Litigationey

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Litigationey
/ˌlɪtɪˈɡeɪʃᵊni/
(Also suish, squabblative (adj.)
Of a commercial issue, important, basically straightforward, but thanks to the intervention of professional advisers, accreted over the ages and rendered in language so opaque that no-one outside the inner cabal knows what is really going on. And that inner cabal sure ain’t talking.

“Litigationey” often describes commercial undertakings predicated on some kind of “plausible deniability” — contractual arrangements which rather wish they were, or looked like, something else.

For example, it is important to those who sell credit default swaps that they should not be mistaken for insurance contracts. Those who deal in equity swaps wish them to be not considered stampable investments in shares. Those who truck in collateral like to take it subject to pledge but at the same time be free to give it away.

These fictions are loosely based on true stories — they are well-meant — but in their dramatic sweep they oblige practitioners to dissemble — to affect silly walks, use secret handshakes and invent elliptical ways of describing mundane things, all in the service of not uttering inconvenient realities.

Of course, the same circumlocution that foxes a taxman can bamboozle a judge.

Thus, over time workaday documents become squabblative because, while the practitioners who propagate them are well-drilled, fluent in these language games and strongly incentivised to maintain the theatre, those who come to the cold — who hail from foreign climes of the litigation department, the bar and the bench are not.

We have remarked before about the differing functions a contract has during its life. Sales, operations, legal and trading each has its own priorities and private agenda. When a commercial accord reaches cataclysm, these newly inducted agents find a different purpose again: to wreak havoc. If given the chance they deny utterly the tacit accommodations their commercial cousins made each other in fair times when the goal of reaching compliant and tax efficient consensus was mutual. A “litigationey” contract gives just such a chance.

Herewith the great bane of hindsight: how we are goaded to forget. But litigation advisers don’t need goading: they never knew in the first place. Why we should commend ever our commercial souls to the hands of those who sit upon the King’s Bench is a question best not pondered.

ISDAs come before the courts one at a time. They are exotic specimens, rather like those ghost orchids: retrieved at personal cost from the depths of a sweaty tropical swamp and prone to cause hallucinations.

Litigation about them is fraught: Rarely do those who argue these cases have any practical sense of what they are or how they work; those adjudicating them certainly don’t.

And here ISDA’s crack drafting squad™’s vernacular plays into the hands of caprice and obstrepereity. That squaddish left-handedness cries out to be misunderstood. Just try asking a non-specialist parse a flawed asset clause, an Event Determination Date, or even the Notices provisions of an ISDA Master Agreement.

There are some cases where the confusion goes deeper: the JC contends that credit default swaps are an intrinsically ambiguous way to address a straightforward problem and, as such, are bound to create fear and loathing.

But this all adds to the JC’s mounting, great conspiracy theory that the whole the financial services industry, and perhaps even commerce itself, is really a perpetual motion machine devised by the various guilds of professional advisers for the sole purpose of extracting rent from it.

See also

• Plausible deniability
• Litigation department
• Writing for a judge
• Equity v credit derivatives showdown
• Purpose