'And if I by Beelzebub Cast Out Devils, …' An Essay on the Diabolics of Network Failure

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.


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).


3/22

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].


4/22

[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.


5/22


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


7/22


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.


11/22


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.


12/22

[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]).


13/22


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).


14/22

[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.


15/22


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).


16/22

[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).


17/22


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.


18/22

[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.


19/22


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).


20/22

[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).


21/22


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).


22/22

[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).

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'And if I by Beelzebub Cast Out Devils, …' An Essay on the Diabolics of Network Failure

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