Since the 1980s, influential participants in the niche over-the-counter
(OTC) derivatives markets have sought to encourage contractual
standardization in the industry to mitigate the potential for unforeseen
legal interruptions and ensure the enforceability of OTC derivatives
contracts. The International Swaps and Derivatives Association (ISDA), a
trade association and standard-setter, has spearheaded this effort;
resulting in the creation and sustenance of a highly successful
transnational private regulatory regime (TPRER). Most notably, ISDA has
generated a standardized boilerplate contract for OTC derivatives, known as
the ‘ISDA Master Agreement’. However, the TPRER within which the ISDA Master
Agreement operates displays some intriguing features and paradoxes. Chief
amongst these paradoxes is that, while this TPRER appears at first glance to
be highly legalistic and formal, indications are that rates of formal
litigation between members of the regulatory regime have traditionally been
low relative to the size of the market (the total notional amount of OTC
derivatives contracts outstanding at the end of 2011 was estimated at US$648
trillion).