2.1 The scientific man and the origins of neutrality

Only a few days after the military attack on Pearl Harbor and Roosevelt’s subsequent declaration of war on the Axis forces on 8 December 1941, the US Secretary of the Treasury, Henry Morgenthau Jr., commissioned his closest assistant, Harry Dexter White, with the task of drafting a proposal for a ‘United Nations Stabilization Fund’ (which would become the IMF) and a ‘Bank for Reconstruction and Development of the United and Associated Nations’ (the future International Bank for Reconstruction and Development (IBRD)).Footnote ³² Wartime diplomacy provided the soil in which the seeds of Bretton Woods were planted.Footnote ³³ With this proposal, the US Treasury aimed to ‘unify and encourage the anti-Axis forces’, while also assuming that the promises of post-war international economic order and capital for reconstruction would weaken the will to fight ‘within the Axis countries’.Footnote ³⁴ The exigencies of war-time diplomacy explain why, for White, ‘to exclude a country such as Russia would be an egregious error’.Footnote ³⁵

White both anticipated and embraced a post-war pluralism in economic systems and political configurations, arguing that after the war:

Rather than seeking an alignment of domestic economic systems or political ideologies, he believed that the pending international economic order would need to overarch a plethora of diverging political systems and to adhere to the classical liberal standard of sovereign equality, diversity, and non-intervention. Both planned and market economies would need capital in the wake of the war, and both would engage in international trade and financial transactions.Footnote ³⁷ If his proposal for an international economic order was to gain traction, White believed that political agnosticism was a pre-condition.

Furthermore, the envisaged mandate and operational scope of the Bank at its inception was limited. The tasks of fighting poverty or serving the basic needs of the ‘underdeveloped’ – let alone practices of state- or governance reform – were not anticipated in the early conceptualization of the Bank, whose envisaged purpose was to help satisfy the ‘unprecedented need for foreign capital’ at the end of the War, by guaranteeing and participating in loans for ‘approved governmental and business projects’.Footnote ³⁸ These financial services would only be granted after a ‘competent committee has made a careful study of the merits of the project or the program’ and, in a written report, concludes that the ‘loan would serve directly or indirectly to raise the productivity of the borrowing country’.Footnote ³⁹ The competent committee would consist of ‘technical staff of the Bank’ and ‘an expert selected by the country requesting the loan’.Footnote ⁴⁰ In other words, the praxis of the Bank was envisaged as a series of isolated, project-bound loan services, the merits of which were solely to be determined by a body of ‘neutral’ experts in Washington D.C.

The Bank’s limited financial purposes and its desire to appeal to a wide spectrum of political rationalities (in addition to White’s private sympathy for the economic system of communist Russia)Footnote ⁴¹ explain the provision in his draft proposal of the Articles, which states that the Bank and its officers ‘shall scrupulously avoid interference in the political affairs of any member’.Footnote ⁴² This ‘political prohibition’ remained unchanged in the draft that would be presented at Bretton Woods.Footnote ⁴³ John Maynard Keynes, the only significant counterweight to White in the Bretton Woods negotiations, had witnessed first-hand the political intrigues that plagued the post-War financial settlement in Versailles in 1919 and eagerly echoed the requirement for the Bank to act ‘with the strictest [political] impartiality’.Footnote ⁴⁴

In the Articles that were eventually agreed upon in Bretton Woods, Article IV(10) is titled ‘Political Activity Prohibited’ and states the following:

Article III(5)(b) confirms that loans shall be granted ‘with due attention to considerations of economy and efficiency and without regard to political or other non-economic influences or considerations’.Footnote ⁴⁶ In a document circulated several weeks before Bretton Woods, the US Treasury clarified that:

The document confidently asserted that ‘[t]he Bank itself can have no policy outside the purely financial sphere’, while acknowledging that the ‘proper limitation of the Bank’s activities depends ultimately on the character of the men responsible for its operations’.Footnote ⁴⁷ Several years later, during the inaugural meeting of the Bank at Savannah in March 1946, Keynes reiterated that ‘[i]f these institutions are to win the full confidence of the suspicious world, it must not only be, but appear, that their approach to every problem is absolutely objective and ecumenical without prejudice or favour’.Footnote ⁴⁸ And when, during US Senate hearings, Senator Taft questioned the realism of this depolitization, Secretary Morgenthau answered, ‘… the institutions will carry out their work as far as it is humanly possible to do it – and it depends on the people running it – on a strictly business basis’.Footnote ⁴⁹

Already at the creation of the Bank, there was little belief that formal legality would be capable of safeguarding the political pluralism and claims for universality that were high on the minds of its chief architects. Instead, the confidence that the Bank would act with the strictest political impartiality and uphold a position of neutrality beyond the rationality of project finance was vested in the personal virtue ethics of the Bank’s agents and the fostered culture of economic expertise. The prototype-hero of the new international economic order was a man ‘expert in [his] field, international in [his] outlook, and scientific in [his] approach’.Footnote ⁵⁰ This glorification of the ‘scientific man’Footnote ⁵¹ was essential to the Bank’s founding story. The old world, as described in White’s original proposal, was marked by ‘disastrous economic policy of each-country-for-itself-and-the-devil-take-the-weakest’, ‘disastrous nationalism’, ‘prejudice and fear’, ‘barbaric international economic relationships’Footnote ⁵² and the ‘law-of-the-jungle’, while the new world would be shaped by ‘wisdom’, ‘intelligence’, ‘expertise’, ‘boldness and vision’.Footnote ⁵³ If the prototype-hero of Bretton Woods was the expert, the prototype institutional design was a limited ‘committee of men’, ploughing through technical assessments, far away from the noise of plenary politics.Footnote ⁵⁴

Despite major changes in its practice in pursuing decades, the veil of neutrality and expertise has remained pivotal for the Bank.Footnote ⁵⁵ But when the USSR imploded and both the demand and potential for international liberal reform increased, the created schism between politics and economics was considered as a cumbersome limitation. The growing ambition of holistic liberal reform stood in stark tension with the Bank’s constitutional mandate and its conscious strategy to uphold an image as ‘quintessential technocracy’.Footnote ⁵⁶

2.2 1989 – The vanishing point of political neutrality?

In his post-Cold War Agenda for Peace, UN Secretary General Boutros Boutros-Ghali stated that ‘[i]n the course of the past few years the immense ideological barrier that for decades gave rise to distrust and hostility … has collapsed’.Footnote ⁵⁷ As an immediate corollary to this geopolitical shift, he noted that ‘[t]he time of absolute and exclusive sovereignty … has passed’ and that the interdependent world demands ‘good internal governance’.Footnote ⁵⁸ Several years before, George H.W. Bush had already declared the arrival of ‘A New World Order … where the rule of law supplants the rule of the jungle’.Footnote ⁵⁹

This New World Order rejuvenated the dream of global liberal reform and sparked a rapid expansion of the ambit and ambition of international executive action.Footnote ⁶⁰ In international legal scholarship, the dream of a New World Order crystalized into several jurisprudential projects – such as the emerging ‘right to democracy’Footnote ⁶¹ and the proposition to reorient international law in the direction of ‘liberal internationalism’Footnote ⁶² – synchronically stressing the relativity and opaqueness of the paradigm of state sovereignty. In both international politics and legal scholarship, the end of ideological bipolarity sparked a growing interest in defining substantive models of political order.Footnote ⁶³

While the Bank had already been a driving force in the structural adjustment of markets and economic policies – having moved away from its strict project-based approach for several years – the end of the Cold War opened up a range of new possibilities. In the wake of the political-ideological pluralism that has defined international institutional practice in preceding decades – and had been one of the core reasons for the Bank’s constitutional non-interference clause – the Bank grew increasingly interested in matters of domestic institutional reform. The downfall of its main competitor in development finance sharply increased their financial leverage for doing so. Barber Conable, Bank president at the time, provides the following analogy:

The assimilation of sub-Saharan African governments with colonized Native American tribes is ripe for critical discourse analysis, and also illuminates how the leadership in the Bank perceived the opportunities this geo-political shift provided.Footnote ⁶⁵ This moment coincided with the G7’s ‘Declaration on China’ in response to the suppression of the Tiananmen Square protests. Condemning the ‘violent repression in China in defiance of human rights’, and underwriting the ‘legitimate rights to democracy and liberty’ of Chinese citizens, the G7, with 52 per cent of weighted votes, agreed that, among other sanctions, ‘in view of current economic uncertainties, the examination of new loans by the World Bank be postponed’.Footnote ⁶⁶ Conable recalls the anxiety this caused in the development world as follows: ‘all the Part IIs [were] thinking [was], “My god, the next thing they’re going to do is they’re going to say, No more loans to Zaire or Ethiopia or somebody else who’s worse than China but doesn’t happen to be in the sights right now”‘.Footnote ⁶⁷ ‘[A]s a result of the demise of the Soviet Union as a force’, Conable observed, ‘there’s a lot of sensitivity. They’re [developing countries] looking, they’re watching us to see what we’re going to do next’.Footnote ⁶⁸

This increased leverage to demand substantive political and institutional reforms was matched by a growing demand by senior management in the Bank. A central figure here was Edward Jaycox, Vice President of the Bank and in charge of the sub-Saharan African region. He argued that a lack of development aid was not to blame for poor African economic performance – let alone the deeply embedded asymmetries of power and entitlement in the global economy – but rather the institutional and political backwardness of African states. Responding to the perceived problem that ‘[we] cannot get the money flowing unless reforms are taking place’, his envisaged project was to get ‘30-odd countries in Africa going full bore for … reform’ – ‘this would be ideal’.Footnote ⁶⁹ If ‘getting the money flowing’ was the Bank’s ideal, ‘full bore reform’ was its precondition. In Jaycox’s perception, however, the necessary political and institutional reforms would have to be instigated from Washington, since, in his view, ‘[African] governments are not very capable of making decisions’.Footnote ⁷⁰ For Jaycox, sovereign states in the South were considered either useless or obstructive in pushing through the inevitable reforms of state and market in line with the post-historical Western blueprint: ‘I still think that the real tension is between the agenda that we have and the agenda that the Africans have’, Jaycox observed, lamenting that ‘[i]f you go to Africa there’s no African minister, there’s no African, there’s hardly any African that has that agenda. They are looking for where their next square meal is’.Footnote ⁷¹ Considering that their ‘reforming mentality is fragile’, he concluded, African states would ‘need a lot of outside support to be successful’.Footnote ⁷²

Surely the conclusions drawn from several interviews should not be overstated,Footnote ⁷³ but these voices do, however, render explicit – more than any official policy document would – the manifest urge for holistic institutional reform, the sense of civilizational supremacy, and the Bank’s perspective on the agency and sovereign quality of decolonized states. The idea of backwardness that was embedded in the economic rationality of the Bretton Woods institutions from the very startFootnote ⁷⁴ increasingly extended to the domain of politics in the wake of the Cold War, thereby expanding the Bank’s reformist ambition deep into the fabric of the state. The aid-dependency of indebted African states and the absence of alternative sources for capital – neither from the Bank’s former ideological counterpart, nor from capital markets – set the stage for this deepening institutional reform.Footnote ⁷⁵

The paradigm of New World Order vocalized in the UN, the US state department and the growing body of liberal internationalist scholarship was explicitly grounded in political ideology – an ideological position that considered rationality and freedom as the essential telos in the dialectics of global history; a history of which the West was now emancipated.Footnote ⁷⁶ Such an explicit political position, however, was antithetical to the Bank’s and constitutional order and its carefully constructed image. As Jaycox noted regarding the perceived need and emerging potential for deepening institutional reform of sub-Saharan African countries: ‘[w]ell, we cannot get involved with the politics of this process. We do not use the word “democracy” very often’.Footnote ⁷⁷ Conable indeed acknowledged that engagement with processes of state reform would inevitably transgress ‘matters of concern to sovereign nations’, and that this program was ‘very sensitive in terms of sovereignty’.Footnote ⁷⁸ The post-Cold War juncture amplified the Bank’s financial leverage, which allowed the organization to extend its loan conditionalities to the domain of politics and legal-institutional design. This reformist gaze was immediately guided at the range of ‘new’ countries in Eastern Europe and Central Asia, which needed to be converted to the ideal of modern statehood.Footnote ⁷⁹ The problem, however, was that the Bank had to translate the politics of New World Order into its own vernacular of secular expertise. It is in this context that the idea of ‘governance’ emerged.

3.1 The birth of governance

The archives of the Bank and its digital collective memory provide a dense and chaotic collection of endless reports, operational guidelines, legal opinions, Bank procedures, research papers, loan documents, policy studies and board decisions. My attempt to contextualize the origins, the politics and the constitutive normative components of ‘governance’ and the ‘rule of law’Footnote ⁸⁰ in the Bank on the basis of these sources encountered a specific methodological issue: everywhere I looked, the concepts were already pre-determined, drawn from pre-existing knowledge. Simultaneously, however, they seemed in constant conceptual flux. Economic experts assert the meaning of ‘good governance’ self-referentially; through formal narratives of self-authorization in which the documents that introduce specific normative idioms function as their own source of authority.Footnote ⁸¹ The act of creation or rupture is always obscured, and thereby also the subjectivities and struggles that spark conceptual change.Footnote ⁸² Most authors link the birth of governance in the Bank with its 1989 study on sub-Saharan Africa, which claims that ‘[u]nderlying the litany of Africa’s development problem is a crisis of governance’,Footnote ⁸³ but nothing in this document helps us explain the choice for the term ‘governance’, which was granted the ‘dignity of archaism’ several decades before.Footnote ⁸⁴ What explains the renaissance of governance? Which substantive capacity does it carry? Which conceptual and political problems does it solve?

To start answering these questions, we have to go back to 1989 when Jaycox, in his words, met with ‘seven or eight really serious, civilian Africans up in a hotel in Baltimore’ to discuss the ‘rapacious [postcolonial] vampire state’, which was plagued by ‘tribalism, the shunning of professionalism, the shutting down of old active mines, the pushing away of young trained people’.Footnote ⁸⁵ The notion that economic depravity was a result of a dysfunctional postcolonial state, which was a central theme in the 1989 study,Footnote ⁸⁶ was an effective way for the Bank to immunize itself from the rising critique that its own agenda of structural adjustment had partly caused economic decline. Not the presence of the West, but its absence and not the deficiencies of the modernizing project, but pervasive tribalism, were framed as the causes of economic stagnation and decline. The problem was that the desired project of ‘modernizing’ the postcolonial state could not be politically articulated. Jaycox recollects:

The semantic distraction was instantly successful. ‘[T]he minute we got it’, Jaycox recalls, ‘it went right into [the 1989] Study [and] all of a sudden it was center stage’. While governance was considered ‘as close as we get to democracy’, it did not to mention it, and while rule of law reform was clearly aimed at reshaping domestic politics and legal-institutional configurations in the Global South, the concept was semantically depoliticized by reference to the ‘development role of the state’ rather than ‘the taboos of political involvement’.Footnote ⁸⁸ Through the euphemism of governance, the Bank could talk about politics in the language of neutrality. And when the concept ultimately revealed itself in the 1989 study, it did so behind the veil of economic expertise. In this neutralizing project, Shihata’s legal intervention proved pivotal.

3.2 The force of law – the role of the General Counsel in moments of change

In order to grasp the institutional salience of Shihata’s legal performance, it is necessary to situate the role of the General Counsel in the Bank’s broader organizational framework. Contrarily to the plenary assemblies in other IOs, the Bank’s Board of Executive Directors (Board) – its political body and main decision-making organ – counts only 25 members, consisting of six permanent members and 19 alternating directors, who represent mixed constituencies (clustered along lines of geography and income diversity).Footnote ⁸⁹ Voting powers in the Board are determined by the number of shares held by each country.Footnote ⁹⁰ This set-up evidently fits uncomfortably with the notion of sovereign equality and generates an institutional imbalance between the ‘developed’ and the ‘developing’ world – the so-called Part I and Part II countries – in the Bank’s decision-making process.Footnote ⁹¹ As a counterweight to the disproportional powers of ‘developed’ states, however, the Bank, as a financial institution, is heavily dependent both on ‘developing’ countries (which are the clients of its financial services) and private capital markets. In light of this dependency, it is pivotal for the Bank to ‘protect its reputation for technical excellence, professionalism and objectivity’.Footnote ⁹²

A second organizational friction is apparent in the relationship between the Board and Bank management. The Bank’s political directors, who are only appointed for a two-year mandate,Footnote ⁹³ are often no match for the expertise and decision-making powers concentrated at management level.Footnote ⁹⁴ As Shihata remarked, ‘board members have big titles like “executive directors” and big offices with assistants’, but ‘the real power is in the hands of Management’.Footnote ⁹⁵ This problem is apparent in the oral accounts of many executive directors at that time. While the Danish executive director stated that ‘the projects were just too complex for the Board as such to make a meaningful contribution’,Footnote ⁹⁶ his Canadian colleague more rhetorically remarked that ‘[t]he Board mainly dealt with transactions, which is a little like watching a parade go by through a keyhole’.Footnote ⁹⁷ This discrepancy, according to Patrick Coady, the US executive director, created an ‘issue … of trust’, urging him to conclude that ‘I don’t think the Board trusts Management’.Footnote ⁹⁸ The disconnect and distrust between the Board and its management amounts to a classical principle-agent problem, with the principle lacking both resources and institutional capacity to monitor and control its agents.Footnote ⁹⁹

The Bank’s Articles, I argue, are pivotal to this principle-agent relationship, containing both the original act of delegation and the agreed limits on the power and practice of senior management. In contentious times of change – marked by widening organizational oppositions – we notice that the ‘rule of law’ (in the form of the Articles) becomes a focal point around which executive directors gather,Footnote ¹⁰⁰ and it is in constitutional language that resistance against agent-slippage can be articulated and that trust can be restored. Most of the directors from the Global South who were present in the Board meetings during which the turn to governance was discussed turned to the language of legality in an attempt to curtail the Bank and to safeguard the sovereignty of their states from political interference.

Stressing the ‘huge potential for mischief’ implicated in the Bank’s turn to governance, Benhocine, an Algerian director at the time, asked for ‘reassurance that nothing could be done in the name of this paper to exceed or undermine the Bank’s legal mandate’, and particularly the political prohibition clause, which he held as ‘sacred’.Footnote ¹⁰¹ Benhocine called upon these legal restrictions to curtail the Bank’s ‘crusader types, those with seriousness who would see this as a tool to prosecute their causes [and as] an alibi … to meddle in our affairs’.Footnote ¹⁰² Hosny, an Egyptian national like Shihata, reiterated the ‘sensitivities of the issues involved, and the need for the management to ensure that we adhere strictly to the legal mandate of our institution’.Footnote ¹⁰³ Speaking for a group of mostly Asian countries, director Vibul added that ‘the legal restrictions from involvement in the political agenda serve to protect the Bank’s reputation and integrity’.Footnote ¹⁰⁴ Al-Assaf, from Saudi Arabia, equally stressed the dependency of the Bank’s technocratic credibility on its political agnosticism, stating that ‘the Bank operates under a number of limitations established by its Articles. Indeed, this is a source of its widely-acknowledged professionalism and technical judgment’.Footnote ¹⁰⁵ With the Gambian director Langley echoing that the Bank should be ‘avoiding those [governance interventions] that are legally outside [its] mandate’,Footnote ¹⁰⁶ the majority of directors speaking for the Global South had articulated their concerns regarding the Bank’s expanding agenda for political reform, and they had unanimously done so with recourse to legality.

These interventions signal a constitutional moment in the Bank during which the ‘rule of law’ was asked to mediate between the managerial push for deepening reform (as voiced by Jaycox) and the political demand for non-interference (provided by the Articles). Aligning with the indeterminacy critique and testifying to the inevitable porosity of legal norms, however, the Bank’s ‘mandate’, and the restricted domain of ‘political interference’, could evidently not be determined through formal legal hermeneutics (a task too massive even for Hercules). As I elaborate below, there was no outcome caused or demanded by law; no pure legal answer on where to draw the boundaries of the sovereign realm in the wake of the Cold War. One response to this observation would be to debunk the illusions of those clinging to the legal relic and to look beyond its formal promises for what it truly is: an empty vessel, passively carrying the ‘social’, the ‘managerial’ or the ‘political’ from place to place.Footnote ¹⁰⁷ Were the directors naïve in expecting so much from the Articles? Considering what is asked from the ‘rule of law’ in liberal imaginaries – to contain political praxis and power; to draw meaning from a Platonic, pre-performative realm – it indeed seems bound to disappoint. Only after moving away from these essentialisms do we see what the ‘rule of law’ is doing.Footnote ¹⁰⁸ Only then can we picture its presence in the Bank’s boardroom and appreciate the treasured artifacts through which it acts:Footnote ¹⁰⁹ a common language of contestation; a way for the Bank to align its growing political aspirations with its technocratic constitutional condition; a mode of shaping and regulating an emerging field of practice; and – ultimately – a path towards closure through the promise of constraint.Footnote ¹¹⁰

Departing from a formalist reading of the Bank’s founding treaty, however, the locus of this legal authority seems to limit its potential: Article IX of the Articles assigns the task of constitutional interpretation to the Board itself; the very body in need of an external legal resolution.Footnote ¹¹¹ While this procedure might be useful for the Bank to articulate a coherent interpretative position on its Articles in the context of a dispute with external actors, it is clearly insufficient in resolving interpretative disputes that divide the Board itself. What is needed in this scenario is a legalization of politics, not vice versa.Footnote ¹¹² For law to perform its pivotal functions, it needs to reside – or at least appear to do so (the notion of appearance returns across oral accounts) – outside the vagaries of partisan politics or managerial exigency. It is at this point that the Office of the General Counsel becomes visible.

As General Counsel, Shihata had consciously positioned himself as mediator between the Bank’s deeply-embedded institutional fault lines – ‘developed’ vs. ‘developing’ and Board vs. management – during its turn to governance. For years already, he had been struggling to obtain the social status of ‘spokesman’ for the Articles and personification of the ‘rule of law’.Footnote ¹¹³ In his career, he wrote more legal opinions than all his predecessors combined, and – ‘based on their certainty that they would not just get support of whatever Management says’ – more and more Board members started to rely on his legal advice, which, in Shihata’s view, ‘increased the relative importance of the role of the General Counsel’ in the Bank.Footnote ¹¹⁴ As one Managing Director of the Bank later put it, Shihata became ‘an institution within our institution’, so that ‘[n]o major policy decision [was] taken and no major meeting of [the] Board ended without one fundamental question always being asked: “What does Mr. Shihata think?”’.Footnote ¹¹⁵ In light of the asymmetry of information problem and the level of distrust between different factions within the Bank, Shihata positioned himself as reliable guardian of the original contract (‘what matters really in the end is that they take your word seriously because they see that you are consistent and not saying things just to defend one side or the other’).Footnote ¹¹⁶ To obtain this crucial institutional role, he argued, ‘the General Counsel should act as an independent legal authority. If he appeared to be part of the day-to-day management, his credibility as the Legal Advisor to the Board would be greatly diminished’.Footnote ¹¹⁷ The ‘rule of law’ that was asked to intervene during the Bank’s turn to governance did not have the shape of abstract Articles, but of an institutional performance that Shihata had perfected.

On the basis of the Bank’s institutional configuration and Shihata’s accounts, we can distil several features on which this authority of the General Counsel seems to hinge: a promise of formalism (‘I have acted as spokesman for the law’); a slow process of precedent-building (‘they [need to] see that you are consistent’); a solid appearance of impartiality (‘the General Counsel should act as an independent legal authority’); a stern resistance to the extra-legal (‘[my] willingness throughout to leave if the rule of law was ignored’); and – as a result of all these virtues – the recognition by political actors that in law they could place their trust. Shihata was well aware of the fragility of law’s mode of existence within the Bank and consciously constructed the potency of his expertise; always transporting this sacred artifact, this heavy, massive and homogenous object of value – the ‘rule of law’ – into every room he entered and every document he signed; never acting as himself and never immersed in the urgency of immediate concerns, but exclusively embodying ‘the law’, which could only be spoken for in the cold vernacular of the competent and disinterested expert.Footnote ¹¹⁸

In a recent interview, Leroy confirms this importance of the General Counsel in the Bank, as well as the need for legal interventions to be ‘perceived as neutral’, describing her role as follows:

Leroy’s account reaffirms the ‘miraculous’ power of the General Counsel to embody and renew the invisible ‘contract’ that weaves the scattered factions of the Bank together (that which ‘makes this institution work’). Legal praxis performs a pledge of neutrality; aligning scattered expectationsFootnote ¹²⁰ and tying (in Shihata’s words) the ‘changing circumstances’ of the present to the promises of the past.Footnote ¹²¹ This explains why the ‘rule of law’ – understood as a set of discourses and practices, rather than as a normative ideal – is particularly potent in times of radical change, which are marked by insecurity, distrust and widening institutional divisions. The turn to governance constituted such a momentum. These oral accounts of former Bank directors and two General Counsels not only allow us to identify the locus of legality, but also illuminate the fragility of its existence as well as the preconditions for this form of expertise to gain traction and to operate as a ‘competent performance’ with potent institutional effects.Footnote ¹²² This enriched understanding of the ‘rule of law’ in the Bank puts the nature and power of Shihata’s intervention in sharper focus.

3.3 Legalizing change – the rule of law and the illusive delineation of politics

As already described, the move to governance created a lot of nervousness among the developing countries in the Bank’s Board. In the preceding section, I described the pivotal institutional role of the General Counsel in mediating the tension between the growing reformist ambition of the Bank and its promise of political neutrality. In what follows, I provide a substantive analysis of the legal interventions through which Shihata legalized the Bank’s agenda of ‘governance’ reform in light of the political prohibition clause, thereby paying specific attention to the performative nature and textual strategies of his legal opinions.Footnote ¹²³ Additionally, I add insights from Leroy’s recent legal memorandum, which extended the Bank’s ‘governance’ praxis to the domain of criminal justice reform (CJR) in 2012.Footnote ¹²⁴ Both legal opinions provide a rationalization and legitimization of the Bank’s expanding powers by introducing (and extending) the notion of ‘governance’ and translating the program of state reform into a depoliticized language of modernity, efficiency and objectivity. More generally, both illustrate the performativity of the ‘rule of law’ in the Bank. As I will show, this performativity is marked by a tension between the promise of legal formalism in applying the Articles and the image of the ‘creative lawyer’,Footnote ¹²⁵ whose role is to provide a language of justification for managerial concerns external to law.Footnote ¹²⁶

Exploring the first tension, it is important to highlight the performative nature of Shihata’s opinion, which rendered the managerial turn to ‘governance’ and ‘rule of law’ reform an object of legal and constitutional inquiry.Footnote ¹²⁷ Aware of the ‘considerable debate’ that the issue of governance has sparked ‘both within and outside the Bank’, Shihata’s primary aims were to ‘explain the legal framework suggested for the Bank’s dealing with the issue and to clarify the legal limits’ in order to ‘ensure consistency with its legal mandate and the requirements of its Articles of Agreement’.Footnote ¹²⁸ A first remarkable textual feature in Shihata’s opinion is the very elaborate exposition of the Bank’s Articles – both its limited mandate and the political prohibition clause – to which he dedicates eight pages. This prominent presence of the Articles enforces his qualification of the Bank as ‘an international organization, the legal capacity and the mandate of which are limited by the purposes stated in its Articles and by the provisions excluding political considerations’.Footnote ¹²⁹ Underlining the limited mandate and capacities of the Bank, as granted by its founding treaty, this argument exemplifies the functionalist paradigm in the law of IOs, according to which the competences of IOs are the product of an act of attribution from a collective principle (the member states) to an agent (the IO) in the form of a multilateral treaty.Footnote ¹³⁰ This consent-based approach is reiterated in his claim that the Articles – formalizing the act of attribution – should be qualified as an international treaty, to be interpreted in conformity with the general rules of international law, as codified in Articles 31–33 of the Vienna Convention on the Law of Treaties (VCLT).Footnote ¹³¹ Corollary to the claim that the Bank possesses only a limited set of competences attributed in the Articles, the opinion states that the Bank ‘cannot venture to act beyond its purposes and statutory obligations without the risk of acting ultra vires’.Footnote ¹³² In light of these limited competences, ‘attractive matters as political reform and democratization’, he concludes, ‘cannot in my judgment be satisfied without an amendment of the Articles’.Footnote ¹³³

To grasp the performative character of this position, it is essential to reiterate that Shihata does not speak in the name of an institutionalized (international) judiciary, nor is he being called upon to address a legal dispute.Footnote ¹³⁴ The scope of the Bank’s praxis and power is not structurally subjected to legal or judicial review (either external or internal). As a corollary, the legal constraints on management and the institutional weight of legal justificatory practices are not shaped by parameters endogenous to law (e.g., legal hermeneutics, validity or enforcement) but contingent upon the social potency of the actors involved; the problems they seek to resolve; the alliances they manage to assemble; the textual and discursive strategies they employ and the institutional equilibria that structure their engagement. The Bank continuously expands its operational praxis without legal involvement (e.g., in public health, gender or education), often far beyond the apparent confines of its delegated powers as provided by the Articles. For reasons set out above, however, its expansion into the fields of ‘governance’ reform was subject to important legal interventions. Rather than constitutionally constraining the praxis of the Bank, the ‘rule of law’ served as an essential object of value in resolving issues that were fundamentally extra-legal.

In order for the ‘rule of law’ to perform these functions, Shihata’s first textual move was essential: the Bank needed to be qualified as a legally constituted and circumscribed object, inevitably at risk of acting ultra vires.Footnote ¹³⁵ Therefore, rather than interpretatively revealing (or discovering) the formal legal boundaries for the operational practice of the Bank, Shihata performatively asserted them. Doing so, the opinion articulated the institutional identity of the Bank in legal terms and elevated Shihata’s own institutional position to a site of constitutional review:

As a result of this assertive act, the contentious move to ‘governance’ reform was – miraculously– transmuted into a legal issue;Footnote ¹³⁷ a qualified object of constitutional reflection and formal legal analysis, defined by the promise of constraint. Shihata had to vigorously hold this position, resisting the pressure by the Bank’s management. He later recalls:

Shihata’s aim, in short, was not merely to discover legal answers to the issue of ‘governance reform’, but to qualify this expansion as a constitutional concern. Before legalizing the Bank’s expansion, he needed to assert the ‘rule of law’ itself.Footnote ¹³⁹

Simultaneously, however, the central question in the opinion – to ‘identify aspects of governance which are relevant to the Bank’s work and may therefore defensibly fall within its mandate’Footnote ¹⁴⁰ – could not be legally determined. Neither the Bank’s mandate (‘development’) or its limits (the ‘political’) have any identifiable internal legal meaning. In light of this indeterminacy of the Bank’s Articles, Shihata argued that the Articles should be interpreted ‘like the constitution of a state’,Footnote ¹⁴¹ driving him away from the VCLT articles to what he describes as a ‘purposive, functional interpretation’,Footnote ¹⁴² or an ‘evolutionary dynamic interpretation’,Footnote ¹⁴³ in servitude of ‘the needs of the Bank’s business’Footnote ¹⁴⁴ and in light of ‘changing circumstances’.Footnote ¹⁴⁵ In light of these self-referentially constructed needs, the legality of governance reform was considered self-evident: ‘the Bank’s increasing concern with issues of governance [is] a logical last step in its gradually expanding involvement in policy reform’.Footnote ¹⁴⁶ In shifting from a ‘contractualist’ to a ‘constitutionalist’ perspective on the law of IOs,Footnote ¹⁴⁷ a new range of hermeneutic tools became available. ‘The doctrine of implied powers’, Shihata argued in setting out his interpretative framework, ‘is now generally considered part of the customary law of international organizations’.Footnote ¹⁴⁸ This heuristic of ‘implied powers’, however, was substantively modified by Shihata. While the ICJ’s Reparations for Injuries and Certain Expenses Advisory Opinions – the formal nest of the implied powers doctrine – demanded a nexus between attributed and implied powers – shifting from ‘necessary implication’ to the more obscure criterion of ‘appropriateness’ – Shihata’s understanding of the concept, in conjunction with his teleological approach, was that any reading of the Bank’s mandate and purposes is legally valid as long as it ‘does not conflict with the “textual” approach, that is, with the ordinary meaning of the terms used in the text’.Footnote ¹⁴⁹ In other words, the demand for a positive nexus between the legal text and the implied powers in the case law of the ICJ was transformed by Shihata into a negative criterion: legal interpretation would confirm the Bank’s business exigencies as long as this did not contradict the explicit wording of the Articles. This extremely permissive hermeneutic allowed Shihata to legalize the Bank’s continuous managerial expansion.Footnote ¹⁵⁰

To understand how this doctrine operated, it is essential to underline that the telos underpinning Shihata’s teleological approach and his notion of implied powers was endogenously produced.Footnote ¹⁵¹ It was the Bank’s own 1989 study on sub-Saharan Africa that expanded the scope of development (the Bank’s telos) to the proper configuration of the ‘modern state’. Shihata’s opinion grounded its purposive interpretation in what it described itself as a ‘landmark study on the development of sub-Saharan Africa’, which presumably provided a ‘more comprehensive treatment of development issues’.Footnote ¹⁵² This highlights the pivotal role of legal interpretation in the self-referential expansion of the Bank’s social system: Shihata’s opinion did not only respond to ‘changing circumstances’ through the voice of legal reason, but also constitutionally qualified those, conferring upon them the ‘practical universality of that which is official’Footnote ¹⁵³ and legitimizing this operational practice on the grounds of its very own existence. In short, through the liberal hermeneutics of constitutional interpretation, Shihata, rather than serving as constraining ‘constitutional irritant’, provided a justificatory framework for managerial expansion; an enabling legal language for growth.Footnote ¹⁵⁴

It is through this paradigmatic contradiction between Shihata’s formalist promise and the managerial manifestation of it that the constraint of political neutrality was redefined. On the one hand, Shihata reiterated the importance of the political prohibition clause, linking it to the ‘principles of equality of states and non-intervention in domestic affairs, enshrined in the UN Charter … and high in the minds of the original drafters who envisaged universal membership in the institution’.Footnote ¹⁵⁵ The Bank, he argued, should ‘avoid the vagaries of partisan politics’, and ‘technical considerations of economy and efficiency, rather than ideological and political preferences, should guide [its] work at all times’.Footnote ¹⁵⁶ This formal delimitation was necessary to restore the trust of the Bank’s political directors and to maintain its status as a ‘quintessential technocracy’.Footnote ¹⁵⁷

On the other hand, the memorandum argued that the dichotomy between politics and economics had ‘lost its original clarity’, and that ‘for the purpose of the Bank’s Articles’, all matters of ‘city, state, government and public policy’ could then be taken into account as long as an ‘objective analysis of the Bank’s staff’ – on the basis of ‘established doctrines and theories’ – established their ‘direct and obvious economic effects’.Footnote ¹⁵⁸ While framed as a series a disengaged observationsFootnote ¹⁵⁹ and a logical continuation of previous practice, this represents a major constitutional leap in the Bank: the ideal of political neutrality seized to apply to all matters of state that could be framed in a causal economic relationship, and the ‘established doctrines and theories’ for econometrically measuring states were granted an enabling constitutional quality.Footnote ¹⁶⁰ Whenever matters of domestic political order could be translated in the language of economic expertise, they would lose their political status and be brought under the ambit of the Bank’s reformist gaze. This translation of ‘politics’ obtained a strong symbolic power in the Bank, and became internalized as the proper way to think about neutrality and politics.

Today Shihata’s opinion on political interference has obtained the institutional status of constitutional precedent.Footnote ¹⁶¹ His translation of the political prohibition was recently taken one step further by General Counsel Leroy in her legal opinion on CJR in 2012. Interestingly, this legal opinion adopts Shihata’s interpretative structure and strategy: it displaces the act of rupture or decision by reference to external changes in ‘circumstances’ or ‘conditions’,Footnote ¹⁶² while simultaneously elevating the Bank’s endogenous economic research to the level of axiom. The opinion relies on Shihata’s legal strategy in three important ways. First, the opinion reiterates that interpretation of the Bank’s Articles has to be ‘purposive, guided by a broad view of the objectives under the Articles and examined against the evolving understanding of development’.Footnote ¹⁶³ Second, the argument links this evolving telos on which this interpretative scheme is built to the Bank’s own epistemic practice, in this case the 2011 World Development Report on ‘Conflict Security and Development’.Footnote ¹⁶⁴ Third, arguing that ‘justice reform’ has ‘long been considered as forming part of the Bank’s mandate’, Leroy argues that its involvement in the CJR is only a ‘logical continuation’ of previous practice.Footnote ¹⁶⁵ When turning to the matter of politics, however, Leroy argues that Shihata’s precedent is overly rigid: given ‘the difficulties of establishing causality in any development project’, the memo argues, the ‘direct economic effect’ test is overly cumbersome, and ‘the Bank must be satisfied that interventions in areas with political dimensions, such as criminal justice, are grounded in an appropriate and objective economic rationale’.Footnote ¹⁶⁶ The opinion vaguely summarizes the constitution of an economic rationale as ‘an amalgam of expert objective analysis of the empirical evidence and logical application of theory’.Footnote ¹⁶⁷ This rationale, Leroy further notes, ‘will no doubt further evolve in tandem with the evolution of our understanding of the linkages between economic development and crime’.Footnote ¹⁶⁸

In sum, with the turn to ‘governance’ reform, the principle of political neutrality in the Bank was substantially modified. Performative legal interventions – oscillating between legal formalism’s promise of constraint and the teleology of managerialism – proved pivotal to this process. According to the justificatory legal framework that was adopted, a practice of domestic institutional reform would fall outside the sphere of political interference as long as it was grounded in an ‘appropriate and objective economic rationale’. This approach did not only highlight certain political reform practices – i.e., those occupied with constructing an ‘appropriate framework for business development’ – it also obscured others: Shihata’s legal precedent was both instrumental in introducing market-friendly institutional reforms, and in insulating the Bank from the transnational human rights agenda.Footnote ¹⁶⁹

By following the formal schémas of constitutional reasoning and promising the solemn adherence to ‘correct’ legal interpretation, Shihata had claimed the symbolic power to officially redefine the ontological boundaries of the ‘political’ in the Bank. As Bourdieu notes regarding the world-making powers of formal legal judgment more generally:

Although aimed at a different conceptual object, Bourdieu’s recourse to ‘magic’ is not too different from Leroy’s description of her own power as ‘miraculous’ – both refer to the extraordinary capacities of legal discourse in universalizing specific normative proclamations and depoliticizing the substantive choices they are based on. This insight highlights the role of the legal opinions in legitimizing the Bank’s turn to state reform and in translating its political tenets in the language of economic expertise – the language of the Bank’s founding story. Regarding the implementation of governance reform, Hosny, Egypt’s executive director, claimed that ‘[t]he Bank can certainly assist through dialogue and persuasion without treading on the political sovereignty of borrowers’.Footnote ¹⁷¹ Central to both the translation of politics, and this envisaged project of persuasion, was the proliferation of epistemic practices that defined, measured and quantified the ‘rule of law’ and the ‘modern state’ in pursuing decades.