International Trust Laws and Analysis 2019-4 By William Byrnes & Robert J. Munro Texas A&M University School of Law In the Trust Law section, this supplement contains updates to the chapters on Andorra, Anguilla, Austria, Bahamas, British Virgin Islands, Cayman Islands, Costa Rica, Dominica, Gibraltar, Guernsey, Hong Kong, Isle of Man, Macau, Mauritius, Seychelles and Switzerland. In the Company Law section, this supplement contains updates to the chapters on Anguilla, Brazil, Greece, Pakistan and the charts on Brazil. ANDORRA This chapter is up-to-date as of August 2019 Trust Laws – Suppl. 4 (2019) AND i ANDORRA AND ii Trust Laws – Suppl. 4 (2019) ANALYSIS ANDORRA ANALYSIS OF TRUST LAWS* After 700 years of being dominated by two co-princes, the French President and the Spanish Bishop of Seo de Urgel, the 180-square mile nation of Andorra wedged between two powerful neighbors in the Pyrenees has progressed towards greater self-rule with the adoption of its first constitution in 1993. This historic document affirms Andorra’s right to have a parliamentary system of government having as its chief executive a Cap de Govern (Head of State). During the period of princely rule going back to the Middle Ages, Andorran trusts have been used as an important vehicle in channeling assets under the civil law concept of fideicomis. Fideicomis is the Roman-origin word for what in common law countries is often referred to as a trust. It is the vehicle or entity through which a physical or legal person receives certain goods by gift with instructions to distribute these assets to third-party beneficiaries according to pre-established terms and conditions [Dret Civil Vigent a Catalunya (1923), §453, ¶100]. Andorra’s almost pure tax haven status, with no tax on personal and corporate income including trust income, is of value to individual settlors of international trusts. The Foreign Investment Law, which came into effect on November 7, 2008, provides for the opening up of 200 sectors of the Andorran economy by entrepreneurs and businesses from other countries. Foreigners can now hold 100% of a business in one of the 200 designated economic sectors, including industrial production, research and development, e-commerce, and education and training. The previous limit was 33%. Another point to consider before entering Andorra is that the country’s official language is Catalan, with French and standard Castilian Spanish widely spoken. The use of English is not as prevalent as in other European countries. In December 1996, Andorra adopted a Passive Resident Law that allows foreigners to qualify for residence in the Principality if they reside within Andorra for at least 183 days in a year and do not practice or work in any professional activity. The Law on Passive Residence Permits November 2006 established that a quota would be determined periodically according to the “economic and social needs of the Principality of Andorra.” An initial quota of 500 such permits was set. Passive residents do not work or carry out professional activity in the Principality. New entrants to the Principality must: show minimum annual income of 30,000 euros for the head of the family and 7,000 euros for each dependent family member; prove good conduct in their previous domicile; produce health insurance and a pension plan; own or rent a house or apartment in the Principality; pay a non-interest bearing deposit of 30,000 euros plus 7,000 for each dependent to the Andorran National Institute of Finances (INAF) which is refundable on departure. Andorra’s judicial system, based on Old Catalan and Roman Law, permits the establishment of trusts by using a trustee heir or fideicomissario, an individual or entity who accepts assets as a gift and distributes them to beneficiaries according to the settlor’s instructions. Excellent confidentiality provisions in the fideicomis will probably make Andorra a much more desirable trust situs now that the Principality has emerged as a self-governing, although not yet fully sovereign, state. At present *This analysis was written by Neal D. Futerfas, Attorney at Law, 50 Main Street, White Plains, N.Y. 10606, phone (914) 682-2171. Trust Laws – Suppl. 4 (2019) AND 3 ¶1 ANDORRA the country derives most of its income from serving as a free port that draws 9 million bargain-hungry shoppers a year chiefly from neighboring France and Spain. The OECD requested in 2019 stakeholders’ input on the dispute resolution process. It is reviewing Andorra’s implementation of the base erosion and profit shifting (BEPS) Action Plan minimum standard on tax treaty dispute resolution under Action 14. Andorra is subject to a Stage 1 review, which focuses on changes that have been made to implement the standard. [¶1] Legislative background. In view of the fact that the Andorran government has not approved or adopted a trust law since the first trusts appeared in the Principality and Old Catalan concepts have never been codified, the principal corpus of doctrinal reference consists of books written by famous jurists. Since 1923, the book entitled Dret Civil Vigent a Catalunya, by Antoni M. Borrell i Soler, has been the authoritative compendium traditionally used as a legal reference by Andorran jurists. Roman and old Catalan concepts still apply in the Principality, and various legal references discuss the law as derived from those eras. The Code de Successions of December 30, 1991, was adopted by the Province of Catalan and applies only to that Province and not to Andorra generally, though Andorra may well incorporate certain aspects of it in the future. Andorran fideicomis or trust law is among the most complex and subtle in the world. In practice only a nominal legislative background exists since the principles of the fideicomis, including family foundations, fiduciary gifts, and other quasitrust devices have not been codified to any great extent. The relevant principles are derived from Old Catalan, French, Spanish, and Roman theory and practice, with the most useful formulations of these principles to be found generally in publications by recognized legal scholars. These scholarly papers often represent in practice the foundation of judicial proceedings for the establishment and functioning of devices similar to trusts and will likely continue to fulfill that role in the Principality until a codification is compiled, if ever. Insofar as can be ascertained, the English version of the Borrell i Soler text on the fideicomis accompanying this analysis represents the first translation ever made into English. Andorra substantially revised its anti-money laundering regime in December 2000 with the passage of its Law on International Criminal Co-operation and the Fight against the Laundering of Money and Securities Deriving from International Delinquency (December 2000 Act). Subsequent amendments to the Andorran Criminal Code extend the predicate offenses for money laundering to all serious offenses that are punishable by a prison term of at least six months. Tax evasion is not a crime in Andorra. In 2008, Andorra ratified the UN Convention for the Suppression of the Financing of Terrorism. The implementation of the Convention led to a separate offense of terrorism financing within the Andorran Criminal Code-Article 366bis. Banks and other financial institutions are required to know, record and report the identity of customers engaging in significant transactions. Customer identification, including identification of the beneficial owner, is required at the time a business relationship is established and before any applicable transaction. The December 2000 Act imposes reporting obligations upon Andorran financial institutions, insurance and re-insurance companies, and natural persons or entities whose professions or business activities involve the movement of money or securities that may be susceptible to laundering. It specifically covers external accountants and tax advisors, real estate agents, notaries, and other legal professionals when they are acting in certain professional capacities, as well as casinos and dealers in precious stones and metals. Obligated entities must report suspicious transactions regardless of the amount involved. Reports of suspicious AND 4 Trust Laws – Suppl. 4 (2019) ANALYSIS ¶2 transactions are made to the Unit for the Prevention of Laundering Operations, Andorra’s financial intelligence unit. The government has signed asset sharing agreements with France, Spain and Switzerland. The FIU is able to exchange information with the US FinCEN. Andorra has signed cooperation agreements with the FIUs of Spain, France, Belgium, Portugal, Luxembourg, Monaco, Poland, Netherlands Antilles, Bahamas, Thailand, Albania, Mexico, Panama and Peru. Mandatory declaration forms are used at the borders. Andorra is a party to the UN Convention for the Suppression of the Financing of Terrorism, the UN Convention against Transnational Organized Crime, the 1988 UN Drug Convention but not the UN Convention against Corruption. Andorra is a member of MONEYVAL, a Financial Action Task Force-style regional body. Its most recent evaluation report is at <http://www.coe.int/t/dghl/monitoring/moneyval/ Countries/Andorra_en.asp>. In 2013, the Council of Ministers approved two bills to strengthen the financial system. The first bill relates to the organizational requirements and operating conditions of entities, the protection of investors, market abuse and financial guarantee accords. The second bill relates to the legal status of entities. The first bill provides