Settlor, Trustee Or Beneficiary of a Trust… in the Courts of the Contracting State in Which the Trust Is Domiciled »

Conference Presentation

Some Recent Case Law On Private International Law of Trusts

ROMANO, Gian Paolo

Reference

ROMANO, Gian Paolo. Some Recent Case Law On Private International Law of Trusts. In: STEP Lausanne, 2016 Conference, Lausanne, 3 May 2016, 2016, p. 1-22

Available at: http://archive-ouverte.unige.ch/unige:135147

Disclaimer: layout of this document may differ from the published version.

1 / 1 Survey of Recent Cases on Private International Law of Trusts

Gian Paolo Romano, Lausanne, 3 May 2016

Good morning everybody. And thank you for your warm welcome. Let me thank Guillaume Grisel for his generous invitation. It’s always nice to be back in Lausanne. When Guillaume asked me to choose a topic for today’s conference, I thought it might be worth looking at some cases generated by the Hague Trust Convention of 1985. Part of the reason is because the Swiss cantonal courts and the Federal Tri- bunal had to deal with this Convention repeatedly over the last few years. I am particularly thinking about the famous – or infamous – Rybolovlev decision that sparked some criticism and concern. And so… why not have a look at how courts in other jurisdictions grapple with the same rules, possibly to receive some guidance? The second reason is that the Convention has a strong bond with Switzer- land, this part of Switzerland in particular, the drafter of the Explanatory Report being the late Professor von Overbeck who passed away one month ago, aged 91. And celebrating one of his achievements is, I believe, a way to pay tribute to this « old grand man »’s tireless work and outstanding service to the Swiss as well as the international community. Not only was Professor von Overbeck the founding father and first director of the Swiss Institute of Comparative Law in Lausanne, but he also was throughout his career a champion of the dialogue among nations and the mutual respect for their legal values. And the Hague Trust Convention, in an effort to build bridges between the civilian and the common law traditions, remains a testament to his beliefs and his leadership.

*** Now, the Trust Convention is an applicable law convention. It does not deal with jurisdiction. When I started working on my speech (that is over the week-end), I rea- lised it would be good to also cover some jurisdictional cases. Let me remind that the Lugano Convention and the Brussels Ia Regulation provide for specific trust-related rules on jurisdiction. And the Swiss Private International Law Act also lays down some uni- quely crafted provisions in this regard. And so the first part of my talk – which is not reflected in the title I pro- posed some months ago (I hope you won’t be mind this inconsistency) – will be addressing some challenging questions as to jurisdiction, while the second part will be dealing with applicable law. *** Let me read Article 5(6) of the Lugano Convention: « A person domiciled in a Contracting State may… be sued… as settlor, trustee or beneficiary of a trust… in the courts of the Contracting State in which the trust is domiciled ». Now this text raises a number of intricate problems... …some of which were evidenced by a 2008 English case, Gomez v. Go- mez-Monche Vives. Alfredo Gonzalez Diez created, in 1984, a trust by transferring to a Jersey company a substantial shareholding in Gonzalez Byass & Company Li- mited… … a Cayman Island company, which happens to be the holding of the well- known producer of sherry. English law was expressly stated to govern the trust.

The settlor died in 1991, intestate and domiciled in Spain. The beneficiaries under the trust were three sons. The settlor’s surviving spouse, and mother of the beneficiaries, a Spanish domiciliary, had designated herself to be « Appointor » based on a fiduciary power in the trust deed. At the time of the proceedings, a BVI trustee had replaced the original Jersey trustee. And a Liechtenstein company was responsible for the day-to-day administration of the trust. The beneficiaries started proceedings against their mother as well the trustees… …claiming that the trustees had, in breach of trust, paid to her capital and income. They contended that their mother had to reimburse those monies. And the beneficiaries also sought to have their mother removed as an appointor. The defendants, in particular their mother, raised lack of jurisdiction of the English court. *** In order to determine whether Article 5(6) made it possible for her to be sued in England, the first issue was: Where was the trust domiciled? There is no common definition of « domicile » of a trust in Brussels I and Lugano. Both instruments refer to the private international law of the forum. According to the 2001 Order – that has implemented Brussels I in the UK – a trust has its domicile in « the system of law with which the trust has its closest and most real connection ».

Now, English law had been expressly chosen to govern the trust. However, there was no geographical connection between the trust and England : …the place of residence of the trustees was not England, the trust was not administered in England, nor were any of the beneficiaries in England… Nonetheless, both the High Court and the Court of Appeal were satisfied that the trust was domiciled in England on the ground that (quote) « the connection between a trust and its proper law is in every sense real and close ». I am not sure whether the conclusion would have been the same under Ar- ticle 21(3) of the Swiss Act… … which relies on the « place of administration » as designated by the settlor or, in the absence of such designation, the « place of effective administration ». The initial place of administration was probably Jersey and the place of administration at the time when the facts occurred was probably Liechten- stein. But quite apart from this, the equation « domicile is in the State whose law was chosen by the settlor » is something of unsettling. This would mean that any trust governed by English law created anywhere in the world may trigger jurisdiction of the English courts ; and… when the defendant is domiciled in a Lugano or Brussels I State, the English courts will have no power to stay based on forum non conveniens. I wonder whether this is really a sensible solution. *** The second issue the court faced with was the capacity in which the beneficiaries sued the surviving spouse.

With respect to the first claim, the High Court had concluded that she was not sued as a « beneficiary ». That’s because the clamaints themselves argued that she was a not beneficiary, as consequence of which she had to return the monies she wrong- fully received. On appeal, Lord Collins disagreed. « She is sued – he said – because she has been treated as a beneficiary by the trustees and by herself ». So Article 5(6) applied to the first claim against her. With respect to the first claim, she was amenable to jurisdiction in En- gland. *** The final question was whether the fact that she was also sued as an « appointor » triggered Article 5(6) also with respect to the second claim. As we’ve seen, this Article mentions « the settlor, the beneficiaries and the trustees », but not the appointor nor the protector. Which is why the High Court held that an « appointor » does not rank as a « trustee ». The Court of Appeal approved, based on the need to interpret restrictively interpretation the special heads of jurisdiction listed in Article 5. Now, back in 1978, when the language of Article 5(6) was negotiated, there was no practice of using « appointors » or « protectors ». Nowadays – as you know much better than me – « protectors » may be granted extensive fiduciary powers, such as to replace trustees, change the accounting currency, change the law governing the trust, add or delete beneficiares…

And so, I am wondering whether one should not add the « protectors » to the list of the defendants that may be sued before the courts of the domicile of the trust. Article 149b of the Swiss Act encompasses – I believe – lawsuits filed against the « appointor » as covered by the expression « affaires relevant du droit des trusts ». So the drafting of the « LDIP » in this regard seems to be superior over the the Lugano Convention. *** Another case that posed a wide range of issues, including some novel ones, made all its way up to the Privy Council. The trust deed in question was entered into by Lady Crociani, the settlor. The original trustees were herself, resident in Mexico, and Bank American Trust, a Bahamas corporation. The beneficiaries included Lady Crociani’s two daughters, Princess Camil- la de Bourbon des Des Deux Siciles and her sister Cristiana. Clause 15 of the deed provided that (quote) « the validity and construction of the Agreement.. shall be governed by the law of the Commonwealth of the Bahamas… ». Clause 12 incorporated what is sometimes referred to as « shifting jurisdictional clause ». Some of you may be familiar with it. Clause 12 essentially provided for the absolutely discretionary power of the initial trustees (quote)… « to resign and appoint a new trustee outside the jurisdiction and… declare that the trusts thereof shall be read and take effect according to the laws of the country of the residence or incorporation of such new Trustee… » The Clause went on to say that

« thereafter the rights of all persons involved… shall be subject to the exclusive jurisdiction of and construed only according to the laws of the said country, which shall become the forum for the administration of the trusts ». There had been various changes in trusteeship. From 2007 to 2011, some Jersey trustees were appointed, and it was common ground that, based on clause 12, the proper law became that of Jersey. Relations between Lady Crociani and Cristiana deteriorated in 2011. Cristiana raised allegations that the Jersey trustees had acted wrongly. Soon afterwards, the Jersey trustees resigned and appointed Appleby Trust (Mauritius) Ltd, a company incorporated in Mauritius, as sole trustee. Cristiana became angry and filed an action in Jersey against her mother and the former Jersey trustees as well as the Mauritius trustee. The defendants challenged jurisdiction of the Jersey court arguing that the proper place to litigate was as distant a forum as Mauritius. *** The Royal Court of Jersey had first to construe the sentence : « the said country shall become the forum for the administration of the trusts ». According to the respondents, this is reference to the courts which have jurisdiction to resolve disputes. According to the claimants, those words simply refer to the place where the affairs of the trusts are run. The Privy Council left open the question. « The Board sees no ground – I quote – for holding that the expression has such a well-established technical significance that it cannot (mean) the place where the trust is administered in the sense of its affairs being orga- nised ».

More importantly, the Privy Council ruled that, to the extent that the exclusive jurisdiction can shift from one country to another based on the de- termination of a trustee, the relevant jurisdiction is the one that is designated by the clause in place at the time when the facts of the dispute occur as opposed to the time when the action is filed. And the breach or abuse that Cristiana blamed her mother and the trustees for was committed after the shift from the initial Bahamas jurisdiction to the Jersey jurisdiction, but before the shift from the Jersey jurisdiction to the Mauritius jurisdiction. I think this is a wise solution. When it comes to applying those « rotating » jurisdiction clauses, the relevant time has to be the time when the facts occur. This solution should, I think, also be embraced by the Swiss authorities in the situations where the trustee is « authorised to choose the forum » as contemplated by Article 149b of the Swiss Act. Otherwise, a trustee, when litigation is threatened against him by a beneficiary, can in bad faith designate a distant forum (say New Zealand) to make it more difficult for the beneficiaries to pursue their claims. *** Even when an exclusive jurisdictional clause is available, the question of- ten arises as to what kind of claims fall within it. That’s, I believe, the hardest part of the trust-related private international law: …to draw the dividing line between trust issues and non-trust issues. Let me illustrate this through an Italian case. Italy ranks among the non-trust countries that have adopted the Hague Convention.

Most of the Italian courts tend to apply the Convention not only to international trusts, but also to what has come to be known as « trust interni », the « wholly domestic trusts ». The case I have in mind does not involve a « trust interno ». The trust had been created by an Italian national. The trustees were UK and Swiss domiciliaries. A clause in the deed provided that (quote) « All rights under this Deed and its construction and effect shall be subject to the jurisdiction of the courts, and construed according to the laws, of England and Wales ». The settlor died. The daughter was one of the beneficiaries. Apparently, she first filed a lawsuit in Switzerland in her capacity as beneficiary. She then brought proceedings before the Tribunale di Udine seeking an order declaring the trust unenforceable or not being capable to adversely affect her rights. The Italian lower court found that the jurisdiction clause was binding on her. On appeal, the Supreme Court enquired in which capacity the claimant had been bringing her claims. In the background, there was the « claw-back action » (azione di riduzione) that the claimant contemplated. In this regard, she did not act as a « successor » to the settlor but as an « opponent », as a « forced heir ». And so, the clause was not binding on her. As a result, jurisdiction of the Italian court should be affirmed.

It would have perhaps been clearer to disregard the jurisdiction clause by simply saying that the claim was an inheritance claim and non a trust claim. *** Such greater clarity defines the London High Court decision in the Cha- ralambous v. Charalambous case. The husband and wife petioned for divorce. The wife filed an application for variation of a trust created by the husband’s mother during the marriage. The husband denied that the trust was a nuptial settlement. Alternatively, he relied on the provision of the deed that conferred exclusive jurisdiction on the Jersey courts: …which argument was dismissed by the court as « totally misconceived » : the right of the wife to seek variation and the power of the English court to vary are derived not from the trust deed but from the matrimonial regime. *** The last thing I want to note concerns jurisdiction to vary the trust. In a 2015 case, the High Court of Justice was faced with an application to vary four settlements entered by a Kenyan family. The oldest one, done in 1950, was governed by the law of Kenya. The settlor was domiciled in Kenya. Most of the trust assets were located in Kenya. And the trustees and the beneficiaries were resident there. Now, should the court of a country exercise jurisdiction to vary trusts governed by foreign law?

Interestingly, the Court invokes Article 8, letter h, of the Hague Conven- tion that mentions that the law applicable to trust governs inter alia « the variation or termination of the trusts ». And so the Court assume jurisdiction to vary… …and also based on evidence that Kenya would enforce the English variation order. One is left to wonder whether the English courts would in turn be prepared to recognize variation orders made, for example, with Swiss courts with respect to trusts governed by English law and domiciled in England. *** Let me note that the Italian courts have many times been requested to appoint trustees based on the terms of the trust deed. In a 2011, the Tribunal di Reggio Emilia relied on the « escape clause » under Article 15 of the Hague Convention to exclude the power of the Italian courts to make this kind of order. « le disposizioni inerenti alla titolarità dell’azione processuale e dei rimedi apprestati dal legislatore per la tutela dei diritti ». Only Italian law, including procedural law, govern mandatorily when Ita- lian courts may be called upon to intervene and what kind of remedies they may grant. But a minority of the Italian courts audaciously ventured to replace trustees when the law applicable to the trust allowed them to do so. I wonder whether arbitrators – arbitration clauses are apparently sometimes used in deeds drafted in Italy – may exercise such a power. *** No time to deal with this though. Because we have got to move to the applicable law.

Let me start this second part by reminding you that the Trust Convention applies to trusts established or evidenced in writing. But some countries have extended its scope beyond that. This happened in Switzerland as well as in the United Kingdom, based on Article 2 of the Recognition of Trust Act 1987. A 2010 case involving two Russian tycoons was about an oral trust. Boris Berezovsky brought a claim against Roman Abramovich seeking o- ver 3 billion pounds in damages for breach of fiduciary duties. According to Berezovsky, an oral agreement had been reached during a meeting at the Dorchester Hotel in London whereby Abramovich would hold on trust Berezovsky’s interests in Sibneft, the company resulting from an aluminium deal. And so the question was whether the trust was governed by English law or Russian law. The Court relied on the Convention to answer this. I will come to this in a minute. *** One of the cornerstones of the Convention is the freedom of the settlor to choose the law governing the trust. That’s what Article 6 says. If there is no choice, either express or implied, Article 7 offers a fall-back rule: the trust will then be governed by the « law with which it is most closely connected ». *** Distinguishing between « implied choice » and « absence of choice » has proved challenging. An example is offered by an Australian case: in the Estate of Constantinou.

Sir George Constantinou was one of the wealthiest Papua New Guinean businessmen. He made a will in 2006 creating trusts for the benefit of some of his 14 children. He died in a brutal car-hijacking two years later. The executor was one of his adult sons. He made an application before the Court of Queensland in order to know which law governed the trust. And, if that law proved to be that of Papua New Guinea, the executor sought guidance as to whether he was allowed to appoint new trustees or purchase real property. The court first turns to the « terms » of the will … And « the words of the will » (quote) « show the testator’s address at Port Moresby, Papua New Guinea, the address of the executor also at Port Mo- resby… (and) the will is marked as having been drawn up by solicitors in Port Moresby ». The court further took the view that the expression « in the light of the circumstances of the case » under Article 6 would also allow it to have regard to the testator’s domicile… as well as to the fact that the majority of his business interests were in Papua New Guinea. And so, the court concluded that there was an « implied choice of law ». But not being able to conclusively choose between Article 6 and Article 7, the court went on to satisfy itself that the closest connection was also with Papua New Guinea. *** Another issue is to which extent an implied choice may be gathered from the ties that exist between the trust instrument and earlier trust instruments which incorporate a choice of law or other closely related transactions, ty- pically contractual transactions, which incorporate a choice-of-law.

This question was raised in the Berezovsky v. Abramovich case. Berezovsky argued that, because of the pre-trust acquisition agreements were subject to English law, English law was to be regarded as impliedly chosen by the parties. The issue of implied choice of law was critical, because in the absence of such a choice, the trust would probably fail due to application of Russian law that does not recognize the trust. *** Which brings me to an additional question raised by the Berezovski case. To which extent, when applying the « closest connection test », the fact that, under one of the candidate laws, the trust would be non-existent may play a role? Some ambiguity in this regard flows from a passage of the von Overbeck Report which reads: « One would think that, given the broad power to assess the situation that Article 7 confers on a court, the judge will have a tendency to conclude that a trust is most closely connected with a State which has this institution ». The High Court concluded that « the point made by the Report is unlikely to be correct ». The Court of Appeal was less inclined to disregard the Report on this point. *** A similar issue was raised in a 2014 case, Gorgeous Beauty Limited v. Irene Liu and others. One of the candidate laws, although knowing the trust as an institution, would have invalidated it under the particular circumstances.

The case was about the dispute between two branches of a Taiwanese family with respect to the running of the family business. Gorgeous Beauty – that’s a pretty name – was a company incorporated under the laws of Seychelles. The dispute centered on a declaration of a trust signed by Irene Liu (one of the defendants) at a time when she was director of Gorgeous Beauty that some assets were held on trust for the benefit of a member of her family. The other branch of the family contended that this was part of a fraud. They claimed that the governing law was Seychelles law… .. under which the trust would have been invalid because it failed to com- ply with the requirements of the Seychelles International Trusts Act of 1994… …whose Section 76 provides that « an international trust must not identify the settlor or the beneficiary unless the beneficiary is Seychellois ». And the declaration of trust indicated both the settlor and the beneficiary. The defendants contended that English law applied to the trust. They relied on the style of drafting, that corresponded to the English legal style, and in particular, the fact that the « Declaration of Trust names the settlor, trustee and beneficiary and defines the trustee’s power consistently with English law ». Neither side contended for Taiwanese law. The London High Court concluded, although with some hesitation, that, English law was the most closely connected. And the fact that, under Seychelles law, the trust would not have been valid did have some influence in the analysis under Article 7. *** Article 7 fails to specify the relevant time at which the connection between the trust and a particular jurisdiction should be assessed.

A 2013 New South Wales case, Hiralal v. Hiralal, has brought this to the fore. The Hiralal family had ties with Fiji, Australia and India. The settlor was a Fijian national. In 1993, when he was domiciled in Fiji, he created testamentary trusts whose beneficiary was his wife, until she died or remarried, after which the trust fund would be distributed among his six children. The settlor died in 2010 in Fiji although he had been mainly living in Syd- ney for the last four years as consequence of the military coup that Fiji suf- fered in 2006. The High Court of Fiji granted probate of the will. Soon after his husband’s demise, the surviving spouse complained she received limited financial benefit from the trusts. And so, in August 2012, she commenced proceedings against the trustees in Sydney seeking recovery of the Australian assets and the removal of the defendants on account of their alleged misadministration. Slattery J. writing for the Supreme Court of New South Wales held that « in testamentary trusts, the appropriate time (to assess the closest connection) is the time of the creation of the will as opposed to the time of the death of the testator ». The settlor made his will ten years before moving to Australia. « Application of the Hague Convention points to Fijian law governing his trust ». *** One may wonder whether appreciation of the closest connection at the time when the trust is created always proves a sensible solution.

At least two out of the four connections indicated in Article 7 – the situs of the trust assets and the residence of the trustee – may well change over time. And so, when the facts giving rise to a dispute occur, the most closely connected country may well be different than the one that was most closely connected in the the first place. Interestingly, Article 10 of the Convention seems to say : « it’s up to the law governing the trust in the first place to determine if and when a change of governing law is permissible… …including as the result of the center of gravity of the trust moving to another jurisdiction or as a result of the desire of the trustee to change that law. *** Striking a balance between the different factors that may well point towards different laws may not prove a straightforward task. The Supreme Court of Queensland had to discharge this task in Hutchinson & Anor v. Bank of Scotland. The settlor, James MacKenzie, was a Scotsman who’d lived in Queensland for 55 years. As a retired marine engineer, he accumulated a wealth worth 11 million, consisting of real estate in Queensland, shares in companies listed in Aus- tralia and the United Kingdom, as well as bank accounts with the Bank of Scotland. In his will, he appointed his niece and his solicitor to be his executors and directed them, once the administration of his estate was completed, to hand over the residuary estate to the Bank of Scotland. The Bank of Scotland would then hold those assets as a trustee to the ad- vantage of a number of beneficiaries.

The executors started proceedings in Queensland seeking guidance as to what law applied to the administration of the trust, whether Australian or Scottish. And so, the court had to engage in comparing the ties with Australia and with Scotland. Among the factors that point towards the law of Scotland, the court stres- sed both the fact « the nominated trustee was the Bank of Scotland, a pro- fessional trustee… » and the fact that, « save for one of the beneficiaries, all of the beneficiaries were in the United Kingdom, many of them being Scottish organisations ». « A further important factor – the Court added – is that the distributions provided for in the trust are expressed to be in pound sterling ». On the other hand, « a significant proportion of the assets are in Australia and the deceased was resident and domiciled in Australia ». On balance, the Court concluded (quote) « the trust is centered on people and institutions located in Scotland » and so Scottish law applied to it, except for matters governing registration of shares and revenue laws) *** Let me quickly address what is probably the most critical area : the interaction between the law governing the trust and the law governing other issues or areas that may interfere with the trust affairs in different ways. Article 15 specifies that the law applicable to the trust may not impair the effet utile of mandatory rules under the laws governing succession, matrimonial property, rights in rem, and so on. And so let me offer just example of how this may prove problematic. *** It is about succession.

It is the first English reported case on the Convention. Sir Derek Barton had been for long decades professor at the Imperial Col- lege, London. In 1969, he was awarded the Nobel Prize for chemistry. Once he retired, he moved to Texas where he spent the last ten years of his life teaching at the A. & M. University. He died in 1998 domiciled in Texas. He left the residue of his estate on trust. The executors and trustees were his wife, American citizen, as well as one of his friends. The beneficiaries were his son, UK citizen living in the UK, and the Royal Society of Chemistry. Now, under English law, the beneficiaries are entitled to vary or terminate the trust. And so, by a deed of variation, the son and the Royal Society of Chemistry agreed that the son was to receive a lump sum instead of the annuity that had been determined by the testator… …who apparently strongly desired that no capital would be paid to his son before he turned 65. Under Texas law, it seems that the wishes of the settlor cannot be overriden by the beneficiaries. Now, Clause 1 of the will said « I declare that this my Will shall take effect in accordance with English law ». Despite this express choice of law by the testator, the law governing his succession was Texas law.

That’s because the choice of law of nationality is not permissible under Texas and English systems of Private International Law. One of the questions was whether the English choice of law was intended to govern the trust as well. One of the trustees contended that this was not the case, Texas law being more consistent with the testator’s intentions and desires. Sir Lawrence Collins upheld the deed of variation, holding n°1 that the choice of law extended to the trust and n° 2 this was not an inheritance issue but a trust issue. Paradoxically, the law applicable to the trust was less in conformity with the wishes of the testator than the law applicable to his succession. *** This reminds me of a Swiss case decided in 2008. An Englishman domiciled here, in Canton de Vaud, chose English law to govern his succession. He took a number of testamentary dispositions, which included the creation of a trust. He then re-married. Now, under English law, subsequent marriage revokes prior wills. This is not the case under Swiss law, which would have been applicable in the absence of choice. So, by virtue of the law chosen by the testator, his last will was revoked and so the trust will was prevented from coming to existence. Bottomline is, sometimes the law you choose prevents you from achieving what you truly want to achieve. It may have a kind of « boomerang » effect. ***

This brings me to another important issue… …which is the interaction between the law applicable to trust and both the law applicable to the transfer of assets into the trust and the law applicable to the assets themselves, particularly when those assets are represented by shares. A very recent case landed before the London Court of Appeal shows how quickly those issues may get complex. Proceedings were brought by the liquidators of Saad Investment Company (SICL), a company incorporated under the laws of Cayman island. Saad was an investment firm belonging to a conglomerate group created by M. Al-Sanea, a Saudi Arabian businessman. Operational headquarters of Saad are reported to actually be in Geneva. Saad was wound up by the Grand Court of Cayman Island on 18 Septem- ber 2009. The winding up petition had been filed forty-five days earlier, on 30 July 2009. Two days before the wound up order – that is on 16 September 2009 – Mr. Al-Sanea transfers to a Saudi Arabian company called Samba shares worth 318 million dollars in five Saudi Arabian companies. The liquidators of Saad claimed that the shares were held on trust by Mr. Al Sanea for the benefit of Saad as a result of seven transactions which took place between 1998 and 2008. The trust – so they said – was governed by the law of Cayman Island. So, at the time when the shares were transferred, the liquidated company had a proprietary interest in the disputed shares. And, because the transfer took place after the petition for winding up was filed, the transfer was a voidable disposition based on insolvency legis- lation.

Now, Samba, the recipient of the disputed shares, claimed that the seven transactions were governed by the law of Saudi Arabia or the law of Bah- rain. Neither law would trigger beneficiary interest of Saad, and so no separate beneficial interest for Saad could have arisen from those transactions. Mr. Al-Sanea had full title over them and the transfer he effected to Samba was perfectly valid. The liquidators of Saad could not claim anything back. Sir Terence Etherton writing for the High Court found for defendant and concluded that Saudi Arabia or Bahrein law applied. This was so, in his opinion, because of an express choice of Saudi Arabia and Bahrein law in the early transactions and also based on Article 7, the law applicable to the alleged trust being the law of Saudi Arabia or Bahrein as the one most closely connected. The Court of Appeal reversed the decision. Based on Article 4, which provides that « the Convention does not apply to preliminary issues relating to the validity of… acts by virtue of which assets are transferred to the trustee », the Court said that the law of situs governs the capacity of the settlor to alienate property, whereas the law of trust governs the validity and effect of trusts. The later transactions contained no express choice of law. They contained a free-standing declaration of trusts and « it must at least be arguable that it is to be implied from the terms of the declarations of trust in the later transactions that they were to be governed by a common law legal regime that would validate them, most likely Cayman islands law ». *** I wanted to mention a couple of additional cases.

But I have noticed that lunch is being served and I prefer not to overstrain your patience. I will not state any conclusion. Let me just note that unless you are a Princesse de Bourbon or a Nobel Prize winner or a Russian aluminium tycoon or perhaps a Gorgeous Beau- ty, trust may not really be for you. This is the impression one might gather from this survey. But trust is for some of your clients. And I guess that’s enough. Thank you all very much for listening.