The global crisis triggered a vast programme of financial markets reform, including a new regime for over-the-counter (OTC) derivatives which requires hitherto private contracts to be cleared through central counterparties (CCPs). This article argues that the interaction between underlying law and this new regulation needs to be addressed in order to advance the objectives of the reforms. The starting point for the argument is the two techniques that underpin CCPs: limited access and posting assets, or margin. Having established that access via intermediated or ‘client’ clearing will become increasingly important with mandatory clearing, the article explores the impact of client clearing on the legal rules governing the margin posted by users of a CCP. The detail of the interaction between European regulations on CCP clearing and the UK rules on client assets is considered as an example. The dilemma identified arises because regulation, designed to improve financial stability by mandating clearing, may potentially undermine certain ways in which CCPs promote that outcome. The article concludes that the interaction between underlying law and new regulation needs to be accounted for and addressed at EU level, in order to safeguard the functions that attracted regulators to clearing in the first place.

click here for full text via CUP [ON CAMPUS]
click here for full text via CUP [OFF CAMPUS]

 We evaluate the diverse legal rules governing CCP default management by investigating the extent to which they provide adequate legal certainty. The paper discusses the processes of clearing and collateral posting in detail, establishing the nature of the rights which CCPs rely upon when managing defaulting members. We then consider the relationship between CCP default management processes and insolvency law, as defaulting members are sometimes (but not always) insolvent. This leads to an evaluation of the legal issues arising along a typical default timeline of default declaration; returning to a matched book; and use of the defaulter’s collateral.

click here for full text

click here for access via Westlaw [ON CAMPUS]
click here for access via Westlaw [OFF CAMPUS]

The post-crisis global regulatory regime for the over-the-counter ('OTC') derivatives markets mandates the use of central counterparties ('CCPs'). CCPs serve markets by becoming buyer to every seller and seller to every buyer. Two techniques, selective membership and collecting margin, are central to CCPs working safely. The objective of this article is to use a legal perspective to consider how G20-led reforms to the OTC markets interact with, and complicate, these two techniques. The article starts by establishing that arrangements allowing CCP members to access clearing service for their clients (‘client clearing’) will become increasingly important as a result of regulatory reform, because parties unwilling or unable to become members will now require access. The article then demonstrates how client clearing complicates the legal underpinnings of CCPs, in particular as they relate to the provision of margin. The problematic interaction between the new clearing regime and the UK rules on client assets is considered as an example. The article concludes that these legal complexities need to be addressed at EU level in order to safeguard the functions that attracted regulators to clearing in the first place.

CLICK HERE TO DOWNLOAD FULL TEXT [SSRN] | [LSE COPY]

The September 2008 collapse of the Lehman Brothers group marked the nadir of the global financial crisis. While the regulatory aftermath has been extensively debated, the effects of the case law that arose from the insolvency have not. This paper explains the need to redress the balance. It starts by considering the quantity and qualities of the Lehmans case law, examining why the 30 plus decisions handed down by the English courts enjoy an unusually high precedent-setting potential. The paper proceeds by analysing the precedential effects of these decisions, and it reports on a recent workshop held at the London School of Economics that met to consider this question. Subject to the event’s terms of engagement, the paper draws out several themes from the discussion, including the impact of the Lehmans cases on the principles of contractual interpretation, the law of trusts and insolvency law. By way of conclusion, it is submitted that the impact of Lehmans case law reaches far beyond that particular insolvency, to worldwide users of standard form documents, the global financial markets and the common law itself. Seen in this light, the Lehmans case law is a significant, but under-appreciated, side-effect of the global financial crisis.

CLICK HERE TO DOWNLOAD FULL TEXT [SSRN] | [LSE COPY]

Regulation has been at the centre of the financial debate since the global financial crisis, but a full appreciation of the lessons of the crisis also requires account to be taken of private law. This article begins by considering the overlapping functions of private law in the financial markets, including its capacity to address the unprecedented and complex problems that arise during crises and their aftermath. Focusing on the role of property law in insolvency proceedings, we use four case studies to evaluate the wider implications of this function of private law. Our research suggests that the use of private law to manage the fall-out to the recent crisis has come at a price, which is the impact on a number of fundamental legal principles that underpin the markets. We conclude that the continued robustness of private law requires a more proactive approach from various constituencies.

click here for full text via OUP [ON CAMPUS]
click here for full text via OUP [OFF CAMPUS]

click here for full text

This paper uses new research into the derivatives markets to develop our understanding of standard form contracts as transnational law and to show how transnational law theory may be usefully informed by empirical work. Traditionally, it has been assumed that international business communities seek to avoid the courts. However, the paper shows that the national courts play a prominent role in adjudicating disputes involving derivatives. Basing the discussion on the detail of these decisions by the English courts, the paper demonstrates that adjudication does not necessarily undermine widely used standard form contracts, and that it may even reinforce practices that underpin them. This is particularly the case where there is imperfect co‐incidence between a trade association's members and a standard form contract's users. Having explored recent cases, the paper reconciles its findings with a more open and imaginative account of the role of national courts within transnational law theory.

click here for full text via Swetwise [ON CAMPUS]
click here for full text via Swetwise [OFF CAMPUS]

This is a working paper exploring the private law underpinning CCP clearing in the financial markets. It argues that a private law analysis can help to explain the capacity of CCPs as a legal device. It makes particular reference to EU and US regulatory reform in the wake of the crisis, following on from the G20 statements that OTC derivatives should be cleared on CCPs where possible.

click here to down full text [SSRN] 

In the wake of the financial crisis considerable momentum has built up behind proposals to extend central counterparty (CCP) clearing in the over-the-counter derivatives markets. However, implementation is proving complex. This paper argues that one cause of this complexity is that the public sector is seeking to incorporate into legislation (and require the wider use of) a privately owned and operated risk management mechanism. As a matter of law, the paper argues that CCP clearing can be understood as a market-generated ‘legal device’; in other words, one designed to support the markets by means of the interaction of various private law techniques. Following this analysis through, the paper highlights the benefits and drawbacks which derive from the legal techniques underlying CCP clearing (standardisation of contracts, asset-backing, netting and so on) and argues that these qualities are inherent to the device. It concludes that the inherent capacity of CCP clearing gives rise to a qualitatively different set of challenges for policymakers to those arising from technical implementation and it explains that both types of problem need to be addressed if the CCP prescription is to be effective.

click here for full text via CUP [ON CAMPUS]
click here for full text via CUP [OFF CAMPUS]

A number of high-profile campaigns relating to diversity have focussed on the large law firm sector since the mid-2000s. Reflecting what has been called the ‘diversity approach’ to equality management, they have emphasised voluntary action based on business case reasoning. This paper considers the impact of these campaigns in practice, focusing the dynamics of diversity policy-making within firms. Drawing upon empirical work conducted in large law firms, it explores in particular the perspective of newly appointed diversity staff who have day to day responsibility for diversity policies in the majority of large law firms. It discusses research findings that show while certain policies were being implemented across the large law firm sector, much turned on the position of diversity staff within firms and their ability to conduct in-house negotiations effectively, to compromise and downplay the potential for disruption to the status quo. On the basis of this research I consider the ongoing debates about holding law firms to account with respect to the diversity of their workforce. While the strategy of pressurising firms to disclose ‘diversity data’ seems to gather pace the paper recommends an open discussion about the goals of diversity policy making as a pre-condition of greater accountability.

There has been a long line of official initiatives seeking to address the poor record of the solicitors' profession on diversity. One of the latest, the Law Society's 2009 Diversity Charter and Protocol, attempts to harness client pressure as a way of bringing about change. The objective of the paper is to assess this strategic use of ‘demand‐side diversity pressure’ in the solicitors' profession, contextualizing the strategy and using different perspectives to assess it. The paper first considers the strategy as a development of ‘business case’ arguments for diversity and explores the implications of scholarly objections to this approach. Secondly, the paper uses empirical data from the City law firm sector to explore the nature and practical effects of demand‐side diversity pressures within law firms. I conclude by considering the prospects of the Law Society's scheme having a meaningful effect, factoring in the possible effects of the ongoing global economic crisis.

click here for full text via Swetwise [ON CAMPUS]
click here for full text via Swetwise [OFF CAMPUS]