Regulating Contracting in Global Value Chains. Institutional Alternatives and their Implications for Transnational Contract Law

Abstract

Abstract Global Value Chains (GVCs) are both instruments to organize production and vehicles to implement transnational standards, to improve sustainability and to ensure compliance with regulatory requirements. GVCs present a very high degree of interdependence among the enterprises. GVCs are not uniform universes. Part of the production process is organized through subsidiaries of the chain leader, partly with independent suppliers linked to the chain leader by long-term and stable contractual relationships, and partly with spot contracts. Hence, different modes of contracting are needed to ensure coordination and uniformity of principles along the chain. The differences within the chain suggest that a modular approach with adaptation to the various types of relationships is more effective than a uniform approach indifferently applied both to intrafirm (subsidiaries) and inter-firm (relationships with independent suppliers) contracting. While acknowledging the relevance of the institutional and legal framework, including the applicable law, this article focuses on the contractual structure of chain governance. We propose a modular architecture that integrates general principles of global trade in supply chains with local regulations. This approach will better combine the supplier codes, the framework agreements between parties, and the individual contracts that regulate specific exchanges.