on the revised text
Document préliminaire No 8ter de septembre 1983 Preliminary Document No 8ter of Seplember 1983
Australie/Australia
General
It appears to us that the Convention as presently drafted w o u l d , i n practice, have a quite limited o p é r a t i o n . One reason f o r this is that article 2A w i l l limit the Conven-tion to trusts f o r w h i c h the applicable law under articles 3 and 4 contains provisions relating to trusts; another reason is that the Convention w i l l be limited to trusts created i n w r i t i n g and w i i i therefore not be applicable to a wide range o f implied and resulting trusts.
T h è s e restrictions i n the scope o f the proposed Conven-t i o n have Conven-taken accounConven-t of, inConven-ter alia, Conven-the facConven-t Conven-thaConven-t Conven-the reason f o r having a Convention is itself a limited one, i.e. a need to provide f o r common law trusts to be re-cognised i n civil law countries.
Nevertheless it appears to us that there is a need to keep in m i n d the likely implications o f a Convention which w o u l d deal only to a limited extent w i t h trusts. We need to consider this now because it could have a significant bearing on the later c o n s i d é r a t i o n which w i l l take place w i t h a view to determining whether the benefits flowing f r o m the Convention w o u l d be such as to make ratifi-cation o f it désirable.
A common law country may at that stage feel that i f it were to ratify the Convention there w o u l d be compel-ling arguments f o r applying the Convention conflicts r é g i m e to ail trusts, including trusts originating i n coun-tries w h i c h have not ratified the Convention and trusts o f a k i n d excluded f r o m the Convention. So far as the applicable law is concerned, our p r é s e n t view is that a country w h i c h ratified the Convention w o u l d i n practice have to apply it as a Convention o f universal o p é r a t i o n . • M o r e specifically we w o u l d need to approach the ques-tion o f possible ratificaques-tion o n the basis that i f we were to ratify we w o u l d need to apply the applicable law provisions i n relation to trusts emanating f r o m ail com-mon law countries. The significance o f this is that we are unaware o f problems arising as between common law jurisdictions.
We w o u l d also need, i n considering the question o f ratification, to keep i n m i n d that it w o u l d be undesirable for the law applied by c o m m o n law countries which do not r a t i f y the Convention to gèt out o f line w i t h the law applied by us as a Party to the Convention. I n short, there w i l l be a need f o r us to be satisfied that i n provid-ing f o r trusts to be recognised i n civil law countries we do not create problems as between c o m m o n law coun-tries.
We have given some thought to whether it w o u l d be practicable to have a Convention p r o v i d i n g f o r c o m m o n law trusts to be 'recognised' without facing up to the
stage, however, we have not been able to see how this c o u l d be donc.
We w i l l be interested to hear at the October meeting o f the Spécial Commission whether the experts f r o m other c o m m o n law countries share our concerns and whether they see any alternative approach which w o u l d achieve the limited objectives o f the Convention without giving rise to those concerns.
I shall now comment on particular provisions i n the draft Convention.
Article 1
Our view has already been mentioned that the Conven-tion should have a universal o p é r a t i o n i n relaConven-tion to the applicable law. The provisions o f récognition appear to be o f a différent character, and to need to have a recip-rocal o p é r a t i o n . We accordingly favour Variant A . T o make the matter quite clear it might be d é s i r a b l e to include a provision similar to article 11 o f the Conven-tion o n the Law Applicable t o Traffic Accidents.
Article 2
We w o u l d omit the f o u r t h paragraph o f article 2. The aim o f the article is to give to lawyers and judges i n civil law countries sufficient indications o f what constitutes a trust, and this is admirably done i n the first three paragraphs o f the article. The f o u r t h paragraph, how-ever, does not give that sort o f i n d i c a t i o n ; it indicates how i n one respect a trust o p é r â t e s . There is no doubt-ing that the matter dealt w i t h by the paragraph is a matter o f importance, going as it does to one o f the basic objectives o f the Convention. But we see it as a matter which should more appropriately be included i n article 7, which sets out what is involved i n récognition of a trust. Indeed, the matter is already provided f o r i n that article. We think that i f it is included as well i n article 2, there is a danger that courts i n civil law coun-tries may wrongly conclude i n some circumstances that what they have before them is not a trust w i t h i n the meaning o f the Convention.
We t h i n k an additional paragraph should be added to the article to make it clear that it is not necessarily inconsistent with the existence o f a trust f o r a trustée to be one o f the beneficiaries under the trust. We see the same sort o f need to make this clear as is recognised i n the existing draft in relation to where the settlor reserves certain rights and powers to himself. As a matter o f drafting it may be d é s i r a b l e to deal w i t h both points i n a single paragraph.
Article 3
While this article presently permits a settlor to choose a separate law to apply t o a part o f the trust, f o r this purpose a part o f the trust appears to refer to a part o f the trust assets. The article does not appear to permit a choice o f one law to apply to, say, validity and another law to administration. This seems clear f r o m article 6 and it differs f r o m the existing common law position.
N o justification f o r restricting the settlor's existing freedom having been advanced, we consider that article 3 should be amended to provide that a settlor can exer-cise his autonomy o f choice so as to provide f o r différ-ent laws to apply i n relation to various aspects o f a trust. This w i l l , o f course, call f o r consequential amend-ments particularly to article 6.
Article 4
We have difficulty w i t h the t h i r d paragraph o f this ar-ticle and propose that it be omitted.
It is inappropriate that i n the context o f article 4 such a provision be expressed i n a permissive f o r m (i.e by the Word 'may'). I f included, the provision w o u l d need to be made mandatory, but we doubt whether a man-datory provision to the efîect o f the paragraph w o u l d be justified.
Article 5
We have difficulty w i t h several matters o f détail i n this article. M o r e fundamentally we have réservations about the inclusion o f the article at ail.
I f the article is to be retained, there is a need to refer in its opening words to the place o f the principal admin-istration, not just the place o f administration. The ar-ticle w o u l d be appropriate only f o r trusts f o r which the applicable law at the outset is governed by the principal place o f administration. O n this basis it is not appropriate f o r
-- trusts f o r which the applicable law is chosen under article 3;
- trusts which, under the second paragraph o f article 4, have a doser connection w i t h a law other than that of the principal place o f administration;
- a severable part o f a trust which fell w i t h i n the third paragraph o f article 4 ( i f retained).
Our basic réservation concerning article 5 is that its rationale is unclear. I t does not, as we read it, produce a change o f the applicable law o f a trust, but provides for a new law to govern matters o f administration 'to the extent that the original applicable law so directs or permits'. R é f é r e n c e w o u l d have to be made to the two iaws and this w i l l add to complexity.
Article 6
We have some réservations about the p r é s e n t provisions in this article f o r the law applicable under the Conven-tion to govern the validity o f a trust.
One concern is that the absolute terms in which this is expressed might have the effect o f restricting the p r é s e n t freedom o f courts to apply to a trust, particularly a testamentary trust, the law o f the State which makes the disposition valid.
We are also troubled that article 6 w o u l d require the validity o f a testamentary trust to be governed by a law the sélection o f which w o u l d not take into account the domicile o f the testator at the date o f death. •
Our existing position is that we regard the validity o f a testamentary trust o f moveables as generally governed by the law o f that domicile - there is some doubt whether the concept o f 'proper law' has any application in wills.
It appears f r o m Scott on Trusts, 3rd edn., that i n the United States, the position is more flexible i n this regard but that, even so, c o n s i d é r a b l e significance still normal-ly attaches there to the domicile o f the d e ç e a s e d at the date o f his death. Thus, at S.390 it is said
-'Ordinarily the law governing the validity of a trust of moveables created by will, like the validity of the will itself, is determined by the law of the testator's domicile at death. There are, however, two situations in which the law of another state may détermine the validity of the trust.
The first is where the testator has designated the law of another state as the governing law. The second is where the testator has fixed the administration of the trust in a state other than that of his domicile at death.'
As a matter o f drafl;ing, and subject to the foregoing c o n s i d é r a t i o n s , we suggest that
-1 the words ' f o r m a i and essential' be inserted i n line 1 before the w o r d 'validity',
2 the word 'eifects' i n line 2 be amended to 'effect', 3 the last f o u r Unes be replaced by the f o l l o w i n g
-'Where a trust is created by a will or an instrument of conveyance or transfer, the law applicable under this Con-vention will govern the validity of the trust provided the will or instrument of conveyance or transfer is not invalid by virtue of any other law which is applicable to it. ' This f o r m u l a t i o n w o u l d , we think, dérive support f r o m the f o l l o w i n g passage i n Scott, S.588:
'Here we must distinguish, however, between the validity of the will as such, and the validity of the provisions therein for the création of a trust. If the will is invalid, the intended trust will fail. If the will is valid there still remains the question as to the validity of the trust.' It w o u l d also remove doubts as to whether the applica-ble law under the Convention governs the validity o f a d é c l a r a t i o n o f trust.
Article 7
We have difficulty w i t h the words 'created under' i n the first paragraph o f this article. We do not k n o w what meaning thèse words are intended to have, but our i m -pression is that the aim o f the paragraph is merely to indicate that the trust to which the article applies must be one f o r which the applicable law is governed by article 3 or 4.
The w o r d 'requires' i n line one o f the t h i r d paragraph appears to us to be inappropriate. The applicable law may not require M or any o f the f o u r impHcations listed in sub-paragraphs ato d but it may make provision f o r those matters or some o f them. We w o u l d accordingly replace the w o r d 'requires' w i t h the w o r d 'provides'.
Article Y
We view this article as dealing w i t h a matter o f consid-érable importance and have réservations as to whether it is satisfactory i n its p r é s e n t f o r m . We w o u l d like to see the article make it clearer that it covers mandatory ruies o f testamentary and proprietary law without a need such as exists i n the p r é s e n t draft f o r those matters to be 'other than trusts'. We think thèse matters should not be treated as falling w i t h i n separate compartments f r o m trusts to which they are related.
We also think it unsatisfactory that the p r é s e n t draft o f this article d é p e n d s entirely on the choice o f law rules o f the State o f the f o r u m . We think it should d é p e n d upon which law has the closest connection w i t h the particular matter i n question.
We accordingly propose that the article be amended to read as f o l l o w s :
'This Convention shall not restrict the application of any mandatory rules of a law which relates to
-a the v-alidity, construction or effect of wills or test-a- testa-ments or the administration of deçeased estâtes;
b the validity, construction or effect of conveyances or transfers of assets;
c the régulation of relations between persons and their spouses, children or dépendants, especially restrictions on the right to dispose of assets to other persons; or d matters other than trusts;
and which is applicable to a matter arising in relation to a trust by reason of it being a law of the place having the closest real connection with that matter. '
Retrospectivity
We suggest the inclusion o f an article providing that the Convention w i l l apply only to trusts which corne into existence after ratification by the relevant State.
Additional provisions needed for non-unified States We propose the inclusion o f two provisions as under:
A Where a State has two or more territorial units in which différent Systems of law apply in relation to trusts, any référence to the law of that State in connection with the récognition of the validity of a trust shall be construed
as referring to the law of the territorial unit in which récognition is sought.
B Where a State has two or more territorial units in which différent Systems of law apply in relation to a trust this Convention need not be applied to the récognition in one territorial unit of the validity of a trust created in another territorial unit.
cf. Articles 19 and 20 o f the Convention on the Célé-bration and R é c o g n i t i o n o f the Validity o f Marriages.
We w i l l not be seeking the inclusion o f a f é d é r a l clause in this Convention.
Canada
We welcome the consideraole strides f o r w a r d which are made by the draft Convention, particularly after so many years o f attempts by c o m m o n and civil law jurisdictions to reach a r é c o g n i t i o n accord on this subject. Especially we welcome articles 3, 4 and 7.
The suggestions made here are intended only to assist i n the clarification o f matters that we feel continue to re-main i n some doubt.
Article 1
I f variant A is chosen by the Spécial Commission, we w i l l seek a clarification o f the words, 'their récognition in relations between Contracting States'. I f the f o r u m is Contracting State X , and a trust beneficiary domiciled in Contracting State Y sues the trustée i n respect o f trust property i n X , w i l l the Convention be inapplicable i f the applicable law is the law o f State Z, which is not a Contracting State?
Article lA
We think further clarity is needed as to the types o f trust to which the Convention does not apply. Though A r t i -cle 2 is only a 'gateway' provision, we assume that i n its first two lines it is defining the meaning o f ' i n w r i t i n g ' in article l A . Statutory trusts w o u l d appear to be ex-cluded, but concern has been expressed over the term, 'a j u d i c i a l décision'. I t does not appear to exclude the constructive trust, though the Canadian d é l é g a t i o n is aware that that is the intent, and doubt has been express-ed as to the status o f a resulting trust. I n some Cana-dian provinces the court is statutorily empowered to create a trust where none existed before {e.g., an out-right legacy to an incapacitated person), and to re-write the terms o f a trust despite the fact that thereby a new trust cornes into existence. We w o u l d suggest that the words, 'or by a j u d i c i a l décision', be omitted. We realise that this créâtes non-recognition inter alla o f the two Canadian types o f trusts we have mentioned, but we think this may have to be the price o f clarity i n the scope o f the Convention.
Article 2
Though the Spécial Commission has decided i n gênerai
Nous sommes très heureux du p r o g r è s c o n s i d é r a b l e que r e p r é s e n t e le Projet de convention, surtout parce que, depuis de nombreuses a n n é e s , des juridictions de com-mon law et de droit civil tentent d'en arriver à un accord de reconnaissance à ce sujet. Les articles 3, 4 et 7 nous semblent p a r t i c u l i è r e m e n t importants.
Les présentes propositions ont pour seul but d'aider à éclaircir des questions q u i , à notre avis, soulèvent en-core des doutes.
Article 1
Si la Commission spéciale choisit la variante A , nous tenterons d'obtenir l'éclaircissement des termes « s a re-connaissance dans les rapports entre les Etats contrac-t a n contrac-t s » . Dans le cas o ù le contrac-tribunal c o m p é contrac-t e n contrac-t escontrac-t celui de l'Etat contractant X et que le bénéficiaire d'un trust domicilié dans l'Etat contractant Y poursuit le trustée concernant les biens du trust situés dans l'Etat X , la Convention sera-t-elle i n o p é r a n t e si la loi applicable est celle de l'Etat Z, qui n'est pas un Etat contractant?
Article lA
Nous sommes d'avis q u ' i l faudrait définir plus claire-ment les genres de trusts auxquels la Convention ne s'applique pas. Bien que l'article 2 ne soit qu'une dispo-sition établissant des conditions préliminaires, nous supposons q u ' i l définit, dans ses deux p r e m i è r e s lignes, le sens de l'expression « p a r écrit» de l'article l A . Les trusts statutaires semblent exclus, mais l'expression
« d é c i s i o n de j u s t i c e » a cependant soulevé certaines questions. Cette disposition ne semble pas exclure le
«constructive» trust, bien que la délégation canadienne sache que c'est le but r e c h e r c h é , et des doutes ont été e x p r i m é s quant au statut du «resulting» trust (trust par implication). Dans certaines provinces canadiennes, la loi donne au tribunal le pouvoir de créer un trust où i l n'y en a pas (par exemple: dans le cas d'un legs pur et simple fait à un incapable), et d'adapter les m o d a l i t é s d'un trust m ê m e si cela e n t r a î n e la création d'un nou-veau trust. Nous proposons que les termes « o u par une décision de j u s t i c e » soient r e t r a n c h é s . Nous sommes conscients que cela e n t r a î n e , entre autres choses, la non-reconnaissance des deux types de trusts canadiens que nous avons m e n t i o n n é s , mais nous croyons que c'est le prix q u ' i l faut payer pour s'assurer que le champ d'ap-plication de la Convention soit clair.
Article 2
Bien que la Commission spéciale ait décidé de f a ç o n
re-open this issue, concern has been expressed that a civil law authority may not recognise the existence o f a trust i f the trustée is also a beneficiary, and has exten-sive powers with respect to the distribution o f the trust f u n d and its income, as well as to the administration of the trust. I.e., the 'gateway' does not alert the civil law authority to the fact that a trust may exist i n thèse cir-cumstances. The Australien d é l é g a t i o n may also be con-cerned w i t h this matter, we understand, and we would welcome the o p i n i o n o f civil law experts as to whether this concern is justified.
Article 3, paragraph 3
We do not find the meaning clear, particularly given the fact that i n article 4, paragraph 3, the word 'part' is used to refer to what w o u l d appear to be the assets o f the trust. We w o u l d suggest the f o l l o w i n g alternative:
This choice may extend to the formai validity, the essen-tial validity, and the administration of the trust, and a différent choice may be made with respect to each.
Article 5
Though we do not have strong views on the matter, we suggest that a re-wording o f the first line o f this article to read - 'Where the administration of a trust is changed from one place to another' - w o u l d remove any doubt
whether the first eleven words are referring to a change in the law o f the place o f administration.
We w o u l d also draw attention to the fact that this article does not assist the civil law authority to d é t e r m i n e what are matters o f administration. By making no statement on this issue, the d r a f l Convention might appear to leave it to 'the original applicable law' to d é t e r m i n e what administration means. We doubt whether this is intended, because the f o r u m must d é c i d e whether the issue i n question is one o f administration before it w i l l turn to 'the original applicable law'. However, i f the 'original applicable law' is intended to d é t e r m i n e the matter, we think article 5 should say so. See below f o r alternatives.
Article 6
This article can be read as requiring that ail matters o f validity, construction and administration be governed by the laws o f a single jurisdiction. I f article 3, para-graph 3, is amended (as we suggest) to make it clear that this is not intended, we think it advantageous to have a cross-reference to that article and paragraph.
We w o u l d suggest two possible alternative provisions to appear at the close o f this article dealing with the dis-tinction between matters o f administration, and other matters. They are as f o l l o w s :
For the purposes of this Convention matters relative to the administration of the trust concern the management, in-cluding the investment, of the trust property, except where the instrument otherwise provides.
or
For the purposes of this Convention matters relative to the administration of the trust concern the management of the trust, including paragraphs b, c, d, e and f of this article, except where the instrument otherwise provides.
pas soulever de nouveau cette question, certaines
pas soulever de nouveau cette question, certaines