Dalhuisen on International Commercial, Financial and Trade Law

Transcription

1 Dalhuisen on International Commercial, Financial and Trade Law Jan H. Dalhuisen LL. M (UC at Berkeley), Dr. Jur. (Amsterdam), Fcl Arb. (London) Professor of Law, King's College, London and Visiting Professor U.C. School of Law Berkeley HART PUBLISHING OXFORD AND PORTLAND, OREGON 2000

2 Table of Cases Table of Legislation xxix xliii CHAPTER I. THE SOURCES OF MODERN INTERNATIONAL COMMERCIAL AND FINANCIAL LAW 1 PART I NATIONAL AND TRANS-NATIONAL OR INTERNATIONAL COMMERCIAL AND FINANCIAL LAW Introduction The Development of Civil and Common Law Civil and Common Law Notions of Commercial Law The Development of a Separate Commercial Law in France and Germany Old and New Commercial and Financial Law. International Professional Law The Origin of Civil and Common Law The Early Roman Law Development The Classical Roman Law and the Corpus Iuris Civilis The Revival of the Roman Law in Western Europe, the Ius Commune The Ius Commune and Local Law Natural Law and the Natural Law School. Gotius' De lure Belli ac Pads, its Approach and Impact The German Historical School The Nineteenth Century Civil Law Concept of National Codifications and the Role of Interpretation The Development of the Common Law The Common Law Approach to Precedent, Codification and Statutory Interpretation Civil and Common Law Compared The Relation between Statutory and Non-statutory Law in Civil and Common Law. General Principles, Custom and Statutory Positivism Legal Thinking in Civil and Common Law. The Role of Interpretation. Begriffs- and Interessenjurisprudenz in Civil Law. Legal Formalism and Realism in Common Law Twentieth Century Governmental Intervention in Private Law. Mandatory Domestic Rules. The Effect of Globalisation and the Denationalisation of Private Law The Transnational Private Law amongst Professionals The Guiding Function of International Commercial and Financial Law. The New Legal Order in the Professional Sphere. The Lex Mercatoria v. Ius Commune Approaches 61

3 xii Spontaneous Sources of Law: Fundamental and General Legal Principle. Custom Uniform Substantive Law as Alternative to Private International Law The Hierarchy of Norms in Modern International Commercial and Financial Law. The Role of Fundamental and General Principles, of Custom, Uniform Treaty Law, Comparative Domestic Law, and Private International Law Agents of International Convergence and Harmonisation. The Role of Unidroit, Uncitral, the Hague Conference, the EU, and the ALI and Commissioners on Uniform State Law in the USA. Impact of the International Legal Practice and Scholarship The Role of National Courts and of International Commercial Arbitration 81 PART II THE NATURE STATUS AND FUNCTION OF PRIVATE INTERNATIONAL LAW Modern Private International Law The Underlying Concept of Modern Private International Law Drawbacks of Conflict Rules The Modern European and US Approaches to Conflicts of Laws Refinement of the European Model The Development in the USA The Various Modern US Conflict Theories The European Approach of Exception Clause. Reasonable and Fair Solutions in the Dutch Proposals The Emphasis on the Facts rather than on the Rules: the Nature of the Relationship and of the Transaction. Modern Interpretation Techniques Private International Law and Harmonised Law Private International Law and the Application of Uniform Law The Situation with regard to EU Directives 97 PART III THE DEVELOPMENT OF TRANSNATIONAL OR INTERNATIONAL COMMERCIAL AND FINANCIAL LAW The Lex Mercatoria, Interrelation with Private International Law The Concept of the Modern Lex Mercatoria as a Hierarchy of Norms The Major Protagonists of the Lex Mercatoria and their Views. Legitimation The Hierarchy of Norms. Elaboration Fundamental Legal Principle. Transnational Rules of Contract Formation and the Normative Interpretation Technique. Procedure Fundamental Principles. The Notion of Transnational Ownership Mandatory Customs and Practices HO Mandatory Uniform Treaty Law, Contractual Provisions, Directory Trade Practices, Directory Uniform Treaty Law, Common Legal Notions, Domestic Laws and their Mandatory Provisions H3

4 3.3 Operation of the Lex Mercatoria and Objections to it Operation of the Lex Mercatoria Direct References to the Lex Mercatoria Parties' Choice of a Domestic Law v. the Lex Mercatoria Objections to the Lex Mercatoria Approach 120 CHAPTER II. DOMESTIC CONTRACT LAWS, UNIFORM INTERNATIONAL CONTRACT LAW AND INTERNATIONAL CONTRACT LAW PRINCIPLES. INTERNATIONAL SALES AND CONTRACTUAL AGENCY 123 PARTI DOMESTIC CONTRACT LAWS Introduction Formation and Interpretation or Construction of Contracts in Civil and Common Law The Role of Parties' Intent in Civil Law. The Normative or Teleological Interpretation Method. Common Law Approach The Civil Law Notion of Good Faith and its Modern Use in Interpretation Consensus in Civil Law and its Normative Interpretation Intent in Common Law. Offer and Acceptance, the Notions of Consideration, Exchange or Bargain The Practical Significance of the Consideration Requirement in Common Law Contracts: Construction and Remedies in Common Law The Common Law Notion of Consideration and the Civil Law Notion of Causa. International Aspects Custom and the Interpretation of Contracts Other Aspects of Contractual Validity: Capacity and Authority Other Aspects of Contractual Validity: Formalities Other Aspects of Contractual Validity: Definiteness The Civil Law Notion of Good Faith and the Common Law Alternatives of Implied Terms, Nature of the Relationship of the Parties, and Reliance The Notion of Good Faith in Civil Law Good Faith in Common Law. Alternatives. Equity and Fiduciary Duties Distinguished Good Faith in the Unidroit and European Contract Principles EU Notion of Good Faith The Lesser Need for Legal Refinement in the Professional Sphere. Interpretation, Mistake, Gross Disparity and Disclosure Duties The Status of Commercial Letters of Intent Pre-contractual Negotiation and Post-contractual Implementation Duties of Professionals. Abuse of Rights Force Majeure, Re-negociation Duties and Hardship Adjustments in Professional Relationships Performance of the Contract, Defences, Default and Excuses, Termination Performance in Kind or Specific Performance Defences to Performance. Invalidity and Rescission 172 xiii

5 xiv The Significance of Promises, Conditions and Warranties in connection with Performance in Common Law. Representations and Covenants Default or Breach and Damages Excuses The Definition of the Concept of Force Majeure. Frustration and Economic Impossibility. Development in Civil and Common Law Unforeseen Circumstances and the Balance of the Contract. Hardship Modern Legislative Approaches to a Change in Circumstances. Contractual Hardship Clauses Privity of Contract Privity or Third Party Rights and Duties under a Contract Development of Contractual Third Party Rights and Duties in Civil Law The Situation in Common Law and the Changes in the USA and England The Unidroit and European Principles of Contract Law The Applicability, Reach and the Directory or Mandatory Nature of the Principles Approach to Contract Formation. Capacity, Formalities and Specificity Notions of Good Faith and Reasonableness. Interpretation and Supplementation of the Principles and Contracts thereunder The Impact of Custom Consensus and its Failure. The Question of Continued Validity Performance, Default and Force Majeure Excuses. Hardship Privity of Contract The Nature and Impact of the Principles Directory and Mandatory Rules of Contract Directory and Mandatory Conflict Rules in Domestic Laws Treatment of Directory and Mandatory Contract Rules in Private International Law Mandatory Uniform International Contract Rules The Effect of the Freedom of Movement and the Freedom of Establishment on the Application of Domestic Mandatory Rules 211 PART II THE CONTRACT FOR THE INTERNATIONAL SALE OF GOODS The Main Aspects of the International Sale of Goods Introduction The Minimum Requirements of the Sales Agreement. Special Features and Risks of International Sales Legal Risk in International Sales Special Arrangements to Cover the Risks in International Sales International Sales as Contracts between Professionals. Applicable Law Currency and Payments in International Sales. Free Convertibility and Transferability of Money 223

6 2.1.7 The Transfer of Title in International Sales Conform Delivery and the Passing of Risk in International Sales The Passing of Risk in Civil and Common Law Propriety Sale Price Protection in Civil and Common Law The Role of Intermediaries and Documents in International Sales The Safe Harbour Function. Agents and Documents of Title The Use of Agents. Their Position The Use of Negotiable Documents of Title. Bills of Lading and Warehouse Receipts Documents of Title in Payment Schemes The Use of Negotiable Instruments: Bills of Exchange The Uniform International Sales Laws Origin and Scope The System of the Vienna Convention: Directory or Mandatory Rules Applicability of the Vienna Convention The Sales Law of the Vienna Convention Supplementation and Interpretation of the Vienna Convention The Interpretation of International Sales Contracts under the Vienna Convention. Meaning of Conduct and Custom Supplementation of the Vienna Convention: Private International Law and the Rome Convention on the Law Applicable to Contractual Obligations The Main Rules of the Rome Convention on the Law Applicable to Constructual Obligations The Vienna Convention and the Different Trade Terms in International Sales The Incoterms, their Status and Relation to the UCC and Vienna Convention The Vienna Convention and the ICC Model International Sale Contract The Law Merchant Concerning International Sales 275 PART III AGENCY The General Notion of Agency The Use of Agents. Their Position The Role of the Agent. Explicit and Apparent Authority The Notion of Independence, Apparent Authority and Agencies of Necessity The Consequences of Agency, Conflicts of Interests and Duties of the Agent Undisclosed and Indirect Agencies The Civil Law Indirect Agency. The Relationship between the Principal and Third Party. Customers' Assets The Economic Importance of Modern Agency International Aspects of Agency Private International Law Aspects of Agency 290 xv

7 xvi Treaty Law concerning the Law Applicable to Agency The Lex Mercatoria and Agency The EU Commercial Agent Directive 294 CHAPTER III. INTERNATIONAL PAYMENTS AND PAYMENT SYSTEMS 297 PART I THE NOTION AND MODALITIES OF PAYMENT Payment and Ways and Means of Payment What is Payment? The Notion of Money as Unit of Account and Unit of Payment. Money as Store of Value Paper Currencies and Modern Currency Election Clauses Freely Convertible and Transferable Currency The Different Ways and Means of Payment. Pull and Push Systems of Payment Cash Payments and the Bank Transfer Option in Commerce and Finance Payment Through Bank Transfers The Nature of Bank Accounts and their Use in the Payment Circuit When is a Bank Payment Made? The Question of Acceptance and the Liberating Effect of the Payment The Legal Characterisation of Bank Transfer Payments. Assignment, Novation or Own Legal Status Modern Electronic Payment Systems. Clearing. Fedwire, CHIPS and CHAPS The Risks in Modern Payment Systems. Payment Mistakes and Restitution Set-off as Method of Payment Legal Nature and Characterisation Eligibility Contractual Adaptations of the Set-off. Settlement, Novation and Close-out Netting Use of Contractual Netting Clauses. Contractual Netting and Bankruptcy The Evolution of the Set-off Principle The ISDA Swap Master Agrements and Swap Netting 325 PART II INTERNATIONAL PAYMENTS International Payment Arrangements to Minimise Payment Risk Cross-border Payments and their Risks Payment in Open Account Ways to Reduce Payment Risk Ways to Reduce Payment Risk: The Accepted Bills of Exchange Ways to Reduce Payment Risk: Collection Arrangements Ways to Reduce Payment Risk: Letters of Credit. The Different Banks Involved The Types of Letters of Credit 335

8 2.1.8 The Documents Required under a Documentary Letter of Credit The Right of Reimbursement of the Issuing Bank under a Letter of Credit The Letter of Credit as Independent and Primary Obligation. The 'Pay First, Argue Later' Notion Non-performance under Letters of Credit. The Exception of'fraud' Transferable Letters of Credit and Back to Back Letters of Credit Ways to Reduce Payment Risks: Autonomous Guarantees. Examples. Standby Letters of Credit The Law and/or Rules Applicable to Collections, Letters of Credit and Bank Guarantees. The ICC Rules and their Status. The Lex Mercatoria The Uncitral Convention on International Guarantees and the World Bank Standard Conditions International Set-offs The Law Applicable to Set-offs and Contractual Netting The Law Applicable to Novation Netting and Swap Transfers 347 PART III MONEY LAUNDERING Techniques International Action 349 xvii CHAPTER IV. OWNERSHIP, POSSESSION AND LIMITED OR CONDITIONAL LEGAL OR EQUITABLE PROPRIETARY RIGHTS IN CHATTELS AND INTANGIBLES (31/3/00) 351 PARTI LAWS OF MOVABLE PROPERTY Proprietary Laws in Common and Civil Law Types of Assets Chattels and Intangibles The Proprietary Aspects of Claims The Importance of the Law of Chattels and Intangibles The Types of Proprietary Rights in Civil Law The Nature and Limited Number of the Proprietary Rights in Civil Law. The Numerus Clausus Notion The Way Proprietary Rights are Expressed and Protected in Civil Law. The Notions of Ownership, Possession and Holdership or Detention. Constructive Possession and Holdership The Acquisitive Prescription and its Importance in Civil Law. Procedural and Substantive Law Aspects. Acquisitive Prescription and the Protection of Bona Fide Purchasers The Proprietary Defences in Civil Law The Civil Law Relativity or Priority Principle in Respect of Proprietary Rights. The Difference with the Relativity of Obligatory Rights 373

9 xviii 1.3 The Types of Proprietary Rights in Common Law. The Practical Differences with Civil Law Legal and Equitable Interests in Chattels Ownership and Possession of Chattels in Common Law Equitable Proprietary Interests in Chattels The Common Law System of Proprietary Defences. Tort Actions based on Better rather than on Absolute Rights Constructive Possession in Common Law. The Absence of Acquisitive Prescription. Statutes of Limitation Practical Difference between the Common and Civil Law Approaches to Proprietary Rights in Chattels Approximation of the Common and Civil Law Systems of Proprietary Law in Chattels. User and Income Right Trusts, Constructive Trusts, Tracing and Agency. The Civil Law Response The Basic Features of the Common Law of Trust The Practical Significance of Trusts in Common Law Countries Constructive Trusts and Tracing Resulting Trusts, Statutory Trusts and Charitable Trusts Trust and Agency. Trust and Bailment Related Civil Law Structure Private International Treaty Law and Trust Law Principles The Transfer of Proprietary Rights in Chattels The Legal Requirements for a Transfer of Chattels The Formalities of a Sale: Contract or Delivery. Double Sales The Importance of Identification. Effect on the Transfer. Sales of Future Assets, Bulk Transfers, and De Facto Transfers of Title The Development of the Rules Concerning Delivery as a Formal Requirement of Title Transfer in Civil and Common Law Capacity. Causes of Contractual Invalidity. Effect on the Title Transfer The Transfer Agreement. The Abstract and Causal System of Ownership Transfer The Origin of the Abstract and Causal Views of Tittle Transfer Disposition Rights. The 'Nemo Da? Rule and the Protection of Bona Fide Purchasers Origin of the 'Nemo Daf Rule and of the Principle of Bona Fide Purchaser Protection The Retention Right of the Seller in the Case of Default of the Buyer Secured Transactions and Conditional Sales The Difference between Secured Transactions and Conditional Sales What are Sale-Repurchase Agreements or Finance Sales? The Characterisation Issue. Property-based and Security-based Funding When are Finance Sales Converted into Secured Transactions? The Operation of Finance Sales. Effect of the Conditionality of the Transfer. Proprietary Effect of Conditions. Duality of Ownership and of Possession in Civil Law. Openess of Proprietary Systems? 441

10 1.6.5 Examples of Finance Sales: Finance Leases, Repos and Factoring. Finance Sales as Executory Contracts, Cherry Picking and Netting The Outward Signs of Security and Ownership-based Funding Interests. Possession or Filing. Attachment and Perfection of Security Interests under the UCC Uniform Security Law and Principles of Security Laws Proprietary Rights in Intangible Assets, their Creation and Transfer Proprietary Rights in Intangible Assets and the Possibility and Method of their Transfer. The Meaning of Notification and the Situation in Double Assignments. The Civil Law Development The Development in Common Law The Transferability of Claims and Contracts. Assignment of Rights and Delegation of Duties. The Debtor's Defences and the Impact of Contractual Restrictions on the Transfer The Assignability of Future Claims Assignment, Novation, Amendement, Subrogation and Subcontracting Different Types and Objectives of Assignments The Better Right of the Assignee. The Notion of Abstraction and the Comparison with Negotiable Instruments The Notion of Abstraction and the Liberating Effect of Payment by the Debtor The Ranking between Assignees, The Nemo Dat Rule in Assignments Contractual and Proprietary Aspects of Assignments. Mandatory Rules. Applicable Law and Party Autonomy Special Assignment Issues. Warranties, Conditions and Default Bankruptcy Aspects of Assignments Uniform Rules Concerning Assignments Private International Law Aspects of Chattels Application of the Lex Situs The Notions of Equivalence and Adaptation. Conditional Ownership, Security and Retention Rights Trusts. The 1985 Hague Convention on the Law Applicable to Trusts and their Recognition Uniform Law concerning the Proprietary Aspects of Chattels The Lex Mercatoria concerning Chattels Private International Law Aspects of Assignments The Various Aspects of Assignments. Characterisation Issues. Mandatory Law Current Approaches to Choice of Laws Issues in Assignments Treaty Law Approaches to the Law Applicable to Assignments. The Choice of Law Provision of Article 12 of the Rome Convention and the Draft Uncitral Receivable Finance Convention Uniform Law concerning Proprietary Rights in Intangibles The Lex Mercatoria concerning Bulk Assignments 510 xix

11 xx PART II NEGOTIABLE DOCUMENTS OF TITLE AND NEGOTIABLE INSTRUMENTS The Role of Documents Bills of Lading and Warehouse Receipts The Origin and Nature of the Bill of Lading and its Operation in the Proprietary Aspects of the Transfer of Goods The Status of the Bill of Lading in Legal Systems that Require Delivery for Title Transfer. Abstraction. The Situation in Germany and the Netherlands The Status of the Bill of Lading in Legal Systems that do Not Normally Require Delivery for Title Transfer. The Situation in France Bills of Lading as Quasi-negotiable Instruments in the UK. The Situation in the USA Consequences of the Different Attitudes to Documents of Title when Goods are transferred to Transferees other than though a Transfer of the Bill of Lading The Transfer of Risk The Named Bill of Lading Private International Law Aspects of Bills of Lading Lex Mercatoria and Uniform Treaty Law concerning Bills of Lading Negotiable Instruments Bills of Exchange Acceptance and Discounting of Time Drafts The Persons Liable under a Bill of Exchange. Recourse The Principle of Independence and Abstraction The Holder in Due Course. Personal and Real Defences. Other Types of Holders Cheques Modern Use of Bills of Exchange and Cheques Bills of Exchange and Competing Assignments of the Underlying Claims Position of the Holder in Due Course of a Bill of Lading Compared to the Bona Fide Holder of a Bill of Lading Foreign Bills of Exchange. Private International Law Aspects Uniform Treaty Law The Lex Mercatoria concerning Bills of Exchange The Dematerialisation of Documents of Title and Negotiable Instruments. Electronic Transfers The Traditional Use of Documents of Title and Negotiable Instruments. Their Inconveniences and Risks. Seaway Bills Electronic Systems and their Importance in Replacing Transportation Documents The Situation with Regard to Bills of Exchange. Electronic Bank Transfers 544

12 PART III INVESTMENT SECURITIES The Different Types of Shares and Bonds Traditional Distinctions Negotiability of Investment Securities The Risk Factors in the Holding and Transfer of Investment Securities Book Entry Systems for Shares and Bonds Depository Receipts. Dematerialisation and Immobilisation The Legal Characterisation of Book Entry Entitlements The Internationalisation of Custody and Settlement Systems and its Opportunities The Leading Role of the Euromarket for Bonds and the Effect on International Share Trading. The Dominant Role of International Practices and the Bankruptcy Law Implications Law Applicable to International Investment Securities Transactions The Lex Mercatoria concerning International Investment Securities Transactions 565 CHAPTER V. SECURITY AND OWNERSHIP-BASED FUNDING TECHNIQUES 567 PART I SECURED TRANSACTIONS AND FINANCE SALES Civil and Common Law Approaches Secured Transactions Modern Non-possessing Security Interests in Personal Property and the Alternative of Finance Sales The Importance of Modern Finance Sales. Characterisation Problems Major Differences in the Domestic Laws on Proprietary Financial Protection and the Impact of Bankruptcy Laws Harmonisation Attempts. Principles of Security Laws? Conditional and Temporary Ownership Transfers The Duality of Ownership in Finance Sales Autonomous Transnational and Domestic Legal Developments in Third Party or Proprietary Effects of Contractual Clauses The Situation in the Netherlands Introduction. The New Civil Code of Security Substitutes and Floating Charges. The Reservation of Title Conditional and Temporary Ownership. The Lex Commissoria Open or Closed System of Proprietary Rights The Situation in France Introduction. The Vente a Remere and Lex Commissoria The Impact of the Notion of the 'Solvabilite Apparente The Modern Repurchase Agreement or 'Pension Livree The Reservation of Title Finance Sales. Transfer of Receivables, Lot Dailly and Tritisation (Fonds Communs de Creances) Open or Closed System of Proprietary Rights 615 xxi

13 xxii 1.4 The Situation in Germany Introduction. The Development of the Reservation of Title and Conditional Transfers Sicherungsubereignung and Conditional Sales Finance Sales Curbing Excess. Open or Closed System of Proprietary Rights. Curbing Excess The Situation in the UK Introduction. Differences from Civil Law Basic Features of Conditional or Split Ownership Interests. Equitable Charges. Open System of Proprietary Rights The Distinction between Conditional Sales and Secured Transactions. Publication Requirements Reservation of Title Finance Sales The Situation in the USA Introduction. The Approach of Article 9 UCC The Unitary Functional Approach and Finance Sales. Problem Areas n Article 9 UCC Proprietary Characterisations Finance Sales as Distinguished from Secured Transactions in Civil and Common Law. The Recharacterisation Risks Introduction. Loan and Other Types of Funding The Practical Differences between Security- and Ownership-based Funding Legal Differences between Security- and Ownership-based Funding Concluding Remarks International Aspects of Conditional or Finance Sales and Secured Transactions Private International Law Approaches. Uniform Law Attempts of Unidroit and Uncitral Model Laws. The EBRD Attempt Other Efforts at International Harmonisation: The Draft Unidroit Convention on International Interests in Mobile Equipment Model Laws or Uniform Law. Applicability 667 PART II MAJOR TYPES OF FINANCE SALES Finance Leasing Rationale of Finance Leasing Legal Characterisation Comparative Legal Analysis International Aspects of Finance Leasing Uniform Substantive Law. The Unidroit Convention The Leasing Convention's Sphere of Application, Its Interpretation and Supplementation The Definition of Financial Leasing under the Convention The Proprietary Aspects 680

14 xxiii The Enforcement Aspects The Contractual Aspects The Collateral Rights Concluding Remarks Repurchase Agreements The Repurchase Agreement as Prime Alternative to Secured Lending. Its Legal Characterisation The Development of the Repo in Investment Securities. Securities Lending and the Buy/Sell Back Transaction Margining The Netting Approach in Repos The PSA/ISMA Global Master Repurchase Agreement Concluding Remarks Factoring or Receivable Financing. The Unidroit Convention and the Uncitral Receivable Financing Convention Receivable Financing and Factoring. International Attention Factoring: The Contractual Aspects Factoring: The Proprietary Aspects Bulk Assignments The Liquidity of Claims International Assignments. The Uncitral and Unidroit Conventions. Their Content, Field of Application, Interpretation and Supplementation Details of the Unidroit Factoring Convention Details of the Uncitral Convention Concluding Remarks 716 PART I CHAPTER VI. LIBERALISATION AND RE-REGULATION OF CROSS-BORDER FINANCIAL SERVICES. THE SITUATION IN THE EU AND WTO/GATS 717 INTRODUCTION: FINANCIAL SERVICES ACTIVITIES, SERVICE PROVIDERS AND FINANCIAL REGULATION Domestic and Cross-border Financial Services. Regulatory Impact Financial Services and Financial Regulation. Cross-border Financial Services and International Capital Flows The Objectives of Modern Financial Regulation The Institutional and Functional Approaches to Regulation International Aspects of Financial Services Regulation Focus of International Financial Regulation Home and Host Country Rule The EU Model and GATS. The Basle Concordat concerning International Banking Regulation The Essentials of the Banking Business and its Regulation The Major Aspects of Banking. Supervision and Banks of Last Resort Types of Banks and their Operations 731

15 xxiv Banking Risks Broad and Narrow Banking Banking Regulation and Banking Regulators. International Aspects Intermediation and Desintermediation of Banks and the Development of the Securities Markets The Banking or Current Account Agreement The Essentials of the Securities Business and its Regulation Major Types of Securities. Negotiable Instruments. Transferable Securities and Investments Securities Markets and their Organisation. Official Markets Unofficial Markets, Globalisation of Markets, Euro-markets Secondary Market Trading Systems Internet or Electronic Trading The Role of Investment Banks as Underwriters and Market Makers The Role of Security Brokers and Investment Managers The Risks in the Securities Business. Securities Regulation and its Focus. The European and American Approaches Insolvency of Securities Brokers. The Notion of Tracing International Aspects of Securities Regulation Securities Regulators Modern Financial Products. Derivatives and Securitisations. Hedge Funds and Their Operations Modern Developments in Financial Products The Use of Derivatives The Valuation of Derivatives. Contracts for Differences Derivative Markets and their Operations. Clearing and the Notion of Margin Derivatives Risk, Netting and the Regulation of Derivatives Activity Legal Aspects of Swaps. Integration and Conditionality, Acceleration and Close Out. The ISDA Swap Master Agreement Asset Securitisation. Legal Aspects and Risks Hedge Funds and their Operations 778 PART II INTERNATIONAL ASPECTS OF FINANCIAL SERVICES REGULATION; DEVELOPMENTS IN GATTS, THE EU AND BIS/IOSCO/IAIS Free Movement of Goods, Services, Current Payments and Capital after World War II Cross-border Movement of Goods. GATT Cross-border Current Payments and Movement of Capital. IMF The Cross-border Movement of Services. GATS The WTO The Creation of the EEC The Common Market and Monetary Union. The Various Pillars of the EU 783

16 2.2.2 The EU Institutional Framework and Forms of Legislation Definition of Cross-border Services. Connection with Free Movement of Goods and Persons and with the Right of Establishment Restrictions on the Basic Freedoms. Regulated Services and the General Good Concept The Use of the Notion of the General Good in the EU Failure of the Harmonisation Approach in the Regulated Financial Services Early EU Achievements in the Regulated Financial Service Industry Banking Details of the Early Banking Directives and Recommendations Mortgage Credit Details of the Early Securities and Investment Recommendations and Directives UCITS Early Directives in the Insurance Area The System of Branching-Out under the First Banking and Insurance Directives. Non-Discrimination under Host Country Rule. Regulatory Co-operation The Globalisation of the Financial Markets and the Effect on the Liberalisation of Financial Services Autonomy of the International Capital Markets The Early Development of the Eurobond Market and its Main Features. Eurodeposits Further Delocalisation, Competitive Deregulation. Situation in the USA The Legal Status of Euromarket Instruments and Underwriting Practices Central Bank Involvement Effects of the Free Flow of Capital on the EU. The 1988 Directive on the Free Movement of Capital The 1988 Directive and the Redirection of Savings and Tax Avoidance Issues The 1988 Directive and the Movement of Financial Products and Services The 1988 Directive and Monetary and Exchange Rate Aspects of the Free Flow of Capital Developments in the BIS, IOSCO and LAIS The Functions of the BIS, IOSCO and IAIS The BIS Capital Adequacy Approach for Banks. The Basle Accord. Criticism. Other Regulatory BIS Initiatives Credit Risk, Position Risk and Settlement Risk. Off-balance Sheet Exposures The Risk Asset Ratios, Risk Weightings and Qualifying Capital 812 xxv

17 xxvi BIS Proposals for Netting, Market Risk and Interest Rate Risk. The 1994 Amendment and 1996 Interpretation Document The 1994 BIS Discussion Paper on Public Disclosure of Market and Credit Risk by Financial Intermediaries (Fisher Report) The April 1995 BIS Amendements to its 1993 Proposals concerning Market Risk Position and Settlement Risk. CAD. International Guidelines. BIS and IOSCO The 1999 BIS Proposals Capital Adequacy Calculations The Level Playing Field for Banks and the Effect of a Change in the Minimum Capital Requirement 817 PART III THE NEW GENERATION OF EU DIRECTIVES COMPLETING THE INTERNAL MARKET IN FINANCIAL SERVICES The New EU Approach towards the Regulated Financial Services Industries following the Liberalisation of the Capital Flows after The Essence of the New Approach. Mutual Recognition of Home Country Rule. Limited Harmonisation. The European Passport Cross-border Activities through an Establishment or though Direct Services. Different EU and US Approaches Residual Host Country Rules, The Concept of the General Good and its Abuses Division of Tasks. No Single EU Regulator. Regulatory Competition Interaction with GATS The EU Reciprocity Requirements. Relation with Third Countries. National Treatment and Effective Market Access The EU Second Banking Directive (SBD) and Investment Services Directive SBD: Home Country Rule Reach. Residual Host Country Powers. The General Good SBD: Scope of the Banking Passport. Universal Banking SBD: Procedure for Obtaining the Passport. Home and Host Country Communications ISD: Basic Structure. Background and Scope ISD: Home Country Rule, Authorisation, Capital, Prudential Rules. Procedure for Obtaining the Passport ISD: Conduct of Business ISD: Residual Host Country Powers. The General Good ISD: Regulated Markets Concentration Principle and Stock Exchange Membership. Price Reporting ISD: Member States Committee Long-distance Selling of Financial Products of Consumers The EU Approach to Capital Adequacy The Own Funds and Solvency Directives for Banks. Differences from the BIS Approach 836

18 xxvii The Capital Adequacy Directive for Investment Services Firms. Market or Position Risk General and Specific Risk. Off-balance-sheet Exposures Settlement and Other Risk. The Treatment of Hedges. Netting Qualifying Capital and Capital Adequacy Influence of the Modern BIS Approach The EU Approach to the Level Playing Field between Banks and Securities Houses Other Recent EU Regulatory Initiatives in the Financial Area Large Exposures Deposit Protection and Investor Compensation Winding-up of Credit Institutions Pension Funds Consolidated Banking Supervision. Basle Concordat and EU Implementation Lead-regulator Concept. International Co-operation The Liberalisation of the Insurance Sector Non-Life Life Reciprocity Combined Effect of the First and Second Insurance Directives The Insurance Passport. Home and Host Country Powers. The General Good Insurance Products and Mandatory Contract Rules The Solvency Regime Effect of the Insurance Liberatlisation Other Insurance Directives: The Insurance Accounts and Insurance Brokers Tax Benefits Insurance Winding-up Directive 845 IV. CONCLUSION 845 Index 847