Supply chains, contractual governance and certification regimes

Abstract

Contractual governance of the food supply chain is on the rise. In this paper we focus on a particular set of instruments for transnational governance of food supply chains: transnational contracts and agreements. Looking at transnational contracts as instruments for implementation of transnational private regulation, we compare different mechanisms for the enforcement of safety and sustainability standards in global food supply chains. We conclude that the regime of contractual remedies follows different logics from the ones of regulatory and certification regime. (1) The former aims at redressing the victim of the breach inducing compliance through a re-active approach; whereas the latter pro-actively tries to restore compliance with regulatory process in order to pursue regulatory objectives. (2) The former focuses mainly on products, the latter on process. (3) The former concentrates on individual transactions while the latter focuses on the interdependence of contractual relationships along the chain and creates collective governance mechanisms. This paper suggests that the combination of the two sets of remedies may reinforce coordination and cooperation along the chain, therefore improving the level of quality, safety or sustainability of certified production. A higher level of awareness about the impact of standards and certification on the contract rules on remedies can have other positive consequences: it may improve contract drafting, leading the parties to coordinate different remedial systems when addressing the consequences of the breach and the ones of certification remedies; it may help courts to better define the scope and preconditions of contractual remedies and their effects on transnational regulation; it may guide law makers and standard setting institutions, when providing principles, rules or guidance concerning the consequences of the breach within contracts and along the chain, particularly in the food sector. From this perspective, the current work conducted by Unidroit and Fao for the production of a Legal Guide on contract farming could represent an important opportunity to define the links between multiple remedial regimes in food chains.