International Standards and the Lex Mercatoria of Finance

The Faculty of Law welcomes Associate Professor Cally Jordan, Melbourne Law School (Australia).

Abstract

In the last 15 years, international financial standards have surged to prominence in the wake of crises, but the standards, and the ‘soft law’ discourse which supports them, are both problematic.

Conceptual difficulties underlie the “soft law” discourse, revealing profoundly different patterns of legal thought that cut across national boundaries. The result is different understandings of international financial standards, and largely unsatisfactory results. Finally, international financial standards appear strangely remote from the daily grind of international commercial practice, where they are largely unknown. But perhaps in this disconnect lies clues to important normative forces at work in international finance, and in particular the international capital markets.

The proposition put forward here is that the formal regulation of financial markets is supported by a body of strong and persistent customary law, a lex mercatoria, a rarely acknowledged but powerful undercurrent in finance, especially in its international iteration.

Is it possible that the global financial crisis represented not only a failure of formal, state-led regulation, as it surely did, but also a breakdown of a lex mercatoria of finance? If that is the case, international standard setters and national regulators ignore this lex mercatoria at their peril. To do so, would be to miss a true, powerful, source of normativity operating in international financial markets.

The speaker

Cally Jordan, LLB'77, BCL'80, has spent over fifteen years with the World Bank, both as a consultant and as a full-time advisor, on commercial, financial, corporate governance and corporate law in numerous countries. Between 1991 and 1996, she was Associate Professor at the McGill's Faculty of Law and member of the Institute of Comparative Law. More recently, she spent 2010 as a Visiting Professor at Duke Law School, Durham, North Carolina and taught for a semester in 2011 at Georgetown's Center for Transnational Legal Studies in London. Since then she has been a visiting fellow at the Max Planck Institute for International and Comparative Law in Hamburg (2012), the London School of Economics (2013), the British Institute for International and Comparative Law (2013) and the inaugural P.R.I.M.E Finance Fellow at the Netherlands Institute for Advanced Studies outside The Hague (2013).