French Think Tank Issues Report on Law Applicable to Assets Registered in Distributed Ledgers
The Legal High Committee for Financial Markets of Paris has recently published an English version of its report issued in May 2024 on The determination of the law applicable to assets registered in distributed ledgers. The report was produced by a working group chaired by Jérôme Chacornac (Paris II University) and Hubert de Vauplane (Kramer Levin Naftalis & Frankel).
The introduction of the report presents the background and purpose of the report as follows:
In connection with the adaptation of French law to the entry into force of a European
framework for distributed registry technologies, the Financial Markets Authority (AMF) asked the Legal High Commitee for Financial Markets of Paris (HCJP) to prepare a report on the state of solutions in French private international law to conflicts of laws relating to the proprietary effects of assets registered in a distributed ledger.
The issues to be addressed under French law are part of a rapidly changing context. Several countries, including the United States, Switzerland, Germany, Monaco and Liechtenstein, have adopted specific substantive law and conflict-of-laws rules concerning certain types of assets registered in “distributed” or “decentralized” ledgers.
A draft set of Principles on Digital Assets and Private Law (“DAPL”) was adopted in May 2023 by the Unidroit General Assembly, consisting of substantive law principles and a specific conflict-of-laws rule (hereinafter, the “Unidroit Principles”). The work carried out by Unidroit was envisaged as a possible starting point for the development of an international instrument on the subject by the Hague Conference on International Law, as part of a “joint initiative” between the two organizations. However, this joint initiative was halted in view of France’s reservations about its premises, which were shared by other member states of the HCCH.
In France, the entry into force of the “pilot regime” regulation has led to several adapta ons to securities law, while the adoption of the “MiCA” regulation has recently been the subject of further work in the marketplace. This report has endeavored to integrate this evolving framework into its presentation and proposals, making a clear dis nc on between de lege lata and de lege ferenda elements, in particular as regards the avenues for adapting French law to the MiCA regulation recommended in a HCJP report published during its preparation.
It was in this context that the undersigned were asked to set up a working group to identify any gaps or shortcomings in French conflict-of-laws rules, and to consider the relevant connecting factors for the purposes of drawing up any specific rule. The working group met six times between November 2023 and May 2024, to decide on the method to be used, then to examine the determination of the relevant connecting factor for transferable securities registered in a distributed ledger technology, before considering the characterization and possible connecting factors for assets other than transferable securities.
This report is therefore concerned with determining the law applicable to the proprietary effects of assets registered in distributed ledgers.
The report can be downloaded here.