Financial market regulation and private law: a new frontier of transnational commercial law

Abstract

Global financial markets are among the most extensively regulated markets in the world economy. This poses significant challenges from a private law perspective when regulatory rules interfere with private rights and obligations. This article examines the potential of transnational commercial law (TCL) to provide for a private law framework suited to the regulatory reality in global financial markets. The article finds that, while regulatory aspects are generally excluded from TCL instruments, notable exceptions to this general rule occur. Based on an analysis of the approaches undertaken in the Unidroit Convention of Substantive Rules for Intermediated Securities (Geneva Convention), including the accompanying Legislative Guide, the Unidroit Principles on the Operation of Close-Out Netting Provisions and the UNCITRAL Model Law on Secured Transactions, the article maps out three methods that allow for a reconciliation of private and regulatory rules: (i) the adoption of a flexible private law system including default and conflict rules; (ii) the use of opening clauses to allow deviations from TCL rules in accordance with international regulatory standards; and (iii) a codificatory approach through the development of a comprehensive and systematic legal framework consisting of both private law and regulatory rules. Finally, the article addresses potential obstacles and objections that future TCL instruments will face when addressing regulatory aspects. Overall, the article argues that an efficient financial market requires a foreseeable set of private law rules that—considering the continuous expansion of regulatory law—must address the pressing issues deriving from the interrelation of regulation and private law. However, the adaption of TCL instruments should be limited to common-sense financial market regulation that, even if differing from State to State, generally follows globally shared regulatory goals.