2.1 Introduction

In recent years, fiduciary law has moved toward the center of scholarly attention in the common law world.Footnote ¹ In spite of its “elusive” nature,Footnote ² enough instances of fiduciary relationships occur across a wide variety of legal areas that many – with good cause – describe it as a distinctive field.Footnote ³ Courts as well as scholars in common law jurisdictions deal concepts and ideas concerning fiduciary law back and forth.Footnote ⁴ Although civil law countries have no tradition of the trust as a legal institution,Footnote ⁵ courts and scholars alike term relationships based on some kind of personal or professional trust “fiduciary.”Footnote ⁶ German law subjects guardians,Footnote ⁷ trustees in bankruptcy,Footnote ⁸ attorneys,Footnote ⁹ and others to a specific set of fiduciary duties, the most important of which is a duty of loyalty.Footnote ¹⁰ France has introduced “la fiducie,” a substitute for the common law trust.Footnote ¹¹ Indeed, civil law countries have long combined property and contract law in order to fashion substitutes for the common law trust. Contract-based Treuhandverhältnisse – that is, relationships of trust – have been a staple part of the German legal discourse for several decades, if not centuries.Footnote ¹² And in recent years, the trust as a legal institution is gaining ground in civil law jurisdictions, following national recognition of the Hague Trust Convention by countries such as Italy and the Netherlands.Footnote ¹³

Some scholars even argue for progressing toward a hybrid system of fiduciary law, built on unified principles applicable both in common law and civil law jurisdictions.Footnote ¹⁴ There is some precedent for this hybrid approach. For instance, East Asian countries with a strong civil law background such as Japan have adopted (and adapted) the trust as a legal institution.Footnote ¹⁵ Mixed legal systems in the United States (Louisiana) and Canada (Quebec) have done the same.Footnote ¹⁶ Nor is this hybridity limited to domestic law. International institutions such as the Organization for Economic Co-operation and Development (OECD), the United Nations Environment Programme (UNEP) Finance InitiativeFootnote ¹⁷ (e.g., the OECD Principles of Corporate Governance,Footnote ¹⁸ and the UN report on “Fiduciary Duty for the Twenty-first Century”Footnote ¹⁹) are shaping fiduciary norms across national borders, even though these initiatives do not have the force of law themselves – at least when viewed from traditional Hartian or Kelsenian accounts of law.

In short, even a cursory review shows ample evidence of the importance of fiduciary-related norms not only in common law and civil law jurisdictions, but also beyond the nation-state. Additionally, many norms are created through national or quasi-national legislation on a supranational level as, for example, in the European Union, while others are developed by nongovernmental actors.

In other areas of the law with regulations and rules spreading beyond the nation-state, scholars have been trying to spell out a concept of transnational law, determined to map the reality of “something being there” that does not quite fit the bill of either national law or international law.Footnote ²⁰ In the well-known words of Philip Jessup:

Given the phenomena described, the rather obvious question driving this chapter is subsequently: Is there such a thing as transnational fiduciary law? Answering this question and mapping a research agenda proves to be a thorny issue, however, because the object of analysis is difficult to grasp. It is not only fiduciary law that is “elusive,”Footnote ²² but also transnational law and transnational legal theory. More than one scholar attempting to capture the concept of transnational law ends up with playing a fugue in a minor key: “Transnational law remains an imprecise notion.”Footnote ²³ Anyone slogging through the heap of literature on transnational legal theory ends up in “a jungle without a map.”Footnote ²⁴ Given that “[t]here is no unicity of its sources and no systemic form of justification” and that “it does not conform to a general or universal model,”Footnote ²⁵ it is no wonder that definitions of transnational law have multiplied over the years.Footnote ²⁶

Moreover, some lawyers, especially those with a common law background, may question if the project is not seriously limited from the start. If the trust is a creature born and bred in the common law, how can a transnational fiduciary law framework encompass both civil law and common law countries? This is a question traditionally allocated to the comparativist’s breadbasket. But again, the scholar seeking to stand on the shoulders of others is in danger of a misstep. Comparative law and transnational law have a lot in common. Not even the latest edition of the Oxford Handbook of Comparative Law,Footnote ²⁷ arguably one of the most sophisticated and far-reaching volumes on the subject, contains a distinct section on the relationship of comparative law and transnational law, let alone one on comparative fiduciary law.Footnote ²⁸ Methodologically, this makes thinking about transnational fiduciary law a daunting task. It cuts across transnational law, fiduciary law, and comparative law with only one certainty: Even fundamental issues are unclear, elusive, and hotly debated. At least at first glance, the endeavor of finding a vantage point puts the author in a legal cockleshell without oars in the middle of the Atlantic, drifting along on an ocean of literature.

Grappling with all these issues, this chapter aims to make a threefold contribution: First and foremost, it lays a foundation stone for transnational fiduciary law as a field, existing at the intersection of transnational law and fiduciary law and including both common law and civil law traditions. It shows that from a functional comparative perspective it is possible to bridge the common law/civil law divide in fiduciary law. Germany, to give but one example, solves many problems located in fiduciary law and equity in the common law through contract. Second, methodologically, this chapter connects transnational law and comparative law inquiries, arguing that inquiries into transnational legal ordering (TLO) require a comparative, functional approach to legal problems and institutions. This problem-focused approach complements TLO theory’s focus upon the construction of legal orders in response to social problems. Third, and relatedly, this chapter expands both transnational law and fiduciary law by establishing new perspectives on how law develops transnationally and how fiduciary law in particular has developed in both common law and civil law jurisdictions. It explores how transnational law may evolve out of national norms through horizontal entanglement of national legal orders. Moreover, it demonstrates how the diffusion and implementation of nonnational norms engender transnational legal orders through vertical integration. The argument proceeds as follows.

Section 2.2 deals with a significant preliminary. According to many a common lawyer’s intuition, the divide between common law and civil law with respect to equity and the trust as a legal institution gives cause to question the project as a whole. From a functional perspective, however, the different legal traditions do not present a significant obstacle. Both civil law and common law countries have to deal with the phenomenon of one person enjoying some sort of discretionary power over the interests or position of another. Comparatively speaking, this establishes a common tertium comparationis and therefore a point of entry for transnational fiduciary law.

Anyone talking about transnational law needs to take a stand and clearly set out their premises, otherwise they run the risk of becoming incoherent. Accordingly, Section 2.3 takes a deeper look into the methodological toolbox and scrutinizes the horizontal and vertical ordering of fiduciary law. On the horizontal level, transnational fiduciary law may come into existence as a consequence of entangled national legal orders. The starting point is a blind spot left by conventional transnational legal theory. Concentrating on “norms beyond the nation-state,” most scholars neglect that national laws themselves might be a suitable basis for the emergence of a transnational legal order. Drawing on the theory of histoire croisée and connected histories, this chapter argues that transnational law may come into existence through the entanglement of national laws. Spreading out from Japan, the trust has been diffused over South Korea, Taiwan, and China – all countries with a strong civil law background. Close historical ties and traditions shared among the “East Asian four” have established connections between the legal systems and a strong sense of awareness as to how the respective others develop their national laws – allowing legal reforms in one country to echo changes in the laws of the others. Going far beyond standard comparative fare, these coevolutions make it impossible to understand national norms without taking into account this background of entangled laws.

Vertical ordering of fiduciary law occurs whenever norms “beyond the state” become implemented in multiple national systems. A good example is the standards and principles concerning environmental, social, and governance (ESG) issues. These standards and principles, generated by the United Nations, the OECD, and other nonstate actors, contain a rich body of norms on fiduciary law, aiming at integrating stakeholder interests into the fiduciary duties of corporate boards and investment managers. They address policy makers and legislators all over the world and purport to provide benchmarks for the creation of legal norms on the national level.Footnote ²⁹ Given their intended scope of application and transformation into laws within multiple nation-states, such frameworks potentially provide the basis for transnational legal orders and, in the present context, for transnational fiduciary law. The question remains, however, as to whether and how these norms turn from nonbinding standards and principles into law, at least from a socio-legal perspective. Pundits close to the Delaware approach in corporate law and traditional US investment managers’ fiduciary law are quick to deny the legal relevance of ESG standards. Both the loi PACTE, a recent piece of French legislation, and EU ESG reporting standards prove them wrong, however. Nation-states with stakeholder-oriented governance systems provide doors that allow so-called soft law to enter and settle down as hard fiduciary law.

However, merely looking at the spaces of legal ordering is not enough. Transnational legal orders “articulate … a set of norms for legal subjects over a given territory.”Footnote ³⁰ Consequently, a transnational legal order is not only defined by its regional extension or geographic scope, but also by its normative elements or what may be called its intension. In other words, talking about “orders” implies being able to define an order’s legal scope.Footnote ³¹ This can only be done by identifying the relevant norms at play in a specific area of legal ordering spanning a certain geographic space. Therefore, Section 2.4 engages with different elements in the transnational ordering of fiduciary law. Viewing fiduciary law(s) through the lens of transnational legal theory helps to shed some light on its confines, even within the common law world. Fiduciary law is defined by specific elements, specific traditions, and the extent to which it binds actors in a particular type of social relationship. Two examples serve as illustrations, the first relating to the duty of loyalty and the second to the duty of care: Whereas the duty of loyalty serves as the distinctive marker of fiduciary relationships in the common law, set apart from contract and contract law principles, it cannot do comparable work in civil law countries. Many of contract law’s shortcomings in the common law do not exist in a civil law regime. Therefore, the duty of loyalty is not distinctive in the way it is in England, the United States of America, and other regions of the globe resting on equity traditions. Loyalty is distinctive, however, in that it separates fiduciary relationships from other agreements by implementing an obligation unknown to “regular” contracts. Again, the trust in East Asia illustrates how this plays out as a socio-legal matter. As the example of the duty of care shows, different orders of fiduciary law evolve even in the common law world. Whereas, for example, the United States recognizes the duty of care as a fiduciary obligation, English and Australian courts explicitly deny this possibility. Courts communicating across the borders of England and Australia have built an entangled regime of national fiduciary law, producing a transnational version of fiduciary law to a certain extent set apart from other nations of the common law.

Section 2.5 concludes by summarizing the chapter’s findings concerning transnational legal ordering of fiduciary norms.

2.2 Theorizing Transnational Fiduciary Law and the Civil Law/Common Law Divide

Anyone theorizing about transnational fiduciary law must grapple with a challenge absent from the conventional legal material that transnational legal theory addresses. A strong line in transnational legal theory relates to transnational legal orders established by contract. For Western nation-states, freedom of contract is a core principle of their respective private laws; thus, talking about contract law and contractual models does not encounter significant obstacles with respect to methodology. Fiduciary law, with its strong roots in equity traditions not known in civil law jurisdictions, is different. As shown in Section 2.2.1, comparative law and the functional method it relies on provide tools for overcoming differences in doctrine and legal traditions.Footnote ³² What remains to be elucidated, however, is the relationship between transnational law and comparative law. It will be argued in Section 2.2.2 that transnational law necessarily involves comparability. After these methodological preliminaries, Section 2.2.3 deploys the tools. Given that the comparative literature is sparse and gives a bird’s-eye view of civil law regimes,Footnote ³³ and, alas, is not always very precise, it seems useful to discuss a specific example in greater detail in order to show the mechanisms at work. Regarding Germany’s position as one of the major and most traditional civil law orders, it seems especially suitable as the basis for a case study.

2.3 Spaces of Transnational Fiduciary Law

Transnational law exists in different spacesFootnote ¹⁰⁶ and so does transnational fiduciary law. Notwithstanding the ubiquity of fiduciary law, there is no “world” or “global” fiduciary law, as will be discussed in Section 2.2.3. Legal ordering of fiduciary law rather occurs in two dimensions. Entanglement of national laws can entail the emergence of transnational legal orders on the horizontal level (Section 2.2.1). On the vertical plane, norms created “beyond the state” may trickle down into national legal systems either because legislators and courts transform them in national laws or actors make use of them in enforcing rights and remedies (Section 2.2.2).

2.4 Elements of Transnational Fiduciary Law

Transnational legal orders unfold in terms of geographic and legal scope.Footnote ²²⁰ Until now, this chapter has dealt with the geographic scope as the first prong of transnational legal ordering. The following section takes up the second prong, the elements of transnational legal orders.

Employing a transnational perspective not only uncovers multiple spaces of transnational legal ordering of fiduciary law. It also reveals how fiduciary law on the transnational plane develops elements different from national legal orders, either as variations on common themes, such as the duty of loyalty, or because the content of fiduciary obligations diverges from national law. First of all, as Section 2.4.1 will show, the distinctiveness of the duty of loyalty, an issue of the highest importance in national common law legal orders, may play out differently, depending on the scope of contract. Secondly, Section 2.4.2 demonstrates that even within the common law, court communication between individual nation-states may engender several fiduciary legal orders. Thirdly, Section 2.4.3 argues that the duty of loyalty does not necessarily become manifest in a single norm which, when applied to a fact-pattern, unfolds in more fine-grained specific rules, but may also be the result of bundling together a number of particular rules. In other words, different legal orders may construct the duty of loyalty differently. Again, East Asia provides an example.

2.5 Conclusion

Viewing fiduciary law from the perspective of transnational legal theory provides important insights into the emergence of legal orders and processes of legal ordering transcending the boundaries of nation-states. All legal systems have to address problems arising out of relationships in which one person enjoys discretionary powers over the interests of another. Interestingly, but perhaps not surprisingly, both common law and civil law jurisdictions have developed a set of tools subjecting the person having powers under loyalty constraints in various ways. Regardless of their differences in traditions and technical approaches, from a functional perspective the divide between common law and civil law may be crossed.

On the one hand, this perspective makes it possible to paint a picture of fiduciary law outside the common law. It shows how norms and institutions taken from the common law (such as the trust) may survive and develop in civil law systems, which lack an equity tradition. On the other hand, using the example of trust law as an instance of fiduciary law shows that conventional transnational legal theory leaves a blind spot, because it concentrates too much on norms “beyond” the nation-state being incorporated or acknowledged in national legal institutions.

Transnational fiduciary law develops in different spaces and may develop in horizontal and vertical dimensions. Horizontal transnational ordering concerns the flow of norms between nation-states. The example of the trust in four East Asian countries, Japan, Taiwan, South Korea, and China, demonstrates that legal orders may evolve in reaction to each other, using and implementing norms created in other nation-states. This recursive process is not captured by traditional accounts of comparative law. Transnational legal theory offers a methodological toolbox, which allows one to better focus on the process of norm creation beyond nation-states. The case study of so-called soft law on ESG is an example of vertical transnational ordering of fiduciary law. Exploring fiduciary law from a transnational angle and its socio-legal approach adds value, because it lays bare several ways in which nonbinding norms created by international organizations like the UN or the OECD have normative thrust, even in legal systems resting on legal concepts like shareholder value.

Last, but not least, employing a transnational perspective provides insights into how the contents of fiduciary obligations may be conceptualized differently in different (transnational) legal orders. Even though the duty of loyalty remains distinct, its import may differ from order to order. Moreover, the contents of fiduciary obligations may vary. Communication between courts in Australia and England led to a transnational fiduciary legal order where the duty of care is no longer considered having the quality of a fiduciary obligation.

3.1 Introduction

Fiduciaries frequently confront transnational situations. Lawyers – an archetypal class of fiduciary – have long counseled participants in cross-border transactions and conducted their own activities transnationally.Footnote ¹ Financial institutions – firms that often act in a fiduciary capacityFootnote ² – have provided products transnationally for centuries.Footnote ³

Yet, even as people, products, and capital have become more mobile, scholars have until recently given little attention to the transnational dimensions of fiduciary law. Instead, they have focused on activities occurring within the borders of legal systems.Footnote ⁴ Scholars have explored fiduciary obligations by examining when they arise, what they require, and how they apply and have applied in various substantive fields and legal systems,Footnote ⁵ but they have rarely examined how fiduciary law applies to conduct spanning national systems or to disputes that transcend national frontiers. Even the application of private international law principles to fiduciary law, an exercise that examines problems with transnational dimensions, has largely gone unexplored by fiduciary scholars.

This chapter conceptualizes “transnational fiduciary law,” a term that marries the fields of fiduciary and transnational law. Transnational fiduciary law warrants attention because of the growing frequency and significance of transnational business problems and the inevitability that many such problems have fiduciary dimensions. This chapter identifies two primary understandings of the concept and explores their scope and possible content.

Under the first interpretation of this composite concept, the term “transnational” qualifies what fiduciary scholars have conventionally understood as fiduciary law. Transnational fiduciary law, on this view, encompasses the application of fiduciary law to transnational problems and situations. The directors of a Delaware corporation that does business in Venezuela may face such problems. A US mutual fund advisor who invests in UK companies on behalf of US investors fulfills a fiduciary role. In the course of their work, these actors will owe fiduciary duties under US law, even though their operations may occur outside the United States. This sense of transnational fiduciary law further encompasses the global spread of fiduciary laws, as jurisdictions learn from each other or perhaps reform or develop their laws, converging with those of another system.

Under the second interpretation, transnational fiduciary law refers not to fiduciary law as applied in transnational contexts but rather to transnational law governing the conduct of fiduciaries. Transnational law lacks a universally accepted definition.Footnote ⁶ Nevertheless, here we seek some wider notion of a “legal order” that is said to govern the behavior of parties operating within it. This order incorporates formal laws but also “regulatory instruments and mechanisms of governance that, while implicating some kind of normative commitment, do not rely on binding rules or on a regime of formal sanctions.”Footnote ⁷ As such, this understanding largely encompasses the first interpretation but extends more broadly to include norms, contractual constraints, customary practices, official guidance, and assorted voluntary schemes, all of which might achieve similar objectives to fiduciary law.Footnote ⁸

In this chapter, I argue that scholarly attention to the transnational dimensions of fiduciary law ought, in most instances, to be bounded by the first interpretation. Fundamentally, I question whether transnational law governing fiduciaries generally can be equated with fiduciary law at all without causing significant confusion. Fiduciary duties are distinctive in ways that prevent non-fiduciary law – to say nothing of vague and shifting norms – from serving as substitutes. Keep in mind that much of the law that governs fiduciaries is not fiduciary law; nor does it purport to be fiduciary law. Similarly, many of the duties fiduciaries owe are not fiduciary duties.Footnote ⁹ What makes them fiduciaries, then, is precisely fiduciary law, not the wider range of laws and norms to which they may also be subject.Footnote ¹⁰

Another difficulty with the second interpretation is that legal norms and practices that appear to serve similar functions as fiduciary law may be rarely stated and therefore difficult to verify. When they are stated, they may be vague and provisional. It is, therefore, hard to determine whether transnational fiduciary law in this second sense exists at all in practice. The chapter provides case studies illustrating the difficulty of isolating the second interpretation in practice, except as it reduces to the first through its incorporation of fiduciary law applied in transnational contexts.

To be clear, I do not claim that the transnational dimensions of fiduciary law are irrelevant. Far from it: Fiduciaries find themselves more and more involved in deals across jurisdictions, which can raise thorny questions about how they must behave in order to meet fiduciary obligations. Nor do I reject the importance of transnational law or transnational legal ordering. However, I suggest that we treat transnational fiduciary law as an application of fiduciary law rather than as a field deserving independent study, at least until we can establish that transnational fiduciary law – in the first interpretation – is itself distinct from fiduciary law.

3.2 Definitional Issues

Although transnational fiduciary law simply marries the concepts of fiduciary law and transnational law, defining the term poses challenges. Scholars in each of these fields conceive of law differently, with transnational law scholars adopting a more capacious understanding.

To fiduciary scholars, fiduciary law means “hard” law. Hard law imposes “legally binding obligations that are precise (or can be made precise through adjudication or the issuance of detailed regulations) and that delegate authority for interpreting and implementing the law.”Footnote ¹¹ First, fiduciary law imposes legally enforceable obligations, requiring loyalty and, under American law, due care.Footnote ¹² Second, fiduciary obligations are precise or capable of being made precise through adjudication or rulemaking. As Seth Davis notes, fiduciary “duties of loyalty and care can be specified in these relationships by reference to a specific maximand and a discernible set of decision rules.”Footnote ¹³ Third, authority for interpreting and implementing fiduciary law is delegated to courts. It is an oft-stated principle that parties themselves do not determine whether a fiduciary relationship exists; courts do.Footnote ¹⁴

To scholars of fiduciary law, therefore, fiduciary law is state-enforced law, the product of common law or legislative principles.Footnote ¹⁵ This is so even when fiduciary law is applied to non-fiduciaries functioning in a fiduciary-like manner or to duties that are analogous to fiduciary duties.Footnote ¹⁶ Of course, fiduciary law may reflect various policies and rationales,Footnote ¹⁷ enable the development of social norms,Footnote ¹⁸ and be seen as codifying moral intuitions or reasoning.Footnote ¹⁹ But no matter what is contained in the larger sphere of goals and justifications surrounding fiduciary law, it is conventionally understood as state-enforced law.

In contrast to fiduciary law as conventionally understood, transnational law is both hard – state-enforced – and “soft.” It need not be the product of legislative, regulatory, or judicial determinations but can instead result from “customary practices, norms, and patterns of behavior regulation.”Footnote ²⁰ These are enforced not by the state but “through such social and political processes as economic sanctions, ‘shaming,’ and reputational effects.”Footnote ²¹ Transnational law may also be created in an ad hoc manner by the parties through private legal ordering, which they can accomplish through private contract or standard-setting.Footnote ²² Such law is transnational because it applies to parties located in multiple national systems,Footnote ²³ or targets events or situations that occur in more than one national system,Footnote ²⁴ or “regulates actions or events that transcend national frontiers.”Footnote ²⁵

This is one way to conceptualize transnational law: as a substantive body of law – with the notion of law broadly conceived – applied in transnational contexts. Another focus of study is transnational legal ordering, which focuses upon processes of normative settlement across national borders, which can occur through “hard” or “soft” law as the result of interactions among actors and institutions in multiple jurisdictions.Footnote ²⁶ Developed by Terence Halliday and Gregory Shaffer, this theoretical framework addresses how legal norms are produced transnationally and migrate across borders, shaping legal practice.Footnote ²⁷ Here the focus of study is the transmission of laws “across borders, regardless of whether they address transnational activities or purely national ones” and the roles of networks and institutions in constructing them.Footnote ²⁸

How to fuse these disparate notions of law into a single composite concept? In fact, I believe it is necessary to develop more than one composite, as no one sense of transnational fiduciary law fully embraces what is traditionally understood as fiduciary law alongside both approaches to transnational law. I therefore develop two interpretations of transnational fiduciary law.

In the first, the term “transnational” qualifies what fiduciary scholars have conventionally understood as fiduciary law. Here, transnational fiduciary law encompasses the application of fiduciary law to transnational problems and situations. A scholar exploring transnational fiduciary law in this sense will seek to understand how particular fiduciary laws operate across national boundaries or jurisdictions, as parties transact in multiple national systems or create business arrangements that implicate parties in multiple national systems. This scholar may also take interest in the changing practice of fiduciary law within a given national system as its legislators, regulators, jurists, and practitioners learn from their experiences in contact with other national systems or find their domestic business environments altered by foreign laws governing parties doing business in an increasingly globalized financial milieu. For instance, scholars may note the extension of US fiduciary practices to other parts of the world where US fiduciaries, such as mutual fund managers, are required to follow US fiduciary law even as they operate abroad. Halliday and Shaffer’s theoretical framework of transnational legal orders provides a framework for studying these processes. Section 3.3 examines transnational fiduciary law on this understanding: hard law as applied in transnational contexts.

Under the second interpretation, transnational fiduciary law encompasses transnational law understood as a corpus of law or as the production and transmission of law that governs fiduciaries. Law may be hard or soft. Section 3.4 considers this interpretation and explains why I regard it as overinclusive.

3.3 Fiduciary Law with Transnational Dimensions

Among fiduciary law scholars, fiduciary law has a decidedly national orientation. Assumed prototypes for the accepted or status-based categories of fiduciary relationship – those between partners, agents and principals, lawyers and clients, trustees and beneficiaries, and directors or officers and the corporations they serve – are rarely considered to exhibit transnational dimensions. If they do, those dimensions rarely feature in the questions that fiduciary scholars address. Other relationships, though not fiduciary relationships by default, may also have fiduciary character because, say, a party reposes trust or confidence or is vulnerable to opportunism.Footnote ²⁹ These, too, rarely have transnational legal dimensions. Questions that tend to concern fiduciary scholars – fiduciary standards of conduct; how those standards vary across relationships, jurisdictions, and time periods; and the remedies available for fiduciary breach – usually do not involve transnational activities or situations. And while comparative fiduciary law attracts strong scholarly attention, it too lacks transnational dimensions, since it tends to consider the law of one national system alongside that of another rather than the law that spans those systems or that governs actors located in or problems arising in both national systems. One measure of this scholarly indifference is the recently published Oxford Handbook of Fiduciary Law. Its forty-eight chapters offer one of the most comprehensive accounts of the subject, but none of them deals substantively with transnational fiduciary law.Footnote ³⁰

Yet fiduciary law, understood in its conventional sense, often has transnational dimensions. A fiduciary’s activities may span borders, or a fiduciary may face problems arising in multiple national systems. A fiduciary itself may reside in multiple national systems. The fiduciary law governing fiduciaries may apply across national borders. And scholars undertaking comparative studies of fiduciary law examine how fiduciary law in one national system may migrate to and influence law in other systems.Footnote ³¹ In Section 3.3.1, I explore circumstances such as these, in which fiduciary law has transnational character.

3.3.2 Fiduciary Law with Transnational Application: Extraterritoriality

Fiduciary law, as conventionally understood, may also have extraterritorial effect and therefore apply to transnational problems. This is thanks in part to the enormous global influence of US mutual funds.Footnote ⁴⁹ The managers of mutual funds owe fiduciary duties, according to the Investment Advisers Act of 1940.Footnote ⁵⁰ These duties govern their conduct even if it spans national systems or occurs in another national system.Footnote ⁵¹

In practice, that conduct will often be transnational because mutual funds may, and commonly do, vote in corporate elections held by their portfolio companies – companies that are often based outside the United States. Frequently fund managers will “vote by proxy.” In 2003, the Securities and Exchange Commission adopted Rule 206(4)-6 of the Investment Advisers Act,Footnote ⁵² making clear that investment advisors are fiduciaries even when deciding whether and how to vote their funds’ proxies and creating powerful incentives for advisors to vote their proxies.Footnote ⁵³ Indeed, investment advisors vote virtually all of their shares, usually voting in-line with the recommendations of proxy advisors.Footnote ⁵⁴ Indeed, investment advisors vote virtually all of their shares, usually voting in-line with the recommendations of proxy advisors. The largest US mutual fund families – Blackrock, Vanguard, and State Street Global Advisors – have significant holdings in foreign corporations. For example, BlackRock, the largest US manager of mutual funds, invests some $1.6 trillion in Europe, the Middle East, and Africa and a further $428 billion in the Asia Pacific,Footnote ⁵⁶ together representing around 30 percent of BlackRock’s total assets under management.Footnote ⁵⁷ Data from the United Kingdom illustrates the increasingly transnational nature of investment advisors’ activities. Figure 3.1 shows the holdings of UK public companies from 1963 to 2020 by various categories of shareholder, including individuals/households, insurance companies, pension funds, mutual funds, and foreign shareholders (labelled “rest of the world”). Over this period, individual/household ownership decreased as ownership by institutional investors increased. Foreign ownership rose from 7 percent in 1963 to 56.3 percent in 2020, giving foreign investors significant influence over UK companies through voting and other stewardship activities.Footnote ⁵⁸ Of these international investors, US mutual funds are the largest category, accounting for some 30 percent of all foreign investor holdings in UK public companies.Footnote ⁵⁹ When the investment advisors of these US mutual fund advisors vote their shares in UK companies, US fiduciary law governs their decisions.Footnote ⁶⁰

Figure 3.1. Share ownership patterns in the United Kingdom, 1963–2020Footnote ⁶¹

The same applies to US investors voting on boards of companies outside the United Kingdom. US fiduciary law follows US investors across the globe, ensuring that US fiduciary law has considerable transnational presence and effect.

3.4 Transnational Law Governing Fiduciaries

Section 3.3 focused on fiduciary law that is transnational in character. In Section 3.4, the analysis widens to encompass transnational law governing fiduciaries and therefore applies broader conceptions of law. Here, law means not just the hard law of legislation, regulation, and judicial decisions, but also private legal ordering through contract and standard-setting by parties. Terence Halliday and Gregory Shaffer theorize what they call a “transnational legal order” (TLO), defined as “a collection of formalized legal norms and associated organizations and actors that authoritatively order the understanding and practice of law across national jurisdictions.”Footnote ⁶⁴ Halliday and Shaffer explain that “state law … becomes TLO law in subject areas when transnational legal norms are adopted and practiced in a settled, concordant way so that a new normal arises regarding the social understanding of the legal norms that apply.”Footnote ⁶⁵ And, as we saw, the focus of transnational law also can be on the production of norms and their transmission across borders – not just the body of law or the legal order, but the ways in which interaction across jurisdictions affects the development of laws and legal norms within national jurisdictions.Footnote ⁶⁶

Under this interpretation, transnational fiduciary law is not so much the application of fiduciary law across borders as transnational law that governs the conduct of fiduciaries or the transnational legal ordering of fiduciaries. Conceiving of transnational law in this way would bring a broader range of legal instruments within transnational fiduciary law than does the first interpretationFootnote ⁶⁷ and would attend more to the role of transnational institutions and networks in the development of legal norms. Below I explore these understandings of transnational law by sketching a few brief examples of transnational norms, practices, and patterns of behavior that may govern the conduct of fiduciaries. These examples exclude cases that would also fall within the first interpretation through their incorporation of fiduciary law applied in transnational contexts.Footnote ⁶⁸ I then consider whether these arrangements are firmly enough established across borders to amount to transnational law and, more fundamentally, whether they may sensibly be described as fiduciary law at all. The framework of TLO theory helps us assess the extent to which such norms have settled transnationally from a socio-legal perspective.

3.5 Conclusion

Although fiduciaries frequently confront transnational situations, the topic of transnational fiduciary law has attracted little scholarly attention. This chapter identifies two primary interpretations of the term, one limited by a conventional understanding of fiduciary law, the other taking a broad understanding of transnational law and applying it to fiduciaries. I prefer the former meaning since it is more attentive to the distinctiveness of fiduciary relationships and duties. The interpretation is broad enough to capture the process by which fiduciary law develops, including by reference to developments in other systems. However, I would not equate the second interpretation – transnational law that governs fiduciaries – with transnational fiduciary law. Doing so would overlook the distinctive character of fiduciary law. It would also create confusion. And it is not apparent how much that interpretation would advance analysis beyond the first interpretation. A better term for scholars interested in transnational law governing fiduciaries may be the transnational legal ordering of fiduciaries or transnational fiduciary legal orders, as theorized by Halliday and Shaffer, since these terms are less apt to lead to confusion. A further benefit lies in reliance on the term “legal order,” which is often used in transnational law scholarship and has a fairly settled meaning.

I do question the merit of investigating transnational law governing fiduciaries as an independent field, as distinct from, say, transnational law in commerce, unless we can first establish whether there is something distinctive about transnational law as it applies to fiduciaries. Instead, I would regard transnational fiduciary law as a particular application of fiduciary law that must develop in a manner consistent with general principles of fiduciary law and with the substantive legal areas in which fiduciaries operate.

4.1 Introduction

In both common and civil law jurisdictions, fiduciary duties (in the broadest sense) have long been recognized as a key element of the relationships between financial intermediaries and their customers. If one defines fiduciary relationships as including “important social and economic interactions of high trust and confidence that create an implicit dependency and peculiar vulnerability of the beneficiary to the fiduciary” (to borrow a definition suggested by Leonard Rotman),Footnote ¹ a broad range of financial services clearly match the description.Footnote ² From a comparative – and, particularly, from a Trans-Atlantic perspective – a useful starting point for analysis can be found in the statutory definitions of financial activities subject to specific prudential and conduct-of-business regulations. Wherever intermediaries hold money or other assets on behalf of clients in connection with transactions carried out on their behalf,Footnote ³ or agree to provide expert advice with regard to investmentsFootnote ⁴ or the conditions of a loan taken out by a customer,Footnote ⁵ the existence of both a high level of trust and a high level of dependency and vulnerability on the part of the client is not just a characteristic feature of the intermediary-customer relationship, but provides the very rationale for public intervention, particularly in the form of conduct-of-business regulation. From a common law perspective, such activities usually will be qualified as agency relationships, which, given the functional nexus between fiduciary law and the law of agency in common law generally,Footnote ⁶ helps explain why common law courts have frequently held that financial intermediaries are under fiduciary duties of loyalty and care, as well as duties to disclose certain information, to their customers.Footnote ⁷ This doctrinal analysis can be backed up by an economic analysis of the agency problems between the intermediary (acting as “agent” for less knowledgeable investors) and the customer (as a “principal” who, almost by definition, can hardly protect himself against the fallout from information asymmetries and conflicts of interest on the part of the former).Footnote ⁸ Even in civil law jurisdictions, where the legal basis for financial services contracts usually consists of, or is derived from, statutory categories of general contract law,Footnote ⁹ the concept of fiduciary duties increasingly has come to be accepted as an analytical framework.Footnote ¹⁰ For a number of reasons to be explored in detail later, both the substantive laws pertaining to the provision of financial services and, indeed, their doctrinal interpretation can be seen to have converged in a large number of jurisdictions over the last few decades.

With international standard-setters – in particular, the International Organization of Securities Commissioners (IOSCO) – as a driving force behind these developments,Footnote ¹¹ the emergence of an increasing body of an internationally agreed-upon set of standards applicable to intermediary-customer relationships in financial services seems to showcase transnational legal ordering, in terms of the causes of convergence and the underlying institutional arrangements that facilitate the transmission process, as well as the substance of such duties and their adaptation in different legal systems. On closer inspection, however, the picture is more nuanced. As rightly observed in a recent contribution by Howell Jackson and Talia Gillis, we have to distinguish between the regulatory regimes applicable to the provision of financial services, consisting of “elaborate set[s] of ex ante requirements and supplemental open-ended duties that govern the operations of regulated entities and police their interactions with the public,” on the one hand, and parallel, overlapping or indeed conflicting, fiduciary duties proper, which are derived from general principles of private law and imposed ex post by courts in individual lawsuits.Footnote ¹² As will be discussed in Section 4.2, while the structure and content of regulatory regimes have been converging over the past decades, the relevant fiduciary principles, in terms of substance, interpretation and, indeed, their functions within the respective private law regimes, continue to vary among different jurisdictions. This is certainly true within the European Union, where EU law has gone some way to harmonize the regulatory framework, whereas the applicable private law remains defined by the laws of the Member States, many of which had established transactions-oriented principles long before the first harmonization efforts at the European level.Footnote ¹³

However, in addition to the international harmonization of regulatory conduct-of-business standards, their interaction with the applicable private law regimes can also be identified as a common theme: Whether and to what extent principles of general contract law are influenced by regulatory requirements, and which of the two regimes prevails in cases of conflicting duties – such questions will ultimately influence which duties can be enforced by customers in private lawsuits against the intermediary. The answers may differ from jurisdiction to jurisdiction, depending on the doctrinal basis. Yet, the very fact that regulatory requirements and duties under general contract law coexist and that the potential for tensions between the two regimes clearly is a recurring phenomenon provides sufficient grounds for the hypothesis that, in the end, fiduciary activities by financial intermediaries are the object of an emerging transnational legal order.

Focusing on conduct-of-business standards for securities services providers,Footnote ¹⁴ this chapter explores the emergence of a transnational body of fiduciary duties of financial intermediaries. Section 4.2 examines the interaction between regulatory requirements and fiduciary principles and explains the transnational character of the former. Section 4.3 then looks into the process of how transnational regulatory principles have been adapted by European legislation, which in turn has triggered a process of convergence also of the underlying contract law regimes. In this process, substantive and organizational duties of care and loyalty have changed their nature: Principles derived from the common law doctrine of fiduciary law are adapted to different contract law regimes, while retaining their functions and meaning for the individual customer. As demonstrated by ongoing disputes concerning the relevance of regulatory duties for individual contractual relationships in several European jurisdictions, this process is by no means frictionless – but it is, for that very reason, an interesting case study in the emergence of a transnational legal order. Section 4.4 concludes.

4.2 Fiduciary Law in Financial Intermediation: A Transnational Legal Order?!

4.3 Making Transnational Law Apply Transnationally: The Case of European Financial Law

4.4 Conclusions

Over many decades, regulatory frameworks for the provision of financial services – in particular, vis-à-vis retail customers – have come to complement national contract laws with conduct-of-business standards designed to establish minimum qualitative standards of care, skill, and honesty for the provision of a wide range of services to customers. At least parts of this regime mirror and, to some extent, replicate duties that have also been recognized as fiduciary duties in general private law, particularly because (and to the extent that) the underlying contractual relationships qualify as agency relationships in common law. Modern conduct-of-business standards, developed in order to facilitate the effective protection of investors through ex ante supervision and enforcement of qualitative requirements, thus have come to complement (and, in part, to supersede) functionally parallel duties that would otherwise be enforceable ex post, within the context of individual lawsuits brought by customers against their intermediary. Historically, this development can be explained with the desire to balance out deregulatory developments in US state legislation since the beginning of the twentieth century through the imposition of harmonized standards in federal securities regulation in the 1930s.

This process has been taken up by a global trend toward converging regulatory standards since the 1980s, which – both in international standards (in particular, the IOSCO “Principles”) and European legislation – has been driven by the desire to open national financial markets and facilitate cross-border competition for financial services intermediaries. Though certainly onerous in terms of compliance cost, the adaptation and implementation of a growing body of transnational conduct-of-business standards thus certainly has served industry interests. In this regard, securities regulation clearly is in line with the emergence of international standards in other fields of financial regulation, including, in particular, the area of prudential requirements for the establishment and ongoing operations of banking institutions – and it is reflective of the relevance of “soft law” as a driving force behind the development of transnational legal orders more generally.Footnote ⁹⁴

With regulatory (as distinct from contract) law as a platform and transmission mechanism for the emergence of a transnational regime for the regulation of fiduciary relationships between intermediaries and customers, the respective provisions have changed their nature. While the understanding of fiduciary duties and, indeed, their relevance for the solution of problems in the individual contractual relationships differ considerably, especially between common and civil law jurisdictions, the emerging body of principles and duties can nonetheless be described as “functional fiduciary law” – that is, legal solutions to economic problems that arise in agency relationships irrespective of the respective underlying contract law frameworks and their links toward more general principles (good faith, duties of care, skill, and honesty) in the respective legal systems. In this sense, the emergence of a universally accepted body of conduct-of-business standards certainly can be characterized as a successful example of transnational legal transplants.

Apart from the incentives of the regulated industry to accept and implement such standards as a price for unrestricted access to foreign markets, two interrelated aspects in particular appear to have facilitated this development: First, regulatory law is, almost by definition, generic in nature, and thus less contingent on functional interlinkages with general principles of contract law, be they rooted in common or statutory civil law. Second, precisely because the inclusion of transaction-oriented conduct-of-business standards originally served to compensate for weaknesses in the protection of investors under general principles of fiduciary law, the applicable regulatory standards were at the same time more focused on specific aspects of the intermediary-customer relationships – and simpler to administer. Regulatory conduct-of-business standards apply independently from general principles of contract law. At the same time, they are not intended to provide a legal basis addressing all aspects of the relevant relationships, but merely add to general contract law by imposing certain protective duties and facilitating their ex ante supervision by public authorities. This allows the implementation and enforcement of regulatory requirements in a way that is functionally and operationally separate from the application of general contract law, which in turn facilitates their “export” to, and adaptation by, jurisdictions with different contract law regimes.

Against this backdrop, however, problems of coordination between the regulatory sphere and the respective contract law environment are inevitable, and it is hardly surprising that such problems can be identified as a common concern in many jurisdictions, including the Member States of the European Union. Realigning regulatory standards with the technical content of applicable contract law and, indeed, general principles of contract law (including, for that matter, the common law of agency and fiduciary duties) continues to be difficult, especially in cases where the substantive content diverges. In this respect, ongoing discussions on the private law implications of the harmonized body of European conduct-of-business regulations is just one illustrative showcase. As long as national differences in the treatment (and resolution) of such conflicts continue to exist, the process of “transnationalization” of what could be described as “functional fiduciary law” clearly remains incomplete – with potentially significant results in terms of substantive outcomes. Although the transnational convergence of regulatory standards that can be described as “functional” fiduciary law has made enormous progress over the past decades, the private law regimes applicable to the intermediary-customer relationship continue to differ considerably. International “soft law” instruments are highly relevant, and transnational cooperation of regulatory institutions acting under highly politicized mandates and corresponding restrictions, and influenced by strong market forces, continues. The resulting emergence of transnational standards for the regulation of financial intermediation reflects an ongoing process of transnational legal ordering, but does not represent a mature transnational legal order, yet.

5.1 Introduction

The aim of this chapter is twofold. First, it is a comparative study on the potential benefits and limitations of applying fiduciary law in a “hard case.” This analysis is inductive in nature. It aims at contributing to a better understanding of fiduciary law doctrines in both common and civil law jurisdictions. Second, the chapter focuses on specific transnational processes that may shape fiduciary norms. In particular, it analyzes the influence of transnational private ordering on the establishment of fiduciary duties in state law.

Centering on a case study, the chapter discusses the legal aspects of “net-short debt investing” on global bond markets through the lens of transnational fiduciary law. Generally, the term “net-short” refers to the positioning of an investor who benefits as the price of a specific financial asset falls. Net-short debt investing is an increasingly popular investment strategy that enables bondholders (i.e., holders of a company’s debt) to cash in on the default of the bond-issuing company by building up a net-short position in credit default swaps (Section 5.2). The strategy raises the question whether the net-short investor has a fiduciary duty of loyalty toward (1) the issuer of the bond, (2) other bondholders, and (3) the counterparty of the credit default swap (CDS) (Section 5.3). This legal question has a transnational dimension: large-scale bond sales do not only involve a number of different jurisdictions, but also heavily build on mechanisms of private ordering (Section 5.4).

The chapter argues that any legal conceptualization of net-short debt investing must consider this transnational dimension (Section 5.5). Specifically, the chapter will make the case that the concept of fiduciary duties should be interpreted with a view to facilitating mechanisms of transnational private ordering.

To make this argument, this chapter assesses a case study – the Windstream v. Aurelius dispute involving net-short debt investing – one that, at first glance, seems an unlikely candidate for the application of fiduciary norms. One thing is clear: The practice of net-short debt investing may have adverse effects on issuers of bonds, other bondholders, and credit default swap counterparties. Yet “hard” fiduciary law – that is, the domestic legal norms of common law and civil law countries that fiduciary theorists typically focus upon – is unlikely to apply fiduciary duties to net-short debt investing, leaving market participants largely without viable remedies. The picture may change, however, if we take seriously the transnational dimension of bond market cases such as Windstream v. Aurelius. Transnational bond markets are a prime example of transnational private ordering, one with a fiduciary dimension, as this chapter argues.

5.2 Case Study: Net-Short Debt Investing

The problems of net-short debt investing have received considerable media attention: the Financial Times opines that US companies face “a growing threat from activist investors,” whereas others critically discuss the role of “hedge-fund debt cops.”Footnote ¹ Even more pointedly, an opinion piece in the New York Times claims, “What Hedge Funds Consider a Win Is a Disaster for Everyone Else.”Footnote ² What, then, is net-short debt investing? The phenomenon is well illustrated by the much-discussed Windstream v. Aurelius case, which was decided by a federal trial court in New York.Footnote ³

The (stylized) facts of the case are as follows. In 2013, Windstream, a telecoms company, issued bonds in order to finance its operations. As is standard market practice, the bond documentation contained a number of so-called covenants. Bond covenants, as an instrument of creditor protection, are clauses that oblige the bond issuer to comply with certain financial ratios, such as a specific debt-to-earnings ratio, and to refrain from risky financial activities.Footnote ⁴ One of the bond covenants prohibited Windstream from transferring any assets to affiliated companies. Windstream violated this prohibition when it transferred a considerable number of its network services to a holding company in 2015, allegedly for regulatory purposes. Given this violation of a covenant, the bondholders, with a quorum of 25 percent, would have been entitled to declare an “event of default” after a sixty-day cure period and demand immediate repayment of the bonds (acceleration).Footnote ⁵

However, the bondholders took no action after Windstream violated the covenant. Their decision not to act was in line with common bond market practice. Triggering an event of default and accelerating repayment of the bond is considered the bondholders’ “nuclear option,” as it almost invariably leads to the bankruptcy of the bond issuer. Thus, bondholders mostly use covenant violations as bargaining chips for adjusting the financial conditions of the bond and restructuring the company’s debt rather than enforce the clauses by demanding immediate repayment (Section 5.4).

In this regard, the facts leading to the Windstream v. Aurelius dispute were unusual. Aurelius, a US hedge fund, bought 25 percent of the Windstream bonds in 2017 – that is, well after the covenant violation. It then took swift action by declaring an event of default and demanding immediate repayment of the bond, causing Windstream to fall into bankruptcy. Why did Aurelius act this way? It is hard to know from publicly available information. On one account, one based upon unproven market rumors, Aurelius had built a net-short position on Windstream’s debt by buying credit default swaps worth ten times the amount of its bond exposure.Footnote ⁶ Thus, Windstream’s default – which Aurelius had triggered itself (a so-called manufactured default) – allowed Aurelius to cash in on the credit default swaps. Aurelius effectively relied on the letter of the bond covenant in order to benefit from Windstream’s bankruptcy.

Perhaps Aurelius was acting strategically in this way. Perhaps not. The most that one can say – and all that needs to be said for this chapter’s argument – is that for Aurelius, such a strategy certainly would have made business sense. Whether it made sense from a broader economic perspective seems rather questionable, given that Windstream as the bond issuer (as well as its shareholders and employees), other bondholders and the counterparty of Aurelius’ credit default swaps all stood to lose.Footnote ⁷ On the other hand, one could argue that broader market benefits in the form of deterrence effects for potential covenant violators achieved through Aurelius’ “policing” role outweighed these individual losses.Footnote ⁸ As a matter of law, the question is what duties Aurelius had toward other market participants (Section 5.3). Both the economic and the legal assessment of the case, however, are contingent upon the structure of transnational bond markets and the reasonable expectations of market participants (Section 5.4). This chapter now turns to those topics, arguing that fiduciary law can play an important role in translating market structures and expectations into legal categories.

5.3 Fiduciary Duties: A Comparative Analysis

As the Windstream v. Aurelius dispute shows, the legal implications of net-short debt investing concern at least three different relationships: those between bondholder and issuer, relationships within the group of bondholders, and relationships between bondholder and CDS counterparty. Different laws may apply to each of these relationships under conflict-of-laws rules. The legal framing of the relationships might particularly differ between common law and civil law jurisdictions.

5.4 The Transnational Dimension of Fiduciary Law

This chapter suggests that we might reach a different conclusion if we take the transnational dimension of the case seriously. It argues that the bond market is a prime example for transnational private ordering. Against this background, it outlines a transnational approach to fiduciary law. Following this approach, it takes a fresh look at the justification and scope of fiduciary duties in both common and civil law jurisdictions. Specifically, it examines the potential of fiduciary law to “enable and bolster social norms”Footnote ⁴⁸ formed in a transnational context.

5.5 Conclusion

Under traditional doctrines of fiduciary law in both common and civil law traditions, the practice of net-short debt investing is hard to capture. However, fiduciary law doctrine accepts that justified expectations giving rise to a fiduciary relationship may be formed not only in the bilateral relation between two parties but also in the wider setting of a market or social field. By translating these expectations into legal rights and obligations, fiduciary law can be a powerful tool for enabling and framing private ordering. In this sense, “transnational fiduciary law” stands for an approach that seeks to reinterpret existing doctrines of fiduciary law in light of the specific problems of cooperation arising in transnational settings. Both formal and informal elements of TLOs are thus reflected in the rules and principles of state law.

Under a transnational fiduciary law approach, strategies of net-short debt investing may amount to violations of the fiduciary duty of loyalty. They run counter to the justifiable expectation of bond issuer and other bondholders alike that default provisions in bond indentures are only enforced for securing or facilitating repayment of the bond. This informal expectation of behavior may complement the formalized rules of transnational standard contracts that structure global bond markets. However, market participants may also use standard contracts for collectively opting out of fiduciary duties.

6.1 Introduction

The public trust doctrine has been called “the law’s DNA.”Footnote ¹ The doctrine, it is argued, is rooted in natural law. Its ancient principle – that some waterways are not to be put under private ownership – is one that nearly all peoples have recognized nearly all the time.Footnote ² Its modern iteration holds that the state is a trustee for natural resources more broadly. Today’s public trust doctrine, some say, “is perhaps the only principle … that can provide a common global platform” for the rule of environmental law in an era of political stagnation and environmental degradation.Footnote ³ In short, the public trust doctrine “has become internationalized,”Footnote ⁴ and not a moment too soon.Footnote ⁵

What, precisely, would it mean to say that the public trust doctrine is internationalized? This chapter addresses that question, which has, as far as I can tell, at least five answers worth examining. My main conclusion is that the public trust doctrine is a transnational legal norm but not a transnational legal order. This thesis will, I recognize, require unpacking. To do that, I apply concepts from Gregory Shaffer and Terence Halliday’s theory of transnational legal orders (TLOs).Footnote ⁶ My claim is about the processes and degree of transnational normative settlement around the public trust norm.Footnote ⁷ In a nutshell, the claim is that the public trust doctrine is not a transnational legal order in the way that, say, the rule of law is a transnational legal order.Footnote ⁸ Put this simply, the claim may seem obvious to anyone familiar with the advocacy of civil society organizations, lawyers, and academics to get governments to embrace the public trust doctrine as an ordering principle for environmental protection and natural resource management.Footnote ⁹ But my thesis yields nonobvious insights into not only the public trust doctrine but also public fiduciary law.

In using the public trust doctrine as a case study of the transnational dimensions of public fiduciary law, this chapter aims to introduce an empirically focused socio-legal approach into conversations about public fiduciary theory. To date, public fiduciary scholarship has focused upon the juridical properties of fiduciary relationships and the normative values of fiduciary law. Some scholars have made the conceptual claim that public fiduciary law is transnational in scope.Footnote ¹⁰ In responding to that sort of claim, this chapter suggests the need for rigorous analysis of normative settlement (or lack thereof) around public fiduciary norms. To the extent that public fiduciary theory “outlines an agenda for reform” of transnational law,Footnote ¹¹ it must confront the challenges of achieving normative settlement in legal practice. The public trust doctrine’s transnational career, so to speak, is a case study in these challenges. And this case study may offer lessons for scholars studying the framing, development, and institutionalization of TLOs, particularly those that draw upon domestic legal norms.

6.2 The Public Trust as a Case Study

The public trust doctrine is a particularly useful case study of transnational normative settlement of public fiduciary norms. Public fiduciary scholars have pointed to the public trust doctrine as an example of the norm of fiduciary government within domestic legal systems.Footnote ¹² Increasingly, legal actors – particularly, NGOs and legal academics – have framed the problem of transnational environmental regulation in terms of the public trust.Footnote ¹³

The roots of the modern public trust doctrine are often traced to Roman law through the English common law, although the doctrine has a more limited scope in England today than it does in other common law countries, particularly India and the United States.Footnote ¹⁴ Contemporary interest in the doctrine owes much to the influence of American legal scholar Joseph Sax, who argued in 1970 that the doctrine may serve as a “tool of general application for citizens seeking to develop a comprehensive legal approach to resource management problems.”Footnote ¹⁵ In particular, Sax argued that the doctrine authorized courts to “promote equality of political power for a disorganized and diffuse majority” against “self-interested and powerful minorities [who] often have an undue influence” on policymaking.Footnote ¹⁶

It did not take long for Sax’s vision to influence international lawyers. In 1976, Ved Nanda and William K. Ris argued that the public trust doctrine was a “viable approach to international environmental protection.”Footnote ¹⁷ More recently, Peter Sand has argued that the public trust can be scaled up from the national to the global level.Footnote ¹⁸ Mary Christina Wood and Gordon Levitt have described the doctrine as a “macro approach” to natural resource management, suggesting that the “doctrine is perhaps the only principle … that can provide a common global platform of fiduciary duty enforceable by domestic courts.”Footnote ¹⁹ Raphael D. Sagarin and Mary Turnipseed ask, “[a]s the [doctrine] increasingly manifests in international and comparative contexts, will it … evolve into a central tool for addressing complex global environmental challenges?”Footnote ²⁰

In this view, which has gained prominence in response to national governments’ failures to address the threat of climate change, there is a problem of politics that traverses all areas of environmental lawmaking and natural resource management and exists at all levels of governance, from the local to the national and the transnational. The problem is one of political dysfunction and myopia.Footnote ²¹ The public trust is a legal solution to this problem.Footnote ²²

Thus understood, the public trust doctrine addresses the type of problem that public fiduciary theory aims to address more broadly. Public fiduciary theory holds that public officials generally owe duties of loyalty and care to those subject to their authority, just as a private trustee owes fiduciary duties to her beneficiaries.Footnote ²³ Thus, public fiduciary theory has aimed to identify the normative entailments of public authority.Footnote ²⁴ For the normatively oriented scholar, the appearance of trust (or trust-like)Footnote ²⁵ norms in multiple legal systems across space and time provides some evidence that trust is a constitutive legal concept, and a normatively attractive one at that. This is why discussions of public fiduciary theory may begin by citing examples from classical Greece, the Roman Republic, post-Restoration England, sixteenth-century imperial Spain, the seventeenth-century Dutch Empire, and the League of Nations, among others.Footnote ²⁶ To the extent that public fiduciary theorists have suggested that fiduciary norms are settled within domestic or international law,Footnote ²⁷ critics have questioned these suggestions.Footnote ²⁸

For the most part, however, the question of normative settlement has been neglected with public fiduciary theory. Normative settlement concerns the process by which legal norms become taken for granted by legal actors, particularly those tasked with implementing and applying law.Footnote ²⁹ Focusing upon normative settlement “can emancipate scholars and practitioners alike from the tenacious premise that a coherent and dominant set of transnational legal norms amounts to anything more than just transnational norms.”Footnote ³⁰

TLO theory provides a framework for assessing transnational normative settlement. Halliday and Shaffer define a TLO as “a collection of formalized legal norms and associated organizations and actors that authoritatively order the understanding and practice of law across national jurisdictions.”Footnote ³¹ The aim of a TLO is “to produce order in a domain of social activity or an issue area that relevant actors have construed as a ‘problem’ of some sort.”Footnote ³² A legal order is “transnational insofar as it orders social relationships that transcend the nation-state.”Footnote ³³ And an order “is legal insofar as it [1] has legal form, [2] is produced by or in connection with a transnational body or network, and [3] is directed toward or indirectly engages national legal bodies.”Footnote ³⁴

A transnational norm does not itself constitute a TLO. The existence of a legal norm on the transnational plane does not by itself show normative settlement at national and local levels. When it comes to settlement, the “ultimate test” of the existence of a fully institutionalized TLO is whether actors at the transnational, national, and local levels share “a set of legal norms that they simply take for granted as being appropriate in a particular situation.”Footnote ³⁵ A TLO, moreover, may be more or less aligned with the problem (or “issue area”) that it aims to address.Footnote ³⁶

The upshot is that there is more than one sense in which the public trust doctrine, or, more generally, public fiduciary norms, may (or may not) “become internationalized.”Footnote ³⁷ Some scholars, for example, have focused upon identifying public trust norms in domestic laws and judicial opinions.Footnote ³⁸ Others focus instead upon international organizations.Footnote ³⁹ Still others may point to both domestic and international law, often without theorizing the relationship between the two. Joseph Orangias’s recent work makes an important advance through a process-oriented approach that distinguishes between “internalisation,” defined as the spread of public trust norms across national borders, and “transnationalisation,” defined as the application of public trust norms to transnational management of resources.Footnote ⁴⁰

To preview the analysis that follows in the next two parts of this chapter, there are at least five ways in which we might say that the public trust doctrine is “transnational” or “international.” First, the point might be simply that the public trust doctrine or its functional equivalent appears in multiple legal systems. This comparative law point does not necessarily tell us much, if anything, about transnational processes of normative framing, development, and settlement. Second, we might assess the degree of convergence on the public trust framing across multiple domestic legal systems. That is, we might be interested in whether domestic legal actors themselves frame problems in terms of the public trust. The point here is not simply that there are functional equivalents to the public trust doctrine. Rather, the point is that domestic legal actors, such as courts (but not only courts), have adopted public trust norms to frame and address problems of environmental policymaking and natural resource management. Third, we might go beyond domestic law to say that the public trust doctrine is a transnational norm in the sense that civil society, acting in ways that cross the national borders, employs it as a frame to construct and respond to social problems. The public trust doctrine is a transnational norm both in the sense that we see some convergence upon it across domestic legal system and the sense that civil society has mobilized it as a frame for transnational advocacy. Fourth, we might analyze whether and to what extent the public trust doctrine has been institutionalized in a particular problem area through a TLO. There are “micro-TLOs” for specific resource management problems that incorporate public trust norms.Footnote ⁴¹ Studying the successes and failures of these TLOs sheds light upon the obstacles to normative settlement around the public trust doctrine. Finally, we might ask whether the public trust doctrine has become a “meta-TLO” that cuts across multiple legal orders and generally frames legal responses to problems of environmental law and resource management.Footnote ⁴² There have been calls for the creation of a meta-TLO based in public trust norms. But no such meta-TLO exists.

6.3 The Public Trust as a Transnational Norm

All countries face the problem of political dysfunction in environmental policymaking and natural resource management. The public trust doctrine provides a legal solution by authorizing courts to review policymaking for compliance with fiduciary norms. To the extent that multiple legal systems have converged on this solution, especially as the result of transnational processes such as horizontal judicial dialogue and civil society advocacy, the public trust doctrine is a transnational norm.Footnote ⁴³

In recent years, scholars of environmental law have argued that the public trust doctrine is transnational in this sense. Michael Blumm and Rachel Guthrie argue that the doctrine has been adopted not only in the United States, where it has a long history, but also in eleven other domestic legal systems, including India, where it has a broader scope than in US law.Footnote ⁴⁴ In each country, they argue, public trust norms have emerged as a solution to a similar problem of environmental policymaking and natural resource management. Sand has similarly argued that the public trust doctrine is emerging as a common legal solution to the problem of politics in environmental law.Footnote ⁴⁵ As Wood summarizes the scholarship, there has been convergence across multiple legal systems on the general norm that there “is a public property right” in some natural resources “and corollary sovereign obligation” to manage those resources for the benefit of the public.Footnote ⁴⁶

There are transnational dimensions to the modern convergence around this norm. For one, the cases reveal a “transnational judicial dialogue” concerning the public trust.Footnote ⁴⁷ In M. C. Mehta v. Kamal Nath, for example, the Supreme Court of India discussed modern US public trust law and Professor Sax’s article at great length before declaring the doctrine to be “the law of the land.”Footnote ⁴⁸ Recent public trust litigation concerning climate change, much of it brought or at least supported by the Children’s Trust, a US-based NGO, has aimed to foster this sort of transnational dialogue.Footnote ⁴⁹ International governmental organizations have also lent some support to the transnational dialogue concerning the public trust. In its first-ever Global Report on the Environmental Rule of Law, the United Nations Environment Programme (UNEP) discussed a decision of the Lahore High Court in Pakistan as an example of an effective rights-based approach to environmental protection.Footnote ⁵⁰ In addition, the UNEP’s compendium of judicial decisions has included and identified public trust cases from various jurisdictions.Footnote ⁵¹

To the extent that the public trust doctrine’s origins are in Roman law, it is unsurprising to see public trust norms in multiple modern legal systems. Moreover, given British imperialism in the nineteenth and early twentieth centuries, and American hegemony in the twentieth and twenty-first centuries, we might expect to see a doctrine of Anglo-American common law appear around the globe, whether we call that process “transplantation”Footnote ⁵² or something else. But existing scholarship risks overstating the degree of convergence by understating the complexity of fiduciary law.

In analyzing the public trust doctrine as a transnational norm, it is important to distinguish between the existence of functional equivalents and convergence upon the public trust doctrine. A comparativist may interpret a law as responding to a social problem.Footnote ⁵³ From there, “[t]he comparativist will look for a law in a different legal system that can be interpreted to perform a similar function.”Footnote ⁵⁴ The presumed similarity between functional equivalents is limited. Two legal institutions from different systems may be “similar in one regard (namely in one of the functions they fulfill) while they are (or at least may be) different in all other regards – not only in their doctrinal formulations and concrete modes of resolving a problem, but also in the other functions or dysfunctions they may have besides the one on which the comparatist focuses.”Footnote ⁵⁵ Thus, a comparative law perspective, if anything, may be important in bringing our attention to the differences between legal norms and institutions.Footnote ⁵⁶

When it comes to the public trust doctrine, the differences between legal systems may begin with the definition of the general norm. Is the function of the public trust doctrine to address abuses of trust? Or, is the function to recognize public rights? Within common law countries, the public trust doctrine has allocated the ownership of some resources into public rather than private hands.Footnote ⁵⁷ There are, moreover, similarities between this aspect of the public trust doctrine and principles in some civil law countries, including the concepts of Sozialpflichtigkeit and öffentliche Sachen in German law, not to mention the concepts of domaine public and droit de garde in French law,Footnote ⁵⁸ as well as concepts within Spanish law, Mexican law,Footnote ⁵⁹ Ecuadorian law, and Brazilian law.Footnote ⁶⁰ In particular, the notion that public rights to navigable waterways limit their privatization enjoys widespread acceptance.Footnote ⁶¹

But treating the “public trust” and “public rights” as synonyms may obscure more than it reveals. It makes a difference whether a legal norm’s aim is to address problems of political dysfunction – that is, whether one’s concern is to constrain the political branches from pursuing private interests and thus abusing the public trust reposed in them. Empowering a national ministry to protect public rights to particular natural resources, as various countries have done, is not the same as empowering the judicial branch to review the political branches’ decision-making for compliance with fiduciary norms.Footnote ⁶²

As I have argued elsewhere, focusing upon an abstract “public trust” norm tells one little about the law on the books, much less the law in action. The state may be a trustee for natural resources, but what does that mean, and how are its duties implemented? Much of “the bite” of fiduciary law lies in implementation of the conduct and decision rules that specify the duties that the public trust norm entails.Footnote ⁶³ Across legal systems, there may be significant variation in the relationship between these conduct and decision rules – particularly where, as in the case of fiduciary law, the two types of rules “often diverge.”Footnote ⁶⁴ And to the extent that fiduciary law rests upon “informal social norms” for its implementation,Footnote ⁶⁵ comparative legal analysis should highlight variations in such norms and understandings of social roles.

There is significant variation among (and within) jurisdictions in the conduct and decision rules that implement explicit public trust norms. Even within the United States, which, along with India, has one of the most well-developed public trust doctrines, there is considerable variation among the various subnational governments as to which types of resources the public trust covers and what legally enforceable duties are imposed upon public trustees. Some US states hew closely to the historical scope of the doctrine, which was limited to a prohibition on the privatization of watercourses, while others apply the doctrine more broadly to reach resources other than navigable waterways and to impose procedural and substantive obligations on government actors.Footnote ⁶⁶ There is also considerable variation among common law countries. Though often cited as the source of the public trust doctrine, including in India and the United States, English common law recognizes a much narrower version of the doctrine.Footnote ⁶⁷ The public trust norm has “had little influence”Footnote ⁶⁸ in Australia and has played a more limited role in Canada than some comparative analyses suggest.Footnote ⁶⁹

There is also variation in the public trust (or trust-like) conduct and decision rules across civil law countries and between civil law and common law countries. Indeed, it is a fair question whether the doctrine’s “methodology and terminology is essentially derived from the Anglo-American law of charitable trusts.”Footnote ⁷⁰ Sand, for example, compares the public trust doctrine in India with the role of the Nature Conservation Board in Sweden and the Environment Ministry in Italy.Footnote ⁷¹ Here, the differences among the legal systems are instructive. In India, the doctrine imposes robust constitutional duties on government actors regarding a wide range of environmental resources and directs courts to review their actions closely for abuse of trust.Footnote ⁷² In Sweden, the Nature Conservation Board plays an “Ombudsman” role for the protection of natural resources,Footnote ⁷³ while the Environment Ministry in Italy may sue on behalf of the public for damage to the environment.Footnote ⁷⁴ In the Swedish and Italian examples, the Nature Conservation Board and the Environment Ministry involve governmental representation of the public in confronting threats to the environment, while the Indian public trust doctrine is as much, if not more, concerned with the threats that the government may pose to the environment. This is a familiar distinction from a fiduciary law perspective; as I have argued elsewhere, the public trust norm may play the role of empowering government to act or the role of constraining government action.Footnote ⁷⁵

Finally, there is significant variation in the institutional frameworks for implementing the doctrine and the degree of implementation at the local level. Consider first the role that institutions play. Within US law, the modern public trust doctrine conjures images of private citizens and NGOs litigating on behalf of the public and requesting judicial review of actions taken by the political branches. This image no doubt reflects the important role that impact litigation plays in the politics of the United States. Thus, the public trust doctrine in US law is as much an institutional and cultural choice for litigation to solve social problems, as it is a body of conduct and decision rules. That may also be the case in India, which has a mechanism for direct petition to the Supreme Court in cases of national significance, including the canonical public trust cases in Indian law.Footnote ⁷⁶ The doctrine does not play the same institutional role elsewhere, as we have already seen.

Implementation of the doctrine at the local level varies as well across and within jurisdictions. Within the United States, where the doctrine is well developed, there is such variation. In the United States, for example, courts have generally not applied the public trust doctrine to the national political branches, which is practically significant insofar as the national government owns and manages a great deal of land in the American West, as much as 90 percent in some states.Footnote ⁷⁷ There is, to cite another example, no case law in Nigeria on the scope of the public trust doctrine and the duties it entails, though scholars have cited Nigerian law as implicitly recognizing the public trust norm.Footnote ⁷⁸ And although South Africa has expressly incorporated the public trust into its law, “in the 21 years since the promulgation of South Africa’s constitution and environmental legislation, and there has been little academic and legal recognition of the public trust provisions.”Footnote ⁷⁹

There has been some convergence around public trust principles across domestic legal systems, particularly around the notion that some resources (such as watercourses) are subject to public rights. But once we move beyond the general public trust norm to consider conduct and decision rules, institutional design, and local implementation, there is significant variation across national legal systems.

6.4 The Public Trust as a Transnational Legal Order

The existence of a transnational norm does not by itself show the existence of a TLO. Put simply, norms may cross national boundaries without settling at the transnational, national, and local levels in such a way as to impact behavior at all these levels. That is the “ultimate test” of a TLO.Footnote ⁸⁰

The Ramsar ConventionFootnote ⁸¹ on wetlands conservation provides an intuitive and important example of the distinction between a transnational norm and a settled TLO. The Ramsar Convention is about the heartland of the public trust doctrine: wetlands. If anything, then, we would expect to see significant normative settlement around implementation of the Ramsar Convention norms. What we see, however, is a transnational norm that has not settled to shape behavior at the national and local levels. The Convention is one of the first environmental law treaties with a “global scope,”Footnote ⁸² and has “near-universal membership (171 parties [as of March 2021]).”Footnote ⁸³ The contracting parties have agreed, among other things, to designate at least one wetland within their borders for conservation, to promote “as far as possible, the wise use of wetlands in their territory,” to monitor the state of wetlands, and to consult and coordinate among themselves regarding wetlands protection.Footnote ⁸⁴ The Ramsar system includes Advisory Missions tasked with monitoring and reporting on noncompliance.Footnote ⁸⁵ Yet the data on wetlands protection tells a sobering story: roughly 35 percent of wetlands worldwide have been “lost over the Convention’s life.”Footnote ⁸⁶

The Convention provides not only evidence of a transnational norm – conservation and “wise use” of wetlands – that is at the core of the public trust doctrine, but also evidence that this transnational public trust norm has not become a TLO. The Convention’s “very general” and “somewhat vague” norms have not induced widespread practices of wetlands stewardship.Footnote ⁸⁷ Its reliance upon listing and reporting and “shaming states into better protection” has had limited effect.Footnote ⁸⁸ That is not to suggest that the Convention has no effect. Political actors within a country, as well as transnational NGOs, may use the Convention to frame their advocacy as against “competing domestic concerns.”Footnote ⁸⁹ Even in those cases where the Convention provides “overarching concepts” for domestic advocacy and negotiation, it may still “play[] a limited role” in actually ordering behavior.Footnote ⁹⁰ What we do not see is transnational normative settlement at the national and local levels. Instead, “the impact of the Ramsar Convention on national wetlands protection policies has been negligible.”Footnote ⁹¹

The Ramsar Convention’s failure speaks to the challenge of constituting a TLO based upon fiduciary law. Of course, this failure no doubt has something to do with the Convention’s particular features, such as its choice of voluntary compliance mechanisms. But it also has something to do with the opacity of fiduciary norms. One of the often-observed features of fiduciary law is its moralizing rhetoric. Fiduciary law “embraces abstract moral injunctions of loyalty and care.”Footnote ⁹² At a high level of generality, there may be normative agreement about fiduciary duties, which may explain why there is near-universal agreement to the “wise use” principle of the Ramsar Convention. But when it comes to the legal ordering of behavior, the challenge is to institutionalize and implement fiduciary law’s moral injunctions. That the Ramsar Convention has failed to do.

In understanding the problem of normative settlement, we can usefully contrast the Ramsar Convention with another contemporaneous TLO that incorporates public trust norms: the 1972 UNESCO Convention Concerning the Protection of the World Cultural and Natural Heritage.Footnote ⁹³ The initial draft of the Convention, submitted to UNESCO by the head of the United States Council on Environmental Quality (US CEQ), a division of the Executive Office of the President, was titled the “World Heritage Trust Convention.”Footnote ⁹⁴ The Nixon White House had proposed the creation of a “world heritage trust” the prior year,Footnote ⁹⁵ as had a 1965 White House Conference on International Cooperation.Footnote ⁹⁶ US-based environmental NGOs, such as the Sierra Club, repeated these proposals.Footnote ⁹⁷ Thus, the Convention emerged in no small part from efforts by the United States to upload the public trust norm to the transnational domain.

The Convention can be understood as creating a “transnational public trusteeship.”Footnote ⁹⁸ The Convention provides for a process for a state to propose that the World Heritage Committee designate a world heritage site within the state’s borders,Footnote ⁹⁹ requires an accounting from host countries of the steps they have taken to conserve these sites, and has been implemented at the transnational level through the World Heritage Committee as well as international tribunals and at the local level through private enforcement in courts.Footnote ¹⁰⁰ This regime, which has 194 state parties,Footnote ¹⁰¹ is a “highly concordant TLO.”Footnote ¹⁰² It has a high degree of normative settlement at the transnational level (i.e., the World Heritage Committee and international tribunals), the national level (i.e., the state parties, which identify sites for designation and enact implementing legislation),Footnote ¹⁰³ and the local level (i.e., through judicial enforcement and advocacy by civil society organizations, which may include appeals to local, national, and international media, as well as efforts by private corporations to conserve heritage sites).Footnote ¹⁰⁴ Such a regime is not a private trust,Footnote ¹⁰⁵ but the World Heritage TLO resembles the public trust doctrine insofar as it involves a state’s obligations to manage a specific res for the benefit of the public and to account for that management.

The United Nations Convention on the Law of the Sea (UNCLOS)Footnote ¹⁰⁶ is another example of a TLO that can be understood in public trust terms. This Convention addresses a range of problems arising from the “freedom-of-the-seas” doctrine, which held that the seas and offshore resources were generally open to all. Article 136 of UNCLOS proclaims that the deep seabed and “its resources are the common heritage of mankind.”Footnote ¹⁰⁷ Much like the traditional common law public trust doctrine, the Convention proscribes alienation of these common resources. It further imposes duties upon states to protect such resources and specifies that activities in the area shall be “for the benefit of mankind as whole.”Footnote ¹⁰⁸ The Convention established the International Seabed Authority (ISBA) to manage the extraction of mineral resources from the international seabed.Footnote ¹⁰⁹ Commentators have described this regime in terms of a public trust, with the ISBA acting as trustee of a specific res (namely, submarine mineral resources) for the global public.Footnote ¹¹⁰ With 167 state parties, the UNCLOS regime is a relatively settled one, though, notably, the United States has signed but not ratified the Convention, which undermines implementation of some of its provisions.Footnote ¹¹¹

From one vantage, UNCLOS and the World Heritage Convention may be understood as TLOs within separate issues spaces. UNCLOS addresses problems of resource management on and underneath the seas, while the World Heritage Convention addresses preservation of culturally and historically significant sites. They may thus be seen as responding to different social problems and thus as having little to do with one another.

From another vantage, however, UNCLOS and the World Heritage Convention may be understood as micro-TLOs that address different aspects of the same problem. Daniel Bodansky has developed the concept of a “micro-TLO” in the context of assessing transnational legal responses to climate change.Footnote ¹¹² There is no encompassing TLO that addresses climate change, Bodansky argues, but there are “micro-TLOs … with more limited legal or geographical scope.”Footnote ¹¹³ Such micro-TLOs may provide order within “one or another part of the issue ‘space.’”Footnote ¹¹⁴ For instance, within the climate change issue space, there appears to be an emerging micro-TLO for emissions from maritime transport.Footnote ¹¹⁵

UNCLOS and the World Heritage Convention can be described as micro-TLOs insofar as they both are transnational legal orderings that address the general problem of resource management and environmental protection. Both TLOs respond to the issue of ensuring that governments manage particular shared resources in the public interest. And both address that issue by imposing trust (or at least trust-like) duties.

From the perspective of TLO theory, whether to view UNCLOS and the World Heritage Convention as micro-TLOs depends upon how relevant social actors construct the problem each addresses. If, pace Bodansky, one is concerned with the problem of climate change, UNCLOS and the World Heritage Convention might be seen as micro-TLOs that address different aspects of that problem by incorporating public trust principles into international law.Footnote ¹¹⁶ To the extent that one thinks of the problem in terms of global environmental regulation and resource management, it makes sense to view the two regimes as micro-TLOs that address different aspects of a common problem. This possibility suggests a more ambitious role for the public trust in transnational law.

In this more encompassing sense, the public trust doctrine might be seen as a “meta-TLO” – that is, a frame for the rule of (environmental) law. Jothie Rajah has developed the concept of a “meta-TLO” to understand transnational rule of discourse, which “frames and contextualizes all efforts to manage and regulate law, legitimacy, and conceptions of legality in the sphere of the transnational.”Footnote ¹¹⁷ The concept of a meta-TLO thus seeks to describe a TLO that serves as a frame or an “umbrella category” for other TLOs.Footnote ¹¹⁸

Proponents of an encompassing public trust TLO have suggested that it may serve as a frame for environmental regulation and natural resource management, both domestic and transnational. Civil society organizations as well as legal academics have called for a meta-TLO based upon environmental trusteeship. As Klaus Bosselmann has described, for example, the Ecological Law and Governance Association, a “global network of lawyers and environmental activists,” has established the Earth Trusteeship Initiatives, which published the Hauge Principles for a Universal Declaration on Responsibilities for Human Rights and Earth Trusteeship.Footnote ¹¹⁹ While the Hague Principles sweep more broadly than the public trust doctrine, as they state trusteeship obligations for all human beings, Bosselmann draws upon public fiduciary theory to make the legal argument for trusteeship as a meta-principle.Footnote ¹²⁰

The public trust doctrine is not yet a meta-TLO. The most obvious example to prove this point is the failure of proposals to reconstitute the Trusteeship Council as a public trustee for the global environment. The Trusteeship Council was established pursuant to Chapter XIII of the Charter of the United Nations and tasked with monitoring “the political, economic, social, and educational advancement of the inhabitants of each trust territory” administered by UN members.Footnote ¹²¹ In 1994, the Council was suspended once Palau, the last trust territory, became an independent nation-state.Footnote ¹²² Several years later, UN Secretary-General Kofi Annan proposed a reconstitution of the Council with a new mandate: global environmental protection.Footnote ¹²³ Ultimately, the proposal went nowhere. Instead, following the 2005 World Summit, the General Assembly proposed eliminating Chapter XIII of the Charter and with it the Trusteeship Council.Footnote ¹²⁴ The Trusteeship Council, it concluded, “has no remaining functions.”Footnote ¹²⁵

The failure of Secretary-General Annan’s proposal may not be surprising. The concept of trusteeship has a long and ignominious colonial history, as does the Trusteeship Council.Footnote ¹²⁶ Moreover, refashioning the Council’s mandate to focus on environmental protection would require an amendment to the Charter, which is rare.Footnote ¹²⁷

In imagining other possibilities for the emergence of a meta-TLO, it is worth focusing upon the interaction between international legal commitments and domestic litigation. Particularly interesting is the potential for interaction between the Paris Agreement and domestic litigation. The Paris Agreement itself can be understood in terms of a public trust norm; for example, the Agreement requires states to account for their nationally determined contributions (NDCs),Footnote ¹²⁸ which might be analogized to a fiduciary’s duty to account. Scholars have begun to chart not only the increase in climate change suits in domestic courts since the Agreement’s adoption,Footnote ¹²⁹ but also the “cross-level” interactions between the Paris Agreement and domestic climate change litigation.Footnote ¹³⁰ Litigants use multiple frames for such litigation, including human rights frames, tort law frames, and the public trust doctrine.Footnote ¹³¹

In domestic public trust litigation, advocates have characterized the public trust as a transcendent principle of sovereignty.Footnote ¹³² A group of leading American legal scholars, for example, recently described the doctrine as an “inherent limit on sovereignty” in an amicus brief before the US Supreme Court.Footnote ¹³³ Legal practitioners and NGOs have also pointed to this understanding of the public trust, while courts in multiple countries have expressly incorporated the public trust doctrine as a principle of natural law. The Indian Supreme Court, for example, recognized the doctrine as one “of the laws of nature [that] must … inform all of our social institutions.”Footnote ¹³⁴ Similarly, the Supreme Court of the Philippines reasoned that the doctrine, which it incorporated into Filipino law, “may even be said to predate all governments and constitutions.”Footnote ¹³⁵ The more recent Urgenda decision of the Hague District Court, which has garnered global attention, concluded that the state’s duty of care includes an obligation to adopt climate change mitigation measures, a holding that may be understood in public trust terms.Footnote ¹³⁶

Public trust litigation in various countries occurs in connection with transnational organizations and networks. For example, the United Nations Environment Programme’s first Environmental Rule of Law Global Report pointed to public trust litigation in Pakistan as a case study of the potential for litigation to address climate change.Footnote ¹³⁷ Echoing Wood’s characterization of the problem of environmental lawmaking today, the UN Report found that while there has been “a dramatic growth” of environmental laws and regulatory institutions, the rule of law is failing the global environment.Footnote ¹³⁸ Instead of decisive regulatory action by political branches of government, there is widespread delay.Footnote ¹³⁹ In the face of this delay, the UN Report proposed the adoption of rights-based approaches to environmental protection.Footnote ¹⁴⁰ As an example, the Report pointed to Ashgar Leghari v. Federation of Pakistan, in which the Lahore High Court held that the Pakistani government’s delay in responding to climate change violated the constitutional rights of Pakistani citizens, including their rights under the public trust doctrine.Footnote ¹⁴¹ Similarly, in 2017, the UN Environment Programme and the Sabin Center for Climate Change Law at Columbia University published a report on global climate change litigation that discussed the “relevance of the public trust doctrine to governments’ approaches to climate change mitigation and adaptation.”Footnote ¹⁴²

Despite these connections with governance on a transnational level, it cannot be said that public trust litigation has led to the formation of a settled TLO. Much of the litigation is recent and ongoing. The reticence of some national courts to enforce public trust principles suggests that any emerging normative settlement may be fragile or at least limited in scope. The progression of the Juliana litigation in the United States is an example. In Juliana v. United States, the Children’s Trust, an NGO based in the United States that focuses upon bringing public trust litigation to force governments to take additional steps to address climate change, won a major victory when a US federal district court held that the federal government is a trustee of natural resources with fiduciary duties to current and future generations.Footnote ¹⁴³ The trial court pointed to the natural law understanding of the doctrine, which it held that had been incorporated into US law through English common law.Footnote ¹⁴⁴ But a federal appeals court reversed on jurisdictional grounds, holding that the US federal courts did not have authority “to order, design, supervise, or implement the plaintiffs’ requested remedial plan” in light of the “complex policy decisions entrusted, for better or worse, to the wisdom and discretion of the executive and legislative branches.”Footnote ¹⁴⁵ Thus, in some jurisdictions, including the United States, in which the modern public trust doctrine was born, the future of public trust litigation as a response to transnational environmental problems is in doubt.

6.5 Conclusion

The flexibility of the trust concept invites us to frame a variety of legal relationships in fiduciary terms. But this same flexibility poses a challenge to a socio-legal analysis that seeks to understand the ways in which actors settle (or not) on a legal order to address those problems. From this perspective, which focuses upon normative settlement, the distinction between transnational norms and transnational legal orders matters.

This chapter aimed to clarify the ways in which we might think about the question, “has the public trust doctrine become internationalized?” It showed that public trust doctrines or their functional equivalents appear in multiple legal systems. But the existence of functional equivalents by itself is not evidence of transnational normative settlement. There has been some convergence among relevant actors (domestic courts, but not just courts, for instance) on the public trust framing of problems in environmental law and natural resource management. The degree of convergence is easily overstated, however. The convergence among domestic courts on public trust norms has occurred in part as a response to the advocacy of transnational civil society actors and organizations that have mobilized it as a framework. In so doing, they may point to examples of micro-TLOs that incorporate public trust principles to address specific resource management problems. They may also learn lessons from the failures of some transnational norms, such as the Ramsar Convention’s “wise use” norm for wetlands conservation, to settle into full-fledged TLOs. Whether domestic litigation strategies, shaped in light of international standards such as those in the Paris Agreement, can overcome the challenge of implementing open-ended standards of fiduciary responsibility and lead to the formation of a meta-TLO based upon the public trust remains to be seen.