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. 1 *** 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. 2 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 fidu- ciary 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 adminis- tration of the trust. The beneficiaries started proceedings against their mother as well the trus- tees… …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 ap- pointor. 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 ». 3 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 set- tlor or, in the absence of such designation, the « place of effective adminis- tration ». The initial place of administration was probably Jersey and the place of ad- ministration 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 bene- ficiaries sued the surviving spouse. 4 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 bene- ficiary, 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 « ap- pointor » 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… 5 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 jurisdic- tional 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… decla- re 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 6 « thereafter the rights of all persons involved… shall be subject to the ex- clusive jurisdiction of and construed only according to the laws of the said country, which shall become the forum for the administration of the trusts ».