- •Contents
- •Preface
- •Table of legislation
- •Table of cases
- •Introduction
- •1.1 Convergence
- •1.2 Path-dependence
- •1.2.1 Politics
- •1.2.2 Economics
- •1.2.3 Culture
- •1.2.4 Social and commercial norms
- •1.2.5 Legal mentalities
- •1.3 Functional convergence
- •1.4 Summary of the analysis
- •2 Paper transfers
- •2.1 The historic starting point
- •2.2 Law and equity
- •2.3 Legal title and registration
- •2.4 Equitable title
- •2.4.1 Equity and transfers of registered securities
- •2.4.2 Legal nature of an equitable (beneficial) interest
- •2.4.3 Acquisition of an equitable (beneficial) interest
- •2.4.4 Equitable title and specific performance
- •2.4.4.1 Enforceable contract
- •2.4.4.2 Claimant must be ready and willing to perform
- •2.4.4.3 Specific or ascertained assets
- •2.4.4.4 Damages are an inadequate remedy
- •2.4.4.5 Conclusions
- •2.4.5 Equitable title on appropriation of securities and payment of purchase price
- •2.4.6 Equitable title on delivery of transfer documents
- •2.4.7 Express trusts
- •2.4.8 Conclusions
- •2.5 Summary of the analysis
- •3 Dematerialisation
- •3.1 Talisman
- •3.2 The need for reform
- •3.3 CREST
- •3.3.1 Introduction
- •3.3.2 Legal title
- •3.3.3 Equitable title
- •3.3.4 Conclusions
- •3.4 The 2001 reforms
- •3.4.1 Introduction
- •3.4.2.1 Effect of entries on registers: shares
- •3.4.2.2 Effect of entries on registers: public sector securities, corporate securities other than shares
- •3.4.2.3 Conclusions
- •3.4.3 Legal title
- •3.4.4 Equitable title
- •3.4.5 Conclusions
- •3.5 Summary of the analysis
- •4 Impact on the institutional framework
- •5 Defective issues
- •5.1 Introduction
- •5.2 Novation
- •5.2.1 Novation by operation of law
- •5.2.2 Novation by contract
- •5.2.3 Novation as a fiction
- •5.3 Defective issues and estoppel
- •5.4 Securities as negotiable rights
- •5.5 Summary of the analysis
- •6 Unauthorised transfers
- •6.1 Introduction
- •6.2 Certificated securities and estoppel
- •6.2.1 Restoration of the legal owner’s name on the register
- •6.2.2 Liability of the issuer
- •6.2.3 Liability of the person who instructed the issuer to amend the register
- •6.2.4 Conclusions
- •6.3 Uncertificated securities and estoppel
- •6.3.1 Restoration of the legal owner’s name on the register
- •6.3.2 CRESTCo’s liability for forged instructions
- •6.3.3 Liability of the issuer
- •6.3.4 Securities as negotiable rights
- •6.3.5 Conclusions
- •6.4 Summary of the analysis
- •7 Indirect holdings
- •7.1 Introduction
- •7.2 Certainty of intention
- •7.3 Certainty of subject matter
- •7.3.1 Tangible goods
- •7.3.2 Registered securities
- •7.3.3 Analysis
- •7.3.3.1 Academic commentators
- •7.3.3.2 US authority
- •7.3.3.3 Policy considerations
- •7.3.3.4 Law reform
- •7.3.4 Conclusions
- •7.4 Summary of the analysis
- •8 Conclusions on English law
- •9 The historic starting point
- •9.1 Securities as intangibles
- •9.2 Shortcomings of the law of assignment
- •9.3 Theories overcoming the law of assignment
- •9.3.1 Nature of the instrument
- •9.3.2 Contract
- •9.3.3 Transfer by novation
- •9.3.4 Conclusions
- •9.4 Securities as tangibles
- •9.5 Summary of the analysis
- •10 Paper transfers
- •10.1 Transfer of ownership
- •10.1.1 German Law
- •10.1.2 Austrian law
- •10.1.3 Conclusions
- •10.2 Unauthorised transfers
- •10.2.1 Introduction
- •10.2.2 German law
- •10.2.3 Austrian law
- •10.2.4 Conclusions
- •10.3 Defective issues
- •10.3.1 German law
- •10.3.2 Austrian law
- •10.3.3 Conclusions
- •10.4 Summary of the analysis
- •11 Impact on the institutional framework
- •11.1 Indirect holdings
- •11.2 Immobilisation
- •11.3 Global certificates
- •11.4 Government bonds
- •11.5 Summary of the analysis
- •12 Immobilisation and its legal analysis
- •12.1 Genesis of the statutory regime
- •12.1.1 1896 German statute
- •12.1.2 Depotgesetz 1937
- •12.2 Relationship between clients and their intermediary
- •12.3 Co-ownership
- •12.4 Transfer of co-ownership
- •12.4.1 Introduction
- •12.4.2 Depotgesetz
- •12.4.3 German property law
- •12.4.4 Global certificates and Government bonds
- •12.4.5 German Government bonds
- •12.4.6 Austrian law
- •12.4.7 Conclusions
- •12.5 Unauthorised transfers
- •12.5.1 German law
- •12.5.2 Austrian law
- •12.5.3 Conclusions
- •12.6 Defective issues
- •12.7 Summary of the analysis
- •13 Evidence of convergence?
- •16 Legal doctrine and market infrastructure
- •17 Implications for convergence
- •17.1 UNIDROIT draft Convention
- •17.2 EU Legal Certainty Project
- •Select bibliography
- •Index
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buyer to assume that the seller had authority to sell. It is important to note that the prevailing view in both systems is that the rules on the good faith acquisition of title can be applied only because securities are classified as tangible movables; the orthodox view is that if that classification were to change, the buyer would not be protected against adverse claims.
In contrast, English law has yet to find a way in which the rules governing unauthorised transfers certificated transfers can apply to unauthorised transfers of uncertificated transfers.37 There is, however, every reason to believe that the courts will find a solution consistent with the path adopted by English law.
12.6 Defective issues
The conclusion of section 10.3 was that under both German and Austrian law there is a rule that causes the issuer to be liable if she has created bearer certificates that appear to carry certain rights. This amounts to a representation with which the issuer is fixed even if she did not validly issue the certificates. The issuer is liable to a bearer who relied on the certificates and acquired them without knowing that they had not been validly issued. In both jurisdictions, the issuer is liable because the bearer relied upon paper certificates.
Both German and Austrian law encounter difficulties when analysing securities that have been issued defectively and that are transferred through the central depository and the intermediaries attached to them.38 The problem is that transfers through the central depository are effected through book entry; the certificates are kept in a vault and the purchaser does not rely on a representation contained in them when she buys the securities.39 It is nevertheless possible to fix the issuer with a representation. If the issuer provided the central depository with a global certificate or otherwise caused the securities to be transferable through the central depository, this amounts to a
37See section 6.3.
38Interestingly, a similar problem arises in England, where the rules on defective issues developed in relation to certificated securities and where it is yet unclear how these rules apply to uncertificated transfers (chapter 5).
39Meyer-Cording and Drygala, Wertpapierrecht 22; Andreas Zahn and Stephan Kock, ‘Die Emission von unverbrieften Schuldtiteln durch die Europa¨ische Zentralbank’, [1999]
Wertpapier Mitteilungen 1963–1964; Ulrike Meyer-Panhuysen, Die fehlerhafte Kapitalerho¨hung (Ko¨ ln: Dr. Otto Schmidt 2003) 39–41, 53.
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represenation. The issuer is liable to those who purchased securities relying on the fact that the securities were transferable through the current German and Austrian depository system.40
12.7 Summary of the analysis
In this chapter, the German and Austrian rules governing transfers of indirectly held securities have been analysed. Unlike England, which has opted for dematerialising securities transfers, Germany and Austria opted for immobilising them. The relationship between intermediaries and investors is traced in terms of bailment in both German and Austrian law. Investors are considered to be co-owners of the indirectly held securities; they are also considered to hold co-possession of the securities certificates deposited with the central depository. This contrasts with the position adopted by English law, where the relationship of investors holding securities indirectly is governed by the law of trusts.
A co-ownership interest in indirectly held securities is transferred by way of a book entry on the books of the intermediary with which the securities are held. This book entry is legally classified as involving a transfer of possession to the securities certificates from the seller to the buyer.
Purchasers of indirectly held securities are protected against adverse claims arising out of unauthorised transfers by the same rules that protect purchasers of directly held securities in German and Austrian law. Notwithstanding the fact that investors hold a co-ownership interest in a bulk of securities held with a central depository, the buyer in good faith can rely on the rules protecting the purchaser of a tangible against unauthorised transfers. The position in English law is less clear. The rules that govern transfers of certificated securities had not been abolished when uncertificated securities were introduced in England. It is, however, unclear if, and to what extent, the rules that protect purchasers of certificated securities also offer protection to purchasers of uncertificated securities.
In spite of the different doctrinal approach prevailing in England, on the one hand, and in Germany and Austria, on the other, there exists one important similarity. All three jurisdictions have found a way of eliminating paper from the process of transferring securities; at the
40 Micheler, Wertpapierrecht 242–246.
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same time, neither of the jurisdictions has created a new legal regime from scratch to support securities transfers that are effected without the need to move paper certificates. Instead in all three jurisdictions the existing rules governing paper transfers were modified to accommodate paperless transfers. Moreover, the analysis presented in chapters 4 and 11 leads to the conclusion that the legal rules governing paper transfers had significant impact on the institutional setup that was put in place to handle paperless transfers.