Conservation trust funds.

• Author: Guerin-McManus, Marianne

In her book, In Fairness to Future Generations: International Law, Common Patrimony, and Intergenerational Equity, Professor Edith Brown Weiss describes a theory of intergenerational equity in which:

[E]ach generation receives a natural and cultural legacy in trust from previous generations and holds it in trust for future generations. This relationship imposes upon each generation certain planetary obligations to conserve the natural and cultural resource base for future generations and also gives each generation certain planetary rights as beneficiaries of the trust to benefit from the legacy of their ancestors. These planetary obligations and planetary rights form the corpus of a proposed doctrine of intergenerational equity, or justice between generations. (1) As we begin a new millenium, it is no mystery that human demands on Earth's natural systems have reached unsustainable levels, resulting in environmental trends such as "population growth, rising temperature, falling water tables, shrinking croplands per person, collapsing fisheries, shrinking forests, and the loss of plant and animal species." (2) Vast improvements in technology, proven to be a mixed blessing, account for part of the problem. The global economy also plays a significant role: the market, although "a remarkably efficient device for allocating resources and for balancing supply and demand ... does not respect the sustainable yield thresholds of natural systems." (3) If we do not want to pass the point of no return and head towards ecological disaster, we must develop a policy ethic sensitive to the "basic features of the natural world: we will never understand it completely, it will not do our bidding for free, and we cannot put it back the way it was." (4) Equally important, we must alter the way we view the global economy and find new ways to finance projects to protect what has not yet been destroyed.

Conservation trust funds are one financing mechanism that has been recently employed, building on lessons learned from other models in the areas of conservation and development. Conservation trust funds are well suited to conserving natural resources due to their long time frame, their stable and enduring structure, and their ability to build local capacity in order to sustain it independent of outside agencies. As Professor Weiss points out, "[t]he basic principle of intergenerational equity requires that the present generation compensate future generations for the costs that it imposes on them for its own use of the planet and natural and cultural resources." (5) This is precisely what conservation trust funds set out to do.

This article will discuss the origins of the trust fund concept and the development of trust funds in the context of conservation. It will highlight the basic principles that should be taken into consideration and the issues to be addressed in designing the framework of a trust fund. Finally, this article will describe concrete steps to developing and implementing a trust fund, and relate through specific case studies some of the lessons learned from past experiences.

TRUST FUNDS: GENERAL BACKGROUND

What is a Trust Fund?

A trust is a legal arrangement in which assets are managed by one group (the trustee) on behalf of another group (the beneficiary). (6) In the case of conservation trust funds, the assets are grants and/or other donor funds, the trustee is usually a board of directors, and the beneficiary is usually the host country and/or a non-governmental organization ("NGO") in that country. Conservation trust funds are considered "public" or "charitable" trust funds, because they "finance projects that serve a public purpose, and the legally-designated beneficiary is the general public." (7) Trusts have a long history in the English common law and in those countries whose legal systems are based on English law. (8) In countries with legal systems other than the common law, trust funds can be established through national legislation or in analogous forms, such as "foundations" in civil law countries, which have a separate legal personality of their own. (9)

A BRIEF HISTORY OF THE LAW OF TRUSTS

Modern English and American trust doctrines can be traced back to the English use: a general trust concept that "entailed the transfer of legal title (enfeoffment) to a person who was to hold the property (the feoffee to uses) for the benefit of another (the cestui que use)." (10) The use, similar to trust concepts in other societies, developed as an equitable response to positive-law deficiencies and a restrictive English common law of property. (11) This method of circumventing the law was first and most extensively used by religious orders seeking to get around the Mortmain Acts--a series of acts prohibiting clergy from receiving donations of land for the purpose of "prevent[ing] the alienation of lands to religious corporations that consequently became perpetually inherited in one `dead hand,' hence, the term `Mortmain.'" (12) By conveying the land to a feoffee to uses, clergy could reap the benefits of land ownership without violating the Mortmain Acts. (13) Other groups who regularly employed the use include debtors attempting to evade creditors, vassals seeking to escape the burdens of feudal landholding, men trying to avoid the duties of dower, and those who wanted to convey land without having to deal with the constraints on a legal estate. (14)

Increasingly frequent employment of the use as an instrument of fraud led to the enactment of the Statute of Uses in 1535 (Statute). (15) The Statute tried to convert all equitable uses into legal estates by eliminating the feoffee to uses, making the beneficiary the legal owner. (16) However, some equitable interests escaped conversion due to the Statute's plain language and the interpretation of its construction by the common law courts. (17) Therefore, modern English and American trusts survived the Statute as a result of the Court of Chancery's interpretation of the uses as "trusts." (18)

As one ventures farther back in history, the origin of the English use itself has been topic of much academic debate. (19) The earliest theory maintains that the Roman fideicommissum was responsible for the origin of the trust. (20) Since Roman law served as the basis for the canon law of the church, and the ecclessiasts, who sought to circumvent the Mortmain Statute of the late fourteenth century, were the originators of the use, it seemed logical that the fideicommissum would be the direct ancestor of the use. (21) However, critics of this theory point out that the fideicommissum is by nature a testamentary bequest, while the use rarely arose by will. (22) Another theory, propounded by Frederic William Maitland and Oliver Wendell Holmes, attributed the origin of the trust to the Salic salmannus--a position that is likened to that of the feoffee to uses. (23) This Germanic theory has also been criticized as drawing only superficial similarities between the salmannus and the English trust. (24)

More recently, scholars of Islamic law and others have put forth the theory that the Islamic waqf (pl. awqaf) most likely inspired the creation of the English trust, due to historical proximity and structural similarities. (25) The waqf is a legal institution developed by Muslim jurists in the seventh, eighth, and ninth centuries A.D. and existed in two forms: "the waqf khairi--an endowment for an object of a religious or public nature--and the waqf ahli or dhurri--a family endowment." (26) The Islamic theory maintains that by the twelfth century, the waqf was already a well-established and widespread legal device in the Middle East, and Franciscan Friars returning from the Crusades in the thirteenth century brought the new concept back to England for the purpose of circumventing their Order's religious vow of poverty. (27) Of equal importance is the fact that structurally, the waqf and the English use are almost identical institutions. (28)

Regardless of the exact origin of the modern Anglo-American trust, these four institutions--the Roman fideicommissum, the Salic salmannus, the Islamic waqf, and the English use--all "emerged as a result of positive-law deficiencies and restrictions concerning the ownership and devolution of property," and to some extent their origins are "properly found in the historical circumstances in which [they] arose." (29) The same can be said of modern trust institutions in other areas of the world, such as the yayasan in Southeast Asia, (30) and the fideicomiso in Latin America. (31) Conservation trust funds, as we shall see, are no exception.

THE HISTORY OF CONSERVATION TRUST FUNDS

Trust funds have only recently been employed to achieve conservation purposes. They arose in response to various issues that surfaced in the late 1980's, in particular "debt-for-nature-swaps"--transactions in which a developing country's foreign debt is canceled in return for a commitment to domestic conservation investment. (32) The debt-for-nature swap was one reaction to the developing country debt crisis, which officially began in 1982 when Mexico announced that it would not be able to make payments on its international debt. (33) Despite their successes, these financial transactions often generated large amounts of local currency that local beneficiaries could not adequately absorb. In addition, there was an increasing need for long-term financing of conservation projects; (34) but what was lacking was a visible, transparent, and intermediary structure between various sources of financing and conservation projects.

In response to these concerns, the trust fund concept was imported from the estate-planning field to the conservation field, growing out of "the need for long term sustainability beyond the initial infusion of funds that a swap transaction creates." (35) This latest innovation in conservation finance was facilitated by Congress's enactment of...