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

6 France

Finally, it has been argued that the accountholder – intermediary relationship should be classified as a sui generis contract with ‘most of the characteristics of dépôt’.111 Under this view, the accountholder – intermediary relationship consists of elements of the contracts dépôt, contrat d’entreprise and mandat as just discussed, and, it is submitted, this classification is therefore the most appropriate one.112 Doctrinally, such a sui generis contract that consists of, or is similar to different contrats nommés would be called a contrat atypique (an untypical contract) or a contrat complexe (a complex contract).113

In sum, the classification of the accountholder – intermediary relationship in general private law terms proves to be highly problematical. It is generally agreed, however, that some elements of the contract of dépôt are applicable and that an accessory contract of mandat must be construed.114 But in practice, all classification is avoided by referring to the account provider as conservateur, rather than dépositaire, and to the securities account agreement as conservation.115

6.3.5 Nature of accountholder interests

Already before the dematerialisation, controversy existed in the legal literature on the nature of an investor’s interests in his securities. The dematerialisation, however, did not contribute to the determination of that issue, but rather intensified the debate. As of today, the classification of an accountholder’s interests in the securities he is entitled to, is still highly contested. It is generally agreed, on the other hand, that accountholder interests do not classify as co-ownership rights.116

Scholarly debate has mainly questioned whether accountholder interests are of a proprietary or contractual nature, and persuasive arguments have been brought forward on both sides. First, proprietary rights are generally considered to be effective erga omnes, i.e. can be asserted against all. Accordingly, art. 12 of Decree no. 49-1105 of 4 August 1949 granted investors a right of revendication in the case of their custodian’s insolvency,

111DE VAUPLANE & BORNET (2001), no. 974. Contra HUET (2001), no. 33127. GHOZI in CNCT 1997 Report, 212 calls this special type of dépôt ‘dépôt d’actif financier’ (although he does not seem to accept a qualification as a sui generis contract).

112See DE VAUPLANE & BORNET (2001), no. 974, n.162 for further references.

113A contrat sui generis on the other hand, is a contract to which no elements of any existing contrat nommé (statutory contract) is applicable. A contrat atypique is a contrat innommé, but which has many similarities to a certain contrat nommé, whereas a contrat complexe is a contract which resembles or is a mixture of several contracts. See MALAURIE, AYNES & GAUTIER (2001), nos. 5, 8 and 19.

114BONNEAU & DRUMMOND (2005), no. 232.

115DE VAUPLANE & BORNET (2001), nos. 970 and 968.

116See RIPERT & ROBLOT II (1976), nos. 1764 and MAFFEI (2005), 243. Cf. BERNASCONI (2000), 23.

115

6 France

a right which could not be challenged by any creditor of the insolvent custodian.117 Similarly, the Code monétaire et financier currently provides that an insolvent intermediary’s administrator must transfer all accountholders’ securities to accounts with other intermediaries, but any reference to a ‘right of revendication’ has been omitted.118

Furthermore, it follows from the case law that accountholders take free of all competing claims by third parties, except for cases of an accountholder’s mala fides and vices regarding the securities concerned.119 A credit entry in a securities account thus provides a bona fide transferee/accountholder with a virtually non-challengeable interest, even if the initial entitlement holder has been involuntarily ‘dispossessed’. This strongly resembles arts. 2279 and 2280 C. civ., which provisions protect bona fide transferees in possession of movable tangibles from competing third party claims. Consequently, some authors have argued that a credit entry in a securities account or credit balances classify as movable tangibles, while others have contended that arts. 2279 and 2280 should apply, regardless of the classification.120

Third, the Code monétaire et financier determines that account providers, i.e. intermediaries in the case of titres au porteur and issuers in the case of titres nominatifs, should protect accountholders’ rights of ownership regarding their financial instruments.121 Moreover, under general French private law, ownership involves, more particularly, the rights of usus, fructus and abusus; art. 544 C. civ.122 All of these rights are directly applicable to accountholder interests, as an accountholder is entitled to the collection of dividends and interests, and the enforcement of his corporate rights (fructus), and may also freely use (usus) and dispose of (abusus) his securities.

Yet legal literature has been reluctant to accept that dematerialised securities should be subject to a droit réel (right in rem) like ownership, since general

117 That provision has made some authors qualify the rights of investors as collective ownership, thus following the German example. See RIPERT & ROBLOT (1996), no. 1803.

118Art. L. 431-6 C. mon. fin.

119E.g., Paris, 25 October 1991, Dr. sociétés, 1992, no. 1138, as cited by J.-C. HALLOUIN in his annotation of Cass. com., 18 October 1994, Bull. Joly, December 1994, p. 1296, no. 362 and Cass. com., 22 October 2002, Rev. sociétés, July-September 2003, p. 511. Cf. REYGROBELLET (1999), 309 et seq.

120See BONNEAU & DRUMMOND (2005), no. 91. See MARTIN (1996) and MAFFEI (2005) for the

former position. But see Paris, 5 July 1990, Dr. sociétés, December 1990, 7, no. Q-20, where it was held that ‘article 2279 C. civ. does not apply to dematerialised securities’. Cf. also DROBNIG (2004), 748, REYGROBELLET (1999), 314-315 and PELTIER in CNCT 1997 Report, 171, on the relationship between art. L. 431-2 first paragraph C. mon. fin., which provides that a transfer of securities ‘results from’ the credit entry in the transferee’s account, and art. 2279 C. civ.

121Art. L. 533-7 C. mon. fin.

122BERGEL, BRUSCHI & CIMAMONTI (1999), nos. 47 and 80 et seq.

116

6 France

private law requires rights in rem to have an individualised object.123 It has, on the other hand, been argued that although the securities to which credit balances on securities accounts refer, are indeed fungible and nonindividualisable in abstracto, the securities accounts themselves, as well as securities of the same issue thus separated, are sufficiently individualised to be subject to proprietary rights.124

Second, from the dependency of an accountholder on the account provider’s fulfilment of its obligations, it must be concluded that the rights of the former cannot always be asserted erga omnes. If an accountholder does not separate his own securities from those of his clients, for instance, revendication by the latter in the accountholder’s insolvency becomes virtually impossible.125 Moreover, if not duly informed by the accountholder on corporate actions, its clients cannot exercise their (corporate) rights.

Furthermore, although it has been argued as noted above, that case law indicates that accountholders take free of all competing claims by third parties, except for instances of an accountholder’s mala fides and vices regarding the securities concerned, the cases cited only concerned (successful) challenges by counterparties to a transfer of ownership of securities.126 Accountholder rights have therefore not (yet) been tested in court against third party property claims. Finally, accountholders’ rights are only enforceable against third parties when these rights are recognised as such by an account provider, i.e. when securities are allocated to specific investors by way of a securities account.127 Consequently, credit entries and credit balances in a securities account have been considered to be constitutive elements for the existence of dematerialised securities.128

That position is not generally accepted, but doctrine seems to agree that a (credit balance on) a securities account is a constitutive element for the assertion of an accountholder’s rights vis-à-vis third parties, while it provides challengeable proof vis-à-vis counterparties of a transfer.129 It is submitted that accountholder interests must therefore be classified as a

123See RIPERT & ROBLOT (1996), no. 1795 and AUCKENTHALER (2004), 20 and the references provided there.

124See GHOZI in CNCT 1997 Report, 182 and 208 and BOUÈRE & DE VAUPLANE in CNCT

1997 Report, 260. Cf. REYGROBELLET (1999), 308. Contra AUCKENTHALER (2004), 19.

125Cf. Cass. com., 18 October 1994, Bull. Joly, December 1994, p. 1296, no. 362. But in Cass. com. 5 March 2002, Dalloz, 2002, no. 13, 1139, a revendication claim to fungible securities was sustained.

126See REYGROBELLET (1999), 315 and BONNEAU & DRUMMOND (2005), no. 86 et seq. Cf. infra, s. 6.4.3.

127See, e.g. Paris, 31 October 1991, Bull. Joly, 1992, p. 64, no. 14 and BOUÈRE & DE VAUPLANE in CNCT 1997 Report, 263.

128Accord MAFFEI (2005), 242 et seq. and REYGROBELLET (1999), 314 and the further references provided there. Contra CLÉMENT in CNCT 1997 Report, 246.

129AUCKENTHALER (2004), 21.

117

6 France

combination of both rights in rem and in personam,130 for they can be asserted against third parties, but also depend on the fulfilment of the account provider’s obligations and the latter’s maintenance of its clients’ securities accounts.

6.3.6 Intermediary insolvency and the treatment of shortfalls

General insolvency rules are provided in book VI of the Code de commerce, while specific provisions concerning financial intermediary bankruptcies are have been introduced by, notably, the Act MAF and the Loi de sécurité financière.131 As a general rule of bankruptcy law, all of a debtor’s assets are affected by the declaration of his bankruptcy, but that declaration does not impede creditors’ enforcement of their revendication rights; art. L. 621-16 and L. 621-18 C. com.

However, because of the dematerialisation of all French securities and the consequent absence of physical certificates, accountholders cannot revendicate the securities they are entitled to through physical delivery, should their intermediary become insolvent. Moreover, as general private law requires rights in rem, including the right of revendication, to have an individualised object to be enforceable, fungible assets such as dematerialised securities cannot be subject to revendication.132 Accountholders would therefore be treated as unsecured creditors, but under art. L. 431-6 C. mon. fin., the intermediary’s bankruptcy administrator must transfer all its clients’ securities to accounts with other intermediaries.133 Provided there is separation of the insolvent intermediary’s assets from those of its clients, this rule thus safeguards accountholders from claims by the intermediary’s creditors to the insolvent estate.134

When accountholders prove to be entitled to more securities than the intermediary’s omnibus account with the CSD indicates, a shortfall occurs, because in all instances where accountholder entitlements do not match their account provider’s omnibus account with the CSD, the latter accounts

130 See RIPERT & ROBLOT (1996), no. 1795. Contra MAFFEI (2005), 242, arguing that accountholder interests are solely proprietary in nature.

131Act no. 96-597 of 2 July 1996 and Act no. 2003-706 of 1 August 2003, respectively.

132RIPERT & ROBLOT (1996), no. 1795 and DE VAUPLANE & BORNET (2001), no. 1158. See art. L. 621-122 C. com. for a few exceptions. Moreover, in Cass. com. 5 March 2002, Dalloz, 2002, no. 13, 1139, a revendication claim to fungible securities was expressly sustained. Cf. also supra, s. 6.3.5.

133See also art. L. 213-2 C. mon. fin.

134Art. 332-4 Règlement Général AMF. See, e.g. Paris, 10 December 1999, RD banc. fin., May-June 2000, p. 184, no. 134, where the court held that accountholders could not revendicate because the account provider’s bookkeeping was in disorder.

118

6 France

prevail.135 To cover the resulting deficit, recourse is had first to the intermediary’s own assets, as any deficit is deemed to result from illegal tirage sur la masse.136 Any remaining deficit is distributed pro rata amongst accountholders, i.e. the losses are apportioned between the accountholders in proportion to their entitlements.137 With regard to this deficit, however, accountholders are treated as mere unsecured creditors.138

6.4 SECURITIES TRANSFERS

6.4.1 Introduction

The technical procedures to effectuate a transfer of intermediated securities by book-entry are fairly straight-forward. Titres au porteur are transferred pursuant to a written instruction by the transferor to his intermediary. This intermediary then debits the transferor’s securities account, and passes the instruction on to Euroclear France, which debits the intermediary’s omnibus account and credits the transferee’s intermediary’s omnibus account. That

intermediary, in its turn, credits the transferee’s account, which completes the transfer.139

The procedure is almost the same for titres nominatives administrés, except for the fact that after having debited the transferor’s account, the transferor’s intermediary issues – via the CSD – a bordereau de références nominatives

(book-entry references note) to the issuer of the securities transferred, so that the transferor is de-registered in that issuer’s books.140 After having credited the transferee’s account, the transferee’s intermediary issues a similar note via the CSD to the issuer to have the transferee registered as new owner. After that registration, the issuer confirms the settlement to the intermediaries via the CSD.141

135DE VAUPLANE & BORNET (2001), no. 1159.

136See supra, s. 6.3.4.

137Art. L. 431-6 C. mon. fin. No transfer in the sense of the preceding paragraph can therefore be effectuated before all investors have asserted their claims; see DE VAUPLANE & BORNET (2001), nos. 1162-1163 on the technicalities of that procedure.

138Art. L. 621-43 C. com. See PINIOT in CNCT 1997 Report, 222 and MAFFEI (2005), 246. But as an additional measure of investor protection, a special guarantee fund has been created to compensate investors’ losses up to the amount of € 70.000; arts L. 322-1 through 322-4 C. mon. fin. and Resolution of 29 September 1999, esp. Article 5.

139But when a securities transfer follows a stock exchange transaction, a clearing house is interposed as CCP between the intermediaries and CSD; see Ch. 4.2. Moreover, the transferee’s intermediary usually credits the transferee’s securities account before its omnibus account with Euroclear France has been credited; AUCKENTHALER (2004), 376.

140Art. L. 431-1 C. mon. fin.

141See Euroclear France 2003 Disclosure Framework, p. 22.

119

6 France

The legal aspects of securities transfers by book-entry, on the other hand, are a much debated and complicated matter. In an important decision, the

Chambre commercial de la Cour de Cassation held that a securities transfer should be analysed as common cession (transfer of ownership).142 Under general private law, such a transfer implies that ownership is transferred when the parties consent to the price and object of the sale (solo consensu).143 Under that approach, the credit entry in a transferee’s securities account would make the transfer effective, i.e. enforceable against third parties, but not effectuate the transfer of ownership itself.144 Between agreement and the credit entry in the transferee’s securities account, the transferor would thus not be able to assert his interests against third parties, including the issuer and possibly the transferee’s insolvency administrator. Moreover, he would not be able to re-transfer the assets to which he was entitled, while the transferor’s securities account would refer to securities to which he would no longer be entitled.145

The Chambre civil de la Cour de Cassation, however, has held that dematerialised securities classify as choses de genre (fungible movable tangibles), and that art. 1585 C. civ. requires such assets to be individualised in order to be effectively transferred. It therefore concluded that, contrary to the solo consensu approach of the Chambre commercial of the same court, the ownership of dematerialised securities can only be effectively transferred through individualisation by a credit entry in the transferee’s account.146

6.4.2 Moment of transfer

The situation has been simplified somewhat since the introduction of art. L. 431-2 first paragraph C. mon. fin., which states that in the case of a sale of financial instruments concluded on a regulated stock exchange, ownership ‘results’ from a credit entry in the transferee’s securities account. But the article further provides that the moment of, and the conditions under which that book-entry is effectuated are to be determined by the exchange in

142Cass. com., 22 November 1988, Bull. Joly 1989, p. 84, no. 19. See also Cass. com., 23 November 1993, Dr. sociétés, February 1994, p. 18, no. 41.

143Art. 1591 C. civ. and art. 1583 C. civ. Art. 1583 C. civ. reads: ‘between parties, [sale] is perfected and ownership is legally acquired by the buyer vis-à-vis the seller the moment agreement has been reached on the property and the price (…)’. See also Cass. 1re civ., 16 July 1992, Banque et Droit, January-February 1993, p. 22, where a transfer of ownership was nullified because of the absence of a price on the transfer order.

144Cf. PINIOT in CNCT 1997 Report, 217.

145Cf. BONNEAU & DRUMMOND (2005), no. 662.

146Cass. 1re civ., 6 March 1996, RD bancaire et bourse, November-December 1997, p. 238, no. 1. See also DE VAUPLANE & BORNET (2001), no. 48 and GERMAIN & FRISON-ROCHE, annotation of Cass. 1re civ., 6 March 1996, RD bancaire et bourse, November-December 1997, p. 238, no. 1.

120

6 France

question, i.e. by the rules of Euronext. Under the current rules of Euronext, a transferee’s securities account is credited throughout the trading day (settlement under the Relit Grande Vitesse system), or on T+1, i.e. the morning after the day of transaction (settlement under the Relit system), although parties may agree otherwise.147 The omnibus account of the transferee’s intermediary with the CSD, however, is credited on T+3, i.e. three days after the transaction, and the transferee’s securities account is therefore credited before the settlement has been fully completed.148

However, art. L. 431-2 first paragraph C. mon. fin. is applicable only to securities listed at a regulated stock exchange, and if securities are neither admitted to the CSD’s system of custody, nor traded on a regulated stock exchange, the transfer is governed by art. L. 228-1 ninth paragraph C. com., which fortunately also provides that a transferee’s ownership ‘results’ from a credit entry in his account.149

A transfer of securities admitted to the CSD’s system of custody, which does not result from a regulated stock exchange transaction, is subject to still other rules. Pursuant to art. L. 431-2 fourth paragraph C. mon. fin., a transfer of ownership of dematerialised securities that results from a so-called over the counter (‘OTC’) transaction, takes place the moment the transfer has become final or irrevocable under the rules of the CSD’s settlement system. Whereas most transfers become irrevocable at the end of the trading day when the Banque de France has controlled the money leg of the transaction, for some designated transactions, including OTC transactions, finality is ensured during ‘real time’, i.e. throughout the trading day.150

Ownership of securities admitted to the CSD’s settlement system is thus transferred during ‘real time’ when the transfer results from an OTC transaction, but the transferee only acquires ownership the moment when the money leg of the transaction has been settled and the account of the transferee’s intermediary with Euroclear France has been credited. Prior to

147DE VAUPLANE & BORNET (2001), no. 73 and 77. Since 19 December 2001, Relit and Relit Grande Vitesse ‘merged’ into RGV2. RGV2 now comprises the two different ways of settlement; MINOR & MAFFEI in VEREECKEN & NIJENHUIS (2003), 166.

148AUCKENTHALER (2004), 26.

149L. 228-1 ninth paragraph C. com. was enacted by Ordinance no. 2004-604 of 24 June 2004. Prior to this ordinance, general rules of private law applied to these OTC transactions, and ownership was transferred solo consensu; art. 1583 C. civ. However, these transfers could be asserted against third parties, including the issuer, only after a credit entry was made in the transferee’s account; art. 2 of Decree no. 83-359 of 2 May 1983. Ordinance no. 2004-604 of

24June 2004 sought to unify the transfer of ownership regime; COURET & LE NABASQUE (2004), 188. Cf. also MAFFEI (2005), 240-241.

150MINOR & MAFFEI in VEREECKEN & NIJENHUIS (2003), 166.

121

6 France

that moment, the intermediary in whose name the securities are then credited is deemed to be the owner thereof.151

In sum, as a derogation from the solo consensu rule of general private law (art. 1583 C. civ.), the ownership of dematerialised securities is most often transferred when the credit entry in the transferee’s account has been made. Thus, the effectiveness or enforceability of the transfer currently usually coincides with the transfer of ownership.152 But in OTC transactions settled trough the CSD’s custody system, ownership is transferred to the transferee when the money leg of the transaction has been settled. The contractual aspects of the securities transaction, however, continue to be governed by

general rules of private law, such as the rules that concern the formation of the contract.153

6.4.3 Annulment and finality

Although not entirely certain, it seems unlikely, as has been noted above, that third parties can successfully challenge a transfer of dematerialised securities and a subsequent credit entry in the transferee’s securities account, unless the transferee’s mala fides or vices regarding the securities concerned could be proven.154 But the parties to a sales agreement may challenge the transfer and the credit entry in the transferee’s securities account on other grounds also. On the other hand, a successful challenge assumes that the transferor has been able to identify the transferee, which is not always likely in today’s anonymised stock markets.155

Other than on the general private law grounds just discussed, securities transfers may be reversed for reasons specified by the Code monétaire et financier. More specifically, art. L. 431-2 second paragraph C. mon. fin. provides that a securities transfer is de iure annulled ‘if the securities concerned are not credited to the account of the transferee’s intermediary with the CSD at the moment and under the conditions that credit entry was due under the rules of the stock exchange.’156 In other words, when a seller, his intermediary, or the CSD defaults in delivering, the transfer is annulled,

151Art. L. 431-2 fifth paragraph C. mon. fin. Cf. DE VAUPLANE & BORNET (2001), nos. 1165 and 611-634, BONNEAU & DRUMMOND (2005), no. 669 and infra, s. 6.4.3.

152BONNEAU & DRUMMOND (2005), no. 90.

153Arts. 1582 – 1701 C. civ. See DE VAUPLANE & BORNET (2001), no. 53-2 and PINIOT in

CNCT 1997 Report, 218.

154Cf. MAFFEI (2005), 248.

155Yet a successful challenge has no consequences for the settlement system; Euroclear France 2003 Disclosure Framework, 22.

156That is, on T+3 or three days after the transaction was concluded; see supra, s. 6.4.2.

122

6 France

even if the transferee’s intermediary has already (provisionally) credited the transferee’s securities account.157

However, this provision is problematical for a number of reasons. First, its relationship with art. L. 431-3 C. mon. fin. is unclear, as art. L. 431-3 C. mon. fin. also provides that a securities transfer following a sales transaction is de iure annulled when the transaction fails to settle.158 No general doctrinal consensus exists, but the better view seems to be that art. L. 431-3 C. mon. fin. specifically applies when the sale proves to be defective in a preliminary stage of the transaction, i.e. if no consensus has been reached on the price, whereas art. L. 431-2 C. mon. fin. applies when the seller defaults regarding his delivery obligation.159

Second, art. L. 431-2 C. mon. fin. does not specify what the consequences of annulment are for the obligations that follow from the initial transaction, and it is debated whether the annulment of the transfer of ownership also involves the annulment of the initial transaction and all obligations resulting from that transaction.160 But because it is generally considered that a reversal of all credits and debits throughout the custody chain would be an unacceptable consequence, only the provisional credit entry in the transferee’s account is rescinded, while the transferor’s account remains unaffected.161

Third, whereas art. L. 431-2 first paragraph C. mon. fin. provides that a transferee’s ownership of securities ‘results’ from the credit entry in his account, it must be inferred from art. L. 431-2 second paragraph C. mon. fin. that the finality of a securities transfer is only truly secured after a credit entry in the securities account of the buyer’s intermediary with Euroclear France. Thus, should a transferee’s intermediary become insolvent after having credited its client’s account and having received payment for that

157Cf. art. L. 621-28 paragraph 4 C. com. See also BONNEAU & DRUMMOND (2005), no. 666 et seq.

158Art. L. 431-3 C. mon. fin. first paragraph reads: ‘When financial instruments are to be delivered (…) against payment, defaulting delivery or defaulting payment (…) or if no agreement has been concluded, (…) all the non-defaulting party’s obligations are annulled vis-à-vis the defaulting party (…)’.

159It has also been argued that art. L. 231-3 C. mon. fin. provides for a de iure annulment of the obligations of the transaction as a sort of exceptio non adimpleti contractus (cf. art. 1612 C. civ.), whereas art. L. 231-2 C. mon. fin. provides for an annulment of the transfer of ownership only; PELTIER in CNCT 1997 Report, 171. Furthermore, art. L. 231-3 C. mon. fin. could be analysed as facilitating close-out netting procedures of repurchase agreements (see infra, s. 6.5.2), when the initial seller is in default regarding his payment of the repurchase price. In the latter view, the initial buyer cannot be made subject to any obligation to resell securities to the defaulting initial seller, while the exceptio non adimpleti contractus does not provide for an annulment of a debtor’s obligation; AUCKENTHALER (2004), 132-133.

160Contra BONNEAU & DRUMMOND (2005), no. 667.

161The transferee’s intermediary, having already paid the purchase price, is refunded by the CCP; DE VAUPLANE & BORNET (2001), no. 75-1.

123

6 France

credit entry, but before its omnibus account with Euroclear France has been credited, the transfer is annulled pursuant to art. L. 431-2 second paragraph C. mon. fin. Consequently, the credit entry in the transferee’s account is rescinded and concerning the payment price, the transferee has a mere unsecured claim against the intermediary’s bankrupt estate. That seems unfair, but the legislature might have argued that the intermediary’s bankrupt estate would be unjustly reduced when a transferee would be allowed to successfully assert a revendication claim, while the intermediary never received a credit entry in its omnibus account with the CSD.162

Similarly, but in a more direct way, art. L. 431-2 fourth paragraph C. mon. fin. connects the transfer of ownership to the finality of the transfer. It must here be reiterated that for OTC transactions settled through the CSD’s system, art. L. 431-2 fourth paragraph C. mon. fin. provides that the ownership of securities is transferred the moment when the transfer has become final under the rules of the CSD’s settlement system. Under such circumstances, a transferee thus only acquires ownership the moment when the money leg of the transaction has been settled and the securities account of the transferee’s intermediary with Euroclear France has been credited.163

Art. L. 431-2 fourth paragraph C. mon. fin. was enacted as an implementation of the EU Settlement Finality Directive (‘SDF’),164 which also led to the present form of arts. L. 330-1 and L. 330-2 C. mon. fin. Art. L. 330-1 II C. mon. fin. secures the finality of instructions given to, and payments and settlements executed in settlement systems on the day of an intermediary’s insolvency. Instructions, payments and settlements therefore remain valid when given or executed on the day of the declaration of insolvency, whereas under general rules of insolvency law, instructions and legal acts on the day of the declaration of insolvency are considered void.165 Moreover, all other provisions of general insolvency law that may have retroactive effect, such as provisions on fraudulent preferences, are thus excluded from applicability.166

Pursuant to art. L. 330-2 C. mon. fin., excluded from applicability are all provisions that would render void the creation and enforcement of security rights on securities, including pledges and transfers of title, when those security rights have been created in order to secure payment obligations

162Cf. DE VAUPLANE & BORNET (2001), no. 1165.

163Art. L. 431-2 fifth paragraph C. mon. fin. and DE VAUPLANE & BORNET (2001), nos. 1165 and 611-634. Cf. supra, s. 6.4.2.

164Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (OJ L 166/45).

165Arts. L. 621-32 and L. 621-24 C. com. For the definition of ‘instruction’, see art. 4.4.3.6.

Règles de compensation de Clearnet.

166MINOR & MAFFEI in VEREECKEN & NIJENHUIS (2003), 186 and 189.

124