This chapter examines the relationship betweenprivate ordering/self-regulation and national contract law rules. It assesses the impact that private ordering exerts upon national contract law, with particular reference to the legal response to the ISDA Master Agreement. The chapter also examines aspects of market-specific regulation in the United Kingdom. Many areas traditionally covered by common law rules, such as the control of unfair terms in contract, are now the preserve of regulators such as the Financial Conduct Authority (FCA) and the Competition and Markets Authority. In addition to the activities of regulators, enforcement of consumer contract law can be undertaken by a range of organisations and dispute resolution services provided by private entities or through various ADR schemes. There are often significant divergences between the regulatory approach to contract enforcement and the applicable contract law rules on the issue. To illustrate this, the FCA review of the mis-selling of interest rate hedging products to ‘unsophisticated’ customers is contrasted with case law on misrepresentation covering the corresponding scenario under the common law.

One the basis of the decisions handed down over the last three decades, and in particular since 2008, this book has argued that the English ‘Financial Courts’ have taken a market-minded or ‘macro’ perspective when adjudicating derivatives disputes. This approach has evolved with the markets themselves, as the courts have sought to respond to the exigencies of global markets operating on standard terms containing the default choice of English law and the English courts. In this sense, the English courts coped well with the unprecedented demands of the last financial crisis, including the spike of cases relating to the collapse of Lehman Brothers and novel and complex challenges to the administration of valuation and close-out in volatile markets. This approach has, however, proved more problematic in those cases reflecting the sheer diversification of the modern derivatives markets, so that end-users now include individuals and other types of non-sophisticated customers, an issue which does not have to be factored in by cases on standardised commercial terms used in sectors such as shipping.

Every position in the financial markets, from a vanilla interest rate swap to a syndicated loan, from a repo to a bond, is a contract. Contractual risk mitigation techniques, such as Events of Default, are more significant in sectors where parties enjoy fewer public sector regulatory protections, as is the case in syndicated loans and derivatives, but contractual relationships underpin all financial positions. More complex structures, such as synthetic securitisations or a chain of interests in intermediated securities may involve multiple parties and span diverse jurisdictions, but in legal terms they are merely combinations of contracts. The same applies to products which are shrouded in jargon or which seem exotic at the time.

To challenge a contractual counterparty’s decision-making is to invoke different and (for financial market participants) less familiar types of legal standards to those examined thus far, requiring a different type of scrutiny by the courts and raising questions about the boundaries between public and private law.