trusts

Civil law jurisdictions

Introduction | Origins | The Concept | Deciding on a Trust | Other Jurisdictions

Civil Law Jurisdictions

Civil law countries have historically evolved vehicles of their own to serve a similar purpose as that of the English trust. Interestingly, the development of both the English trust and similar vehicles on Continental Europe drew upon certain aspects of Roman law.

History

Continental Europe’s reception of Roman law stemmed from the sixth century’s Byzantine compilation of Roman law, the Corpus Juris Civilis. Fundamental principles of Roman law were that the law of property with a limited number of real rights (numerous clauses) was very distinct from the law of obligations such as contract, delict or tort and unjust enrichment, the distinction being that in the former real rights allowed for the recovery of specific property whereas in the latter obligations conferred only personal rights to compensation. Ownership of property was considered absolute and indivisible, although arrangements could be made for the substituting of one owner with another in particular events.

Trust-like devices in Roman law included the fideicommissum and the fiducia, arising from the notion of trusteeship duties and disabilities in the tutor-pupil relationship with respect to property owned by the pupil. Fideicommissum developed as an extra testamentary means of S disposing of property on his death to T, with T under an obligation on a particular event (for example death or remarriage) to pass it (or its value) on to B. Fiducia developed into 2 types: (i) the fiducia cum amico; and (ii) the fiducia cum creditore. Under a fiducia cum amico, property was transferred to a friend, for example for safekeeping until the transferor’s return (similar to a knight’s conveyance of land to a friend while off on a crusade). With a fiducia cum creditore, property was transferred to a creditor as security for performance of some obligation, subject to being retransferred to the transferor on performance of the obligation. The person to whom the property was transferred (the transferee), had to take reasonable care of the property and account for any profits arising from the property. Under this arrangement, however, the transferor of the property only had a personal right to compensation if the transferee refused to retransfer the property or wrongfully gave it to another person.

These trust-like devices were used by landed families to preserve their wealth and influence until the nineteenth-century codes based on the Code Napoleon (for example, in France, Belgium, Italy and Spain) prohibited such substitutions except to a minor extent. In the German Code, the Treuhand developed into a fiduciary agency concept in a bi-partite principal-agent relationship, rather the situation where S transfers assets to T, for the benefit of B. In this relationship, if S transfers property to T a Treunder for the benefit of S or B, the property is immune from claims of T’s private creditors, if S (but not B) claims this immunity so that B is unprotected unless S has pledged to B his right to obtain a release of the property from the claims of T’s creditors.

Other countries, for example Spain, have not developed the Roman fiducia into the Treuhand concept. So in Spain, if S transfers assets to T for the benefit of S or of B, both S and B are unprotected if T becomes insolvent because the assets are treated as part of T’s indivisible patrimony available for T’s creditors. If, however, title to property is transferred to T for a temporary purpose, some countries such as Italy and Switzerland do not regard such property as part of T’s patrimony.

Exceptions to the principle of indivisible patrimony are present in the case-law or codes on many Continental countries. For example, in Italy or Switzerland assets purchased in one’s own name by an agent for an undisclosed principal forms a fondo patrimonale (in Italy, assets owned by parents for the exclusive benefit of minor children) which is segregated from the estate of the heir until accepted after taking an inventory of the assets and liabilities of the deceased (for example, in Spain, Greece and France). This principle also applies to the testamentary secret trust in Spain, the Catalan herencia de confianca and the commercial comision de confianza of Italy (and Peru).

European Trust

The principles of a European Trust were launched at a conference on the 15th of January 1999 at The Hague. These 8 principles seek to develop a general trust concept to be introduced by an EC directive, with such directive being binding as to the result to be achieved, but leaving to the discretion of the Member States the choice of form and methods. Of great utility would be a general legislative trust framework based on an appropriate refinement of the 8 Principles in order to achieve new practices and structures in a rapidly changing commercial environment.

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