Greater legal certainty for the trust business - Federal Council adopts Opinion on the ratification of the Hague Trust Convention

Federal Department of Justice and Police

Bern, 05.12.2005 - The Federal Council wishes to create a firmer legal basis for the growing trust business. To this end, on Friday it adopted the Opinion on the ratification of the Hague Trust Convention.

Trusts are common primarily in states with anglo-saxon legal traditions. The term describes a legal relationship in which certain assets are transferred on a fiduciary basis to one or more trustees, who must manage these assets and use them for a purpose determined in advance by the settlor. A large volume of assets belonging to trusts or administered in the name of trusts is also held in Switzerland. More and more banks have their own trust departments, while rising numbers of Swiss-domiciled companies specialise in the administration of trusts. Fiduciary companies and law firms are others which are increasingly becoming involved in trust planning and administration.

Need for greater legal certainty

Trusts are already broadly recognized under Swiss law. In terms of its legal structure, a trust falls somewhere between a fiduciary relationship and a foundation. As the trust business grows, there is a need for greater legal certainty, however. Both the parties involved in trusts and the relevant authorities have a vested interest in a system that sets out with the greatest degree of certainty the legal provisions which apply to trusts in individual cases. Furthermore, a firm legal foundation creates a better climate for the setting-up and administration of trusts, thereby increasing the appeal of Switzerland as a business location.

Ratification recommended unanimously

Trusts are already broadly recognized under Swiss law. In terms of its legal structure, a trust falls somewhere between a fiduciary relationship and a foundation. As the trust business grows, there is a need for greater legal certainty, however. Both the parties involved in trusts and the relevant authorities have a vested interest in a system that sets out with the greatest degree of certainty the legal provisions which apply to trusts in individual cases. Furthermore, a firm legal foundation creates a better climate for the setting-up and administration of trusts, thereby increasing the appeal of Switzerland as a business location.

The Federal Council's proposal to ratify the Hague Convention on the Law Applicable to Trusts, and for the Convention to be recognized officially in Switzerland, has been welcomed by all of the parties involved in the committee stage. Some of these parties regard ratification as a pressing matter. The changes to the law that are contained in the draft also went through largely unchallenged. The Federal Council Opinion provides for an amendment to Swiss federal legislation on international private law (the IPRG), which currently contains no special provisions on trusts. This revision of the law will permit a degree of interplay between the Convention and the IPRG. Meanwhile, specific provisions on court jurisdiction and the recognition of decisions made abroad will be added to the IPRG. Furthermore, the federal debt enforcement and bankrupty act (the SchKG) will be extended to take account in Swiss debt enforcement proceedings of the distinction between the personal assets of the trustee and the trust.

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