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this gives them a preferential status in the insolvency of the intermediary. Moreover, despite the fact that investors under German and Austrian law have a claim to the underlying securities, this claim is enforceable only indirectly through the chain of intermediaries that operates between the ultimate client and the central depository. The claim is subject to the rules on shortfalls; the extent to which it can be satisfied is determined by the entitlements held by the intermediaries forming part of the chain.

There exists a slight difference in terms of outcomes achieved by the two approaches. In German and Austrian law the buyer of indirect securities usually becomes the owner when the securities are credited to her account. In England, equitable ownership usually vests in the buyer when the three requirements for certainty have been satisfied. This is frequently before the securities are credited to the client’s account.

12.5 Unauthorised transfers

12.5.1 German law

The Depotgesetz does not contain special rules dealing with adverse claims. German and Austrian legal doctrine apply the general rules of property law contained in their respective civil and commercial codes.

These rules protect the bona fide purchaser of tangible movables. The conclusion of subsection 10.2.2 was that they apply also to bearer securities. To be protected against adverse claims the buyer needs to satisfy two requirements; she needs to show that she acted in good faith; she also needs to have possession of the tangible movable transferred to her.

In subsection 10.2.2 it was shown that the rationale underlying the German rules on this point is that the delivery of a tangible movable to the buyer entitles her to assume that the seller had authority to sell. The buyer is also entitled to assume that the seller had authority to sell if she has had assigned to her the right to claim the securities from a third party by the seller. The rules on good faith acquisition of title are, traditionally, explained as being a reflection of the ability of the seller to effect delivery of a particular item. If the seller is able to bring an asset into the physical possession of the buyer, the buyer is entitled to assume that the seller also had authority to sell.

This underlying explanation causes some German scholars to propound the view that the buyer of a co-ownership interest is not protected

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by the rules on good faith acquisition of title.31 A co-ownership interest is not capable of being physically delivered to the buyer. When the buyer acquires co-possession, no aspect of the transfer process indicates which fraction of the ownership right to the bulk belonged to the buyer. The physical delivery of particular items amounts to a representation entitling the buyer to assume that the seller had authority to sell, but the acquisition of co-possession does not represent to the buyer the fraction of the bulk to which the seller’s assumed authority relates.

The exclusion of co-ownership interests from the application of the rules on the good faith acquisition of ownership does, however, not concern transfers of co-ownership interests held in securities that are deposited according to the Depotgesetz. The general view of German legal doctrine is that co-ownership interests in deposited securities can be acquired in good faith. The policy reason supporting this is that the transfer system which is supported by the Depotgesetz would not be able to operate efficiently if transferees could be subjected to adverse claims.32 Investors can choose to hold and transfer securities either in the paper form or through intermediaries connected with the central depository. When securities are transferred through the physical delivery of paper documents, the transferee is protected against adverse claims. Intermediaries would be unable to persuade clients to take advantage of their custody and transfer services if clients did not receive equivalent protection when deposited securities are transferred. It is in the interest of the German securities market to eliminate paper from the transfer process; as a matter of legal policy, the law should support this legitimate market interest and protect buyers acquiring securities through the paperless transfer system against adverse claims.

31Canaris, Bankvertragsrecht, paras. 2026–2027, 1994; Einsele, Wertpapierrecht 105–106; Opitz, Depotgesetz 313; Heinsius, Horn and Than, Depotgesetz, s. 24, para. 26; Horn, ‘Die Erfu¨ llung’ 11.

32Ku¨ mpel, Bankund Kapitalmarktrecht, para. 11.411–11.412; Canaris, Bankvertragsrecht, para. 2026; Hueck and Canaris, Wertpapiere 16; Ingo Koller, ‘Der gutgla¨ubige Erwerb von

Sammeldepotanteilen an Wertpapieren im Effektengiroverkehrs’, [1972] Der Betrieb 1905; Heinsius, Horn and Than, Depotgesetz, s. 6, para. 91; Fritz Fabricius, ‘Zur Theorie des

stu¨ ckelson Effektengiroverkehrs’ 482; Ulrich Meyer-Cording and Tim Drygala, Wertpapierrech, 3rd edn. (Berlin: Luchterhand Neuwied, Kriftel, 1995) 23; Harm Peter Westermann, ‘Das Girosammeldepot im deutschen Recht’, (1985) 49 Rabels Zeitschrift fu¨r ausla¨ndisches und internationales Privatrecht 231; Drobnig, ‘Dokumentenloser Effektenverkehr’ 30; Ingo Koller, ‘Empfielt sich eine Neuordnung und Erga¨nzung

des Wertpapierrechts im BGB’, in Bundesministerium der Justiz (ed.), Gutachten und

¨

Vorschla¨ge zu Uberarbertung des Schuldrechts, vol. II (Ko¨ ln: Bundesanzeiger Verlagsgesellschaft, 1981) 1504.

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The doctrinal argument supporting the application of the rules on the good faith acquisition of ownership to co-ownership interests in deposited securities is that in the case of deposited securities, there exists a method of representing to the buyer the fraction of the bulk to which the interest of the seller relates. The credit on the account of the buyer amounts to a representation which entitles the buyer to assume that the seller was authorised to sell.33 Credits on securities accounts maintained according to the Depotgesetz have this particular legal quality because the banks effecting these credits are subjected to a special regulatory regime.34 As a result, the rules on the good faith acquisition of title apply.

12.5.2 Austrian law

The conclusion of subsection 10.2.3 was that the Austrian rules on the good faith acquisition of ownership to securities differ slightly in detail from the German ones. These differences do not, however, have an impact on the analysis of transfers of deposited securities in Austrian law. Like German legal doctrine, Austrian legal doctrine maintains that a co-ownership interest is, in principle, not protected by the rules on the good faith acquisition of title.35 Co-ownership interests in deposited securities are, however, exempt from that principle. As in German law, the credit on a securities account is presumed under Austrian law to amount to a representation that entitles the purchaser to assume that the vendor had authority to sell.36

12.5.3 Conclusions

Both German and Austrian law apply the rules on the good faith acquisition of tangible movables to transfers of securities which are held through intermediaries connected to the central depository. Both legal systems adapted these rules. The current doctrinal position is that the credit on a securities account is a representation entitling the

33Canaris, Bankvertragsrecht, para. 2027; Koller, ‘Der gutgla¨ubige Erwerb von Sammeldepotanteilen an Wertpapieren im Effektengiroverkehrs’, [1972] Der Betrieb, 1857 1905–1906; Heinsius, Horn and Than, Depotgesetz, s. 6, para. 91; Horn, ‘Die

Erfu¨ llung’ 11–12, 14–15.

34Canaris, Bankvertragsrecht, para. 2027; Heinsius, Horn and Than, Depotgesetz, s. 6, paras.

40, 91.

35 ¨

Gert Iro, in Peter Avancini, Gert Iro and Helmut Koziol, Osterreichisches Bankvertragsrecht, vol. II (Wien: Manz, 1993), paras. 7/124, fn. 338, 7/153.

36 Iro, Bankvertragsrecht, II, para. 7/154.