CONTRACT AND COMMERCIAL LAW: The logic and Limits of harmonisation Roy Goode Readers are reminded that this work is protected by copyright. While they are free to use the ideas expressed in it, they may not copy, distribute or publish the work or part of it, in any form, printed, electronic or othenwise, except for reasonable quoting, clearly indicating the source. Readers are permitted to make copies, electronically or printed, for personal and classroom use I begin with the pleasant duty of thanking you for the privilege you have conferred on me in appointing me this years G J. Wiarda Visiting Professor at this distinguished University and Law Faculty. I should like to express my particular appreciation to my hosts, Professors Ewoud Hondius and Patrick honnebier and to mrs ellen hondius for all their kindness and hospitality, to the secretaries who with cheerful efficiency dealt with my seemingly endless requests for photocopies and to my postgraduate class in transnational commercial law, whose intelligence and enthusiasm made my teaching such a pleasure, even if perhaps some of them had what might be described as a balanced attitude to study And I am delighted to see here tonight several other old friends Professor Pieter Sanders, the doyen of international commercial arbitration; Judge Rosalyn Higgins of the International Court of Justice, and Professor Teun Struycken, President of the International Private Law Association 600 years. Beginning as an advocate he became beguiled by academe and in 1947 wa back Gerard Wiarda was a distinguished member of a family that can trace its lineage ppointed professor of administrative law in Utrecht. It is a testament to his outstanding qualities that, although he was at Utrecht for no more than three years, after which he accepted an invitation to become a judge of the Supreme Court and eventually President, his influence as a scholar of enormous range was such that the g J. wiarda Institute was set up in his honour as an umbrella for the research departments within the law faculty. He had an absorbing interest in human rights, and it was therefore no great surprise when he was later appointed a judge of the European Court of Human Rights, of which he eventually became President. So I feel honoured to be asked to deliver this years wiarda inaugural lecture, and I am conscious of doing so in the shadow of one of Utrechts outstand ing commercial lawyers and a former rector magnificus of this University, willem Molengraaff My talk this afternoon is concerned with the harmonisation of contract and commercial law. The subject is vast and there are members of this law faculty possessing remarkable language skills which I lack and a knowledge of comparative law and of foreig gal systems vastly exceeding my own. My focus is therefore less on the broad theoretical underpinnings of the harmonisation debate and more on practical aspects of the harmonisation process, which I believe are all too often neglected and on the need to back common assumptions with empirical evidence My talk will be in two halves. The first concerns harmonisation at the international evel in a strictly limited field and by means of hard law, namely international convention the second addresses an altogether more ambitious project at regional level, namely the harmonisation of European private law with particular reference to a proposed European Contract Code and in this context discusses the relative merits of hard law and soft law that
CONTRACT AND COMMERCIAL LAW: The Logic and Limits of Harmonisation Roy Goode Readers are reminded that this work is protected by copyright. While they are free to use the ideas expressed in it, they may not copy, distribute or publish the work or part of it, in any form, printed, electronic or otherwise, except for reasonable quoting, clearly indicating the source. Readers are permitted to make copies, electronically or printed, for personal and classroom use. I begin with the pleasant duty of thanking you for the privilege you have conferred on me in appointing me this year’s G.J. Wiarda Visiting Professor at this distinguished University and Law Faculty. I should like to express my particular appreciation to my hosts, Professors Ewoud Hondius and Patrick Honnebier, and to Mrs Ellen Hondius, for all their kindness and hospitality, to the secretaries who with cheerful efficiency dealt with my seemingly endless requests for photocopies and to my postgraduate class in transnational commercial law, whose intelligence and enthusiasm made my teaching such a pleasure, even if perhaps some of them had what might be described as a balanced attitude to study! And I am delighted to see here tonight several other old friends: Professor Pieter Sanders, the doyen of international commercial arbitration; Judge Rosalyn Higgins of the International Court of Justice; and Professor Teun Struycken, President of the International Private Law Association. Gerard Wiarda was a distinguished member of a family that can trace its lineage back 600 years. Beginning as an advocate, he became beguiled by academe and in 1947 was appointed professor of administrative law in Utrecht. It is a testament to his outstanding qualities that, although he was at Utrecht for no more than three years, after which he accepted an invitation to become a judge of the Supreme Court and eventually President, his influence as a scholar of enormous range was such that the G.J. Wiarda Institute was set up in his honour as an umbrella for the research departments within the Law Faculty. He had an absorbing interest in human rights, and it was therefore no great surprise when he was later appointed a judge of the European Court of Human Rights, of which he eventually became President. So I feel honoured to be asked to deliver this year’s Wiarda inaugural lecture, and I am conscious of doing so in the shadow of one of Utrecht’s outstanding commercial lawyers and a former rector magnificus of this University, Willem Molengraaff. My talk this afternoon is concerned with the harmonisation of contract and commercial law. The subject is vast and there are members of this law faculty possessing remarkable language skills which I lack and a knowledge of comparative law and of foreign legal systems vastly exceeding my own. My focus is therefore less on the broad theoretical underpinnings of the harmonisation debate and more on practical aspects of the harmonisation process, which I believe are all too often neglected and on the need to back up common assumptions with empirical evidence. My talk will be in two halves. The first concerns harmonisation at the international level in a strictly limited field and by means of hard law, namely international conventions; the second addresses an altogether more ambitious project at regional level, namely the harmonisation of European private law with particular reference to a proposed European Contract Code, and in this context discusses the relative merits of hard law and soft law, that
is. rules which do not in themselves have the force of law I Harmonisation at the international level Fascination with the idea of some great universal law which would transcend the boundaries of empire and state is of long stand ing. Some 2, 000 years ago Cicero wrote: There shall not be one law at rome another at athens one now another hereafter but one everlasting and unalterable law shall govern all nations for all time. It is a tribute to the power of Cicero's language that this passage was relied on by the founder of English commercial law, Lord Mansfield, in a case decided in 1759, to resolve a disputed question of Admiralty law Of course, Cicero's dream was never realised or realisable. Nevertheless, we came astonishingly close to a pan-European law in that remarkable period in the High Middle Ages when Roman law was rediscovered, reshaped by the glossators and taught in the University of Bologna, to which flocked students from all over Europe in such numbers that by 1160 Ad this one university is estimated to have had between 10,000 and 13,000 law students. And from the teaching at Bologna and later elsewhere there developed a relatively unified approach to the science of law, with Roman law as its base and Latin as the universal legal language. This ius commune, as we know, eventually succumbed to the rise of the nation state and national laws The question for us in the 2 1st century is whether we are in the course of establishing a new European, or even international, ius commune The process of harmonisation through an international instrument is almost always engthy and arduous and involves the infusion of a prodigious amount of expertise, time and money. It is thus a process not lightly to be undertaken. i do not myself subscribe to the view that the existence of d ifferent national laws governing commercial transactions is self evidently injurious to international trade. Rather i share the approach of that great commercial and comparative lawyer, Harold Gutteridge, who combined deep scholarship with a down-to-earth approach to his subject. In the second edition of his famous book Comparative Law, published in 1949 and still unsurpassed in its clarity and wisdom, he wrote n these terms of the limited progress in the unification of law: "It would seem that much of the blame for the failure to achieve more definite and permanent results must be attributed to an excess of zeal fostered by an exaggerated belief in the need for unification and over confidence in its feasibility. 3 And there, in this simple, elegant statement, we find what I regard as even now the sole criteria which justify a harmonisation project: the existence of a problem sufficiently serious to justify the labour and expense involved and the feasibility of the harmonisation proposed. I shall return to the grand idea of a modern ius commune in the context of European private law. At this stage, I would merely offer the reminder that the mediaeval ius commune was developed by scholars, not by legislators, and the question who produces the law is fundamental The globalisation of international trade and finance over the past 20 years has led to an upsurge in conventions on different aspects of private law governing commercial transactions. Among these may be mentioned the 1980 Vienna Convention on Contracts for De Republica, 3. 22.33 Luke v Lyde(1759 2 Burr 882 H C Gutteridge, Comparative La, 2nd edn.( Cambridge University Press, 1949)p 157
is, rules which do not in themselves have the force of law. I Harmonisation at the international level Fascination with the idea of some great universal law which would transcend the boundaries of empire and state is of long standing. Some 2,000 years ago Cicero wrote: ‘There shall not be one law at Rome, another at Athens, one now, another hereafter, but one everlasting and unalterable law shall govern all nations for all time.’1 It is a tribute to the power of Cicero’s language that this passage was relied on by the founder of English commercial law, Lord Mansfield, in a case decided in 1759,2 to resolve a disputed question of Admiralty law. Of course, Cicero’s dream was never realised or realisable. Nevertheless, we came astonishingly close to a pan-European law in that remarkable period in the High Middle Ages when Roman law was rediscovered, reshaped by the Glossators and taught in the University of Bologna, to which flocked students from all over Europe in such numbers that by 1160 AD this one university is estimated to have had between 10,000 and 13,000 law students. And from the teaching at Bologna and later elsewhere there developed a relatively unified approach to the science of law, with Roman law as its base and Latin as the universal legal language. This ius commune, as we know, eventually succumbed to the rise of the nation state and national laws. The question for us in the 21st century is whether we are in the course of establishing a new European, or even international, ius commune. The process of harmonisation through an international instrument is almost always lengthy and arduous and involves the infusion of a prodigious amount of expertise, time and money. It is thus a process not lightly to be undertaken. I do not myself subscribe to the view that the existence of different national laws governing commercial transactions is selfevidently injurious to international trade. Rather I share the approach of that great commercial and comparative lawyer, Harold Gutteridge, who combined deep scholarship with a down-to-earth approach to his subject. In the second edition of his famous book Comparative Law, published in 1949 and still unsurpassed in its clarity and wisdom, he wrote in these terms of the limited progress in the unification of law: ‘It would seem that much of the blame for the failure to achieve more definite and permanent results must be attributed to an excess of zeal fostered by an exaggerated belief in the need for unification and overconfidence in its feasibility.’3 And there, in this simple, elegant statement, we find what I regard as even now the sole criteria which justify a harmonisation project: the existence of a problem sufficiently serious to justify the labour and expense involved and the feasibility of the harmonisation proposed. I shall return to the grand idea of a modern ius commune in the context of European private law. At this stage, I would merely offer the reminder that the mediaeval ius commune was developed by scholars, not by legislators, and the question who produces the law is fundamental. The globalisation of international trade and finance over the past 20 years has led to an upsurge in conventions on different aspects of private law governing commercial transactions. Among these may be mentioned the 1980 Vienna Convention on Contracts for 1 De Republica, 3.22.33. 2 Luke v. Lyde (1759 2 Burr 882. 3 H.C. Gutteridge, Comparative Law, 2nd edn. (Cambridge University Press, 1949) p. 157
the International Sale of Goods the 1988 UNIDROIT Conventions on Intemational Financial Leasing and International Factoring, the 2001 Cape Town Convention on International Interests in Mobile Equipment with its associated Aircraft equipment Protocol, the UNCITRAL Convention on the assignment of receivables in International Trade. also concluded in 2001, and the 2002 Hague Convention on the law applicable to certain rights in respect of securities held with an intermediary. Time allows me to talk of only two of these Conventions, the Cape Town Convention and the Hague Convention, in both of which I was one of those involved from the early origins to their conclusion L I The Ca The Cape Town Convention is by any standards ambitious. It provides an international regime covering the financing of interests in aircraft objects, railway rolling stock and space assets by means of secured loans, sales under reservation of title and leases. A financier taking security over these classes of asset faces serious problems arising from the fact that the assets in question are either earth-bound but constantly on the move, so that a financier has no guarantee that a security or title-retention interest created under its own law will be recognized and enforced elsewhere, or, in the case of satellites and other space assets, is not on earth at all. Huge sums of money are invested in the acquisition of aircraft, satellites and railway rolling stock. Yet there are countries whose law is hostile to the whole idea of non possessory security or embodies restrictions and requirements which place obstacles to entry them protection against the debtor's bankruptcy creditors. In consequence, developing o countries either find it difficult or even impossible to obtain finance for the acquisition of such objects or, if they do obtain finance, it is expensive. So a key objective of the Convention is to provide a legal regime which will make creditors feel comfortable, open to developing countries access to funds and bring down borrowing costs The central features of the Cape Town Convention are the easy creation of an international interest, by security or title retention, with a set of basic default remedies and the ability to secure fast provisional relief, the establishment of an international public register to record these interests, operated by a registrar under the supervision of a Supervisory Authority; and a simple set of priority rules based on the principle that a registered interest has priority over a subsequently registered interest or an unregistered interest and is protected from the general body of cred itors in the debtors insolvency. The Convention does not come into force as regards any class of object unless and until there is a Protocol in force for that class and it then takes effect subject to the Protocol. So far, only one Protocol has been concluded, namely the Aircraft Equipment Protocol, and this both modifies and supplements the Convention to accommodate the particular requirements of the aviation ndustry and its financiers The Convention and Protocol are complex instruments which together run to 99 Articles, only two fewer than the vienna sales Convention and infinitely more complex Nevertheless, the Convention and Protocol were signed on the spot at the Diplomatic Conference by no fewer than 20 States, and others have since signed. To come into force, the Convention and Protocol require eight ratifications. There is every expectation that these will materialise during the present year or shortly thereafter and that the Convention will be a considerable success
the International Sale of Goods, the 1988 UNIDROIT Conventions on International Financial Leasing and International Factoring, the 2001 Cape Town Convention on International Interests in Mobile Equipment with its associated Aircraft Equipment Protocol, the UNCITRAL Convention on the Assignment of Receivables in International Trade, also concluded in 2001, and the 2002 Hague Convention on the law applicable to certain rights in respect of securities held with an intermediary. Time allows me to talk of only two of these Conventions, the Cape Town Convention and the Hague Convention, in both of which I was one of those involved from the early origins to their conclusion. I.1 The Cape Town Convention The Cape Town Convention is by any standards ambitious. It provides an international regime covering the financing of interests in aircraft objects, railway rolling stock and space assets by means of secured loans, sales under reservation of title and leases. A financier taking security over these classes of asset faces serious problems arising from the fact that the assets in question are either earth-bound but constantly on the move, so that a financier has no guarantee that a security or title-retention interest created under its own law will be recognized and enforced elsewhere, or, in the case of satellites and other space assets, is not on earth at all. Huge sums of money are invested in the acquisition of aircraft, satellites and railway rolling stock. Yet there are countries whose law is hostile to the whole idea of nonpossessory security or embodies restrictions and requirements which place obstacles to entry into a valid agreement and even more obstacles in enforcing security interests and giving them protection against the debtor’s bankruptcy creditors. In consequence, developing countries either find it difficult or even impossible to obtain finance for the acquisition of such objects or, if they do obtain finance, it is expensive. So a key objective of the Convention is to provide a legal regime which will make creditors feel comfortable, open to developing countries access to funds and bring down borrowing costs. The central features of the Cape Town Convention are the easy creation of an international interest, by security or title retention, with a set of basic default remedies and the ability to secure fast provisional relief; the establishment of an international public register to record these interests, operated by a Registrar under the supervision of a Supervisory Authority; and a simple set of priority rules based on the principle that a registered interest has priority over a subsequently registered interest or an unregistered interest and is protected from the general body of creditors in the debtor’s insolvency. The Convention does not come into force as regards any class of object unless and until there is a Protocol in force for that class and it then takes effect subject to the Protocol. So far, only one Protocol has been concluded, namely the Aircraft Equipment Protocol, and this both modifies and supplements the Convention to accommodate the particular requirements of the aviation industry and its financiers. The Convention and Protocol are complex instruments which together run to 99 Articles, only two fewer than the Vienna Sales Convention and infinitely more complex. Nevertheless, the Convention and Protocol were signed on the spot at the Diplomatic Conference by no fewer than 20 States, and others have since signed. To come into force, the Convention and Protocol require eight ratifications. There is every expectation that these will materialise during the present year or shortly thereafter and that the Convention will be a considerable success
I. 2 The Hague Convention This Convention, concluded at The Hague in December 2002 under the presidency of Professor Struycken and with Professor Stefania Bariatti as Chair, deals with the law governing the proprietary effects of the holding and transfer or pledge of securities through a custodian or other intermed iary rather than directly from the issuer. Under trad itional conflict of laws rules, issues relating to the transfer of securities are governed, in the case of registered securities, by the law of the place where the issuer is incorporated or alternatively securities held through an account with an intermediary, since the root of title is not the register or the physical location of bearer securities but the securities account with the ntermediary, and the law best suited to determine proprietary issues is the law of the place of business of the relevant intermediary. This place of the relevant intermediary'approach (PRIMA)is already embodied in a restricted way in Article 9(2)of the EC Settlement Finality Directive. What the Hague Convention does is to extend the concept, in modified form, to the international plane and in a relatively unrestricted way. The principal modification is that, to promote predictability, the law governing proprietary issues, whether as between the parties or in relation to third-party rights and priorities, will be that selected by the account holder and the intermed iary to govern the account agreement. This is subject to a so-called reality test, which in essence requires that the selected law is that of a state or territorial unit of a State in which the intermediary carries on the business of maintaining securities accounts, though without necessarily maintaining the particular account in question in that State Though the Hague Convention is very much shorter than the Cape Town Convention and a good deal less complex, it nevertheless raised a host of difficult issues stemming in no small measure from the wide diversity of institutions and practices involved in the securities industries in different countries. Yet the Convention was concluded a mere 2/ years after work first began, an astonishing achievement. The existence of a major problem was quickly established. In world financial centres, dealings in securities may amount to billions of dollars every night. It is therefore of vital importance to the parties to know what law governs proprietary issues. Yet apart from the conflict rule in Article 9(2)of the EC Settlement Finality Directive, which is of limited application, and decrees in Belgium and Luxembourg where the two international central securities depositories, Euroclear and Clearstream, are respectively based there are few national laws laying down clear conflict rules L. 3 The ingredients of success What can we learn from the working methods adopted in the preparation of these instruments? I would identify four crucial factors (1)The avoidance of excessive ambition It is better to have a limited target that is achievable than a grand design that is not. Three factors are common to the five conventions to which I referred earlier. First, they are confined to commercial transactions, because consumer transactions are already highly regulated and strongly overlaid with mandatory laws. Second, they are limited to cross border transactions, because it is primarily in international trade that problems of differences
I.2 The Hague Convention This Convention, concluded at The Hague in December 2002 under the presidency of Professor Struycken and with Professor Stefania Bariatti as Chair, deals with the law governing the proprietary effects of the holding and transfer or pledge of securities through a custodian or other intermediary rather than directly from the issuer. Under traditional conflict of laws rules, issues relating to the transfer of securities are governed, in the case of registered securities, by the law of the place where the issuer is incorporated or alternatively keeps its register and, in the case of bearer securities, by the lex situs of the certificates at the time of the transfer in question. These rules do not, however, work well in the case of securities held through an account with an intermediary, since the root of title is not the register or the physical location of bearer securities but the securities account with the intermediary, and the law best suited to determine proprietary issues is the law of the place of business of the relevant intermediary. This ‘place of the relevant intermediary’ approach (PRIMA) is already embodied in a restricted way in Article 9(2) of the EC Settlement Finality Directive. What the Hague Convention does is to extend the concept, in modified form, to the international plane and in a relatively unrestricted way. The principal modification is that, to promote predictability, the law governing proprietary issues, whether as between the parties or in relation to third-party rights and priorities, will be that selected by the account holder and the intermediary to govern the account agreement. This is subject to a so-called ‘reality test’, which in essence requires that the selected law is that of a state or territorial unit of a State in which the intermediary carries on the business of maintaining securities accounts, though without necessarily maintaining the particular account in question in that State. Though the Hague Convention is very much shorter than the Cape Town Convention and a good deal less complex, it nevertheless raised a host of difficult issues stemming in no small measure from the wide diversity of institutions and practices involved in the securities industries in different countries. Yet the Convention was concluded a mere 2½ years after work first began, an astonishing achievement. The existence of a major problem was quickly established. In world financial centres, dealings in securities may amount to billions of dollars every night. It is therefore of vital importance to the parties to know what law governs proprietary issues. Yet apart from the conflict rule in Article 9(2) of the EC Settlement Finality Directive, which is of limited application, and decrees in Belgium and Luxembourg, where the two international central securities depositories, Euroclear and Clearstream, are respectively based, there are few national laws laying down clear conflict rules. I.3 The ingredients of success What can we learn from the working methods adopted in the preparation of these instruments? I would identify four crucial factors: (1) The avoidance of excessive ambition It is better to have a limited target that is achievable than a grand design that is not. Three factors are common to the five conventions to which I referred earlier. First, they are confined to commercial transactions, because consumer transactions are already highly regulated and strongly overlaid with mandatory laws. Second, they are limited to crossborder transactions, because it is primarily in international trade that problems of differences
in national laws are likely to cause the most acute problems and because of a perception that states who have a strong sense of the superiority of their own laws will feel less sensitive to changes where these are confined to transactions between businesses in different states third their raison d'etre is not simply the existence of differences in national laws but the fact that these were wholly inadequate to cater for the needs of those engaged in international trade (2) Participation of all interested parties from the outset The traditional method of preparing international conventions is for a study group or working party consisting of scholars and/or lawyers in government to prepare draft texts and send these out for comment. But consultation is not the same as participation. The quality of a project improves dramatically if from the very outset those who have first-hand knowled and experience of the practices of the sectors affected are involved -not necessarily members of the Study group but as people committed to work together to produce proposals, criticisms and suggestions for the improvement of texts. Early participation of interested sectors is necessary in order to show that there is a serious problem to be addressed and that it is capable of solution. If the major players give an affirmative answer on these two points then at least the case for harmonisation has been properly made, and the project can proceed a huge impetus was given to work on the Cape Town Convention by the massive input of the aviation industry, different groups hold ing meeting after meeting, preparing paper after paper, and organising seminar after seminar. Not only did this help to ensure that he resultant texts reflected commercial practices and needs, it also reduced the financial and administrative burdens on the hard-pressed UNIDROIT Secretariat and, equally important generated a high level of interest in the project and support for it which in turn influenced the thinking of governments. In addition, an economic impact assessment was commissioned from two economists working under the auspices of INSEAD, whose report estimated that if a stable international legal environment could be provided for the creation, enforcement perfection and priority of security and title-retention interests, the leading cred it-rating agencies would upgrade the rating of aircraft receivables and the consequent reduction borrowing costs could lead to savings of up to $4 billion a year. There were those whe iewed this estimate with a considerable measure of scepticism. but a mere ten days ago, Ex- im Bank -the Export-Import Bank of the United States-issued a press release offering a reduction of one third in its exposure fee on the financing of large US aircraft for all buyers in foreign countries that ratify and implement the Cape Town Convention. This announcement shows in dramatic form the enormous potential value of a sound international legal regime for the protection of international interests in aircraft The participatory approach was also strongly present in the Hague Convention project The securities industry is highly complex and diversified The major players include issuers, registrars and transfer agents, central bankS, international and national central securities depositories operating clearing and settlement systems, custod ians and sub-custodians, and broker-dealers, and the ind irect holding system sets up what is often a long chain of intermediaries and account holders, each of which may be based in a different jurisdiction. As with aircraft, there was intense participation by the numerous international and regional organisations, essential if one was to obtain a complete picture, since no one group or individual could be expected to have a detailed knowledge of the whole industry. At least one of the rules, namely the rule that a choice of law agreed between parties A and B, would also govern third-party rights, was counter-intuitive and would have been rejected outright by the trad itional conflicts lawyer but has been found essential in order to promote predictability
in national laws are likely to cause the most acute problems and because of a perception that states who have a strong sense of the superiority of their own laws will feel less sensitive to changes where these are confined to transactions between businesses in different states. Third, their raison d’être is not simply the existence of differences in national laws but the fact that these were wholly inadequate to cater for the needs of those engaged in international trade. (2) Participation of all interested parties from the outset The traditional method of preparing international conventions is for a study group or working party consisting of scholars and/or lawyers in government to prepare draft texts and send these out for comment. But consultation is not the same as participation. The quality of a project improves dramatically if from the very outset those who have first-hand knowledge and experience of the practices of the sectors affected are involved - not necessarily as members of the Study Group but as people committed to work together to produce proposals, criticisms and suggestions for the improvement of texts. Early participation of interested sectors is necessary in order to show that there is a serious problem to be addressed and that it is capable of solution. If the major players give an affirmative answer on these two points, then at least the case for harmonisation has been properly made, and the project can proceed. A huge impetus was given to work on the Cape Town Convention by the massive input of the aviation industry, different groups holding meeting after meeting, preparing paper after paper, and organising seminar after seminar. Not only did this help to ensure that the resultant texts reflected commercial practices and needs, it also reduced the financial and administrative burdens on the hard-pressed UNIDROIT Secretariat and, equally important, generated a high level of interest in the project and support for it which in turn influenced the thinking of governments. In addition, an economic impact assessment was commissioned from two economists working under the auspices of INSEAD, whose report estimated that if a stable international legal environment could be provided for the creation, enforcement, perfection and priority of security and title-retention interests, the leading credit-rating agencies would upgrade the rating of aircraft receivables and the consequent reduction in borrowing costs could lead to savings of up to $4 billion a year. There were those who viewed this estimate with a considerable measure of scepticism. But a mere ten days ago, Exim Bank - the Export-Import Bank of the United States - issued a press release offering a reduction of one third in its exposure fee on the financing of large US aircraft for all buyers in foreign countries that ratify and implement the Cape Town Convention. This announcement shows in dramatic form the enormous potential value of a sound international legal regime for the protection of international interests in aircraft. The participatory approach was also strongly present in the Hague Convention project. The securities industry is highly complex and diversified. The major players include issuers, registrars and transfer agents, central banks, international and national central securities depositories operating clearing and settlement systems, custodians and sub-custodians, and broker-dealers, and the indirect holding system sets up what is often a long chain of intermediaries and account holders, each of which may be based in a different jurisdiction. As with aircraft, there was intense participation by the numerous international and regional organisations, essential if one was to obtain a complete picture, since no one group or individual could be expected to have a detailed knowledge of the whole industry. At least one of the rules, namely the rule that a choice of law agreed between parties A and B, would also govern third-party rights, was counter-intuitive and would have been rejected outright by the traditional conflicts lawyer but has been found essential in order to promote predictability