Legal opinion

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The Jolly Contrarian’s Glossary

The snippy guide to financial services lingo.™

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Legal opinion. (n): 1. A long and detailed disclaimer of its own liability which a law firm will charge you handsomely for preparing.

2. A document designed to achieve exactly the opposite effect to the one its addressee anticipates, in that it carries as little by way of meaningful existential content as possible, while being as comprehensive, categorical and absolute as it can be about what it is not saying. Which is, more or less, everything.

This is typical of the sum total of the positive statement of the law you find in a legal opinion:

(Subject always to the qualifications, assumptions and caveats set out on pages 4-85)[1], this agreement is enforceable in accordance with its terms.

Which is a lawyer’s way of saying “Brexit means Brexit”. Should the agreement your solicitor has prepared for you make no sense whatsoever; if it is plainly impossible for an ordinary Englishman to divine the merchants’ commercial consensus no matter how carefully one examines the text — hardly an inconceivable contingency when that agreement was drawn up by a lawyer — then your expensively wrangled opinion does no more than verify that sorry state of affairs.

From the Jolly Contrarian’s stock of old adages that might not mean very much: “A legal opinion is just an onion with pi in it.”

So what are legal opinions for?

There are certain matters that regulation, or some senior, uninformed person in credit risk management once wanted to be told in black and white, and around which a markedly formal practice has evolved: the “opinion” has long since evolved away from “legal advice” in the broad sense of — well, telling your clients what is and is not a prudent thing to do — to be a formal, limited, crafted statement that addresses a specific, purely legal, arcanity. The classics are the effectiveness of close-out netting — here Basel regulation mandates a lengthily reasoned legal opinion (in fact, several) — the effectiveness of security (security being one of those things beset with tripwires and magic words) and the effectiveness of paperwork constituting transferable securities (also something considered to have a high degree of muggle-ineffability).

They will not address matters of fact — so you will find counsel drawing petulant distinctions between whether a “derivative” is a qualifying investment for a given issuer, and whether the contract you have identified, which calls itself “a derivative”, is documented under ISDA and so forth, is in fact what it says it is — nor matters of foreign law, in which the legal eagle in question has no mandate to express any opinion.

See also


  1. And Schedule 3, and the four appendices to our letter of engagement for that matter.