Lloyd's Maritime and Commercial Law Quarterly
The Hague Securities Convention: a critical reading of the road map
Maisie Ooi *
This article considers one of the more important conflict of laws problems of our time: that of the choice of law rule for disputes over shares and other securities (bonds and other financial instruments and assets) indirectly held. The present choice of law rule for shares is the lex situs, which is widely regarded as unsuited to securities indirectly held. Various theories have been offered as to whether the solution lies in the redefinition of the lex situs, or in the creation of a new choice of law rule altogether. This article considers the solution proposed by the Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary, and what the Explanatory Report on the Convention has directed on the manner of its application. The Convention, adopted at a Diplomatic Session of the Hague Conference on 13 December 2002, is not yet in force.
I. INTRODUCTION
The number of cross-border securities transactions in the primary and secondary markets has increased dramatically in the last decade, mainly on the back of increased reliance on the intermediated system of securities holding and trading. By breaking the need for the investor to be in a direct relationship with the issuer, the intermediated system (by which investors hold and transfer their securities through a securities account with an intermediary) paradoxically allows issuers and investors even greater access to each other across the global securities markets. This alternative system of securities holding1
has achieved much in increasing the breadth and depth of securities markets but, in so doing, has also significantly increased risks for those involved in these activities.
This article considers one of these risks, namely that of parties to a transaction involving indirectly held securities being unable to ascertain in advance and with a reasonable amount of certainty the law that will be applied to determine their rights in the event of a dispute. The problems of choice of law for indirectly held securities have been said to be difficult and important enough to cause a large number of financial institutions to spend tens of millions of dollars for legal advice on the subject without fully resolving
* Advocate and Solicitor of the High Court of Malaya, Solicitor of the Supreme Court of England and Wales, Solicitor of the High Court of Hong Kong; Visiting Associate Professor, Faculty of Law, National University of Singapore. The writer is grateful to Professor Adrian Briggs of the University of Oxford, who read the drafts and gave invaluable advice, and Associate Professor Yeo Tiong Min, her colleague, who gamely engaged in lengthy discussions with her on renvoi
and the incidental question.
1. The intermediated system (commonly referred to as the “indirect holding system”) does not displace the direct holding system.
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