Soft Law in Global Financial Markets Regulation

Attempts to harmonize the regulation of global financial markets through the traditional processes of international law have had little successes. Consequently, alternative arrangements for cooperation and elaboration of common standards have been developed by formal and informal regulatory networks comprising an array of technical, self-regulatory, professional, national and supranational (public and private) institutions. The efforts and activities of these networks have given rise to the emergence of a body of regulations, standards and principles collectively referred to as ‘soft law'.The soft law approach to regulation has emerged as the dominant approach to promoting international regulatory harmonization and cooperation in global financial market. While consensus building on the basis of soft law and other informal arrangements has resulted in impressive achievements over the years, it is important to revisit this trend in the light of recent developments in the global financial market and the current clamour for reforms in the international financial architecture.This paper analyses the framework and scope of soft law in global financial market regulation. It examines its potency and challenges and rouses a reconsideration of its current dominance in global financial market regulation. It explores the question of the legitimacy of soft law and the institutions from which it emanates against the backdrop of international law and investigates the criteria against which their legitimacy should be assessed