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Given how hateful the process of reviewing and applying netting determinations is, it is a mystery of modern finance and an outright failure of free-market capitalism that the process of obtaining these opinions is as much of a bugger's muddle as it is, but it is. Two consituencies, only, gain from the netting opinion process: those law firms who write them, and the industry bodies which have fashioned an entire cottage industry out of commissioning them. Here, in a piece of contrarian advocacy, are some simple steps one could take to make the process better. This might dent the annual revenues of our learned friends, but it is hard to muster any tears about that. | Given how hateful the process of reviewing and applying netting determinations is, it is a mystery of modern finance and an outright failure of free-market capitalism that the process of obtaining these opinions is as much of a bugger's muddle as it is, but it is. Two consituencies, only, gain from the netting opinion process: those law firms who write them, and the industry bodies which have fashioned an entire cottage industry out of commissioning them. Here, in a piece of contrarian advocacy, are some simple steps one could take to make the process better. This might dent the annual revenues of our learned friends, but it is hard to muster any tears about that. | ||
====Summarise==== | |||
If you are must write a 120-page opinion — and our learned friends would say, “we must: that is what a “written and reasoned” opinion means”, then at the very least, provide a curt summary at the front '''including a table with yes/no recommendations'''. | |||
Now it goes against the grain for lawyers to get to the point, of course — [[bright line test]]s are for the birds — but ultimately their clients must make yes/no decisions, they must do that based on these opinions, and a verbose screed that labours over [[Aleatory contract|aleatory contracts]], and spends [[Extraordinary rendition|pages defining what company is not]], is of very little use to that endeavour. | |||
How is it any more reassuring for the ongoing stability of the financial system that firms spend their time interpreting not the content of their legal agreements, but the content of ''legal opinions about'' their legal agreements? | |||
====Make it machine-readable==== | |||
Providing a 120 opinion — especially one without a summary — as a locked, scanned, tiff image that cannot even be searched for words like “[[aleatory]]” speaks to a humour of the blackest and most wicked kind. We are two decades into the twenty-first century, friends. | |||
====Co-ordinate==== | |||
Bizarrely, giant financial institutions who are past masters at, well, “relentlessly jamming their blood funnels into anything that smells like money”, give the industry associations they fund a free pass. This is so out of character as to make us wonder whether compromising photographs are involved. | |||
You would like to think the [[FIA]], [[ISDA]], [[ICMA]] and [[ISLA]] would fall over themselves to prove their respective worths serving their largely common memberships by co-ordinating such a profoundly tedious exercise, gathering, summarising and articulating opinions — especially since the bulk of each opinion (the general review of each jurisdiction’s insolvency regime and general application of set off and netting) is common to all of them. (the question “is a single agreement enforceable as a matter of basic contract law?” is not, for most lawyers, an especially difficult one to answer). | |||
But no: not only do these associations jealously prosecute their own netting opinion programmes, asking the same questions about the same jurisdictions and same legal entities, only in subtly different ways, ''they don’t even go to the same firms''. In [[Luxembourg]], [[ICMA]] uses [[Clifford Chance]], the German Banking Association [[Allen & Overy]] and [[ISDA]] uses Allen & Overy for some and Linklaters for the others. Why would anyone be so wasteful? (The stock answer given: competition laws!) | |||
This is wonderful for the worshipful company of [[close-out]] [[netting opinion]] writers, but is hardly value for their clients. Nor do the different entity groups use the same entity categorisations. | |||
So here’s the thing, friends: netting opinions are — to put it bluntly — a paranoid anachronism dating back to the prehistoric time of [[The First Men]], when swaps were new, apparently comprised of fearful magic, and there was terror as to what they could do. Swaps are now part of the fabric of the space-tedium continuum. No insolvency administrator has so much as ''tried'' to pull one apart in 40 years, in any jurisdiction, however ropey its grasp of the principles of sound financial governance.<ref>I know what you are thinking: that shows what a prudent process netting compliance is. May I direct you to my favourite elephant joke?</ref> Yet we contrive to let third-party bureaucrats we have appointed waste our time, resources, risk monitoring capacity and most importantly money, without a second glance? | So here’s the thing, friends: netting opinions are — to put it bluntly — a paranoid anachronism dating back to the prehistoric time of [[The First Men]], when swaps were new, apparently comprised of fearful magic, and there was terror as to what they could do. Swaps are now part of the fabric of the space-tedium continuum. No insolvency administrator has so much as ''tried'' to pull one apart in 40 years, in any jurisdiction, however ropey its grasp of the principles of sound financial governance.<ref>I know what you are thinking: that shows what a prudent process netting compliance is. May I direct you to my favourite elephant joke?</ref> Yet we contrive to let third-party bureaucrats we have appointed waste our time, resources, risk monitoring capacity and most importantly money, without a second glance? | ||