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The EFLMG has been closely following the legal effects in Europe of the Argentina crisis and the related work of the G-10 Working Group on contractual clauses.

The EFMLG has been assessing the differences between the existing national legal frameworks for the issuance of securities.

The EFMLG has undertaken the task of considering whether it would be suitable to harmonise force majeure clauses which are incorporated, for example, into the standardised master agreements governing financial transactions in the EU, with a view to decreasing legal impediments to cross-border financial activity. The EFMLG has produced some guidelines for transactions affected by force majeure events as well as recommendations which focus respectively on strikes and computer breakdowns as possible force majeure events.

The EFMLG has provided its views in respect of the activities of the Hague Conference on Private International Law's work on a Draft Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary.

The EFMLG has closely followed the implementation by EU Member States of Directive 2002/47/EC of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements (the ‘Collateral Directive'). This Report presents the findings of the EFMLG survey on the implementation of Collateral Directive, following-up on the June 2000 EFMLG report ‘ Proposal for an EU Directive on collateralisation' on the creation of a harmonised framework with regard to collateralisation in Europe ."

The EFMLG elaborated and circulated to the relevant European institutions in June 2000 a report proposing an EU directive to harmonise some basic legal features regarding collateralisation. It concluded that n ew legislation at a European level to simplify and harmonise the law relating to collateral is necessary and is justified by the benefits it would bring to participants in the international financial markets and to consumers in the form of enhanced stability in those markets and lower costs.

The aim of any new legislation should be to create a clear, simple and effective framework for collateralisation. It should reduce the formalities and administrative procedures associated with the creation and enforcement of pledges and transfers of title and should provide appropriate protection from the application of insolvency law to collateral provided under pledges and transfers of title. It should not adversely affect consumers.

The EFMLG is grateful that most of the issues raised in the EFMLG proposal were considered by the Commission when preparing a draft Directive on Financial Collateral Arrangements. The EFMLG is pleased to see that the passage of the proposal through the EU legislative process has addressed most of the concerns contained in the EFMLG report and that on 13 December the ECOFIN has given its political approval to the draft directive and on the same day the European Parliament adopted a resolution endorsing Mr Pérez Royo's report on that draft.

HARMONISATION OF LAWS RELATING TO SECURITIES HELD IN BOOK-ENTRY FORM IN THE EU

The EFMLG is making public on its website a Report on the 'Protection for Bilateral Insolvency Set-off and Netting Agreements under European Community Law' which identifies various legal uncertainties resulting from the EU Insolvency Regulation, Collateral Directive and Banks Winding-up Directive. The EFMLG notes that an opportunity to clarify Community law on the scope of protection for insolvency close-out netting arrangements might arise during a possible review of the Collateral Directive. The EFMLG would urge the Commission to take advantage of such a review process to also amend and expand the Collateral Directive's close-out netting provisions.

In the activities of the EFMLG, the absence of a harmonised legal regime governing the holding and transfer of financial instruments in the EU has received particular attention. As a result, the EFMLG has published a Report in which it makes several recommendations.

• The EFMLG supports the Giovannini Group's proposal for an EU Securities Account Certainty project.
• Community legislative action should be taken to harmonise the legal regime governing the holding and transfer of financial instruments by way of book-entries in the EU.
• A statutory dematerialised holding regime based on book-entries, allowing for transfers of financial instruments under terms harmonised to a sufficient extent so that their differences no longer constitute barriers to cross-border trading, would be instrumental to take full advantage of the effects of such harmonisation measure and of the huge advances in computer technology.

As explained in the Report, the EFMLG firmly believes that this reform project is not only highly desirable for the internal market for financial instruments, but that it is also technically feasible.

On 31 July 2008, the EFMLG adopted its report entitled «Towards improved judicial efficiency for financial services claims”. The impulse for the report came from the Council of EU Ministers of Economy and Finance (ECOFIN), which following its informal meeting in Helsinki in October 2006 requested the ECB and Commission to “monitor and assess the institutional features that hinder the effective functioning of the financial system, with a view to improving the framework conditions of the markets” .

The courts are integral to the institutional infrastructure on which well functioning financial markets rely, for example to provide legal certainty and resolve disputes. In view of this, in early 2007 the ECB approached the EFMLG and asked it to assess the efficiency of the courts in resolving claims of financial institutions, and if it found shortcomings, to advise how the situation could be improved.

The EFMLG report is not to be regarded as an empirical study but it does highlight issues, which in the EFMLG members' judgment and experience hinder the efficient and timely resolution of creditors or investors claims - something clearly to the detriment of the financial markets. The report makes nine recommendations, which if implemented would help to improve the situation for financial institutions trying to enforce simple claims. The principal recommendation is that policy makers should adopt measures to reduce the time between filing of a claim to first judgement, to introduce specialised financial market courts at appeal level and to encourage the wider use of pan European arbitration by international financial groups.

It is hoped that the Report will raise awareness of these issues among policy makers and that it will prompt EU Ministers to take measures in the recommended areas, in order to improve the efficiency of the courts in resolving financial claims.

On 7 May 2007, the EFMLG adopted its report on legal obstacles to cross-border securitisations in the EU. Over the past years, both at the national and European level, securitisation markets have witnessed important legislative and regulatory developments. At the Member States level, a number of initiatives have been taken to establish an appropriate legal and regulatory environment to facilitate the development of domestic securitisation markets across Europe. However, the securitisation landscape in the European Union (EU) is characterised by its diversity and its fragmentation and a number of legal impediments affect the development of true pan-European securitisations.

The assessment of national legal frameworks undertaken by the EFMLG in the fifteen 'old' EU Member States (i.e. the EU Member States before the May 2004 enlargement), indicates that full harmonisation of securitisation laws is not a realistic or even desirable objective, since such an exercise would affect a number of areas of law which are, for some Member States, intimately related to the roots of their domestic legal systems. However, following extensive consultation with market participants, the EFMLG concluded that a certain number of principles common to all jurisdictions need to be applied to ensure a high level of transparency, efficiency and legal certainty with regard to securitisation transactions. Most of these principles have been translated into EFMLG recommendations for further convergence of securitisation laws in the EU, which are set out in the report. As an alternative to a full harmonisation scenario, these principles could be enshrined in an EU directive dealing with certain legal aspects of securitisation.

A more effective and homogeneous application of Internal Market principles to the European securitisation industry would contribute to the diversification of opportunities offered to professionals involved in the securitisation market and to investors across the EU Member States. This could be particularly beneficial in the Member States that have not developed a specific legal framework on securitisation and/or where the securitisation market remains underdeveloped.

The EFMLG trusts that the recommendations contained in the enclosed report will increase the awareness of legislators to the need to take legislative action to promote the development of an integrated European securitisation market. Without the support of public action, it is unlikely that pan-European integration of this promising financial sector will occur.

The EFMLG has been looking into the existing variances in the legal definitions of repurchase transactions, which could potentially pose a problem for the full integration of the EU financial markets.

The EFMLG has provided its support to the work of the ACI -The Financial Markets Association regarding Short-Term European Paper (STEP).

More information concerning the project is available on the ACI website at www.aciforex.com , including the overall proposals and reommendations of the Euribor-ACI STEP Task Force.

The EFMLG is looking into the matter of signing authorities in connection standard market documentation. The work comprises the elaboration of a comprehensive overview of the national requirements in the EU and the elaboration of best practice recommendations inclusive of the preparation of a draft template power of attorney. The latter tries to reflect practical deficiencies (defective or unclear powers of attorney issued by market participants) that have been identified.

The EFMLG regularly discusses issues related to standard market documentation of relevance to the EU financial markets.

This includes e.g. the state of affairs as regards the use of the European Master Agreement, how it is being used and what the users experience is or the state of affairs as regards the use of cross-product master agreements.

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