Interview: Katherine Tew Darras, Isda general counsel

Author: IFLR Correspondent | Published: 8 Mar 2019
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tew darras
Katherine Tew Darras

By Sharon Kimathi, Practice Insight deputy editor

Perceptive, ambitious and inspiring; Katherine Tew Darras, the International Swaps and Derivatives Association (Isda) general counsel, graces this special edition of IFLR's Women in Business Law group Q&A, as part of this year’s International Women’s Day.

Darras joined the organisation in 2001 as assistant general counsel, and climbed up the ranks as general counsel for the Americas in 2001. She became acting general counsel after David Geen’s departure from the role in January 2016.

Here she talks to IFLR's Wibl group about working on Isda’s rigging credit derivatives scandal, her greatest challenges, and many successes during her tenure.

What advice can you give to young women who are about to enter the financial law world?

Establish and maintain strong relationships as you go. No matter how busy you are, the contacts that you make and nurture over the years will provide experience and opportunities throughout your life.

Did you have a preference between private practice and in-house at the beginning of your career?

I worked at a law firm at the beginning of my career, where I was able to rotate between departments for a year. This gave me a good sense of experience in a range of practice areas. I sampled labour and employment law, competition law, intellectual property law and commercial law. This ultimately allowed me to choose an area I most enjoyed commercial law. Law firms provide great training for new lawyers in many aspects of legal practice, which is hard to replicate in-house.

What drew you to Isda?

Isda provides an interesting range of work in the context of an international market. As I had been working in the syndicated lending field, and derivatives are used to hedge loans, I was familiar with the industry, but there was also lots to learn. There were only two lawyers at the time I joined, so I was able to get involved in a wide variety of projects from inflation to equity derivatives in North America, Europe and Asia. I was also exposed to new legal areas, being in-house, including intellectual property and employment law issues. Isda has always been in the forefront of the derivatives market on new issues. That, combined with the innovations throughout the industry, has led to many interesting projects.

Can you walk us through a typical day in the life of Isda general counsel?

When I’m in my office in New York, a typical day starts at around 8am when I review news stories related to the industry and respond to emails from Europe. I typically spend the first half of my day on the phone speaking with colleagues and members about Isda-related projects and then use the afternoon to review draft Isda materials (documents, whitepapers etc.). When travelling, I’m meeting contacts from Isda member firms in various international cities from London to Singapore. I also speak at or attend a fair number of industry conferences during the year on key industry issues.

What are the most enjoyable and challenging aspects of your role?

The answer to this question is two-fold, since it’s about the people and the unexpected/complex legal issues. I’ve learnt over the years that people and our approach to working with them are key to problem solving. Everyone is different, so we need to stay flexible. Second, there are always novel facts that need to be applied to existing contracts or legal constructs. No one can see into the future and, therefore, it is hard to draft contracts for every eventuality. And combining the two together is the biggest challenge of working at Isda, but also the biggest reward when we work together with the industry to solve problems.

Before you were made general counsel in 2016, Isda was accused of rigging the credit derivatives market, which resulted in a $1.87 billion settlement. Can you describe what it was like working on the case, and lessons learnt along the way?

Before I answer this question, I would like to clarify that Isda’s settlement was actually pretty modest; we agreed to some behavioral remedies and agreed to pay $750,000 (I don’t want people with the misimpression that Isda had $2 billion lying around).  

I learnt a lot of important lessons from this case, but I think two things in particular are worth mentioning.

Firstly, I discovered the value of good policies and procedures. Isda has always taken internal legal and ethics compliance seriously. I’m not saying there has been a culture change, but I learned that a few stray emails, or a few stray conversations – even if well-intentioned, and even if people thought they were complying with the law – can cause years of disruption and huge legal fees.

When we overhauled our compliance efforts – basically around the time the case started – we could see how it made a difference. We are now more accurate in our emails and are more cautious and precise in our working group agendas.

Secondly, I learned that litigation is far more expensive and burdensome than I could have imagined. As mentioned, I’m a banking lawyer by training, so I hadn’t had much litigation experience. Isda was by far the smallest and least capitalized defendant in the group, and yet we produced millions of pages of documents. We had to sit for multiple depositions and spend significant amounts on legal fees and experts, and then we still had to settle. This goes back to my first point – I would rather spend more on compliance then face one of these litigations.

We do that now. We spend more on compliance than we did before because we want to avoid even the hint of litigation.

Isda recently released French and Irish master agreements as a Brexit solution. How long did that project take to prepare? Will there be other similar legal agreements?

We wanted to provide a common law and civil law governing law to facilitate intra-EU transactions post Brexit, leading us to selecting French and Irish law. I don’t see other master agreements being developed in the foreseeable future, although we will add supporting documents under French and Irish law (collateral documents). The project took around a year and was very well supported by the local legal communities in France and Ireland. Without the support of the local legal community in these markets, the projects would not have been completed in a timely fashion. We thank them for their help and support.

You have worked on Brexit, initial margin and Libor reform, among other things. Which one is the most challenging, and are any of them enjoyable to work on?

Both Brexit and Libor reform are incredibly complex as both were unanticipated contractually, leading to the need for novel solutions. All three projects have been a lot of fun to work on as they combine complicated legal issues with novel facts, and bring Isda members and the industry together to share a lot of great ideas to solve these issues. During my time at Isda, the industry had one complicated project after another, but I’d say Isda and the industry are up for the challenge.

During your time at Isda, what project are you most proud of?

That’s a difficult one! There are three that come to mind, and they are all technology oriented. 

First, the Dodd Frank protocols and the development of Isda Amend – standard industry solutions for compliance. We developed the technology with IHS Markit to exchange sensitive information on a large scale. 

Next, the 2011 Isda Equity Derivatives Definitions – facilitating smart contracts for the equity derivatives market (standardization and product options), which will also facilitate distributed ledger technology in this area. 

Third and most recently, Isda Create, an online bilateral negotiation tool that we launched with Linklaters and Nakhoda to assist with the creation, execution and delivery of Isda documentation. The first module will be used for initial margin, but we will gradually add other documentation to the platform. Isda Create allows firms to document on a large scale and also consume legal data in structured format – a first for derivatives documentation.

For more information on IFLR's Women in Business Law group click here.