The European Commission has published a Communication on the law applicable to the proprietary effects of transactions in securities. The Commission's objective is to clarify the conflicts of law provisions in the Financial Collateral Directive, the Settlement Finality Directive and the Winding-up Directive. These Directives apply to book-entry securities and instruments, the existence or transfer of which presupposes their recording in a register, an account, or centralized deposit system. All three Directives designate the applicable law based on the place of the relevant register or account. However, there is a degree of uncertainty because the provisions in the Directives use different language and because there is diverse interpretation and application of the provisions across the EU. The Communication confirms the Commission's view that the terms 'maintained' and 'located' used in these Directives mean the same thing and that the different ways across the EU of determining where the account or register is 'maintained' or 'located' are valid. The Commission's views are subject to any potential future decisions of the Court of Justice of the European Union on these issues.

The Commission will monitor developments in this area and assess whether any further action is necessary. National authorities are called upon to take the Commission's clarifications into account when applying the conflicts of law provisions of the FCD, SFD or WUD. The Communication should be read in conjunction with the Commission's proposed Regulation on the law applicable to the third-party effects of assignments of claims.

View the Communication.

View the proposed separate Regulation on assignment of claims.