The Conflict of Laws in the Context of Shares and Securities Held Through an Intermediary: Friend or Foe of Capital Market Integration?

Abstract

The importance of financial markets is capital for businesses nowadays. Pension funds as well as private investors hold portfolios composed by shares of different companies. It becomes more and more common to invest-or to hear other people claiming having invested-into companies situated in the other edge of the world. Globalization of economies is becoming a reality and can be felt more and more, especially after the recent Asian economic crisis which in fact was the outcome of a chain reaction. Economies interact in such way since quite some time, however “les liens d’argent viennent toujours avant les liens de droit”. If the actual economic environment is a big financial market, its legal analysis shows a completely different picture because of the fragmentation of this one economic whole into different national or regional jurisdictions. Therefore, one could ask how is it possible to invest into companies of different nationality quoted into different stock markets despite the aforementioned fragmentation. Furthermore, in case of international litigation in matters of shares and securities what law will be applicable? This paper will attempt to present how the indirect holding system works from a legal point of view. This presentation will render more apparent the difficulties of adapting to this system the classic approaches of private international law. A solution to this problem was, though, necessary not only in the context of the E.C. market integration policy, but also seen from a more global point of view legal certainty and predictability are imperatives to any kind of development of financial markets; this has had as outcome the creation of new connecting factors and even new approaches made especially for the needs of the indirect holding system. Once again, financial law becomes a legal laboratory, though being this time at the service of further market integration.