учебный год 2023 / Haentjens, Harmonisation Of Securities Law. Custody and Transfer of Securities in European Private Law

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dematerialised securities, but also in the case of immobilised securities, the accountholder – intermediary relationship is most often initiated by the opening of a securities account instead of a physical delivery. Yet it has been argued that the opening of an account should be deemed a deposit in the sense of Article 1918.112 Furthermore, Article 1917 BW requires custody to be without payment to the custodian for its service, which is clearly not the case in most of securities custody agreements. Also outside the context of securities custody however, this provision has been overruled by both statutory law and case law.113

A classification of the accountholder – intermediary relationship as depositum irregulare would respond to most of the objections just discussed. First, provisions such as Articles 1918 and 1919 BW are unknown to depositum irregulare as this is not a statutorily-regulated contract. Second, a custodian is not obliged to return the deposited assets in specie under a contract of depositum irregulare,114 which accords with the practice of fungible securities custody. Under a contract of depositum irregulare however, depositors are unable to revindicate their assets115 and are left with a mere contractual claim against their custodian.116 Moreover, it has been argued that under a contract of depositum irregulare, a custodian acquirers full power of disposal over the deposited assets.117 Therefore, depositum irregulare does not seem to be appropriate as a characterisation of securities custody since both in the instance of immobilised and of dematerialised securities custody, accountholders enjoy a right of co-ownership which

provides them with proprietary protection and denies their custodian power of disposal.118

The additional contract of mandate119 regards the custodian’s obligation to perform certain administrative tasks. The performance of some of these tasks requires the accountholder’s explicit consent or assignment, while others are

112DU LAING (2001), 339 and CERFONTAINE (2004), 486-487.

113Cf. Article 1928(2) and see, e.g., Cas. 1re civ., 26 September 1940, Pas. 1940, III, 228. See also CERFONTAINE (2004), 481 and 487-488.

114PEETERS & VAN DER VORST (2001), 453-454 and SAGAERT (2003), 400 et seq.

115This has led some authors to qualify the accountholder – custodian relationship as verbruikleen (loan for consumption). Contra SAGAERT (2003), 392. Verbruikleen is the common characterisation of the deposit of money and also denies the depositor a right of revendication; DU LAING (2001), 263-265.

116This claim is a strong one, as depositum irregulare custodians are also under a strict obligation to return the assets, i.e. these custodians cannot exonerate liability even on the grounds of force majeure; DU LAING (2001), 266.

117Contra PEETERS & VAN DER VORST (2001), 453; SAGAERT (2003), 391 and E. HUYGHE in his annotation of Hof van Beroep te Antwerpen, 20 August 1990, T.R.V. 1990, 544-545.

118On the other hand, the fact that statutory provisions are required to grant such proprietary protection could be used as an argument for the position that in the absence of such provisions, depositors would not be able to revindicate, which indicates a depositum irregulare.

119Cf. DU LAING (2001), 337-338 and CERFONTAINE (2004), 482 and 484.

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performed on the basis of an implicit mandate. The custodian’s obligation to receive and pass on the proceeds of the securities in his custody to his clients would be an example of the latter category.

The precise scope of the additional contract of mandate however, is a matter of debate.120 It is unclear, for instance, whether and to what extent it includes an obligation for the custodian to provide its clients with information and advice on securities management.121 It is generally acknowledged on the other hand, that it includes an obligation for the custodian to enable its clients to perform both the mandatory and voluntary corporate actions connected with the securities in its custody.122 Further, it is uncontested that the custodian must cooperate in the settlement of securities transactions concluded by his clients. Some authors have considered the custodian’s administrative tasks to be more important than the custody of securities itself and have therefore characterised the accountholder – custodian relationship as a rekening–courant agreement123 or as an asset management agreement.124 However, these characterisations have not found general support.

In conclusion, a classification of the accountholder – custodian relationship with traditional concepts appears highly problematical, especially with regard to fully dematerialised securities. Core elements of both depositum regulare, depositum irregulare and mandate seem to be present in the custody of fungible securities.

5.3.6 Nature of accountholder interests

Both in the case of dematerialised and immobilised securities, Belgian accountholders enjoy a right of co-ownership as to a notional pool of securities to protect them against their immediate intermediary’s insolvency. KB no. 62 Article 2(3) expresses this co-ownership right as follows: ‘a right of co-ownership, which is an uncorporeal right, which is enjoyed by the collective depositors upon fungible deposit with the CSD or its participants as to the pool of similar securities deposited with them.’125 Thus, this coownership right is enjoyed as to the pool of securities maintained by their immediate intermediary, but also to the latter’s accounts with the CSD, other intermediaries, to the CSD’s accounts with other CSDs and the issuer, and to

120See, e.g., VAN RYN & HEENEN (1988), 553 and DU LAING (2001), 344 et seq.

121DU LAING (2001), 348-351.

122BODDAERT (2004), 120.

123VAN RYN & HEENEN (1988), 552. Cf. also DU LAING (2001), 361.

124See CERFONTAINE (2004), 483-484.

125Translation by the author. For dematerialised securities, cf. the almost identical Article 468(5) W. Venn.

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the securities physically held by the CSD’s sub-custodian(s).126 In other words, Belgian investors enjoy a proprietary right as to the aggregate number of securities of the same kind that are held by or via their immediate intermediary.127

Where general private law requires the individualisation of assets for any proprietary right to be enforced against these assets,128 the notional pool of securities, i.e. the aggregate number of securities held through intermediaries, is considered to be a sufficiently individualised asset in the context of an accountholder’s right of co-ownership.129 Moreover, since the aggregate number of securities held through the custody chain is considered as one asset for the purpose of an accountholder’s property rights, the number of intermediaries interposed between the issuer and ultimate investor does not affect the latter’s rights. As a consequence, Belgian investors enjoy their rights against their immediate intermediary regardless of where the actual securities are located.130

As accountholders enjoy a right of co-ownership, their securities do not become part of the CSD’s or the participants’ estate.131 More specifically, an accountholder’s right of co-ownership refers to the following rights:132 a) a right of disposal as to the balance of his securities account, a right which includes the right to transfer, either outright or by way of security, the right to pledge and to grant any third party a right of usufruct;133 b) a right of revendication of equivalent securities in the case of the account provider’s insolvency, i.e. a right of retrieval of securities of the same kind and number as deposited. In the case of bearer securities, revendication is perfected by the (physical) delivery of the securities out of the custody system, and it is perfected by a transfer to another securities account in the case of dematerialised securities. c) a right to enjoy the corporate rights that are attached to the securities on the accountholder’s balance.

Together with the rights that have been discussed in the previous section, an accountholder’s co-ownership represents the combination of rights which an accountholder enjoys against his immediate intermediary. As mentioned before, these rights must be sharply distinguished from an accountholder’s

126Cf. BODDAERT (2004), 103-104 and 222-223.

127Cf. TISON (1996), 254.

128See, e.g., SAGAERT (2003), 380-381.

129VAN RYN & HEENEN (1981), 148, DU LAING (2001), 359. Cf. SAGAERT (2003), 398 and 402.

130Even if they are located abroad; see infra, s. 2.6.

131SAGAERT (2003), 402. As a consequence, securities accounts have been compared to a kwaliteitsrekening (an account that does not form part of the accountholder’s estate); DIRIX (1998), 10-11, SERVAES (2000), 521, n.28 and PEETERS & VAN DER VORST (2001), 455.

132See BODDAERT (2004), 104-105 and 220-221.

133For an extensive discussion of usufruct of fungible securities, see BODDAERT (2004), 113-

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rights to the underlying securities.134 This distinction becomes apparent when considering that in principle, the accountholder’s rights (including his right of co-ownership) may be enforced only against the accountholder’s immediate intermediary. Solely in the situation of the immediate intermediary’s insolvency can it be said to work erga omnes.135 Furthermore, the accountholder’s rights against his intermediary are not affected by the actual location of the securities even if they are located abroad,136 since the notional pool of securities to which accountholders may enforce their right of co-ownership is deemed to be located with the immediate intermediary and not with the ‘actual’ location of the securities.137

Therefore, an accountholder’s right of co-ownership is fundamentally different from any proprietary right under general private law, in that it is ordinarily limited to the accountholder – intermediary relationship and that it may have an intangible asset as an object. Thus, an accountholder’s proprietary right must be considered to be a sui generis right.138

5.3.7 Intermediary insolvency and the treatment of shortfalls

As discussed in the previous section, accountholders enjoy a right of coownership. This right can be enforced in their immediate intermediary’s insolvency.139 As a consequence, accountholders’ assets are not available to the intermediary’s creditors. This also applies to the securities’ proceeds such as interests and dividends, which are paid by the issuer to the CSD and subsequently passed on to the participants and their clients.140

Although as a general rule, accountholders may enforce their rights only against their immediate intermediary,141 they may claim revendication of their securities also against upper-tier intermediaries and other intermediaries with whom the immediate intermediary maintains securities

134See, extensively SERVAES (2000), 522-523. See also SCHRANS & STEENNOT (2003), 272 and BODDAERT (2004), 84 and 104. Cf. GUYNN (1996), 43.

135See infra, s. 2.3.7.

136KB no. 62 Article 4. Cf. also infra, s. 2.6.

137SERVAES (2000), 523.

138Cf. PEETERS & VAN DER VORST (2001), 454 and 456.

139Cf. Article 471(5) W. Venn. and see BERNASCONI, 2000, 22, nt.83; GUYNN (1996), 43-44 and TISON (1996), 254.

140KB no. 62 Article 13(2) and cf. BODDAERT (2004), 232.

141KB no. 62 Article 13(1) for immobilised securities and the Act of 2 January 1991 Article 11(1) and Article 471(1) W. Venn. for dematerialised securities. KB no. 62 Article 12 provides the same rules in the case of the CSD’s insolvency; where KB no. 62 Article 13 is mentioned in the following, corresponding paragraphs of Article 12 are also meant to be included.

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accounts if the immediate intermediary becomes insolvent.142 Only then, the accountholder’s property right is ‘traced’ through the chain of custody. KB no. 62 Article 13(5) and Article 471(4) W. Venn. must be interpreted in this light too; these provisions grant accountholders that have used an agent to maintain a securities account with a participant the right to enforce their right of ownership directly against this participant, should the agent become insolvent, even if the account is not registered in the ultimate accountholder’s name. In other words, investors holding securities accounts with a non-participant also enjoy proprietary protection in the case of this non-participant’s insolvency, provided the non-participant holds an account with a participant. Although these investors are beneficial owners and not co-owners in the sense of, e.g. KB no. 62, they enjoy a similar revendication right.143 This may be considered remarkable for a civil law country that is unfamiliar with the concept of trust.

Should a deficit occur when all accountholders try to revendicate their assets, the insolvent intermediary’s own securities are first used to cover this deficit. In legal literature, some controversy exists as to whether this entitlement of the accountholders to the insolvent intermediary’s own assets ranks superior to the intermediary’s creditors who hold a proprietary security right in the same assets.144 But in practice, pledgees invariably rank higher than the insolvent intermediary’s clients, because creditors that have bona fide obtained a security interest are not only protected as such against competing claims of third parties,145 but may also assert a right of retention on the collateralised securities against the debtor/intermediary until their claim has been satisfied. In the case of a remaining deficit, this deficit is allocated pro rata, i.e. in proportion to the accountholder’s entitlements.146

142KB no. 62 Article 13(2) for immobilised securities and the Act of 2 January 1991 Article 9 and Article 471(2) W. Venn. for dematerialised securities.

143The sole difference would be that these investors may not revendicate directly against the CSD; BODDAERT (2004), 228-229.

144See TISON (1996), 255 and SUNT (1996), 457. Cf. also BODDAERT (2004), 223.

145Act of 2 January 1991 Article 7(3) and Article 470(2) W. Venn. for dematerialised securities, and KB no. 62 Article 7(1)(2) for immobilised securities.

146KB no. 62 Articles 13(3) and 13(4) for immobilised securities and the Act of 2 January 1991 Article 8 and Articles 471(3) and 471(4) W. Venn. for dematerialised securities. As an additional measure of investor protection, the Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investment-protection schemes (OJ L 84/22), implemented as Act of 17 December 1998, requires that investors be compensated for their losses to the amount of (at least) € 20.000. To that purpose, the said implementation Act creates a special guarantee fund.

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5.3.8Intermediary preference/statutory lien

Under Belgian law, intermediaries may obtain a proprietary preference over their clients’ assets and this is created by law. The enforcement of this preference or statutory lien is identical to the enforcement of a pledge over book-entry securities, including the right of the security taker to enforce his rights without judicial intervention and his right of appropriation and subsequent netting.147

A distinction is made between the statutory lien of intermediaries over their clients’ accounts and such lien of a settlement or clearing institution over their participants’ accounts. The latter lien is created over a participant’s omnibus account with the CSD to secure all claims the CSD might have against this participant, provided that these claims have originated in the context of clearing and settlement; Act of 2 August 2002 Article 31(2). The CSD’s lien concerns the participants’ own assets, but may also concern participants’ clients’ assets. These clients must have agreed to this and an intermediary acting without such consent is liable to charged with a criminal offence. It can be questioned, however, to what extent this rule really protects the client; if the participant acts without consent but has the CSD no attributable knowledge of this fact, i.e. if it acted in good faith, the CSD’s actions cannot be challenged by the deprived clients; Act of 2 August 2002 Article 31(5).148

The preference of intermediaries over their clients’ assets is intended to protect the intermediary against their clients’ insolvency, but may also “remind clients of the risks attached to securities transactions”.149 In contrast to the CSD’s preference, the intermediaries’ lien is more limited in scope as it applies only to securities that are held by or transferred to the intermediary to secure the settlement of transactions for their clients; Act of 2 August 2002 Article 31(1).

5.4 SECURITIES TRANSFERS

5.4.1 Introduction

As a matter of principle, general private law rules also apply to the transfer of ownership of securities. Theoretically, ownership of securities is therefore

147Act of 2 August 2002 Articles 31(4)(1) and 31(4)(2). On the history of these provisions, see DEVOS (2000), 538.

148The Explanatory Memorandum to the draft Act of 2 August 2002 likened this protection of an actor in good faith to similar rules of general private law codified in Articles 2279 and 2280 BW, Doc 50 1842 and 1843, 72.

149Explanatory Memorandum to the draft Act of 2 August 2002, Doc 50 1842 and 1843, 69.

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transferred solo consensu in the case of a sale, i.e. by mere agreement between the parties; Articles 1583 and 1138 BW. But, as will be shown in the following sections, how a securities transfer is evidenced and when it takes proprietary effect, i.e. when it becomes effective against third parties, is usually determined by more specific rules, which are not always found in, or seem consistent with, the civil code.

Ownership and thus any transfer of directly held effecten op naam (registered securities), for instance, is ultimately evidenced by registration in the issuer’s register and some other, technical formalities connected therewith; Articles 250, 365 and 504 W. Venn.150 But the effectiveness against third parties of a transfer of directly held registered securities is governed by the rules that govern the assignment of claims; Article 1690 BW. This Article provides that an assignment becomes effective against all third parties except the debtor by the agreement to transfer (solo consensu). It can be asserted against the debtor (in the case of registered securities: the issuer) when the latter has been informed of the assignment (e.g. through registration in the issuer’s register) or when he has acknowledged it.151 A transfer of directly held effecten aan toonder (bearer securities), on the other hand, is evidenced and made effective against third parties through physical delivery, as Article 2279 BW deems a possessor of a movable asset to be the owner of that asset; Article 504 W. Venn.

5.4.2 Moment of transfer

Analogous to that provision on directly held bearer securities, it may be inferred from KB no. 62 Article 6(3) that a credit entry in a transferee’s securities account evidences and renders effective a transfer of immobilised bearer securities. Similarly, a transfer of dematerialised securities is both evidenced and made effective against third parties by a credit entry in the transferee’s account.152 Moreover, dematerialised securities can only be transferred this way; Article 468(2) W. Venn. and the Act of 2 January 1991 Article 6(1).

However, it has also been supposed that dematerialised securities are transferred according to the rules of Article 1690 BW on the assignment of claims, but this view is not generally accepted. First, an accountholder’s entitlement to dematerialised securities classifies as a proprietary (be it incorporeal) right and rules that govern the assignment of claims are

150On these provisions and their loose application, see LAGA & LIETAER (2001), 476-477.

151Cf. TISON (1996), 231, n.9.

152This rule has been inspired by general rules on money payments by book-entry: SCHRANS & STEENNOT (2003), 296. Cf. also, e.g., TISON (1996), 231 and 241 and SUNT (1996), 457-

458.But see, e.g. PEETERS & VAN DER VORST (2001), 451.

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therefore not applicable.153 Moreover, if a transfer of dematerialised securities would be perfected and made effective against third parties by agreement alone plus notification to the issuer, a highly impractical discrepancy between balances of securities accounts and legal ownership would be created.154

A credit entry in a transferee’s securities account thus evidences and renders effective a transfer of both immobilised and dematerialised securities, but the civil code determines that a sale of fungible assets only takes proprietary effect, i.e. is effective against third parties, when the assets are made sufficiently ascertainable; Article 1585 BW.155 In other words, certainty of subject-matter determines the moment of transfer, and it has been argued that in the case of a sale of fungibles, such certainty is only obtained the moment when the fungibles have been delivered, i.e. credited to the transferee’s securities account.156 The more generally accepted view however, seems to be that a sufficient degree of certainty is reached once the destination of the securities has been determined. From that moment onwards, the category and number, as well as the source and destination of the securities to be transferred can be known,157 which is considered to have occurred after clearing by the CCP/CSD.158

Thus, a discrepancy can be discerned between specific rules of securities law, prescribing that the evidence and effectiveness of a securities transfer are determined by a credit entry in the transferee’s account, and general private law, which is generally interpreted so as to imply that fungible securities are transferred when cleared by the CCP or CSD.

5.4.3 Annulment and finality

As concluded previously,159 a book-entry in a securities account represents only a challengeable evidence of title. Prior to modification by the Act of 14 December 2005, even bona fide accountholders could therefore be

153See SCHRANS & STEENNOT (2003), 295, n.422. Cf. also supra, s. 2.3.6.

154TISON (1996), 243.

155But this provision does not apply when fungible assets are (to be) transferred en bloc, i.e. without individualisation. When securities, for example, are made subject to a donation or a

bequest, the solo consensu rule again applies; Article 1586 BW. See, more extensively on the problems that arise when the general private law rules on donation are applied to book-entry

securities, TISON (1996), 243-248 and SUNT (1996), 459.

156That would be analogous to the current law of money payments by book-entry; see, e.g. Hof van Beroep te Antwerpen (Antwerp Court of Appeal), 17 May 1984, R.W. 1984-1985,

157BODDAERT (2004), 106.

158See TISON (1996), 241-242 and SCHRANS & STEENNOT (2003), 116-117.

159S. 5.3.2.

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challenged by veri domini that were dispossessed by fraud or administrative mistake. The Act of 2 January 1991 Article 5 compensated for this lack of protection in a specific situation: if participants who are not allowed to engage in transactions with their clients’ assets do transfer these assets (either outright or as collateral), the acquirers of these assets in good faith cannot be successfully challenged by the deprived clients. Strangely enough, the Act of 2 January 1991 applied to certain dematerialised government bonds only while no such rule had been codified for all other dematerialised securities in the W. Venn.160

All acquirers of KB no. 62 securities on the other hand, were protected against competing claims that concern stolen or lost certificates, provided that no dispossession of these securities had been filed prior to their deposit into the KB no. 62 system.161 To solve this discrepancy, and to protect all bona fide transferees, the Act of 14 December 2005 extended the scope of Articles 2279 and 2280 BW, so that bona fide holders of entitlements to immobilised and dematerialised securities are now all protected against competing claims of third parties.162

However, the rules of general insolvency law may also require the reversal of securities transactions if executed after a declaration of bankruptcy. The implementation of the EU Settlement Finality Directive, however, ensured the finality of the netting of securities transfers against possible challenges by insolvency administrators.163 Netting and settlement of securities transactions, as well as orders thereto, are now final if executed or registered in the system before insolvency or in the absence of knowledge of a participant’s insolvency by the settlement system; Act of 28 April 1999 Articles 3 and 4.164 Furthermore, the Act of 28 April 1999 Article 6 derogates from the general rule of Belgian insolvency law that insolvency proceedings have retroactive effect to the beginning of the day on which the bankruptcy has been declared (the ‘zero-hour rule’).165 It provides that all transfer orders prior to a bankruptcy declaration may not be revoked nor may any consequent payment, delivery, netting or any other legal act in the process of settlement be reversed. But prior legislation already exempted

160Although the liability of the intermediaries remains unaffected; TISON (1996), 250-251 and

161Act of 24 July 1921 and KB no. 62 Articles 9 and 10. See supra, s. 2.3.3.

162Through the introduction of Article 475bis W. Venn. (dematerialised securities generally), KB no. 62 Article 19 (immobilised securities) and the Act of 2 January 1991 Article 13bis (certain categories of dematerialised securities).

163See DEVOS (2000), 546. Prior to the implementation of the SFD however, orders could already be made irrevocable by agreement, by the general terms of the settlement system and by the rules of the intermediaries; DEVOS (2000), 533.

164The Act of 28 April 1999 only applies to the participants to a (settlement) system. For nonparticipants, similar rules are provided by the Act of 22 March 1993 Article 157; SCHRANS & STEENNOT (2003), 394 and 406-414. On the latter provision, see DEVOS (2000), 534 et seq.

165Act of 8 August 1997 Articles 17 et seq. (Loi sur les Faillites/Faillissementswet).

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transfers by or to credit and clearing institutions before insolvency or in the absence of knowledge of that institution’s insolvency from the ‘zero-hour’ rule; Act of 22 March 1993 Article 157(1).

5.5 CREATION AND ENFORCEMENT OF SECURITY RIGHTS

5.5.1 Introduction

As a civil law country, Belgium recognises a limited number of security rights, of which only burgerlijk pand (civil pledge), handelspand (commercial pledge), and, to some extent, the transfer of ownership by way of security are relevant in this context. These security rights will be discussed in the following sections, where it will be seen that the creation of those rights when vested in book-entry securities, i.e. securities immobilised under KB no. 62 and dematerialised securities, is governed by special rules. Moreover, the enforcement of security rights on book-entry securities derogates from general private law rules.

5.5.2 Transfer of title

Some unclarity exists as to whether fiduciary transfers are allowed under Belgian law. From an important decision of the Belgian Cour de Cassation/Hof van Cassatie (Supreme Court), it may be inferred that, in principle, fiduciary transfers are forbidden although specific statutory provisions may derogate from this. The scope of the decision however, is a matter of debate.166 On the other hand, a creditor/pledgee is clearly forbidden from appropriating pledged assets in the case of his debtor’s/pledgor’s default (known as pactum commissorium). Article 2078(2) BW and Article 1 Title VI of Book 1 Code de Commerce/Wetboek van Koophandel

(Commercial Code) render all such agreements void.

The Act of 2 January 1991 already exempted securities transfers of ownership by way of security, such as intended in repurchase agreements and the like, from the fiduciary ban; Articles 23 and 25bis(1).167 These provisions have now been transferred to the implementation Act of the EU Financial Collateral Directive. The latter Act explicitly excludes all Civil Code provisions as well as all Commercial Code provisions that concern security interests from applicability to transfers of ownership of financial

166Cass. 1re civ. 17 October 1996, 2 Revue de la Banque/Bank en Financiewezen 1997, 114 and annotation by Peeters. See also PEETERS & VAN DER VORST (2001), 430.

167See DEVOS (2000), 538-540. See also SCHRANS & STEENNOT (2003), 280, n.351.

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