EN 
 
 
OPINION OF THE EUROPEAN CENTRAL BANK 
of 25 May 2005 
at the request of the Ministry of Finance of Lu xembourg on a draft law on financial collateral 
arrangements 
(CON/2005/12) 
 1. On 16 March 2005 the European Central Bank (ECB) received a request from the Ministry of 
Finance of Luxembourg for an opinion on a dr aft law on financial collateral arrangements 
(hereinafter the ‘draft law’). The draft law wa s submitted to the Chamber of Representatives of 
Luxembourg on 25 November 2003. Subsequently the Government of Luxembourg amended the 
draft law on 16 April 2004. These amendments are also the subject of the present consultation. 
2. The ECB’s competence to deliver an opinion is based on the third, fifth and sixth indents of 
Article 2(1) of Council Decision 98/415/EC of 29 June 1998 on the consultation of the European 
Central Bank by national authorities re garding draft legislative provisions
1, as the draft law relates 
to (i) the Banque centrale du Luxembourg (BCL) and the other central banks in the European System of Central Banks (ESCB); (ii) securiti es settlement systems; and (iii) the stability of 
financial institutions and markets. 
3. The ECB notes that the main purpo se of the draft law is to tran spose in Luxembourg Directive 
2002/47/EC of the European Parliament and of th e Council of 6 June 2002 on financial collateral 
arrangements (hereinafter the ‘Collateral Directive’)
2. While national authorities are not obliged to 
consult the ECB on draft legislative provisions th e exclusive purpose of which is the transposition 
of Community directives into the law of Member States, under Article 25.1 of the Statute of the 
European System of Central Banks and of the European Central Bank (hereinafter the ‘ESCB 
Statute’) the ECB may offer advice to and be consulted by the competent authorities of the 
Member States on the scope and implementation of Community legislation relating to the stability 
of the financial system. The draft law addresses matters directly relevant to the Eurosystem’s core fields of competence which will have an impact both on the efficient and safe use of financial 
collateral arrangements in EU financial market s and the Eurosystem’s credit operations.  
4. The draft law also contains certain provisions that go beyond merely transposing the Collateral 
Directive, including provisions on the statutory lie n granted to depositories principally operating a 
                                                           
1 OJ L 189, 3.7.1998, p. 42. 
2 OJ L 168, 27.6.2002, p. 43. 
2 securities settlement system (SSS) that have an im pact on the BCL’s Statute and that relate to the 
incorporation into the legal framework in L uxembourg of certain provisions of the Hague 
Convention on the Law Applicable to Certain Ri ghts in respect of Securities held with an 
Intermediary (hereinafter the ‘Hague Convention’ ). Since the provisions on the statutory lien of 
depositories principally operating an SSS have implica tions for the BCL’s lien under its Statute, the 
ECB addresses this matter first. 
Statutory lien granted to depositories princi pally operating a securities settlement system   
5. Under the current law in Luxembourg3 a statutory lien is granted to depositories principally 
operating an SSS (hereinafter the ‘depositories’) over a participant’s own assets held by the 
depositories in relation to the system they operate where such assets are not affected by collateral 
duly notified to or accepted by the depository. Fo r this purpose ‘collateral’ is defined as any 
realisable asset, including money, provided in  the context of a pledge, repurchase agreement, 
fiduciary transfer or a similar agreement, or in another way, with the aim of guaranteeing the rights 
and obligations which may arise in the context of  an SSS, or provided to Member States’ central 
banks or to the ECB vis-à-vis such realisable assets4. 
6. The draft law, as amended by the Government of Luxembourg, specifies that the depositories’ 
claims vis-à-vis a participant arising from the tran sactions carried out by the participant on its own 
account, as well as on behalf of its clients, are guara nteed by the statutory lien of the depositories. 
The draft law also grants a lien to these depositori es on the assets of a participant’s clients held by 
the depositories in relation to the system they operate, but this lien only guarantees a depository’s 
claims vis-à-vis a participant arising from the tran sactions carried out by a participant on behalf of 
its clients.  
7. Under the law in Luxembourg this statutory lien wo uld supersede any general or special statutory 
lien5. However, it is unclear whether it would pr evail over the lien granted to the BCL, which 
provides that claims of the BCL, the ECB or an y other national central bank (NCB) in the ESCB 
resulting from operations in connection with common monetary or exchange rate policies will have 
priority over all debtor assets, whether held with  the BCL or with an SSS or any other counterpart 
in Luxembourg, and that this lien ra nks equally with that of a pledgee6. 
8. The statutory lien granted to the depositories on the assets of a participant’s clients held in relation 
to the system which they operate increases, in terms of scope, the risk of potential conflicts 
                                                           
3  Article 17 of the loi du 1er août 2001 concernant la circulation de titr es et d’autres instruments fongibles  (Law of 
1 August 2001 on the circulation of securities and other f ungible instruments; hereinafter the ‘Securities Law’). 
4  Article 25(4)(b) of the draft law, amended by Government al Amendment No 7 relating to the statutory lien granted to 
depositories, repeats the provisions of Article 17 of the Secu rities Law. The definition now refers to the central bank 
members of the ESCB. 
5  The second paragraph of Article 17 of  the Securities Law (and Article 25(4)(b ) of the draft law, as amended by 
Governmental Amendment No 7).  
6  Article 4(4) of the loi du 23 décembre 1998 relative au statut moné taire et à la Banque centrale du Luxembourg (Law of 
23 December 1998 on the monetary status and the Banque centrale du Luxembourg), under the subheading ‘Financial 
bases’. 
3 between the statutory lien of the depositories and the lien of the BCL and the ESCB central banks. 
It is noted in this respect that the lien of the BCL and the ESCB central banks has, in large part, 
been introduced into the law in Luxembourg in order to reinforce the BCL’s financial position7, 
thereby assisting the BCL and the Eurosystem in performing their central banking tasks. In this 
regard the ECB takes note of the particular situa tion of the BCL within the Eurosystem. The risks 
stemming from the BCL’s operations with the financial sector8 are of systemic relevance in view of 
the relative importance of the financial market in Luxembourg. The BCL is the third largest 
national central bank within the Eurosystem9 in terms of liquidity granted to credit institutions and 
the amount of collateral used for monetary policy op erations. A substantial part of the assets used 
to collateralise Eurosystem credit operations on a cross-border basis originates in Luxembourg. 
Furthermore, the Standards for the use of EU  Securities Settlement Systems in ESCB credit 
operations, published in 1998, are relevant from th e perspective of the Eurosystem as a user of a 
central securities depository operating an SSS. Sta ndard 1 states that an SSS must provide adequate 
protection of the rights of the NCBs and the ECB in  respect of securities held on their accounts in 
such systems. Against this backdrop, the ECB woul d strongly prefer a statutory lien granted to the 
depositories that does not prejudice the legal position of the BCL and the ESCB central banks in performing their central banking functions. The ECB hopes that the relevant provisions of the draft 
law can be amended accordingly in  order to fully secure the le gal position of the BCL and the 
ESCB central banks.  
9. The ECB notes that both the current law in Luxembourg and the provisions of the draft law exclude 
from the scope of the statutory lien granted to the depositories any own assets of participants, which are affected by collateral duly notified to  or accepted by the depository. The ECB is of the 
view that this exclusion should also apply to the assets of participants’ clients, which are affected 
by collateral duly notified to or accepted by th e depository. Furthermore, the statutory lien of 
depositories, including the lien on the assets of a pa rticipant’s clients intended by the draft law, 
should not cover the BCL’s assets or the assets provi ded as collateral to the BCL or another central 
bank member of the Eurosystem, regardless of any notification or acceptance requirement, which in any case should not affect the realisation and enforceability of such collateral. 
10. The comments on the articles of the draft law point out that the lien over the assets of a 
participant’s clients is very limited since, as mentioned in paragraph 6 above, it only covers the 
assets of a participant’s clients in respect of tran sactions carried out on behalf of those clients
10. 
The statutory lien of qualified intermedia ries and clearing and settlement institutions11 under 
                                                           
7  Report of the Commission des Finances et du Budget  (Commission of Finances and B udget in Luxembourg, 10.12.1998) 
on draft law No 4468/07, p. 2.  
8  Draft law No 4468/07, comments on the ar ticles, comment on Article 4(4), p. 9. 
9 Comments on key figures of the 2004 BCL accounts ar e available on the BCL website (http://www.bcl.lu). 
10 See the comments on the articles, comment on Article 25(4), p. 23. 
11  Referred to in Article 31 of the loi du 2 août 2002 relative à la surveillance du secteur financier et aux services 
financiers (Law of 2 August 2002 on the supervision of the financial sector and on financial services). 
4 Belgian law12 also covers the assets of clients and, in the case of clearing and settlement 
institutions, the assets of a participant’s client s. However, under Belgian law, the assets of a 
participant’s clients can only be credited to an a ccount with the relevant intermediary or clearing 
and settlement institution (and therefor e be covered by the statutory lien) if those clients give their 
written consent13. It is noted in this respect that one of the rules set out in the ESCB-CESR 
Standards  for Securities Clearing and Settlement in the European Union14 lays down that entities 
holding securities in custody must not use the cu stomer’s securities for any transaction unless they 
have obtained the customer’s explicit consent. Under Directive 2004/39/EC15, the same principles 
apply to investment firms16. Furthermore, Belgian law expressly provides for criminal sanctions for 
those who, acting on behalf of an intermediary, use the financial instruments of clients without 
their written consent, whether this use is for their own profit, the profit of the intermediary or the 
profit of third parties17. Under Belgian law, there is also a requirement of segregation between the 
assets of participants’ clients and the own assets of a participant18. Finally, there is a solidarity 
mechanism between all the clients of a particular participant within the system under which, in the 
event of the participant’s insolv ency, the clearing or settlement institution will enforce its lien on 
the assets of this participant’s clients taken as a w hole, i.e. without taking into account the positions 
of the individual clients19. In the case of Luxembourg, the ECB notes that the draft law does not 
                                                           
12  Article 10(1) of the  loi du 15 décembre 2004 relative aux sûretés financières et portant des dispositi ons fiscales diverses 
en matière de conventions constitutives  de sûreté réelle et de prêts portant sur des in struments financiers (Law of 
15 December 2004 on financial collateral and various tax provisions in relation to in rem  collateral arrangements and 
loans for financial instruments). Under Article 10(1) and (2) of  this law, unless otherwise agreed between the parties, the 
lien of the pledgee prevails over the stat utory lien of qualified intermediaries and clearing and settlement institutions as 
well as over the statutory lien of the Na tionale Bank van België/Banque  Nationale de Belgique (hereinafter the ‘NBB’), 
provided that the intermediary, the institution or the NBB, as the case may be, has agreed to register this pledge on 
financial instruments covered by the stat utory lien to a special a ccount in its books or has acknowledged that cash has 
been given as collateral. 
13  Article 148(3) of the loi du 6 avril 1995 relative au statut des entreprise s d'investissement et à leur contrôle, aux 
intermédiaires et conseillers en placements  (Law of 6 April 1995 on the legal status and supervision of investment firms, 
intermediaries and investment advisers), title as am ended by the Law of 2 August 2002; and Article 31(5) of the Law of 
2 August 2002. 
14  Standard 12, key element 6 of the St andards for Securities Clearing and Settle ment in the European Union, jointly 
published by the ESCB and the Committee of European Secu rities Regulators (CESR), October 2004; available on the 
CESR and ECB websites (http://www.ces r-eu.org and http ://www.ecb.int). 
15  Article 13(7) and (8) of Directive 2004/39/EC of the Eu ropean Parliament and of the Council of 21 April 2004 on 
markets in financial instruments ame nding Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of 
the European Parliament and of the Council and repeali ng Council Directive 93/22/EEC (OJ L 145, 30.4.2004, p. 1; 
hereinafter the ‘MiFID’). 
16  Under Article 13(7) of the MiFID, wh en holding financial instruments belongi ng to clients, inve stment firms must 
safeguard clients’ ownership rights, especi ally in the event of the investment firm’s insolvency, and prevent the use of a 
client’s instruments on own account except with the client’s express consent. Article 13(8) of the MiFID provides that 
investment firms must also, except in the case of credit institutions, prevent the use of client funds for their own account. 
17  Article 148(3) of the Law of 6 April 1995. 
18  Article 26(16°) of the Law of 2 August 2002. 
19  Comments on the articles of the projet de loi modifiant la loi du 6 avril 1995 relative aux marchés s econdaires, au statut 
des entreprises d’investissement et à le ur contrôle, aux intermédiaires et c onseillers en placement, et la loi du 
4 décembre 1990 relative aux opérations financières et aux marchés financiers (draft law amending the Law of 
6 April 1995 on secondary markets, the legal status and supervis ion of investment firms, in termediaries and investment 
advisers, and the Law of 4 December 1990 on financial oper ations and financial market s), 5 December 1995, comment 
on Article 9, p. 7; and the comments on the articles of the projet de loi relative à la su rveillance du secteur financier et 
aux services financiers (draft law on the supervision of the financial sector and on financial services), 4 June 2002, 
comment on Article 31, p. 70. 
5 indicate whether the assets of participants’ client s would be treated on an individual basis and does 
not have any requirement to obtain the client’s co nsent for the use of these assets. Against this 
background, the ECB is of the view that the authorities of Luxembourg should consider the adoption of appropriate mechanisms ensuring both  the protection of clients’ assets and the smooth 
operation of the clearing and settlement system.  
11. Finally, the ECB understands that if a lien on the assets of a participant’s clients is granted to 
depositories, as contemplated by the draft law, th e assets of a participant’s clients would not be 
available to collateralise credit extended to partic ipants. However, it should be ensured that the 
increased opportunities for custodians to receive (intraday) credit, in cases where there are 
insufficient financial assets to collateralise su ch credit, do not risk creating moral hazard. 
General comments regarding implemen tation of the Collateral Directive
 
12. As previously noted, the ECB has an interest in  the harmonised implementation of the Collateral 
Directive20. In this regard, the ECB very much welcom es the fact that the dr aft law does not avail 
itself of any of the opt-out possibilities provided in the Directive. This will also help to ensure a 
broad application of the Directive’s provisions under the law in Luxembourg. In this regard the 
ECB would like to recall its position that ‘simple and reliable methods of collateralisation, which 
include efficient enforcement methods, are of fundame ntal interest to the Eurosystem, as they help, 
inter alia , to ensure the smooth functioning of the Eurosystem’s single monetary policy’21. For this 
reason, the ECB supports the authorities of Luxem bourg’s grouping into a single law the provisions 
on different kinds of financ ial collateral arrangements. 
Personal scope of the Collateral Directive  
13. The draft law applies to operations transferring title to assets as collateral, including by fiduciary 
means, and to operations involving repurchase agre ements on property, in which the assignor or the 
assignee or both are ‘finance professionals’22. The recognition of the validity and third party 
enforceability of insolvency netting is subject to  the condition that they result from operations 
subject to agreements or bilateral or multilatera l netting clauses between two or more parties of 
whom at least one is a ‘finance professional’23. This concept of a ‘finance professional’ is very 
wide and encompasses, in addition to various public authorities and financial entities, any 
commercial or industrial establishment with pr ofessional access to the financial market, pension 
funds, securitisation bodies, entities or bodies partic ipating in a securitisation operation and any 
                                                           
20 See paragraph 2 of ECB Opinion CON/2003/11 of 26 June 2003 at the request of the Austrian Federal Ministry of Justice 
on a draft Federal law implementing Dir ective 2002/47/EC of the European Parliament and of the Council of 6 June 2002 
on financial collateral arrangements. See also paragraph 3 of ECB Opinion CON/ 2004/27 of 4 August 2004 at the request 
of the Belgian Ministry of Finance on a draft law on fina ncial collateral and various ta x provisions in relation to in rem 
collateral arrangements and loans for financial instruments. Both are available on the ECB’s website 
(http://www.ecb.int). 
21  Paragraph 4 of ECB Opinion CON/2004/27. 
22  Articles 13 and 15 of the draft law. 
23  Article 18 of the draft law. 
6 other financial sector professional24. As emphasised by the ECB in previous opinions ‘establishing 
different regimes for the creation and use of the sa me kind of collateral, depending on the type of 
parties involved, implies evaluating the status of th e parties to an arrangement and tends to disrupt 
the operation of collateralised transactions’25. The ECB welcomes the fact that the personal scope 
of the draft law goes beyond the Collateral Directive’ s requirements. In this respect, the fact that 
the concept of ‘commercial or industrial establis hment enjoying professional access to the financial 
market’, includes for example, the finance company of a group or special vehicle enjoying the 
support of a large group26, tends to indicate that the draft law would cover arrangements between 
two unregulated entities27. When implementing the Collateral Directive a comparable approach was 
also followed in Denmark28 and Germany29 with respect to transactions between corporates.  
14. As regards pledges30, the draft law applies, whatever the na ture of the parties to the financial 
collateral arrangements, without restricting the categories of collateral takers or providers31. The 
ECB notes in this respect that the Conseil d’Etat (the Council of State of Luxembourg), in a recent 
opinion32, suggests that, along the lines of the legislation adopted in Belgium33, there should not be 
any limitation in terms of personal scope on other types of financial collateral arrangements such as 
repurchase agreements or transfers of title as colla teral. This would imply that the requirement for 
the arrangements to be concluded with one fi nance professional would be abandoned, except for 
fiduciaries34. In line with its comments on the draf t Belgian law on financial collateral35, the ECB 
would welcome a ‘broad scope a nd uniform approach to financ ial collateral arrangements’. 
Material scope of the Collateral Directive  
15. The draft law applies to pledge contracts concerning assets (‘ avoirs ’)36, operations transferring title 
to assets as collateral37 and repurchase operations concerning all kinds of tangible or intangible 
property38. Assets are defined as financial instruments and claims. While the concept of claims is 
not further defined in the draft law, financial in struments are defined in the broadest sense. The 
                                                           
24  Article 1(12) of the draft law. 
25  Paragraph 4 of ECB Opinion CON/2004/27. 
26  Comments on the articles of the draft law, comment on Article 1. 
27  See in this respect the opinion of the Chambe r of Commerce of Luxembourg, 23 August 2004, p. 2. 
28  L 2003-12-19 nr 1171 Ændring af lov om værdipapirhandel m.v., lov om finansiel virksomhed med flere love ; Act 
No 1171 of 19 December 2003, amending the law on trade in secur ities etc., the law on investment companies, and other 
legal acts. 
29  Gesetz zur Umsetzung der Richtlinie 2002/47/EG vom 6. J uni 2002 über Finanzsicherheiten und zur Änderung des 
Hypothekenbankgesetzes  und anderer Gesetze  (Law transposing Directive 2002/47/EC of 6 June 2002 on financial 
collateral and amending the Mortga ge Banking Law and other Laws) . 
30  Articles 3 to 12 of the draft law. 
31  This is confirmed by Article 18 of the draft law. 
32  Council of State of Luxembourg opinion of  13 April 2005 on Articles 13, 14, 15 and 18. 
33  Law of 15 December 2004. 
34  Opinion of the Council of State of Luxem bourg of 13 April 2005 on Articles 13 and 14, p. 10. 
35  Paragraph 4 of ECB Opinion CON/2004/27. 
36  Article 3 of the draft law. 
37  Article 13 of the draft law. 
38  Article 15 and Article 16(2) of the draft law. 
7 ECB understands that credit claims in the form of  bank loans would be covered by the draft law. 
The ECB welcomes the approach proposed by the au thorities of Luxembourg since it is in line with 
the ECB’s recommendation in its opinion on the pro posed collateral directive, a recommendation 
which the ECB still supports. In particular, the ECB proposed extending the scope to ‘cover all 
types of assets that are eligible for Eurosystem credit operations, including, inter alia , credit claims 
in the form of bank loans’39. To date, some Member States have  chosen to go beyond the Collateral 
Directive’s requirements with regard to the defi nition of the implementing legislation’s material 
scope, as the Collateral Directive refers to the more narrowly defined concepts of ‘financial 
instruments’ and ‘cash’. For example, in France, the material scope of the legislation implementing 
the Collateral Directive is extended to claims, bills  and contracts, and different forms of rights, 
provided that they are assignable40, while in Sweden the scope of the draft legislation transposing 
the Collateral Directive encompasses money loans41. 
Netting provisions  
16. The draft law covers the ‘netting of assets’42 which includes both claims and financial instruments. 
Furthermore, the draft law’s definition of ‘close-out netting provision’43 is very similar to the 
corresponding definition in the Collateral Directive44. Title V of the draft law refers to the concepts 
of ‘close out netting’, ‘netting’, ‘agreements (‘ conventions ’) or bilateral or multilateral netting 
clauses between two or more parties ’, and also  ‘netting agreements’ (‘contrats de compensation’) . 
The ECB notes that other provisions of the law in Luxembourg refer to the concept of ‘ conventions 
de compensation et de novation ’45. The comments on the articles justify the separate reference to 
netting agreements by the fact that netting may be  either (i) a means of realising a financial 
collateral arrangement, in which case it is covered by  this term; or (ii) an independent contract 
between professionals or between a professional and a non-professional, with this latter case 
covered by the use of th e term ‘netting agreement’46. For the sake of clarity, it might be useful to 
define the concept of ‘netting agreements’ in the general provisions of the draft law and to ensure 
consistency in the use of the concepts of ‘ contrat ’ or ‘ convention ’ in relation to netting in both the 
draft law and other relevant provisions of the law in Luxembourg.  
                                                           
39 Paragraph 10 of ECB Opinion CON/2001/13 of 13 June 2001 at the request of the Council of the European Union 
concerning a proposal for a Directive of the European Parlia ment and of the Council on fina ncial collateral agreements 
(OJ C 196, 12.7.2001, p. 10). See also paragraph 6 of ECB Opinion CON/2003/11. 
40  Articles L.431-7-1 and following of the Code Monétaire et Financier  (the French Monetary and Financial Code), as 
amended by Ordinance No 2005-171 of 24 February 2005. 
41  See the Swedish legislative pr oposal on financial collateral ( Regeringens proposition 2004/05:30 om finansiella 
säkerheter ), adopted in April 2005, and the legislative amendments entering into force on 1 May 2005. 
42  Article 18 of the draft law. 
43  Article 1(2) of the draft law. 
44  Article 2(1)(n) of the Collateral Directive. 
45  Article 61-14 of the loi du 5 avril 1993 relative au secteur financier (Law of 5 April 1993 on the financial sector). 
46  Comment on Article 2, p. 15. 
8 Private international law issues   
17. The draft law contains a specific title on private inte rnational law issues which aims in particular to 
transpose the conflict-of-law rule contained in th e Collateral Directive. In this respect, the ECB 
notes that the draft law reproduces almost verbatim the conflict-of-law provisions of the Directive
47. However, the draft law departs slightly fro m the Directive since two paragraphs have 
been added to the list of matters that may arise in relation to book-entry securities collateral that, 
under the Directive, are governed by the law of the country in which the relevant account is maintained
48. These two additional matters concern respectiv ely: (i) the duties of the keeper of the 
relevant account towards a person other than th e holder of the relevant account who claims 
concurrent rights on book-entry securities with this  keeper against the relevant account holder or 
any other person49; and (ii) the extension of the financ ial collateral arrangement for book-entry 
securities to entitlements to dividends, income or othe r distributions, or to redemption, sale or other 
proceeds50. The ECB has, in principle, no objection to these additional matters being subjected to 
the Collateral Directive’s conflict-of-law ru le, although this goes beyond the Directive’s 
requirements. 
18. The comments on the articles of the draft law51 point out that these two matters are directly inspired 
by the Hague Convention52 and that ‘since, according to the timetable currently planned, the 
Convention should be ratified rather rapidly and th us replace the Directive, it appeared useful to 
harmonise the scope of [Luxembourg] legislation with the scope of the Convention’53. The ECB 
stated in its recent opinion on a proposal for a Council decision concerning the signing of the Hague Convention that it ‘would, in view of th e Convention’s possible implications and current 
Community legislation, … welcome a comprehensiv e prior assessment of the Convention’s impact 
in the Community. […] In order not to pre-empt an open-ended outcome, this assessment should be undertaken prior to a discussion of the possible signature of the Convention, considering that the existing Community regime is sufficiently satisfactory and does not require an urgent or compelling signature of the Convention’
54. The European Commission shares this view and 
indicated in a recent Green Paper55 that it would prepare a legal assessment evaluating the concerns 
raised by the end of 2005, enabling it to decide  then whether changes would be needed to the 
abovementioned proposal for a Council decision. 
                                                           
47  Article 23(1) and (2) of the draft law implementing Article 9(1) and (2) of the Collateral Directive. 
48  Article 9(1) of the Collateral Directive. 
49  Article 23(2)(d) of the draft law.  
50  Article 23(2)(f) of the draft law.  
51  Comment on Article 23, p. 22. 
52  Article 2(1)(e) and (g) of the Convention.  
53  Comment on Article 23, p. 22; November 2003. 
54  Paragraph 20 of ECB Opinion CON/2005/ 7 of 17 March 2005 at the request of the Council of the European Union on a 
proposal for a Council decision concerning the signing of the Hague Convention on the Law applicable to certain rights 
in respect of securities held with an intermediary (COM(2003) 783 final), (OJ C 81, 2.4.2005, p. 10).  
55 ‘Green Paper on Financial Services Policy (2005-2010)’, COM(2005) 177, 3 May 2005, p. 10; available on the website 
of the European Commission (http://www.europa.eu.int). 
9 19. The ECB doubts, as suggested in the explanatory te xt to the draft law, that the Hague Convention 
may serve as a basis for interpreting the conflict-o f-law rule contained in the draft law. The essence 
of the Hague Convention’s conflict-of-law regime56 is that the law applicab le to the issues covered 
by the Convention is the law in force in the Stat e that the relevant intermediary and the account 
holder have expressly agreed as governing their account agreement, or the law of the State that their agreement expressly provides as applying to th ese issues. This primary rule is only tempered 
by the ‘reality test’ whereby the Convention also re quires the relevant intermediary to have, at the 
time of the agreement, an office in that State which is engaged in a business or other regular 
activity of maintaining securities accounts. By cont rast, the conflict-of-law rule proposed by the 
draft law refers to the law of the country in wh ich the relevant account is located. This location-
based conflict-of-law rule is inconsistent with the Hague Convention’s conflict-of-law rule, which 
is primarily based on the freedom of contract of the relevant intermediary and the account holder, subject only to a relevant office requirement in order to avoid entirely arbitrary choices. If the 
Hague Convention were to be ratified by the Co mmunity, it would not therefore be possible to 
apply the conflict-of-law rule established by th e draft law in the light of the Convention. 
20. This opinion will be published on the ECB’s website. 
  Done at Frankfurt am Main, 25 May 2005. 
 
[signed] 
 
The President of the ECB 
Jean-Claude TRICHET 
                                                           
56  Article 4(1) of the Hague Convention.