THE TRUST IN CONTINENTAL EUROPE: A BRIEF COMMENT FROM A U.S. OBSERVER Thomas P. Gallanis PREFACE OF THE PARKER SCHOOL OF FOREIGN AND COMPARATIVE LAW Lance Liebman EDITORIAL: SPECIAL ISSUE ON TRUST LAW Jacopo Crivellaro COUNTRY REPORT: ITALY Maurizio Lupoi COUNTRY REPORT: CYPRUS Elias Neocleous COUNTRY REPORT: SWITZERLAND David W. Wilson and Caroline L. Nagai COUNTRY REPORT: NETHERLANDS J.M. Milo COUNTRY REPORT: SPAIN Sonia Martin Santisteban COUNTRY REPORT: LUXEMBOURG Thibaut Partsch and Jeremie Houet COUNTRY REPORT: SAN MARINO Andrea Vicari COUNTRY REPORT: GERMANY Alexander Grimm and Johannes Rehahn THE COLUMBIA JOURNAL OF EUROPEAN LAW ONLINE THE TRUST IN CONTINENTAL EUROPE: A BRIEF COMMENT FROM A U.S. OBSERVER Thomas P. Gallanis * Frederic William Maitland, the renowned historian of English law, called the trust “the greatest and most distinctive achievement performed by Englishmen in the field of jurisprudence.”1 The trust is certainly a great achievement. It is a “remarkably flexible tool used for a variety of purposes, both commercial and non-commercial.”2 And as a mechanism for the gratuitous transfer of wealth, the trust is at the very “core of modern estate planning practice”3 in the United States and other common-law countries.4 Yet is the trust distinctive? Much ink has been spilled on the question.5 On the one hand, “trust-like”6 devices appear in other legal systems—for example, the Roman fideicommissum,7 the German Treuhand,8 and the Islamic waqf.9 On the other hand, none of these trust-like devices is precisely the same as the common- law trust. This special issue of the Columbia Journal of European Law is part of an ongoing dialogue about the potential role of the trust in countries outside the common-law tradition. In * N. William Hines Chair in Law, University of Iowa (USA); Associate Reporter, RESTATEMENT (THIRD) OF TRUSTS, VOLUME 4; Associate Executive Director, Uniform Law Commission Joint Editorial Board for Uniform Trust and Estate Acts. In this commentary, I am speaking in my personal capacity only. 1 F.W. Maitland, The Unincorporate Body, in 3 THE COLLECTED PAPERS OF FREDERIC WILLIAM MAITLAND 272 (H.A.L. Fisher ed. 1911). 2 THOMAS P. GALLANIS, FAMILY PROPERTY LAW: CASES AND MATERIALS ON WILLS, TRUSTS AND FUTURE INTERESTS 391 (5th ed. 2011). 3 Id. 4 See D. Waters, The Distinctive Characteristics of the Anglo-Saxon Trust, in TRUST & FIDUCIE: CONCURRENTS OU COMPLÉMENTS 27 (2007) (“[T]he common law trust is no longer geographically Anglo- Saxon except in its beginnings. It is now applied worldwide from Hong Kong to Malaysia, Singapore and India to Abu Dhabi, England and Wales to Canada and the multi-jurisdictions of the United States, Bermuda to the Caribbean and the South Pacific, and New Zealand to Australia.”). 5 For citations from the recent literature, see footnote 4 in T.P. Gallanis, The Contribution of Fiduciary Law, in THE WORLDS OF THE TRUST (L. Smith ed., forthcoming from Cambridge University Press). 6 On this term, see W.F. Fratcher, Trust, in 6 INTERNATIONAL ENCYCLOPEDIA OF COMPARATIVE LAW 11- 101. See also VERTROUWD MET DE TRUST: TRUST AND TRUST-LIKE ARRANGEMENTS (D. Hayton et al. eds. 1996); TRUSTS AND TRUST-LIKE DEVICES (W.A. Wilson ed. 1981). 7 See generally DAVID JOHNSTON, THE ROMAN LAW OF TRUSTS (1988). 8 See generally ITINERA FIDUCIAE: TRUST AND TREUHAND IN HISTORICAL PERSPECTIVE (R. Helmholz & R. Zimmerman eds. 1998). 9 See generally D. Powers, The Islamic Family Endowment (Waqf), 32 VAND. J. TRANS. L. 1167 (1999); J.A. Schoenblum, The Role of Legal Doctrine in the Decline of the Islamic Waqf: A Comparison with the Trust, 32 VAND. J. TRANS. L. 1191 (1999). i ii COLUMBIA JOURNAL OF EUROPEAN LAW ONLINE Vol. 18 1999, for example, the International Working Group on European Trust Law, in connection with the Business and Law Research Centre in Nijmegen, published Principles of European Trust Law, with the stated purpose of “assist[ing] those who wish to discover and study the core ideas of the trust,”10 but also with the caveat that the authors did not “advocate the adoption by civil law jurisdictions of any trust concept….”11 Ten years later, in 2009, the same Centre and an enlarged Working Group published Towards an EU Directive on Protected Funds.12 The year 2009 also saw the publication of Book X (on “Trusts”) of the Draft Common Frame of Reference.13 In Canada, the Quebec Research Centre of Private and Comparative Law14 has hosted workshops and conferences on comparative trust law.15 The country reports in this special issue of the Columbia Journal of European Law testify to the continuing international interest in the trust and also to some of the theoretical and practical hurdles facing civilian countries that consider adopting the trust or aspects of it. In this brief commentary, let me offer the following four observations. First, it is striking that the Continental European countries are interested in the trust primarily for commercial reasons16 whereas the focus of U.S. law is on the trust as a mechanism for family wealth transmission.17 In reality, trusts are valuable devices for commercial and donative purposes.18 The European discussions and developments serve as a welcome reminder that we in the U.S. cannot afford to ignore the commercial uses of trusts.19 And the reminder runs in the other direction, too. European jurisdictions interested in the commercial benefits of the trust would do well to consider also its many advantages as a vehicle for intergenerational wealth management and transfer.20 Second, the Continental European interest in the trust provides an occasion for us to return to first principles: What is (and is not) a trust? What demarcates the trust from a trust-like 10 PRINCIPLES OF EUROPEAN TRUST LAW 11 (D.J. Hayton et al. eds. 1999). 11 Id. 12 TOWARDS AN EU DIRECTIVE ON PROTECTED FUNDS (S.C.J.J. Kortmann et al. eds. 2009). For an assessment, see B. Macfarlane, Book Review, 16 EDINBURGH L. REV. 130, 130-32 (2012). 13 PRINCIPLES, DEFINITIONS AND MODEL RULES OF EUROPEAN PRIVATE LAW: DRAFT COMMON FRAME OF REFERENCE (DCFR), VOL. 6 (C. von Bar & E. Clive eds. 2009). For an analysis and critique of Book X, see A. Braun, Trusts in the Draft Common Frame of Reference: The “Best Solution” for Europe?, 70 CAMB. L. J. 327 (2011). 14 The Centre is now called the Paul-André Crépeau Centre for Private and Comparative Law. 15 See the essays in RE-IMAGINING THE TRUST: TRUSTS IN CIVIL LAW (L. Smith ed. 2012) and in THE WORLDS OF THE TRUST, supra note 5. 16 See PRINCIPLES OF EUROPEAN TRUST LAW, supra note 10, at 5 (“The idea of this book sprung from a very particular source. In business and the financing of commerce[,] globalization has given rise to a renewed interest in civil law quarters in common law trust doctrine and the purposes to which that trust form can be put.”). 17 See RESTATEMENT (THIRD) OF TRUSTS ch. 1, intro. note (2003) (excluding business trusts from the coverage of the project and focusing instead on “the trust as a device for flexible, long-term settlement of family property”). 18 On the commercial uses of trusts, see D. Hayton, English Trusts and Their Commercial Counterparts in Continental Europe, in EXTENDING THE BOUNDARIES OF TRUSTS AND SIMILAR RING-FENCED FUNDS (D. Hayton ed. 2002); D. Hayton, The Uses of Trusts in the Commercial Context, in MODERN INTERNATIONAL DEVELOPMENTS IN TRUST LAW (D. Hayton ed. 1999); J.H. Langbein, The Secret Life of the Trust: The Trust as an Instrument of Commerce, 107 YALE L. J. 165 (1997). 19 U.S. law schools could usefully note that the Cambridge University LL.M. program includes a course on commercial equity. 20 See generally Gallanis, supra note 5. By way of example, the extension of the French fiducie to enable its use for family wealth transfer is being urged by some French lawyers. See J. Saiac & D. Gutmann, The French “Fiducie”: A Missed Opportunity or a Work in Progress?, EUROPEAN TAXATION 149 (April 2010). 2012 COLUMBIA JOURNAL OF EUROPEAN LAW ONLINE iii device? What differentiates the law of trusts from other bodies of law, such as the law of contract? These questions remain to be fully answered, and the answers will likely vary among jurisdictions. Even between England and the U.S., one can see different approaches.21 Third, it is fascinating to observe the different routes by which aspects of the common- law trust can be introduced into a modern civilian jurisdiction. The typical route is the enactment of legislation, such as the Luxembourg law of July 27, 2003,22 or the French statute of February 19, 2007.23 But legislation is not the only route. In Italy, Professor Lupoi has argued24 successfully25 that the country’s ratification of the Hague Convention on the Law Applicable to Trusts and on their Recognition26 enables Italian settlors to establish trusts of Italian property managed by Italian trustees—the trust interno.27 Fourth and last, European attention is concentrated on the express trust, but it is worth remembering that the law of trusts in Anglo-American jurisdictions is broader—extending also to trusts imposed by law such as resulting and constructive trusts.28 The constructive trust, in particular, has the potential to serve as a broad and flexible remedy.29 It remains to be seen whether the European countries attracted to features of the express trust will consider adopting some of these other offspring of Anglo-American equity. _______ This symposium issue of the Columbia Journal of European Law is a welcome addition to the ongoing dialogue about the role of trusts or trust-like devices in civilian jurisdictions—and indeed about the role of the trust worldwide.