International recognition and adaptation of trusts: the influence of the Hague Convention.

• Author: Dyer, Adair
• Position: Symposium: The International Trust, part 2

1. INTRODUCTION

   The preparation of an international convention on the law applicable to trusts and on their recognition was, for the Hague Conference on Private International Law, a step into a new analytical area--that of the unknown legal institution.(1) Topics such as the adoption of children, or even divorce and legal separation, had offered some problems of characterization---or occasionally even the complete absence of the institution in question--but none had offered such a wholesale absence of a legal institution as did the trust project in 1982 with its non-trust countries (for the most part, classified for convenience as "civil law countries"). The Adoption Convention, completed in 1964, had offered the problem of characterization, or of definition, as between "plenary" adoptions and adoptions granted in some countries that had less than plenary effects.(2) Since countries that have Islamic law tend to reject, for religious reasons, any mechanism for child care that involves a change in the parent-child relationship, the model for the work in the sixties on the Adoption Convention(3) was based mainly on adoption practice in Europe. For the work on divorce, the gap in legal institutions was that a minority of the countries participating in the negotiations did not have provision for divorce in their laws, and others did not provide for legal separation. This gap was met in the Convention of June 1, 1970 on the Recognition of Divorces and Legal Separations(4) by including provisions specifically directed to the situations of countries that did not have one or the other of these institutions.(5)

   The broad gap between jurisdictions based on English law (together with those that have adopted by statute either a comprehensive form of trust, or trusts for use in particular areas of activity) and those jurisdictions that have never had a fiduciary mechanism such as the trust (whose legislation may even preclude the operation of such a mechanism) posed a challenge that brought about a new style of research at the Hague Conference. In addition to French, English had only been brought in as an official and working language of the Hague Conference, in 1964 when the United States joined during the Conference's 10th Plenary Session. There had only been one member of the Permanent Bureau with English as his native language and trained in the common law and equity since 1966. Now, for the first time, a member from the common law staff and a member from a civil law, non-trust jurisdiction were assigned to work together and prepare the report that would begin, and form the basis for, the initial discussions leading to the adoption of a treaty dealing with the private international law of trusts. The result was Preliminary Document No. 1, issued in May 1982 and entitled Report on Trusts and Analogous Institutions, by Adair Dyer and Hans van Loon.(6)

   Fortunately, the work of the Hague Conference on a topic depends only for its start on the practical experience and analytical skills of the members of the Permanent Bureau, all of whom are to a large extent "generalists." Member states come to the rescue with distinguished specialists, both in private international law and in the subject area. From the first meeting of the Special Commission, these experts took over the shaping of a treaty text, depending on the Secretariat only for essential support services. The United States sent Professor Donald Trautman of Harvard University, who had taught trusts (as well as conflict of laws alongside Professor Arthur von Mehren), succeeding to and in consultation with Professor Austin Scott. Canada sent Professor Donovan Waters, author of the leading treatise on the Canadian law of trusts(7) as well as of a book on constructive trusts.(8) The United Kingdom sent Professor David Hayton, the legal scholar continuing the leading treatise, Underhill and Hayton, Law Relating to Trusts and Trustees,(9) and the leading casebook, Nathan and Marshall.(10) The Scottish legal system was represented at the Special Commission by the other expert designated on behalf of the United Kingdom, Professor A.E. Anton, member of the Scottish Law Commission, who participated in the work of the ad hoc Drafting Committee that met in November 1982 and drew up the first Draft articles.(11)

   The continental European countries, for obvious reasons, had more difficulty sending experts who were known for their work in the field of trust law. Switzerland, which had a leading court decision on the treatment of a trust by a non-trust country, contributed Professor Alfred E. von Overbeck, a well-known academic expert on private international law, who was elected Reporter by the Special Commission. The host country, the Netherlands, contributed the work and long experience of C.D. van Boeschoten, a distinguished senior partner of a major law firm in The Hague, who was elected to serve as Chairman of the Special Commission. Germany designated Professor Hein Kotz, who had authored a pioneering comparative work entitled Trust und Treuhand.(12) Italy sent A. Gambaro, Professor of Comparative Law at the University of Turin. France sent Jean-Paul Biraudo, a magistrate then attached to the Ministry of Justice, who authored the book Les trusts anglo-saxons et le droit francais.(13)

   For the diplomatic conference, Egypt, which could take an interested role because of the Islamic legal institution, the waqf or wakf,(14) sent A. Rizk, Vice-Minister of Justice and Vice-President of the Supreme Court, together with Professor Fouad Riad of Cairo University. Japan, which had the fiduciary institution known as Shintaku,(15) sent its most distinguished expert on private international law, Professor Ikehara of Sophia University and Professor Emeritus of the University of Tokyo. Australia sent Professor Michael Pryles to the diplomatic session, alongside Trevor Bennett of the Attorney General's Department, who had participated in the Special Commission's work. Cyprus, which had just joined the Hague Conference, sent Justice A. N. Loizou of its Supreme Court. Of course, many other experts, including governmental lawyers and magistrates, participated actively in the work on trusts and made significant contributions to the results. It is notable that Panama for the first time sent an observer to follow the Conference's work.

   It is not the purpose of this article to trace the whole history of the trusts project at The Hague, but I simply wanted to give the reader some flavor of the treaty-making process at the Hague Conference, which the Secretary General of the United Nations once referred to as "highly-structured procedures."(16) The structure comes from the Conference's Statute(17) that, since its entry into force in 1955, has provided for a diplomatic conference, in principle, once every four years, and for the first time has established a permanent intergovernmental organization(18) with a standing Secretariat, committed to the mission of working for the progressive unification of the rules of private international law. The four-year cycle imposes discipline both on the Permanent Bureau and the experts forming the delegations to complete the preparatory work in time to be able to adopt the final text of pending conventions at the next Plenary Session. The Trusts Convention conformed to this pattern and was adopted at the Hague Conference's 15th Plenary Session in October 1984.(19)

   What were the reasons that led the Hague Conference to undertake this task, which Professor Waters once described as the first serious attempt in 600 years to bridge the gap of the "English" Channel (known in French as La Manche) in the field of fiduciary law?(20) Much can be attributed to the impact of the European Economic Community (EEC), which now has evolved into the European Union and is presently made up of fifteen countries.(21) The creation of a Common Market among six continental European countries(22) starting in 1957 had made it feasible for businesses from Britain, the United States and Canada to establish multinational operations in Western Europe on a much broader scale than had been possible in the past. This process was accelerated when Great Britain, Ireland, and Denmark joined the EEC in 1973, and business people came to be based and domiciled in a country other than that of their nationality for many years. The reverse process for continental European business people accelerated with the entry of Great Britain and Ireland into the EEC. English, Irish, and U.S. citizens tended nonetheless to do their estate planning in their traditional way (i.e., by setting up inter vivos trusts or trusts in their wills), while acquiring property in non-trust countries. Some of the continental European executives living in England or the United States learned to like the flexibility of the trust mechanism and began to use it while still owning or inheriting property in non-trust countries. Notaries and, occasionally, courts in some of the non-trust countries began to be confronted with the existence of an unknown and unrecognized player in the context of the settlement of an estate--the trustee.

   This growing problem was posed in a limited but important way in a legal text in 1978. The original six Member States of the EEC--all non-trust jurisdictions on the continent of Europe--had drawn up a treaty on jurisdiction and on the recognition and enforcement of judgments, reciprocal as among them, in 1968. This treaty is known as the Brussels Convention,(23) and it performs a role among the countries of the European Union analogous to that which the "full faith and credit clause" of the U.S. Constitution plays among the fifty states of the union in regard to mutual respect for the judgments of each other's courts.(24) The entry of Great Britain and Ireland into the EEC meant that, for the first time, when these new member states acceded to the Brussels Convention, litigation involving trusts and...