What is required to be a governing law?

— Part Three of Four —

Two things are required. First, the choice should be expressly made. If an express choice is not made, there are a series of fallback rules under the Convention, but clearly the far better approach is to make an express choice.

Second, the jurisdiction whose law is chosen must be a jurisdiction (i.e. nation) where the intermediary has a “Qualifying Office.” A “Qualifying Office” is an office that is engaged in the regular activity of maintaining securities accounts. Nations like the United States (with our fifty States) or Canada (with its ten Provinces and three Territories) are termed “Multi-unit States.” The intermediary can have a Qualifying Office in any of the units of a Multi-unit State, even if the “unit” whose law is chosen is not the same unit where the Qualifying Office is located. So, for example, an account agreement with an intermediary physically located in the State of Massachusetts could validly select the law of the State of New York as governing law, even if it has no office in New York. It is expected that many intermediaries regularly dealing in securities will adopt New York law because of the long-standing and voluminous securities transactions in that jurisdiction. New York law might be the governing law selected even for account agreements with account holders and/or intermediaries located far outside of New York – in Idaho, Arkansas, Illinois, or Alabama; the selection of New York law will be valid so long as the intermediary has a Qualifying Office anywhere in the United States, and there is some international element to the securities or transaction.