The anti-network: Private global governance, legal knowledge, and the legitimacy of the state

American Journal of Comparative Law

Volumn 56, Issue 3, 2008, Pages 605-630

  Riles, Annelise ^a  

^a MIT Sloan School of Management

Author keywords

[No Author keywords available]

Indexed keywords

EID: 49249111433     PISSN: 0002919X     EISSN: None     Source Type: Journal    
DOI: 10.5131/ajcl.2007.0018     Document Type: Conference Paper

References (123)

1. See, e.g., RODNEY BRUCE HALL & THOMAS J. BIERSSTEKER, THE EMERGENCE OF PRIVATE AUTHORITY IN GLOBAL GOVERNANCE (2002).
2. See, e.g., Morris R. Cohen, Property and Sovereignty, 13 CORNELL L.Q. 8 (1927).
3. See, e.g., HANS KELSEN, PURE THEORY OF LAW (Max Knight transl., 2d rev. & enlarged German ed. 1967);
4. HERBERT L. A. HART, THE CONCEPT OF LAW (1961).
5. See, e.g., KELSEN, supra note 3; RENÉ DAVID & JOHN E.C. BRIERLEY, MAJOR LEGAL SYSTEMS IN THE WORLD TODAY (1978).
6. For a critique of this view of law, see James Gordley, Comparative Law and Legal History, in OXFORD HANDBOOK OF COMPARATIVE LAW 753 (Mathias Reimann & Reinhard Zimmerman eds., 2006).
7. See, e.g., RULES AND NETWORKS: THE LEGAL CULTURE OF GLOBAL BUSINESS TRANSACTIONS (Richard P. Appelbaum, William L.F. Felstiner & Volkmar Gessner eds., 2001);
8. Sol Picciotto, Networks in International Economic Integration: Fragmented States and the Dilemmas of Neo-Liberalism, 17 NW. J. INT'L L. & BUS. 1014 (1996-97).
9. Analogous arguments are made about public international law. See, e.g., MARGARET E. KECK & KATHRYN SIKKINK, ACTIVISTS BEYOND BORDERS: ADVOCACY NETWORKS IN INTERNATIONAL POLITICS (1998).
10. For an account of how global private law might be analogous to state law, see David V. Snyder, Private Lawmaking, 64 OHIO ST. L.J. 371 (2003).
11. As Ralf Michaels and Nils Jansen make plain, this assumption is more prevalent in the American literature on private law. In Germany, in contrast, a different conception of both private law and of the state would hold that private law is in fact a part of state law. See Ralf Michaels & Nils Jansen, Private Law Beyond the State? Europeanization, Globalization, Privatization, 54 AM. J. COMP. L. 843 (2006).
12. See Annelise Riles, A New Agenda for the Cultural Study of Law: Taking on the Technicalities, 53 BUFF. L. REV. 973 (2005);
13. ANNELISE RILES, COLLATERAL KNOWLEDGE (2007) (unpublished manuscript, on file with the author).
14. Ronit and Schneider usefully distinguish between private legal authority which is delegated to the private law-making institution by a state, and private legal authority which is autonomously claimed or built by non-state forces. Karsten Ronit & Volker Schneider, Private Organizations and Their Contribution to Problem-Solving in the Global Arena, in PRIVATE ORGANIZATIONS IN GLOBAL POLITICS 1, 23 (Karsten Ronit & Volker Schneider eds., 2000). However, they also overstate the distinction where they fail to consider how the actions of private actors exercising regulatory authority outside state action, may in fact constitute a delegation of authority from the state.
15. At present, in the absence of extensive case law or regulatory actions by the U.S. Securities and Exchange Commission or the Commodity Futures Trading Commission, there is some uncertainty about the implications of American securities laws for the derivatives markets. The statutory language (concerning such issues as fraud and insider trading) of the American securities laws is very broadly stated, and designed with the kinds of fraud in mind that would apply to manipulation of on-exchange trading. The case law, likewise, is closely linked to on-exchange transactions. Although solid doctrinal arguments for the application of portions of the securities laws to certain entities in the swap markets could be made, to date, neither the SEC and the CFTC have shown a strong inclination to develop those arguments. Nevertheless, the trading activities of swap partners are subject to various forms of regulation, by virtue of these players' nature as regulated institutions. As Hal Scott points out, however, this can lead to irregular levels of regulation in a market that includes a variety of parties, including banks, securities firms, corporations, hedge funds, governments and individuals: As a formal matter, the derivatives activities of banks in the United States are highly regulated by bank supervisors. This regulation involves detailed examination of their activities as well as the capital requirements discussed below . . . . However, there is no regulatory framework for supervision of the derivatives activities of securities firms by the SEC or the Commodity Futures Trading Corporation (CFTC). Securities firms are not generally regulated for safety and soundness except through capital requirements, and unregistered affiliates of such firms dealing in swaps have not even been subject to capital requirements, until the SECs proposal in 2003 in response to the EU's Conglomerates Directive. HAL S. SCOTT, INTERNATIONAL FINANCE: T RANSACTIONS, POLICY, AND REGULATION 640 (2006). Banks are subject to capitalization requirements under the terms of the Bank for International Settlements, an international organization of bank regulators. There are also disclosure and accounting rules that apply to public companies.
16. Most of the large lawsuits by users of derivatives against dealers have been brought on common law and statutory grounds such as fraud and failure to disclose material information, or have tested on the argument that the end user plaintiff was prohibited from engaging in derivatives trading. SCOTT, supra note 9, at 663. See also Frank Partnoy, The Shifting Contours of Global Derivatives Regulation 22 U. PA. J. INT'L. ECON. L. 421 (2001).
17. International Swaps and Derivatives Association, Inc., Master Agreement (2002).
18. See International Swaps and Derivatives Association, Inc., Membership, http://www.isda.org/membership/ (last visited Dec. 17, 2006).
19. See JOSHUA COHN, ISDA MASTER AGREEMENTS: 1992 1987 VERSIONS COMPARED 2-13 (1992);
20. INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC., USER'S GUIDE TO THE 1992 ISDA MASTER AGREEMENTS (1993);
21. THE ISDA COLLATERAL DOCUMENTATION WORKING GROUP, INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INSTRUCTIONS TO EXTERNAL COUNSEL FORM 2 (1999);
22. CHRISTIAN A. JOHNSON, OVERTHE-COUNTER DERIVATIVES DOCUMENTATION (2000). ISDA produced the first version of its Master Agreement in 1987. It revised it in 1992 to account for new kinds of derivatives products developed in the intervening years.
23. Maureen E. Cain & Christine Harrington, Introduction, in LAWYERS IN A POSTMODERN WORLD: TRANSLATION AND TRANSGRESSION 1 (Maureen E. Cain & Christine Harrington eds., 1994).
24. See Kevin E. Davis, The Role of Nonprofits in the Production of Boilerplate, 104 MICH. L. REV. 1075 (2006).
25. The rights of the collateral holder are a matter of national property, contract and commercial law, and the requirements for giving and taking collateral (for creating a security interest in US parlance), are defined by and vary according to, the terms of local statutory and common law. In the common and civil law traditions alike, collateral has long been recognized as a special kind of property right. Collateral is a species of ius in re aliena in Roman Law, rights in others' property, which "impose restrictions on the exercise of the rights of ownership by the owner." ADOLF BERGER, ENCYCLOPEDIC DICTIONARY OF ROMAN LAW 27 (1953);
26. ROSCOE POUND, JURISPRUDENCE 185 (1959). In the individual states of the United States collateral is now also understood as a species of commercial law enshrined and protected by statute - by the Uniform Commercial Code as adopted in each state.
27. This fact is generally celebrated in the practitioner literature for derivatives lawyers and by some scholars of derivatives law and decried by some scholars of bankruptcy law. See, e.g., Kimberly Summe, The European Union's Collateral Reform Initiatives, 22 (6) COMPANY LAW 186 (2001).
28. For criticisms from bankruptcy law scholars, see Franklin R. Edwards & Edward R. Morrison, Derivatives and the Bankruptcy Code: Why the Special Treatment? 22 YALE J. ON REG. 92 (2005);
29. Ronald J. Mann, Bankruptcy and the Entitlement of the Government: Whose Money is it Anyway?, 70 N.Y.U. L. REV. 993 (1995);
30. Ronald J. Mann, Explaining the Pattern of Secured Credit, 110 HARV. L. REV. 625 (1997);
31. Elizabeth Warren & Jay L. Westbrook, Contracting Out of Bankruptcy: An Empirical Intervention, 118 HARV. L. REV. 1197 (2005).
32. Perhaps this is why a recent study of creditor rights in twelve transition economies found that the protections afforded creditors by collateral law correlate better than the protections afforded creditors by bankruptcy law with increased levels of lending. See Rainier Haselmann, Katharina Pistor & Vikrant Vig, How Law Affects Lending, 285 Columbia Law and Economics Working Paper (2006), available at SSRN: http://ssrn.com/ abstract=846665.
33. Lucian Arye Bebchuk & Jesse M. Fried, The Uneasy Case for the Priority of Secured Claims in Bankruptcy, 105 YALE L. J. 857 (1996).
34. As Carruthers, Babb and Halliday show, bankruptcy law reform is part of the standard package of neoliberal reforms instituted by countries around the world since the early 1990s. Bruce G. Carruthers, Sarah L. Babb & Terence C. Halliday, Institutionalizing Markets, or the Market for Institutions? Central Banks, Bankruptcy Law, and the Globalization of Financial Markets, in THE RISE OF NEOLIBERALISM AND INSTITUTIONAL ANALYSIS 94, 105 (John L. Campbell & Ove Kaj Pedersen eds., 2001). These reforms in most cases actually run counter to other neo-liberal reforms because by favoring reorganization over liquidation they continue to protect debtors from creditors and to preserve a sphere of national regulation from the reach of global capital. Carruthers, Babb & Halliday, supra, at 116-18.
35. ISDA Master Agreement clause on bankruptcy.
36. See DALIA MARIN & MONIKA SCHNITZER, CONTRACTS IN TRADE AND TRANSITION: THE RESURGENCE OF BARTER (2002). My thanks to Jing Leng for bringing this analogy to my attention.
37. Janet K. Levit, A Bottom-up Approach to International Lawmaking: The Tale of Three Trade Finance Instruments, 30 YALE J. INT'L L. 125 (2005).
38. See Annelise Riles, Collateral Relations: Property Relations in the Near Future (unpublished manuscript, on file with the author).
39. See also Mann, supra note 17. Note that collateral does serve one important function, which is not "private" in nature: the Bank for International Settlements capitalization requirements for banks allows credit counterparties for collateralization in calculating capital adequacy requirements. Hence collateralizing transactions lowers capital adequacy requirements and makes trading cheaper. See generally, BASEL COMMITTEE ON BANKING SUPERVISION, A NEW CAPITAL ADEQUACY FRAMEWORK (1999).
40. "Transnational merchant law, which is generally and mistakenly regarded in purely technical, functional, and 'apolitical' terms, is . . . a central and crucial mediator of domestic and global political/legal orders in that it enables the extraterritorial application of national laws as well as the domestic application of transnational commercial law." CLAIRE A. CUTLER, PRIVATE POWER AND GLOBAL AUTHORITY: TRANSNATIONAL MERCHANT LAW IN THE GLOBAL POLITICAL ECONOMY 4 (2003).
41. These critics point out that the architecture of the transnational global private law regime is founded on the national private law of property and contract in particular. Caroline Bradley emphasizes, for example, that contracts rely upon the mechanisms of the state for enforcement and transform these in turn, such that the "apparent sharp distinction between governmental and self-regulation soon breaks down." Caroline Bradley, Private International Law-making for the Financial Markets, 29 FORDHAM INT'L L.J. 127, 128 (2005).
42. See supra note 16 and accompanying text.
43. Randall D. Guynn, Modernizing Securities Ownership, Transfer and Pledging Law: A Discussion Paper on the Need For International Harmonization with Responding Comments by Professor James Steven Rogers (USA), Professor Kazuaki Sono (Japan) and Dr. Jürgen Than (Germany), 1996 I.B.A. CAPITAL MARKETS FORUM, Sec. on Bus. L.;
44. Randal D. Guynn & Margaret Tahyar, The Importance of Choice of Law and Finality to PvP, Netting and Collateral Arrangements, 4(2) J. FIN. REG. & COMPLIANCE 170 (1996).
45. Conflict of laws issues occupied the attention of ISDA legal staff I observed as much as any other area of law. See RILES, supra note 7. Foreign holders of collateral feared that in the event of the bankruptcy of a counterparty in Tokyo, for example, Japanese bankruptcy courts might choose to apply Japanese law and they might not recognize the priority of the collateral transaction over other creditors' claims. See Hasan-ho, Law No. 71 of 1922. According to Hattori and Henderson, Japanese bankruptcy law has a strongly territorialist orientation and Japanese courts therefore can adjudicate only those assets within Japanese territory. DAN F. HENDERSON & TAKAAKI HATTORI, CIVIL PROCEDURE IN JAPAN, §11-27, §11-28, §11-29 (1983). However, case law diverges from this "to the point where Japanese bankruptcy proceedings affect foreign assets, and foreign bankruptcy proceedings affect assets in Japan." HENDERSON & HATTORI, supra, § 11-28.
46. The transnational nature of collateral transactions goes beyond the mere (but important) fact that the parties to a swap are often incorporated in different jurisdictions. Collateral may be posted in different currencies, or in the form of government bonds issued by different governments. The collateral usually is held with intermediaries often incorporated in yet other jurisdictions, with places of business in still other locales. These intermediaries book the collateral in computerized ledgers maintained on servers that may be located yet elsewhere in the world. And when, as is permitted under the law of some countries, the pledgee (the party which receives the collateral) "repledges" the collateral to yet another party to satisfy its own obligations, which then repledges it again, one gets a picture of a constant global movement of collateral in and out of accounts in many jurisdictions.
47. Patrick J. Borchers, Choice of Law Relative to Security Interests and Other Liens in International Bankruptcies, 46 AM. J. COMP. L. 165 (1998).
48. On questions relating to the validity of the collateral, some jurisdictions, following classical private international law rules, look to the law of the place where the securities are held. But doctrine in this area developed to deal with tangible forms of property, such as paper securities. Where "collateral" is in actuality a set of numbers in a computerized account, or in multiple accounts, maintained by multiple intermediaries, the question of where it "is" for the purpose of this analysis is almost metaphysically unanswerable. One resolution adopted by some jurisdictions (including the U.S. in the wake of recent revisions to the UCC, as concerns certain issues) is to look to the law of the place where the intermediary whose account the collateral is held with is located. Richard Potok, Legal Certainty for Securities Held as Collateral, 18 INT'L FIN. L. REV. 12 (1999).
49. Recent revisions to Article 8 and 9 specifically take the UCC global by addressing questions of choice of law and tailoring the terms to the character of cross-border transactions: The local law of the securities intermediary's jurisdiction, as specified in subsection (e), governs: (1) acquisition of a security entitlement from the securities intermediary; (2) the rights and duties of the securities intermediary and entitlement holder arising out of a security entitlement; (3) whether the securities intermediary owes any duties to an adverse claimant to a security entitlement; and (4) whether an adverse claim can be asserted against a person who acquires a security entitlement from the securities intermediary or a person who purchases a security entitlement or interest therein from an entitlement holder. UCC § 8-110 (b). See also U.C.C. art. 9 (1999); 3 U.L.A. 9, 9 (Supp. 1999) (effective July 1, 2001). In some respects, at least, the European Union follows a similar approach. See, Parliament and Council Directive 2002/47 on financial collateral arrangements art. 8, O.J. (L 168) 43-44. Another approach (adopted in the U.S. by UCC Article 9 with respect to certain issues relating to the validity of the security interest) is to look to the law of the location of the debtor. Ryan E. Bull, Operation of the New Article 9 Choice of Law Regime in an International Context, 78 TEX. L. REV. 679 (2000).
50. For many (but not all) legal issues surrounding validity, Japanese courts look to the law of the place where the securities were issued. Hideki Kanda, Japan, in CROSS BORDER COLLATERAL: LEGAL RISK AND THE CONFLICT OF LAW 366 (Richard Potok ed., 2002).
51. And this says nothing about what law would govern the question of the priority of the collateral holder's claim, in the event of bankruptcy. The question of how different national courts with jurisdiction over the assets of a bankrupt company with transnational contacts should coordinate, and when they should defer to the law of another jurisdiction, remains very much unresolved. Hannah L. Buxbaum, Rethinking International Insolvency: The Neglected Role of Choice-of-Law Rules and Theory, 36 STAN. J. INT'L L. 23 (2000).
52. See Robert Wai, Transnational Liftoff and Juridical Touchdown: The Regulatory Function of Private International Law in an Era of Globalization, 40 COLUM. J. TRANSNAT'L L. 209 (2002),
53. Wai adapts the legal realist and critical legal studies insight that technical legal issues (such as here, which law should apply) are always already forms of political compromise and hence open for reopening as tools of political change. See ROBERTO MANGABEIRA UNGER, FALSE NECESSITY - ANTI-NECESSITARIAN SOCIAL THEORY IN THE SERVICE OF RADICAL DEMOCRACY (2001). Wai and others suggest that Private International Law is uniquely suited to address the particular problems posed by the global private law such as overlapping legal regimes, or "regulatory gaps" where no particular state regulates a certain practice. Id.
54. As one such lawyer writes, The ISDA Agreement should not be perceived as a law unto itself. The fundamental legal principles of contract law, company law, trust law, the law of torts and the law of insolvency, etc., still apply, as appropriate, in circumstances where an ISDA Agreement becomes the subject-matter of litigation. From a business standpoint, the significance of national boundaries has decreased considerably in the last decade. However, it remains the case that, from a legal standpoint, national boundaries continue to be very important, not least in the context of insolvency. Agnes Foy, The ISDA Master Agreement - Managing Legal Risk: Jurisdictions and Counter-parties, 6 COM. L. PRAC.104 (1999).
55. In the United States, intensive lobbying on the part of ISDA has resulted in important revisions of New York state law, the UCC, and the national bankruptcy law, and has averted other proposed regulation opposed by ISDA. The European Union also has responded to ISDA lobbying by producing a directive on collateral supported by ISDA. In Tokyo, likewise, ISDA has an elaborate system of committees in place to address legal reforms as well as high-level contacts in all branches of the Japanese bureaucracy. The representatives of even the foreign banks at ISDA Tokyo meetings are almost exclusively Japanese employees of these foreign banks, graduates of top universities with connections to former teachers and classmates in the bureaucracy and on the bench.
56. On December 13, 2002, the Hague Conference on Private International Law adopted a Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary, available at http://www.hcch.net/ index_en.php?act= conventions.text&cid=72.
57. This convention, a product of intensive lobbying by ISDA and other global commercial groups, affirms that if the agreement between the intermediary and the custodian of the security specifies which law should apply, that law applies as long as it bears a reasonable relationship to the transaction. The first order principle of the convention is the freedom of the account holder and intermediary (but not the pledgor and pledgee) to choose the applicable law by contract. Groups such as ISDA participated actively in the drafting of the convention. The Hague Conference official with primary responsibility for its drafting defends this freedom of contract principle on grounds that states have an interest in economic development, and in supporting "certainty in the marketplace promoted by the Convention. This is not a case of private versus public interest. The Convention itself represents a clear decision by the state that the public interest resides in enforcement of the Convention's rule." Harry C. Sigman & Christophe Bernasconi, Myths about the Hague Convention Debunked, INT'L FIN. L. REV., Nov. 2005, at 31. The convention was concluded July 5, 2006, but it has not yet come into force. Even if the question of which law governs the collateral agreement is ultimately settled by treaty, this will not resolve the question of the relationship between the law of collateral and national bankruptcy law: it will not preclude a Japanese bankruptcy court for example from recognizing the collateral as valid under New York law as specified by the CSA, but then applying Japanese bankruptcy law to the question of whether the collateral holder should be able to keep the collateral after a bankruptcy filing.
58. James Coiley, New Protections for Cross-Border Collateral Arrangements: Summary and Analysis of Draft E.U. Directive on Financial Collateral, 16 (5) J. INT'L BANKING L.119 (2001).
59. Parliament and Council Directive 2002/47 on financial collateral arrangements, O.J. (L 168) 43. On the reasons for EU regulation, see Summe, supra note 17.
60. UNIDROIT, the International Institute for the Unification of Private Law, is "a global legal organization with 59 Member States whose laws include all the key systems of financial law around the world." UNIDROIT, THE UNIDROIT STUDY GROUP ON HARMONISED SUBSTANTIVE RULES REGARDING INDIRECTLY HELD SECURITIES, POSITION PAPER 5 (2003).
61. The UNIDROIT Secretariat submitted a preliminary draft on December 23, 2004 which was further negotiated by a committee of experts in May, 2005. UNIDROIT, PRELIMINARY DRAFT CONVENTION ON HARMONIZED SUBSTANTIVE RULES REGARDING INTERMEDIATED SECURITIES (2005). See also International Swaps and Derivatives Association, Comment on Preliminary Draft Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary (Hague Convention on Private International Law ed., 2002).
62. Anna Gelpern and Mitu Gulati point to a different kind of interaction between standardized contracts and public law: they argue from the case of sovereign debt contracts that standardized contracts can serve as "public symbols" - ways public authorities signal about political events. Anna Gelpern & G. Mitu Gulati, Public Symbol in Private Contract: A Case Study, 84 WASH. U. L. REV. 1627 (2006).
63. See e.g., Stewart Macaulay, Elegant Models, Empirical Pictures and the Complexities of Contract, 11 LAW & SOC'Y REV. 507 (1976-1977);
64. STEWART MACAULAY, JOHN KIDWELL, WILLIAM WITHFORD & MARC GALANTER, CONTRACTS: LAW IN ACTION (1995).
65. Schmitthoff long ago identified "the contribution which standard contract forms and general conditions of business . . . can make to the unification or harmonisation of the law of international trade." Clive M. Schmitthoff, The Unification or Harmonisation of Law by Means of Standard Contracts and General Conditions, 17 INT'L & COMP. L. Q. 551 (1968).
66. He emphasized the aura of "realism" about this "unifying activity" owing to the fact that the rules are created by the business community rather than by government. Id. at 555. Ralf Michaels has recently analyzed these issues as a matter of the accommodation of global private law regimes by the state. Michaels usefully dissects these forms of accommodation into three distinct kinds, all of which enter into play in standardized contracts - deference, incorporation, and delegation. Ralf Michaels, The Re-statement of Non-State Law: The State, Conflict of Laws and the Challenge of Global Pluralism, 51 WAYNE L. REV. 1209 (2005).
67. KLAUS PETER BERGER, THE CREEPING CODIFICATION OF THE LEX MERCATORIA (1999).
68. See BRUNO LATOUR, LA FABRIQUE DU DROIT : UNE ETHNOGRAPHIE DU CONSEIL D'ETAT (2002).
69. On this "as if" quality of law, see HANS VAIHINGER, THE PHILOSOPHY OF "AS IF": A SYSTEM OF THE THEORETICAL, PRACTICAL AND RELIGIOUS FICTIONS OF MANKIND (C.K. Ogden trans., 1925).
70. Klaus Peter Berger for example writes that business people "create their own law through the drafting, use and refinement of general conditions of trade, standardized contracts and other clauses as well as the development of practices and usages, elevating them from regional to world-wide customs." BERGER, supra note 41, at 27-28. In contrast, the fact that these global norms are "spontaneously generated" and not the product of purposeful law-making activity has led one commentator to doubt whether they are coherent enough to constitute a source of law. See Roy Goode, Rule, Practice, and Pragmatism in Transnational Commercial Law, 54 INT'L & COMP. L. Q. 539, 547 (2005).
71. See Levit, supra note 22.
72. Philip G. Cerny, Embedding Global Financial Markets, in PRIVATE ORGANIZATIONS IN GLOBAL POLITICS 59 (Karsten Ronit & Volker Schneider eds., 2000);
73. DAVID A. WESTBROOK, CITY OF GOLD: AN APOLOGY FOR GLOBAL CAPITALISM IN A TIME OF DISCONTENT (2003).
74. Saskia Sassen, De-nationalized State Agendas and Private Norm-Making, in PUBLIC GOVERNANCE IN THE AGE OF GLOBALIZATION 61 (Karl Heinz Ladeur ed., 2004).
75. Most recently, Paul Schiff Berman has called for borrowing once again from the insights of anthropology and cognate fields in the study of globalization to afford "a more nuanced idea of how people actually form affiliations, construct communities, and receive and develop legal norms." Paul S. Berman, From International Law to Law and Globalization, 43 COLUM. J. TRANSNAT'L. L. 485, 489 (2005).
76. Many political scientists and lawyers see private norms as more "complex" and "heterodox" than state law because each industry makes its own norms and hence the result is a pluralistic legal order with no clear hierarchies of norms. See Cerny, supra note 46, at 60. In place of national legal systems, these theorists see coexisting, fragmented, sometimes integrated, sometimes conflicting normative orders with different degrees of access to coercive authority - of the state and other coercive forces in society. Boaventura de Sousa Santos, for example, states that "a legal field is a constellation of different legalities (and illegalities) operating in local, national and global time-spaces." BOAVENTURA DE SOUSA SANTOS, TOWARD A NEW LEGAL COMMON SENSE: LAW, GLOBALIZATION, AND EMANCIPATION 85 (2002).
77. In a previous project on global public law, I have critiqued this propensity to see networks everywhere and to view these as inherently normatively good. ANNELISE RILES, THE NETWORK INSIDE OUT (2000).
78. ROBERT C. ELLICKSON, ORDER WITHOUT LAW: HOW NEIGHBORS SETTLE DISPUTES (1991).
79. See generally RILES, supra note 49.
80. A longstanding insight of the law and society literature is that the mundane activity of "repeat players" - insiders such as the major players in the global private derivatives markets - does not simply comply with, but rather produces, legal regimes. Marc Galanter, Why the "Haves" Come out Ahead: Speculations on the Limits of Legal Change, 9(1) LAW & SOC'Y REV. 95 (1974).
81. Edelman, Uggen and Erlanger argue in the context of the regulation of organizations, that "The meaning of law . . . unfolds dynamically across organizational, professional, and legal fields." Lauren B. Edelman, Christopher Uggen & Howard S. Erlanger, The Endogeneity of Legal Regulation: Grievance Procedures as Rational Myth, 105(2) AM. J. SOC. 406 (1999).
82. Specifically, both socio-legal studies and the social studies of finance have emphasized the way social relations can substitute for the impossible demands for information required to effectively police one's agreements in the global marketplace. The argument is that small "clubs" of actors come to know and trust one another intimately, and to develop a rich network of norms governing their transactions, such that very locally defined social relations of trust and informal norms come to substitute for both financial knowledge and legal norms. MITCHEL Y. ABOLAFIA, MAKING MARKETS: OPPORTUNISM AND RESTRAINT ON WALL STREET (1996);
83. CAITLIN ZALOOM, OUT OF THE PITS: TRADERS AND TECHNOLOGY FROM CHICAGO TO LONDON (2006).
84. Global legal norms and institutions are created through the efforts of individual legal actors, working on particular projects in the service of their very locally defined interests based upon their social networks - their personal career interests, the interests of their families or class, or of their firms and organizations - to forge alliances with others. YVES DEZALAY & BRYANT G. GARTH, DEALING IN VIRTUE: INTERNATIONAL COMMERCIAL ARBITRATION AND THE CONSTRUCTION OF A TRANSNATIONAL LEGAL ORDER (1996)..
85. Two recent empirical papers present material that hints at trouble for the view of standardized contracts as mere vessels of narrative meaning. Choi and Gulati make the interesting claim that some terms of boilerplate often have no clear meaning even among industry members. Stephen J. Choi & G. Mitu Gulati, Contract as Statute, 104 MICH. L. REV. 1129 (2006). Boilerplate does not necessarily enshrine clearly accepted norms, in other words. Unfortunately, rather than push the standardized contracts literature to come to terms with this empirical insight, the authors seek to do away with the trouble this finding causes by proposing a theory of interpretation of these documents that would read industry norms back in. Likewise, Gelpern and Gulati present a fascinating account of how a clause in a standardized sovereign debt contacts came to be changed: despite the extensive work devoted to this change, industry participants insisted that the change mattered little in the end. Gelpern & Gulati, supra note 38.
86. Don Brenneis, Reforming Promise, in DOCUMENTS: ARTIFACTS OF MODERN KNOWLEDGE 41 (Annelise Riles ed., 2006);
87. Hirokazu Miyazaki, Documenting the Present, in DOCUMENTS: ARTIFACTS OF MODERN KNOWLEDGE 206 (Annelise Riles ed., 2006).
88. Annelise Riles, [Deadlines]: Removing the Brackets on Politics in Bureaucratic and Anthropological Analysis, in DOCUMENTS: ARTIFACTS OF MODERN KNOWLEDGE 71 (Annelise Riles ed., 2006).
89. In a somewhat analogous way, Karen Knorr-Cetina and Urs Bruegger describe traders' visual experience of the market through the formatting of a computer screen such as the Bloomberg terminal as a kind of "postsocial" form of relationality. Karen Knorr Cetina & Urs Bruegger, Traders' Engagement with Markets: A Postsocial Relationship, 19(5/6) THEORY CULTURE & SOC'Y 161 (2002).
90. As Mariana Valverde puts it, it demands that we ask "not about the content of claims but about process and flow - about how actors pick through documents or discourses and cobble together new governing machines that recycle old bits in new ways." Mariana Valverde, Authorizing the Production of Urban Moral Order: Appellate Courts and Their Knowledge Games, 39(2) LAW & SOC'Y REV. 419 (2005).
91. How are these deals legally accomplished in the absence of a fully developed framework of global law? The key to this lies in legal work, and the role of legal work in transnational transactions. The term "legal work" is used here to mean technical work, with and on the law, undertaken usually but not necessarily by lawyers, in specific transactions for specific clients. Doreen McBarnet, Transnational Transactions: Legal Work, Cross-Border Commerce and Global Regulation, in TRANSNATIONAL LEGAL PROCESSES: GLOBALISATION AND POWER DISPARITIES 98, 98-99 (Michael Likosky ed., 2002).
92. One of the features of the global private law regime, in the eyes of commentators, is its "technical" quality. That is, the markets at issue are taken themselves to be highly specialized and "of a technical and complex nature." Pedro Gustavo Teixeira, Public Governance and the Co-operative Law of Transnational Markets: The Case of Financial Regulation, in PUBLIC GOVERNANCE IN THE AGE OF GLOBALIZATION 305, 311 (Karl Heinz Ladeur ed., 2004);
93. which accords special power to insiders and professionals: We find that the ability of professions to exercise lawmaking power in an area such as bankruptcy law increases significantly when agenda setting, inventing and drafting new laws, and legislative politicking takes place underneath the wider horizon of political debate. Politics take place at two levels: when it is above the political horizon, it activates all the forces and counterforces of the political system and thus imports into technical or financial law reform a much wider set of issues than pertain to the substantive and administrative core of the reform itself; this also activates classic patterns of oppositionalism. When it is below the political horizon, it is not widely debated; it does not stir public controversy; it does not activate usual interest group polarities and conflicts; and it does not trigger instinctive party political opposition. Below the horizon, professions can exert much more influence, and they do so characteristically by insisting that their contributions are technical, expert, and neutral and thus do not warrant the scrutiny that might otherwise focus upon them. Bruce G. Carruthers & Terence C. Halliday, Professionals in Systemic Reform of Bankruptcy Law: The 1978 U.S. Bankruptcy Code and the English Insolvency Act 1986, 74 AM. BANKR. L. J. 35, 74 (2000).
94. See Levit, supra note 22, at 131.
95. One could say that the users of ISDA forms share a set of institutional practices, codes of behavior, by virtue of the fact of their employment in particular kinds of institutions (e.g., banks and securities firms). But this simply restates the argument here: ISDA forms are one important material instantiation of this institutional practice.
96. Annelise Riles, Introduction: In Response, in DOCUMENTS: ARTIFACTS OF MODERN KNOWLEDGE 1 (Annelise Riles ed., 2006).
97. See also NIKLAS LUHMANN, A SOCIOLOGICAL THEORY OF LAW (Elizabeth King & Martin Albrow trans., 1985).
98. Susan Silbey has produced a detailed critical retrospective of this argument. Susan Silbey, After Legal Consciousness, 1 ANN. REV. L. & SOC. SCIENCE 323 (2005).
99. A core insight of the law and economics literature on standardized contracts is that standardization serves the important economic function of reducing the transaction costs associated with producing new contracts, such as researching the law and drafting the terms of the contract ("learning benefits"). Marcel Kahan & Michael Klausner, Standardization and Innovation in Corporate Contracting (or "The Economics of Boilerplate"), 83 VA. L. REV. 713, 719-20 (1997). For example, Kahan and Klausner point out that standardized contracts also reduce litigation costs because they deploy terms that have already been vetted in court. Id.
100. For example, Mark Suchman, working in the domestic American context of the development of intellectual property law in Silicon Valley, draws attention to mundane practices of contract production as one source, among others, of the creation of new legal norms. Suchman points to "a significant but often overlooked aspect of industrial governance: the routinization of transactional practices within a developing organizational community." MARK SUCHMAN, THE CONTRACTING UNIVERSE: LAW FIRMS AND THE EVOLUTION OF VENTURE CAPITAL FINANCING IN SILICON VALLEY 2 (2007) (unpublished manuscript, on file with the author).
101. Likewise, Doreen McBarnet and Michael Powell argue, for the case of international tax lawyers and corporate takeover law respectively, that law is the artifact of the accumulation of individual legal projects and of solutions developed by lawyers operating separately in the service of their clients. See Doreen McBarnet, Legal Creativity: Law, Capital and Legal Avoidance, in LAWYERS IN A POSTMODERN WORLD: TRANSLATION AND TRANSGRESSION 73 (Maureen E. Cain & Christine B. Harrington eds., 1994);
102. McBarnet, supra note ; Michael J. Powell, Professional Innovation - Corporate Lawyers And Private Lawmaking, 18 (3) LAW & SOC. INQUIRY 423 (1993).
103. Science studies scholars have argued that scientific truths and economic markets are artifacts of networks of theories, ideas, people, institutions, machines, and other "actants" - nodes of animate and inanimate agency. See BRUNO LATOUR, SCIENCE IN ACTION: HOW TO FOLLOW SCIENTISTS AND ENGINEERS THROUGH SOCIETY (1987);
104. ARAMIS OR, THE LOVE OF TECHNOLOGY (1996).
105. More recently, Latour has extended the analysis to law in his study of the French Conseil d'Etat. See LATOUR, supra note 42. Documents in this understanding are "immutable, presentable, readable and combinable" artifacts used to mobilize networks of ideas, persons, and technologies. Bruno Latour, Drawing Things Together, in REPRESENTATION IN SCIENTIFIC PRACTICE 26 (Michael Lynch & Stephen Woolgar eds., 1988).
106. The legal literature on standardized contracts, for example, emphasizes that standardized contracts facilitate "coordination" among the parties by focusing attention on certain "focal points" and allowing the parties to treat others as settled. Robert B. Ahdieh, The Strategy of Boilerplate, 104 MICH. L. REV. 1033 (2006); Choi & Gulati, supra note 53. There are "network benefits" to standardized contracts whereby the more parties use the contracts, the more standard they become and hence more valuable they become to all users. See Kahan & Klausner, supra note 63, at 725.
107. The intuitive aesthetic appeal of this argument has much to do with a wider modernist aesthetic of relationality. I have critiqued the aesthetics of networks in an earlier monograph. See RILES, supra note 49.
108. See KECK & SIKKINK, supra note 5; Kathryn Sikkink, Human Rights, Principled Issue-Networks, and Sovereignty in Latin America, 47 (3) INT'L ORG. 411 (1993);
109. Anne-Marie Slaughter, The Real New World Order, 76 (5) FOREIGN AFF. 183 (1997).
110. See ALAN WATSON, LEGAL TRANSPLANTS: AN APPROACH TO COMPARATIVE LAW (2d ed., 1993).
111. See. e.g., JAMES GORDLEY, FOUNDATIONS OF PRIVATE LAW: PROPERTY, TORT, CONTRACT, UNJUST ENRICHMENT 5, 41 (2006).
112. INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, COLLATERAL SURVEY 105 (2000);
113. Paul Avanzato, How to Use the Collateral Carousel, 17 (1) INT'L FIN. L. REV. 2 (1998).
114. Christian A. Johnson, Derivatives and Rehypothecation Failure - It's 3:00 p.m., Do you know where your collateral is?, 39 ARIZ. L. REV. 949 (1997);
115. Bill Mapother, Get Double Duty from Collateral, 64(2) CREDIT UNION MAGAZINE 74 (1998).
116. (tanpo keiyaku ni okeru shouhitaishaku kousei to youshin no toraekata ni tsuite. A Method for understanding Pledges based on Loan and Set-off [Loan for Consumption, Return of the Same Kind]).
117. See Guynn, supra note 27.
118. See ISDA COLLATERAL DOCUMENTATION WORKING GROUP, supra note 13; INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC., GUIDELINES FOR COLLATERAL PRACTITIONERS (1998);
119. David Suetens, Collateralization and the ISDA Credit Support Annex, 14 (8) INT'L FIN. L. REV. 15 (1995).
120. ISDA has attempted to address the private international law issues surrounding collateral by creating versions of its collateral agreement that are specifically tailored to the laws of the UK, New York, and Japan. In each of these versions, the parties expressly affirm that they wish the law of the UK, New York or Japan to apply to their transaction. In so doing, they rely upon a doctrine of private international law that in matters of contract, the parties should be able to choose which law applies to their transaction so long as it bears a reasonable relationship to the transaction. EUGENE F. SCOLES ET AL., CONFLICT OF LAWS 947 (3d ed. 2004). In Japanese law, this principle is codified in the statute; Horei [Application of Laws General Act], Law No. 10 of 1898, art. 7(1), as amended: "As regards the formation and effect of a juristic act, the question as to the law of which country is to govern shall be determined by the intention of the parties.".
121. Marilyn Strathern, Cutting the Network, 2(3) J. ROYAL ANTHROPOLOGY INST. 517 (1996).
122. This is what makes legal knowledge technocratic in my view, for bureaucratic work also begins from the premise of a certain lack of local knowledge. DOCUMENTS: ARTIFACTS OF MODERN KNOWLEDGE (Annelise Riles ed., 2006).
123. See LUHMANN, supra note 61, at 200.