1985 Convention on Law of Trusts

1985 Convention on Law of Trusts, updated 9/4/20, 4:05 AM

Hague “Convention on the Law Applicable to Trusts and on Their Recognition” of 1985

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Sovereign Law Series

Hague “Convention on the Law
Applicable to Trusts and on Their
Recognition” of 1985


Short-Form Reference:

1985 “Convention on the Law of Trusts”

In-Line Micro Reference:

1985 “Law of Trusts”

Ratification / Registration:

“HCCH” Hague Conference on Private International Law,
Netherlands Ministry of Foreign Affairs as Depositary,
Hague (01 Jul 1985)

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Official Text of this Law Source as Ratified

Convention on the Law Applicable to Trusts
and on Their Recognition

Preamble

The States signatory to the present Convention,

Considering that the trust, as developed in courts of equity in common law
jurisdictions and adopted with some modifications in other jurisdictions, is a unique
legal institution;

Desiring to establish common provisions on the law applicable to trusts and to deal
with the most important issues concerning the recognition of trusts;

Have resolved to conclude a Convention to this effect, and have agreed upon the
following provisions:


CHAPTER I – SCOPE

Article 1

This Convention specifies the law applicable to trusts and governs their recognition.

Article 2

For the purposes of this Convention, the term "trust" refers to the legal relationships
created – inter vivos or on death – by a person, the settlor, when assets have been
placed under the control of a trustee for the benefit of a beneficiary or for a specified
purpose.

A trust has the following characteristics –

(a)
the assets constitute a separate fund and are not a part of the trustee's
own estate;

(b)
title to the trust assets stands in the name of the trustee or in the name
of another person on behalf of the trustee;

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(c)
the trustee has the power and the duty, in respect of which he is
accountable, to manage, employ or dispose of the assets in accordance with the terms
of the trust and the special duties imposed upon him by law.

The reservation by the settlor of certain rights and powers, and the fact that the
trustee may himself have rights as a beneficiary, are not necessarily inconsistent with
the existence of a trust.

Article 3

The Convention applies only to trusts created voluntarily and evidenced in writing.

Article 4

The Convention does not apply to preliminary issues relating to the validity of wills or
of other acts by virtue of which assets are transferred to the trustee.

Article 5

The Convention does not apply to the extent that the law specified by Chapter II does
not provide for trusts or the category of trusts involved.


CHAPTER II – APPLICABLE LAW

Article 6

A trust shall be governed by the law chosen by the settlor. The choice must be express
or be implied in the terms of the instrument creating or the writing evidencing the
trust, interpreted, if necessary, in the light of the circumstances of the case.

Where the law chosen under the previous paragraph does not provide for trusts or the
category of trust involved, the choice shall not be effective and the law specified in
Article 7 shall apply.

Article 7

Where no applicable law has been chosen, a trust shall be governed by the law with
which it is most closely connected.

In ascertaining the law with which a trust is most closely connected reference shall be
made in particular to:

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(a)
the place of administration of the trust designated by the settlor;

(b)
the situs of the assets of the trust;

(c)
the place of residence or business of the trustee;

(d)
the objects of the trust and the places where they are to be fulfilled.

Article 8

The law specified by Article 6 or 7 shall govern the validity of the trust, its
construction, its effects, and the administration of the trust.

In particular that law shall govern:

(a)
the appointment, resignation and removal of trustees, the capacity to act
as a trustee, and the devolution of the office of trustee;

(b)
the rights and duties of trustees among themselves;

(c)
the right of trustees to delegate in whole or in part the discharge of their
duties or the exercise of their powers;

(d)
the power of trustees to administer or to dispose of trust assets, to create
security interests in the trust assets, or to acquire new assets;

(e)
the powers of investment of trustees;

(f)
restrictions upon the duration of the trust, and upon the power to
accumulate the income of the trust;

(g)
the relationships between the trustees and the beneficiaries including the
personal liability of the trustees to the beneficiaries;

(h)
the variation or termination of the trust;

(i)
the distribution of the trust assets;

(j)
the duty of trustees to account for their administration.



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Article 9

In applying this Chapter a severable aspect of the trust, particularly matters of
administration, may be governed by a different law.

Article 10

The law applicable to the validity of the trust shall determine whether that law or the
law governing a severable aspect of the trust may be replaced by another law.


CHAPTER III – RECOGNITION

Article 11

A trust created in accordance with the law specified by the preceding Chapter shall be
recognised as a trust.

Such recognition shall imply, as a minimum, that the trust property constitutes a
separate fund, that the trustee may sue and be sued in his capacity as trustee, and
that he may appear or act in this capacity before a notary or any person acting in an
official capacity.

In so far as the law applicable to the trust requires or provides, such recognition shall
imply, in particular:

(a)
that personal creditors of the trustee shall have no recourse against the
trust assets;

(b)
that the trust assets shall not form part of the trustee's estate upon his
insolvency or bankruptcy;

(c)
that the trust assets shall not form part of the matrimonial property of
the trustee or his spouse nor part of the trustee's estate upon his death;

(d)
that the trust assets may be recovered when the trustee, in breach of
trust, has mingled trust assets with his own property or has alienated trust assets.
However, the rights and obligations of any third party holder of the assets shall remain
subject to the law determined by the choice of law rules of the forum.



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Article 12

Where the trustee desires to register assets, movable or immovable, or documents of
title to them, he shall be entitled, in so far as this is not prohibited by or inconsistent
with the law of the State where registration is sought, to do so in his capacity as
trustee or in such other way that the existence of the trust is disclosed.

Article 13

No State shall be bound to recognise a trust the significant elements of which, except
for the choice of the applicable law, the place of administration and the habitual
residence of the trustee, are more closely connected with States which do not have
the institution of the trust or the category of trust involved.

Article 14

The Convention shall not prevent the application of rules of law more favourable to
the recognition of trusts.

Article 15

The Convention does not prevent the application of provisions of the law designated
by the conflicts rules of the forum, in so far as those provisions cannot be derogated
from by voluntary act, relating in particular to the following matters:

(a)
the protection of minors and incapable parties;

(b)
the personal and proprietary effects of marriage;

(c)
succession rights, testate and intestate, especially the indefeasible shares
of spouses and relatives;

(d)
the transfer of title to property and security interests in property;

(e)
the protection of creditors in matters of insolvency;

(f)
the protection, in other respects, of third parties acting in good faith.

If recognition of a trust is prevented by application of the preceding paragraph, the
court shall try to give effect to the objects of the trust by other means.


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Article 16

The Convention does not prevent the application of those provisions of the law of the
forum which must be applied even to international situations, irrespective of rules of
conflict of laws.

If another State has a sufficiently close connection with a case then, in exceptional
circumstances, effect may also be given to rules of that State which have the same
character as mentioned in the preceding paragraph.

Any Contracting State may, by way of reservation, declare that it will not apply the
second paragraph of this Article.

Article 17

In the Convention the word "law" means the rules of law in force in a State other than
its rules of conflict of laws.

Article 18

The provisions of the Convention may be disregarded when their application would be
manifestly incompatible with public policy (ordre public).

Article 19

Nothing in the Convention shall prejudice the powers of States in fiscal matters.

Article 20

Any Contracting State may, at any time, declare that the provisions of the Convention
will be extended to trusts declared by judicial decisions.

This declaration shall be notified to the Ministry of Foreign Affairs of the Kingdom of
the Netherlands and will come into effect on the day when this notification is received.
Article 31 is applicable to the withdrawal of this declaration in the same way as it
applies to a denunciation of the Convention.

Article 21

Any Contracting State may reserve the right to apply the provisions of Chapter III only
to trusts the validity of which is governed by the law of a Contracting State.


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Article 22

The Convention applies to trusts regardless of the date on which they were created.
However, a Contracting State may reserve the right not to apply the Convention to
trusts created before the date on which, in relation to that State, the Convention
enters into force.

Article 23

For the purpose of identifying the law applicable under the Convention, where a State
comprises several territorial units each of which has its own rules of law in respect of
trusts, any reference to the law of that State is to be construed as referring to the law
in force in the territorial unit in question.

Article 24

A State within which different territorial units have their own rules of law in respect of
trusts is not bound to apply the Convention to conflicts solely between the laws of
such units.

Article 25

The Convention shall not affect any other international instrument containing
provisions on matters governed by this Convention to which a Contracting State is, or
becomes, a Party.


CHAPTER V – FINAL CLAUSES

Article 26

Any State may, at the time of signature, ratification, acceptance, approval or
accession, or at the time of making a declaration in terms of Article 29, make the
reservations provided for in Articles 16, 21 and 22. No other reservation shall be
permitted.

Any Contracting State may at any time withdraw a reservation which it has made; the
reservation shall cease to have effect on the first day of the third calendar month after
notification of the withdrawal.



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Article 27

The Convention shall be open for signature by the States which were Members of the
Hague Conference on Private International Law at the time of its Fifteenth Session.

It shall be ratified, accepted or approved and the instruments of ratification,
acceptance or approval shall be deposited with the Ministry of Foreign Affairs of the
Kingdom of the Netherlands.

Article 28

Any other State may accede to the Convention after it has entered into force in
accordance with Article 30, paragraph 1. The instrument of accession shall be
deposited with the Ministry of Foreign Affairs of the Kingdom of the Netherlands.

The accession shall have effect only as regards the relations between the acceding
State and those Contracting States which have not raised an objection to its accession
in the twelve months after the receipt of the notification referred to in Article 32.
Such an objection may also be raised by Member States at the time when they ratify,
accept or approve the Convention after an accession. Any such objection shall be
notified to the Ministry of Foreign Affairs of the Kingdom of the Netherlands.

Article 29

If a State has two or more territorial units in which different systems of law are
applicable, it may at the time of signature, ratification, acceptance, approval or
accession declare that this Convention shall extend to all of its territorial units or only
to one or more of them and may modify this declaration by submitting another
declaration at any time.

Any such declaration shall be notified to the Ministry of Foreign Affairs of the Kingdom
of the Netherlands and shall state expressly the territorial units to which the
Convention applies.

If a State makes no declaration under this Article, the Convention is to extend to all
territorial units of that State.



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Article 30

The Convention shall enter into force on the first day of the third calendar month after
the deposit of the third instrument of ratification, acceptance or approval referred to
in Article 27.

Thereafter the Convention shall enter into force:

(a)
for each State ratifying, accepting or approving it subsequently, on the
first day of the third calendar month after the deposit of its instrument of ratification,
acceptance or approval;

(b)
for each acceding State, on the first day of the third calendar month after
the expiry of the period referred to in Article 28;

(c)
for a territorial unit to which the Convention has been extended in
conformity with Article 29, on the first day of the third calendar month after the
notification referred to in that Article.

Article 31

Any Contracting State may denounce this Convention by a formal notification in
writing addressed to the Ministry of Foreign Affairs of the Kingdom of the Netherlands,
depositary of the Convention.

The denunciation takes effect on the first day of the month following the expiration of
six months after the notification is received by the depositary or on such later date as
is specified in the notification.



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Article 32

The Ministry of Foreign Affairs of the Kingdom of the Netherlands shall notify the
States Members of the Conference, and the States which have acceded in accordance
with Article 28, of the following:

(a)
the signatures and ratifications, acceptances or approvals referred to in
Article 27;

(b)
the date on which the Convention enters into force in accordance with
Article 30;

(c)
the accessions and the objections raised to accessions referred to in
Article 28;

(d)
the extensions referred to in Article 29;

(e)
the declarations referred to in Article 20;

(f)
the reservation or withdrawals referred to in Article 26;

(g)
the denunciations referred to in Article 31.

In witness whereof the undersigned, being duly authorised thereto, have signed this
Convention.

Done at The Hague, on the first day of July, 1985, in English and French, both texts
being equally authentic, in a single copy which shall be deposited in the archives of the
Government of the Kingdom of the Netherlands, and of which a certified copy shall be
sent, through diplomatic channels, to each of the States Members of the Hague
Conference on Private International Law at the date of its Fifteenth Session.