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Legal Documents as Means of Financial Abstraction: How Bankers’ Lawyers Constructed Swaps and Changed Finance

Published online by Cambridge University Press:  02 September 2021

Pascale Cornut St-Pierre
Pascale Cornut St-Pierre*
Affiliation:
Faculty of Law(Civil Law Section) of University of Ottawa [Pascale.CornutSt-pierre@uottawa.ca].
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Abstract

Finance rests on a process of abstraction, based on various material devices that have been studied by economic sociologists in recent years. The fact that many of those devices are legal in nature has not attracted much attention, even though financial instruments are typically embodied in legal documents. This paper argues that interactions involving legal documents shape both financial markets and their regulation, by specifying the contextual elements that will be deemed relevant in interpreting financial commitments. It takes as a case study the emergence of swaps since the 1980s. Through their work in standardizing, commenting, and litigating swaps contracts, bankers’ lawyers were able to recast obligations between banks and their clients in more abstract terms, discarding all references to specific business projects. Such abstraction simultaneously allowed the spectacular development of swaps markets, their positioning on the fringes of regulations, and the strengthening of bankers’ prerogatives against their clients.

Keywords

Law and FinanceFinancializationLegal Work and Financial InnovationFinancial Derivatives’ Legal HistoryFinancial Regulation and Categorization
Type
Research Article
Information
European Journal of Sociology / Archives Européennes de Sociologie , Volume 62 , Issue 2 , August 2021 , pp. 309 - 335
Copyright
© European Journal of Sociology 2021

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Footnotes

This article stems from doctoral research funded by the Fonds de Recherche du Québec–Société et Culture, the Social Sciences and Humanities Research Council of Canada, and the Canadian Institute for Advanced Legal Studies. I would like to thank Nafise Shooshinasab, Thomas Angeletti, Benjamin Lemoine and the anonymous reviewers for their helpful comments on earlier versions of this paper.

References

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