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Professor Matthias Haentjens appointed member of European Commission’s Expert Group

Professor of Financial Law Matthias Haentjens is recently appointed member of the European Commission’s Expert Group on Conflict of Law regarding Securities and Claims. The Group’s tasks shall be to assist the Commission with its work on conflict of laws on third-party effects of transactions in securities and claims. The Group shall assist the Commission in the preparatory works leading up to a potential legislative proposal on conflict of laws rules on third party effects of transaction in securities and claims.

To facilitate cross-border investing, the Commission’s Capital Market Union Action Plan envisages for 2017 a targeted action plan on securities ownership rules and third-party effects of assignment of claims. The CMU Communication, published in September 2016, further specified that the Commission will draft a legislative initiative to determine with legal certainty which national law shall apply to securities ownership and to third party effects of the assignment of claims. This topic has been addressed by different international fora. The Hague Securities Convention, which was approved in 2002, sets out rules on the applicable law to certain rights in respect of securities held with an intermediary. However, the 2001 UN Assignment Convention that covers conflict of laws rules for third-party effects of assignment of claims has not yet entered into force. 

With regard to this problem the Commission, as required by article 27(2) of the regulation on the law applicable to contractual obligations (“Rome I”), prepared a report on this matter to completing the gap. The Commission carried out a study and published the report on 29 September 2016 which presented possible approaches and stressed the link with securities transactions.

Transaction in intangible securities and claims are the backbone of financial markets and are important for a vast number of corporate finance operations. Whether such transactions are valid vis-à-vis third parties is significant also for market participants who are not related to the transaction in question but who interact with any of the parties separately and need certainty about who has a right to the securities or claims. If a transaction is performed in a pure domestic context, there is usually no problem answering this question based on national substantive law. However, if there is a cross-border situation, which is more often than not, it is unclear which national substantive law applies. Conflict of law regimes are harmonised at EU level only to a limited extent. As a result, cross-border transactions in securities and claims bear significant risk that legal defects emerge and result in financial loss (“legal risk”). It is therefore quite conceivable that different persons may be considered as owners under different laws. 

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