The move towards "dematerialization" started partially in the United States in the late sixties, and has been generalised in France during the eighties, followed by the rest of Europe during the years 2000.

This distinction is ancient and draws back to the time where foreign investors used to repatriate paper securities subscribed with issuers incorporated under a different constituency.

In countries where the first interpretation prevails, the investor shall dispose of a right to "rivindicate" (claim as one's own) which will allow him a speedy recover of the securities.

[6] This second interpretation does not comfort the investor, even when it is backed by experienced lawyers (see case of Banco Santander's securities deposited with Lehman Brothers).

The aim of this harmonisation of the registration methods is to create a bridge between European directive 98/26 on payment and securities settlement systems and the less integrated practices of non-European countries.

This downward process related to the subscription requires, an exact replication of the debits and of the credits of the securities between each link of the intermediation chain.

[citation needed] The ownership aspects concerning securities are governed in the United States by Article 8 of the Uniform Commercial Code (UCC).

[8] But the DTC and the FED hold no individual register of the transfers of property, so that the possibility for an investor of proving the property of its securities relies entirely on the good replication of the transfer recorded by the DTC and FED at the lower tiers of the holding chain of the securities.

As a consequence, it also prevents the investor, to assert its securities at the upper level of the holding chain, either up to the DTC or up to a sub-custodian.

Furthermore, this re-characterisation of the proprietary right into a simple contractual right enables the account provider, to "re-use" the security without necessarily being obliged to ask for the authorisation of the investor, in particular within the framework of temporary operations such as security lending, option to repurchase, buy to sell back or repurchase agreement.

In the latter case the beneficiary of the trust agreement, becomes itself a "beneficial owner" with no possibility to reflect this ownership in its balance sheet.

Accordingly, the United Kingdom and most other countries of Common law felt no difficulty of being brought into line with the American contractual approach.

[citation needed] The Unidroit convention states, in its preamble, the principle of neutrality with respect to company law.

Nevertheless, for the remainder, signatory States will have to compel their transmitters to recognise as intrinsic right holders, persons which, under the law of the issuer, would have been regarded as shareholders or bondholders.

Admittedly, in practice, the US legislation envisages procedures enabling the genuine investor to obtain a "mandate" ("proxy") from their respective final intermediary in order to exercise the rights to vote on behalf of the latter.

[11] The States that will sign the Unidroit convention will thus facilitate the control of their national issuers by intermediaries incorporated under US law.