Chapter 8. Intermediated Securities and Private International Law
As observed in the preceding section, current conflict of laws analysis varies, according to the lex fori and its analysis, which causes, in many cases, forum shopping. A worse problem is that in practice, without a clear and specific PIL rule for intermediated securities, and if the traditional lex situs rule is applicable, it is difficult or almost impossible from the perspective of a collateral taker to know, in advance, how to satisfy all the perfection requirements of the collateral securities which the collateral taker will receive. For instance, assume that Japanese Collateral Provider A holds, through her Intermediary X incorporated under Korean law, and located in Seoul, a portfolio of German bearer bonds in the form of a global securities certificate which is held, in turn, with a German bank located in Hamburg, and in custody in the vault of the German central securities depository, i.e. CBF. Further assume that she holds dematerialised Japanese shares, listed on a Korean exchange through the CSD linkage between KSD and JASDEC, and certificated debt securities, issued by a Québec issuer, which are, in fact, in custody with the offices of CDS, the Canadian CSD in Ontario, Québec, British Columbia and Alberta. She also holds American depositary receipts, issued by the Bank of New York held in the Belgian CSD, Euroclear, Belgium’s vault in Belgium. Let’s further assume that German Collateral Taker B tries to find legal advice before her (pledge) collateral transaction, which will be concluded in accordance with English law. In this context, it would be extremely difficult to deliver a proper advice, because, first of all, the advice might be different depending on a forum court as discussed above. Additionally, from a practical point of view, it is time-consuming and costly work to obtain all the information on, according to each type of security, where the securities certificates are actually located, and whether the securities are dematerialised or otherwise, as well as meeting all the legal requirements and acquiring other necessary legal information for the collateral transaction, even if securities types and their locations are detected. Since, in practice, unlike the above hypothesis, it is quite difficult to find the location, it is not difficult to be led to the conclusion that the traditional lex situs rule is an almost impracticable and inappropriate connecting factor in respect of intermediated securities.