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Annelise Riles, Collateral Knowledge: Legal Reasoning in the Global Financial Markets (University of Chicago Press, 2011).

What if it turned out that much of the crucial work that law does in the world operates in a register that is not captured by most legal scholarship? What makes legal reasoning and legal technique so resilient and so abidingly “legitimate,” even while other forms of expert knowledge, like those underpinning government fiscal policy, quantitative risk modeling, and the rational actor model unravel (as they did in the midst of the recent financial crisis)? How much of the work of building and maintaining global governance is accomplished under the radar, by the routinized practices of law – and to what extent can grand political ambition leverage these underappreciated tools in the service of its own ends? These are the challenging questions that Annelise Riles poses in this rich and elegantly-written book. For those not familiar with her argument, it merits serious attention.

The focus of Riles’s book is contracts for collateral. Riles spent years conducting field work and follow-up studies in the Japanese derivatives markets, tracking daily back office routines underlying collateral contracts. Riles argues that the legal construction of collateral is interesting for two reasons. The first is the curious fact that at the height of the recent financial crisis, when the great conceptual edifices of international finance shook, collateral – the very notion of it, its enforceability and its legitimacy – was never seriously questioned. In her words, “collateral seems to have survived the tectonic shifts in market ideologies of the last few years with its reputation intact when so much else of what once was unquestionable dogma – free markets, self-regulation, the innate brilliance and rationality of derivatives traders – now seems like a quaint mythology from a strange other world” (page 1). The book is partly devoted to trying to understand just what it is about collateral contracts that makes them so robust. She suggests, provocatively, that the wonder is not that the financial system broke down in fall 2008; the wonder is that it ever operated at all, across time zones, across differing institutional processes and national contexts, across technical glitches, and across the logistical complexities of global markets. The book is full of surprising and counterintuitive examples of the important role that legal technique plays in that system.

The second reason that collateral is interesting, as Riles demonstrates, is that collateral is precisely collateral in our thinking about law, much in the way that law itself is collateral to the sweeping political ideas that transfix us: neoliberalism, globalization, the efficient market hypothesis, global financial regulation. Collateral, and law (and the lawyers whose job it is to “paper the deals”), are sideshows, the necessary but dull operational handmaidens to the dazzling main event. Riles’s point is that in fact, the mundane technical processes surrounding collateral are sustaining, stabilizing, and even constitutive of broader governance systems to a degree that we have not appreciated. Riles says that one of the book’s goals is “to show theorists and practitioners in the law that this given and commonsense dimension of their life work is in fact doing far more work than they could possibly imagine, and that legal expertise is an ensemble of far more nuanced and fine-grained pattern of theories and practices than they acknowledge to themselves” (page 13).

As an anthropologist, Riles treats legal instruments, practices, knowledge, and techniques  – the actual filling out of forms based on the ISDA Master Agreement, the deployment of legal fictions, the particular practical problem-solving orientation underlying legal reasoning – as artifacts, and as profoundly important ones. Her account is likely to resonate with many who have experienced the way that corporate lawyers, working on a deal agreed upon by others, function almost like high priests of an elaborate follow-on legal ritual based on esoteric knowledge and arcane documents. Riles claims that legal technique matters not only in the way it might in a Deals class, or in a real deal. It also matters at the meta-level, where we think about how we might restructure a financial system to make it more robust. She speaks eloquently about the “agency” of tools, and suggests that “in the ‘meantime’ [while we are preoccupied with higher order theories and political objectives], the means often occlude the ends and overtake the instrument’s user” (page 229). Moreover, the tools Riles catalogues are specifically legal tools. For example, she describes the almost miraculous time-travelling effect that the legal fiction underlying “netting” (i.e., agreeing in advance that, at some future potential point of insolvency, collateral contracts shall be deemed prior to that point to have been netted in a particular order) has on collateral holders’ positions.

Collateral Knowledge builds a ground-up account of the profound importance of mundane legal technique, but it builds that account all the way up through the higher reaches of legal philosophy. Riles engages with Hayek, drawing on examples from risk management in the OTC derivatives markets. She rejects the Hayekian notion that public sector action is destined always to fall behind private sector action, while acknowledging the perceived “legitimacy gap” that nevertheless exists.

In a fascinating turn, she examines how the “audacious legal trick” of the legal fictions underlying collateral – which are conventionally used by private sector actors, but which are neither inherently private nor inherently public – manage to trail so much legitimacy behind them. Riles challenges the Realist notion that formal documents do not matter, and the post-Realist notion that law should be made to conform to real world conditions, on the grounds that law’s generative power derives from its own attenuated relationship to reality and its use of legal forms and legal fictions. Riles also confronts sociolegal scholarship. She challenges the distinction between law-on-the-books and law-in-action, and identifies the field’s failure to study legal discourse as a cultural phenomenon in its own right rather than just as a function of social, political, and economic forces. On each front, the book’s insistent, ethnographically-informed focus on the intricacies and function of technocratic legal knowledge practices makes a fresh and hugely important contribution.

If Riles is right, what might this mean for legal scholarship? Riles suggests that it is time to stop thinking solely in terms of grand regulatory architectures and new institutional designs, and time to examine the potential inherent in legal technique. Legal scholarship has only the most rudimentary framework for speaking about artifacts like legal forms, fictions, and routinized practices as if they were conceptually interesting or institutionally significant. Collateral Knowledge marks an important step in helping to democratize access to and appreciation of legal technique, in the service of producing more effective forms of regulation.

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Cite as: Cristie Ford, A Radical Perspective on the Mundane, JOTWELL (June 7, 2012) (reviewing Annelise Riles, Collateral Knowledge: Legal Reasoning in the Global Financial Markets (University of Chicago Press, 2011)),