The legitimacy of private standards: lessons from fair trade and forestry for international tax governance

There has been a proliferation of global ‘private’ governance initiatives like Fairtrade International (FI) and the Forest Stewardship Council (FSC), which set standards for the trade in a range of products to promote fair and sustainable outcomes. Private standards have historically focused on the trade in physical products. Initiatives like Transparency International, the Equator Principles and the UK’s Fair Tax Mark (FTM) are extending private governance to business services, where a key focus of concern is the tax and investment practices of multinational corporations (MNCs). One lesson from the history of private standards is that the legitimacy of a scheme will be challenged by directly and indirectly affected groups. Moreover, despite the contested nature of legitimacy, experience suggests that proponents of such standards ignore it at their peril, because a lack of credibility will significantly impair scheme effectiveness. This chapter examines the contested nature of global private governance legitimacy and, drawing on case studies and emerging codes of practice, it develops a framework to analyse GSO legitimacy and undertake an analysis of FTM, a recent initiative in the UK’s financial services sector to govern domestic and MNC tax compliance.