New Governance Mechanisms in International Economic Law: The Role of Soft Law

Abstract

Economic governance consists of the processes that support economic activity and economic transactions by protecting property rights, enforcing contracts and taking collective action to provide appropriate physical and organizational infrastructure. These processes are carried out within international organizations, in both formal and informal ways. The international order is currently characterized by the proliferation of different treaties on overlapping matters and by new governance mechanisms, which are non-binding modes of steering.

Many treaty rules are indeterminate either because a single rule cannot encompass effectively every scenario. Thus, treaties require further concreteness, which soft law can provide as it draws on pertinent technical and scientific expertise and is conducted in less politicized contexts. Purely formal international law is unlikely to solve the problem. Since non-binding governance mechanisms are less constrained by treaty texts, they can balance conflicting objectives and develop more innovative solutions to the problem of conflicting legal rules. Some non-legal governance mechanisms can be embedded in law or be semi-institutionalized, engage in ongoing rule making and produce detailed norms.

The paper proposed evaluates the role of soft law in regulating a globalized world, with the aim of demonstrating that formal international law and ‘new’ or non-legal governance mechanisms can be brought into a fruitful relationship. For this purpose, the paper will analyze the functioning of the International Monetary Fund (IMF) where conditionality criteria subordinate the admission of the States to financial aid.

Keywords: economic governance, soft law, non-binding mechanisms, International Monetary Fund (IMF), conditionality criteria, economic crisis, Greece

JEL Classification: F02, F10, F30, F33, F34