Global economic governance during the middle ages: The jurisdiction of the champagne fairs

This article reviews the history literature on the Champagne fairs and argues that their unique success rested on the close approximation of a limited-access, extra-territorial jurisdiction, with a de facto global (cross-jurisdictional) reach: contracts and judgments issued at the Fairs were expected to be enforceable across Europe, via a mix of agreements and power struggles with distant, municipal or territorial authorities. The threat of reprisals worked merely as a reflection of (i) the geopolitical leverage of the French King, and (ii) the specific market power first accumulated by the Fairs, and then lost. The paper argues however that with no substantial local community of merchants in Champagne, Greif's (2006) model of inter-city mutual dissuasion and reprisals may not apply to this experience. Guarantees against extortion had to be bargained over by the merchants with the Fairs’ feudal rulers. An equilibrium-based analytical framework is thus proposed, that accounts for the development, growth and eventual demise of the Fairs. Insolvency, rather than pure moral hazard, is used as the reference case for market indiscipline, calling for formal interaction between jurisdictions.