LL4H4      Half Unit
International Financial Law

This information is for the 2025/26 session.

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International Financial Law addresses the commercial, property, and insolvency law dimensions of international financial transactions. Since the 1980s, this area has evolved into a distinct field in several key respects, gradually detaching from general commercial and insolvency law. This development was initially driven by a profound transformation in banks’ business models, following the collapse of the Bretton Woods system and the consequent removal of capital controls—marking the advent of global finance.

The contemporary deployment of commercial law mechanisms by financial institutions to optimise risk management and maximise returns remains poorly understood among generalist commercial lawyers. The economic rationale and policy choices underpinning these mechanisms demonstrate how law can actively support the development of global financial centres. For many decades, English and New York law have held a dominant position in transactions where parties were free to choose the governing law. However, recent trends indicate a gradual shift towards other jurisdictions, particularly those in Continental Europe and Asia, which are rooted in civil law traditions. Certain legal aspects—especially those related to insolvency—are necessarily governed by the law of the insolvent party’s jurisdiction, rendering choice of law unavailable. International finance is, therefore, marked by the interplay between jurisdictions grounded in different legal traditions.

Part I: Introduction to the Financial Market (1 lecture)

The opening lecture introduces students to the structure of the financial market. It identifies the principal actors, their objectives, and the evolution of their business models. It also outlines the core types of transactions used by financial institutions—such as banks, insurers, and brokers—to pursue objectives including speculation, security, hedging, and economic or regulatory arbitrage. The lecture explores the role of law and regulation within this framework. Despite the market’s complexity, academic analysis reveals that only a limited number of fundamental transaction types underpin most financial operations, albeit under various guises. The primary objective of this section is to demystify the financial market by elucidating its logic and basic operational mechanisms.

Part II: Transaction Types and Risk Management (4 lectures)

The second part investigates how financial market participants employ four basic transaction types to manage the fundamental tension between risk and return. These transactions are used to generate specific legal effects: risk creation, risk transfer, and risk mitigation. Risk mitigation, in particular, is both highly technical and central to financial law, as it addresses credit risk associated with counterparty insolvency and market risk linked to price volatility. The lectures in this part analyse the principal methods of risk mitigation, including personal surety, derivatives, security interests and financial collateral, asset-backed securities, and techniques of risk compression such as set-off, netting, and clearing.

Part III: Internationalisation of Financial Transactions (1 lecture)

This section advances the students’ understanding of financial transactions within an international context. It addresses the globalisation of financial markets and the corresponding legal challenges. Although capital can move across borders with relative ease, legal systems remain largely national in scope. The resulting lack of international coordination (‘territorialism’) contributes to legal uncertainty, inefficiency, and reduced liquidity. Conversely, international convergence (‘universalism’) may erode national legislative authority over financial activity. Financial institutions may exploit fragmented legal regimes for arbitrage purposes, while also benefiting from legal harmonisation through enhanced cross-border operations and deeper capital markets. This part of the course explores the principles governing the determination of applicable law, and critiques the limitations of a purely conflict-of-laws-based approach. Students will consider the difficulties posed by the failure of cross-border financial institutions and assess the case for binding international legal instruments. They will also evaluate the implications of the increasing scope for parties to choose the applicable law.

Part IV: Complex Financial Structures (3 lectures)

This section examines how the foundational transaction types may be combined to create complex legal structures, such as securitisation, the indirect holding of financial instruments, and certain forms of crypto-assets. These structures often involve cross-border elements, thus engaging the laws of multiple jurisdictions. The lectures will analyse the legal risks inherent in such financial engineering and examine proposed legal solutions to mitigate these risks.

Part V: Legal Policy in Financial Law (1 lecture)

The final lecture applies the knowledge acquired throughout the course to core questions of legal policy. Legislative and regulatory choices are rarely neutral, often shaped by competing interests. Policy must strike a balance between ensuring sufficient liquidity for the broader economy and avoiding excessive risk accumulation—particularly in the form of liquidity and leverage—in the financial system. This section explores various policy manifestations of this tension, with a particular focus on the emergence of international ‘safe harbour’ protections as embodied in the ISDA and GMRA master agreements.

Common Law or Civil Law?

Since parties for their transactions often choose English or New York law (to the extent allowed), the Common law conception is of great importance to the financial market worldwide. However, in terms of numbers, most jurisdictions follow the ideas and concepts of Civil law. Therefore, in this course, Common law and Civil law will be juxtaposed so as to see the commonalities and differences and to grasp the difficulty of combining both in the context of international transactions. The course will not be taught specifically on the basis of Common law rules. Rather, teaching is based on principles, using examples drawn from Common law, Civil law, EU law and other international standards, to foster a broad, adaptable and transposable understanding.

Lectures

1st Part: Introduction

1. 1: Introduction to financial law and the financial market

• The financial market, commercial law and regulation
• The interaction of law and regulation: capital controls,
  business models and new risk mitigation tools
• Basic and complex types of financial transactions
• National and international law

2nd Part: Basic transactions

1. 2: Creating and transferring risk

• Excursus 1: Nature of banking; the bank balance sheet
• Creating risk by raising capital: loans (incl. syndicated), deposits, shares (equity), bonds (debt)
• Excursus 2: (Security) Trustees
• Nature of securities
• Primary and secondary market; trading and settlement
• Funds
• Transferring risk: Assignment, novation, emulating transfers
• Convergence of methods and regulatory arbitrage

1. 3: Risk mitigation I and II – From security interests to financial collateral

• Security interests (pledge, mortgage, fix and floating charge) and quasi-security interest (title-transfer)
• How regulatory arbitrage works: the example of fix and floating charge under English law
• The limitations of security interests and the shift to financial collateral
• Repurchase agreements (Repos) and securities lending

1. 4: Risk mitigation III – Personal surety, derivatives

• Guarantee, indemnity, insurance
• Futures, options, swaps, credit default swaps
• Regulatory arbitrage and re-characterisation risk
• The power of standard market documentation (ISDA, GMRA, LMA) as
  transnational legal framework

1. 5: Risk mitigation IV – Set off, netting and clearing

• Basic bilateral mechanisms: set off, settlement netting, close-out netting
• Importance for monetary operations, derivatives, repos, securities lending
• Close-out netting and insolvency principles
• Multilateral clearing and central counterparty clearing

3rd Part: Global markets and domestic legal policies

1. 6: Internationalisation and Conflict of Laws

• Cross-border financial services, branches and subsidiaries
• Insolvency of multinational financial institutions
• Territorialism and Universalism
• Conflict of laws: Lex rei sitae, lex societatis, lex situs, lex contractus, PRIMA
• Choice of law and the global influence of English law

4th Part: Complex transactions and Financial Engineering

1. 7: Securitisation and Asset-backed securities

• True sale and synthetic securitisation
• The role of credit ratings
• The legal risk of ‘credit enhancement’ (derivatives, flip clauses, etc)
• The role of securitisation in the 2008-2010 financial crisis

1. 8: Financial instruments – holding, transfer, collateral

• Stock exchanges – trading of securities
• Clearing organisations – settling the trade
• Domestic holding and transfer of securities
• International holding and transfer of securities
• Derivatives clearing

1. 9: Crypto-assets

• Manifestations and taxonomy
• Delimitation from traditional assets: distributed creation and holding networks
• ‘Code is law’ – ‘Is code law?’
• Policy axioms for a progressive legal framework
• Domestic legal analysis vs international approach

5th Part: ‘Financialisation’ of the economy and systemic consequences

1. 10:  Commercial law and regulation of finance – a special area of law

• The dichotomy of liquidity and risk
• Bank insolvency and safe harbour protection of the repo and derivatives markets
• The tension between contract law and insolvency law
• Regulatory arbitrage: commercial law, regulation, tax regime
• The lack of an international framework

6 hours of seminars and 20 hours of lectures in the Autumn Term.

This course has a reading week in Week 6 of Autumn Term.

This course will have two hours of lecture teaching each week plus a one-hour tutorial (small groups) in weeks 1, 3, 5, 7, 9 and 11 in Autumn Term. There will be a Reading Week (no lectures or tutorials) in Week 6 of Autumn Term.

Students will be asked to submit a 2,000 word essay during Autumn Term. 

A detailed reading list will be made available on Moodle prior to teaching.

• P. Paech, Draft book chapters (‘Paech’). For most lectures, the draft book chapters are available for free as download from ssrn.com (links provided). They provide a good first layer of understanding of the relevant subject matters and serve as a starting point of students’ reading journey.
• P. Wood, Law and Practice of International Finance (University Edition, Sweet & Maxwell, 2014). Note: this book is an excellent catch-all overview of great practical value. Even though it does not look ‘academic’ (there are no references) it is quite analytical. It is great value for money as paperback or e-book and has long-term value for all jurisdictions.

J. Benjamin, Financial Law (OUP 2007). Note: this book is an excellent analytical work and difficult to replace, even though it predates the financial crisis and may look therefore outdated in certain parts. Unfortunately, it is too expensive to buy and therefore should be accessed through the library which holds a good number of copies available for students.

Exam (100%), duration: 150 Minutes in the Spring exam period