Publication: Working Paper Series No. 107

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EBI is happy to announce a contribution of Prof. Matthias Lehmann (Vienna University) and Jonas Schürger (Vienna University) in the EBI Working Paper Series No. 107. Their paper entitled “Multilateralizing Deference – A Proposal for Reforming Global Financial Law” was published on 9th December 2021.

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 the current design of these mechanisms also has considerable weaknesses. The biggest is that they are granted unilaterally, which 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.

In light of this, the present contribution 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. We suggest that deference should be based on mutually acceptable criteria, including international standards. In our opinion, it should 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, we think that 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.

Read the entire paper here: or