23 november 2017

Private standards in commercial contracts

Regulatory standards developed by non-state, private actors are regularly incorporated in contemporary international commercial contracts. In this way, lead firms in the supply chain, such as large retailers and brand-name companies, seek to ensure specific qualities of the goods and services they sell to consumers locally, yet source globally. Compliance with such private standards is significant, both for the lead firm and its suppliers down the chain. For lead firms it is the principle way in which it can deliver on the qualities of the products and services they source globally, while for suppliers compliance is a preliminary condition to access primary commodity markets, to earn a supply contract and to keep it. Assessing and ensuring compliance, however, may be problematic first of all because the qualities private standards aim to ensure are often credence qualities. Secondly, most of the standards used are process-based, and can be unclear or ambiguous. This triggers important (socio-)legal questions concerning the substantive and procedural aspects of compliance with private regulatory standards in commercial contracts that this Chapter seeks to discuss. In addressing these questions the Chapter reviews (empirical) studies on the use of private standards in contracts, private certification schemes and case law on the interpretation of private standards.

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