Chapters III (under the somewhat unfortunate title of “Recognition”63) and IV (“General Clauses”) of the Convention seek to separate methodically the matters governed by the law applicable to the trust from those governed by another law referred to by the forum’s conflict rules. In particular, the Convention states the principles that allow the effects of a trust to be co-ordinated with the mandatory rules applicable, for example, to the trustee’s estate for inheritance purposes as well as the protection of his co-contractors and creditors.
63 See KÖTZ (1999) p. 44.
As Article 11 provides, the recognition of the effects of a trust gov-erned by foreign law “shall imply, as a minimum, that the trust property constitutes a separate fund, that the trustee may sue and be sued in his capacity as trustee, and that he may appear or act in this capacity before a notary or any person acting in an official capacity.” (Article 11 par. 2). In-sofar as provided by the law applicable to the trust, this implies that the assets in trust are shielded from seizure by the trustee’s personal creditors and that they do not form part of his matrimonial property rights, or part of his estate for inheritance purposes. It further implies that the trustee must have the standing to sue and be sued in respect of these assets, to appear in his capacity as trustee before any public official or notary, and to record his ownership as trustee expressly in respect of assets subject to registration (Article 12).
The Convention takes particular care to identify the issues that the private international law of a court seized of a case may submit to other laws. These essentially include:
– the validity of wills creating trusts or of other acts by virtue of which assets are transferred to the trustee (Article 4);
– the rights and obligations of third party holders of the assets in trust (Article 11 par. 3 d);
– the mandatory provisions of the law designated by the forum’s conflict rules, relating in particular to the protection of minors and incapable parties; the personal and proprietary consequences of marriage;
inheritance rights, especially indefeasible shares; transfer of title to property and security interests in property; protection of creditors in matters of insolvency; and protection of third parties acting in good faith (Article 15);
– those provisions of the law of the forum which must be applied even to international situations, irrespective of conflict rules (Article 16 par. 1);
– in exceptional circumstances, effect may also be given to the mandatory laws of a state having “a sufficiently close connection with a case”(Article 16 par. 2).
This extensive list reflects the concern of those who drafted the Convention to guarantee to states, whose laws do not include trusts, that the recognition of foreign trusts will not compromise the fundamental principles underly-ing their legal systems. The same objective is further guaranteed by a gen-eral reserve in respect of the state’s public policy (Article 18) and by the
safeguard clause (Article 13) already referred to, which enables a court to refuse recognition of “a trust the significant elements of which, except for the choice of the applicable law, the place of administration and the ha-bitual residence of the trustee, are more closely connected with States which do not have the institution of the trust or the category of trust involved.”
Switzerland’s private international law must provide the Swiss courts and authorities with the conflict rules necessary to characterise a trust, de-termine the applicable law and discern the extent of that law’s effects. Does this justify Switzerland’s signature and ratification of the Convention, as most Swiss legal writers now believe64, or could we simply retain the exist-ing rules contained in the SPILA. Three main questions appear to be deci-sive factors in this choice:
– Is Switzerland’s current private international law adequate?
– Do the rules proposed by the Convention guarantee sufficient respect for the essential principles and institutions of Swiss law?
– Should the ratification of the Convention be accompanied by the adop-tion, by the Swiss legislature, of rules of substantive law or of private international law?
– The answer to these questions is the subject of the following chapters.
IV. Lacunae in Swiss Private International Law
Where a court seeks to identify the conflict rules that will enable it to assert jurisdiction and to determine the applicable law, it must begin by characterising the legal relationship or issue before it. This characterisation must be made the lege fori, i.e. according to the substantive law of the forum: the court must identify, in its own domestic law, which institution corresponds to the legal relationship in question. However, Swiss domestic law does not contain trusts. As the SPILA of 18 December 1987 does not contain rules specifically applicable to trusts, the court must characterise
64 See in particular FLATTET (1990) pp. 264 & 272; FUCHS (1998); GIOVANOLI (1994) pp. 215 s.; GUILLAUME (2000); GUTZWILLER (1985) p. 56; von OVERBECK (1997);
REYMOND (1997), id. in Droit et pratique des opérations fiduciaires en Suisse (1994) p. 22; SUPINO (1994) pp. 223-226: THÉVENOZ (1995) pp. 350 s.; THÉVENOZ & DUNAND
(1998) pp. 506 s.; WACH (1987); WATTER (1995) p. 252. Comp. BREITSCHMID (1995) pp. 63 s.; KÜNZLE (2000) pp. 440 s.
the trust by its resemblance to an institution existing in Swiss law (contract, corporate body, will, etc.), which will determine which chapter of the SPILA contains the rules designating the appropriate forum – insofar as the Lu-gano Convention does not apply65 – and the relevant choice-of-law rules.
When broken down into the components of Swiss domestic law, the legal relationships binding the settlor, the trustee and the beneficiaries with regard to the assets in trust may be characterised in three fundamentally different ways. Based on the Harrison decision, a trust can be viewed as a contract between the settlor and the trustee, combined with a transfer of property from the first to the second and a third-party beneficiary clause.
Recent cases have determined that66 some trusts (though doubtless not all) may be characterised as organised estates (patrimoines organisés, organisierte Vermögen), which chapter 10 of the SPILA treats in the same way as organised partnerships. Lastly, a successoral characterisation may be envisaged for trusts created by a transfer that only becomes effective on the demise of the settlor.