Derivative contracts in EU law: never mind the definition?

Abstract

ABSTRACT In line with international policy initiatives after the 2008 financial crisis, the EU co-legislators have sought to mitigate the potential destructive effects of derivative contracts through a host of far-reaching legislative interventions (e.g. mandatory usage of central counterparties (CCPs)). To determine the scope of application of these legislative initiatives, the definition of derivatives is of pivotal importance. Although a strand in legal scholarship has aimed to map the conceptual properties of derivatives, the derivatives definitions that have been conceived by the EU co-legislators to demarcate the scope of recent legislative interventions have received virtually no attention. This article seeks to fill this gap. Through a combination of conceptual and regulatory analysis, the article develops two new arguments. First, it argues that derivatives definitions in EU law do not identify any distinctive conceptual properties of derivatives and, instead, only provide a circular description of what derivatives may be. Secondly, it submits that this conceptually unsatisfactory approach is symptomatic for a more fundamental deficit in the conceptual underpinnings of derivatives. By exploring the relation between the derivatives definitions in EU law and the conceptual properties of derivatives, this article seeks to uncover some of the conceptual impurities in the premises on which the major overhaul of EU derivatives legislation has been built.