Multilateralizing Deference – A Proposal for Reforming Global Financial Law

40 Pages Posted: 13 Dec 2021 Last revised: 8 Nov 2022

See all articles by Matthias Lehmann

Matthias Lehmann

University of Vienna

Jonas Schürger

University of Bonn - University of Bonn, Department of Law, Institute of Private International Law and Comparative Law, Students

Date Written: December 9, 2021

Abstract

Deference mechanisms, such as substituted compliance and equivalence, serve important purposes: They open up markets to foreign service providers, avoid double regulation, and reduce market fragmentation. Yet, their current design also has considerable weaknesses. The biggest of these is that they are granted unilaterally. This leads to excessive costs, uncertainty, and incomparability in the assessment. States are holding back their recognition of other regimes, which they often mix with unrelated issues. As a consequence, national markets remain shut, and the global economy underperforms. Additionally, international frictions and dangers for financial stability are created.

This contribution therefore suggests an alternative way by transferring the assessment of deference to an institution on the international level. This would secure the necessary neutrality, objectivity, and comparability of the analysis; and also save costs. Deference could be based on mutually acceptable criteria, including international standards. It would be carried out by a neutral arbiter such as the IMF, the FSB, or IOSCO. To maintain state sovereignty, the result of the procedure should be considered non-binding. Even with this proviso, multilateral deference would have advantages because it would set a common background for the deference decision that is to be taken at the national level.

Keywords: Deference, Global Financial Law, Equivalence, Substituted Compliance, Reform, Multilateralism, IOSCO, FSB, Extraterritoriality

JEL Classification: F02, F59, F65, K22, K23, K33

Suggested Citation

Lehmann, Matthias and Schürger, Jonas, Multilateralizing Deference – A Proposal for Reforming Global Financial Law (December 9, 2021). European Banking Institute Working Paper Series 2021 - no. 107, Available at SSRN: https://ssrn.com/abstract=3981699 or http://dx.doi.org/10.2139/ssrn.3981699

Matthias Lehmann (Contact Author)

University of Vienna ( email )

Schottenbastei 10-16
Vienna, A-1010
Austria
+431427735122 (Phone)
1010 (Fax)

HOME PAGE: http://https://eur-int-comp-law.univie.ac.at/team/lehmann-matthias/

Jonas Schürger

University of Bonn - University of Bonn, Department of Law, Institute of Private International Law and Comparative Law, Students ( email )

Adenauerallee 24-42
Bonn, D-53113
Germany

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