Finance in Public Service: Discreet Joint Regulation as Institutional Capture at the Paris Commercial Court

Businesses of all kinds are usually very keen to participate in regulation of their own sector. One way of contributing to regulatory activity is to exercise influence in the State institutions set up to solve conflicts between businesses and discipline entrepreneurs. This can lead to institutional capture, which we redefine at the institutional (not individual) level as an extreme form of joint regulation. This chapter describes and illustrates one of the ways the financial industry effectively runs a State institution through analysis of the operations of a judicial institution, the Paris Commercial Court. This is France’s main first-level commercial court, and its judges are lay volunteer judges, that is, business people elected by their business community through their local chamber of commerce. The court functions as an institution of discreet joint regulation of markets, hearing commercial litigation and bankruptcy cases. It is a contested terrain, the object of broader conflicts played out outside the court buildings. We focus on how this court handles bankruptcy proceedings, observing the composition of chambers, the judges’networks, and the normative choices made by bankers when dealing with insolvency and recovery plans. The results illustrate the financial industry’s domination of this institution, and its epistemic, normative and regulatory influence. This exposure of the connections between discreet joint regulation, the dual role of finance, and institutional capture more generally shows it is time to re-examine the inner organizational, structural and normative workings of economic and legal institutions, from the perspective of protecting the public interest in regulation of capitalist economies where the private/public sector boundaries are increasingly blurred.