Yesterday I spoke about Collateral Knowledge at the Saint Louis University Law School. One member of the audience, a former general counsel of a hedge fund with extensive experience with ISDA agreements, raised a great question:
Q: You talk about how ISDA agreements create a kind of settled system of private market governance outside the purview of the state. But there is so much that is undecided or in flux about ISDA agreement. All the key terms are in the attached schedules and other negotiable aspects of the agreement and those are left to the parties. So it is not nearly standardized enough. (The implication of the question for the thesis of the book, then, was that private law beyond the state may be much less effective, or authoritative, than I suggest).
Great question. Here is my answer in a nutshell.
It is absolutely correct that, from the point of view of users of ISDA agreements such as this speaker, all the important stuff is in the schedules and other negotiable portions of the agreement. And that is the very intent of technologies like the master agreement–to draw users’ attention to certain questions, only. In fact, I found that many users of ISDA master agreements don’t even know what the rest of the document says in much detail–they just focus on the parts that need to be filled out. This is why I describe the contract as a machine (something meant to be used) rather than a text (something meant to be read).
However, your point really just confirms the power of this technology! Because look what it has done–it has convinced you that the only really salient issues, the only important issues, are the ones it intends you to focus on. But in fact there are many other potentially significant issues that are entirely determined by the boilerplate, and industry practice, effectuated through this document, is to treat those issues as entirely settled and noncontestable. This is what Gramsci calls hegemony: when something is so much of a given, so generally accepted, that it is unthinkable as a potential source of conflict or contestation. Talk about a tremendous political achievement.