What gives soft law its power? What is meant here by soft law are quasi-legal instruments that have no legal force, such as non-binding resolutions, declarations, and guidelines created by governments and private organizations. Why is it that these instruments, possessing no legal force or coercive mechanisms, are often widely adopted and, even more perplexing, generally followed? This question is of particular relevance to international law where a centralized legislative authority is absent and yet has seen the proliferation of quasi-legal documents, such as ‘protocols,’ ‘principles,’ ‘guidelines,’ ‘codes of conduct,’ ‘communications,’ ‘checklists,’ and ‘rules.’ This growing body of soft law wields considerable international influence. Situated somewhere in the ill-defined hinterland between hard law and non-law, soft law has far-reaching implications for international governance.
I argue that soft law derives much of its power from network effects. A network effect occurs where the value of a product or service increases as the number of other agents using the same product or service grows. Network effects arise from the need for compatibility between standards. The classic example of a network effect is language: as a language grows in popularity, so too does its usefulness, which encourages further growth. Moreover, the rules of a language—its grammar, spelling, pronunciation—hardly need enforcement. They are self-enforcing. The paper argues that international law—particularly international commercial law—is susceptible to network effects and that this helps explain why, despite lacking coercive force, so much soft law is voluntarily adopted and complied with. Parties wishing to interact require common standards. Like left and right-hand drive, it is often the case that parties have no strong preference for which rules are adopted so long as they are commonly adopted. In such circumstances, parties merely require gentle direction as to which rules they should adopt in order to successfully coordinate. Network effect pressures then take care of the rest, triggering coalescence around these rules and ensuring that they evolve into common standards, widely adopted and followed.
I argue that areas of soft law that exhibit strong network effects are uniquely calibrated to induce voluntary adoption and compliance. Identifying the presence of network effects with respect to soft law is useful on both descriptive and prescriptive fronts. It not only provides an explanatory account of the process through which certain soft law gains ascendancy, but several important considerations of a prescriptive nature flow from this insight. I argue that it is possible for policy-makers to strategically harness this dynamic to stimulate legal harmonization. For instance, there are concrete steps that international bodies, such as the United Nations Commission on International Trade Law [UNCITRAL] can take to promote the standardization of the rules and practices of arbitration. Network effects, however, can also give rise to significant problems, such as ‘lock-in’, rent-seeking exploitation of path dependency, and the drawbacks to ‘over-standardization’. I also consider some of these potential problems at length, and caution that policy-makers need to be mindful of these dangers.