Shaffer, 2016). This is where the emphasis of transnational and global law scholarship diverges. Global law scholarship tends to focus on explaining the life of law “beyond” the state, often without reckoning with the ongoing significance of national jurisdictions as sources, targets and transit sites for transnational legal processes. The more limited focus of the transnational law concept on normative diffusion across borders is conceptually beneficial given the diversity of legal phenomena that exist beyond the exclusive control of the national state, yet in reality ‘operate at more limited sub-global levels’ (Twining, 2009: 24). “Global law” semantically suggests a higher order of denationalised (i.e. not national or international) law that exists above and beyond national states, whereas a transnational law perspective seeks to map the multidirectional flow of legal norms across and within legal borderlands (Shaffer, 2014: 214).

When it comes to the regulation of global markets, transnational legal norms have achieved a remarkable degree of consolidation (Braithwaite and Drahos, 2000). In contrast to norms that might require market competitiveness to be tamed for some other moral or social good (e.g. human rights or protection of environmental commons), the transnational mobility of market-facilitating legal norms is naturally reinforced by the accumulation incentives states have to participate in global markets, as well as the mechanisms which protect private capital and investment (see Bhatt, forthcoming). No state can be described as autonomous from the universal reach of global capitalism, which has achieved an unprecedented degree of hegemony in terms of economic organisation vis-à-vis the particular “legal structure” associated with processes of commodification (Cutler, 2005: 532, citing Kennedy, 1985: 976–977). As Cutler (ibid.) puts it, ‘the commodity system presupposes laws of contract and property that legitimate and enforce private ownership of the means of production and exchange.’ While capitalist economic systems originated within and expanded from particular national jurisdictions in Europe, ‘each state itself experiences competitive imperatives to accumulate’ within the global economy (Dunn, 2014: 84). Transnational legal norms are consequently mobilised through multilateral and bilateral investment and trade frameworks which facilitate capital mobility,¹ as well as the legal relations and economic power disparities that structure negotiations between agents and recipients of capital investment and states (Sassen, 2007: 12). All states negotiate new norms and relations in the context of ‘common capitalist imperatives’ (Dunn, 2014: 80) ‘common capitalist imperatives’ (Dunn, 2014: 80). Quite simply, ‘capitalist imperatives’ (ibid.) are those which incentivise states to facilitate the constantly expanding creation of market “value” (i.e. through the commodification of material and immaterial things), the extraction and maximisation of profit (“surplus value”), and the consequent reinvestment of profit to produce even higher returns. As Brian Tamanaha (2008: 406) puts it, the global capitalist economy should be credited with ‘the most powerful contemporary impetus, momentum and penetration of new [legal] norms.’ And nowhere is transnational legality becoming more consolidated than in the context of “risky” extractive industries and their volatile global markets.

Transnational legal norms associated with the ‘commodity form’ (see Cutler, 2005) are transmitted across borders via the legal infrastructure of the global economy, but are also diffused through the agency of supra- and sub-national actors and networks (Garth and Dezalay, 1996; Zumbansen, 2013; Bhatt, forthcoming; Shaffer, 2014: 1). The intrinsic ordering impetus of global capitalism, supported as it is by particular legal forms and norms, is also reinforced by the most powerful agents and institutions of the global economic system. International and regional development financing institutions, commercial law firms, private banks, credit ratings agencies and influencing organisations (e.g. World Economic Forum) almost universally buy into the market logic of risk mitigation and investment promotion. Thus, taking a bird’s-eye view of the socio-legal “web” of transnational market-facilitating rules, norms and networks, a distinctive set of “stability norms” designed to facilitate and secure global markets (e.g. non-discrimination, anti-expropriation, political risk mitigation, contract enforcement and competitiveness) has achieved an unprecedented degree of hegemony across the global economic order.²

The key question this book explores is how this increasingly consolidated body of norms becomes authoritative within states seeking global economic integration – and pursue “development” – vis-à-vis competitiveness in natural resource markets. While much trans...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Dedication Page
• Table of Contents
• List of tables and maps
• Preface: the state has forgotten its reason for being?
• Acknowledgements
• List of Mongolian words and acronyms
• Part I Theory and summary of the book
• Part II The case study
• Part III Theoretical reflections
• Index