Working Papers

N-EXTLAW Working Paper Series No.1

Sustainable Contracting for a Non-Extractive Economy

Jie Ouyang

N-EXTLAW Working Paper Series, no. 1 (1/2023)

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Abstract: Business runs on contracts, making them one of the most important legal vehicles compounding the effect of extractive capitalism. But the very ubiquity of contracts hides its potential to be refitted as an effective governance tool for just commercial transactions. Drawing on the theory of relational contract, this report repurposes commercial contracts as a relational governance device with a hybrid compliance mechanism that navigates the purpose-driven co-operation between the parties. It offers some guidelines on contract drafting and informal and formal enforcement for non-extractive entities who are struggling to find their way around non-extractive practices. It further unsettles some unchallenged contract law doctrines by reflecting on third-party rights and just price rule, calling for reform of contract law and adjudication to make non-extractive contracting an easier and more attractive option for all business operators. Against the broader vision of a non-extractive economy, non-extractive contracting opens the gate for us to reimagine contracts as an enabling toolkit. Contracts should no longer be solely driven by an economic engine to amplify commodifying capitalism; they should evolve into a governance vehicle that embeds and fuels non-extraction by bringing care, purpose and ethics back into our zeitgeist.

Experimental Regulation for Social Innovations

Marlie Janssens

N-EXTLAW Working Paper Series, no. 1 (2/2022)

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Abstract: The current economic model is damaging the social and environmental resources it relies on. This extractive model is structured by a legal system which overly focuses on economic growth instead of social and sustainable purposes. Where a legal system is based on competition and controlling organizations driven by short-term profits, organizations which tend to pursue positive contributions in the long-term experience obstructions. This paper takes social innovations as a starting point and explores how unnecessary regulatory burdens can be removed for this type of social innovation through experimental regulation.
Currently, various experimental regulations already exist in Dutch law, but often with the purpose of stimulating technological innovation.  In this paper, the focus lies on developing legal experiments that stimulate social innovation. As such, existing experimental regulations that support technological innovation are taken as a starting point, with the aim of broadening their scope to include social innovation. First, in section 2, two types of regulatory experiments and their functions will be discussed. This section will demonstrate the idea of experimental regulation for fostering technological innovation and provide a brief overview of the advantages and disadvantages of experimental regulation. In this context, it is relevant to take a closer look at the methodology of experimental legal regimes. Section 3 then argues to broaden experimental regulation to social innovations and shows how this relates to existing experimental regulation, with its advantages and disadvantages. The section also consists of other suggestions for stimulating social innovations.

Internalising the Cost of the Green Transition: A Proposal for a Mandatory ‘Transition Reserve’ 

Prof. dr. Marija Bartl and mr. drs. Nena van der Horst

N-EXTLAW Working Paper Series, No. 1 (1/2022)

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Abstract: Large emitters, more so than any other company, are exposed to the risk of transition. If they do not transition, they will end up with unsustainable business models and stranded assets in the not-so-distant future, eventually going bankrupt as a result. One would hope that large emitters would take this risk seriously and invest into their own transition - but this is not necessarily the case. The incentives inherent in the contemporary model of financial markets and corporate governance,  alongside the possibility of public ‘bail out’, motivate companies to distribute their funds to shareholders or managers instead of investing into the green transition. In this short note, we propose to introduce two new legal obligations for large emitters, both aimed at ensuring that these companies do their part in the transition. First, we argue that large emitters should be required to keep enough money on their accounts to actually be able to pay for the costs of the transition. In order to achieve that, we propose to introduce a legal requirement to establish a new mandatory reserve: a transition reserve.  Second, we argue that the best way to establish the height of such reserves, as well as outline necessary steps toward such transition, is to formalize transition investment plans. We make some suggestions as to how to formalize these transition investment plans in law, building on the current developments at national and EU level around such plans.