'And if I by Beelzebub Cast Out Devils, …' An Essay on the Diabolics of Network Failure
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Transcript of 'And if I by Beelzebub Cast Out Devils, …' An Essay on the Diabolics of Network Failure
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7/28/2019 'And if I by Beelzebub Cast Out Devils, ' An Essay on the Diabolics of Network Failure
1/22Electronic copy available at: http://ssrn.com/abstract=1434311
SPECIALISSUE:THELAWOFTHENETWORKSOCIETY
ATRIBUTETOKARLHEINZ LADEUR
And if I by Beelzebub cast out Devils,: An Essay on the
DiabolicsofNetworkFailure
ByGuntherTeubner
A.LimitsoftheNetworkSociety
It canonly seem impolite to speak aboutnetwork failure in thepresenceofKarlHeinz
Ladeur,
who
has
been
insisting
that
the
law
needs
to
change
in
order
to
address
the
transformationoftheorganizationalsocietyintothenetworksociety.1Alas,hereIstand;I
candonoother.
Hierarchyfailure,marketfailure,yesbut,networkfailure?Wehavelivedthroughpainful
experiencesofhierarchyfailure.Oneofthegreatinnovationsoftheorganizationalsociety
wastoinventthehierarchyofdecisionmaking.Theinventionachievedtremendousgains
inconsistencyofdecisions,theirsecurityandimpact.Yet,itcameataprice.Concentrating
external contacts to the pinnacle of the organization dangerously restricted the
information flowbetween theorganization and its environment: a restriction so severe
that itcouldnotberemediedby informalcontactsontheorganizationsbase.Thetopof
theorganization lostsightof itsenvironment;theorganizationtenaciouslyheldonto its
bureaucraticandrigid,internallyproducedconstructionsofitsoutsideanditsobservance
offixed
strategies.2
Translated byMoragGoodwin,RalfMichaels and Peer Zumbansen.Rights for the translation reserved. ThistranslationhasbeenproducedfortheGermanLawJournal.SubsequentpublicationoftheEnglishversionofthis
articleoriginallywritteninGermanmustbeauthorizedbytheTranslators.
Professor of Private Law and Legal Sociology,GoetheUniversity, Frankfurt/Main, and Centennial Professor,
LondonSchoolofEconomics.Email:[email protected]
1 A small sampling: KarlHeinz Ladeur, Was leistet der Netzwerkbegrifffr die Verwaltungswissenschaft? inGRUNDLAGENDERVERWALTUNGSLEHRE(VeitMehde&UlrichRamsauereds.,2009);KarlHeinzLadeur,DieRegulierungvonSelbstregulierungunddieHerausbildungeinerLogikderNetzwerke inDIEVERWALTUNG,Beiheft4,59;KarlHeinz Ladeur,TowardsaLegalConceptof theNetwork inEuropeanStandardSetting, inEUCOMMITTEES:SOCIALREGULATION,LAWANDPOLITICS,151(ChristianJoerges&EllenVoseds.,1999);KarlHeinzLadeur,TowardsaLegalTheoryofSupranationality: TheViabilityoftheNetworkConcept,3EUROPEANLAWJOURNAL,33(1997).
2MATHIASE.BRUN,PHILIPPEMASTRONARDI&KUNOSCHEDLER,HIERARCHIEUNDNETZWERKE,(2005).Thetextsimplifiesthesuccessstoryofnetworksandfocusesonlyonhierarchyfailure.Aparallelstorywouldbethatofmarketfailureastriggerfornetworkbuilding.See,inaddition,GuntherTeubner,NetworksasConnectedContracts,23,52(2008),availableat:http://ssrn.com/abstract=1233545.
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7/28/2019 'And if I by Beelzebub Cast Out Devils, ' An Essay on the Diabolics of Network Failure
2/22Electronic copy available at: http://ssrn.com/abstract=1434311
[Vol.10No.04396 German Law J ou rna l
Thelaw
carried
aconsiderable
degree
of
joint
responsibility
for
this
hierarchy
failure.
Ladeurcriticized the rigiditywithwhich thepublic lawof theorganizationsocietyhad
supported and immunized the hierarchical coordinationmechanisms of immobile large
scaleorganizationsagainstchange.3Comparabledevelopmentshadmarkedprivatelawin
a number of areas: the examples of collective labour law, corporate law and tort law
illustratetheway inwhichthe lawhadbeenfuellingthe internalhierarchizationandthe
externalconcentrationtowardstheorganizationtop.Organizational law,bothpublicand
private,mustbeseenasamajorculpritintheproductionofhierarchyfailure.4
Thelastthirtyyearshaveseenanetworkrevolutionthatresultedinathorougherosionof
organizational hierarchies in both the private and the public sector. A dramatic
decentralization of decisionmaking took place. Thiswas achieved by a high degree of
operational
autonomy
which
the
newly
emerging
network
organizations
granted
to
their
nodal points.Decentrallyorganized company groupsandadministrative agencies, inter
organizationalnetworksaswellasglobalnetworksofregulatoryagenciesnowallsharea
formidablyhigh levelofenvironmentalopennessandadaptability.It isdehierarchization
thatenabledtheorganizationtomultiplytheobservationsofitsenvironment,toincrease
its variety, to move the organization closer to life, as well as to augment its
responsiveness and flexibility.5 In these successful alternative forms of coordination,
planningno longeroccurscentrally.Instead,differentnetworknodesareabletoobserve
different environmentswhile being internally able to communicate the resultsof these
observationsandtoconcretizedifferentstepsofthedecisionmakingprocessonebyone.6
Today, heterarchical networks are dominating hierarchical organizations to such a high
degree,thattheworldsocietycansafelybereferredtoasanetworksociety.
Yet,in
the
background,
the
diabolics
of
network
failure
are
lurking.
The
decentralization
caused the devil of hierarchy to exit from the organizational body under aching and
groaning.Theuncertaintiesconnectedwiththehierarchysenvironmentweresuccessfully
exorcizedandmadeway foran intensiveexchangeofmultiplenetworknodeswiththeir
environments. In spite of these attempts, however, the smell of sulphurwill not pass,
because the devil was cast out only with the help of Beelzebub, substituting one
threatening uncertainty for another. Whereas the devil represented uncertainty with
3 KARLHEINZ LADEUR, POSTMODERNE RECHTSTHEORIE: SELBSTREFERENZ SELBSTORGANISATION PROZEDURALISIERUNG 177
(1992).
4Seealso,TEUBNER,supranote2,36.
5PETERLITTMANN&STEPHANA.JANSEN,OSZILLODOX:VIRTUALISIERUNG DIEPERMANENTENEUERFINDUNGDERORGANISATION110(2000).
6NIKLASLUHMANN,ORGANISATIONUNDENTSCHEIDUNG211(2000).
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2009] 397TheDiabolicsofNetworkFailure
regard to the environment, the name of Beelzebub stands for a not less threatening
uncertaintyregarding
the
inner
coordination
of
the
nets
autonomized
nodal
points.
Followingafirsteuphoricphase,thepraxisofnetworks isnowdocumentedbyahostof
reports attesting to their confusing overcomplexity. The failures are manifold:
overwhelming environment information, coordination blockades, severe interface
problems, permanent decision conflicts, asymmetric power relations, opportunistic
behaviourofnodesandcentre,aswellasnegativeexternalitiesofnetactivities.7While
networksareconsideredtorespondrathersuccessfullytothecontradictorychallengesof
themarket environment, it is now their internal structure,which gives rise to nagging
problems: On the one hand, corporate networks aim at an enlarged and intensified
economization of corporate activities, on the other, however, they endanger their
functionalandexistentialfoundations,inparticularthestabilitynecessaryfortherelations
among
the
network
partners.
8
Networks
tend
to
aggravate
those
very
problems
that
they
simultaneouslyworktoresolve.Likeothermoderninstitutions,networksmobilizeinternal
selfdestructive dynamics.While it is true that they are able to translate productively
contradictions in their environment internally into tensionladen, yet sustainable
expectations,theyreinforcetheirinternalselfdestructivepotentialbysettingfreeinternal
tensionsthatresultfromtheirhybridformandfrom internalconflictsoftrust.Onceyou
add to thismix outside pressures on speed, flexibility, cost cuts and competitiveness,
networkpartnerswillbegintoactopportunistically.Atthispoint,networkfailurebecomes
seemingly inevitable. We have little reason to downplay the potential damage which
results both for the inside of the network and for its third parties. The wellknown
phenomenonof organized irresponsibilityhas foundaprominentsuccessor in reticular
irresponsibility.
Hereagain,
the
law
is
not
innocent.
It
is
aco
producer
of
network
failure,
as
it
fails
to
mitigate the threats of the new uncertainties.With regard to hierarchies, the law had
notably reinforcedhierarchy failurebydutifully supporting thecentralizationofdecision
making.Withregardtonetworks,thelawseemstoplayadifferentrole:treatingnetworks
with great resistance against something so alien, it helps to facilitate network failure.
7The sharpest criticismof network failure isHartmutHirschKreinsen,Unternehmensnetzwerke revisited,31
Zeitschrift fr Soziologie 106, 118 (2002); other issues are critically illuminated by VOLKER BOEHMENESSLER,UNSCHARFES RECHT: BERLEGUNGEN ZUR RELATIVIERUNG DES RECHTS IN DER DIGITALISIERTENWELT 534 (2008); JohannesWeyer, Zum Stand der Netzwerkforschung in den Sozialwissenschaften, in SOZIALE NETZWERKE: KONZEPTE UNDMETHODEN DER SOZIALWISSENSCHAFTLICHEN NETZWERKFORSCHUNG, 1, 25 (JohannesWeyer ed., 2000); Dirk Messner,
Netzwerktheorien: Die Suche nach Ursachen undAuswegen aus der Krise staatlicher Steuerungsfhigkeit, inVERNETZT UND VERSTRICKT NICHTREGIERUNGSORGANISATIONEN ALS GESELLSCHAFTLICHE PRODUKTIVKRAFT, 26, 56 (Elmar
Altvateretal.eds.,1997).
8 HIRSCHKREINSEN, supra note7, 118 Einerseits zielen Unternehmensnetzwerke auf eine erweiterte undintensiviertekonomisierungderUnternehmensaktivitten,andererseitsgefhrdensiedadurch ihreFunktionsund Existenzbedingungen, insbesondere die fr die Beziehungen zwischen Netzwerkpartnern erforderliche
Stabilitt[TranslatedfromtheGerman].
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[Vol.10No.04398 German Law J ou rna lLawyerstendtodismissnetworksasmerelyoneofnumerousnewtermcreationsofthe
morerecent
legal
debate
that
lay
an
unfounded
claim
to
novelty.9
A
recently
published
volumeofessays showshowpublic lawyers,whenasked todevelopa legaldoctrine for
networks, approach the network categorywith, indeed, great fear and apprehension.10
Only two authors succeed in this regard, while the rest indulge in dark metaphors.
Similarly, inprivate law,antitrust law, in thenameof freedomofcompetition, tends to
illegalize cooperative formsofnetworks,whichgoes farbeyondwhatwouldhavebeen
necessary.Here,thelawattachesthestainofanticompetitivebehaviourtomanyformsof
cooperation among otherwise independent corporate actors, which either increases
inadequatelytheautonomyofnodalpointsoragainreinforceshierarchization.11
Wefinda
rigid limitationofconceptualchoices inbothcontractandcorporate law,whereweare
askedtoopt foreithercontractororganizationtertiumnondatur.Anewcomparative
studyofdifferentEuropeanlegalsystemsconcludes:Boththemultilateralandthelinked
models
face
serious
limitations
under
current
contract
law,
more
in
some
legal
systems
thaninothersandoptsforaEuropeanregulatoryregimeforcontractualnetworkscalled
Principles of European Contractual Networks.12
Although private law is supposed to
support private autonomy, it comes emptyhanded when asked to provide for an
organizational framework to deal with networks. Corporate networks have by now
assumedasolidplace in regulatedmarkets, ranging fromenergyto telecommunications
markets, frombanknetworkstotransportandairtrafficnetworks.Butthe lawsanswer
exhaustsitselfintheconceptofbilateralcontracts.13
Still,itgetsworse:Inrecentconflicts
arisingoverthepassingonofnetworkadvantagesamongmembersofafranchisechainit
wouldhavebeenadequatetoredistributekickbackpaymentsthatthefranchisorhadkept
secret from its franchisees. However, both private law doctrine and the courts refuse
stubbornly todevelopnewconnexionisticconcepts for theemergingpatternsofaction,
attributionand liability,whichwould formanappropriate remedyagainst thenetworks
9 [E]ine von zahlreichen Begriffsschpfungen derjngeren rechtswissenschaftlichen Diskussion, die Neuheitbeanspruchen,ohnesiezubelegen.[TranslatedfromtheGerman]ChristophMllers,NetzwerkalsKategoriedesOrganisationsrechts: Zur juristischen Beschreibung dezentraler Steuerung, in NICHTNORMATIVE STEUERUNG INDEZENTRALEN SYSTEMEN, 285, 285 (JanberndOebbecke ed., 2005). For an overview of the reception of networkconceptsinpublic law:KARSTENNOWROT,NETZWERKE IMTRANSNATIONALENWIRTSCHAFTSRECHTUNDRECHTSDOGMATIK,15
(2007).Seealso,LUHMANN,supranote6,207.
10NETZWERKE (SigridBoysenet al.eds.,2007).Also,MLLERS, supranote9,295,views thenetwork concept aslegallyfruitless, butturnsthisfruitlessnessintoapositive.
11Onlyrarelyisantitrustlawcritisedfromthisperspective:JrgenEnsthaler&DagmarGesmannNuissl,Virtuelle
Unternehmen in der Praxis: Eine Herausforderungfr dasZivil, Gesellschafts und Kartellrecht, 55 BETRIEBS
BERATER,2265,2269(2000).
12FabrizioCafaggi,CONTRACTUALNETWORKSANDTHESMALLBUSINESSACT:TOWARDSEUROPEANPRINCIPLES?2008/15EUI
WORKINGPAPERLAW40,43(2008).
13 From a comparative law perspective, CAFAGGI, supra note12, 52. Some legal systems, however, aremore
advancedthanothers.
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2009] 399TheDiabolicsofNetworkFailure
chronic internal coordinationweaknesses.14
Even the avantgarde among legal scholars
thatcelebrates
the
socio
economic
accomplishments
of
networks
and
invents
finely
craftedlegalconceptsofnetworksandnetworktypologiesfailstoaccountfortheirdeep
running coordination difficulties. While the legal concept of basis of contract
(Geschftsgrundlage, developed by case law and subsequently codified in 313 of the
GermanCivilCode,BrgerlichesGesetzbuchBGB),neverdesigned toaddressnetwork
connections,isdrawnupontoestablishsomefewconnectionsbetweenisolatedbilateral
relations15, the doctrine of network contracts resists any direct acknowledgement of
reticular responsibilitywith new liability rules. Therewouldjust be no need!16
One is
almost tempted to pen the second volume to a provocative book, to be entitled The
PrivateLawAgainstSociety.17
B.
Opportunity
Structure
of
Networks
and
Laws
conceptual
readiness
Inthefaceofnetworkfailurethepresentlegaldoctrineoffersafalsealternativebyasking
ustochoosebetweenareturntohierarchyandamoveforwardtodecentralization.Result
isasterileoscillationbetweentwoequallyunattractivepoles:ontheonehandthefailure
of environmental compatibility and that of internal coordination on the other.Devil or
Beelzebub? Yet, there is no reason to despair. Waiting already in the background is
anotherexorcistshouldonecallhimLucifer?whopromisesanotherformofexorcism,
thistimetargetingnetworkfailure.Withoutadetourviathetopoftheorganization,the
newbringeroflightsuggestsdrasticallyincreasinginternalirritability.Inordertoovercome
network failure thisapproachaimsatdevelopingorganizational formsand responsibility
rulesfornetworksthatwillholdontotheadvantagesofthedecentralizedorganizationof
nodes while decisively strengthening their mutual coordination.18
This will drastically
14 ApolloOptik: Pflicht des Franchisegebers zur Weitergabe von Differenzrabatten an Franchisenehmer 43BETRIEBSBERATER (BGHBB)2254 (2003);HertzBGHBB1071 (2006).Different,however, isB9149/04Praktiker
BaumrkteGmbH2006BKartA.Pursuingthepreviouslineofargument,again:PraktikerOLGDsseldorfBB2007,738.
15Networkcontracts:MATHIASROHE,NETZVERTRGE:RECHTSPROBLEMEKOMPLEXERVERTRAGSVERBINDUNGEN(1998);Basis
ofcontract:StefanGrundmann,VertragsnetzundWegfallderGeschftsgrundlage ,inFESTSCHRIFTFRHARMPETERWESTERMANN,227,232(LutzAderholdetal.eds.,2008);StefanGrundmann,DieDogmatikderVertragsnetze,207
ARCHIVFRDIECIVILISTISCHEPRAXIS,718,742(2007).
16MarinaWellenhofer,ThirdPartyEffectsofBilateralContractswithintheNetwork, inCONCTRACTUALNETWORKS:LEGAL ISSUESOFMULTILATERALCOOPERATION,119 (MarcAmstutz&GuntherTeubnereds.,2009) (withconcessionsregarding tort law); FRANK BAYREUTHER,WIRTSCHAFTLICHEXISTENTIELL ABHNGIGEUNTERNEHMEN IM KONZERN, KARTELL
UNDARBEITSRECHT,399(2001);ROHE,supranote15,418.
17ThefirstvolumeisentitledTheStateAgainstSociety:KARLHEINZLADEUR,DERSTAATGEGENDIEGESELLSCHAFT:ZURVERTEIDIGUNGDERRATIONALITTDERPRIVATRECHTSGESELLSCHAFT(2006).
18RAINERKULMS,SCHULDRECHTLICHEORGANISATIONSVERTRGEINDERUNTERNEHMENSKOOPERATION,186,227(2000).
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[Vol.10No.04400 German Law J ou rna lreducetheprivityprincipleforallthosecontractsconnectedbythenetwork.Furthermore,
itwill
introduce
different
legal
rules
for
multilateral
contracts
with
regard
to
their
formation,theirvalidity,theirdefaults,andtheirtermination. Inaddition, itwillfacilitate
quasicorporate governance structures in multilateral contracts identifying the legal
conditionsunderwhichcontractualnetworkswillhavetobetreatedascollectiveactors.
Finally, itwill increase individual and collective liability for faulty coordination visvis
suppliersandbuyers.19
SocialscientistsindeeddisplayacertainoptimismwhenitcomestocastingoutBeelzebub
himself.20
WithaLuciferiangeste,theyhintattheinnerpotentialofnetworkstotransform
external contradictions into merely internal tensions and to deal with these tensions
productivelythroughmutualobservationsofnodesandallofthiswithout resortingto
centralhierarchicalorganizations.Theyinsist,however,thatthiswouldonlybepossibleif
there
were
sufficient
support
from
the
outside:
an
institutional
environment
where
fiduciary relationships can arise and also a high level of trust that can allow the
developmentofshared innovativeknowledge.21
Theprimarycandidateswhocouldgive
this support are organizational culture, governmental economic policies, economic
associations, and management consultancies, but also the law is to play a role. The
question for law is:22
Whichnormscancontribute tosetting free from itsblockades the
integration potential which exists in what Niklas Luhmann calls the heterarchical,
connexionisticandnetworklikecombinationofcommunications?23
Whichremediesdoes
the law hold in stockwith regard to the Achilles heel of networks, namely their inner
coordinationweakness?What needs to be uncovered here is a latent correspondence
relationbetweensocialnormsand law. InLadeurswords, itwouldbethemandateofa
socialepistemologyoflawinordertoprovideforamanagementofcoherencebetween
legalandextralegalruleboundednessofnetworks.24
Thisprogramhasbeenformulated
19CAFAGGI,supranote12,6.
20 ARNOLD WINDELER, UNTERNEHMUNGSNETZWERKE: KONSTITUTION UND STRUKTURATION, 336 (2001); Jrg Sydow,
Management von Netzwerkorganisationen: Zum Stand der Forschung, in MANAGEMENT VONNETZWERKORGANISATIONEN,279,299(JrgSydowed.,1999);MarkA.Lemley&DavidMcGowan,LegalImplications ofNetwork Economic Effects, 86 CALIFORNIA LAWREVIEW 479, 198 (1998); ElmarGerum,WielandAchenbach&Frank Opelt, Zur Regulierung der Binnenbeziehungen von Unternehmensnetzwerken: Ein Problemaufriss, 67ZEITSCHRIFTFHRUNGUNDORGANISATION266,267(1998).
21CAFAGGI,supranote12,3.
22 Lars Viellechner, Knnen Netzwerke die Demokratie ersetzen? Zur Legitimation der Regelbildung im
Globalisierungsprozess, inNETZWERKE,36,43 (SigridBoysenetal.,eds.,2007),posesthequestion forpublic lawandprovidespreliminaryanswers.
23
Niklas
Luhmann,
The
State
of
the
Political
System,
in
NIKLASLUHMANN,
ESSAYSONSELF
REFERENCE,
165
(1990).
24Also, INOAUGSBERG&KARLHEINZLADEUR,DIEFUNKTIONDERMENSCHENWRDE IMVERFASSUNGSSTAAT:HUMANGENETIK
NEUROWISSENSCHAFT MEDIEN,164(2008);KarlHeinzLadeur,DierechtswissenschaftlicheMethodendiskussionund
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2009] 401TheDiabolicsofNetworkFailure
as research agenda of a double institutional analysis, as it was developed by Philip
Selznick.25Pursuing
an
institutional
analysis
of
networks,
the
ensuing
questions
is:
Where
can the opportunity structure be found, the social potential for an increasingly non
hierarchicalcoordinationwithinthenet?Pursuingan institutionalanalysisofthe law,the
questionwouldbe: istherea conceptualreadinessofthe lawwhichwouldenable itto
set this potential free by facilitative rules? This agenda is close to what Ladeur has
frequently been pursuing, be it in the field of internet governance,media networks or
virtualauctions,leadinghimtoanormativeprogramofanetworkadequatelaw.26
Which, now, are the components of networks that, byworking against the centrifugal
tendenciesofnetworks, are able to support their internal coordination?And,bywhich
doctrinalconstructscouldthelawrespondandstabilizethesecomponents?Inspiteofthe
strongscepticismamonglawyerswhomaintainthatthetermnetworkdoesnotlenditself
to
legal
doctrinal
use,
this
should
reveal
a
close
correspondence
between
social
structures
andlegalrulesthatiscapableofaddressingnetworkfailure.I. Integration Potential I: Spontaneous Orders Local contacts, Overarching Binding
Connections
We do not have Hayeks spontaneous orders in mind, which are able to generate
distributedknowledgeon thebasisofmarketcompetitiveactswithoutcentralplanning.
We are concerned here not with competitive markets, but instead with cooperative
relations beyond themisleading alternative of contract vs. organization. Networks are
spontaneousorderssuigeneris,whosecooperativerelationsareinfactnotdispersingbut
concentratingthesoughtknowledge.27
Netrelationscreatecommitmentsandsocialbonds
out of cooperative actionswhich connect recursivelywith each other. Those social ties
formthe
glue
that
holds
networks
together
the
strength
of
weak
ties28
and
that
work
effectivelyagainst the centrifugal tendenciesof autonomizedprofit centres as longas
thesetiesaresufficientlysupportedbysocialandlegalinstitutions.
die Bewltigung des gesellschaftlichen Wandels, 64 RABELS ZEITSCHRIFT FR AUSLNDISCHES UND INTERNATIONALESPRIVATRECHT60,78(2000).
25PHILIPSELZNICK,THEMORALCOMMONWEALTH:SOCIALTHEORYANDTHEPROMISEOFCOMMUNITY 229(1992).
26 KarlHeinz Ladeur, eBayBewertungssystem und staatlicher Rechtsschutz von Persnlichkeitsrechten,
KOMMUNIKATIONUNDRECHT,85(2007);especiallyforcefulwithregardtotransnationalnetworksisThomasVesting,TheNetworkEconomyasaChallengetoCreateNewPublicLaw (beyondtheState), inPUBLICGOVERNANCE INTHE
AGEOFGLOBALIZATION,247(KarlHeinzLadeured.,2004).
27CordulaHeldt,InternationalRelationsandSemispontaneousOrder:TheCaseofFranchisingandConstruction
Contracts,in
CONCTRACTUAL NETWORKS:
LEGAL ISSUES OF MULTILATERAL COOPERATION,
137,
144
(Marc
Amstutz
&
Gunther Teubner eds., 2006); TEUBNER, supra note2, 79; Robert Gordon, Hayek and Cooter on Custom andReason,23SOUTHWESTERNUNIVERSITYLAWREVIEW,453(1994).
28MarkS.Granovetter,TheStrengthofWeakTies,78AMERICANJOURNALOFSOCIOLOGY,1360(1973).
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[Vol.10No.04402 German Law J ou rna l
But,has
the
law
the
conceptual
readiness
to
institutionalize
such
binding
arrangements?
Thisisindeedproblematicforthedominantcontractparadigm,sincethemodernrational
binding institutions, consensual contractandhierarchicalorganization,haveemergedas
winners, casting the spell of illegality over old binding forms as anticompetitive,
clientelisticorevencorrupt.29
Yet,privatelawhasundergoneasetofpromisingdevelopmentstowardsthebindingness
ofnetworkswithoutcontractthatoneshouldforcefullypursue.Thepointofdeparture is
Rudolfvon Jheringsgoodoldculpa incontrahendo thatserved toestablish inparticular
cases legal bonds precisely without a contract, without a promise, without an act of
consensus,butmerelyonthebasisofsocialcoordination.Thiswasachievedwiththehelp
ofa precontractualobligation causedby the comingcontract.30
In themeantimewe
can,
however,
observe
a
considerable
expansion
of
culpa
in
contrahendo
that
was
originally thought to apply only to simple, bilateral relations. The concept has been
constructivelyabusedbyapplyingittomultilateralnetworkswithoutcontract.Sofar,this
developmenthaslargelygoneunnoticed.Settingsidebysidelinesofcaselawthatwould
otherwiseevolveinrelativeignorancefromeachother,wecanobserveratherexoticlegal
regimeswherebythemerelysocialnetworkrelationsbetweenseveralbilateralcontracts
haveservedasthegroundonwhichtoestablishgreaterdegreesof liability.Thecases in
question here include the socalled prospect liability in grey security markets
(Prospekthaftung), trustee liability in complex transactions (Sachwalterhaftung) and, in
parallelfashiontotheseconstellationsevenifnotbuiltdirectlyontheconceptoftheculpa
incontrahendo,thethirdparty liabilityofexperts(Expertendritthaftung),bank liability in
transferchains (berweisungsketten)aswellasconnectedcontracts inagreatvarietyof
contexts(Vertragsverbindungen).31
NetworkshavealsofoundtheirwayintotheEuropean
arena:the
rescindment
of
acontract
will
have
an
impact
on
all
those
contracts
connected
to it, even if theagreementamong theparties sought to ruleout the connection.32
All
theseisolatedlegalinstitutessharethefeaturethattheycreatelegallybindingobligations
amongseveralmutuallyconnectedactors,althoughtheirbasisisnotaspecificagreement
butmerelythefactualbehaviourthroughsocialcontact.
29 In addition, see, Simon Deakin, The Return of the Guild? Network Relations in Historical Perspective, inCONTRACTUALNETWORKS:LEGAL ISSUESOFMULTILATERALCOOPERATION53,58 (MarcAmstutz&GuntherTeubnereds.,
2009).
30RudolfvonJhering,CulpaincontrahendooderSchadensersatzbeinichtigenodernichtzurPerfectiongelangten
Vertrgen,4JAHRBCHERFRDIEDOGMATIKDESHEUTIGENRMISCHENUNDDEUTSCHENPRIVATRECHTS,1(1861).
31
On
the
present
stage
of
development,
Mnchner
Kommentar
BGB,
5th
ed.
2007,
311,
nr.
185.
(Prospectus
liability);311,nr.244.(Trustee);328,nr.150.(Expertthirdpartyliability);328,nr.157(Banktransfer);358nr.3.(Contractconnections).
32ACQUISGROUP,PRINCIPLESOFTHEEXISTINGECCONTRACTLAWCONTRACTI,186(2007).
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The very vagueness, however, of the term social contactwhich is supposed to create
legallybinding
obligations
has
proven
to
be
the
greatest
obstacle
in
the
development
of
networkadequaterules.Obviously,noteverysocialcontactcanbeassumedtobeableto
createthoseconnexionisticsocialtiesoreventhe legallybindingobligationsthatweare
interested inhere.33
The same is true for the categoryof trust,which is too vague to
guide the transition from social ties to legal obligations. It is at this point that the
sociologicalnetworktheorycanprovidesomehelpfulsuggestions:typicalnetconnections
canonlybeassumedwhen thedoublecondition ismet,namely first that theemerging
socialrelationdependsonexpectationsofgeneralizablereciprocityand,secondly,thatthe
entry into the larger network occurs on the basis of local, bilateral contacts.34
This
condition of andsoforth of generalizable reciprocity connections,modelled after the
ideaofamicidegliamicidegliamici, is theprerequisite for theconstructionofmodern,
multilateralnoncontractualtransactionsequencesthatprivatelawyersatfirsttendedto
equip
only
with
duties
to
protect,
before
eventually
moving
to
recognize
them
as
grounds
forcoreobligationsbyallowingforcompensatoryclaimswhensuchcoreobligationshad
beendefaultedon.Followingthe2002reformoftheGermanlawofobligations,thenewly
created 311III BGB establishes a contractual obligation without contract, the new
358IIIBGBstipulatesspontaneouslyconnectedcontractsaswellas,finally,676bIIIand
676e BGB allow for a piercing of the veil in a transfer chain which makes the
intermediate bank liable. These rules can altogether be seen as legislative traces of
recognizingnetworkswithoutcontract.Theyrepresentasubsequentstep ina longterm
evolution during whichjudges had long begun looking for adequate responses to the
pressureofsocioeconomicdevelopments.Thetaskisnowtocontinueonthisavenueand
to integrateother typesof transactions into suchanemerging lawofnetworks,suchas
sponsorship contracts, prospectus contracts,project related expertise contracts,project
contracts, engineering contracts, transportation nets, bankingnetworks and credit card
systems.All
these
examples
remain
still
to
be
belaboured
in
adiscussion
that
has
hitherto
beenlimitingitselftofinancedsales,franchising,justintimeandvirtualenterprises.35
For
the time being, however, private law doctrine remains cautious: even themost daring
networkersinthisfieldholdaparticularlegalregimefornetworkstobedecisionist,and
regarditbeeitherinconflictwithexistinglawor,atbest,tobevisionary.36
Andweknow
whathappenstovisionaries.
33Cf.MnchKommBGB,5thed.2007,311,nr.68.
34Ongeneralisedreciprocity:CHRISTIANSTEGBAUER,REZIPROZITT:EINFHRUNG INSOZIALEFORMENDERGEGENSEITIGKEIT,79(2002);AlwinW.Gouldner,TheNormofReciprocity:APreliminaryStatement,25AMERICANSOCIOLOGICALREVIEW161,176(1960),speaksofthestartingmechanism.Oniterativenetworkbuilding,MichaelBommes&VeronikaTacke, Netzwerke in der Gesellschaft der Gesellschaft. Funktionen und Folgen einer doppelten
Begriffsverwendung, 13 SOZIALE SYSTEME 9, 14 (2007); Rudolf Stichweh, Adresse und Lokalisierung in einem
globalenKommunikationssystem,
in
RUDOLFSTICHWEH,
DIEWELTGESELLSCHAFT:
SOZIOLOGISCHEANALYSEN,
220
(2000).
35Onfranchising,Justintimeandvirtualconcernsindetail,TEUBNER,supranote2,60.
36GRUNDMANN(2008),supranote15,228;(2007)supra note15,724.
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[Vol.10No.04404 German Law J ou rna lII.IntegrationPotentialII:SmallWorldsDualismofStrictandLooseCoupling
Sociologists have identified a further peculiarity of networks that deserves the law's
attention.Themost importantadvantagesofnetworksdonot come tobearmerelyon
connectionsbetween individuals.What ittakesareconnectionsbetweensocialrelations:
dyads,contractrelations,organizations,epistemiccommunities,functionalsystems.37
Itis
onlythedualityofdenseclustersandlooseconnectionsamongthemthatbringsaboutthe
wellknownnetwork intelligence, because theduality itself acts as the competitiveunit
whichcombines thecloutoforganizedspecialunitsand theircoordination.Networksas
highly improbablereproductionrelationsofheterogeneouselementsarecharacterized
bytheunlikelihoodofclosedsystemsopeningtowardseachother.38
Particularexamplesof
such networks,whose success depends on the simultaneity of strict internal and loose
external couplings, are connected contracts, European comitologies as networks of
national
bureaucracies,
inter
organizational
networks,
networks
of
epistemic
communities
andnetworksofresearchinstitutions,firms,andpublicadministrativeagencies.39
Arecent
studyaptlyreferstosuchcasesassemispontaneousorders,becausethefoundationof
the spontaneous networks lies, paradoxically, in the constructivist orders resting on
rationalplanningabhorredbyHayekrelationalcontractandformalorganization.40
ThisdualismisthereasonwhyViellechnercanclaimthatthevaguenotionofnetworkcan
beusedasalegaltermonlywhenitisrealizedasaconnectionofbilateralcontractsand,
asmustbeadded,asaconnectionofformalorganizations.41
Thelawwillhavetotakethis
dualismofstrongandweakconnectionsintoaccount,inmorethanoneway.
Afirstimpactofthedualismgoestothelegalformationofnetworkconnections:Arethere
strict requirementsnecessary for theconclusionofamultilateralcontractamongall the
participants?Or
are
only
minimal
requirements
sufficient
to
render
the
factual
connections
between contracts legallybinding? Some scholars try to constructa networkcontract
and base it on the traditional law of agency with mutual authorizations between all
participants. When a new member enters the network, he is supposed to strike a
multilateralagreementwithalltheothermemberswhointheirturnaresupposedtohave
given theirauthorization inadvance.Thissomewhatmonstrousconstructdisregards the
37MARCBUCHANAN,NEXUS:SMALLWORLDSANDTHEGROUNDBREAKINGSCIENCEOFNETWORKS(2002);DUNCANWATTS,SMALLWORLDS:THEDYNAMICSOFNETWORKSBETWEENORDERANDRANDOMNESS(1999).
38DIRKBAECKER,ORGANISATIONUNDGESELLSCHAFT,14(2002).
39 Michelle Everson & Christian Joerges, ReConceptualising Europeanisation as a Public Law of Collisions:
Comitology, Agencies and an Interactive Public Adjudication, in EU ADMINISTRATIVE GOVERNANCE 512 (Herwig
Hofmann&
Alexander
Trk
eds.,
2006);
LADEUR
(2009),
supra
note
1.
40HELDT,supranote27.
41VIELLECHNER,supranote22,43.
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socialpeculiaritiesofnetworksandthereforeimposegreatlyexaggeratedrequirementson
thelegal
formation
of
networks.42
Other
scholars
ask
for
an
additional
coupling
agreement,or fora completemultilateral contract,or foramultilateral synallagma. 43
Theycommitthesamemistake.Theunfortunatecase lawregardingjunkrealproperty
has been insensitive to interconnectionsbetween theparticipants to theproject.More
specifically, the courts raised the requirements for cooperation between the financing
bank,thefinancialadvisersandtheoperatorsoftherealestate,tosuchahighdegreethat
madeiteasyforbankstoavoidresponsibilityfortheirscandalousfinancepractices.44
Moreover, the dualism of strict and loose couplingsmakes it necessary to distinguish
different typesof legalobligationswithin thenetwork.Mutualperformanceobligations
within the bilateral contractsmust be exactly specified; obligations of cooperation and
informationintheirinterconnectednesscanbeunspecified.Thisdistinctioniswellknown
from
the
field
of
relational
contracts
and
can
be
transposed
to
networks.
By
contrast,
the
allocation of risk and of compensation duties between network partners creates novel
problems. Being situated in the loosely coupled domain of interconnections, these are
implied obligations with an initially unspecified and contextsensitive character.
Nonetheless, theFederalCourtof Justice, in itsopinionsmentionedbefore,45
applied to
them the strict standards forexpresscontractualobligations. Ina franchise relation the
courtrequiredthatafranchisorsobligationtotransferabenefittothefranchisees,needs
tobeexpresslylaiddowninthestandardterms,e.g.asdutytosupport.However,whena
firmchangesitsstandardtermsandabolishesorevenexcludessuchdutiestosupport,the
courtgetscoldfeetandrefusesto identifyan implieddutytotransferinthestructureof
the franchise relation itself. Scholars,of course,applaud.Only the FederalCartelOffice
applies parallel structural reasoning from competition law and establishes a duty of
transfer.46
42Afterwards,allkindsof fictionsarenecessarytoalleviatetheabsurdconsequences;e.g.ROHE,supranote15,85,176,356.
43Couplingcontract:WalterSchluep,ZusammengesetzteVertrge:VertragsverbindungoderVertragsverwirrung,
inFESTSCHRIFTFRHEINZREY285,304(HeinrichHonselletal.,eds.,2003);multilateralcontract:MaxVollkommer,
DerSchutzdesKufersbeimBGeschftdes'finanziertenAbzahlungskaufs,inFESTSCHRIFTFRKARLLARENZ,703,711
(GotthardPaulused.,1973);trilateral synallagma:PeterW.Heermann,TheStatusofMultilateralSynallagma inthe Law of Connected Contracts, in CONTRACTUALNETWORKS: LEGAL ISSUES OFMULTILATERAL COOPERATION 103, 106
(MarcAmstutz&GuntherTeubnereds.,2009).
44SeethebrilliantcriticismbyRAINERMARIAKIESOW,KREDITEINDERRISIKOGESELLSCHAFT(2005).
45ApolloOptik:PflichtdesFranchisegeberszurWeitergabevonDifferenzrabattenanFranchisenehmer43BGHBB2254 (2003);BGHBB2006,1071Hertz.Forpungentcriticism,seeReinhardBhner,ProfitSharingwithinthe
Network:Duty
to
Transfer
Network
Benefits,
in
CONTRACTUALNETWORKS:
LEGALISSUESOFMULTILATERALCOOPERATION,
153(MarcAmstutz&GuntherTeubnereds.,2009).
46B9149/04PraktikerBaumrkteGmbH2006BKartA.Inaccordancewiththepreviousjurisprudenceseeagain
PraktikerOLGDsseldorfBB2007,738.
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[Vol.10No.04406 German Law J ou rna lFinally, the smallworldswith theirdualismof strict and loose coupling turnup for the
questionwhether
the
law
should
stipulate
agenuine
network
purpose
that
is
legally
binding for theparticipants.47
Thedoctrinewants toavoidhaving toqualifynetworksas
corporatestructures,soitgetslostinartificialdistinctionsbetweenacommonpurposeof
corporate entities and a merely unitary purpose of networks. (If common, how not
unitary?Andviceversa.)Or, thedoctrine rejectsa legallybindingpurpose fornetworks
altogetherandmerelyspeaksofeconomicgoals.Instead,privatelawshouldacknowledge
thattheoscillationbetweenstrictandloosecouplingcannotbeovercomeandproducesa
specific legalnetworkpurpose.Networksaremultilateralcontracts,andyettheyact like
formalorganizations. Inthecontractualrealm,aselfinterested focusontheexchange is
legitimate. In the realm of interconnectedness, by contrast, an exclusive orientation
towardsthecommonpurpose isrequired. Incorporatenetworks, individualcorporations
areexpectedtorigorouslypursuetheirownindividualinterestsandyettocomplywiththe
contradictory
simultaneous
requirements
of
cooperation
and
pursuit
of
a
common
purpose.48
Thistwofoldorientationofnetworkparticipantsforcesthelawtorecognizean
independentnetworkorientation,whichexpressestheequalcoexistenceofcommonand
individualorientationinthenetwork.Onlysuchalegalrecognitionofthenetworkpurpose
willsupporttheintegrationofdecentralizedactionwithinthenetwork.
III.IntegrationPotentialIII:IterativityofNetworkDecisions
Here,thesmellofsulphurbecomesespeciallypenetrating.Theresultoftheexorcismisa
specific iterativity of network acts, but while network failure is extorted, one,
Beelzebubian, uncertainty is cast out by another, a Luciferian one.When conditions of
hierarchy collectively binding decisions, centralized competences and hierarchically
orderedcriteriafail,thereaction isan increasedreciprocalobservationofnodeswithin
thenetwork.49
The
authoritative
final
decision
by
the
collective
is
replaced
with
aseries
of
iterative decisions in a multiplicity of observer positions, which mutually reconstruct,
attach,influence,constrain,controleachotherandprovokeeachothertoinnovate,butdo
notresultinonecollectivedecisiononsubstantivenorms.Insteadofuniformityatthetop
of thehierarchy,we find recursivityofdecisionswithin thenetwork.Suchanobservers'
network legitimates itself, as Ladeur formulates in perhaps his strongest provocation
towardsjuridicalthinkinginhierarchies,throughapracticeofexperimentation,accessible
neitherfortheindividualsnorforthestate.50
Now,transparency,reciprocalaccessibility,
47SeeTEUBNER,supranote2,41,withfurtherreferences.
48 Similarly, Christian Kirchner, Horizontale japanische Unternehmensgruppen (keiretsu) im deutschen
Konzernrecht,inLIBERAMICORUMRICHARDM.BUXBAUM,39,351(TheodorBaumsetal.eds.,2000).
49LADEUR,supranote3,80.
50KARLHEINZLADEUR,NEGATIVEFREIHEITSRECHTEUNDGESELLSCHAFTLICHESELBSTORGANISATION82(2000)(einePraxisder
Erprobung,diewederdenIndividuennochdemStaatzugnglich[ist]).
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and generalized reciprocity of network nodes are the top priority; participation and
deliberationacquire
new
significance.
At
the
same
time,
it
becomes
more
and
more
apparentthatLuciferalsoobeysthelogicofexorcismandmerelyreplacesoneuncertainty
withanother.Wewillhavetoreturntothispoint.
From a legalperspective, thenetwork iterativity is relevant in threedimensions. In the
temporaldimension,legalactsareserialized.Inthesubstantivedimension,obligationsare
concretizedinlightofthespecificsituation.Inthesocialdimension,netknotsreciprocally
observe each other. What is especially important here is that legal obligations are
temporalized through framework agreements and later stepbystep concretion. The
problemofuncertaintyisresolvedsothattheobligationsarespecifiedovertime.51
Atthe
beginning,nothingisreallyagreedupon intheframeworkagreement.Thepartiesmerely
declarethemselvestobeboundtotheirnewstatus.Nowtheyarenetworkparticipants.
The
result
is
the
paradox
of
nonbinding
obligation,
the
paradox
of
valid
but
not
binding
legalnorms, theparadoxof formallybinding lawwithout substantiveobligations.52
Only
over time do specific obligations emerge, step by step, against the background of the
networks own history. They are aptly called secondorder contracts. They stabilize
expectationsintheexpectationthatexpectationswillchange.53
Everyexternalchange,but
also every internal net event, changes the expectations,which then create respectively
differentobligationsonthebasisofthe legallybindingnetworkamongtheparties.Such
unspecifiedobligationsthatcanbespecifiedonlyafteracertainperiodoftimewerenot
unknown in classical contract law, but only as secondary obligations opposed to the
primary obligation that was expressly defined at the contractual conclusion. In the
network, by contrast, primary obligations are defined by this type of deferred
determination.
Substantively,the
arrangement
is
of
remarkably
experimental
nature.
Vagueness
and
generality at the first stage are followed by an experimental learning process towards
iterativesubstantiveconcretization.Theiterativityofdecisionsischaracterizedbymultiple
perspectives of the nodeswhich produce a collective inquiry as a differential order
whichhasnounity,nocentre,nobeginning,but isnothingbut theprovisionalresultof
experimentingwithselfproducedconstraints54
Thenetworkpartnersare legallyobliged
51On framework agreements as a strategy to reduceuncertainty, seeNIELSAKERSTROMANDERSEN,PARTNERSHIPS:
MACHINESOFPOSSIBILITY97(2008).
52MatthiasGoldmann,DerWiderspenstigenZhmung,oder:Netzwerkedogmatischgedacht, inNETZWERKE,225,
242(SigirdBoysenetal.eds.,2007).
53
Stefanos
Mouzas
&
David
Ford,
Constitutions
of
Networks,
INDUSTRIALMARKETINGMANAGEMENT
(2009);
ANDERSEN,
supranote51,97.
54 LADEUR, supranote50,167. See also, KARLHEINZ LADEUR,DASUMWELTRECHTDERWISSENSGESELLSCHAFT:VONDER
GEFAHRENABWEHRZUMRISIKOMANAGEMENT22(1995).
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[Vol.10No.04408 German Law J ou rna lnot to a certain conduct or to clearly defined goals but instead to an experimental
situation.The
network
binds
them
neither
to
reliable
conditional
programs
nor
to
purposive programs for which they would have to choose means depending on the
situation,but insteadtoexperimentalprogramsvoidofsubstantivecontentanddefined
onlybythemultiplicityofperspectives.
And in its social dimension, iterativity transforms the one binding collective decision
eitherthecentraldecision,ortheconclusionofcontractthatbindsallparticipantsintoa
multitudeofindividualnodesdecisionsandtheirreciprocalrecursiveobservation.Here,a
practiceofcoordinatingdifferentorganizationalunits,familiarfromorganizationtheory,is
takentotheextreme:Uncertaintyisabsorbedthroughreciprocalacceptanceofdecisions
bydecentralizedentities.Thisabsorptionofuncertaintyischaracterizedbyapeculiarrule
exception relation. The rule is: Decentralized entities accept the decisions of other
decentralized
entities
without
reappraising
their
premises,
and
build
their
own
consecutive
decisionsonthesedecisionswithout furtherado.Theexception is:Theycanquestionor
even deviate from the prior decision only as a consequence from specific burdens of
information and justification. In principle, this decision modus is also known from
hierarchical situations, as exceptional revocation. What is different is the "directive
correlation",thewayinwhichthedecision'sdependenceisdirectedbothhorizontallyand
hierarchicallyupwards.55
Itisreminiscentoftheprincipleof"defaultdeference"inanon
hierarchical court system, inwhich neither binding precedent nor amerely persuasive
force ofwellfounded arguments governs, but instead the principle that the decisions
taken by the other court are binding, and the exception of sharp requirements for
justificationofoverruling.56
Again, it is obvious how thisway of dealingwith uncertainty creates new uncertainty.
Luciferrears
his
head.
Yet,
he
compensates
quite
well
the
internal
weakness
of
coordination.ThatpartofthatpowerwhichwouldtheevileverdolikeMephistopheles
fromGoethe'sFaust,mustfinallydothegood.Indeed,newlegalrulesareinsertedintothe
networkstocompensateforthecompensation.Thedutytorenegotiatethrivesbecauseit
ismadeexactlyforsuchatemporal iteration.57
Throughproceduralization, itmanagesto
defuse the paradox of nonbinding obligation by themere lapse of time.Opportunistic
behaviorthatcouldbeexpectediscounteredwiththethreatofjudicialcontrolofdutiesto
negotiateingoodfaith.Evenstrongeristheeffectofdownstreamcontractualgovernance
mechanisms,expertassessmentproceduresinternaltothenetwork,arbitrationandother
dispute resolutionmechanisms.Here, the interaction between the three dimensions is
55Inaddition,LUHMANN,supranote6,207.
56RogerP.Alford,FederalCourts,InternationalTribunals,andtheContinuumofDeference,43VIRGINIAJOURNALOFINTERNATIONALLAW675,792(2003).
57Cf.MnchKommBGB/Roth,5thed.2007,241,nr.60.
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particularlyobvious.Networkobligationssimplycannotbe formulatedexante.Only the
iterationof
both
amultitude
of
external
events
and
amultitude
of
internal
decisions
makes it possible to define the specific obligations for each individual participant. If
necessary,theycanbedeterminedexpostbyconflictresolutioninstitutionsinternaltothe
network or, in theworst case, by courts.Note that the real effect is not the concrete
regulationofan individual issueexpostbyanarbitratororacourt,but the institutional
arrangementof iterativity itself,whichcreates,stepbystep, legallybindingexpectations
fortheconcretesituation.Theseconsolidatedexpectations,notthe legalsanction inthe
individual case, are how the law strengthens the potential for coordinationwithin the
network.
IV.IntegrationPotentialIV:CollectiveOrientationWithoutaCollective
Whether
networks
take
on
a
collective
character
is
hotly
debated
by
social
scientists.
Do
the networks themselves operate as collective actors or is it only the network nodes?
Positions range from simple multipolar connectivity between the nodes to a full
personificationofthenetworkorganization.58
Thatshouldnotencouragethelawtomake
juridicalpersonsoutofnetworks.Andyetoneofthemostimportantintegrationpotentials
seemstohide ina legallysupportedcollectivizationofnetworkswhich,however,remain
at the same time highly individualistic. Thus, it is necessary to uncover the sui generis
collectivityofnetworks,ifitissupposedtocounteractthecentrifugaltendencies.
Recently,Ladeurhashighlightedapeculiarityofnetworks,whichhasalmostdisappeared
fromsociologicalandeconomictheorizing.Hespokeofthecharacterofthenetworkasa
transsubjectiveevolutionarystructure.59
Contrarytowhatisoftensaid,theconnectivity
ofallwithallisnotwhatiscrucialthisistoostatic.Whatcountsisthedynamicprocess
ofpermanent
changes
driven
by
many
nodes
at
the
same
time,
which
unavoidably
but
unpredictablyhaveaneffectonthewhole.Thetranssubjectivecollectivepotentialliesin
this dynamic. It forces us to destroy the usual connection between collective action
capacity and the unity of representation. Themetaphor of the manyheaded Hydra,
whereunityofactioncomesnotfromasinglecentreofwillformationbutisproducedbya
multiplicityofsimultaneousdecisions,makesclearwhere thepeculiarityof thenetwork
collectivitylies.60
Infact,therearenetworksthatareabletoactindependentlyasawhole:
58 Against their collective nature: Veronika Tacke, Netzwerk undAdresse, 6 SOZIALE SYSTEME, 291, 317 (2000);Eckard Kmper& Johannes F.K. Schmidt,Netzwerke als strukturelle Kopplung, in SOZIALENETZWERKE, 211, 219(JohannesWeyered.,1999).Infavouroftheircollectivenature:MANUELCASTELLS,THERISEOFTHENETWORKSOCIETY,381(2000);JrgSydow&ArnoldWindeler,OrganizingandEvaluatingInterfirmNetworks,9ORGANIZATIONSCIENCE.
SPECIALISSUE,265,265(1998).LUHMANN,supranote6,408,distinguishesvarioussituationsinwhichnetworkstake
onacollectivecharacter.
59LADEUR(2009)supranote1,SectionI.3.
60GuntherTeubner,TheManyHeadedHydra:NetworksasHigherOrderCollectiveActors,inCORPORATECONTROL
ANDACCOUNTABILITY,41(JosephMcCaheryetal.eds.,1993).
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[Vol.10No.04410 German Law J ou rna ljointventures,franchisingsystems,justintimenetworks.
61Thenetworkactsitselfinsuch
casesas
acollective
actor
in
the
political
system,
in
the
economy
and
in
other
social
contexts.Internalandexternalprocessesofsocialattributioncreateanindependentunity
ofaction butnotasasingleactor.Insteadtheycreateapolycorporateactor,anuntil
now unfamiliar social organization.62
Without a centre, without leadership, without a
unifiedmanagement,andwithoutonesingleauthorizedrepresentation,thenetworkacts
exclusively through itsmany individualnodeswhichdonotceasetobecollectiveactors
themselves. They operate simultaneously in their own name and in the name of the
network.Theyproduceandthis isdecisive forourenquiry for internalcoordination
witheachindividualactioncollectivecommitmentsforthewholenetwork.63
Thisburdens
thenodeswithenormousresponsibilityandforcesthemtotakeaccountnotonlyoftheir
owninterestbutthatofthecollectiveineachcalculationanddecision.Thesearethesocial
effects of network commitmentwhich need to be reinforced by legal rules. In such a
confusing
fragmentation
of
the
one
collective
into
many
single
node
decisions
and
in
their
reverseconnectionstothewhole,onefindsthepotentialforintegration,which,however
possiblyduetoitsstrangefragmentationhasnotadequatelybeentakenupbythelaw.
To operate here with the traditional fullfledged juridical person would be counter
productive.This isthecategorymistakeofthemanydoctrinaleffortsthattrytocapture
networkswithconceptsofcorporatelaw.64
Tobeappropriatefornetworks,thelawwould
have todevelopmoresubtle,and inparticular,ambivalentconceptsofcollectivity.That
beginsalreadywithnet interestan independent legalconceptthatcharacterizesthe
collectiveinterestofthenetwork,65
whichisdifferentfromtheconceptofinterestofthe
corporation. Amstutz has developed a law of contract collisions for these contractual
networks which contains metarules for conflicts between bilateral contracts, the
vanishingpointofwhich is the functionalcapabilityof thecontractualnetwork.66
This
conceptshould
not
be
misunderstood
as
instrumental.
The
formula
of
atrans
subjective
evolutionary structure indicates instead a direction. The law should not reduce the
interest of the network to a goalmeans relationship; nor should it compare it to the
interest incontinuedexistencewithouthighlightingtheabilitytochange,abilityto learn
61 The sheer richnessof variety is impressive. It ranges from simple connecting structures (via) tonetworkingprocesses(via)tonetworksassocialsystemswiththeirownboundariesandowntillnowrecursiveusablehistorytonetworksascollectiveactors.Cf.LUHMANN,supra,note6,408.
62UlrichBlz,EinheitundVielheitinKonzern,inFESTSCHRIFTFRLUDWIGRAISER,287(FritzBauretal.eds.,1974).
63TEUBNER,supranote60,208.
64SourcesinTEUBNER,supra,note2,48fn.81,fn.83andfn.88.
65CAFAGGI,supra,note12,7.
66MarcAmstutz,TheConstitutionofContractualNetworks,inCONTRACTUALNETWORKS:LEGALISSUESOFMULTILATERAL
COOPERATION,309,334(MarcAmstutz&GuntherTeubnereds.,2009).
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and ability to evolve of the total constellation. Here one can connectwith the law of
corporategroups,
which
supports
the
autonomy
of
the
subsidiaries
in
relation
to
the
centralcompany.67
Butweneedtogobeyondamerelyinstrumentalautonomythatbinds
thenodestotheprofitinterestofthetotalcompany.Rather,itisreflexiveautonomythat
should be established.68
It existswhen all network nodes reflect independently on the
precarious relationshipbetween theirenvironmentaleffects (in thebroadestsense)and
theirfunctioninthewholenetwork.Reflexiveautonomyplaysadecisiveroleinparticular
in researchnetworksbetweengovernmentalactors,economicenterprisesandacademic
institutions.69
Lawwillsupportreflexiveautonomy if it imposesalegaldutyonthenodes
to take intoaccount the functioningof thenetworkasawholeand if it imposeson the
centreacomplementarydutytorespectthenodesautonomy.
Similarambivalencesshouldbetakenintoaccountbythepoliticalregulationofnetworks.
How
can
one
regulate
from
the
outside
a
trans
subjective
evolutionary
dynamic
if
there
isnounitaryobjectofregulationthattheregulatoryactorcangrabholdofwithcommand
and control,with incentives orwith indirect steering? Partisans of the socalled nodal
governanceapproachsuggestthattheregulationagency,insteadoftryingtoinfluencethe
wholenetworkinvain,shouldconcentrateontheindividualnodes.70
Instead,aBeelzebub
Lucifer strategy seems more appropriate: regulation of networks by networks of
regulation. This means for international networks that one national node of the
internationalregulatorynetworkisalwaysresponsibleforcontrollingitsnationalcounter
partintheregulatednetwork,andthat,connectionsontheregulationlevelshouldcontrol
theconnectionsonthelevelofaction.71
Similarproposalshavealsobeenmadeforcontrol
ofnetworksbycivilsociety institutions.NGOnetworksandstakeholdercommunitieswill
beable todevelop controlpressureonlywhen theybuild simultaneouslycountervailing
powertoeverylocalnodeandtothecentreofaction.72
67Cf.MunichCommentaryAktG,2(2000ed.),308,nr.101.
68 Gunther Teubner, Coincidentia Oppositorum: Hybrid Networks Beyond Contract and Organisation , inCONTRACTUALNETWORKS:LEGAL ISSUESOFMULTILATERALCOOPERATION,3,28 (MarcAmstutz&GuntherTeubnereds.,2009).
69AndreasAbegg,LegislationandSelfRegulationofHybridNetworksattheIntersectionbetweenGovernmental
Administration and Economic SelfOrganization, in CONTRACTUAL NETWORKS: LEGAL ISSUES OF MULTILATERAL
COOPERATION,255,273(MarcAmstutz&GuntherTeubnereds.,2009).
70ScottBurris,PeterDrahosandCliffordShearing,NodalGovernance,30AUSTRALIANJOURNALOFLEGALPHILOSOPHY,
30(2005).
71AnneMarieSlaughter,TheAccountabilityofGovernmentNetworks,8 INDIANAJOURNALOFGLOBALLEGALSTUDIES,
347(2001).
72 For networkedNGOs,MARGARET E. KECK& KATHRYN SIKKINK, ACTIVISTS BEYOND BORDERS (1998). For networkedstakeholder communities, Joshua Cohen& Charles Sabel, Norms and Global Institutions (2006), available at:
www.princeton.edu/~pcglobal/conferences/normtive/papers/Session4_Cohen_Sabel.pdf.
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[Vol.10No.04412 German Law J ou rna lIfone finallyapproaches thecollectivityofnetworks in itscoremeaning, then the legal
controversiesbecome
sharper.
Here,
tough
liability
regimes
for
the
network
as
awhole
comeintoplay.Ontheonehand,liabilitynormsneedtoprotectthenetworkassuchfrom
damagingactionsby itsmembersorbythirdparties.Ontheotherhand, liabilityregimes
need to react tonegativeexternalitiesof thenetwork itself.Up tonow, legaldoctrine,
however, blocks this and limits liability to claims originating in bilateral contractual
relations.73
Yet,thelogicofthenetworkdemandsthatnetworkmemberswhoarenottiedtogetherby
meansofbilateralcontractsare liabletoeachother;particularly,wheretheyviolatethe
collective interestof the network.At thispoint, the coresponsibility of private law for
network failure becomes evident. Where internal coordination disasters are not
sanctionedbyrulesofliability,thelawcounteractsthecoordinationpotentiallatentinthe
network
instead
of
realizing
it.
Free
riding
as
well
as
standard
lowering
in
franchising
and
in supply chains are the dubious constellations. So far only aminority of scholars has
developed liability rules for networkmembers that are not bound to each other by a
bilateralcontract.74
Othersadapttheconstructionofaactioprosociotonetworks,which
allows to compensateharm to the reputationof thewholenetworkdoneby individual
members.75
Complementarytothis,Wolfdevelopedaliabilityregimefortheprotectionof
networksfromdamagesbythirdparties.Iftheoperationcapabilityofanetworkisreduced
throughdamagingtheoperationofonenetworknode,thentheviolator is liablealsofor
theadditionalcostofthedamagetothenetworkitselfthatisfeltbyothernodes.76
The resistance against a liability regime becomes strongest in the reverse case where
external liability would be needed to fight against the often criticized reticular
irresponsibility. A specter floats around the specter of collective liability. Should the
failureof
an
individual
member
be
the
responsibility
of
the
other
members,
who
cannot
be
blamedforthissingularmisbehavior,orevenbetheresponsibilityofthetotality?Butthis
73ROHE,supranote15,439,444;ANNIKASCHIMANSKY,DERFRANCHISEVERTRAGNACHDEUTSCHEMUNDNIEDERLNDISCHEMRECHT UNTER BESONDERER BERCKSICHTIGUNG SEINESNETZCHARAKTERS UND DERANSPRCHE BEI VERTRAGSBEENDIGUNG, 117
(2003).
74HELDT, supra note 27, 150; KnutWerner Lange,VirtuelleUnternehmen, inUNTERNEHMENSRECHTUND INTERNET:
NEUEMEDIEN IMAKTIEN,BRSEN,STEUER UNDARBEITSRECHT,169,188(UlrichNoack&GeraldSpindlereds.,2001);
KARLLARENZ&MANFREDWOLF,ALLGEMEINERTEILDESBRGERLICHENRECHTS,470(1997);GuntherTeubner,Piercingthe
ContractualVeil:TheSocialResponsibilityofContractualNetworks, inCRITICALCONTRACTLAW,211,232 (ThomasWilhelmsoned.,1993);TEUBNER,supranote2,126.
75 Cordula Heldt, Baukooperation und Franchising als multilaterale Sonderverbindung: Vertragsnetzwerke
Parallelschuldverhltnisse Personengesellschaften, Frankfurt: Dissertation, 224; CAFAGGI, supra note 12, 44;
TEUBNER,supra
note
2,
128.
76ManfredWolf,TheProtectionofContractualNetworksAgainst InterferencebyThirdParties, inCONTRACTUALNETWORKS:LEGALISSUESOFMULTILATERALCOOPERATION,225(MarcAmstutz&GuntherTeubnereds.,2009);CAFAGGI,
supranote12,44.
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19/22
2009] 413TheDiabolicsofNetworkFailure
isonlyaghost.Inreality,adecentralizedcollectiveliabilityisconcernedadecentralized
andat
the
same
time
selective
responsibility
within
the
network
configuration,
which
answers internal disastersof coordinationwith an effective threatof sanctions.This is
somewhat similar to the long recognized responsibility for violations of organizational
duties within hierarchical organizations. Interface liability is the network suitable
solution,which reacts to internal coordination failure with liability norms that create
severalresponsibilityforthenetworknodesinvolved.Frenchcaselawhasintroducedthe
conceptofnondivisibilitofanensembledescontrats,whichexcludesanexitoption
fornetworkmembers,evenwhereitisexplicitlyprovidedforcontractually.77
Nonetheless,
suchacollectivedistributedresponsibilityisstillataboo,towhichacoalitionoflawyers
who hold networks to bejuridically irrelevant and modern network lawyers who
choosetoseeonlytheopportunitiesandnottherisksofnetworkscling.78
Themissing
liabilityfornegativeexternalities isthereforetheothermajorhangup,asaconsequence
of
which
private
law
is
co
responsible
for
the
failure
of
networks.
C.CopingwithUncertainty:Reduction,TransformationorIntensification?
Iflegalarrangementsaimtorealizethelatentintegrationpotentialofnetworks,thenthey
shouldcorrectreticularirresponsibilitiesbyaneffectiveliabilityregimeandstrengthenthe
fragile coordinationmechanisms of networks by imposing appropriate obligations. But
therearedoubtsconnectedwitheachof the four integrationpotentialsdiscussed.Does
LucifernotsimplyactlikeBeelzebubhewhodrivesoutSatansuccessfullybutthentakes
hisplace?Ifthatistrue,whatcanbesaidingeneralaboutthediabolicsofnetworkfailure?
Nodoubt, theconnectivityofnetworks inadecentralizedworld theverysymbolonof
networkingisstrengthenedwhenthelaw,withappropriatenorms,supportstheirinner
coordination
and
responsibility.
However
the
price
that
is
regularly
paid
is
anew
dynamic
of separation a new diabolon of networking as we have seen, either through the
difference between binding and nonbinding effects of factual conduct, or through the
dividebetweencontractualsphereandnetworksphere,orthroughthedivisionbetween
contractualframeand laterconcretization,orthroughthedistinctionbetween individual
and collective orientation, or through the difference between competition and co
operation.
Lucifer brings light into the darkness of the uncertainty,which is typical for the inner
coordinationinnetworksandmakes integrationpossibleinspiteofhighdecentralization.
But Lucifer,just like Beelzebub before him who bestowed upon us network failure
instead of hierarchical failure only removes one threatening uncertainty in order to
77E.g.Cass.Civ.April42006RpertoireduNotariatDefrnois2006,1194.
78 BAYREUTHER, supra note 16, 399; SCHIMANSKY, supra note 73, 125; Stefan Grundmann, Die Dogmatik der
Vertragsnetze,207ARCHIVFRDIECIVILISTISCHEPRAXIS,718,718(2007).(withmodifications).
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[Vol.10No.04414 German Law J ou rna lcreateanewone.Shouldthatbetheproductivewayofdealingwithuncertainty:notto
reduceuncertainty
but
to
transform
and
possibly
even
to
intensify
it?
One
knows
this
in
medicineasachangeofsymptom:justastheonepainissoothed,anewpainpopsupin
anotherplaceinthebody.Apparently,withchangesintheuncertaintyofnetworks,weare
on the trailofa generalproblematicofhow todealwithuncertainty: Ifabsorptionof
uncertainty is a process of decision, thismeans that the process should also take into
accounttheprospectoffuturedecisionsandbydoingsoregeneratetheuncertaintythatit
removes.79
Butifuncertaintyisnotabolishedbutonlyregeneratedthenonecouldleaveit
asitis.Howwouldithelpthenetworkifitwonintegrationattheexpenseofdamagetoits
orientation?
The point seems to be that we cannot avoid switching from one devilry to another;
however,onedevil isnotthesameastheother.Beelzebub isunlikeSatan,andLucifer is
unlike
Beelzebub.
And
possibly
in
the
future,
Lucifer
will
be
driven
out
by
another
devil
with similarbutotherhellishqualities.What isdecisiveare the smalldifferences in the
orderofdemons,fromAdramelechviaMammontoThammuz.Thereisonequestionthat
should be answeredwhenever one drives out one uncertaintywith another. Does the
differenceinuncertaintymakeadifference?
Letusgobacktoourfourremediesfornetworkfailureandaskthisquestioneachtime.
Remedy#1:Interfaceliability
This liability regime battles quite successfully the networktypical uncertainty which
emergesat interfacesbetweennodes,by forcingneighboringnodestocoordinatetheir
activities. It imposes liability forcoordination failureonall thosepotentially involved in
theactivitywhich isatstake.But,asusual,theolduncertainty isreplacedbyanewone:
Whichcriteria
will
serve
to
limit
the
number
of
liable
nodes?
This
is
particularly
problematicinlargescalenetworks?Thatisindeedanunfortunatesituation. However,in
comparison, thenewuncertaintyseemsrathercontrollablebecause it ispossible, inany
case with hindsight, to determine with sufficient precision the number of responsible
actorsifoneonlytakesintoaccountthespecificsoftheconcretesituation.Inparticular,if
oneapplies thecriterion:Who is involved in theprojectathandby the realizationof
whichdamagesariseandwhichdifferentiatesitselffromothernetworkactivitiesonecan
avoid anunjust collective responsibility of a too largenumberofparticipantsorof the
wholenetwork.80
79
LUHMANN,supra
note
6,
187.
80Foradetailedanalysis,seeGuntherTeubner,ExpertiseasSocialInstitution:InternalisingThirdPartiesintothe
Contract, in IMPLICITDIMENSIONSOFCONTRACTDISCRETE,RELATIONALANDNETWORKCONTRACTS,333(DavidCampbellet
al.eds.,2003).
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2009] 415TheDiabolicsofNetworkFailure
Remedy#2:Implieddutiesofcare
Thenetwork
failure
which
is
triggered
by
centrifugal
tendencies
in
the
de
central
style
of
decision,canbecorrectedbyimposing implieddutiesofcarethatnetworknodesoweto
eachotherandtothewholeinparticularfields.Immediately,however,anewuncertainty
onthekindandtheextentofsuchdutiesarises.Herethedifferencebetweencontractual
sphere and integrated sphere in the network may provide the criterion limiting the
catalogueofduties,whichinitsturnproducesnew,yetagainlegallysolvableuncertainties.
Remedy#3:Insuranceregime
If one reacts to negative network externalities with the liability rule of distributed
collectiveliability,onemayreducenewuncertainties,ashasalreadybeensuggestedby
imposing a duty of the net centre to insure themembers, the costs ofwhich can be
calculatedwiththefees.81
Ourmethodofcomparativediabolicswouldmakethisapparent.
Remedy#4:Nondivisibilit
Ifthelawlearnsthedoublestrategyforopeningupspacesofautonomyand,afteralong
learning process, determining via prohibitions the borders of autonomy,82
then it will
generouslypermitmanyformsofnetworkcontracts,butinparticularcasesblocktheexit
option with the sword of fire of the nondivisibilit, i.e. it will not allow powerful
networkparticipantstowithdrawfromtheirnetworkresponsibilitybymeansofstandard
contracts.Inthatcase,anewuncertaintyopensupagain,namelytodistinguishsituations
ofdivisibilit from situationsofnondivisibilit.Here too thechancesofconcretising the
nondivisibilit inanincrementalprocessoflegaldecisionsseemmoreattractivethanthe
uncertaintyofleavingthelimitsofexittoprivateautonomy.
Aphilosophyofdealingwithuncertainty if itbecomespartoflegalculturewillcare
forsuch
distinctions.
What
is
needed
is
asecond
order
observation
of
uncertainty
absorption.Whatdoesthenewuncertainty,whichhastakentheplaceoftheoldone,look
like in detail? And so comparative diabolics would recommend: do not rigidly reduce
uncertainty.Rathertrytoarrangetheexorcismofthedevilinsuchawaythatispossessed
onlybytwootherghosts:the increaseof internal irritabilityandthegoalorientatedshift
tocontrollablevariables.
And it seems that to increase internal irritability is at the endmore important than to
controlthenewuncertainty.Withoutadoubtitisimportanttochangetheoneuncertainty
intotheother,toshiftitfromthemarkettotheorganization,fromtheorganizationtothe
81RobertW.Emerson,FranchisorsLiabilityWhenFranchiseesAreApparentAgents,20HOFSTRALAWREVIEW,609,
667(1992),
fn.
274,
668,
670;
Joseph
H.
Jr.
King,
Limiting
the
Vicarious
Liability
of
Franchisors
for
the
Torts
of
Their
Franchisees,62WASHINGTONANDLEELAWREVIEW,417,460(2005).
82RudolfWiethlter,JustificationsofaLawofSociety, inPARADOXESANDINCONSISTENCIES INTHELAW,65,76(Oren
Perez&GuntherTeubnereds.,2005).
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[Vol.10No.04416 German Law J ou rna lnetwork,and fromthenetworktothe law,etc, inordertoreachdecisionaladvantages.
Butwhat
is
really
needed
is
to
maintain,
to
renew
and
to
intensify
the
inherent
network
uncertainty.Why?Becausenetworkuncertaintypossessesaprovocativepower.Networks
create intheirnodalpointsthevaluablepotentialofobservingtheworld fromdiverging
perspectivesandoftransformingthemultipleperspectivesintothedecisionchain.Apoly
perspectivismreplacesthetraditionalrationalistmodelwhichisobsessedbyuniformity.83
Whatcourtsisnotonlythediabolic/angelicroleofnetworkstoregenerateoneuncertainty
after another, but their plurality of deviating positions of observation. Intersystemic
networks indeeddisposeof Ladeurs socialepistemologybecause they institutionalize
differentperspectivesbytheirpluralityofautonomousnodes.Andiftheyareabletolink
theseperspectivestoaconsistentchainofdecision,thentheysystematicallyprovokethe
richesofthepowerofjudgment,theroleofwhichisrealizedintheindecidablecollisionof
incompatibleworldsofmeaningwhichneverthelessneedstobedecided.84
Shouldthisbe
the
hidden
agenda
of
a
network
appropriate
law
a
gentle
compulsion
towards
the
powerofjudgment?
83 Ino Augsberg, Das Gespinst des Rechts: Zur Relevanz von Netzwerkmodellen im juristischen Diskurs, 38
RECHTSTHEORIE,479,
485
(2007).
84Asisknown,ImmanuelKantlocalisesjudgementneitherintheareaofunderstanding,norinpracticalreason,butcharacterisesitasameansofconnectingthetwopartsofphilosophyinawhole,IMMANUELKANT,CRITIQUEOF
JUDGEMENT,12(1790,reissued2007).