The Role of Groups in Norm Transformation: A Dramatic Sketch, in Three Parts

"[Groups] may surpass-collectively and as a body, although not individually-the quality of the few best . . . . [W]hen there are many, each has his share of goodness and practical wisdom . . . . [S]ome appreciate one part, some another, and all together appreciate all."1 INTRODUCTION The promise of efficient contracting stands among the conceptual pillars of the freedom of contract. Yet for all the scholarly ink spent on that promise, realworld reliance on form contracts and the use of boilerplate terms even in tailored contracts counsels closer consideration of our vaunted freedom. Even among the highly specialized-and highly compensated-attorneys charged to draft sophisticated sovereign bond contracts, the use of boilerplate is all but universal. Notwithstanding frequently noted inefficiencies-which I outline below-an array of standardized terms has been replicated in contract after contract after contract. After decades of inefficient lock-in, however, the drafting choices of sovereign debtors are today in the midst of dramatic transformation. Most significantly, recent years have seen a precipitous shift, from the almost invariable inclusion of unanimous consent requirements that all bondholders approve any restructuring of debt obligations, to the similarly universal use of less stringent, majority action provisions for debt restructuring. In early 2003, few observers would have predicted any shift in the long-standing drafting convention favoring unanimity. Yet by the end of that year-with no centralized, regulatory mandate-a strong norm favoring the inclusion of collective action rather than unanimous action clauses had emerged. Notably, a bewildering array of committees, networks, and other collectives of sovereign debt market participants-some formal and others less soemerged around the shift from unanimous action clauses ("UACs") to collective action clauses ("CACs"). At every turn, groups of market participants seemed to come together to coordinate the pursuit of common ends.2 The abrupt and unexpected change in sovereign debt contracting conventions to favor CACs thus offers an opportunity to consider a potential role for the decentralized yet coordinated action of groups in facilitating norm transformation. Legal scholars, as well as economists,3 have focused inadequate attention on the role of clearly defined groups of market participants-committees, task forces, and the like-both in social ordering generally and in the adoption and evolution of norms. One might trace this neglect to some presumptive orientation to state actors and autonomous individual actors as the sole parties of interest in social ordering. Yet, alternative stories of social ordering and norm change might also be told. Such stories, by analogy, are a staple of the dramatic literature. One might thus recall the ill-fated families of Romeo and Juliet-a drama defined by collective, and coordinated, action. In Shakespeare's familiar tale, well-defined groups struggle internally with their defining norms, while simultaneously engaging in recurrent interactions with competing groups, defined by their own, distinct norms. Another illustration might be the jury of Twelve Angry Men, charged to offer a collective verdict-one ultimately reached through a slow but inexorable process of internal transformation. It is to such stories of groups that this brief Essay attempts to call greater scholarly attention. It does so with reference to the no less dramatic (if somewhat less poetic) story of the transformation of sovereign debt contracting norms in recent years. Groups do, of course, make some appearance in the legal literature. The study of social norms is inherently an analysis of groups.4 Interest group theories-a staple of legal analysis since the percolation of Mancur Olson's work among legal scholars5-as well as the analysis of private legal systems6 and the related literature of private lawmaking7 are likewise about groups. …