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Now note what is happening here: as we approach that asymptotic point of intolerable [[tedium]] (the tiniest measurable particle of which is the [[Biggs hoson]], by the way), at the same time the legal superstructure we create to eradicate this ineradicable imperfection grows ever less wieldy. ''We are creating a monster''. What is worse, we may pass through an [[event horizon]], beyond which there is no [[Lexophysics|lexophysical]] way out: we are sucked ever onward by the overwhelming gravitational forces inside a [[negotiation oubliette]]. We are compelled to continue even to our destruction, dashed on the infinitesimal, pointless rocks of [[tedium]], propelled by the colossal weight of the markup we have generated. | Now note what is happening here: as we approach that asymptotic point of intolerable [[tedium]] (the tiniest measurable particle of which is the [[Biggs hoson]], by the way), at the same time the legal superstructure we create to eradicate this ineradicable imperfection grows ever less wieldy. ''We are creating a monster''. What is worse, we may pass through an [[event horizon]], beyond which there is no [[Lexophysics|lexophysical]] way out: we are sucked ever onward by the overwhelming gravitational forces inside a [[negotiation oubliette]]. We are compelled to continue even to our destruction, dashed on the infinitesimal, pointless rocks of [[tedium]], propelled by the colossal weight of the markup we have generated. | ||
There are some famous examples. [[Clifford Chance]] famously created its own | There are some famous examples. [[Clifford Chance]] famously created its own little neutron star trying [[Extraordinary rendition|to define what ''wasn’t'' a company]] in a Luxembourg [[netting opinion]] in 2021. Some say that, in the centrifugally exploding spiral disc shape of the [[2018 ISDA Credit Support Deed for Initial Margin]], the heroic pedants of {{icds}} finally bit off more than they could chew and created a galaxy-sized black hole, into which the entire financial system may already, for all we know, have fallen. | ||
Even great catastrophes have their roots in innocuous trifles. Now, trifles do not get more innocuous than [[tri-party collateral arrangement]]s, so it is fun to see how fractal arguments can arise even in this kind of ''soufflé''. Indemnities, for example, are a common fractal trigger. Even harmless ones. | |||
It is not uncommon for a [[custodian]] to seek an [[indemnity]] for extraordinary costs it incurs HEY! WAKE UP! in holding its clients’ assets and carrying out its clients instructions with regards to those assets. | |||
Now in truth, the risk | Now in truth, the risk a [[custodian]] will suffer ''any'' such “extraordinary costs” is low. After all, what losses would they be? Outside of stamp taxes, it takes some talent for paranoia to come up with any. If a custodian does suffer losses, they are likely to be small in the grander scheme of things<ref>At least, when your grand scheme of things trucks in the multiples of millions, as does a broker’s, and not the paltry basis point remuneration enjoyed by the custodian.</ref> There will be an obvious justice and fairness to these kinds of losses, the allocation is obvious, no-one objects to it, so whether or not there is an indemnity the parties will sort the custodian out quickly and on the strength of the [[commercial imperative]], most likely without a backward glance to the legal contracts. | ||
This is just the [[Custodian]] going “look, I’m doing you a solid, you don’t pay me a lot for it, so it’s only fair if I get hit with some unexpected cost for looking after your assets, I can pass it on to you.” | |||
That said, there will be predictable skirmishes predicated on the width of the [[indemnity]], which will be outrageous, and to fend these off the client-side [[legal eagle]] will engage some of her favourite tropes: [[good faith]], [[commercially reasonable manner]], absence of [[Negligence, fraud or wilful default|negligence, fraud and wilful default]]. All good, clean, harmless fun. But already, we may have passed that dastardly event horizon, and should our legal friends zoom a bit further in, quickly they will realise all is lost. | |||
Someone notices the indemnity is [[joint and several]], between [[pledgor]] and [[pledgee]]. Again, so much so reasonable: the custodian does not want to argue as between these two clients whose fault it was: the custodian knows it was not ''its'' fault. The custodian will just claim on either of them. As to who ultimately foots the bill, the custodian cares not one whit. Let the two of them slug it out. | |||
But how shall they allocate responsibility? The legal eagle’s sacred quest is to solve now, for contingencies that will only come about in the future. There should be a concept of contribution. But should it depend on who instructed? Or whether one or other party was contributorily negligent in bringing the loss about? Should there be a relative contribution mechanism? | |||
all the while they drift closer to the detail, the magnitude of the machinery they are designing to solve for it mushrooms, in complication and heft. So much so that it lends a gravity of its own to proceedings. | |||
{{sa}} | {{sa}} | ||