Ethnic Networks, Extra-legal Certainty and Globalisation: Peering into the Diamond Industry

AS THE CONTRIBUTORS in this volume colourfully illustrate, it is no small task to ensure legal certainty in transnational commerce, and the challenge becomes increasingly acute as commercial exchange becomes ever more globalised. One might expect, however, that the diamond industry would remain largely unaffected by this trend of globalisation. Because diamonds are easily portable, universally valuable and virtually untraceable, state courts are incapable of enforcing executory contracts for diamond sales (Richman, 2004; 2006). In other words, the diamond industry has never enjoyed legal certainty. Instead, it has relied on extra-legal certainty—a non-state system of contract enforcement that rests on personal exchange and reputation mechanisms. What then does globalisation mean for diamond merchants? In fact, globalisation has had, and is having, a striking impact on the diamond industry, and the millennia-old distribution system that relied on multiple layers of personal exchange is showing cracks, or growth marks, depending on the perspective. This chapter explores how globalisation has affected the diamond industry’s distribution networks, and some extrapolation might inform how globalisation affects not just legal certainty, but even a well-developed system of extra-legal certainty. As increasing transnational commerce pushes many industries away from state-sponsored law and towards new forms of private ordering (Appelbaum et al, 2001),