In order to promote cross-border transactions, clarity and predictability about which country's law applies to determine who owns the underlying assets of the transaction is of the essence. If there is legal uncertainty over who owns the asset, depending on which Member State's courts or authorities assess a dispute concerning the ownership of a claim or a security, the cross-border transaction may be enforceable or not, or might confer the expected legal title on the parties or not. In case of insolvency, when the questions of ownership and enforceability of transactions are put under judicial scrutiny, legal risks stemming from legal uncertainty may result in unexpected losses. The objective of this Communication is to help increase cross-border transactions in securities by providing legal certainty on the conflict of laws rules at Union level. Enhanced legal certainty will promote cross-border investment, access to cheaper credit and market integration.

On securities, three directives address the question which national law applies in case of cross-border transactions: the Financial Collateral Directive, the Settlement Finality Directive and the Winding-up Directive. These directives include conflict of laws rules that cover the most important aspects of securities transactions. However, their wording gives rise to different national interpretations. The lack of clarity created by different interpretations of the existing rules might make cross-border transactions more costly due to some residual legal uncertainty around which law is applicable.

Given the volume of transactions concerned, the Commission is of the view that a clarification of the rules is necessary to help markets reduce redundant costs and increase legal certainty around the applicable law.

This Communication clarifies the Commission's views on important aspects of the existing EU acquis with regard to the law applicable to proprietary effects of transactions in securities.

This Communication covers the third-party effects of the transfer of financial instruments. It accompanies the legislative proposal on third-party effects of assignment of claims. Matters governed by the Financial Collateral Directive, the Settlement Finality Directive, the Winding-up Directive and the Registry Regulation are not, however, affected by that legislative proposal