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Cambridge University Press
Commercial Trusts in European Private Law

Commercial Trusts in European Private Law

by Michele Graziadei, Ugo Mattei, Lionel Smith
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In European legal systems, a variety of approaches to trust and relationships of trust meet the universal professionalization of asset management services. This book explores that interface in order to seek a better understanding of the legal regulation of the entrustment of wealth. Within the methodology of the Common Core of European Private Law, the volume presents cases on the establishment and termination of management relationships, obligations of loyalty and of professionalism, and the choice of law.

Product Details

ISBN-13: 9780521115605
Publisher: Cambridge University Press
Publication date: 07/16/2009
Series: The Common Core of European Private Law
Pages: 632
Product dimensions: 6.20(w) x 9.20(h) x 1.60(d)

About the Author

Professor of Comparative Private Law, Facolta di giurisprudenza, Universita del Piemonte orientale.

Professore Ordinario di Diritto Civile, Universita di Torino; Alfred and Hanna Fromm Professor of International and Comparative Law, University of California, Hastings College of Law.

James McGill Professor of Law, Faculty of Law and Institute of Comparative Law, McGill University.

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Commercial Trusts in European Private Law

Cambridge University Press
0521849195 - Commercial Trusts in European Private Law - Edited by Michele Graziadei, Ugo Mattei and Lionel Smith


1 Commercial trusts in European private law: the interest and scope of the enquiry


1 The interest and scope of the enquiry

The topic to which this book is dedicated is of great interest for anybody concerned with the expanding field of European private law. In several European countries business transactions commonly require the use of trusts. The litigation of trust law issues in a business context is becoming more frequent than in the past. At the European level, legal instruments enacted by the European Community make explicit reference to trusts,1 or regulate transactions involving both trusts and other investment vehicles.2 Principles of European Trust Law,3 drafted by a distinguished group of scholars, are now available to provide guidance on the development of trust law in European jurisdictions. At the international level, the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition has entered into force in several countries,4 providing much-needed solutions to conflicts problems raised by trusts, but also posing fresh questions on its impact and its implementation.

The great practical importance of the subject closely matches its burning academic interest. Trusts straddle the law of property and the law of personal obligations. Located at the intersection of core categories of private law, they pose problems that turn on the proper understanding of fundamental notions of private law. From the academic point of view, trusts also raise essential questions about competing claims to property, as well as about the management of property in the broadest sense. Both sets of questions involve hotly debated subjects.

Last, but not least, trusts are familiar features of the legal landscape of the English-speaking world but, on the other hand, they are less than familiar in most civilian jurisdictions. Today it would be wrong to consider trusts a distinctive feature of the common law world, because mixed legal systems have trusts5 and several civilian jurisdictions show important developments in this regard.6 Nonetheless, it is still true that one can hardly imagine how to deal with, for example, English law, without running sooner or later into an issue of trust law. The same is not necessarily true in many other countries, including several major European jurisdictions. This is why, far from being a neglected field among comparative law scholars, the law of trusts has been frequently investigated in comparative perspective.

Within the comparative law field, the present book adopts a new approach to the subject, in terms both of method and of scope of enquiry. The scope of enquiry is limited to trusts operating in the business context. This means that the use of trusts in fields like the law of non-profit organisations, matrimonial property and succession is not covered in this book. Here the focus is on inter vivos transactions that in many European legal systems are the province of contract law, or that require the use of investment vehicles usually established under company law, but that would be characterised as trusts in other European countries like England, Wales, Ireland or Scotland.7 The decision to investigate trusts in the setting of inter vivos transactions conducted for commercial purposes reflects the current state of the European private law debate and its concentration on the role of party autonomy in market integration.8 This is also the reason why the subject is, for the first time, covered for fifteen Member States of the European Community.

This volume does not offer a general comparative treatment of the law of trusts as that subject is commonly understood in anglophone countries. Yet, our terminological choice is less arbitrary than it may appear at first sight, considering also that the English term has no special status in a work covering the laws of several European countries.9

In setting the scene for the comparative discussion of the national laws, part I of the volume introduces the reader to the subject by providing a critical overview of the comparative literature on trusts, and by expanding on common core methodology as applied to this field. The main issues of traditional divergence among legal systems about trusts are thus surveyed with the intent of examining the state of the art about trusts in comparative perspective, thereby providing the general background of the present work.

2 A brief survey of comparative literature and problems

2.1 History, concepts and functional analysis

Comparative law literature on trusts is about a century old. Its focus has changed over time. This section will provide a short account of the transformation. The following survey breaks down into four parts. The first explores the beginnings of academic interest in the topic and the development of functional approaches to the comparative study of trust law; the second covers comparative work conducted to solve conflict of laws issues before national courts; the third deals with comparisons of trust laws to advance unification projects; and the fourth deals with the emergence of a comparative literature dedicated to trusts in the financial context.

Academic interest in the comparative treatment of trusts developed a little more than a century ago, when the history of English law was for the first time investigated by scholars who, at about the same time, established legal history as an academic discipline. In that intellectual climate, while the historical origins of English law were investigated on both sides of the Channel by the first generation of professional legal historians, trusts became a test case to appraise the originality of English law vis-à-vis both the Roman law legacy and the Germanic roots of continental legal systems. The story has been told in more detail elsewhere:10 whereas previous accounts of the history of trusts in England advanced the thesis that English law was largely indebted to ideas and institutions of Roman origins, like fideicommissa, or to the Germanic world, being in substance a local variety of Germanic institutions, like the Salman, no less a scholar than Frederic William Maitland chose trusts as one of the best examples of the need to study English law and legal history on their own terms. Maitland collected the English sources available at that time on the history of uses and trusts and concluded that they did not univocally point in one direction, namely the European continent. He observed that in continental Europe no legal institution possessed quite the same features as English trusts.11

We do not know what conclusions Maitland would have reached if he had known the law of confidentia and fiducia of several areas of continental Europe flourishing from the sixteenth century to the eighteenth century, as well as its earlier manifestations.12 By now it is clear, however, that much of the actual historical experience in this neglected field, and its relevance to the comparative study of the English law of trusts, eluded his attention. In any case, Maitland's research on trusts quickly became the twentieth-century cornerstone of influential comparative work. That work assumed that the English law of trusts was unique. Hence, the correct way to address the topic from a comparative stance was to look for institutions that on continental Europe performed some of the tasks which under English law were performed by trusts. In this context, the focus was mostly on trusts created by valid expressions of the settlor's will, as opposed to trusts serving the purposes of an emerging law of restitution and unjust enrichment.

Looking back to the early days of the comparative study of trusts, it is easy to underestimate the task facing comparative lawyers approaching trusts for the first time. In common law jurisdictions, the topic is vast. The sheer number of precedents on trusts constitutes a formidable challenge even for many dedicated researchers. The language of those precedents and of the relevant legislation is less than familiar to scholars trained in the general jurisprudence of continental legal systems, where the distinction between law and equity plays an altogether different role and is not rooted in the jurisdictional divide between courts of law and courts of equity.13 Furthermore, the lively doctrinal controversy over the nature of the beneficiary's interest,14 which engaged some of the most brilliant common law minds while comparative research on trusts was taking off, inevitably stimulated some conceptual responses to basic questions such as: what is a trust? who owns trust property? In the light of that controversy, it is hardly surprising that the first wave of comparative literature on trusts looked for order and clarity by proceeding first to answer the conceptual question concerning the nature of trusts and of the beneficiary's interest, then to research the functional equivalents and the mechanics of trusts. The search for conceptual clarity was, however, often frustrated by the poor quality of the tools deployed in the analysis. In the trust context, basic jurisprudential notions like 'ownership' or 'obligation' have unexpected meanings. Working on trusts, comparative lawyers have learned that familiar words can easily become traps for the unwary. Refined conceptual analysis of trusts requires a thorough search for the complex denotation of each notion employed to describe trust relationships - it is no coincidence that analytical thinkers like Hohfeld first tested their skills on trusts.15 But such analysis was never developed by the first comparative lawyers who approached the subject. Instead, they relied on the analysis of the nature of the beneficiary's interest in terms of property or obligation, hardly questioning the meaning of those concepts in the context of the law of trusts,16 or they proposed to fit the notion within the framework of other general concepts (like legal personality) familiar to lawyers based in continental Europe as well. The first trend of comparative thought thus spread the idea that trusts were a special form of ownership, whereby the same asset was owned by two or more owners.17 On the other hand, the possibility to resort to 'obligation' as the best category to analyse the trust concept did not receive wide acceptance in comparative literature on trusts, possibly because it ran contrary to the (by then) prevailing common sense among leading trust law scholars in England and in the US.18 The second main trend of thought considered trusts as an example of 'segregation of assets from the patrimonium of individuals, and a devotion of such assets to a certain function, a certain end'.19 This analysis ultimately evolved into the idea that trusts were legal persons,20 though, of course, the prevailing view of the institution in common law jurisdictions avoids collapsing trusts into legal personality. Meanwhile, on the European continent, the perception that trusts posed intractable conceptual problems slowly shifted academic interest in the subject from jurisprudential debates over the proper doctrinal definition of trust relationships to public policy and functional analysis. The roots of these approaches were already present in Maitland's essays on trusts,21 which examined, inter alia, the relationship between trusts and legal personality. Others looked in this direction as well. Lepaulle provided a rich illustration of the various functions performed by trusts in different contexts.22 He compared the role played by civilian institutions in similar settings, pointing to the shortcomings of the civilian solutions. The list of civil law substitutes of trusts analysed by Lepaulle is by now familiar to all comparative lawyers who take an interest in trusts. It comprises general powers of attorney, foundations, associations, gifts sub modo, etc.23 The discussion of functional substitutes of trusts became prominent in the second half of the twentieth century with Hein Kötz's Trust und Treuhand.24 After that, a number of publications explored the same theme, which now features also in very recent contributions on trusts in comparative perspective.25 Mentioning these developments, one could incidentally note that reflections on the common law experience with trusts did at times inspire solutions which were incorporated into the law of civilian jurisdiction without much trouble, thanks to the role played by legal authors as hidden legislators.26 In any case, functional analysis of trusts called for open discussion of the policy issues involved in recognising the legal form. These discussions, however, quickly bifurcated into conflicting views of the policy considerations in favour or against trusts. On one side, the

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Table of Contents

General editors' preface; Preface; Contributors to the volume; Contributors to the case studies; List of Abbreviations; Select bibliographies for jurisdictions represented; Part I. Setting the Scene: 1. Commercial Trusts in European Private Law: the Interest and Scope of the Enquiry; 2. A short note on terminology; 3. The Hague Trust Convention twenty years on; Part II. The Case Studies: Section 1. General Part: 4. Case 1: Creation and termination of the management relationship; powers of the manager; 5. Case 2: Investment duties; 6. Case 3: Conflict of interest; 7. Case 4: Basic insolvency situation; 8. Case 5: Insolvency of investment manager; 9. Case 6: Tracing; 10. Case 7: Choice of law; Section 2. Special Part: 11. Case 8: Pension funds; 12. Case 9: Collective investment schemes; 13. Case 10: Multiple debenture holders; 14. Case 11: Securitisation; Part III. Conclusions: 15. Some difficulties; 16. Comparative remarks on the general part; 17. Comparative remarks on the special part; 18. What's next?; Index.

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