IILJ Emerging Scholars Paper 23 (2012)

Accountability in Transnational Contractual Governance: The International Swaps and Derivatives Association

Maciej Borowicz

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This paper uses the Global Administrative Law (GAL) approach to develop a model of accountability in transnational contractual governance (TCG). In the transnational context contracts are increasingly governed not only by contract law but also by elaborate regimes of private ordering. Derivatives contracts, for example, are governed by the rules developed by the International Swaps and Derivatives Association (ISDA). The fact that these rules of contract governance are set, monitored, and to a certain extent enforced by a body which is not accountable to the public – at least not in a way that national legislators and judiciaries are – prima facie undermines the legitimacy of contracts used in derivatives markets. This is true in particular because of the negative externalities that these contracts are prone to generate. In an attempt to provide an alternative model of accountability this paper argues that accountability of ISDA is better understood as a combination of procedural GAL-like standards applicable to ISDA itself as well as legislative and judicial recognition of the regulatory standards contained in the documentation developed by ISDA, and in particular the ISDA master agreement (MA). This model of accountability makes TCG responsive to both cosmopolitan and national constituencies, strengthening the argument for conceptualization of GAL as a pluralist legal order.