ABSTRACT
This chapter argues that today relational governance mechanisms gain in importance due to two different forces. First, the rise of the internet and other information and communication technologies (ICTs) has facilitated the evolution of a new, virtual form of relational contracting 2.0. Second, globalization undermines the law-making capacity of nation states. The chapter discusses relational contracting 2.0 in light of the wider theoretical debate about the institutional foundations of modern markets. It argues that modern ICT has significantly improved the economic performance of this informal type of contractual governance. The chapter also discusses the extent to which informal contractual governance mechanisms allow stronger parties to control their weaker business partners. It also argues that international arbitration and the New Lex Mercatoria do not develop effective public policy functions in creating a level playing field for the contractual parties but rather tend to strengthen the power gaps between stronger and weaker contractual parties.
