CONTEMPORARY BANKING AND CONFLICT OF LAWS IN SECURITIES DEPOSITORIES

Abstract

This research paper analyzes the impact of contemporary banking and holding systems for securities on the governing principles of private international law. The central thesis posits that the abandonment of physical paper certificates and the retention of securities in the form of dematerialized book-entries through a multi-tiered chain of intermediary banks namely, the emergence of the Indirect Holding System has rendered traditional principles such as the law of the place where the property is situated (lex situs) practically inapplicable. The study provides a comparative analysis of the legal constructs governing ownership of intermediated securities across major jurisdictions, including the British trust model, the "security entitlement" concept under Article 8 of the United States Uniform Commercial Code (UCC), and the co-ownership systems of continental Europe, highlighting the fundamental difficulties of achieving cross-border interoperability among them. Focusing on the cross-border insolvency of an intermediary bank, the paper analyzes the most acute manifestations of conflict between these models, examining priority of claims, local asset protection (ring-fencing), and the tension between universality and territoriality principles. Among international reform mechanisms, the paper comprehensively details the Place of the Relevant Intermediary Approach (PRIMA) and the Hague Securities Convention, offering a critical commentary on the divergence of positions between the United States and the European Union. In conclusion, the author emphasizes the critical necessity of developing a new paradigm in private international law within the context of tokenized assets and distributed ledger technology.