27.6.2002 Official Journal of the European Communities L 168/43 DIRECTIVE 2002/47/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 6 June 2002 on financial collateral arrangements THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 95 thereof, Having regard to the proposal from the Commission ('), Having regard to the opinion of the European Central Bank (?), Having regard to the opinion of the Economic and Social Committee (%), Acting in accordance with the procedure laid down in Article 251 of the Treaty (%), Whereas: (1)  Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (°) constituted a milestone in establishing a sound legal framework for payment and securities settlement systems. Implementa- tion of that Directive has demonstrated the importance of limiting systemic risk inherent in such systems stem- ming from the different influence of several jurisdictions, and the benefits of common rules in relation to collat- eral constituted to such systems. (20 In its communication of 11 May 1999 to the European Parliament and to the Council on financial services: implementing the framework for financial markets: action plan, the Commission undertook, after consulta- tion with market experts and national authorities, to work on further proposals for legislative action on collateral urging further progress in the field of collat- eral, beyond Directive 98/26/EC. (3) A Community regime should be created for the provi- sion of securities and cash as collateral under both security interest and title transfer structures including repurchase agreements (repos). This will contribute to the integration and cost-efficiency of the financial market as well as to the stability of the financial system in the Community, thereby supporting the freedom to provide services and the free movement of capital in the single market in financial services. This Directive focuses on bilateral financial collateral arrangements. 1 () O] C 180 E, 26.6.2001, p. 312. () O] C 196, 12.7.2001, p. 10. () O] C 48, 21.2.2002, p. 1. (*) Opinion of the European Parliament of 13 December 2001 (not yet published in the Official Journal), Council Common Position of 5 March 2002 (not yet published in the Official Journal) and Decision of the European Parliament of 15 May 2002. () O] L 166, 11.6.1998, p. 45. (4) This Directive is adopted in a European legal context which consists in particular of the said Directive 98/ 26/EC as well as Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions (%), Directive 2001/17/EC of the European Parliament and of the Council of 19 March 2001 on the reorganisation and winding-up of insurance undertakings () and Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings (¥). This Directive is in line with the general pattern of these previous legal acts and is not opposed to it. Indeed, this Directive complements these existing legal acts by dealing with further issues and going beyond them in connection with particular matters already dealt with by these legal acts. In order to improve the legal certainty of financial collat- eral arrangements, Member States should ensure that certain provisions of insolvency law do not apply to such arrangements, in particular, those that would inhibit the effective realisation of financial collateral or cast doubt on the validity of current techniques such as bilateral close-out netting, the provision of additional collateral in the form of top-up collateral and substitu- tion of collateral. This Directive does not address rights which any person may have in respect of assets provided as financial collateral, and which arise otherwise than under the terms of the financial collateral arrangement and other- wise than on the basis of any legal provision or rule of law arising by reason of the commencement or contin- uation of winding-up proceedings or reorganisation measures, such as restitution arising from mistake, error or lack of capacity. The principle in Directive 98/26/EC, whereby the law applicable to book entry securities provided as collateral is the law of the jurisdiction where the relevant register, account or centralised deposit system is located, should be extended in order to create legal certainty regarding the use of such securities held in a cross-border context and used as financial collateral under the scope of this Directive. The lex rei sitae rule, according to which the applicable law for determining whether a financial collateral arrangement is properly perfected and therefore good 125, 5.5.2001, p. 15. oJ L 0] L 110, 20.4.2001, p. 28. oL 160, 30.6.2000, p. 1.