238 C O N C L U S I O N S

17.1 UNIDROIT draft Convention

UNIDROIT is in the process of adopting a Convention on the substantive rules regarding intermediated securities. A first draft of that Convention was published in May 2005 and in March 2006 an updated version of that draft was adopted (known as the Convention). The successive drafts of the Convention were prepared by a drafting committee, a group of lawyers from several jurisdictions: Japan, the UK, Canada, Belgium, Chile, a ‘Nordic’ country, France, Germany, Luxembourg, Switzerland and the US.2

The draft of the Convention was written with a view to providing a standard model for securities that are held and transferred through intermediaries. Article 3 states that, in the implementation, interpretation and application of the Convention, regard is to be had to its purpose, to its international character and to the need to promote uniformity and predictability in its application. It can thus be inferred that one of the aims of the Convention is to create uniform legal rules.

Analysis of the Convention shows that it does not promote formal convergence of legal rules: the drafters are not proposing rules that should be implemented in an identical wording across jurisdictions. The Convention also does not attempt to provide an exhaustive legal framework governing securities held through intermediaries. It explicitly allows for the application of domestic (non-Convention) law. Domestic law applies in matters that are subject to the Convention but that are either not expressly settled in the Convention or that cannot be settled in conformity to the general principles on which the Convention is based.3

The Convention promotes functional rather than formal convergence. It does not require legal systems to classify securities as either tangibles or intangibles. It also does not distinguish between bearer, name, or registered securities. It rather regulates securities, in whichever form they may have been issued, that are held through accounts. In doing so, the Convention connects to the common denominator of both English and German law and, it can be speculated, of all the legal systems that were represented on the drafting committee. In both English and German law, securities are held through intermediaries and entitlements of investors are recorded on accounts kept by them. By regulating investor rights by reference to these accounts, the

2 UNIDROIT 2006, Study LXXVIII Doc. 42 ii. 3 Art. 3 (2), Draft Convention.

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Convention avoids having to interfere with the respective legal analysis of the nature of the securities: it does not regulate their proprietary doctrinal analysis.

17.2 EU Legal Certainty Project

The EU has put forward a law reform project which aims to determine whether the differences in the legal regimes governing securities and their transfers provide for obstacles to the emergence of a single European securities market. Like the UNIDROIT in its current draft Convention, the Legal Certainty Group has opted for functional rather than formal convergence.

The Legal Certainty Group first carried out a survey of the existing legal frameworks of all the EU member states; the laws of Japan, the US and Canada were also analysed. The information collected by the Legal Certainty Group, however, was not used as a basis for an economic analysis. It did not compare the relative efficiency of these existing legal frameworks nor determine whether there existed a set of legal rules that would be more efficient in economic terms than any of the rules currently in place.

The members of the Group, having analysed the different legal regimes, instead used their professional judgement to determine whether or not reform harmonising the law across Europe would be necessary. They also used their professional judgement, rather than economic legal analysis, when explaining the options available for a harmonised regime.