Public registers are essential to legal security and the protection of third parties’ interests, especially the interests of purchasers who buy registered assets (or rights over such assets) and the interests of the creditors of titleholders to these assets and rights. Insofar as it pertains to assets located in Switzerland, a trust created under foreign law, recognised under the Con-vention, affects the legal position of such third parties. Notice of the titleholder’s trustee status in relation to the registered asset (or to a limited right, in particular a pledge on the asset) gives them two important pieces of information376:
– To a third party who intends to acquire an asset (or a right pertaining to an asset) to which a trustee holds title, a note of the trustee’s status reveals the risk of exposure to the beneficiaries’ right to trace if the trustee acts in breach of trust377. To avoid this risk, the potential purchaser will require information about the trustee’s powers. In practice, this often means asking the trustee to obtain a legal opinion on whether the planned transaction complies with the trust deed and the law applicable to the trust. Because it leads to increased caution by purchasers as well as additional costs, registration of the trustee’s status has an adverse effect on the asset’s marketability. This obstacle, which varies in importance according to circumstances, is designed to protect trust beneficiaries against alienation against their interests.
– For the trustee’s creditors, a note of the trust’s existence in the public registers allows them to identify the assets unavailable to meet personal debts378. Consequently, it conveys information about the trustee’s personal solvency. His personal creditors know that they cannot seize such assets. Creditors of the trustee in his official capacity (the “creditors of the trust”) can ascertain the existence and legal status of the assets
376Restatement (Second) of Trusts, § 297 comment b and § 308 comment e.
377Article 11 par. 3.d of the Convention; see supra II.F and VIII.
378Article 11 par. 3.a & b of the Convention, see supra II.E and VII.
in the trust fund, out of which they may if necessary satisfy their claims to the exclusion of the trustee’s personal creditors379.
The publication of a registered asset’s inclusion in a special estate held by the titleholder has not attracted much attention from legislators. The testa-mentary charge on the owner of some real property to pass it on to a reversionary heir (substitution fidéicommissaire, Nacherbenenseitzung) may be annotated in the land registry380. The law on investment funds provides for the mere mention in the land register of “the inclusion in a real estate fund” in the case of immovable property to which the fund manager holds title381. This mention does not have any effect per se: it merely indicates the special status of the immovable property which, if the fund manager goes bankrupt, will not be included in the estate in bankruptcy, but retained for the benefit of the investors after deduction of the fund’s debts382. A similar provision was not envisaged for banks’ fiduciary transactions; it would have been superfluous, because FBA, Article 16 item 2 refers only to “movable property, securities and claims which the bank holds in a fidu-ciary capacity”383, which are not usually recorded in public registers.
Wherever Swiss law requires that public registers give notice of the legal relationships affecting certain assets, this purpose and the interests of third parties suggest that it would be helpful to facilitate the addition of notice that the titleholder is a trustee of the registered asset or right. It is hard to see what interest protected by our law would justify using Article 12 in fine of the Convention to limit the cases in which a trustee can require the trust to be indicated when registering his title.
379On this question, see supra VII.A1.c).
380See CC, Art. 490 par. 2, 960 par. 1 (3) and Ordinance on the Land Register of 22 February 1910 (RS 211.432.1), Art. 74. About reversionary heirs, see above note 37.
381FAIF, Art. 36 par. 2.a (1994), restating (with amendments) Article 31 par. 2.a of the Act of 1 July 1966. On the legal characterisation as a mention (in spite of the erroneous French text), see infra IX.B.1.
382FAIF, Art. 16 par. 1; see THÉVENOZ (2000) pp. 358-363. By not ruling out as a matter of principle the exclusion of a patent registered in the patents register without an tion of the fiduciary transfer, the Federal Supreme Court seems to hold that such an indica-tion does not constitute an element of notice required for the applicaindica-tion of CO Arti-cle 401, ATF 117 II 429, JdT 1994 II 2.
383FBA, Arts. 16 (2) and 37b, as amended by the DEBA of 16 December 1994.
The Italian Parliament ratified the Convention without accompanying it with domestic legal provisions to ensure its implementation. However, some legal writers have pointed out the need for such rules in respect of registration384. In contrast, the Dutch parliament, mindful of the impor-tance of this question, dealt with it in a manner that might prove inspira-tional to Swiss legislators. To underline the fact that the law of the Nether-lands neither prohibits nor limits the mention of a trustee’s status in publics registers, the Wet conflictenrecht trusts of 1995 confirmed the trustee’s right to enter his status in Dutch registers by repeating the first part of Article 12 of the Convention and omitting the second (“in so far as this is not prohib-ited by or inconsistent with the law of the State where registration is sought”)385.
The public registers provided for under Swiss law are subject to vary-ing degrees of regulation. While the land, aircraft and shippvary-ing registers benefit from detailed regulations, a few sparse paragraphs cover the rules for patent and trademark registers.
The approach proposed here, inspired by the Dutch choice, is to adopt a general legal basis giving any trustee the possibility of being identified as such in any register, public or otherwise386. It could be drafted as follows:
In relation to property he owns or a right to which he holds title, a trustee shall have the power to require any inscription in the registers that pro-vide notice thereof. He may require his status as trustee to be mentioned, or the existence of the trust to be made apparent in some other way.
The word “right” refers equally to intangible rights such as intellectual or industrial property rights (e.g., trademarks, designs and models, patents) and to limited property rights or personal rights (e.g., real property mort-gage, patent license).
Article 12 of the Convention and the rule proposed above seek to con-fer a power, but not to impose a duty on the trustee to identify himself as such or to make the trust’s existence apparent. The trust deed and, alterna-tively, the law applicable to the trust, do not necessarily require the trustee
384PATON & GROSSO (1994) p. 661.
385Act of 4 October 1995, Art. 3, reproduced in Trust Laws of the World (2000) p. 40. See DYER (1999) p. 1005; von OVERBECK (1997) p. 375.
386Art. 12 of the Convention is not limited to public registers. It also applies to the share-holders’ registers maintained by limited companies, etc. See DYER (1999) p. 1005.
to notify the existence of the trust to third parties. Subject to the law gov-erning the trust, the trust deed can make this form of notice a duty, or a mere power, or forbid it. By making such a choice, the settlor can significantly reduce the beneficiaries’ right to trace assets in the hands of a purchaser.
However, it is not for Swiss law to transform the power provided by the Convention into a duty.
Certainly, the protection of the trustee’s personal creditors is a legiti-mate concern, as they could be misled by the apparent solvency of their debtor if his trustee status is not revealed in the public registers. This fear is unfounded. Where a debtor’s solvency is based on assets such as real es-tate, aircraft, vessels or industrial or intellectual property rights, a lender who is anxious about the debtor’s worth will not be content to verify his assets at the time the loan is made, but will seek collateral, which alone guarantees the possibility of realising it for his benefit in the event of the debtor’s default. The validity of the security interest on real estate not iden-tified in the land register as subject to a trust will then depend entirely on the lender’s good faith (as a bona fide purchaser). If the register is silent about the trust, it may prejudice the beneficiaries’ interests, but not those of the secured creditor.
The mention of the trust in the register cannot be a condition for the separation of estates in the trustee’s bankruptcy387. FAIF Article 16 does not make mention in the land register a condition for exclusion of the real property belonging to a real estate investment fund. Besides, nobody would argue388 that the application of CO Article 401 to registered trademarks or patents turns on the mention in the register of the holder’s status as an agent or fiduciary transferee of the titleholder389.
Statutes (e.g., legislation on the purchase of immovable property by persons residing abroad or against money laundering) or by-laws (e.g., statu-tory clause requiring shareholders to declare whether they act on behalf of
387See KOPPENOL-LAFORCE (1998) p. 39.
388U. RÜEDE-BUGNON, Fiduziarische Rechtsgeschäfte, die ein Markenrecht zum Gegenstand haben …, Berne (Stämpfli) 1978, pp. 92 et seq. & 288 et seq.; W. FELLMANN, Berner Kommentar, t. VI/2/4, 4th ed. (1992), Art. 394 N. 78, Art. 401 NN. 29 & 63 s.;
G. GAUTSCHI, Berner Kommentar, t. VI/2/4, 3rd ed. (1971), Art. 401 N. 12; J. HOFSTETTER, Traité de droit privé suisse, t. VII/II/1: Le mandat et la gestion d’affaires, Fribourg (Ed.
Universitaires) 1994, pp. 124 et seq.
389ATF 117 II 429, JdT 1994 II 2.
third parties) that demand identification of the economic beneficiary natu-rally apply equally to trustees, fiduciary transferees and other persons act-ing on behalf of third parties. The existence and terms of such requirements are based on rules that do not concern us here, when discussing the mainte-nance of registers.