Brussels,

Securities and claims ownership

Cross-border securities transactions within the EU involve the exchange of financial instruments, such as stocks or bonds, between parties located in different member states. These transactions are crucial for the integration of EU financial markets, but they can be complex due to differing national laws and regulations governing securities ownership and settlement.

Challenges in Cross-Border Securities Transactions

  • Legal Uncertainty: When securities are traded across borders, it's not always clear which national law applies to the transaction. This ambiguity can lead to legal uncertainties regarding ownership rights, making it difficult for investors, credit providers, and other market participants to operate with confidence.
  • Impact on Market Participants: The lack of legal clarity can complicate the use of securities as collateral and create challenges in pricing risks, particularly in cross-border scenarios. This uncertainty affects not only the immediate parties involved in the transaction but also other stakeholders who interact with them.

EU Initiatives to Address These Challenges

  • Capital Markets Union (CMU): As part of its broader strategy to create a single market for capital in the EU, the European Commission is working to harmonize the rules governing securities transactions across member states. The CMU action plan, launched in 2015, identified the need for consistent securities ownership rules and clearer legal frameworks for cross-border transactions.
  • Harmonization of Laws: In March 2018, the Commission proposed common conflict-of-laws rules to address the legal uncertainties in cross-border securities transactions. The proposal suggests that the law of the country where the assignor resides should govern the third-party effects of securities assignments. This move is intended to reduce legal ambiguity and enhance the efficiency and safety of cross-border investments.
  • Expert Consultation and Impact Assessment: The Commission has engaged in extensive consultations with experts in private international law and financial markets to ensure that the new rules effectively address the challenges of cross-border transactions. The impact assessment, completed in 2018, provided a detailed analysis of the issues and potential solutions.
  • Clarification of Existing Directives: The Commission also issued a communication to clarify how existing EU directives, such as the Settlement Finality Directive and the Financial Collateral Directive, should be applied to cross-border securities transactions. This clarification aims to ensure consistency in the application of laws across different member states.

Benefits of Harmonization

  • Increased Legal Certainty: By harmonizing the rules governing securities transactions, the EU aims to provide greater legal certainty for market participants, reducing the risks associated with cross-border investments.
  • Enhanced Market Integration: Consistent rules across member states will facilitate smoother cross-border transactions, contributing to the broader goal of integrating EU financial markets.
  • Improved Access to Credit: Clearer legal frameworks will make it easier for investors to use securities as collateral, thereby improving access to credit and supporting economic growth within the EU.

These initiatives are part of the EU's broader efforts to create a more integrated and efficient financial market, ultimately benefiting both market participants and the European economy as a whole.