Legal 'Elasticity' and 'Sidestepping' in European Crisis Management of Financial Markets

This paper explores the roles played by law in crisis management of financial markets and some possible consequences. Three questions are raised—about the ‘elastic’ use of law, about ‘sidestepping’ existing legal order by invention of new structures and about redistributive consequences. These questions are appraised empirically in relation to three areas of financial market law: public support given to banking from 2008 onwards; English case law concerning derivatives contracts when confronted with Lehman-style insolvencies; and the European Stability Mechanism, which during summer 2015 was being primed in relation to Greece. On the first two case studies, law, having been mightily stretched, did not break. Likewise, legal sidestepping, as epitomised by the European Stability Mechanism, may result in a less coherent legal structure; however such incoherence may be not be fatal to the ensemble. On all three fronts, redistributive questions remain controversial, but controversy in itself does not undermine legal structures. A particular form of theory, the Legal Theory of Finance, is discussed in light of the case studies. Such theory may have an unfulfilled longing to discern law-like regularities (ironically chasing economics).