Theorizing Transnational Fiduciary Law

Courtesy of Seth Davis & Gregory Shaffer

What do asset protection trusts in the Cook Islands and Alaska, the UN Environment Program’s “Fiduciary Duty for the 21st Century” report, and the Mitsubishi UFJ Trust and Banking Corporation have in common? They are all examples of transnational fiduciary law.[1]

Fiduciary law is a global phenomenon. It has transnational dimensions, both in its origins and in its contemporary applications. The problems that fiduciary law seeks to solve cut across state boundaries and appear in both common law and civil law traditions. Those problems involve agency costs that arise when someone is entrusted with discretionary authority over the interests of others. In recent years, fiduciary legal theory has enjoyed a “renaissance,” with scholars working on problems of private trust and public governance from a fiduciary perspective.

Transnational legal theory and fiduciary legal theory have yet to meet. In a recent symposium, Theorizing Transnational Fiduciary Law, we sought to bridge the two fields. And in a forthcoming edited volume, we build upon this work with a diverse group of common law and civil law scholars seeking to assess the transnational legal ordering of fiduciary law.

This project begins by focusing on the development of transnational legal orders (TLOs) that may implicate fiduciary law. Developed by Halliday and Shaffer, TLO theory defines a TLO as “a collection of formalized legal norms and associated organizations and actors that authoritatively order the understanding and practice of law across national jurisdictions.” Applying TLO theory to private fiduciary law – the law of agency, trusts, corporations, and so on – as well as to public fiduciary law – the UN’s trusteeship system, for instance – can open up new research questions and shed new light on perennial debates in those fields. Our approach builds upon existing comparative law conversations about agency law, corporate law, and trust law to give special attention to how interactions among transnational, national, and local actors may shape the development of fiduciary law.

Is fiduciary law a transnational body of law or discrete bodies of law? Take the so-called “international trust.” Such trusts have transnational linkages born from the rise of a super-rich class around the world that disposes of its wealth transnationally. The administration of such trusts has generated offshore bodies of trust law that may challenge traditional concepts of fiduciary law. TLO theory may help us understand the development of these legal orders  by examining horizontal interactions among onshore and offshore jurisdictions in the development of transnational trusts. That is not to suggest that there is a unified body of transnational trust law. Rather, it is to invite us to chart the entanglement of domestic lawmaking and practice in light of interactions among transnational, national, and local actors.

Our project builds upon rich comparative work in various fields of fiduciary law. But, as the contributions to a recent symposium show, tracing interactions among transnational, national, and local actors, including public lawmakers and private bodies allows us to assess the extent of transnational settlement of fiduciary norms across areas of law. Tamar Frankel, whose work established fiduciary law as a field, argues that fiduciary law is emerging as a legal order to regulate transnational relationships of trust and dependence. This emergence may be charted in what Masayuki Tamaruya has called “the global evolution of the fiduciary norm,” which he and co-author Mutushkio Yukioka explore in a case study of the Japanese law of fiduciaries. This case study illustrates the interaction of transnational norms and local norms. They maintain that the norms, modes, and behaviors of Japanese styles of corporate management and Japanese concepts of the corporation should be understood by reference not only to hard-law reforms inspired by Western concepts of loyalty, but also to traditional, Japanese, status-based conceptions of loyalty.

Taking up the question of transnational legal settlement, Thilo Kuntz theorizes efforts to integrate environmental, social, and governance (ESG) issues into corporate decision-making as an example of the vertical ordering of transnational fiduciary law. He argues that, at most, there are several different TLOs involving fiduciary norms emerging from these sorts of interactions, not a unified TLO for fiduciary law. Jens-Hinrich Binder asks whether there is a discrete TLO emerging from the transnational development of norms governing the relationship between financial intermediaries and their customers. Assessing the impact of standard-setting by the International Organization of Securities Commissioners (IOSCO) and regulatory developments within Europe, Binder contends that there is no settled TLO, but rather an emerging process of transnational legal ordering as lawmakers seek to reconcile public regulation with private fiduciary law within countries. Moritz Renner’s case study likewise examines a discrete area: the regulation of bond markets. He shows how fiduciary law responds to common problems that arise across common law and civil law jurisdictions in this area, and how private ordering and soft law might give rise to a transnational legal order for bond markets. Finally, Jennifer Hill’s dynamic comparison of Australian, UK, and US corporate law, including corporate governance codes, illustrates the importance of theorizing transnational fiduciary law in terms of the actors producing, contesting, and implementing it.

Thinking about fiduciary law in transnational terms can contribute to our understanding of both fiduciary legal theory and transnational legal theory. Understood broadly, fiduciary law includes not only familiar fiduciary relationships, but also many other “important social and economic interactions of high trust and confidence.” Just as these interactions may be transnational, so too may fiduciary law be viewed in transnational terms.

 

[1] Portions of this blog post are adapted from our article, Seth Davis & Gregory Shaffer, Theorizing Transnational Fiduciary Law, 5 UCI J. Int’l, Transnat’l, & Comp. L. 1 (2020) (available at https://scholarship.law.uci.edu/ucijil/).

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