Duality of European managers. From the foregoing, it should be noted that there are three market infrastructure managers: trading platform managers(investment firms and market operators), whose statutes are subject to MiFID 2, clearing houses or central counterparties, which are subject to EMIR, and central securities depositories, which are subject to CSD Regulation.Although there are differences in the status of managers, they all share the common feature of being subject to a dual connecting factor. First, these managers are subject to a national legislative connecting factor. This is done through their registered office, which is understood to be their real seat, and has a particularly broad scope (Section 1).

Secondly, managers are subject to an administrative connecting factor. The latter reflects the designation of the administrative authority competent to approve the manager and the supervision to which the latter is subject in the exercise of his or her activity. Until recently, there was a parallelism of connecting factors. Indeed, the administrative connecting factor for managers was also the registered office. This criterion, which stemmed from a decentralised model based on a division of administrative powers between the authorities of the Member States, was based on mutual recognition. This model is now being challenged by a centralised model, where the decision is taken by an EU agency, whose legal order is therefore primarily competent to assess all administrative aspects of the managers status. The particularity of this centralised model is twofold: on the one hand, it can be deconcentrated, restoring to the national authorities part of their competence and, on the other hand, the existence of an administrative connecting factor to an EU agency does not call into question the manager's legislative connecting factor, resulting in the competent authority applying the law of the manager's headquarters (Section 2).

Functions of set-off. Once a contract is formed, the regulation of collateral and set-off can disrupt its performance. As the former have already been studied,it is the set-off that will be studied here. Set-off, whether contractual or legal in origin, is defined as ‘the simultaneous extinction of reciprocal obligations between two persons’.Its primary function of paymentis widespread in both civil law and common law systems.However, as Professor Jérôme François writes, set-off ‘is an institution whose extinctive function does not reveal its full richness. It also fulfils a guarantee function and may even, in certain cases, represent the best of guarantees for the party who is in a position to invoke it’.This evolution of the function of set-off, from payment to guarantee of payment, is especially perceptible when one of the parties to the contract is subject to collective proceedings. In this context, the regime which may be attached to set-off will allow ‘the creditor to appropriate the debtor's claim against himself without having to fear any competition’.

This distinction in the function of set-off depending on whether the parties are in good standing or whether one of them is subject to collective proceedings has a particular echo in financial law, but also in conflict of laws: it explains why the law applicable to set-off is not the same when the parties are in good standing and when one of the parties is subject to collective proceedings.Before examining this question, it should be noted that the law applicable to netting now depends on whether the financial contract is subject to the clearing obligation, i.e. the obligation to hedge with a clearing house. This is laid down in the EMIR regulation, the scope of which must first be defined (Section 1). In the event that the clearing obligation is applicable, the intervention of the clearing house leads to the application of a double original regime: on the one hand, it alters the law applicable to the financial contract and, on the other hand, it allows the financial contract to escape the law of collective procedures and resolution (Section 2).

The functioning of the financial market relies on the financial market manager and its members. The status of managers has already been discussed. It is now necessary to consider how market membership is acquired, and the relationships that members are likely to develop. Three relationships can be distinguished: with their clients, with other market members, and with the financial market manager. The regulation of these relationships does not follow a principle of symmetry: they are governed by heterogeneous sources, which do not have identical objectives, and are therefore subject to different conflicts of laws. In the past, the law of the financial market was applied indiscriminately to these different aspects. Today, it follows a twofold movement, which we will trace here. Firstly, the lex mercatus applies to relations with the financial market manager and to transactions concluded between market members. Its application is imperative, as it pursues the proper functioning of the financial market (Section 1). Secondly, the law of the financial market has for a long time extended to contracts concluded between members and their clients. Today, it has withdrawn from these contractual relationships, as the protection of clients is ensured by the professional status of members (Section 2).

Section 1. THE RELATIONSHIP BETWEEN THE FINANCIAL MARKET AND ITS MEMBERS

Access to the status of market member is decided by the market operator itself. This status gives rise to a number of obligations for which the member is accountable in order to allow the proper functioning of the financial market (§ 1). Once the status has been obtained, the market member has access to the trading system, which allows it to conclude transactions with other members. These transactions will be subject to the law of the financial market by application of the Rome I Regulation (§ 2).

In stating our intention to reconcile the rules of financial law and the rules of conflict of laws, we wanted to take advantage of the resulting synthesis to make a diagnosis of the discipline and possibly reveal its deficiencies. Two of them can be highlighted: the contradiction of the objectives of financial law and a complex relationship with common law. A general solution to these difficulties consists in precisely delimiting the interactions of financial law with the various branches of common law in order to account for the reasons why a specific objective justifies the enactment of a special rule. In this delimitation exercise, the methodology of private international law can provide valuable assistance. At the same time, it is intended to show the undeniable contributions of the international application of financial law to the theory of private international law.

Contradictory objectives. The tension that financial law rules are subject to is first of all exacerbated by the sometimes contradictory nature of the objectives they pursue, between the liberalism to which the matter aspires and the protection of investors that it requires. The implementation of commercial operations requires speed and security, which we agree justify the existence of derogatory solutions. However, these solutions may come up against the objective of investor protection, which is not necessarily satisfied with the freedom-responsibility pairing created by this first objective. In this respect, the current point of balance lies in the abundance of information that financial law requires issuers to provide in order to market their securities; it is not certain that this abundance truly allows for the protection of investors by enlightening their consent, unless, precisely, they are investment specialists. This is all the more true since only the latter are in a position to engage the civil liability of issuers who disseminate defective information by proving the causality between the latter and their investment decision or their investment advice. This means that other investors will be better protected by imposing rules of conduct on intermediaries to protect clients, together with prudential rules to ensure their solvency and integrity. The protection of the financial market itself, where financial instruments are admitted to it, is in principle ensured by the administrative and criminal liability of issuers and investors.

The existence of exceptions to the application of EU law. As a matter of principle, the provision of access to a market infrastructure by an operator on the territory of the Union requires, on the one hand, the establishment of a personalised entity and, on the other hand, the authorisation of the latter by an authority of a Member State. These two aspects entail the correlative application of European legislation as well as the competence of the local authorities.By way of exception, it is possible for the foreign operator to provide its service in the Union without establishing a subsidiary, either by setting up a branch or by acting under the freedom to provide investment services. Access to the territory of the Union by these two means does not take place in the same way depending on the market infrastructure (Section 1). This access is nevertheless always likely to be based on the method of equivalence of legislation. This method aims to facilitate cross-border relations between private persons. It is therefore subject to the tension inherent in the objectives of private international law, between coordination of legal orders and preservation of the social order of the forum (Section 2).

Section 1. ACCESS TO THE TERRITORY OF THE UNION

In principle, the relationship with the legislation of third countries is identical: national authorisation is required in order to provide services within the Union. However, it is through the exceptions to this principle that the singularities of each market infrastructure are felt. This is why we will successively study the access to the European territory of financial market managers (§ 1), central counterparties (§ 2), and foreign central depositories (§ 3).

If the study of positive law is to the jurist what fieldwork is to the sociologist, in the same way, domestic law is for the internationalist the raw material of his work. We sometimes tend to forget this, simply because private international law has its own objects of study, foremost among which are conflicts of law. The latter arise from a ‘founding antinomy’between, on the one hand, the division of the world into distinct legal orders since, as Niboyet pointed out, ‘each country must have a law adapted to its needs, and it is in diversity that true civilisation resides’and, on the other hand, the existence of international private relations.On the basis of this duality, private international law develops its own objectives, independent of domestic law, and sometimes contradictory: the coordination of legal orders, which is the basis of the conflict rule method,the true ‘medicine’ for conflicts of laws,and the preservation of their internal order, which is the basis of mechanisms derogating from the application of foreign law, so that international relations do not destabilise the social structure of state legal orders.The discipline draws its singularity from the pursuit of its aims through a methodological approach that can move away from domestic law, either because it leads to the multiplication of points of view that are foreign to it,or because it can be based on the structure of norms in order to deduce the appropriate method of resolution. Nevertheless, domestic law reappears, since the methods used have in common that they are based on its analysis in order to found the rule of jurisdiction or conflict on the legal centre of gravity of the relationship in question, according to the substantive considerations that it promotes.In other words, domestic law is primary in that it attempts to capture the raw fact giving rise to conflicts of law, and therefore constitutes the matrix of the conflict rules. This connection is particularly perceptible when the law of conflicts synthesises domestic law in order to constitute its own categoriesand to give legal institutions the appropriate international connecting factor. In so doing, it casts an original eye on the legislative bodies in question, often revealing their deficiencies.It is on this double exercise of synthesis and characterisation, on the one hand, and of connection, on the other hand, that the present thesis focuses in a field, financial law, where the method of the rule of conflict has not lost its vigour.

The preceding discussions have shown, in particular, how market infrastructures are connected to a legal order and how the law of the financial market is deployed by relying on the connecting factor of the trading platform. The following developments extend these reflections to the status of financial instruments. The influence of the law of the central depository and the clearing house on the proprietary status of financial securities and on the law applicable to financial contracts will be shown. This influence is independent of the financial market, simply because financial instruments can be provided independently of a financial market. The use of a financial market nevertheless implies the use of the services of the clearing house and the central depository as soon as a financial contract or the exchange of a security is concluded through a trading platform.

In the case of securities, the main difficulty today lies in the connecting factor to their proprietary effect. It will be shown that these difficulties, which have their roots in the thesis of the plurality of connections, should be resolved, both in the direct and indirect holding system, by a unitary solution of the conflict of laws. In the indirect holding system, this solution should be based on the connection of the securities settlement system itself (Title 1).

From the point of view of financial contracts, the law applicable to them sometimes suffers from uncertainty when purely domestic contracts or consumer contracts are involved. The difficulty facing the status of financial contracts is, however, less related to the determination of the lex contractus than to its reconciliation with the laws that affect the formation of the contract and its performance. It is in this latter respect that the law of the compensation system will most often extend its realm to the entire lex contractus (Title 2).

The rules of conflict are not identical from one system to another: while regulated markets are connected to the law of the seat of their manager, the systems subject to the Finality Directive use a connecting factor based on the law of autonomy. Such a criterion, designed for exchange contracts, does not allow an adjusted connecting factor of organisational contracts. This is one of the reasons why, on the one hand, trading systems should all be subject to the law of the seat of their manager (Section 1) and, on the other hand, the connecting factor of systems subject to the Finality Directive appears unsatisfactory (Section 2).

Section 1. THE LAW APPLICABLE TO TRADING SYSTEMS

We will present here the solution of the MiFID 2 Directive, applicable only to regulated markets (§ 1), before showing the reasons which push for its analogical extension to all trading systems (§ 2).

§ 1. THE APPLICATION TO REGULATED MARKETS OF THE LAW OF THE SEAT OF THE MANAGER

The MiFID 2 solution. Article 44(4) of the MiFID 2 Directivecontains a conflict rule for regulated markets which states: ‘Without prejudice to any relevant provisions of Regulation (EU) No 596/2014 or of Directive 2014/57/EU, the public law governing the trading conducted under the systems of the regulated market shall be that of the home Member State of the regulated market. ‘

The home Member State of the regulated market is defined by Article 2(55)(b) of MiFID 2 as ‘the Member State in which the regulated market is registered or, if under national law it has no registered office, the Member State in which the head office of the regulated market is situated’. This ambivalent rule requires several clarifications.

Diversity of systems. In the context of market infrastructures, the notion of system refers to four varieties: trading systems, clearing systems, securities settlement systems and payment systems.These systems have distinct regimes depending on their purpose, which requires a closer look at their respective functioning (Section 1), before showing that they have in common that they are contracts (Section 2).

Section 1. MARKET INFRASTRUCTURE SYSTEMS

The different systems will be presented according to their sources. Indeed, while the law on trading systems originates from MiFID 2 (§ 1), the law on payment, clearing and settlement systems originates from the Finality Directive (§ 2). However, there is no common regime for the supervision of systems (§ 3).

§ 1. TRADING SYSTEMS

Notion of trading systems. Among the different varieties, trading systems are the most important in that they constitute the financial market in the strict sense of the term: they organise trading and determine the price of transactions. It should be noted that there are different ways of matching orders and, consequently, different categories of trading platforms: regulated markets, multilateral trading facilities and organised trading systems.Despite this diversity, the unity of the notion of trading platform stems from the fact that they always constitute a multilateral system. MiFID 2 defines the latter concept as ‘a system or arrangement within which multiple third-party buying and selling interests in financial instruments may interact’.In addition to this first criterion, which is based on the system's function, there is a second criterion that is specific to the manager's role in these negotiations.Indeed, for a market to be qualified as a ‘multilateral system’, case law states that the manager must not intervene in a personal capacity in the negotiations.This common function of organising the negotiations and the manager's independence, however, leaves a great deal of room for the different ways of organising the negotiations, which is reflected in the scope of these rules.

European managers of financial infrastructures are licensed under the law of their registered office. This affiliation dictates not only the local application of company law, but also of prudential and insolvency law. The particularity of infrastructure managers is that they are subject to an administrative connecting factor, which may be with the authority of a Member State, according to a decentralised coordination model, or directly with an EU agency, according to a centralised model (Chapter 1). As a matter of principle, the provision of access to a market infrastructure on the territory of the Union triggers the applicability of European law; by way of exception, it is possible for certain third-country operators to be subject only to the law of their headquarters. This limitation of European law is then based on the equivalence method. However, it should be noted that this method is not the only mechanism for self-limitation of local law and that the objectives of substantive law may lead to the eviction of all forms of self-limitation of European law when the provision of clearing services on its territory is at stake (Chapter 2).

Regime of the notion of system. Market infrastructures are systems, which have in common that they consist of a legal element, the rules of the system, and a physical element, the computer system. The most emblematic systems are trading systems, referred to as trading platforms, of which the topical example is the regulated market and whose lower forms are multilateral trading facilities and organised trading systems. This classification as a trading platform has a number of consequences: not only does it entail the application of a specific regime for its manager and for the members of the system, as provided for in MiFID 2, but it also entails a special regime for investors. In fact, the qualification of a regulated market makes applicable, for those who make use of this infrastructure, the legislative package constituted by the Transparency, Takeover and Market Abuse Directives, i.e. it dictates the regime to which investors wishing to conclude market transactions are subject. This explains why, from an international point of view, the connecting factor of the trading platform to the regulation of market operations is possible.

A specific regime is also attached to the qualification of a system within the meaning of the Finality Directive, i.e. to the qualification of clearing, securities settlement and money settlement systems. Indeed, the Finality Directive gives transactions using these systems a definitive character: collective proceedings can no longer call into question the operation. However, the use of the latter systems can be imposed. This is, first of all, the case for people who wish to use the financial market, including the issuer. If the issuer wishes to admit its securities to trading on a financial market, it is obliged by the market rules to deposit them with a central security depository (CSD). The use of these systems can also be imposed independently of the use of a financial market: private persons wishing to conclude an OTC financial contract subject to the clearing obligation will thus have to use a clearing house.

Defects of consent are part of the general protection afforded to contracting parties in French law. These conditions of validity are subject by the Rome I Regulation to the lex contractus.However, the formation of the contract is likely to be disrupted by the application of certain rules traditionally excluded from the domain of the law of contract, either in order to protect the persons concluding financial contracts or in order to protect the underlying asset affected by the conclusion of the financial contract. These rules can be divided into two sets. The first set consists of legislation on the capacity of persons.In French law, however, these do not interfere much with the conclusion of financial contracts, as the enactment of an incapacity regime has more disadvantages than advantages (Section 1). This is why French law favours a second set of rules, relating to the marketing of financial contracts, to ensure the protection of its residents (Section 2). The rules relating to the protection of the underlying are intended to prevent the financial contract, thanks to the rule of autonomy which characterises it, from constituting for the parties an instrument for circumventing the rules applicable to the underlying (Section 3).

Section 1. THE CAPACITY

On the face of it, French law provides for a measured regime of incapacity that tends to promote the hedging function of the financial contract while preventing it from being used for speculative purposes; on reflection, however, the criterion of speculative intent appears dysfunctional (§ 1). In relation to financial contracts, the enactment of an incapacity regime is tantamount to an incapacity of enjoyment (incapacité de jouissance), not of exercise (incapacité d’exercice): when applicable to legal persons, the regime should be aimed at the ability to contract (§ 2).

Mode of negotiation and connection. As a financial contract is a commercial contract, it falls within the material scope of the Rome I Regulation. In order to ensure that the parties’ choice of law is respected, the contract must be international. If the contract is concluded through a financial market, it will necessarily be concluded by its members. Internationality will not pose any difficulty since the law applicable to the financial contract will most often be the law of the trading platform;this connection is nevertheless not really decisive since the contract is then recorded with the clearing house.On the other hand, if the financial contract is concluded over-the-counter, the internationality of the financial contract needs to be characterised. This characterisation is fundamental insofar as it conditions, on the one hand, the very possibility of relying on a choice of law in an area where the law of the contract is likely to determine the enforceability of contractual guarantees, in particular those relating to setoff in the event of insolvency, and, on the other hand, the possibility of relying on a set of legal benefits depending on the applicable law.According to the criteria of the Rome I Regulation, the internationality of the financial contract is characterised, as it is most frequently concluded in an international situation (Section 1). From the point of view of connection, internationality allows the parties, through the selection of a given law, to attribute jurisdiction to the legal system most favourable to the possible contentious enforcement of the contract. This choice is all the more important as in practice the possible interference of the derogatory rule of the Rome I Regulation specific to consumer contracts is rare: it requires, in addition to the characterisation of consumer, the existence of a solicitation by the professional (Section 2).

The current state of market infrastructure is the result of several recent distinctions: first, between the different infrastructures needed for the functioning of the financial market and, second, between the infrastructure and its manager. For a long time, these different aspects were concentrated in the statute of the stockbrokers, instituted by the State. Through this, the financial market managed by the stockbrokers was already attached to the State. This legal, rather than geographical, attachment was already serving as a basis for the regulation of private relations that the infrastructure allowed. In order to observe this, it is necessary to retrace the history of French financial markets from the Middle Ages to the present day (Section 1.). The connecting factor of infrastructures has nevertheless changed, in particular because of the evolution of the institutional context, now European, in which infrastructures are embedded (Section 2.).

Section 1. THE CONFIGURATION OF FRENCH FINANCIAL MARKETS

The contemporary configuration of French financial markets is based on three distinctions. The first is that between the manager and the system. The second distinction is between the systems necessary for the proper functioning of the financial market: trading systems, also called trading platforms, clearing systems and securities settlement systems. The third distinction is between the different categories of trading platforms within trading systems. These three types of separation, which structure the contemporary organisation of financial markets (§ 2), are the result of the historical development of financial markets (§ 1).

Conflicts of laws relating to the ownership of securities most often arise in connection with their transfer.The transfer of securities, like the contractual assignment of claims is, from the point of view of conflict of laws, at the intersection of three distinct laws: the law of the object transfered, the law applicable to the transfer and, finally, the law applicable to the third party ‘effect’ (‘enforceability’) of the transfer. As regards the law of the object transferred, it should simply be recalled that, from the point of view of transfer transactions, the decisive aspect of the regime of securities is their negotiability. Negotiability is dependent on the form assigned to the securities, decided by the law of the issuer or the contract of issue.As regards the contract of transfer, which determines the contractual relations between the transferor and the transferee, this is subject to its own law; the lex contractus will depend on the means by which the contract is concluded. In the context of the financial market, three cases must be distinguished. First, the transfer contract may result from the issuance of an order on the trading platform, in which case the applicable law will be that of the trading platform between the membersand the contract between the member and its client.Secondly, in the case of a public offer of securities, the applicable law will be that designated by the offer.Thirdly and lastly, in the case of an over-the-counter transfer of securities admitted to trading, the applicable law will be that determined by the transfer contract or, in the absence of choice of law, by the domicile of the seller.