The Hague Trusts Convention: Scope, Application and Preliminary Issues

by Jonathan Harris

Overview

Trusts cross borders. When they do,real difficulties may arise. Will the understanding of what a trust is be different in a foreign state? Will the rights, powers and duties of the trustee and settlor be the same? What rights will the beneficiary be able to assert? To what extent will the trust assets be safe from the claims of creditors, forced heirs, or third parties? Which legal system will be applied to the trust? Within what limits? What if the trust needs to be recognised in a state which does not have the institution of the trust in its domestic law?

The Hague Trusts Convention, enacted into English law by the Recognition of Trusts Act 1987, seeks to ameliorate the situation by providing harmonised choice of law rules for “trusts created voluntarily and evidenced in writing.” It also provides for the recognition of trusts in Contracting States. Those Contracting States should recognise the trust, even if they do not have the institution in their domestic law.

This book is the first published in England to devote itself to a detailed analysis of the Convention. It is aimed at academics and practitioners; at private international lawyers and at trust lawyers. Frequent reference is made to the position in civil law states (especially in the Contracting States of Italy and the Netherlands) and in other trust states, both offshore and onshore.

The Hague Trusts Convention deals with the operation of the trust itself. It does not deal with the preliminary steps needed to create a trust. These preliminary matters raise highly complex and uncharted choice of law issues. Detailed discussion of these matters is also provided, and appropriate solutions suggested.

Product Details

ISBN-13:	9781841131108
Publisher:	Bloomsbury Academic
Publication date:	05/04/2002
Pages:	544
Product dimensions:	6.14(w) x 9.21(h) x 1.25(d)

About the Author

Jonathan Harris is Professor of International Commercial Law at the University of Birmingham.

Table of Contents

	Table of Cases	xxi
	Table of Legislation	xxxiii
Part 1	The Creation of Transnational Trusts: Launching the Rocket
1.	Introduction	3
(A)	General	3
(B)	Creation and Transfer	4
(C)	Inter vivos Trusts--Matters to be Considered	5
2.	To What Extent are Matters of Capacity and Essential Validity Excluded from the Hague Trusts Convention?	5
(A)	Capacity	5
(i)	Whose capacity?	5
(ii)	Declarations of oneself as trustee	6
(B)	Constitution of Trusts	7
3.	Capacity	7
(A)	What is Capacity?	7
(i)	Status and capacity	7
(ii)	Essential validity and capacity	7
4.	The Choice of Law Rule for Capacity Questions	10
(A)	Capacity and other Branches of the Conflict of Laws	11
(i)	Contracts	11
(ii)	Capacity to transfer property	15
(B)	Trusts and Capacity	16
(i)	One question or two?	17
(ii)	The transfer of property	17
(iii)	The creation of the trust structure	18
(iv)	Declarations of oneself as trustee	19
(v)	Corporate trustees	19
(vi)	Foreign penal rules and rules which infringe English public policy	20
(C)	Conclusion	20
5.	The Capacity of the Trustee	21
6.	The Capacity of the Beneficiary	21
7.	The Vesting of Property in the Trustee Inter Vivos	23
(A)	Introduction	23
(i)	One question or two?	24
(ii)	Declarations of oneself as trustee	25
(iii)	Intention to create the trust	25
(B)	Immovable Property	26
(i)	The general rule	26
(ii)	Renvoi	26
(C)	Tangible Movable Property	28
(i)	What does "lex situs" mean?	28
(ii)	Exceptions	29
(iii)	Renvoi	29
(D)	Intangible Movable Property	30
(i)	The situs	30
(ii)	Assignment of debts: the issues raised	31
(iii)	Assignability of debts	31
(iv)	The assignment of the debt	32
(v)	Title to the chose in action	32
(E)	Conclusion	33
8.	Perpetuities and Accumulations	33
9.	The Situs of Equitable Interests and Dealings with Subsisting Equitable Interests	34
(A)	General	34
(B)	Trusts and Unadministered Estates	34
(C)	Beneficial Interests and Rights to Enforce a Trust	35
(D)	A Principled Answer	38
10.	Transfers of Subsisting Equitable Interests	39
11.	Sub-trusts	41
12.	Incompletely Constituted Trusts and Trusts of the Benefit of a Covenant	41
13.	Testamentary Trusts: Administration of Estates	43
(A)	The Need for an English Grant	43
(B)	The Jurisdiction of the English Courts	44
(C)	Grants obtained in Scotland, Northern Ireland and the Commonwealth	45
(D)	Applicable Law	45
(E)	Delimiting the Administration of Estates and the Trust	45
14.	Testamentary Trusts: the Law Applicable to Succession	46
(A)	Testate Succession	47
(i)	Movables	47
(B)	Intestate Succession	50
(i)	Movables	50
(ii)	Immovables	51
(C)	Renvoi and Succession	51
15.	Capacity to Create a Testamentary Trust	52
16.	Essential Validity and Testamentary Trusts	52
(A)	General Rule	52
(B)	Executor Trustees	53
17.	Forced Heirship	54
18.	The Potential Impact of the Hague Convention on the Law Applicable to Succession to the Estates of Deceased Persons of 1 August 1989	56
(A)	General	56
(B)	Forced Heirship, Claw-back and the Hague Trusts and Succession Conventions	57
19.	Testamentary Powers of Appointment	59
(A)	General	59
(B)	Essential Validity	59
(C)	Construction	60
(D)	Capacity	60
(E)	Formal Validity	61
(F)	Revocation	61
(i)	Subsequent will or codicil	61
(ii)	Act of revocation	61
(iii)	Subsequent marriage	61
20.	Matrimonial Property Regimes	61
(A)	General	61
(B)	Choice of Law Rules	62
(i)	No ante-nuptial contract	62
(ii)	Ante-nuptial contracts	63
(C)	Matrimonial Property Regimes and the Law Applicable to Succession: Double Recovery and No Recovery	64
21.	The Creation of Transnational Trusts in Offshore Jurisdictions	65
(A)	The Cayman Islands	66
(B)	Bermuda	69
(C)	Jersey	72
(D)	The Isle of Man	75
22.	Conclusion	77
Part 2	The Hague Convention on the Law Applicable to Trusts and on Their Recognition
I	Evolution and Application	81
1.	Background	81
2.	The Desirability of an International Trusts Convention	83
3.	A Convention Evolves	86
4.	Current Status of the Convention	88
5.	The Status of the von Overbeck Report	89
6.	The Implications of Ratification for Non-Trust States and their Domestic Legal Systems	90
7.	An Open-Ended Convention	93
8.	Application of the Convention in the United Kingdom: the Time Factor	94
II	The Convention's Provisions	99
	Preamble	99
Article 1	Functions of the Convention	100
1.	Choice of Law	100
2.	The Recognition of Trusts	101
Article 2	Characteristics of the Trust	103
1.	Introduction	103
2.	The General Characteristics	105
3.	The Specific Characteristics	107
4.	The Characteristics Considered: the "Shapeless" Trust	111
5.	Characterisation	116
6.	Trusts and the Rome Convention	120
Article 3	Types of Trust Governed by the Convention	123
1.	Formalities	123
2.	Which Types of Trust are within the Convention?	124
(A)	Voluntary Trusts	124
(B)	Resulting Trusts	125
(C)	Constructive Trusts	128
(D)	Statutory Trusts	133
(E)	Hayton's Views Considered	133
3.	Why Exclude Judicially Created Trusts?	134
(A)	General	134
(B)	The "Problem" of Recognition of Foreign Judgments in Relation to Trusts	135
(C)	"Remedial" Judicial Trusts	137
(D)	Trusts Imposing a Continuing Obligation	138
4.	The Statutory Extension of the Convention Rules in the United Kingdom	139
(A)	The Relevant Provisions	139
(B)	A Choice of Law Rule for Resulting and Constructive Trusts?	140
(C)	Trusts Arising under the Law of Any Part of the United Kingdom	141
(D)	Trusts "Arising" by Judicial Decision	145
(i)	A source of complexity	145
(ii)	Constructive trusts	145
(iii)	Presumed resulting trusts	148
(E)	Judgments Entitled to Recognition	148
(F)	Conclusion	149
Article 4	Exclusion of Preliminary Matters; the Rocket-Launcher and the Rocket	151
1.	Preliminary Matters Excluded from the Convention	151
2.	Distinguishing between the "Rocket" and the "Rocket-Launcher"	153
Article 5	Non-trust Jurisdictions	158
1.	Application	158
2.	Depecage	161
3.	Categories of Trusts	163
Article 6	Express or Implied Choice of Law	166
1.	The Triumph of Settlor Autonomy	166
2.	Trusts of Land	169
(A)	A Need for the Lex Situs?	169
(B)	The Trusts of Land and Appointment of Trustees Act 1996	171
(C)	Trusts for Sale	172
(D)	Other Interests in Land	174
(E)	A Look Offshore	175
(F)	Where no Law is Chosen to Govern the Trust	175
(G)	Trusts of Movable and Immovable Property	178
3.	A Need for an Objective Connection to the Chosen Law?	179
4.	"International" Trusts	182
5.	Choice of the Law of a State Comprising Several Territorial Units	184
6.	The Need to Choose the Law of a Recognised Legal System	185
7.	Multiple Settlements	186
8.	Contracts and Trusts	186
9.	Consent to the Choice of Law Clause	188
10.	Choice of a Legal System minus its Mandatory Rules	190
11.	Implied Choice of Law	191
(A)	Nature of Implied Choice	191
(B)	Implied Choice and the Law of Closest Connection	194
(C)	Implied Choice and "The Circumstances of the Case"	196
(D)	The Settlor's Purpose--Implied Choice of a Law by which the Trust is Valid?	198
12.	Common Law Authorities on Implied Choice and the Objective Proper Law	198
(A)	Relevance	198
(B)	Testamentary Trusts	199
(C)	Inter Vivos Trusts	201
(D)	Implied Intention to Create a Valid Trust?	208
13.	The Common Law Cases Evaluated	209
14.	Conclusions on Implied Choice of Law	209
15.	Which Law Determines whether a Choice can be Inferred?	212
16.	Time for Ascertaining an Implied Choice of Law	213
Article 7	The Applicable Law in the Absence of Choice	215
1.	Origin and Application	215
2.	The Four Factors Considered	218
(A)	Place of Administration	218
(B)	The Situs of the Trust Assets	220
(C)	The Place of Residence or Business of the Trustee	221
(D)	The Objects of the Trust and their Place of Fulfilment	222
3.	The Relevance of the Place of Residence of the Settlor and Beneficiaries	224
4.	Testamentary Trusts	225
5.	Objective Factors Pointing to a Non-Trust State	226
6.	Validity and the Law of Closest Connection	227
7.	Reflections on the Application of Article 7	227
8.	Time for Assessing the Law of Closest Connection	228
9.	What if the Law of Closest Connection States that Certain Terms of the Trust are not Valid?	229
10.	Law of Closest Connection and the Brussels Convention	232
Article 8	Scope of the Applicable Law	233
1.	Article 8(1)	233
2.	Article 8(2)	235
(A)	The Appointment, Resignation and Removal of Trustees, the Capacity to Act as a Trustee and the Devolution of the Office of Trustee	235
(i)	Appointment and removal	235
(ii)	Capacity of the trustee	237
(B)	The Rights and Duties of Trustees among Themselves	239
(C)	The Right of Trustees to Delegate in Whole or in Part the Discharge of their Duties or the Exercise of their Powers	240
(D)	The Power of Trustees to Administer or to Dispose of Trust Assets, to Create Security Interests in the Trust Assets, or to Acquire New Assets	241
(i)	Administration	241
(ii)	The trustee's power to deal with and acquire trust property	242
(E)	The Powers of Investment of Trustees	243
(F)	Restrictions upon the Duration of the Trust, and upon the Power to Accumulate the Income of the Trust	244
(G)	The Relationships between the Trustees and the Beneficiaries including the Personal Liability of the Trustees to the Beneficiaries	245
(i)	Personal and vicarious liability	245
(ii)	Who is a "beneficiary"?	245
(iii)	Fiduciary duties owed by the trustee to the beneficiary	246
(iv)	Liability and remedies	253
(v)	Trustees' liability to third parties	254
(vi)	Third parties' liability to trustees: personal and proprietary claims	254
(H)	The Variation or Termination of the Trust	256
(i)	Variation of trusts	256
(ii)	Termination of trusts	270
(iii)	Variation, termination and administration	270
(I)	Distribution of the Trust Assets	271
(J)	The Duty of Trustees to Account for their Administration	271
3.	Formal Validity of the Trust	272
(A)	The Need for a Choice of Law Rule to Determine the Formal Validity of a Trust	272
(B)	The Choice of Law Rule	274
4.	Formation and Essential Validity of the Trust	276
(A)	Essential Validity of the Trust	276
(B)	Existence of the Trust	278
(C)	The Terms of the Trust	280
Article 9	Splitting the Applicable Law; the Administration of Trusts	281
1.	The Right to Split the Trust	281
2.	Severable Parts of the Trust	282
3.	Distinguishing Validity from Administration	283
4.	Splitting the Law in the Absence of Choice	289
5.	Choice of the Law of a Non-Trust State to Govern Part of the Trust	289
6.	Matters which Cannot be Controlled by the Terms of the Trust	290
7.	The Administration and Validity of Charitable Purpose Trusts	291
(A)	Validity	291
(B)	Administration	292
(C)	Settling a Charitable Scheme; the Cy-pres Doctrine	293
8.	Non-Charitable Purpose Trusts	295
Article 10	Changing the Applicable Law	297
1.	Motivation for, and Permissibility of a Change of Governing Law	297
2.	A New Law of Closest Connection	298
From the B&N Reads Blog Page 1 of Related Subjects Business Law Personal Finance & Investing General & Miscellaneous Law Estate Planning Wills, Estates, & Trusts Business Law Personal Finance & Investing General & Miscellaneous Law Estate Planning Wills, Estates, & Trusts Editorial Reviews The strength of Harris's book lies in the way he applies his deep knowledge of the substantive law of trusts in his detailed treatment of the Convention…Harris's book is a much needed comprehensive treatment of the Convention, which will be of great interest to both academics and practitioners dealing with trusts in an international setting.” —ZeuP “…a welcome addition to the private international law literature, being the first detailed analysis of the Convention published in the UK...[an] erudite and lucidly written monograph. It deserves to be widely read.” —Trusts and Trustees “Harris' book can be useful in helping to understand the law even in those countries where the convention is not going to enter into force. This is certainly all the merit of the author having written this excellent book. the book is not only useful for English lawyers - which is rather obvious - but also for practitioners in civil law systems.” —European Review of Private Law From the Publisher Seeking to ameliorate the confusion created by cross-border trust law, the Hague Trusts Convention was enacted into English law by the Recognition of Trusts Act of 1987. In this volume, Harris (international commercial law, U. of Birmingham, UK) analyzes the Convention in depth. The first part addresses the creation of transnational trusts; the second part addresses the Hague Convention on the law applicable to trusts and on their recognition. Suitable for academics and practitioners, including private international lawyers and trust lawyers. Distributed in the US by ISBS. Annotation c. Book News, Inc., Portland, OR (booknews.com) Booknews Customer Reviews