Faculty Papers & Publications

A Natural Experiment: Asset Manager Liability

Cally Jordan — Tue, 27 Nov 2012 07:40:16 PST

It is a natural experiment: two highly integrated national economies, sharing a vast continent, a common language and hundreds of years of common experience. They are bound by a free trade agreement which has fostered strong trade flows in goods, services and capital. Yet, in important respects, the structural characteristics of their financial institutions, and the regulatory framework in which they operate, are different, so different in fact, that one country has been crippled for several years now by the global financial crisis and the other has emerged virtually unscathed. The countries, of course, are Canada and the United States. The financial sector in the United States, and its regulation, has been exhaustively documented. Much less consideration has been given to the Canadian side of finance. But in light of the performance of each country in response to the global financial crisis, perhaps it is time to take a closer look. The discussion which follows focuses on one particular corner of the financial sector, asset managers and is based on a study undertaken for a collaborative work on asset manager liability published by Oxford University Press in 2012.

Cadbury Twenty Years On

Cally Jordan — Tue, 18 Sep 2012 08:35:10 PDT

This year marks the twentieth anniversary of the publication of the Cadbury Report, one of the most significant events in modern corporate governance. The Cadbury Report, and its simple two page 'best practices', triggered a global debate on corporate governance. 'Cadbury' codes of corporate governance spread like wildfire. The legacy of the Cadbury Report lives on in the UK with no diminution in the appeal of its voluntary code/comply or explain approach to corporate governance. But there are several clouds looming on the horizon. Comply or explain and voluntary codes of corporate governance appear to have run their course elsewhere in the world. Even in the UK, legislative initiatives on the corporate governance front, either domestically initiated or EU-driven, may be sapping the voluntary code of its vitality. Although the conviction remains strong in the UK that the flexibility and opportunity for easy, rapid adjustments are strengths of the voluntary code approach to corporate governance, the constantly evolving nature of the UK voluntary codes may, in fact, be an indication of a deep-rooted problem. Are these voluntary codes of corporate governance, which give so much deference to industry sentiment and conventional wisdom, in a constant state of flux because they are not getting it right.

International Financial Standards and the Explanatory Force of Lex Mercatoria

Cally Jordan — Tue, 21 Aug 2012 05:50:17 PDT

The global financial crisis has cast a strong light on some hitherto obscure corners of the financial world, provoking an outpouring of calls for concerted international action. “Hard law” having disappointed, can “soft law”, in the form of international financial standards, substitute for traditional national legislation. This article examines some of the difficulties associated with the “international standards as soft law” discourse.

First of all, conceptual problems in the “soft law” discourse itself reveal profoundly different patterns of legal thought cutting across national boundaries, resulting in different understandings of international financial standards. Secondly, recent experience, over the past decade, with some “soft law” international financial standards as both diagnostic and prophylactic tools, has been decidedly mixed, in fact, largely unsatisfactory. Thirdly, the “soft law” discourse in international finance appears strangely remote from the daily grind of international commercial practice, where the discourse is largely unknown. But perhaps in this disconnect between theory and practice lies clues to important normative forces at work in international finance, and in particular the international capital markets. The more one considers the world of international finance, the more obvious become the outlines of centuries old transnational merchant law, the contentious lex mercatoria.

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. The continued prevalence of oral contracting and the stubborn persistence of self-regulatory principles are examples. There are several intriguing implications to this proposition. 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, both, ignore this lex mercatoria (the customs and practices of international finance) at their peril. To do so, would be to miss a true, powerful, source of normativity operating in international financial markets.

Senses of Sen: Reflections on Amartya Sen’s Ideas of Justice

César Arjona et al. — Tue, 21 Feb 2012 12:54:13 PST

This review essay explores how Amartya Sen’s recent book, The Idea of Justice, is relevant and important for the development and assessment of transnational theories and applications to transnational justice and legal education programs. The essay captures a trans-jural dialogue of multinational scholars and teachers, discussing Sen’s contributions to moral justice theory (criticizing programs for “transcendental institutionalism” (like Rawlsian theory) and instead focusing on “comparative broadening” including empirical, relative, and comparative assessments of programs to ameliorate injustice in the world in its comparative concreteness (as in Indian social justice theory and Adam Smith’s Theory of Moral Sentiments and related work). The authors are professors in the transnational legal education program, the Center for Transnational Legal Studies, sponsored by over 25 different law schools, located in London. They teach courses in a wide variety of subjects, including comparative legal theory, constitutional law, business and legal ethics, moral and legal philosophy, international and comparative law, capital markets and business law, emergency powers, international dispute resolution and a variety of other common and civil law subjects.

The Wider Context: The Future of Capital Markets Regulation in Developed Markets

Cally Jordan — Wed, 11 Jan 2012 14:10:12 PST

At a time of such great turbulence, looking to the future directions of capital markets and their regulation in developed economies is a particularly risky business. We are in the midst of a great sea change. Nevertheless, there are several current, and readily observable, phenomena which are likely to shape capital markets regulation in the near future. First of all, the blurring of the distinctions between developed and developing markets themselves, as well as that between domestic and international markets, has put into question the adequacy of existing regulatory frameworks. Also, the transatlantic dialogue, London – New York, has given way to the rise of “multipolarity”; in an age of instantaneous transmission of information, capital and risk, competing centres of gravity have emerged. In addition, centuries-old market institutions are undergoing a period of dynamic change, producing the equivalent of regulatory jetlag. Among international actors, there are calls for what may be the somewhat indiscriminate widening of the “perimeter” of regulation; costs of compliance mount, regulatory uncertainty sets in. To the numerous, conflicting and perhaps unrealisable, goals associated with capital markets regulation has been added detection and prevention of systemic risk. The two great, albeit quite different, capital market regulatory models (those of the United States and the United Kingdom) have taken a beating; it is an open question as to what will take their place. Finally, in face of the virtually insurmountable difficulties of actually creating a World Financial Regulator (to say nothing of its desirability), two organisations, one created in direct response to the Global Financial Crisis, and the other, decades-old, are filling the void. None of these factors operates independently, of course; all interact, contributing to the potential uncertainty and complexity of outcomes.