Muir Watt, Horatia --- "Autonomising financial markets: Lehman Brothers v. BNY Corporate Trustee" [2019] ELECD 145; in Muir Watt, Horatia; Bíziková, Lucia; Brandão de Oliveira, Agatha; Fernandez Arroyo, P. Diego (eds), "Global Private International Law" (Edward Elgar Publishing, 2019) 271

Book Title: Global Private International Law

Editor(s): Muir Watt, Horatia; Bíziková, Lucia; Brandão de Oliveira, Agatha; Fernandez Arroyo, P. Diego

Publisher: Edward Elgar Publishing

ISBN: 9781788119221

Section: Chapter 13

Section Title: Autonomising financial markets: Lehman Brothers v. BNY Corporate Trustee

Author(s): Muir Watt, Horatia

Number of pages: 10

Abstract/Description:

When the bankruptcy of Lehman Brothers Holdings, Inc. (LBHI) produced shockwaves throughout the global financial market and calls for regulation of systemic risk, the role of private international law was hardly a central preoccupation with either financial institutions or the general public. It is well known that Lehman’s over-the-counter (OTC) derivatives portfolio (containing over 900,000 OTC derivatives transactions) was governed by the default provisions of the ISDA Master Agreement. On the terrain of private law, the question arose in the aftermath of the crisis as to whether the Master Agreement played any meaningful role in Lehman Brothers’ bankruptcy and its catastrophic outcome and more generally whether a modification of its terms could reduce the systemic risk associated with derivatives transactions. In respect of the transnational dimension of the Agreement, a more theoretical debate concerned the extent to which attempts to create global certainty by the financial industry through the use of standardised agreements could be seen as a present-day renewal of the lex mercatoria. Might privately created norms provide an alternative frame of reference for the governance of contracts concluded in global financial markets? In such a perspective, the interference of divergent local laws was seen to thwart the operation of uniform contractual terms. However, the presence of a conflict of laws in relation to the interpretation of the ISDA Master Agreement also suggests that private international law plays an essential role in constituting the rules of the game against the backdrop of which the Master Agreement is given legal effect.