Chapter 9. The Hague Securities Convention
As analysed in the previous chapter “Intermediated Securities and Private International Law”, it is evident that there has been huge legal uncertainty as to which law governs cross-border transactions of intermediated securities under the lex rei cartae sitae rule, which is a traditional connecting factor of directly held securities certificates having carried out an adequate disclosure function in the direct holding system. This uncertainty causes a collateral taker to hesitate to make securities collateral transactions with a collateral provider, who holds securities through her intermediary, in the sense that from the perspective of the collateral taker, although it is an essential point to acquire valid security interests, which are enforceable against a third party, it is not easy to determine the law applicable to the collateral transaction under the lex rei cartae sitae or the lex situs rule. Even if this is possible, as mentioned, it is still a costly and time-consuming task, which results in complex practical and legal problems, thereby depreciating the value of securities as collateral. In addition, especially in the global financial market, where jurisdictions are closely inter-connected to, and inter-dependent on, each other, uncertainty in one jurisdiction can rapidly spread to another jurisdiction, exposing intermediaries and investors to systemic risk. In this regard, in May 2000, the Hague Conference on Private International Law (“HCCH”) proposed to develop an international instrument on intermediated securities, and disposition thereof, and adopted the final draft of the Hague Securities Convention on 13 December 2002 in the second part of the Nineteenth Diplomatic Session of the Hague Conference, after holding the Experts meeting in January 2001 and the Special Commission in 2002, and 17 regional discussion workshops.