Convention of 5 July 2006 on the Law Applicable to Certain Rights in respect of Securities held with an Intermediary

General Detail

General Information

  1. Type: Convention
  2. Date of signature:
  3. Place of signature: The Hague, The Netherlands
  4. Depositary:
  5. Date of entry into force: N/A



Sub category

Conflict of laws



What is it about?

The Convention on the Law Applicable to Certain Rights in respect of Securities held with an Intermediary – adopted in 2002 under the auspices of the Hague Conference on Private International Law – deals with conflict of laws arising from cross-border securities transactions. Securities are defined by the Convention as any shares, bonds or other financial instruments or financial assets (other than cash), or any interest therein. The traditional conflict of laws rule for determining the enforceability of a transfer or pledge of securities is based on the lex rei sitae principle (the validity of the disposition is determined by the law of the place where the securities are located). In order to address the legal and practical problems arising from the application of this approach in the modern context of indirectly held securities transactions, the Convention adopted the “Place of the Relevant Intermediary Approach” (“PRIMA”), which has found favour around the world. The first step to determine the choice of law is to look at the law expressly agreed between the account holder and its direct intermediary to govern the securities account. The choice of law, however, is constrained to the extent that the intermediary must have in the chosen State an office that regularly maintains securities accounts. If the account agreement does not contain such a choice of law clause, but expressly and unambiguously states that the relevant intermediary entered into the account agreement through a particular office, the applicable law is the law of the location of such office, provided that it regularly maintains securities accounts. If this test also provides no answer, the Convention considers, as the ultimate fallback, the law of the place of incorporation or organisation of the relevant intermediary.

Why is it relevant?

The Convention reduces the legal uncertainty as to the law applicable to cross-border securities transactions to the benefit of the financial system as a whole. The Convention sets forth a uniform conflict of laws rule for proprietary aspects of dispositions of securities held through indirect holding systems.

Additional Information


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