Trusts on foreign law: how are they arranged and why do they believe in them to protect assets?
On May 19, 2016, within the framework of the St. Petersburg International Legal Forum 2016, a discussion session was held in the format of a round table on the institution of trust (or trust). The legal institution, little-known to the Russian legislator and law enforcer, originated in the countries of the Anglo-Saxon legal system, has aroused keen interest among the forum participants.
The problems arising from the use of trust in civil law relations in the countries of the continental legal system, as it turned out, are problems of a truly international scale, as evidenced by the list of speakers at the round table moderated by well-known Russian lawyer, managing partner of the Bartholius Law Bureau, Yuli Tai . The speakers at the round table were prominent scholars and legal professionals from countries of both common and continental law, specializing in the study of trusts, as well as advising clients on the use of trusts and similar tools in business practice.
The discussion was mainly devoted to the history and experience of using the trust and other similar institutions in jurisdictions such as England, Cyprus, the British Virgin Islands, Germany, Liechtenstein. Also inevitably discussed the issue of the prospects for the introduction of the trust in Russia. As Yuli Tay noted, the attempt of the Russian legislator, undertaken since 1993, to “acquaint” the Russian civil turnover with the trust caused a sharp rejection of all authoritative lawyers of the country (including VA Dozortsev, EA Sukhanov, JK Tolstoy, .V. Vitryansky and others), but in practice the institute was also practically not used. It was also noted that the initial optimistic attitude about introducing a trust into European legal systems was soon replaced by doubt and skepticism caused by restrictions on the disposal of property, special legal regime,
Professor of the University of Cambridge Roderick Munday in his report paid attention to the main stages of the historical development of the trust and the circumstances of its occurrence (the history of the interaction of the common law system and the law of justice). Trusts, which are a result of equity law (equity), are widely used by law enforcers in England to isolate assets.
Nick Kutnaks, a senior lawyer at the Moscow office of Debevoise & Plimpton LLP, speaking after Professor Mandey, also noted that the concept of the trust is a unique historical product of the dualistic legal system in England. Although there are some statutory regulations for trusts, most of the complex set of rules governing trusts in English law derives from centuries of case law. Examples were given of the use of trust in structuring large cross-border financial transactions (cross-border credit operations and debt securities, the creation of mutual trusts, etc.). It was also an important conclusion that it is impossible to fully import English law on trusts in the jurisdiction of civil law (at least, without changing its entire dogmatic structure).
Toby Graham, head of trusts and real estate disputes at Farrer & Co. (Great Britain), one of the reasons for the growing popularity of trusts in Russia, called political events related to the arrest of Mikhail Khodorkovsky in October 2003, and the subsequent tax requirements of the state regarding YUKOS. Wealthy Russian citizens, who acquired their wealth in the Yeltsin years, realized the real threat of “corporate raiding” and were concerned about the preservation of their personal fortunes. The main purpose of using Graham’s institute is to protect assets, but in order to truly take advantage of the assets that a trust institute provides, it’s important to convey to the founder of the trust how the latter works. He must find a trustee
According to the partner of the law firm Koenig Rebholz Zechberger Florian Zehbergera, Liechtenstein, unlike Germany, has always recognized foreign trusts. This country was the first in continental Europe, in whose legislation the institution of trust appeared. However, according to Mr. Zehberber, the motivation for the establishment of trusts in the jurisdiction of Liechtenstein has changed: if earlier the founders of trusts wanted to save on taxes, now they are established to protect assets and to plan inheritance. As a result, the trusts themselves have changed, their designs. It is noteworthy that when asked whether the citizens of the European principality themselves used the mechanism of trust, Mr. Zeberberger gave a negative answer: to solve questions about inheritance, the people of Liechtenstein use their “native” traditional legal mechanisms,
Alexander Wolf, a lawyer at the Frankfurt branch of the law firm Debevoise & Plimpton, and an employee of the dispute resolution practice said that because Germany is not a party to the Hague Convention on the Law Applicable to Trusts and Their Recognition trusts. German law does not provide for an institution of trust, the concept of trusts is absent as such, a testamentary trust is impossible, in particular. Instead, the legislator uses other mechanisms familiar with German law to plan inheritance.
Pavlos Aristodemus, the managing partner of Harneys law firm in Cyprus, who highlighted the fundamental importance of the right to justice from the Anglo-Saxon system of law when using the institution of trust, shared his Cyprus experience in using the Institute of trust. By virtue of its colonial past, Cyprus inherited many institutions of English common law. The speaker described the benefits and positive effects of the use of Cypriot international trusts (protection of property, inheritance planning, confidentiality, flexibility, etc.).