New Test
The first Special Commission of the Convention met at The Hague in January 2001 to consider the appropriate conflict of laws rule. At this first meeting, initially the concept embraced by the PRIMA approach was adopted. The next two years of negotiations and meetings were spent determining an appropriate formulation of the language of the convention, and which PRIMA concepts to accept and which to reject. At the end of the negotiations, the idea that the place of the relevant intermediary was the place to focus on was unanimously rejected in lieu of the approach described below.
The fundamental issue during negotiations was to determine a test that would accurately locate the one jurisdiction for any set of circumstances that would be the jurisdiction whose law would apply. The result of the analysis was that for financial institutions with many offices, it is often not possible to point to one particular location. Delegates concluded that a test that tried to actually locate a particular securities account would result in an unacceptable level of impossibility or uncertainty.
Over time a new approach was developed:
- the account holder and relevant intermediary may choose in the account agreement the law to govern the issues under the Convention;
- this choice will be respected under the Hague Convention provided that the chosen law is of a place where the relevant intermediary has an office that is involved in the maintenance of securities accounts (a "qualifying office").
Read more about this topic: Hague Securities Convention
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