European Business Organization Law Review

The paper focuses on financial transactions, addressing over-the-counter (OTC) trading of derivatives, which many analyses of the recent financial crisis argue produced significant problems. This area of financial activity grew massively from the 1990s, facilitated by legal developments in both the US and the UK that ruled out any state regulation of the market whilst at the same time affirming that the contracts made in the area were fully legally enforceable in US and UK law. At the same time, the private association, the International Swaps and Derivatives Association (ISDA), developed the Model Contract and international private soft law agreements that were generally respected by national legal systems and provided an agreed framework for OTC contracts. The paper explores how this lack of public regulation was legitimated, and the interests which lay behind this legitimation process. It then considers how the financial crisis and the role of OTC derivatives forced a re-opening of the issue of how these markets should be regulated. The paper explores the interplay between what may be described as technical fixes to regulatory problems, on the one hand, and the efforts of private and public actors to defend their interests by shaping the new markets in particular ways, on the other.