Securitisation from mortgages to sustainability: circulating techniques and the financialisation of legal knowledge

ABSTRACT

This article explores what finance can teach us about law’s agency in global governance by tracing the global circulation of a specific technique, securitisation, from its origins in mortgage markets to its recent redeployment as a purported tool for ecological transition. It delves into legal practitioners’ literature to investigate the various legal problems that had to be addressed, and the various legal solutions that were devised, for securitisation to spread globally. Through the examination of concrete technical problems that securitisation lawyers have had to solve—concerning the constitution of special purpose vehicles, the assignment of receivables, and the construction of new asset classes—I show that what has become globalised in the field of law and finance in the past decades is not primarily a set of transnational norms or authorities, but a repertoire of legal techniques, values, and rhetoric for framing and solving legal problems: a financialised legal knowledge.

KEYWORDS:

• Legal technique
• globalisation
• securitisation
• assetisation
• special purpose vehicles

1. Introduction

Finance has played a leading role in globalisation since the 1970s, as evidenced by the work of many economists, sociologists, and geographers.¹ One way of articulating globalisation with the rise of finance is suggested by the work of Saskia Sassen. Sassen claims that the geographic dispersal of economic activity, characteristic of globalisation, paradoxically reinforces the need for central control in multinational firms: it complexifies their management and prompts them to outsource some of their core corporate functions to specialised service firms, such as legal, accounting, and—most notably—financial services firms.² Finance, according to Sassen, is not to be reduced to a question of how to get money flowing into and beyond a company: it is, more fundamentally, about controlling and extracting value from an ever expanding range of activities scattered around the globe.³

To view, as Sassen does, finance as a key component of contemporary capabilities for global control leads to interesting insights for the study of law’s agency in global governance.⁴ Anyone attempting to study international financial law cannot help but be struck by its startling fragmentation: without a unitary, well-defined legal regime, finance is regulated globally by a myriad of informal forums, standard setters, gate keepers, and other modes of private ordering.⁵ Scholars concerned with the rise of a law beyond the state have often focused on organisations like the Basel Committee for Banking Supervision, the International Accounting Standards Board, the Big Three credit rating agencies, or the International Swaps and Derivatives Association—to name but a few—and have typically questioned the legal nature and legitimacy of the norms they produce.⁶ While this scholarship has allowed for a better understanding of how finance is regulated today, it tells us little about the concrete mechanisms through which finance itself channels monetary flows and constrains economic activities worldwide. Sassen’s idea of finance as a capability for global control, in contrast, turns our attention precisely to this latter aspect: how finance bridges people and things across the globe, secures the expectations of some (often to the detriment of others), and gradually constructs its own transnational order.

This article intends to study what finance can teach us about the law’s agency in global governance by examining the diffusion of a specific technique, securitisation, from its origins in mortgage markets to its recent redeployment as a purported tool for ecological transition. Securitisation is a prime example of how, despite the global fragmentation of financial law, financial markets practitioners have succeeded in devising legal-financial techniques that ensure the smooth flow of capital across legal regimes. Indeed, one would be hard pressed to identify securitisation’s global regulator, be it formal or informal, public or private. In its most basic operations securitisation remains governed by national laws—laws on the assignment of receivables, trusts and business organisations, insolvency, taxes, etc.—and neither those laws nor the legal documentation used in securitisation transactions have been standardised globally.⁷ This lack of standardisation has not prevented securitisation from sweeping the world as of the late 1980s, and from connecting countless borrowers, lenders, special purposes vehicles, investment banks, and investors from the four corners of the earth.

To overcome the apparent paradox of a law at once globally fragmented and yet globally fluid, this article adopts a micro-legal perspective. Just like in economics or in sociology, where micro-level analysis focuses on actors’ behaviours and decision-making as opposed to broader structures and large-scale phenomena, law may be approached from the perspective of those seeking to secure and vindicate their rights, rather than from the angle of the legal system and its general rules applicable to all.⁸ This shift in perspective allows me to bypass the theoretical problem of a global regulator’s lack of authority or legitimacy—or of its plain inexistence—and to look at how global legal relationships actually get constructed. So rather than focusing on global norms that purport to regulate finance, and trying to elucidate their legal character, this contribution chooses to examine tangible artifacts of lawyerly work—which comprise various kinds of ‘law-stuff’, as Karl Llewellyn used to say,⁹ including financial contracts, legal opinions and, as examined in this article, the professional legal press—and ask how they shape the rights and obligations of financial markets participants. Such an approach makes obvious what Katharina Pistor so rightly pointed out: that law is constitutive of finance, in the sense that financial instruments consist, in the final analysis, of legally binding commitments to pay certain amounts of money at a future time, and that such legal arrangements channel wealth towards those who know how to use them.¹⁰ Securitisation, micro-legally speaking, thus appears as a series of legal operations designed to reallocate flows of payments and redistribute risks of default: assignment of receivables, transfer of collateral, creation of ad hoc legal entities, issuance of securities, and so on. The critical question, in order to capture the law’s agency beyond the state, becomes: how could such legal operations be validly and efficiently deployed across borders?

This article addresses this question by delving into international financial lawyers’ professional literature. It investigates the various legal problems that had to be addressed, and the various legal solutions that were devised, for securitisation to spread globally. Through the examination of the concrete technical problems that securitisation lawyers have had to solve, I argue that what has become globalised in the field of law and finance in the past decades is not primarily a set of transnational norms or authorities, but a repertoire of legal techniques, values, and rhetoric for framing and solving legal problems: a financialised legal knowledge. Part 2 outlines the methodology used to track the evolution and circulation of the legal techniques underpinning securitisation. After describing what securitisation is and what it tries to achieve, the rest of the article surveys the main technical challenges that legal professionals had to resolve to make securitisation work in different legal systems. Part 3 explores what lawyers deem the most characteristic feature of securitisation: the constitution of special purpose vehicles (SPVs) with its peculiar territorialities. Part 4 focuses on the technique most frequently used for transferring debts to SPVs, the assignment of receivables, and its underlying representation of debt as an asset instead of a relationship. Part 5 studies how, by translating bankers’ financial models into enforceable legal terms, lawyers helped create an ever-expanding range of securitised products and were thus key actors of assetisation. Part 6, finally, examines the rise of sustainable securitisation as an attempt to re-legitimise financial practices that were severely tarnished by the financial crisis.

2. Securitisation and its legal techniques, across borders

Economic geographers have already shown that, while securitisation as an idea could travel relatively easily from one country to another, securitisation as a technology diffused with greater difficulty due to being intricately tied to local political economies and legal systems.¹¹ Before securitisation could cross borders, the legal technology had to be re-engineered to be compatible with new institutional landscapes.¹² Securitisation was first developed in the United States’ mortgage market in the 1970s. Its initial success was rooted in the American political economy, in which government-sponsored enterprises with a mission to advance homeownership actively supported this financial innovation, which promised to stimulate the secondary mortgage market and channel investment into affordable housing.¹³ Yet no such institutional support existed in European or developing countries, where lawyers, along with bankers and accountants, had to invent their own local version of securitisation before this financial innovation could spread in their home jurisdiction. Economic geographers have documented how the diffusion of securitisation occurred through the co-production of innovative knowledges in transnational professional networks and communities of practices, often involving the enlistment of governments for targeted reforms.¹⁴ Their work, however, shies away from an insider view of the expert knowledge so created. Especially from a legal perspective, the exact workings of securitisation’s cross-border re-engineering remains to be elucidated.

The research presented here expands on economic geographers’ investigation on the spread of securitisation through the creation of new expert knowledges, albeit with a focus on the legal techniques that were devised or adapted to implement securitisation across borders. To gain insight into the content of the expert knowledges developed within law firms to allow securitisation to reach new territories, it draws on archival research into past issues of the International Financial Law Review (IFLR). IFLR is a London-based legal magazine specialised in corporate finance and aimed at legal professionals from around the world. Its articles, written mostly by lawyers from the biggest business law firms, are short and practice-oriented: they typically detail innovative deals, expose the latest trends in deal negotiation and documentation, and offer expert opinion on how the law is interpreted and applied within the financial industry. Between 1986 and 2019, IFLR has published over 170 articles on securitisation, exploring various legal issues faced by practitioners in more than 40 countries. This corpus, besides summarising the state of the law in various jurisdictions and identifying key reforms that facilitated the spread of securitisation, offers a glimpse into the technical problems occupying legal professionals at different points in time and into how they would try to solve them. It also gives a sense of certain cultural representations that permeated the discourse of these lawyers, and of how such representations might have informed their legal reasoning.

Before turning to the specific legal issues addressed in these articles, a slightly more detailed presentation of the corpus I constituted is in order. As shown in Figure 1, the first IFLR articles on securitisation were published in the late 1980s, when securitisation began to spread from the United States, first in the United Kingdom, closely followed by other European countries. The number of articles on securitisation increases rapidly from the mid-1990s and remains high through the mid-2000s. This reflects a decade of accelerated development, both in terms of geographical expansion—to Latin America then Asia, and on to Eastern Europe and the Middle East—and of product diversification. The number of publications drops sharply after the 2007–2008 financial crisis and never returns to its previous heights, suggesting the end of the innovation boom in securitisation techniques.

Figure 1. Articles on securitisation published in IFLR, 1986–2019.

The vast majority (83%) of these articles are authored by lawyers, most often working for the largest business law firms headquartered in the UK or the US, such as Clifford Chance, Mayor Brown, Freshfields, or Allen & Overy. These lawyers, however, write from offices located in financial hubs around the world: in London (25%) and New York (10%), of course, but also Paris (6%), Hong Kong (5%), Sidney (5%), Chicago (4%), Amsterdam (2%), and Tokyo (2%), to name but a few. By outlining the transactions that they helped structure and the legal issues that they handled, they position themselves in their professional field and they signal their expertise to potential clients or collaborators, but they obviously do not reveal all relevant information pertaining to their dealings, for confidentiality as well as strategic considerations. Although their writings fall short of revealing the whole truth about securitisation, they nonetheless convey a panoramic view of the legal circuits that such financial technology required, as well as a shared knowledge base among the legal professionals involved.

In the financial press, securitisation is often described as a form of financial engineering pooling together illiquid assets, such as mortgage loans, and using them to back securities distributed to investors on financial markets.¹⁵ For the lawyers writing in IFLR, however, securitisation more accurately implies the sale of payment rights to an independent legal entity whose sole purpose is to acquire such rights (often referred to as a special purpose vehicle, or SPV), and the issuance of securities whose value depends on the payment rights so acquired.¹⁶ The main advantage of such legal scheme is to isolate the payment rights from the estate of the original lender—called, in securitisation’s jargon, the originator—and to place them beyond the reach of its creditors, especially in case of bankruptcy. In the words of some legal practitioners, securitisation is thus essentially about ‘provid[ing] a legal framework that insulates the financial assets being acquired from the claims of parties other than the investors […], thereby permitting the timely transfer of payments from the account debtors to the investors’.¹⁷

The above description encapsulates neatly the legal idea of securitisation. For this idea to materialise into an actual financial operation, however, legal professionals had to clear a series of technical hurdles specific to each jurisdiction, regarding for example the steps necessary for an assignment of claims to be enforceable against third parties, the tax treatment or the capitalisation requirements of the SPV, its registration with a regulator or its disclosure obligations towards investors. In the articles published in IFLR, securitisation lawyers thus raised a variety of legal issues under different legal systems, touching on tax law, securities regulation, capital requirements for banks, accounting rules, but also more basic private law matters, regarding contracts, collateral, trusts and corporations, bankruptcy, and conflict of laws. Among all the legal issues discussed in those articles, the two most salient concern the choice of a legal vehicle as a SPV, to which the next part turns, and the assignment of receivables, discussed in part 3.

3. Setting up a SPV: forging local ties in a global playfield

The use of a SPV is one of the most defining features of securitisation.¹⁸ A SPV serves to pool assets apart from their originator’s business and beyond the reach of its creditors, and to channel the income generated by these assets towards investors through the issuance of securities. To properly perform this function, a SPV needs to be a legal entity distinct from the originator, formally independent from it, but also devoid of any liabilities of its own. It should have no business venture, no payroll, no commitment that might disrupt its timely payments to investors and jeopardise its solvency. To be economically viable, it must in addition be exempted from taxation and allowed to issue debt securities despite being thinly capitalised. In other words, a SPV must be a shell entity, as pure a conduit for cash flows as possible, while incurring the least regulatory costs possible.

Two questions are at the forefront of securitisation lawyers’ discussions concerning SPVs: where should they constitute them, and in which legal form? In answering these questions, securitisation lawyers display a very distinct transnational perspective on the law. When securitisation started to spread, few jurisdictions would allow for the creation of legal vehicles perfectly suited for the task. In common-law countries, trusts were often the preferred choice, due to their flexibility, their advantageous tax treatment, and their use in orphan structures (ie, with no official owner).¹⁹ Civil-law countries, in contrast, generally did not provide for the creation of trusts and often had commercial law rules unsupportive of shell companies, such as minimum capitalisation or mandatory registration requirements.²⁰ A frequent solution was to devise multi-jurisdictional structures, with SPVs located in permissive foreign jurisdictions, such as the United States, the United Kingdom, or offshore financial centres. This is prominent in the corpus, with several IFRL articles published in the early 2000s that read like advertisements for, among others, the Cayman Islands, Guernsey, or Ireland, each touted as a prime choice for setting up SPVs.²¹

In multi-jurisdictional structures, SPVs are used to connect securitisation deals with countries offering attractive legal conditions. A single securitisation structure may incorporate more than one SPV, so as to multiply its territorial connections and thus accumulate the associated legal benefits. Cross-border deals with two or more SPVs are indeed frequently described in IFLR articles.²² SPVs also serve to loosen the grip of countries less friendly to investors. Conveniently located, SPVs may thus not only achieve a tax advantage or regulatory compliance, but also avoid the risks associated with countries perceived as politically or economically unstable. Soon after the devaluation of the Mexican peso in 1994, for example, Latin American companies began to securitise their export trade, rerouting their foreign currency earnings directly to SPVs located in offshore jurisdictions. This way, money flows were kept out of risky countries entirely, insulating them from further currency devaluations or other governmental interventions and reserving them for payments to US investors.²³

The fact that SPVs could be constituted abroad so easily resulted in competition between financial centres—and, by implication, between their legal systems—to attract their share of securitisation’s booming industry. In several civil-law countries, bankers and lawyers lobbied for and obtained legislative reforms enabling the constitution of new kinds of legal entities suitable for use as SPVs. France was the first mover with the creation, as early as 1988, of a new legal vehicle specifically designed for securitisation, called fonds commun de créances, which is neither a corporation nor a trust, but a novel form of co-ownership between investors. As reported in IFLR, ‘the French lawyer often dreams of such quick and positive answers by parliament and government to his concerns and requests for adaptation of the legal system’!²⁴ The French model was then followed by other European civil-law countries, such as Belgium, Spain, and Italy, where lawyers writing in IFLR relate that the legislation adopted was first drafted by the Italian Banking Association.²⁵ Willingness to foster securitisation prompted other countries, such as China, to introduce general legislation on trusts,²⁶ or legislation providing specifically for the creation of securitisation trusts, as was the case in Argentina.²⁷ Still other countries, like Korea, Japan, Brazil, and Portugal, opted for legislation that created a new type of corporate entity to serve as SPVs, known as securitisation companies.²⁸ In just over a decade, IFLR articles point to no less than fifteen countries from the civil-law tradition that have altered the fundamental institutions of their private law, by introducing new kinds of legal vehicles better fitted for global securitisation practices.

The inventiveness of legal practitioners, coupled with the swift adaptation of national legal systems, soon created a menu of structuring options that securitisation lawyers could use to arrange an even wider variety of deals, extending across even more spaces. Interestingly, even though lawyers writing in IFLR sometimes acknowledge that cross-border deals generate complex legal problem-solving that sometimes ‘sounds like a capital market lawyer’s worst nightmare’,²⁹ they rarely call for a global harmonisation of securitisation’s legal framework. The impression that emerges from their writings is that, even though such harmonisation would certainly offer some benefits, its absence is far from insurmountable. As one lawyer puts it: ‘We must not over-estimate the barriers of laws in different countries because over time, as more transactions are undertaken, structuring solutions will be found to overcome these barriers’.³⁰

The ability to work one’s way through the gigantic patchwork of laws bearing on securitisation across the globe hinges on lawyers’ private know-how, considered as one of global law firms’ most valuable assets. Lawyers indeed seem to be keenly aware that, from one deal to another, they are building their capacity for channelling financial flows around the globe as they wish. As a lawyer from London’s Freshfields office writes:

In Europe, multi-jurisdictional transactions of increasing size and complexity (involving up to 25 jurisdictions) are being tackled. The ability to provide all the advice in relation to the core jurisdictions from our own offices is key to the ability to execute these transactions efficiently or indeed at all. The accumulated experience of the past few years means that transactions can now be accomplished which were unthinkable even six or seven years ago.³¹

As this and the previous quotes make clear, in securitisation lawyers’ view, private legal technique is such a powerful tool for global ordering, that these lawyers do not even feel the need for a global regulator to step in. Unsurprisingly, this global ordering through private legal technique has simultaneously led to a rebalancing of powers between finance and society, especially over the issue of debt, as the following section will show.

4. Assigning receivables: circumventing debtors protections for smooth credit flows

One legal hurdle faced by securitisation lawyers in many jurisdictions concerned the transfer of the financial assets to be securitised from the originator to the SPV. Legally speaking, a financial asset is a special kind of property: it is a right to receive payments owed by a debtor pursuant to a loan or other legal grounds. That a creditor may freely sell this right to a third party was far from obvious in most countries, save the United States where securitisation was first developed. For securitisation to expand its territorial reach, legal professionals had to navigate various procedural and substantive legal requirements for the assignment of receivables, a global jumble of rules generally intended to protect debtors.

Prior to the spread of securitisation, the law of most countries required either debtor’s consent or notice before an assignment of receivables could be opposable to third parties and, most importantly, to the debtor himself or herself. Moreover, such notice or consent was sometimes subject to cumbersome formalities, such as the intervention of a bailiff or a notary, the presence of witnesses, or the use of certified mail.³² Through these kinds of conditions, the law recognised the need for debtors to know their creditors’ identity and prevented the creation of a free market in personal and commercial debts. From the perspective of financial law practitioners, however, the requirement to notify debtors—sometimes thousands of them—let alone to obtain their consent, was perceived as a major obstacle to securitisation and one that needed to be circumvented before securitisation could take off.

Unlike the constitution of SPVs, the assignment of receivables could not be delocalised easily, and it was therefore less amenable to forum shopping and multi-jurisdictional structuring. It was certainly possible to choose a foreign law to govern the assignment of receivables,³³ but it tended to complexify deals. Indeed, regardless of the law chosen for the assignment, the receivables themselves and any related collateral would remain subject to their domestic law; in case of difficulties, they would need to be enforced in local courts, where foreign law would need to be proven, and where complex conflict of laws issues may arise.³⁴ The law applicable to third-party relations, such as between the assignee and the assignor’s other creditors, was also particularly difficult to determine, as different countries have used different conflict of law rules to make that determination.³⁵ Local solutions were therefore preferable whenever feasible. Whereas lawyers in the UK and other common-law countries could resort to equitable assignment as a mode of transferring claims without debtors’ notice or consent,³⁶ civil-law countries provided lawyers with more limited options: subrogation, for example, could operate absent debtors’ knowledge, but constrained receivables’ sale price, requiring payment of their full value.³⁷ The 1990s thus saw strong advocacy for the liberalisation of debt markets, soon followed by the creation, in many countries, of new mechanisms for transferring receivables. These remarks by a US lawyer capture the mindset prevailing within financial circles at the time:

The 1998 Nobel Prize winner in economics, Amartya Sen, speaks eloquently about the need for, and merits of, systems that support ‘freedom of exchange.’ In all too many parts of the world, however, the ability of banks and other intermediaries to freely sell financial assets (the obligation of borrowers) has only been recognized slowly. […] As late as the mid-1990s, the US remained rather unique in regard to the saleability of financial assets. Thankfully, it now appears that other nations, realizing that nobody is harmed by properly structured freedom to exchange financial assets, have begun to enact their versions of this essential legal prerequisite to effective securitization.³⁸

From the turn of the 1990s, numerous civil-law countries passed legislation that introduced new means for transferring loans specifically tailored for securitisation, or that facilitated assignments of receivables under their general law:³⁹ lawyers writing in IFLR describe such legislative changes in France, Japan, Belgium, Spain, Korea, Italy, Portugal, Taiwan, and Greece.⁴⁰ Around the same time, assignment of claims also became an object of international negotiation, leading to the adoption in 2001 of the United Nations Convention on the Assignment of Receivables in International Trade, which however has not yet come into force due to lack of ratification. The Convention’s failure is attributable to the profound disparities among legal systems on this issue, explain legal practitioners: ‘Throughout Europe and elsewhere, there is no one consistent approach to […] what constitutes a valid assignment of receivables. […] The bespoke approach of each jurisdiction is built on decades, if not centuries, of case law precedent and customary practices and local biases’.⁴¹

While the law itself was not easily standardised, in practice an astute contractual structure soon gained acceptance among practitioners and regulators across the globe, one that avoided costly notification requirements while reassuring governments that debtors would be adequately protected. Such a contractual structure entails arranging, alongside the assignment of claims, a servicing agreement between the original lender and the SPV, pursuant to which the original lender would keep collecting debtors’ payments, only now on behalf of the SPV. Under such an arrangement, notice to debtors, necessary to perfect the assignment vis-à-vis third parties, is to be sent only upon the occurrence of predefined trigger events, such as the originator’s impending insolvency.⁴² As long as the originator stays out of financial trouble, debtors never have to interact with their new creditor and often remain completely unaware of the assignment. Assurance that the original lender would normally continue to manage the loan and the relationship with the borrower was sufficient to meet governments’ concerns over the possible adverse effects of securitisation on debtors’ protection.⁴³ The fact that servicing agreements typically include terms that restrict the servicer’s ability to renegotiate loans with distressed borrowers, and obligate the servicer to manage the loans in the best interests of securities holders—thus incentivising foreclosures and other modes of judicial enforcement—may cast doubt on the effectiveness of this safeguard,⁴⁴ but this apparently has not troubled governments, or at least not enough to be reported in the IFLR articles. On the contrary, securitisation lawyers mention a few cases of states where securitisation was accompanied by government reforms aimed at simplifying and accelerating foreclosure proceedings.⁴⁵

With the development of securitisation’s legal techniques and their circulation across national spaces, it is also a new cultural representation of debt that has gradually been recognised and, in turn, conveyed by the law. One lawyer in the corpus specifically tackles the ‘cultural issues’ to be faced for securitisation to thrive in alternative markets such as social housing:

One of the biggest impediments to the growth of securitization in this area is the attitude of the lenders, the borrowers and the financial and legal advisers to the disintermediation of their social housing finance. Most financial institutions run social housing lending as a traditional relationship-based product line. […] It is one of the last bastions of traditional lending values where the personal relationship between borrower and lender is still especially important.⁴⁶

As long as debt is represented in law and in society as a relationship between a debtor and a creditor, assignment of receivables is viewed with a degree of suspicion. With the spread of securitisation, an alternative representation of debt was operationalised through legal technique, one in which debt is conceived less as a relationship and more as an asset to be valorised and traded. The rise of this financialised representation of debt is directly tied to the gradual acceptance among regulators and legislators that an assignment of receivables does not necessarily have to be communicated to debtors, because it does not directly concern them. As securitisation lawyers have argued, securitisation is to be conceived as a ‘refinancing instrument’⁴⁷ for businesses and financial institutions, whose inner workings do not have to be disclosed to their clients and customers.

Once it enters the law, such a representation of debt as an asset rather than as a relationship supports the commodification of debt and the impersonalisation and massification of credit.⁴⁸ It also unleashes the imagination of practitioners and inspires the creation of all kinds of new financial instruments, as the next section explores.

5. Translating financial models into law: pushing the boundaries of assetisation

Besides articles discussing the law governing securitisation in a given jurisdiction or on a particular legal issue, IFLR regularly published articles describing new kinds of securitisation, or even specific deals standing out for their innovativeness. In these writings, lawyers exhibit a constant focus on and claim to novelty, which in their practice represents ‘opportunities for premium work’ to be seized by ‘those thinking outside the box’.⁴⁹ For example, securitisation of intellectual property rights, of tax receivables or of earthquake risks have all been dubbed ‘the next big thing’ for securitisation lawyers. Designing new securitisation structures is considered ‘creative’, ‘exciting’, and ‘lucrative’ lawyerly work; merely replicating existing structures, by contrast, is deemed ‘routine’, ‘bread-and-butter’ work, in which ‘some of the thrill is gone’.⁵⁰ The pace of innovation in securitisation is fast, because innovative deals, once marketed, can quickly be reverse engineered and imitated by competitors: they soon become ‘commoditised’ and attract lesser fees for their lawyers.⁵¹

It is typically investment bankers who impulse innovation in securitisation, through the financial models they develop to calculate expected cash flows under different circumstances. The lawyers’ job is to turn these financial models into enforceable legal arrangements, a task that demands ‘comfort with numbers’ and ‘with rule-driven imaginary worlds’, as this US lawyer explains:

Much of the hardest part of securitization drafting involves putting in place rules for dividing up the cash received (or the losses). These rules are created by the computer models of the boffins who design the deals; the models are used […] to give investors a picture of likely financial results to them based on a range of assumptions or scenarios about asset prepayments, defaults, and ultimate recoveries. Unfortunately perhaps, the payments rules contained in the client’s cash flow models cannot simply be copied onto a floppy disk and appended to the contract (although it has been suggested!). They have to be understood by lawyers and translated into enforceable English in a contract.⁵²

Through this translation, legal knowledge itself is progressively financialised: lawyers indeed show a propensity to stuff available legal categories with financial motives and beings, which injects a new creativity into legal practice. Interestingly, lawyers trained in the common-law tradition pride themselves of their self-proclaimed superior ability to understand the economic fundamentals of a deal and to transpose them in a proper legal structure; whereas local lawyers, often from civil-law backgrounds, have the more limited task of delivering ‘enforceability opinions’ and to adapt the deal to its local legal environment.⁵³

Legal categories do not come out of this translation untouched, compelled as they are to make room for these new financial realities. For example, the same lawyer writes:

Unlike more settled areas of the capital markets practice, the rapid rate at which new financial products develop in securitization, and the pattern of creation of a new entity with each transaction, means that securitization lawyers are more often forced to address questions of fundamental analysis than other corporate lawyers. Such basic issues as ‘what is a security’, ‘who is the issuer’, ‘is a transfer of property a true sale or a disguised financing’, and ‘is an interest debt or equity’ are often thrown our way. The right answer often depends on reasoning by analogy, since the available precedents will generally not be precisely on point.⁵⁴

In the articles published in IFLR, this process of redefining and expanding established legal categories is evident with regard to the very notion of a ‘receivable’. Among the various sources of income of a business, which ones qualify in law as a receivable that may validly be assigned to a SPV? Over the years, the answer to this question has become more encompassing, thereby allowing the securitisation of an increasing diversity of claims and values, as illustrated in Figure 2.

Figure 2. Securitisation timeline.

In most countries, securitisation was first introduced as the securitisation of mortgage loans, either residential or commercial. A mortgage loan consists of an existing debt, meaning that some debtor actually owes money to a creditor, who in turn has an enforceable right to be paid. This right of a creditor is usually what is referred to, in law, as a receivable. Most legal systems provided some mechanism for assigning receivables, that is for selling them to a third party. The early 1990s saw the emergence, outside of the United States, of the securitisation of credit card receivables and other streams of revenues, such as telephone bills. In such cases, the rights transferred to a SPV are future receivables: rights to receive payments that will presumably accrue under a contract, like a revolving credit agreement or a telephone line subscription, but for loans or services that have not yet been provided. In many countries, the assignment of future receivables was problematic: if no debt has been incurred yet, then there is no right for a would-be creditor to assign.⁵⁵ As they became more familiar with securitisation, legislators and regulators relaxed their views on assignable claims, as a French lawyer testifies: ‘Legislators used to treat securitization as a mysterious technique from which investors needed to be protected. From 1994 the law has developed in France and it has become easier to securitize a whole range of assets’.⁵⁶ In the late 1990s, various formulas for securitising companies’ future earnings were developed, which departed even further from the conventional legal understanding of receivables: what was securitised were now cash flows from predetermined sources (such as the sale of airline tickets or manufactured goods), or from a whole business or commercial project (like the operation of a football club or an amusement park)—in other words, what was securitised were assets that no longer corresponded to debts owed by identifiable debtors.⁵⁷ By the turn of the 2000s, synthetic securitisation started to spread, in which no receivables or assets whatsoever were transferred to the SPV, but where corresponding cash flows were recreated through the use of derivatives.⁵⁸ Around the same time the first climate-finance instruments also appeared, with the securitisation of catastrophe risk (known as catastrophe bonds) and the securitisation of carbon credits.⁵⁹

Through this evolution, one may observe how securitisation lawyers have helped push the boundaries of assetisation: thanks to their legal techniques and reasoning, things that were not previously thought of as assets became ‘assetised’, as they could now be appraised, with reasonable assurance, as enforceable promises of future income, which could be monetised as of today. As others have shown, assetisation rests on a social construction through which different intermediaries frame specific goods or activities so as to fit with financial markets expectations and to extract rent from underlying socio-economic processes.⁶⁰ Legal professionals, even if they often work behind the scenes, undoubtedly figure amongst such intermediaries. To borrow Ute Tellmann’s insightful expression, they are the ones who turn the devices of calculation, examined in some depth in social studies of finance, into ‘devices of obligation’.⁶¹ In the case of securitisation, lawyers have operationalised, in a manner adapted to each jurisdiction, the financial conception of the firm as a ‘bundle of assets’, which may be unbundled and rebundled so as to ‘unlock [their] financial value’.⁶² Securitisation allows one to cherry-pick the most profitable and reliable among a firm’s assets and to reserve them for investors. Yet this very idea challenges a well-established tenet of private law, which civil-law systems have enshrined in the notion of patrimony. As these Italian lawyers have pointed:

The long-standing principle governing the protection of creditors […] says a debtor is liable for the fulfillment of its obligations with all of its present and future assets. This fundamental tenet is central to credit transactions around the world. Yet it is precisely this concept that structured finance, and securitization in particular, aims to subvert.⁶³

Whereas the doctrine of separate corporate personality had allowed investors to appropriate the profits of industry while assuming no particular responsibility in the conduct of businesses for most of the twentieth century,⁶⁴ financial innovations of the past decades have further allowed their quest for profits to ‘pierce the corporate veil’:⁶⁵ securitisation, along with other financial innovations such as derivatives, have made it possible for investors to extract value from chosen segments of corporate activities, while disassociating themselves from the fate of the firm as a lasting socio-economic organisation. The business models that have developed from such disassociation, which increase competitive pressure within firms and provide fertile ground for fraudulent or predatory practices, turned out to be quite unsustainable, as the global financial crisis showed.

6. Making it sustainable? Re-legitimising securitisation after the financial crisis

Securitisation’s race to innovation came to an abrupt halt following the 2007 financial crisis. Legal-financial structures that were hitherto considered creative and exciting suddenly came to be regarded as a ‘toxic sludge’⁶⁶ and securitisation markets took years to recover. IFLR articles chronicle financial institutions’ repeated calls for help from regulators to restore investors’ confidence and market liquidity.⁶⁷ They also recount the efforts of financial market participants to construct a positive post-crisis narrative for securitisation.⁶⁸ Polled on what was most needed to revive securitisation markets, IFLR readers ‘agree[d] on one thing: it is essential that securitisation be seen as part of the solution, not part of the problem—or, perhaps more accurately, the problem itself’.⁶⁹

Efforts to re-legitimise securitisation were initiated by industry groups, which first devised new standards defining best practices in this area.⁷⁰ In Europe, this led to the Prime Collateralised Securities initiative, a private label launched in 2012 intended to indicate ‘European best practice in terms of transparency, simplicity and quality of processes’ and ‘to build a bridge between regulatory goals and market needs’.⁷¹ These efforts were soon echoed by the regulators themselves, who paired this idea of a simpler, more transparent securitisation with a rhetoric of sustainability. In 2014, the Basel Committee on Banking Supervision, together with the International Organisation of Securities Commissioners, proposed criteria for identifying ‘simple, transparent and comparable securitisations […] that could contribute to building sustainable securitisation markets’.⁷² In 2015, the European Commission similarly proposed a Securitisation Regulation intended ‘to encourage simple, transparent and standardised securitisations’ and thus ‘revive securitisation markets on a sustainable basis’⁷³—a regulation whose entry into force in 2018 was welcomed, according to a British lawyer, as a ‘legislative recognition that securitisation has an important role to play in sustainable financial markets’.⁷⁴ Under this new regime, complex securitisation has not been outlawed, but transactions that qualify as simple, transparent and standardised (STS) securitisations may benefit from preferential capital requirements. Geared towards investor protection, the STS label requires, among other things, that pooled assets be homogeneous in type and limits recourse to synthetic securitisation. The European Regulation partially addresses the issue of jurisdiction shopping by requiring that all originators and SPVs of STS securitisations be constituted in European territory, which is arguably the most controversial aspect of the reform, especially from a non-European perspective.⁷⁵ It leaves intact however other trends discussed in this article, such as the commodification of debt, the financialisation of legal knowledge, and the assetisation of businesses, social life, and soon nature.

Alongside these developments on STS securitisation, another dimension of securitisation’s claim to sustainability has indeed been developing over the past few years: its alleged contribution to the ecological transition and the fight against climate change, through the rise of ‘green’ securitisation. Green securitisation consists in securitising assets that purport to have positive impacts on the environment: for example, issuing securities backed by a pool of electric car loans or solar panel leases or, more controversially, of carbon credits or biodiversity offsets.⁷⁶ From the earliest days of green bond markets, green securitisation was presented by IFLR writers as ‘the next logical step’.⁷⁷ European institutions have since included green securitisation in their sustainable finance agenda and are regularly consulting with financial market participants to set an appropriate regulatory framework for it.⁷⁸ Yet critics warn about the risks inherent to the financialisation of environmental policy that green securitisation entails: such an approach narrows the scope of governmental intervention to merely ensuring the proper functioning of private markets, and risks increasing inequalities by displacing the principle of national solidarity once embodied by the State.⁷⁹ It also exacerbates the tensions surrounding the things, the relationships, and the ecosystems that securitisation transforms into financial assets. Just as mortgage securitisation side-lined the rights and protections afforded to debtors, so too could the upcoming securitisation of ecosystem services or natural disaster risks further disempower local and indigenous communities. This concern is acute, for instance, in biodiversity offset projects, currently on the rise but already tarnished by cases of ‘land grabbing, community displacements, and human rights abuses’,⁸⁰ as these projects are designed to meet investors’ demands before the needs of local populations. Securitisation of revenues from biodiversity offsets is likely to significantly increase demand for such projects and risks further marginalising the interests of those adversely impacted by them.⁸¹

In sum, the last decade has witnessed a renewal of the discourses legitimising securitisation. Sustainability is invoked both as a safeguard for financial stability and investor protection, and as a promise of positive impact on society and the environment. Such renewal, however, was not accompanied by a corresponding redesign of securitisation’s legal techniques and rests on the same legal knowledge and structures that were built before the financial crisis. In other words, the legal circuits that ensured the global circulation and extraction of profit have been left intact.

7. Conclusion: a distinct way of engaging with the law, globally

This article’s dive into the technical issues faced and solved by securitisation lawyers worldwide suggests that there is no such thing as a global norm, standard, or authority governing cross-border securitisation today, nor is there a desire for one. What was observed is rather a range of technical, locally adapted fixes that circulated and elicited new technical responses from lawyers and legislators, allowing ultimately an uninterrupted flow of capital, from debtors to investors, in most parts of the world. The spread of securitisation worldwide has rested on the making of ‘devices of obligation’ whose politics confound the traditional divisions between the state and the market, the law and the economy, the national and the international.⁸² It was driven by legal technique, which travelled from law firms to governments and from governments to law firms, crossing jurisdictions and economic sectors. ‘Legal technique’, as Annelise Riles has observed, ‘became the social, institutional, and intellectual hinge of public and private’.⁸³

What has really globalised in this process is a distinct way of engaging with the law: a repertoire of legal techniques, values, and rhetoric for framing and solving legal problems, that is, ‘a way of doing legal knowledge’⁸⁴ now deeply embedded in finance’s worldview. Analysis of the writings of financial law practitioners highlighted some key features of this financialised legal knowledge: its perception of law as a private know-how for global ordering, as the techniques for territorialising securitisation through the constitution of SPVs have revealed; its support and conveyance of new cultural representations less protective of debtors, as illustrated by the gradual acceptance of undisclosed assignments of receivables; and its translation of financial calculation and ontology into legal categories and legal instruments, as evidenced by lawyers’ input in the creation of new asset classes suitable for securitisation. The financialisation of legal knowledge is closely tied to what economic geographer Sabine Dörry called the ‘dark side of financial innovation’, referring to how legal practices have manipulated the global geography of profits in a way that is largely unsustainable.⁸⁵ Yet the turn to sustainable securitisation, made to re-legitimise this line of business after the global financial crisis, does not point to a substantial alteration of this geography, nor to a retreat from the financialised legal knowledge that underpins it.

The findings of this article largely converge with those of Katharina Pistor, who argues that the law forms ‘the very cloth from which the capital is cut’⁸⁶, allowing it to generate and accumulate wealth for its holders thanks to the attributes it confers on assets: priority, durability, universality, and convertibility. The global spread of securitisation has indeed entailed the construction of legal circuits that have channelled monetary flows from an expanding range of activities taking place around the world and reserved them for investors’ profits. Whereas the legal coding of capital is nothing new—it has been around, in Pistor’s account, for a few centuries at least—its methods are constantly evolving. Through the idea of a financialisation of legal knowledge, this article has attempted to highlight the recent transformations of the law’s language and techniques that have materialised the contemporary circuits of capitalist accumulation, as well as their permeability to finance’s pretensions and culture. As securitisation’s techniques travelled and adapted to new legal environments, and as money started to flow seamlessly from debtors to investors across frontiers, new cultural representations also consolidated—or, as Andrea Ballestero puts it, new ‘metaphysical assumptions’, ‘distinct senses of what the world is and, in consequence, of whether and how certain parts of said world can be financialized and by whom’.⁸⁷ This new worldview that securitisation lawyers have helped to make work, where debt is an asset and future income a resource to be immediately extracted and appropriated, paved the way for the blossoming of new business models and conventions premised on, and further fostering, the global financialised quest for profits.

Acknowledgments

Earlier drafts benefitted from the comments of Joana Mendes, Afroditi Marketou, and the contributors of this special issue on ‘Law’s Agency in Global Governance’; Marte Mangset, Jérôme Pélisse, and the participants of the workshop on ‘Money Professionals’ held in Oslo in October 2022; Benoit Frydman, Frédéric Audren, Arnaud Van Waeyenberge, and other attendees of the seminars organised at the Perelman Centre for legal philosophy of the Université Libre de Bruxelles and at the Law and Tax Department of HEC Paris. I thank them all, as well as Nafise Shooshinasab and Jasmine Gareau-Lindsay for their research assistance.

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Funding

This article stems from a research project funded by the Social Sciences and Humanities Research Council of Canada [grant number 430-2021-00767].

Notes

1 Literature on finance and globalisation is extensive. See, among others, Natascha van der Zwan, ‘Making Sense of Financialization’ (2014) 12(1) Socio-Economic Review 99; Céline Baud and Cédric Durand, ‘Financialization, Globalization and the Making of Profits by Leading Retailers’ (2012) 10(2) Socio-Economic Review 241; Costas Lapavitsas, ‘Theorizing Financialization’ (2011) 25(4) Work, Employment and Society 611; Paul H. Dembinski, Finance: Servant or Deceiver? Financialisation at the Crossroad (Palgrave Macmillan, 2009).

2 Saskia Sassen, The Global City: New York, London, Tokyo (Princeton University Press, 2001); Saskia Sassen, ‘The Global City: Introducing a Concept’ (2005) 11(2) The Brown Journal of World Affairs 27.

3 Sassen, The Global City (n 2); Saskia Sassen, ‘Finance as Capability: Good, Bad, Dangerous’ (2014) Arcade, https://arcade.stanford.edu/occasion/finance-capability-good-bad-dangerous.

4 I use this expression in the sense set forth by Afroditi Marketou and Joana Mendez in introduction of this special issue, by which they ‘propose to see law as a set of techniques and knowledge tools, which, employed in the professional routines of global governance, generate the peculiar truths, worldviews, and species of social ordering that sustain different processes of globalisation’. Afroditi Marketou and Joana Mendez, ‘Making it Work: Law’s Agency in Global Governance’ in this issue of Transnational Legal Theory.

5 For an overview of the workings of this international financial legal order, see Chris Brummer, ‘How International Financial Law Works (and How It Doesn’t)’ (2011) 99 Georgetown Law Journal 257.

6 See, among others, Michael S Barr and Geoffrey P Miller, ‘Global Administrative Law: The View from Basel’ (2006) 17(1) European Journal of International Law 15; Eve Chiapello and Karim Medjad, ‘An Unprecedented Privatization of Mandatory Standard-Setting: The Case of European Accounting Policy’ (2009) 20(4) Critical Perspectives on Accounting 448; Andreas Kruck, Private Ratings, Public Regulations: Credit Rating Agencies and Global Financial Governance (Palgrave Macmillan, 2011); John Biggins, ‘“Targeted Touchdown” and “Partial Liftoff”: Post-Crisis Dispute Resolution in the OTC Derivatives Markets and the Challenge for ISDA’ (2012) 13(12) German Law Journal 1297.

7 Here, securitisation stands in sharp contrast with swaps and other over-the-counter derivatives, whose contractual documentation was standardised very early on by an organisation that could well be described as a global lawmaker, the International Swaps and Derivatives Association. See the contribution of Guido Comparato in this volume, as well as Pascale Cornut St-Pierre, ‘Legal Documents as Means of Financial Abstraction: How Bankers’ Lawyers Constructed Swaps and Changed Finance’ (2021) 62(2) European Journal of Sociology 309; Pascale Cornut St-Pierre, La Fabrique juridique des swaps : Quand le droit organise la financiarisation du monde (Presses de Sciences Po, 2019); Joanne P Braithwaite, ‘Standard Form Contracts as Transnational Law’ (2012) 75 Modern Law Review 779.

8 Benoît Frydman, ‘Comment penser le droit global ?’ in Jean-Yves Chérot and Benoît Frydman (eds), La Science du droit dans la globalisation (Bruylant, 2012), 17–48; see also, in English, Benoît Frydman and William Twining, ‘A Symposium on Global Law, Legal Pluralism and Legal Indicators’ (2014) 47(1) The Journal of Legal Pluralism and Unofficial Law 1.

9 KN Llewellyn, ‘The Normative, The Legal, and the Law-Jobs: The Problem of Juristic Method’ (1940) 49(8) Yale Law Journal 49 1355, 1358: ‘[“Law-stuff”] mean any phenomena in the culture which relate discernably to the legal; it includes rules of law, legal institutions of any kind, the presence and activity of lawyers, judges, jailors, law libraries and their use, courts, “habits” of obedience, a federal system … ’

10 Katharina Pistor, ‘A Legal Theory of Finance’ (2013) 41(2) Journal of Comparative Economics 315; Katharina Pistor, The Code of Capital: How the Law Creates Wealth and Inequality (Princeton University Press, 2019).

11 Thomas Wainwright, ‘Laying the Foundations for a Crisis: Mapping the Historico-Geographical Construction of Residential Mortgage Backed Securitization in the UK’ (2009) 33(2) International Journal of Urban and Regional Research 372, 378.

12 Wainwright (n 11); Thomas Wainwright, ‘Circulating Financial Innovation: New Knowledge and Securitization in Europe’ (2015) 47(8) Environment and Planning A: Economy and Space 1643.

13 Kevin Fox Gotham, ‘The Secondary Circuit of Capital Reconsidered: Globalization and the U.S. Real Estate Sector’ (2006) 112(1) American Journal of Sociology 231; Paul Langley, ‘Securitising Suburbia: The Transformation of Anglo-American Mortgage Finance’ (2006) 10(3) Competition & Change 283.

14 See Wainwright (n 11); Wainwright (n 12); David Bassens et al., ‘Securitization across Borders: Organizational Mimicry in Islamic Finance’ (2013) 13(1) Journal of Economic Geography 85.

15 See for example Chris Gallant, ‘What Is Securitization? Definition, Meaning, Types, and Example’ Investopedia, 13 March 2023, www.investopedia.com/ask/answers/07/securitization.asp (accessed 17 October 2023).

16 Jonathan C Lipson, ‘Re: Defining Securitization’ (2012) 85(5) Southern California Law Review 1229, 1233.

17 Jason HP Kravitt, Ian R Coles and C Mark Nicolaides, ‘Coping with Cross-Border Securitisation’ (1991) 10(11) IFLR 34, 35.

18 Steven L Schwarcz, ‘What Is Securitization? And For What Purpose?’ (2012) 85 California Law Review 1283, 1288.

19 For a comprehensive overview of the qualities of trusts for holding assets and structuring financial flows, and their intrication with financialisation, see Brooke Harrington, ‘Trusts and Financialization’ (2017) 15(1) Socio-Economic Review 31.

20 For discussions on these kinds of restrictions, see for example Svante Hultqvist and Tomas Gardfors, ‘Sweden Launches Domestic Market for Securitization’ (1999) 18(5) IFLR 21; Nicolas Pierard and Michel Barbey, ‘Securitization: Asset-Backed Financing Development’ (2000) IFLR special supplement: Switzerland, a Legal Guide, 35.

21 John F Dyke and William P Simpson, ‘Guernsey: Financing and Securitization Structures’ (2001) IFLR special supplement: Structured Finance Yearbook 77; Andrew S Moon, ‘Cayman Islands: Structured Finance Transactions in the Cayman Islands’ (2001) IFLR special supplement: Structured Finance Yearbook 107; Cormac Kissane, ‘Securitizations: Ireland Improves Tax Regime’ (2003) 22(4) IFLR 55.

22 See, for example, Douglas A Doetsch, ‘Emerging Market Cash Flow Securitizations Take Off’ (1996) 15(11) IFLR 16; Paul Weiffenbach and Joseph Meehan, ‘Cross-border Securitization Entry To World Market’ (1999) IFLR special supplement: Securitization Yearbook 3; Neil Campbell and Norifusa Hashimoto, ‘Korean Air Lines Securitizes Future Yen Ticket Receivables’ (2003) 22 IFLR 16.

23 Doetsch (n 22); Marun Jazbik and Frederico Buosi, ‘New Securitizations Give Hope to Latin American Issuers’ (2002) 21(10) IFLR 37.

24 Philippe Billot, ‘Securitisation à La Française’ (1989) 8(3) IFLR 12, 13.

25 Sandrine Hirsch and Koen Byttebier, ‘Belgium Updates Regime for Receivables Securitization’ (1997) 16(6) IFLR 43; Pere Kirchner, ‘Securitization: Spain’ (1999) IFLR special supplement: Spain and Portugal: A Legal Guide 30; Paolo Esposito, ‘Securitization’ (1998) IFLR special supplement: Italy: A Legal Guide 43; Raffaele Rizzi, ‘Italy Takes New Approach to Securitization’ (1998) 17(11) IFLR 35.

26 Jonathan Zhifeng Zhou, ‘China: The Way is Being Paved: Securitization in the PRC’ (2001) IFLR special supplement: Structured Finance Yearbook 43.

27 Santiago Carregal and Alejandro P Radzyminski, ‘Argentina: Securitization’ (1997) IFLR special supplement: Latin America and Caribbean Yearbook 13.

28 Eric S Yoon and Philip B Gilligan, ‘Investment Grade Korea Revives Securitization’ (2000) 19(2) IFLR 34; Masanori Sato, ‘Japan: Recent Trends in Japanese ABS: Consumer Loan Securitization and New Legislation’ (2001) IFLR special supplement: Structured Finance Yearbook 47; Elaine de Paula Palmer and Juliana Paiva Guimaraes, ‘Brazil: Recent Regulatory Developments in Cross-Border Structures’ (2001) IFLR special supplement: Structured Finance Yearbook 103; William Smithson and Alexandra Maia de Loureiro, ‘Portugal Sets the Stage for Securitization Notes’ (2002) 21(4) IFLR 19.

29 Clifford Chance et al., ‘Securitizing Banesto’ (1994) 13(1) IFLR 15.

30 Jacques Terray, quoted in ‘The Renaissance in European Securitization’ (1999) 18(8) IFLR 21, 25.

31 Ian Falconer, ‘Securitization: Endless Possibilities’ (2000) IFLR special supplement: The Best of the Best 125.

32 Such formalities are discussed, for example, in Billot (n 24) 13 (discussing the conditions set out in article 1690 of the French Civil Code); James Lawden, ‘Japanese Securitization: In for a Major Boost’ (1993) 12(9) IFLR 29; Luis Danton Martinez, ‘The Creation of a Mortgage-backed Securities Market in Mexico’ (1996) IFLR special supplement: Latin America: A Legal Business Guide 35, 36.

33 Piet-Hein de Jager, ‘The Netherlands Gives Securitization a Double Boost’ (1997) 16(9) IFLR 47, 48.

34 Vladimir Dragunov, ‘HCFB Deal Unlocks Russian Securitization Cutting Edge’ (2006) 25(3) IFLR 16, 16–17.

35 This difficulty continues to this day. The European Union is now trying to solve it with a Proposal for a Regulation on the law applicable to the third-party effects of assignments of claims, COM/2018/096 final.

36 Jonathan Walsh and Will Farrant, ‘FSA to Change Rules on Building Society Securitization’ (2000) 19(5) IFLR 21, 23; Martin Fingerhut, ‘Legal Evolution Lays Path for Canadian Securitization’ (2002) 21(4) IFLR 49, 50.

37 Kravitt, Coles and Nicolaides, (n 16) 35.

38 Frederick Feldkamp, ‘Asset Securitization: The Alchemist’s Dream’ (2000) IFLR special supplement: Securitization Yearbook 5, 7.

39 For a scholarly description of this trend towards the ‘deformalisation’ of the requirements for the validity of assignments in European countries, see Arthur F. Salomons, ‘Deformalisation of Assignment Law and the Position of the Debtor in European Property Law’ (2007) 5 European Review of Private Law 639.

40 Billot (n 24); Lawden (n 32); Hirsch and Byttebier (n 25); Kirchner (n 25); Yoon and Gilligan (n 28); Alberto Giampieri and Giovanni Nardulli, ‘Securitization’ (2000) IFLR special supplement: Italy: A Legal Guide 31; Smithson and de Loureiro (n 28); Tim Lester and Mohammed Asaria, ‘Securitization: Korea and Taiwan Follow Japanese Lead’ (2002) 21(10) IFLR 22; George Pergamalis, ‘Greece Unveils New Securitization Law’ (2003) 22 IFLR 31.

41 Rebecca Fruchtman and Alexander L Malaket, The UN Convention on the Assignment of Receivables in International Trade, Mayer Brown Legal Update, 21 May 2020, 6, www.mayerbrown.com/-/media/files/perspectives-events/publications/2020/05/the-un-convention-on-the-assignment-of-receivables.pdf.

42 Such arrangement is well described by Daphne Brinkhuis and Philippe Steffens, ‘The Netherlands’ (2001) IFLR special supplement: Structured Finance Yearbook 85, 87.

43 As discussed for example by David Bonsall, ‘Securitising Assets in the United Kingdom’ (1987) 6(12) IFLR 28, 30–31; Billot (n 24) 14.

44 Jonathan C Lipson, ‘Securitization and Social Distance’ (2017) 37 Review of Banking & Financial Law 827, 849–52; see also David Zalewski, ‘Securitization, Social Distance, and Financial Crises’ (2010) 39(3) Forum for Social Economics 287, 291.

45 See Martinez (n 32) 37; Carregal and Radzyminski (n 27) 14.

46 Chris Oakley, ‘Securitizing to Finance Social Housing (Part II)’ (2005) 24(4) IFLR 75, 76–77.

47 Rob Mannix and Thomas Williams, ‘Europe’s Charter for Securitization Reform Notes’ (2002) 21(6) IFLR 4.

48 Teemu Juutilainen, ‘Law-based Commodification of Private Debt’ (2016) 22(6) European Law Journal 743.

49 Paul Ali, ‘Why Innovative Securitization is Far from Dead’ (2004) 23(9) IFLR 14.

50 These terms are used by ibid (‘the next big thing’, ‘routine’); Adam Glass, ‘The Few, the Proud … the Securitizers’ (2005) 24(2) IFLR 44 (‘creative’); Adam Glass, ‘Innovators Needed’ (2006) 25(11) IFLR 14 (‘exciting’); Adam Glass, ‘Securitization: In Search of the Next Big Thing’ (2004) 23(7) IFLR 29 (‘lucrative’, ‘bread and butter’, ‘some of the thrill is gone’).

51 See Glass, ‘Innovators Needed’ (n 50).

52 See Glass, ‘The Few, the Proud … the Securitizers’ (n 50) 44.

53 Ibid, 44. One may wonder whether this ability stems from the fact that common-law lawyers, and especially American ones, have learned to ‘think like economists’ earlier than their civil-law counterparts, owing to the earlier penetration of law and economics into law schools’ curriculum: Elizabeth Popp Berman, Thinking like an Economist: How Efficiency Replaced Equality in U.S. Public Policy (Princeton University Press, 2022), 81.

54 Ibid, 44.

55 For example, this reasoning is articulated in Finnish law by Kari Lautjarvi and EI Luukkanen, ‘Asset Securitization in a Cold Climate’ (1996) 15(2) IFLR 45.

56 ‘The Renaissance in European Securitization’ (1999) 18(8) IFLR 21, 22 (citing French lawyer Jacques Terray).

57 As illustrated, for example, in Doetsch (n 22); Campbell and Hashimoto (n 22); Conor Downey, ‘Whole Business Securitization Comes of Age’ (1999) 18(9) IFLR 8; Zhang Xin, ‘The Emergence of Project-Backed Securitization’ (2000) 19(1) IFLR 24; Stuart Brinkworth, ‘Football Turns to Securitization to Fund Growth’ (2002) 21(2) IFLR 13.

58 Falconer (n 31) 125.

59 Jonathan Shann, ‘The Art of Securitizing Catastrophe Risk’ (1999) 18(8) IFLR 26; Brian Salter and Fran Rush, ‘Australia: Record Growth and Innovation in the Australian Structured Finance Market’ (2001) IFLR special supplement: Structured Finance Yearbook 39, 40–41.

60 Antoine Ducastel and Ward Anseeuw, ‘The Assetisation of South African Farmland: The Role of Finance and Brokers’ in Valérie Boussard (ed), Finance at Work (Routledge, 2017) 123–36; Kean Birch and Callum Ward, ‘Assetization and the “New Asset Geographies”’ (2022) Dialogues in Human Geography 1.

61 Ute Tellmann, ‘The Politics of Assetization: From Devices of Calculation to Devices of Obligation’ (2022) 23(1) Distinktion: Journal of Social Theory 33.

62 Ducastel and Anseeuw (n 60) 131; see also Greta R Krippner, Capitalizing on Crisis: The Political Origins of the Rise of Finance (Harvard University Press, 2012) 8.

63 James Gerard and Arturo Meglio, ‘Corporate Securitization to Profit from Italian Reform’ (2003) 22 IFLR 49.

64 Paddy Ireland, ‘Finance and the Origins of Modern Company Law’ in Grietje Baars and Andre Spicer (eds), The Corporation: A Critical, Multi-Disciplinary Handbook (Cambridge University Press, 2017) 238–46.

65 Dick Bryan and Michael Rafferty, Capitalism With Derivatives: A Political Economy of Financial Derivatives (Palgrave Macmillan, 2006) 97.

66 Danielle Myles and Tom Young, ‘Growth Assets’ (2014) 33(4) IFLR 22.

67 See eg Mandeep S Lotay, ‘Time for Euro-Talf’ (2009) 28(7) IFLR 26; Lucy McNulty, ‘Where Do We Go from Here? Should the Australian Government Extend its Support to Lower-Rated RMBS Tranches?’ (2011) 30(5) IFLR 34; Ben DiMatteo, ‘Level Playing Field’ (2011) 30(2) IFLR 26.

68 On such narrative, see Ewald Engelen, ‘Don’t Mind the “Funding Gap”: What Dutch Post Crisis Storytelling Tells Us About Elite Politics in Financialized Capitalism’ (2015) 47(8) Environment and Planning A 1606.

69 Lizzie Meager, ‘Securitisation’s Saviour’ (2015) 34(7) IFLR 17.

70 Alex Sell, ‘The Looking to Lead: The Australian Securitisation Forum is Aiming High with its New Standards for Residential Mortgage-Backed Securities’ (2011) 30(5) IFLR 38; Fabrice Susini, ‘How to Save European Securitisation’ (2012) 31(8) IFLR 66.

71 See Susini (n 70) 66–67; see also Engelen (n 68) 1610 and 1617–18.

72 Kevin Hawken, Carol Hitselberger and Jason Kravitt, ‘One Rule, Two Results’ (2015) 34(1) IFLR 37.

73 Simon Ovenden and David Stubbs, ‘Practice What You Preach’ (2015) 34(9) IFLR 27.

74 Merryn Craske, ‘Made Simple?’ (2018) 37(5) IFLR 53, 55.

75 Illustrative of this controversy are the comments from Merrill Lynch’s head of international structured finance research Alexander Batchvarov to the Financial Times: ‘This is just another brick in the wall of the domestication and fragmentation of global capital markets. Suddenly, anything that Europeans buy outside Europe becomes non-STS’. Thomas Hale and Jim Brunsden, ‘EU and US Securitisation Split Worries Investors’, Financial Times (6 January 2016), cited by Teemu Juutilainen, ‘EU Securitisation Regulation: Legal Ordering in Symbiosis with Transnational Bodies’ in Marta Cantero Gamito and Hans-W. Micklitz, The Role of the EU in Transnational Legal Ordering: Standards, Contracts and Codes (Elgard, 2020) 180, 195. Views expressed in IFLR articles, however, come mainly from European practitioners and are largely supportive of the STS regime.

76 Climate Bonds Initiative, Green Securitisation: Unlocking Finance for Small-scale Low Carbon Projects, briefing paper (2017); Frédéric Hache, 50 Shades of Green Part III: Sustainable Finance 2.0—The Securitization of Climate and Biodiversity Policy, Green Finance Observatory, policy report (2020) 59 (‘It is important to realize that, far more than loans for energy efficiency, the new sustainable finance will likely consist largely of securitizations of carbon and biodiversity offset projects and natural disaster insurance, as the latter is far more profitable thanks to financial engineering.’).

77 Ashley Lee and others, ‘Growing Pains: Green Bond Issuance Has Exploded This Year. But Can It Become a Mainstay of Corporate Finance?’ (2014) 33 IFLR 28, 33.

78 See especially European Commission, Consultation on the Renewed Sustainable Finance Strategy (2020) 22; European Banking Authority, Developing a Framework for Sustainable Securitisation (2022); Association for Financial Markets in Europe, European Green Securitisation Regulatory State of Play: Obstacles to Growth and Opportunities for Leadership (2022).

79 Eve Chiapello, ‘Stalemate for the Financialization of Climate Policy’ (2020) 22(1) Economic Sociology 20; Hache (n 76) 73.

80 Hache (n 76) 46.

81 Ibid, 65.

82 Tellmann (n 61) 45.

83 Annelise Riles, Collateral Knowledge: Legal Reasoning in the Global Financial Markets (University of Chicago Press, 2011) 109.

84 Annelise Riles, ‘A New Agenda for the Cultural Study of Law: Taking on Technicalities’ (2005) 53(3) Buffalo Law Review 973, 976.

85 Sabine Dörry, ‘The Dark Side of Innovation in Financial Centres: Legal Designs and Territorialities of Law’ (2022) Regional Studies 3.

86 See Pistor, The Code of Capital (n 10) 4.

87 Andrea Ballestero, ‘Trusts at the Financial Frontier: The Flickering Forms of Property, Water, and Governance’ (2023) 16(3) Journal of Cultural Economy 423, 425.