The great majority of securities in the financial markets are now held in electronic book entry form in securities accounts with custodians or depositaries or settlement systems resulting in proprietary rights in or for the delivery or transfer of the securities concerned. The Hague Convention on the law applicable to certain rights in respect of securities held with an intermediary, agreed on 13 December 2002, is an international multilateral treaty intended to remove, at a global scale, legal uncertainties for cross-border securities transactions.
Following a request formed by the European Council for clarification of four specific legal issues, the European Commission has issued yesterday its legal assessment of the Hague Securities Convention, calling upon Member States to sign the Convention. The Convention establishes a conflicts-of-law regime, under which the law applicable to holdings of securities is the one named in the account agreement with the relevant intermediary. On 23 June 2005, the Council asked the Commission to assess four legal issues, namely: (1) scope of application, (2) extent of third-party rights, (3) consequences for substantive and public law and (4) impact of the diversity of laws on settlement systems and prudential regimes.
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