UC Irvine Journal of International, Transnational, and Comparative Law

This symposium Article theorizes and assesses transnational legal ordering of fiduciary law. Fiduciary law imposes legally enforceable duties on those entrusted with discretionary authority over the interests of others. The fiduciary law of a state may apply to fiduciary relationships having a transnational (or even global) scope. Fiduciary norms themselves are transnational to the extent that they settle as governing legal norms in ways that transcend and permeate state boundaries. Curiously, however, fiduciary legal theory and transnational legal theory have yet to meet. This symposium takes the first steps towards a comprehensive theory of transnational fiduciary law. To assess transnational legal ordering of fiduciary law, one must study the extent of normative settlement across state boundaries. This can be done in terms of a meta concept of fiduciary law involving a transnational body of law, or in terms of the processes that give rise to discrete domains of fiduciary law to address particular problems as understood by relevant actors. Comparative legal analysis is critical for assessing the extent of concordance and divergence in the development and practice of fiduciary law across states. This Article introduces symposium articles that assess transnational fiduciary law as a meta concept; transnational legal ordering of fiduciary law in discrete domains; and comparative fiduciary law. Together, these articles suggest that processes of transnational legal ordering can give rise to transnational fiduciary law and the potential development of discrete transnational legal orders that transcend and permeate nation-states.

Fiduciary law is expanding throughout the world. Fiduciary law aims at encouraging fiduciary relationships, which are beneficial to society. Increasing globalization has increased the need for fiduciary law. Consequently, fiduciary law has spread in both common law and civil law jurisdictions, leading to a need for a unified approach, which would provide many advantages. The two systems share the same goals but achieve them through different means. International fiduciary standards and self-regulation may be helpful in promoting trust to encourage use of fiduciary services. The impact of fiduciary law is predicted to increase because of the increasing importance of trust and trust relationships and increasing interdependence of nations.

In recent years, fiduciary law has increasingly moved to the center of scholarly attention in the common law world. Even a cursory review shows ample evidence of the importance of fiduciary-related norms; not only both in common law and civil law jurisdictions, but also beyond the nation state. Although civil law countries have no tradition of the trust as a legal institution, courts and scholars alike term relationships based on some kind of personal or professional trust “fiduciary”. Additionally, the trust as a legal institution is gaining ground in civil law countries, either following a national recognition of the Hague Trust Convention (e.g., Italy, the Netherlands) or because they have introduced trust legislation (Japan and other countries in East Asia). A number of more sector-specific rules and regulations issued by institutions and initiatives such as the OECD Principles of Corporate Governance and the UN report on “Fiduciary Duty for the 21st Century” are shaping legal norms and legislation. In other areas of the law with regulations and rules spreading beyond the nation state, scholars have been trying to spell out a concept of “transnational law”, determined to embrace the notion of “something being there” which doesn’t quite fit the bill of the traditional dichotomy of national law or international law. Given the phenomena described above, the question driving this Article is subsequently: Is there such a thing as transnational fiduciary law? Answering this question and mapping a research agenda proves to be a thorny issue, however. Not only is fiduciary law itself “elusive”. The same is true for transnational law and transnational legal theory. Methodologically, this makes thinking about transnational fiduciary law a daunting task. Grappling with all these issues, this Article aims to make a twofold contribution: First and foremost, it tries to lay a ground stone for transnational fiduciary law as a field, existing at the intersection of transnational law and fiduciary law. Second, it expands both transnational law and fiduciary law by establishing new perspectives on both fields. It explores how transnational law may evolve out of national norms. Additionally, the Article shows the possibility of crossing the common law-civil law divide in fiduciary law and demonstrates that, compared to the traditional common-law view, the fiduciary duty of loyalty may develop different kinds of distinctiveness in transnational settings. It builds on two main examples: horizontal transnational ordering of the trust in East Asia and vertical ordering of fiduciary law with respect to standards and principles concerning environmental, social and governance (ESG) issues.

At first sight, the emergence of globally accepted conduct-of-business standards for securities intermediaries, driven by international standard-setting bodies, presents itself as a showcase for successful transnational legal ordering. For some time now, such standards have come to address issues that traditionally would be addressed by fiduciary law in common law jurisdictions. Within the European Union, the relevant standards have been transposed into legislation binding on all EU Member States, irrespective of their legal environment. While clearly originating from common law principles governing fiduciary relationships, the standards thus have trickled into civil law systems, turning them into a useful object of study from the perspective of transnational law theory. Against this backdrop, the present Article explores the emanation, development, transnational dissemination, and reception of conduct-of-business standards from a European and German law perspective and looks at enforcement problems in both administrative and contract law. It demonstrates that, while the relevant law can be characterized as reflecting an emerging transnational legal order, differences between legal systems continue to exist and the process of transnationalization is far from over.

Centering on a case study, this Article discusses the legal aspects of “net-short debt investing” on global bond markets through the lens of transnational fiduciary law. The aim of the Article is twofold. On the one hand, it is a comparative study on the potential and limitations of fiduciary law in a “hard case.” This analysis is inductive in nature. It aims at contributing to a better understanding of fiduciary law doctrines in both common and civil law jurisdictions. On the other hand, the Article focuses on the specific challenges of fiduciary law in transnational settings. In particular, it analyses the influence of transnational private ordering on the establishment of fiduciary duties in state law. The Article makes the case that the concept of fiduciary duties should be interpreted with a view to facilitating mechanisms of private ordering.

Japan occupies a vantage point to observe the intersecting theories of fiduciary law and transnational legal ordering. Having modernized its legal system by introducing western law since the late nineteenth century, Japan possesses a body of law that have been influenced by comparatively diverse sources including both civil law and common law traditions, as well as traditional value system. Japan also has a complex past in the region, initially acting as a colonial power to impose its modernized law onto Korea and Taiwan, then as a leading economy in the post-war years, though the past quarter century has witnessed its struggle. Such diversity and dynamics have affected the evolution of fiduciary norms in Japan and in East Asia, and the main part of this Article will trace the historical progression. In Japan and major East Asian jurisdictions, although the terms “fiduciary” and “duty of loyalty” were not part of the legal lexicon until recent decades, the basic notion of duty of care and the context-specific regulation of conflicted transaction were part of the law. The fiduciary norms evolved as their multiple strands of sources interacted with each other, or even came into conflict with each other. The ever-increasing economic interactions increased the pace and dynamics of this process, and regional and global financial crises added to the sense of urgency. This Article will use the framework of transnational legal ordering to understand the complex evolution of fiduciary norms in Japan, East Asia and beyond.

Corporate law and corporate governance are often called upon to address problems in international and transnational contexts. Financial markets are global and the problems in those markets are often similar, if not identical, even though the capital market structure across jurisdictions differs significantly. The beginning of the twenty-first century was marked by a spate of international corporate scandals, and the 2007–2009 global financial crisis reflected the global interconnectedness of contemporary international capital markets. These events highlighted the issue of accountability for wrongful conduct by company directors and officers. Modern corporate governance is highly fragmented, encompassing an array of techniques to control the improper exercise of discretion and conflicts of interest. According to Professor Gilson, it is “a braided framework” that encompasses, not only autonomous legal rules, but also non-binding norms. This Article analyzes, from a comparative perspective, two core aspects of this “braided framework.” First, the Article considers fiduciary duties. It argues that, although there are broad similarities in the scope and operation of fiduciary duties in common law jurisdictions, such as the United States, United Kingdom and Australia, at a more granular level, there are important differences, which may affect the accountability of directors and officers. Secondly, the Article examines corporate codes. Although generally non-binding, corporate codes can create powerful norms concerning the role of directors and officers and the exercise of their powers. These codes may also interact with fiduciary duties in complex and interesting ways, either complementing, or creating tensions with, those duties. Yet, such codes are by no means homogeneous, and substantive differences can often be traced to the identity of the actors responsible for writing them.