The reforms, though largely beneficial, have created an alarming level of uncertainty as to the question of "what law applies" in cross-border securities transactions.
Historically, many jurisdictions attempted to apply the traditional, but now arguably outdated, lex rei sitae test to securities held with intermediaries, by "looking through" the tiers of intermediaries to the laws of one or more of: the jurisdiction of incorporation of the issuer, the location of the issuer's register, or the location of the actual security certificate (the so-called "look-through approach").
Delegates concluded that a test that tried to actually locate a particular securities account would result in an unacceptable level of impossibility or uncertainty.
Over time a new approach was developed: The main rule of the Convention can be summarised as follows: The second step is to apply the "qualifying office" test.
Other issues governed by the Convention include: In 2003, Unidroit started a negotiation process with a view to harmonise the material aspects of intermediated securities.
The purpose is to achieve a further step towards legal integration of securities markets, that consist not only in identifying the applicable law, but also in harmonising some parts of the legislation of the signatory States.