4

National Regulation of Private

Military Companies

4.1 Introduction

Acknowledging the utility of PMCs to states in this age of privatization, the

increasing reliance placed on PMCs by states as they strive to maintain an
adequate defense capacity and the simple fact of their existence, states stand
in a difficult and conflicted situation vis-à-vis the PMC industry. While it is
often expedient for a state to condemn the actions of a given PMC in a for-
eign state, the same state will undoubtedly be reliant on a raft of other PMCs
(or perhaps the same PMCs) for the successful implementation of its defense
policy. Accordingly, the fundamental question to be addressed in this chap-
ter, expressed pragmatically is, how can states impose consistent controls on
PMCs that will simultaneously stymie the actions of rogue PMCs and allow
the state to further its policy objectives via PMCs and not jeopardize the util-
ity of PMCs to that state’s defense agenda?
In this chapter we first examine issues surrounding regulation and regula-
tory design. After a review of the potential of self-regulation, we examine
two voluntary codes as attempts at self-regulation. Then we examine the
broader argument for regulation using the cases of PMC activity in PNG and
Iraq. The remainder of the chapter considers the variety of regulatory
regimes that have been advocated and adopted by various states, namely
New Zealand, US, UK, and South Africa, and assesses the pros and cons of
each model in terms of whether they effectively achieve their regulatory
goals and their potential contribution to developing appropriate and effec-
tive regulation of the PMC on the national front.

4.2 Regulation and regulatory design

Regulation is a controversial topic. Even what is meant by “regulation” is

disputed. Generally, regulation can mean any one of the following: to gov-
ern according to rules; to have state activity controlling other activity; an
instrument of policy (as contrasted with incentive-based instruments); an
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B. Sheehy et al., Legal Control of the Private Military Corporation

© Benedict Sheehy, Jackson Maogoto, and Virginia Newell 2009
 National Regulation of Private Military Companies 111

instrument for shaping of markets to include incentives, and legal rules in a

command-and-control schema possibly including some form of delegated
authority.1 In the discussion of the regulation of PMCs that follows, the term
will be used in the second, third, and fourth senses: that of state control of
market activity, an instrument of policy, and an instrument of market-based
incentives.
Regulation is controversial because of the philosophical commitments it
reflects, not only with respect to economics, social policy, and social philos-
ophy, but also because of the views of constitutionalism it entails. As to the
first set of disputes, scholars and legislators committed to neoliberal views
tend to regard regulation with the same suspicion that they view all gov-
ernment.2 Those scholars and legislators who have a preference for a social
democratic model believe that markets, like many other parts of society,
function better with some level of regulation.3 In the situation at hand, a
total free market in PMCs would be the same as a Hobbes all-out war of all
against all, while at the opposite extreme the government provides and con-
trols all aspects of military, from buttons to bullets and plunder to peace
talks. Clearly, the situation in which we find ourselves is somewhere in the
middle.
The issue of regulation is controversial among legal scholars because of
commitments concerning constitutional law. Following Dicey’s dual foun-
dation model composed of its parliamentary or legislative supremacy and
Rule of Law, regulation which involves the delegation of powers to nonpar-
liamentary bodies is immediately problematic and suspect4—not to reiterate
the concerns with the whole notion of the Rule of Law, discussed in the pre-
vious chapter. Accordingly, regulation, where it is considered a delegation of
parliamentary oversight activity, runs contrary to the legal doctrines identi-
fied by Dicey.
Once one has made decisions concerning the above matters, decisions still
need to be made concerning the empowering legislation: Will it be form-
based (legal rules) regulation or economic effect-based (outcome) regula-
tion,5 or some newer type of regulation6 such as “beyond incentive”-based
regulation which capitalizes on parties’ voluntary efforts to coordinate and
solve problems.7 And still other questions about the structure and view of the
regulator will remain.8 For example, will the regulator be an independent
agency or mere governmental department, or some type of an external self-
funded agency?9 Decisions concerning the nature of the regulation and reg-
ulatory model need to be made to determine whether it will follow an
inquisitorial, or adversarial,10 or ombudsman model;11 follow policy or
address matters ad hoc;12 and finally, whether control of the agency will be
ministerial or by judicial oversight.13 In sum, it is not a simple matter to con-
ceptualize and design appropriate, effective regulation. This level of difficulty
is identified without having identified the substantive issues of the regula-
tion, of objectives and entities. Once these are identified and considered,