Private security companies and their international code of conduct : institutional forces in the creation of transnational governance

(1)

Private security companies and

their international code of

conduct

Institutional forces in the creation of transnational

governance

Student: Jorn Meuwissen

Student number: 5946344

Master Thesis

Graduate School of Social Sciences

Project: Non-state actors in policy making

Date: 05-07-2014

Supervisor: Dr. Rosa Sanchez-Salgado

Abstract:

Incidents like the Nissour Square tragedy in Iraq have made it painfully clear that the current international legal framework is not able to hold private security companies accountable for violations against humanity. To overcome some of the existing problems, a multi-stakeholder initiative has been launched which has become known as the International Code of Conduct for Private Security Providers (ICoC). The goal of this research is to give an overview about the interactions between the different actors in the creation of this process, and to make a theoretical contribution to the existing literature about transnational governance.

(2)

(3)

2

1. Introduction

During the wars in Iraq and Afghanistan, the general public got introduced to an almost forgotten phenomenon: private contractors that do not fight for their country, but primarily to make money. Since the end of the Cold War, this industry grew exponentially and the United States (U.S.) government was among the first that used private security companies (PSCs) on a massive scale to perform duties that are traditionally considered as core tasks of states. It is estimated that the U.S. government hired 310 different PSCs in Iraq alone between 2003 and 2009 (de Nevers 2010: 220). One of the problems with the employment of these companies is that international humanitarian law does not directly apply to them. They do not belong to any national military, which means that these contractors should follow national laws. However, incidents like the Nissour Square tragedy make it painfully clear that it is still not possible to hold contractors, or companies, accountable for their actions. Even though different independent researchers concluded that the contractors where to blame, no one has yet been convicted for their share in this event (Whitten 2012: 503-505). The Nissour Square tragedy is far from the only violent incident in which PSCs have been involved, but it did become a symbol for the failure of national and international laws to control this industry.

Since it is unlikely that intergovernmental agreements will be reached about an effective international legal structure for PSCs, the Swiss government initiated in 2009 a process which has become known as the International Code of Conduct for Private Security Service Providers (ICoC, or Code). The goal of this initiative is to create principles for the private security industry that are based on international humanitarian and human rights laws.1 To make the initiative as effective and legitimate as possible, it was decided that only a multi-stakeholder initiative would have the legitimacy and strength to really make a contribution to the protection of human rights. During the process, it became evident that there were three types of stakeholders that contributed the most to the initiative, and had the most knowledge about the problems. These were the PSCs themselves, states, and civil society

organizations (CSOs). Together, they form the three pillars around which the ICoC is build. The CSO

pillar contains a broad variety of actors who have an interest or expertise about the topic; these include for example academics and non-governmental organizations (NGOs). After the International

Code of Conduct for Private Security Service Providers Association (ICoCA, or Association) was

launched in September 2013, the members of this pillar became merely NGOs.2 The difference between the ICoC and the ICoCA is that the former is the standard to which PSCs most comply. The latter is the organization itself that will enforce the standards by third party grievance mechanisms, and internal and external oversight.

1

http://www.icoc-psp.org/Home_Page.html (05-07-2014)

(6)

5 What is so special about the ICoC compared to other multi-stakeholder initiatives, is that it is the first form of transnational governance that should have universal oversight mechanisms to control PSCs. This means that the ICoC will also conduct field missions in often very dangerous and remote areas. Since the ICoC is such a special case, it is interesting to see how a wide variety of actors, with very different goals and tasks, have been able to create governance mechanisms that should be able to make a contribution to the protection of human rights. Looking at the existing literature about PSCs and their misbehavior, it is striking to see that most researches have been done on the legal framework, or the legal vacuum in which these companies operate. However, the goal of this research is not to make a contribution to the literature about these studies. Though the ICoC is meant to fill a gap in the international legal framework, it is the job of legal experts to see whether the content of the ICoC is really sufficient to make an impact. Experts on internal organizations need to conclude whether the agreements, that have been made on the Association, have the potential to create an effective organization, that will be able to survive on the long term. This research is merely focusing on the interactions between the different pillars. Lessons that can be learned from the ICoC process can make a contribution in the future to other governance initiatives that try to protect human rights. The research question that will be answered in this thesis will therefore be: How did the interactions

between PSCs, states, and CSOs lead to the formation and evolution of the International Code of Conduct for Private Security Providers (ICoC)?

To answer this question, different theories about transnational governance have been used to focus on specific aspects that are vital for effective agreements in the absence of a sovereign leader. In the following chapter, these theories will be explained into more detail. Chapter three will discuss the research design, including the significance of this research and the way how the data is collected and analyzed. Based on the theories, three sub-questions can be separated to help answering the research question. The first is derived from Pattberg (2005: 496), he claims that meetings between different types of stakeholders can only be constructive if they have respect for each other. He has elaborated four pre-conditions that must be met before effective agreements can be made. The first sub-question is therefore: Are the four pre-conditions for effective multi-stakeholder governance in place within the

ICoC? This sub-question will be answered in chapter four. Included in this chapter is the context that

has led to the creation of this organization. The second sub-question: Why would stakeholders want to

participate in the creation of the ICoC? will be discussed in chapter five. According to the theories,

transnational governance is different from government, because it is not possible to force public and private actors to align them to the process or regulations. It is therefore vital that the participants have incentives to make their contributions to the process, and to comply themselves to the agreements that have been made. Chapter five will therefore explain the incentives, and disincentives, of the three pillars to join the ICoC. According to the theory of Djelic and Sahlin-Andersson (2008: 13), processes of transnational governance are being driven by a ‘spiral of distrust’. This basically means that, once

(7)

6 agreements about governance have been made, the different stakeholders will disagree with them once they have seen the effects of these arrangements. Driven by five institutional forces - scientization, marketization, organization, moral rationalization, and deliberative democracy - this distrust will lead to new negotiations and agreements. On their turn, these new agreements will uncover new problems which will also be discussed. The spiral of distrust will therefore lead to a ‘governance spiral’. The institutional forces and their impact on a potential distrust spiral and governance spiral will be discussed in chapter six. Ultimately, the different findings and recommendations for theories on transnational governance and the ICoC will be presented in the conclusion.

2. Theoretical framework

2.1 Transnational governance

The theoretical underpinnings that will be used to analyze the creation of the ICoC is based on the broad concept of transnational governance. The main idea behind this theory is that regulations that are being made at the global level are not only being made, and controlled, by states , but also by non-state actors like international organizations (IOs), transnational corporations (TNCs), and civil society organizations (CSOs) that work on an equal level with states (Pattberg 2005: 589-590). Before this shift from public to private regulation will be explained, it is important to understand how transnational governance is being conceptualized. One of the scholars that wrote most about this subject is Thomas Risse (2002: 2). He conceptualizes governance as: ‘a mode of governing that is

distinct from the hierarchical control model characterizing the interventionist state. Governance is the type of regulation typical for the cooperative state, where state and non-state actors participate in mixed public/private policy networks’. This definition of governance is very useful since it mentions

some of the main characteristics of governance, namely that there are different types of actors involved, there is no clear hierarchy between them, and that there are different types of governance. What is missing in this classification for the purpose of this research is the transnational component. The significance of ‘transnational’ is that this type of governance is not only applicable to the international, national, or sub-national level. Regulations that are made could apply to all these different levels, but it depends on the actors that recognize the regulations (Djelic and Sahlin-Andersson 2008: 4). For these reasons, transnational governance will be conceptualized as:

A mode of governing that is distinct from the hierarchical control model characterizing the interventionist state. Governance is the type of regulation where state and non-state actors participate in mixed public/ private policy networks. Depending on the participation actors, the regulations can be applied beyond, across and within national territories (Risse 2002: 2; Djelic and Sahlin-Andersson 2008: 6).

It is vital to understand that transnational governance is more than only the formulation of rules. To make sure that the rules have any meaning, it is important to organize, structure and monitor the

(8)

7 activities of the actors involved (Djelic and Sahlin-Andersson 2008: 7). To analyze different forms of transnational governance it is important to understand the goals and functions of the governance involved. In general, three, often overlapping, types of governance can be distinguished: Rule and standard setting; rule implementation; and service provision (Börzel and Risse 2002: 5). For the purposes of this research, only theories about rule and standard setting will be discussed because the ICoC is not yet operational. This means that the rules cannot be implemented yet, and services will not be provided.

2.2 Soft regulation

Regulations are usually associated with formal laws made by national governments. This is the reason why many scholars use regulations as a synonym for ‘legislations’ (Baldwin et al. 1998: 3-4). As has been said before, transnational governance does not work inside formal state structures, and that is why it is not possible to use this narrow concept of regulation. Djelic and Sahlin-Andersson (2008: 5-6) have distinguished four different dimensions of regulations that determine the outcome of certain agreements. The first dimension is about the question ‘who is regulating’. In the narrow conception this question is mostly easy to answer, it is the state. Transnational regulations do not have such a strict hierarchy so there can be many actors involved. In fact, it is often difficult to tell who is actually regulating, and who are being regulated (Jacobsson and Sahlin-Andersson 2008: 248).

The second dimension is about the regulatory mode. In the traditional view of regulation, states are making ‘hard law’ that implies on everyone operating in a certain territory. Transnational regulations are only implying on stakeholders that recognize the regulations as such. The rules are not enforced by an authoritarian, sovereign power that has the power to sanction violators of the rule. In this sense, these regulations can be seen as ‘soft regulations’. Therefore the rules can be considered as non-binding, voluntary, and violators cannot be dragged in front of any national court of justice based on this type of regulations. (Mörth 2008: 120).

A third dimension of regulation is the nature of the rules. In this sense, rules can be divided in formal and informal rules. Formal rules are in general written down and need to be strictly interpreted. Informal rules, however, are more flexible and can be interpreted differently in certain situations (Djelic and Sahlin-Andersson 2008: 5-6). This does not mean that transnational rules are always informal. The activities of actors are often monitored and violation of the rules could mean that company concerned will be banned from the organization. Informal rules have some advantages over formal rules. Most important of them is that there can be a progressive discussion, between the actors that are affected by the regulations, to go from ‘good practices, to best practices’ (Kobrin 2009: 362).

(9)

8 The last dimension of regulation is about mechanisms to enforce compliance of actors in both the negotiations and the regulations (Djelic and Sahlin-Andersson 2008: 6). Traditional regulations that are being made by states can be coercively enforced. In contrast, transnational regulations work in a different manner, they depend on reciprocity, positive and negative incentives (Jacobsson and Sahlin-Andersson 2008: 248). The operation of such compliance methods will be explained later on in this theoretical framework.

2.3 A post-Westphalian world order?

The Westphalian world order was relatively easy to understand. The geographical world is divided in different territories and states have the authority to make the rules and decide what behavior is desirable. When certain actors break the rules, state officials can take certain actions to correct violations. Some scholars see a transition of the world order that is more complex than the Westphalian order and that has some characteristics of the pre-Westphalian order. Authority is becoming fragmented, it is often unclear to decide what actions are happening within certain territories, and the borders between the public and private sphere are blurring (Kobrin 2009: 350). Does this mean a ‘retreat of the state’, in which the power of states is dramatically decreasing like Susan Strange (1998: 354) predicted? Probably not, instead, the argument of this paper is a bit more nuanced. What can be seen is a transition of the state. International, national, and local regulations are being transformed in transnational rules, and states are one of the driving forces in this process to extend their influence across the national borders (Djelic and Sahlin-Andersson 2008: 2-3). Although states will stay very important actors, the regulatory mode is changing. Non-state actors are becoming more active at the transnational level and they have started to make their own regulations, with or without governments (Schäferhoff et al. 2009: 452). This does not mean that international rules are disappearing, instead, some even see the current era as the ‘golden era of regulation’ (Levi-Faur and Jordana 2005: 5).

Within the study of international relations there is still a tendency to use a state-centered approach to explain political activities, hereby neglecting the role of non-state actors (Bartley 2011: 520). There are, however, some theoretical approaches that do recognize that non-state actors are becoming more, and more, active in policy-making. The most comprehensive of these are neo-liberalism and constructivism. Hereafter, it will be shorty explained how these different theories look at the rise of transnational regulations and the reasons why the actors involved participate.

(10)

9

2.4 Theoretical explanations about the rise of transnational governance

2.4.1 Neo-liberalism (Interest-based explanation)

The neo-liberalist explanation is largely based on the liberal ideology that started with Adam Smith who stated that ‘the progressive extension and expansion of markets meant, ultimately, not only

greater individual and collective well-being, but also moral, social and political progress away from feudalism and tyranny and towards yeomanry and democracy’ (as cited by Djelic 2008: 55). The

ideas of Smith were mostly based on the situation of Britain in the 18th century. Other scholars like David Ricardo and scholars of the Chicago School extended this idea to the global order in which they claimed that market mechanisms and civil society actors should be more capable in resolving international problems than governments (Beckman 1993: 20-21; Djelic 2008: 63-64). This idea seems to have been adopted by different states, like the United States, that claim that they are not able to solve certain problems because they lack the necessary authority, resources and expertise. Instead, they actively encourage non-state actors to cooperate and solve the matter at stake (Bartley 2007: 330). Privatizations, a myriad of non-state actors, and de-regulation by states created a new dominant international system. For every de-regulation, both on the national and international level, there were a number of new regulations that were made by civil society and business actors (Levi-Faur and Jordana 2005: 7).

Based on neo-liberal theory, it is rather strange that actors would voluntarily constrain themselves by creating new rules. So how can this paradox of de-regulation and re-regulation be explained? As Adam Smith stated in the Wealth of Nations, humans are utility-maximizing creatures, but when they come together in the market, a moral system will be created. (Djelic 2008: 55-56). This means that there must be some good reasons to participate in regulations that restrict your own behavior. A neo-liberal explanation for self-regulation could be that corporations are partly enforced by states since they can threaten corporations with formal legislation in case they cannot come up with satisfying private rules. This is especially the case when the behavior of companies pose a threat to human rights. In this case the “shadow of hierarchy” enforces corporations to work together with civil society organizations to create certain rules (Börzel and Risse 2002: 9). A second explanation why private actors are regulating themselves could be because they have interests that overlap. When there is a lack of governance, it can be hard to interact and do business effectively. An important example is the International Organization of Standardization (ISO) which is created to standardize specifications of technology, services, norms, etcetera. across the world. These standardizations make is much easier for corporations to do business around the world, which used to make use of different measures (Higgins 2006: 11). In chapter 5 of this research, the different incentives and disincentives from the different stakeholders in the ICoC process will be explained in more detail.

(11)

10

2.4.2 Constructivism (knowledge-based explanation)

In contrast to neo-liberals, who take a rational approach, constructivism explains that patterns of behavior are historically and socially constructed. John Gerard Ruggie (2004: 500) is one of the most reputable constructivist scholars on the topic transnational governance. He concludes that the influence of non-state actors in the global world has increased significantly during the last decades and that they have transformed world politics. In doing so, he describes this process as the emergence of a ‘new global public domain’, which he conceptualizes as: ‘an increasingly institutionalized

transnational arena of discourse, contestation, and action concerning the production of global public goods, involving private as well as public actors’ (2004: 504). Although all actors are different, they

have one thing in common: they operate and think globally. States are no longer their point of reference, and they no longer try to serve the national interest. The most interesting about this process is the interplay between corporations and CSOs. The behavior of corporations became interesting for CSOs because they saw a growing imbalance between the rights and obligations of corporations. Corporations have created a new global economic space that effects the life of people around the world. In the eyes of Ruggie, this fact makes it desirable that they are not only responsible toward their shareholders, but also towards the society as a whole. Furthermore, new technologies made it possible to become aware of the bad behavior of these corporations. When there is a general awareness that bad behavior affects the public, actors are likely to participate more (2004: 510-512). CSOs are responding to this with developing control mechanisms that enfold entire sectors. Corporations, on their turn, have responded to these developments with the creation of corporate social responsibility programs that encompass the standards that were created by CSOs. These programs are created with own committees to monitor behavior (Pirsch et al. 2006: 125). What is remarkable about these programs, in the eyes of social constructivists, is that the policy is not constructed from state pressure, but from manipulation derived out of the global markets. Through time, this has resulted in a normative structure that has changed the identities and interests of the different actors involved. This has led so a gradual homogenization throughout the institutional arena (Schäferhoff et al. 2009: 455). Compliance to rules can result from a “logic of appropriateness”. When actors have adapted a particular identity in a particular situation, it is very likely that they will act according to the norms that match this identity (March and Olson 1998: 951-952).

‘The effect of the new global public domain is not to replace states, but to embed systems of governance in

broader global frameworks of social capacity and agency that did not previously exist’ (Ruggie 2004: 519).

2.5 The creation of a transnational governance network

One of the main differences between traditional and transnational regulation is that the former is often made without consent of the actors that are being affected by the regulation, while the latter is being made with a certain consensus within a larger group of participants. This has important implications

(12)

11 for the way how regulations are being set up. Authoritative problem solving is no longer a matter of public institutions, instead, the authority is being split between different actors and has more to do with reciprocity than with coercion and sanctions (Pattberg 2005: 591; Jacobsson and Sahlin-Andersson 2008: 248). Because transnational regulations are voluntary, members need to be attracted rather than forced (Djelic and Sahlin-Andersson 2008: 377). In this section it will be explained how the process of attracting potential participants looks like.

The first step in the creation of transnational governance is the agreement over a certain global problem. These global problems are often the result of a lack of effective norms and rules on both the national and international level (Börzel and Risse 2002: 9). Essential for effective transnational governance is that all actors involved agree that there is no hierarchy between the participants. This is especially important for the relationship between states and other non-state actors. The former need to expect that they do not control everything that happens on the transnational level and that they need non-state actors to solve a particular problem. A precondition for effective cooperation between CSOs and corporations is that the latter need to accept that the former is a legitimate partner to solve business problems. Furthermore, corporations need to accept that CSOs have the capacity to cause reputational damage to the company. As has been explained before, reputations have become very important for companies, so it could be argued that it is the interest of the company to cooperate with them in a constructive way. Another precondition for effective governance is recognition from all parties that, although a company or industry have caused a certain problem, they are also the solution. Without this recognition it has no use to solve a problem through soft regulations since there are no strict coercive mechanisms (Pattberg 2005: 596). What often happens at the first stage of transnational governance is that an actor identifies a problem, presents himself as an independent party and creates a forum where the matters at stake are being discussed. It is important at this point that the different participants make matters negotiable without making direct accusations to each other. At this moment there are no binding rules, but the different actors make propositions about policy that could solve the issue (Jacobsson and Sahlin-Andersson 2008: 256).

The second step of the governance process consists of the mobilization of participants. This is a twofold affair because there are actors that are being attracted, while others, that have not been asked to participate, are trying to present themselves as relevant stakeholders. Actors that are necessary in the governance process can be attracted in a number of ways. At the start there are mostly instrumental reasons why new relations are being formed. Because different types of actors need to be combined, it is important to present the, to be formed, rules as ‘progressive and contributing to

prosperity… rather than as controlling tools’ (Djelic and Sahlin Andersson 2008: 377). In general,

there are a number of reasons why different actors would like to participate in transnational governance, and why they are valuable for the process. Public international organizations, like the

(13)

12 United Nations, can notice a certain problem, but they are confronted with a lack of financial resources and expertise that corporations and CSOs can provide them. The participation of public international organizations can be attractive for others because they can solve discrepancies, especially between business and CSOs (Schäferhoff et al. 2009: 456; Bull et al. 2004: 483). Transnational corporations have an incentive to cooperate with international organizations and CSOs because this can be a way to gain access to public tenders and could be a way to improve their public image. Participation in transnational governance projects can be a way for CSOs to influence policy, increase their public profile, and it could increase their chances of consultancy contracts (Andonova and Levy 2003: 21). Last, but not least, governments would like to participate since it is a way to increase their influence on the global level when this is not possible through intergovernmental negotiations. When there are conflicts within or between governments, transnational governance can be a way to move decision-making from the political arena to external, non-political, arenas. Furthermore, they also get access to a system that is based on the exchange of expertise, information, and support (Maloney et al. 1994: 20; Schäferhoff et al. 2009: 457).

Actors that are initially not invited to take place in the negotiations, but that have the feeling that they should be there, have a number of ways to legitimize their importance. The first is that they can provide essential information or other resources. Theories on transnational governance often assume that all actors involved in the deliberation process recognize the importance of scientific and academic insights. There are, however, conflicts about different ways to conduct science and about the role of individual scientists. Some entities can claim that they have produced independent sets of standardizations that can be used to create, and enforce, regulations (Drori and Meyer 2008: 39-40). A second way to claim legitimacy is to convince others that they represent actors that are affected by the regulations, but do not have the resources to participate in the process (Boli 2008: 106). Although it is often claimed that transnational governance is a governance mode that is based on a level-playing field, in practice it happens very often that actors do not participate because they do not have the resources to do so. This is especially a problem for stakeholders from the geographical southern part of the world (Summers-Raines 2003: 62). Especially CSOs could claim that they represent virtue, the embodiment of goodness, and that they are the ones that should represent actors that are not able to participate. After all, any kind of regulation is only truly legitimate when all the stakeholders that are affected by the regulation are involved with the decision-making (Boli 2008: 96; Schäferhoff et al. 2009: 465).

(14)

13

2.6 Institutional forces in the making of transnational governance

2.6.1 A spiral of distrust and governance

Another important difference between traditional governance and transnational governance is that transnational regulations are more flexible and dynamic than international or national regulations. Once regulations are made, different parties cooperate and compete with each other to change the rules. Although the different parties disagree a lot, they do have in common that they believe in the necessity of the activities that they are conducting together (Bourdieu 1989: 16). Within the existing structure there are always central and peripheral actors. The central ones try to maintain the status quo, while the peripheral ones try to increase their influence and challenge the dominant understanding. Within this process, there are different forces that have influence on the structure of governance. It does not only depend on physical interactions, but also on cultural frames and ideas (Djelic and Sahlin-Andersson 2008: 20-21).

Djelic and Sahlin-Andersson (2008: 13) explain the explosion of transnational governance activities since the 1980s by, what they call, the ‘distrust spiral’. Governance is often created to increase transparency, however, this also leads to the fact that the actors involved will have the feeling that they are monitored in wrongful ways or by incorrect standards. This will lead to more negotiations and deliberation to change the former standards and create new regulation which should lead to more transparency. However, these new standards, evaluations and monitoring activities will reveal new questions and problems, which will lead to new discussions, and so on. This is called the distrust spiral and it is caused by three characteristics (Djelic and Sahlin-Andersson 2008: 380):

1) The absence of a sovereign legitimate ruler;

2) The non-existence of a true leader will lead to competition between others that claim legitimacy based on science and expertise;

3) The trend towards deliberative and participative democracy.

These three characteristics of the distrust spiral can be subdivided in four institutional forces that influence transnational governance: Scientization, marketization, formal organization, moral rationalization, and deliberative democracy. These institutional forces reinforce and oppose each other and by doing so, they form governance processes. Since there is a constant competition between the actors about rules and activities, it is very likely that new agreements need to be made. On the surface, this will lead to a lot of conflict, however, through time it will change the interests of the actors involved and it will lead to a deeper collective stabilization. So, transnationalization will lead to homogenization of the actors involved, and also between across different fields of governance (Djelic and Sahlin-Andersson 2008: 391).

(15)

14

2.6.2 Scientization

The first institutional force that will be discussed is ‘scientization’. The basic idea is that the value of science, measurements and quantifications have expanded rapidly throughout the world. Opinions and normative claims have little value when they cannot be rationalized through hard data (Djelic and Sahlin-Andersson 2008: 383). Most participants in governance processes have an immense faith in science, however, they will often disagree about individual scientists and the appropriateness of the methods that are being used. The participating actors can claim on the basis of measurements and scientific data that they have found the truth, which in turn could well be contested by others. Because of this cycle of contestation over the appropriate scientific methods and the implications which can, or cannot, be drawn from ‘hard’ data, there is a constant search of new scientifically proven (value-neutral) ‘facts’ that can prove that one’s data and opinions are superior to those of others. This development of scientization creates both demand and supply of rule-making in organizations (Drori and Meyer 2008: 32).

Since the beginning of the 1950s, science has become one of the dominant authoritative features of the transnational world. Different actors believe in its universalistic assumptions, both in the natural, as the social world (Snir 2013: 77). An example of this are environmental scientists that make claims about climate change, which have led to worldwide movements to decrease industrial exhaust gasses. Another example is the liberal doctrine that is very present in the modern world. Organizations like the International Monetary Fund (IMF) and World Bank forced African states to open their markets, because they claim that free trade and foreign direct investments will lead to economic development (Drori and Meyer 2008: 44). As has been shown by these examples, science has the power to change the world, and this is definitely true for transnational governance. New scientific revelations often change rules and the ways in which one conducts monitoring activities.

2.6.3 Marketization

The second institutional force that influences transnational governance is ‘marketization’. Since the 1970s, liberal ideology has become, for better or worse, the dominant paradigm in the global world (Djelic 2008: 53). This liberal ideology is twofold. Firstly, liberal market ideology has had an immense impact on the way how national governments and international institutions have structured their economies and the way in which those economies relate to each other. Top-down and bottom-up pressures have led to market-reforms that were based on free trade, competition, privatization, free capital flows, and deregulation. The (often implicit) assumption behind these reforms is that markets are more efficient in allocating goods and resources than public bureaucracies (Chomsky 1999: 66-68).

(16)

15 The second element of the liberal ideology is the social dimension. These ideas are largely based on Locke’s ideas about the citizenship in which human beings would form states that are based on liberty and prosperity in which governments owe their legitimacy to the will of the people (Kreuckeberg 2004: 5). In the transnational system, people believe that many problems cannot be solved through intergovernmental agreements. Instead, private actors need to get more freedom to make a contribution to find solutions that affect problems on the global level (Kenny 2003: 129-130).

The combination of these elements has become embedded in the way how people construct the global social system. Within this social system, actors - which can be individuals, organizations or nation-states - are trying to pursue their interests (Meyer and Jepperson 2010: 110). The diffusion and institutionalization of liberal ideology has led to a powerful process in which actors believe that they need to organize themselves along these ideas. Law-making and enforcement is being replaced by self-regulation, bureaucracies are being dismantled, and the distribution of social and welfare activities is becoming privatized. All these actions should lead to more efficient and effective means to solve problems on both national and international levels. This has also implications for ideas about human rights and individual powers. Throughout the world, these ideas are becoming standardized which has led to a certain homogenization of transnational governance (Djelic 2008: 71-72).

2.6.4 Organizing

New technologies have made it incredibly easy to communicate with people throughout the world. One of the results is that networks have expanded so exponentially because physical contact is no longer needed to interact. This has also made it easier to form organizations in order to facilitate communication, interaction and regulation. Within these organizations there is a certain hierarchy that is restrained by formal rules (about rule-making) and by informal limitations that are based on the interests of its members. Organizations are generally seen as inflexible and stable, but radical changes can be implemented relatively quickly (Ahrne and Brunsson 2008: 77).

The period after the Second World War has introduced a new kind of global organization: the meta-organization. The difference between a ‘normal’ organization and a meta-organization is that the latter is an organization that does not have individuals as members, but other organizations. Examples of global meta-organizations are the United Nations (UN), the World Trade Organization (WTO) or the

Fédération Internationale de Football Associasion (FIFA). However, there are many more unknown

meta-organizations that have significant influence on certain domains (Ahrne and Brunsson 2008: 87). One of the results of meta-organizations is that standardizations become implemented throughout the world. Although there is competition between different actors about what the best standards should be, there is also a certain cooperation between them to create “joint certification platforms” (Reinecke et al. 2012: 808). Furthermore, regulations and standards become legitimized when they are

(17)

16 associated with other sets of regulations or meta-organizations. This association creates new networks through which the parties borrow authority and legitimacy from each other (Higgens and Tamm Hallström 2007: 689). It is thus very likely that successful governance is based on existing rules from meta-organizations, or even states. This diffusion of regulations is also accompanied by diffusion of cultural elements. This, on its turn, leads to a stabilization and homogenization of governance processes, especially within a specialized field (Eberlein et al. 2014: 13-14). This does not mean that the structure of organizations will stagnate because competition and contestations forces organizations to develop new and progressive regulations. Like has been said before, new regulations raise new problems and questions that need to be solved, so organizations need to develop as well.

2.6.5 Moral rationalization

The fourth institutional force that will be discussed in this research is ‘moral rationalization’. The most important concepts of moral rationalization are ‘virtue’ and ‘virtuosity’. The first can be seen as

‘the embodiment of goodness’, while the latter is ‘the embodiment of excellence’ (Boli 2008: 96).

Virtue is the way how people look at the word and how they see how, especially individuals, should be treated. In transnational governance this is most evident in the creation of codes of ethics. These are mainly made to protect individuals since companies and most organizations are seen amoral actors. In the present transnational world, companies and organizations are under constant pressure of competition. This makes them very susceptible to cheat on the rules to pursue their self-interest. This often goes at the expense of the individual and this is the reason why actors, especially CSOs, try to protect them since there is no single sovereign ruler that protects “universal” ethic claims in the transnational/international arena (Boli 2008: 98). Here is where virtuosity starts to play an important role. Virtuosity does not necessarily have to be connected to virtue, but it has become a very important way to rationalize behavior. The global rationalization has created many different ways in how individuals, companies, organizations or states can be rewarded, or punished for their behavior. Examples of these are sport trophies, certifications, the Nobel price, global rankings, or harmful publications. These measures are used by different organizations to rationalize behavior according to universal standards. This process is very closely linked by the scientization of the global world. CSOs often legitimize their actions through the search for “winners and sinners”. Since statements that are based on hard data carry more weight than just moral statements, different actors have progressively created ways to rationalize virtue. It is thus necessary to create modes of monitoring by which behavior according to sets of standardizations can be measured (Rodin 2012: 36-37). Competition between different standard setters leads to new types of measurements, and through time it is likely that they start to look much alike. This should be the beginning of a universal global ethic by which the different actors in the transnational world should comply to (Reinecke et al. 2012: 808).

(18)

17

2.6.6 Deliberative democracy

The last institutional force that shapes and structures transnational governance processes is deliberative democracy. Since actors in a transnational context cannot be forced to respect soft regulations, or participate in the process, it is vital that their autonomy is respected (Djelic and Sahlin-Andersson 2008: 25). Negotiations need to be based on equality, so power should be equally divided between the participants. This also affects how accountability is divided, since soft regulation inherently cannot resort to the possibility of legal sanctions. So, it is important that such soft regulations, that are not enforced by a single universal sovereign authority, are democratically legitimate (Mörth 2008: 119-120).

Traditional authority is based on hierarchy and a monopoly of the legislator. Legitimacy of the legislator comes in liberal democracies from local and national elections. Within this system, authority and accountability are clearly divided between public and private actors (Olsen 2003: 96). Transnational governance is set up in a very different way. Different kind of stakeholders participate in a process in which rules are made by both state and non-state actors that operate on an equal level. This creates problems for traditional liberal assumptions about the representative democracy since not everyone has the possibility to give their opinion about the regulations that are being made. To make governance legitimate, it is necessary to create open discussions, in which decisions can only be made on societal deliberation that is based on procedural rules (Mörth 2008: 123-125). Since there is no hierarchy, some scholars claim that transnational governance has the potential to be more legitimate than traditional state democracy, since it is a more direct democratic process in which stakeholders participate autonomously (Keane 2003: 10-11). There are nonetheless some serious problems, because in practice, it is absolutely not the case that all stake-holders are participating. People that really negotiate in these processes are mostly experts that are structured within companies, organizations, and state departments (Mörth 2008: 127). It is a fallacy to think that it is likely that ordinary citizens will participate in transnational governance processes, they simply do not have the resources and they often lack the expertise to contribute in a constructive way. Furthermore, citizens are a very diffuse group. Nonetheless, to make transnational governance as legitimate as possible, ordinary citizens need to be represented. It is thus important to make clear rules about the decision-making process (Risse 2004: 17).

To make transnational governance both effective, and legitimate, there need to be made some trade-offs between deliberation and legitimacy. The first important point that needs to be considered is the selection of the stakeholders for the decision-making process. Hereby, one needs to look at who are affected by the regulations, and who potential stakeholders represent (Risse 2004: 17). The second consideration is how deliberation can be structured and remains constructive. Some decisions can be better made behind closed doors since participants have to think less about their followers who could

(19)

18 criticize their representatives for making certain statements. Behind closed doors, ideas can be exchanged more freely than in public settings. This, however, does make the process less transparent, but it improves efficiency and possibly the quality of the outcome (Risse 2004: 17-18). Creating a legitimate, efficient, and effective decision-making structure is by no means an easy process. There will always be debates about how power and authority are divided between the different stakeholders. It is nonetheless essential to reach consensus about this to make sure that the governance can be effective on the long-term. Rules about the decision-making process need to be based on equality and carefully documented in formal regulations (Livermore 2006: 769).

3. Methodology and research design

3.1 Research design

Although the role of private actors in policy-making is being analyzed for more than three decades, these researches mainly focused around lobbying activities and their influence on agenda-setting of state agencies. When studies focused around agreements between private actors, they were mainly concentrated on the role of businesses and their mutual relationships. However, true transnational governance processes, in which there are different stakeholders involved, never got much attention (Pattberg 2006: 590). Within transnational governance there are three, overlapping, types of governance that can be distinguished: Rule and standard setting; rule implementation; and service provision (Börzel and Risse 2002: 5). Most of the research that has been done is focused on the latter two, while the first process is essential for the last two to become successful (Pattberg 2006: 594). It is thus important that there will be done more research at rule and standard setting. For this reason this research will focus on the interactions between the different stakeholders in a transnational governance process in the stage in which rules were being made.

One of the reasons why the topic of this research is the ICoC, is because there has never done any research on this subject. The only study about the ICoC that has ever been conducted was done by Dickinson (2013), but this was a study about whether the Code itself, and how public/private partnerships could make a contribution to the protection of human rights. It thus focusses more on the outcome of the process, then on the process itself. This reflects the comments made by Pattberg on the availability of research on the three types of governance processes. This research builds a theoretical framework to investigate how the interactions between the different stakeholders shaped the governance process itself and whether it could lead to further cooperation and deeper governance in the future, independent from the content of the agreements that where being made.

The type of study that has been chosen for this research is a most-likely case study design in which the ICoC is the case, and the three pillars are the units of analysis. It is a most-likely case because

(20)

19 transnational governance consists of very substantial processes in very different sectors. Although the theories about transnational governance are relatively new, they are very detailed and that is why it is expected that such theories will have high applicability for this research (Levy 2008: 12).

The objective of the ICoC is the protection of human rights against companies, in this case PSCs. Other governance initiatives that try to protect human rights against the conducts of private actors are for example the United Nations Global Compact and the Fair Labor Association. These three initiatives have in common that they are voluntary corporate social responsibility (CSR) programs that try to protect civilians against the behavior of companies that could violate human rights (Williams 2004: 767). What is different from the ICoC, compared to other CSR initiatives around the world, is that it will be the first type of governance in which states, companies and CSOs work on an equal basis, with independent global oversight mechanisms that operate in often extremely dangerous regions (Rosemann 2011: 13-14). Since the ICoC does have a very different approach than other CSR initiatives, it is important to do an in-depth study about this project for two reasons. First of all as this process breaks new ground, the applicability of theories will have to be carefully assessed. When there is relatively little research and the subject is quite unique, it is the task of academics to explore the underlying mechanisms carefully and compare it to more developed subjects. So this research design makes is possible to identify and explain causal mechanisms based on the theories that are presented in the theoretical framework, and possibly suggest modifications to them (Vennesson 2008: 227). The second reason is because the ICoC can be used as a, positive or negative, example for other CSR projects that will be made in the future. Just as the initiators of the ICoC looked at other projects that were developed in the past.3 Especially the relationship between CSOs and the, very controversial, private security industry is something that can only be studied through qualitative research methods. So summarizing, the two reasons for an in-depth most-likely case study are to uncover and fully appreciate unexplored mechanisms and to provide a better base for future comparative work – both for academic work and other transnational processes.

The fact that it is a qualitative research design does give problems with generalization. Since governance processes are happening so frequently, it would be a serious misconception to think that the ICoC is representative for how transnational governance works in general (Bryman 2008: 391). It is probably the only type of governance which combines PSCs, CSOs and states. Furthermore, as will be explained throughout this research, there are not many states and CSOs that really have become a member of the ICoC. Especially the states that participated mostly, Australia, the United Kingdom (U.K.) and the United States (U.S.) have in common that they belong to the Anglo-Saxon culture. This feature is linked to the believe in market mechanisms in solving public problems. This could give

3

(21)

20 a bias for how states work in general. Although generalizations are not possible from this research, there will be issues discussed that are likely to happen in other governance processes as well. So conceived, there is a trade-off between the measure of in-depth analysis and generalization. Due to the lack of theories that are explicitly applied to this field and the lack of research on this matter, this research chooses to deliver a more in-depth and exploratory analysis as this might serve as a basis for other, more comparative and generalizable research.

3.2 Data collection and analysis

Data collection has been a troublesome affair. Like has been said before, the ICoC is a very new organization and, so far, there is only one research that focusses on this topic. The private security industry in general is a topic that is still very much covered in secrecy. Even basic information about the size of the industry and the number of PSCs is very hard to find (Percy 2012: 943). Most of the data available pertains to incidents such as the Nissour Square tragedy rather than quantitative data on the size and behavior of PSC operations. Information about the ICoC process itself is also very scarce. The organization itself is only scarcely mentioned in a handful of publications, so it was a real challenge to connect these different pieces of information together. Some internet-based data, often retrieved from websites that were a part of the development of the ICoC, was limited in terms of the level of detail. Fortunately, the ICoC’s own website does contain substantial information about the participation of the different actors during the different meetings and working groups. To make the process as transparent as possible, the ICoC decided to publish the minutes of their meetings online. Besides useful data, these minutes also provided additional leads for other data collection, specifically in the form of interviews as most of the contact information of participants was available through there.4

However, although all this information was available, it was still very difficult to arrange interviews with these people. From the outset of this research the best case scenario was to conduct interviews with three people from each pillar, and one with the someone from the independentGeneva Centre for the Democratic Control of Armed Forces (DCAF), in order to make sure that the information would come from a variety of different viewpoint to prevent information bias, which is a pitfall of using interviews as data (Beber 2012: 403). Between April the 30th and June the 16th, 68 different persons and organizations where approached on multiple occasions by e-mail and phone with the request to conduct an interview. To make the information as reliable as possible, only individuals were approached that were directly involved in the process. Of these 68 people, six where representatives of states, 24 of CSOs, and 38 from PSCs. At first glance it seemed as if securing the cooperation of the PSCs would be the largest hurdle as there is so little information to be found about their conducts.

(22)

21 CSOs, on the other hand, were expected to be very forthcoming, since they often have strong public opinions about the (mis)conducts of PSCs and are strong advocates of transparency in this field. The opposite turned about to be true to the point that interviews with PSCs had to be declined due to an overload of data from their point of view. In the end there were seven interviews conducted. Three interviews with representatives from different PSCs by Skype or Phone, two with employees of governments, and one face-to-face interview in Geneva with an employee of the DCAF. Unfortunately this entails that the point of view of the CSOs is not represented in the interview data. To remedy this situation an expert questionnaire was made, but again the CSO representatives proved unresponsive. However, this does not mean that there is no data on the viewpoint of the CSOs, data collection in the form of document analysis – CSO website publications, meeting minutes and comments on draft charters – does provide invaluable insights in the role of CSOs.

Before each interview, an interview guide was made to make sure that all the relevant topics would be covered. These questions were all based on the theoretical framework to make sure that the information was a valid as possible. Due to the very recent nature of the ICoC in general, it happened often that the interviewees talked about certain issues that were not mentioned before, but were relevant for this research. In such cases the interview guide served as a loose guide, but it did not form a straightjacket to prevent the uncovering of new information. This approach has been described as semi-structured interviews (Bryman 2008: 438). After each interview the information was processed. Depending on the permission of the interviewee, the manuscripts can be retrieved upon request.

To obtain valid results and structure the data, the interviews were processed according to a coding frame, based on the topics and indicators that are presented in the theoretical framework. Information that was contrary to other data found and which could not be verified was omitted from this document, or was being handled with extreme caution. Since the content mostly consisted of what has been referred to in content-analysis literature as ‘latent’, it was important to carefully analyze who gave the information, and what kind of interest the source has (Berg 2006: 242-244). Fortunately, the interviews often corresponded very well with each other and all the interviewees were directly involved I the process, which strengthens the robustness of the data.

4. The need for a new type of regulation

Before the creation of the ICoC will be discussed, it is important to understand how PSCs are being regulated before the ICoC was set-up, why it is necessary to make new regulations for this industry and why it became so relevant in the last decades. As we have seen in the theoretical framework – signified by the concept of the spiral of distrust – the transnational process leading up to the formulation of codes of conducts is crucial. This chapter will try to describe the context in which the

(23)

22 ICoC is created, and whether the pre-conditions for effective multi-stakeholder governance were in place. The need for the ICoC arose out of the tremendous growth of the private military and security industry since the end of the Cold War, and the problems and fears this has caused to a variety of different stakeholders in the global society. Before the formulation of the problematic nature of the rise of PSCs is being discussed, it is paramount to understand what PSCs are and what role they have played. PSCs are defined by the ICoC as: ‘any company (…) whose business activities include the

provision of security services either on its own behalf or on behalf of another, irrespective of how such company describes itself’ (Swiss Confederation 2010: 5). Whereby security services are defined

as: ‘guarding and protection of persons and objects, such as convoys, facilities, designated sites,

property or other places (whether armed or unarmed), or any other activity for which the personnel of companies are required to carry or operate a weapon in the performance of their duties’ (Swiss

Confederation 2010: 5). In the traditional Westphalian view, security is a service that must be provided by nation-states who hold the monopoly of violence. Because the monopoly of violence is one of the foundations of modern statehood, one would expect that this practice is being defended heavily, especially by liberal democratic states. The last two decades show, however, that this is often not the case. States have not been able to make effective regulations regarding PSCs and the industry has grown so rapidly that states are no longer able to control the conducts of the industry (de Nevers 2010: 219-220).

4.1 The rise of an industry

Contemplating the rise of the private security industry is not a mere descriptive task, rather it is an essential feature in the study of the formulation of the ICoC as it is exactly this rise of the private security industry that is the central constitutive element of the transnational process leading up to the ICoC. Although PSCs have always existed in some form or another, the end of the Cold War has caused an explosion of their activities and their numbers. There are some estimates about how much the industry has grown, but it has proven to be very difficult to give exact statistics about this growth. The main problem in calculating their growth is the wide variety of services that these companies provide, which muddies the water as to what can be counted among the concept of PSC. A company like G4S, one of the largest security companies in the world, had an annual revenue of 9.09 billion euros in 2012 (G4S 2013: 1). However, they also provide services like cash solutions, security consultancy, and (electronic) monitoring. Furthermore, many of their security services are executed without the use of armed guards (G4S 2013: 10). This makes it very hard to make an approximation of their PSC activities as described in the ICoC. Most estimates about the size of the industry state that it had an annual revenue around the 200 billion dollar in 2010, while this number was around the 50 billion dollar in 1990. The industry is expected to grow annually around the eight percent (Holmqvist 2005: 7; Abrahamsen and Williams 2009: 1; Tzifakis 2012: 12). Brooks (2000: 132-133)

(24)

23 has identified three main reasons for this trend. The first is that the end of the bipolar world system has made it unnecessary for either the Soviet Union, or the United States, to secure the positions of many state leaders in unstable regions. This resulted in many civil wars, especially in Africa, in which both sides started to hire mercenaries to settle the conflict. It is estimated that there fifteen conflicts in Africa between 1950 and 1989 in which PSCs were involved. Between 1990 and 1998 this number increased to 65 conflicts (Musah and Fayemi 2000: 265-275; Leander 2005: 609).

The second reason for the growth of the PMSC industry is the reduction of military personnel after the Cold War and the Apartheid regime in South Africa. This has resulted in a large supply of former soldiers that started to sell their services to a wide variety of different clients (Brooks 2000: 132). Although most services are provided to states, it is interesting to note that many PSCs have started to specialize themselves to maritime security (Figure 4.1). This specialization is mainly the result of increased piracy activities around the waters of Somalia since 2006. The ransoms of the ships and their crew can be as high as 5.5 million dollars. This gives ship owners important incentives to increase the security of their vessels that sail around the Gulf of Aden and the Indian Ocean (Bowden 2010: 9). Other places where PMSCs are highly active are in other states that struggle with an effective rule of law like Iraq, Nigeria, Yemen and Columbia, where they are mainly used to protect companies and individuals. Individual security guards earn typically three times more than their army counterparts. This makes it highly lucrative for former army personnel to start working in the private sector (Avant 2005: 127).

The third, and possibly most important reason for the rise of PSCs is that end of the Soviet threat caused a lot of pressure in Western politicians to re-organize their defense capabilities. Since it was no longer necessary to have a large army that could be deployed at any moment, states started to look more critically at their defense activities and focused more on efficiency (Krahmann 2005a: 251-252).

(25)

24 At moments when it is necessary, these states will outsource many of their former responsibilities to PSCs so that they are no longer tied to long-term contracted staff. Figure 4.2 shows the ratio of contracted civilian personal to military personnel in different conflicts in which the US was involved since 1775. These figures are however slightly biased since much of the civil personnel do not work for PMSCs, but work for example in construction or logistics. However, much of the military personnel do not carry arms either. Although there is no clear data on the amount of private contractors that really carry arms, it is fair to say that national armies are becoming more and more dependent on them. The goal of many militaries was no longer to be self-sufficient, but to focus more on core-competencies. For most of the other activities that are needed at a certain moment, PSCs are being used (Petersohn 2010: 540). States are, however, very different in the way how they use PSCs. The U.S. uses private contractors in almost every aspect of their activities. Within Europe there are big differences, the German government is for example for different reasons much more reluctant to outsource parts of its military than the British government (Krahmann 2005b: 283). The relevance of this rise of the private security industry is that it led to the formation of a consensus on the problematic nature of PSCs, which requires regulation on a transnational basis. The following sections will identify what incident raised the urgency of regulating PSCs and how the transnational formulation of a problem came to be.

4.2 Nissour Square and the call for regulations

Although the private security industry grew very rapidly since the end of the Cold War, its rise was largely unnoticed by the public until the Iraq War in 2003. Since this was the first war in which PSCs

Private security companies and their international code of conduct : institutional forces in the creation of transnational governance