How successful has the Hague convention on trusts been
The Hague Convention on the Law Applicable to Trusts and on their Recognition (hereinafter: “the Hague Convention")  , though undoubtedly an ambitious attempt to harmonise Conflict of Laws rules on the law applicable to trusts, was received by the legal community with a certain amount of scepticism about its ability to eliminate uncertainties in civil law jurisdictions and has generated little support worldwide  .
An examination of the status of the Convention in Europe reveals that the scepticism was not unjustified. Only five Member States of the European Union have so far ratified the Hague Convention: the United Kingdom (1989); Italy (1990); Malta (1994); The Netherlands (1995) and Luxembourg (2003). Switzerland has also ratified the Convention in 2007.  France and Cyprus have both signed, but not ratified, the Convention. In addition, the micro-states of Lichtenstein, San Marino and Monaco ratified the Convention in 2004, 2005 and 2007 respectively.
Some may regard the rather desultory number of European States who have ratified the Hague Convention as a solid proof of its failure. However, it should be borne in mind that prior to the Convention, no civil law jurisdiction, particularly in Europe, would recognise the principle of a separated protected fund owned by a trustee which was segregated from the rest of his patrimony  . The reluctance to recognise this principle was based on the civil law doctrine of numerous clauses, according to which there can only be a limited number of “real" rights over or in a property owned by another and no others  .
Nevertheless, as will be seen, following the adoption of the Convention, civil law States which have ratified the Convention, Such as The Netherlands and Switzerland, amended their civil codes and harmonised their domestic laws with the rules of the Convention. Other States, such as France and Luxembourg, have developed or amended their own trust-like institutions, such as the “fiduciary contract" (or “fiducie"), the compatibility of which to the definition of trust under the Convention is discussed in later chapters.
What follows is a discussion on the effect of the Hague Convention in civil law jurisdictions in Europe, specifically in Italy, The Netherlands, France, Luxembourg and Switzerland, all of which are contracting States to the Hague Convention, all of which has been influenced by the Convention in different ways. The following discussion will not be limited to the Private International Law level but will also review the changes in domestic law of the examined jurisdictions.
Indeed, Professor David Hayton, who led the United Kingdom delegation to the Fifteenth session of Hague conference on Private International Law and is one of the strongest advocates of the Convention  , emphasis that the purpose of the Convention objectives is not limited to the Conflict of Laws level, but to develop, where needed, domestic trust laws in civil law States, as follows:
...not introduce the trust into the internal private law of States that do not have the concept of the trust; it simply makes foreign States recognise trusts of property as a matter of private international law, although for recognition to mean something, the internal private law needs to recognise that the trust fund is separate from the owner’s private patrimony, so as to be immune from claims of the owner’s creditors heir and spouse.  (emphasis added)
This view is partly based on The Explanatory Report on the Trusts Convention which was composed by Professor Alfred von Overbeck soon after the Convention was concluded. The report clarifies that whereas other Hague Conventions on Private International Law deal with Conflict of Laws rules in existing legal institutions that are universally known, this particular Hague Convention defines the relevant legal institution, i.e. the legal institution of trust, specifically for civil law States. The report goes on to say that from the definition offered by the Convention, such States would later be able to create their own domestic trust law  . Hence, any discussion as to whether the Hague Convention has been successful or not should examine it from the perspective of both Private International Law and domestic law.
The conclusions of this comparative analysis will suggest whether it is sensible for the European Union to introduce an EC Regulation on the Private International Law of trusts which is similar to Rome I Regulation  .
BACKGROUND: ARTICLE 2 OF THE HAGUE CONVENTION
The basis of the following comparative discussion, and indeed the starting point for any discussion on the Hague Convention, must be the Convention’s attempt to define the concept of trust. What was once considered impossible and impractical to define  , famously described on one occasion as being ‘like an elephant...easy to recognise but difficult to describe’  , was now framed in Article 2 of the Hague Convention. It stipulates the following:
For the purpose of this Convention, the term “trust" refers to 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 specific purpose. A trust has the following characteristics –
The assets constitute a separate fund and are not a part of the trustee’s own estate;
Title to trust assets stands in the name of the trustee or in the name of the trustee or in the name of another person on behalf of the trustee;
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.
According to Professor Hayton, the first paragraph of Article 2 is a classic Anglo-American trust wherein the trustees have legal ownership of the trust assets and the beneficiaries have equitable or beneficial ownership. The second paragraph contains the central characteristics of the “trust", so that it can cover certain trust-like institutions or future trust-like institutions. The third paragraph emphasises that it is possible for the settlor to reserve powers for himself, such as the power to revoke the trust and the power to add beneficiaries  .
Critics of the Hague Convention have argued that the terminology adopted by the Convention is not comprehensive in its nature, that it refers to legal relationships rather than to trustee obligation, and it ignores the notion of ownership of the assets by the trustee  . Others have criticised the definition provided in Article 2 as being a “gateway definition": an image that caters to the need for judges and lawyers in civil law jurisdictions to be able to characterise their own domestic trust-like devices as “trusts"  . For example, Article 2 does not mention the trustees’ obligation to account for their conduct to the beneficiaries, an obligation which was identified by Millet LJ in Armitage v Nurse  as an ‘irreducible core of obligations owed by the trustees to the beneficiaries and enforceable by them which is fundamental to the concept of trust’.  Maurizio Lupoi has even referred to the trust definition under Article 2 as “the shapeless trust"  , arguing that it does not meet the typical characteristics of the Anglo-American trust, and was the result of heavy influence by the “civilian" delegates to the Hague Conference  .
As shall be seen, despite its vague terminology and the “shapeless" definition it offers, Article 2 has provided civil law jurisdiction with a common terminology to be used in the development of Private International Law rules and the creation of domestic laws related to trusts and trust-like institutions.
Italy is one of the few civil law jurisdictions which ratified the Hague Convention  . It had implemented the Convention by simply stating that it now formed part of Italian Law and did not amend its civil code nor enact a domestic trust law  . As a result, only a trust that is governed by the law of a foreign State which has a specific and substantive law on trusts will be recognised in Italy.
Nonetheless, in the twenty years following the ratification of the Hague Convention, the trust institution has gradually established itself as a key player in the social and economic spheres, providing new and attractive solutions for estate planning, family businesses, private succession and the protection of family assets.
At present, trusts are regulated in Italy by the provisions of the Italian civil code and fiscal laws and are subjected to Italian public policy. Thus, the Italian law would recognise a trust governed by foreign law so long as it is compliant with Italian rules regarding forced heirship, spousal property rights (including those on the termination of marriage), provision for the protection of creditors, provisions for the protection of minor and incapable individuals and other provisions considered to be part of Italian public policy (Article 15 of the Hague Convention).
However, according to the current leading opinion of the Italian courts, a person resident or domiciled in Italy (hereinafter “Italian") can validly settle a trust, governed by foreign law, even if the trust has no international elements or connections besides its proper law. In other words, an Italian settlor can create a trust with Italian trustees who administer the trust’s assets, which are located in Italy, for the benefit of Italian beneficiaries  . A trust that has these characteristics is often referred to by Italian practitioners as an “Italian domestic trust" or “trust interni"  . The trust interni was almost regulated in legislation in late 1999  but the proposal was put on hold in January 2000 in response to a statement made by the Italian government on its intention to put forward its own proposal  . It has yet to do so.
Despite the Italian legislature failure to provide an adequate codification for the trust interni, the Italian courts have taken the initiative and established, over the years, a legal framework for the application of the Hague Convention in Italy. Such was in the Lucca Tribunal decision in the matter of Cassani c Mattei  .
The decision was the first judicial decision made in Italy with regards to the Hague Convention and is therefore of great significance. According to the unofficial translation of the decision  , the case concerned an Italian resident in the United States (“the testator") who died, leaving a daughter as his sole heir. The testator created a discretionary trust in his will for all the needs of his daughter during her lifetime, and for the needs of his daughter’s children until such children reached the age of 25. The daughter rendered her father’s will void, claiming that it had breached her forced heir’s rights. According to Articles 536-548 of the Italian Civil code, dispositions made to a trust by an Italian resident or domicile whose succession is subjected to Italian law cannot infringe the rights of forced heirs; it could therefore be challenged in court. Under Articles 553-564 of the Italian Civil Code, the principal remedy granted to forced heirs who have suffered a prejudice under Italian forced heirship rules is based on the action of “Reduction" (“azione di riduzione")  . However, the daughter did not apply for the remedy of Reduction but rather for the declaration of the trust as void.
In its decision, the Lucca Tribunal succeeded in reconciling the validation of the trust with the daughter’s right, as a forced heir, by interpreting Article 15 of the Hague Convention in a way that will not infringe the heir’s rights and at the same time will not render the trust void, namely:
It seems clear to the court that the point of article 15 is to permit the application of any provision of internal law which may protect the rights of forced heirs and particularly in the case where the law of the contracting state is based on the principle that the rights of the forced heir cannot be violated. 
Subsequently, the court held that because the daughter did not make her application to the court through an action of “reduction" under the Italian civil code, but rather opted for a declaration of the trust as void, the court would not grant her the requested remedy.
The decision of the Lucca Tribunal is significant not only in relation to the recognition of the Hague Convention in Italy, but also with regards to the evolution of the concept of trusts in Italy. Firstly, the court recognised that an Italian resident or domicile can create a valid trust even if all the elements of the trust are located in Italy, so long as the proper law of the trust was a foreign law. Secondly, the decision to validate the trust proves that it is possible to achieve a well balanced decision that reconciles the mandatory rules of civil law jurisdictions with the common law concept of trusts.
In the years following the Lucca Tribunal decision, Italy has seen a booming trust industry and a growing number of Italians choosing to use trusts in private and commercial life. The growing popularity of trusts has led the Italian legislator to make its most expressive advocation of the Hague Convention by imposing new taxes on trusts, which prior to 2007 were tax free. The new income tax which was introduced in the Italian Budget Law of 2007 (hereinafter “The 2007 Budget law")  applies to settlors both resident and non-resident in Italy, with a distinction made according to the different types of trusts (for example: fixed, discretionary, revocable or irrevocable)  . Thus, any beneficiary who is identified as such in the trust instrument (under any form of trust), will be taxed as a result of his or her entitlement, irrespective of any actual distribution  . The 2007 Budget law also amended the existing inheritance tax, extending it to trusts  .
An examination of the changes made in Italy in light of the Hague Convention objectives may lead to the conclusion that Italy has positively responded to the Convention, willingly accepting and implementing the Conflict of Laws rules it offers. Moreover, the decision of the Lucca Tribunal, which successfully validated a foreign trust with Italian public policy by applying Article 15 of the Convention and domestic legal institutions (such as the doctrine of reduction), is a model to all civil law jurisdictions that are struggling to reconcile their own rules of public policy with the trust concept. Nonetheless, Italy has yet to fashion a special domestic law on trusts, and it seems that much work needs to be accomplished by the Italian legislator in order to fully incorporate the trust as an integral legal institution in Italy.
Although The Netherlands ratified the Hague Convention just three years after Italy (in 1995)  , and despite the fact that the legal system in both States is based on the civil law, the effect that the Convention has had on the Dutch law is almost completely different than on the Italian legal system and has been strongly influenced by each State’s domestic legal institutions and traditions.
Prior to the ratification of the Hague Convention, any separation of ownership, as provided by the Convention, was impossible under the Dutch Civil Code (DCC). During the proceedings which lead to the ratification of the Convention, it became clear that no existing mechanism that could qualify as “trust", according to Article 2 of the Convention, existed in Dutch law  . This included domestic trust-like institutions such as the bewind and the fiducia and any attempt to amend the bewind so it would be compatible to the definition of trust under the Convention failed  .
However, amid a growing worldwide competition to attract foreign capital and investment and as a result of inner-pressures to create a domestic law on trust, either by modifying the existing trust-like devices or introducing a “pure" Anglo-American trust  , the Dutch legislator enacted the law of “Wet Conflictenrecht Trusts" (1995).
The new law set aside the limitation imposed by the DCC in the context of the recognition of trust under the Convention  and enabled Dutch trustees to own a separate, protected fund which was segregated from the rest of their patrimony  .
By the legislation of the “Wet Conflictenrecht Trusts" the Dutch legislator has demonstrated that he was willing to deal with the Hague Convention directly. This approach is quite different than the Italian approach to the Convention where the Italian legislator has not attempted to make any changes in the Italian civil code aside from noting the ratification of the Hague Convention and leaving to the Italian courts to deal with problems arising from the recognition of foreign trusts and domestic laws. As a result, The Netherlands might enact a domestic law on trust a complete and coherent domestic law on trust sooner than Italy does.
Despite playing a significant role at the fifteenth session of the Hague Conference and signing the Hague Convention, France has not ratified the Convention. As a result, French law does not contain any provisions that deal specifically with foreign trusts or their recognition. Regardless, French courts have taken a pragmatic position and recognised foreign trusts since the 1970s, on the basis of Private International Law doctrines. One such case was Courtois and others v De Ganay Heirs (1979)  in which the Court of Appeal in Paris upheld the law chosen by the settlor of the trust on the basis of the “parties’ autonomy"  . As J.M. Tirard notes, in its decision the court did not refer to the “settlor" as such but instead referred to “the parties" as it mistakenly took the view that the trust was a special contract. The principle of the “parties’ autonomy" is often used by international Conventions and EU Regulations on Private International Law  and was, in fact, employed in the Hague Convention (Article 6). The decision of the Court of Appeal in Paris was later affirmed by the Cour de cassation in the case of Ziesennis (1996)  whereby the court confirmed that the trust is governed by the proper law of the trust which is the law chosen by “the parties".
It should be noted that this pragmatic approach was partly influenced by France’s international and European commitments and obligations such as The Hague Convention on the Law Applicable to Agency  and the Brussels Regulation, both of which pertain to trusts. 
As a result, foreign trusts are, in fact, recognised as such in France and seen as a specific legal arrangement in their own right so long as they are governed by a foreign law which recognises their concept, that they are compatible with French mandatory rules (ordre public) and that they do not constitute a ‘fraude a’la loi’  . Hence, a French national may set up a trust outside the jurisdiction of France provided that such a trust was not established for the sole purpose of depriving forced heirs rights or other rights protected by public policy  .
An important development in France’s domestic law was made later on, in February 2007, when the French legislator enacted the law of the “fiducie". The law comprises 18 articles divided into five chapters, most of which were inserted to the French Civil Code (“Code Civil") or were part of an amendments in existing laws  .
The fiducie, as defined in Article 2001 of the French civil code, is a transaction whereby one or more constituants of assets or bundle of assets, rights or securities is transferred to one or more fiduciaries, holding them segregated from their own patrimony, who bear the duty to act for the benefit of one or more beneficiaries  .
Whereas some commentators regard the fiducie as the ‘equivalent of a trust under Common Law’  , others argue that the trust and the fiducie, although similar, are based on separate principles  . Firstly, the fiduciarie does not become the legal owner of the assets when they are transferred to him by the constituant and he is obliged to keep the assets in separate accounts. Secondly, the fiducie is merely a contract which must be registered at the local tax office, thus having more in common with Company law practice rather than trusts. Thirdly, only legal entities subject to corporation tax can create a fiducie (Article 2014); thus, individuals cannot set up a fiducie to be used for estate planning. Moreover, only legal entities from the banking and insurance sectors or state-approved monitory and financial institutions may hold the office of fiduciarie. Finally, Article 2013 of the Code Civil stipulates that if a constituant creates a fiducie with the intention of making a gift to the beneficiary, the fiducie would be void and the tax consequences of such an act would be extremely severe  . There are other characteristics which set the fiducie apart from trusts such as the short period of time (33 years) over which property rights can be held by the fiduciarie under a fiducie, and the fact that the constituant and the fiduciarie reside in the European Community or a state which has a tax treaty with France.
Nevertheless, even those who oppose the comparison between the fiducie and the Anglo-American trust do not deny that the fiducie bear similar characteristics to those of the trust under Article 2 of the Convention and even more so to the Anglo-American trust  . Indeed, it is suggested that the fiducie and the trust share the same “DNA" which may eventually, in the future, lead to the ratification of the Convention and the adaptation of the fiducie to the definition of trust under Article 2 of the Convention.
A comparative analysis between the definition of the fiducie and the definition of trust under Article 2 of the Convention shows that under both definitions a person can place assets under the control of another for the benefit of others; the assets will be regarded as a separate fund whose title will stand in the name of another (“another" and not “trustee" or “fiduciarie" since the rights and duties of a “trustee" are not identical to those of the “fiduciarie") who must manage the assets according to the law and the (trust) deed or the (fiducie) contract. Hence, neither the personal creditors of the fiduciarie nor the creditors of the settlor may seize the fiduciarie’s patrimony unless their claims arise from the holding and management of the patrimony itself  .
It is interesting to note that although the element of accountability toward the beneficiaries was excluded from the definition of trust under Article 2 of the Convention in favour of a more general definition, this element is featured under both the fiducie and the Anglo-American trust. According to the law of fiducie, the fiduciarie is accountable to the constituant and the beneficiary (Article 2022) and is liable out of his own resources for any wrongs that he commits while carrying out his functions (Article 2026). Also the beneficiaries, the constituant or an interested third party can ask the court to remove and replace the fiduciarie if he neglects or fails to discharge his duties (Article 2027). In comparison, one of the core elements of the Anglo-American trust is the beneficiaries' rights to enforce the trust and make the trustees account for their conduct  . Moreover, both the fiducie and the trust share the principle introduced in Saunders v Vautier (1841)  whereby the beneficiaries have the power to waive their rights to the trust and bring it to an end  . Furthermore, both the fiducie and the Anglo-American trust must be for the benefit of people  .
It seems the French fiducie shares some, but not all, of the characteristics of the trust concept. In certain respects, as the next chapter will demonstrate, a comparison between the French fiducie and the Luxembourgian fiduciary contract reveals that in certain aspects the French fiducie is closer to the trust concept than the Luxembourgian fiduciary contract is, despite the later being amended in 2003 to comply with the definition of trust under Article 2 of the Convention.
It is therefore suggested that since some of its fundamental principles are already operating in practice, as demonstrated in the pragmatism of the French Courts towards the recognition of foreign trusts, the ratification of the Hague Convention is not out of reach.
This conclusion is reinforced by the decision of the Tribunal de Grande Instance (TGI) in the case of Mrs. Evelyne Pollio (2004)  . This decision is of great importance since it was the first time that a French court delivered a decision in a tax case involving trusts  . In its decision, the TGI held that a French resident beneficiary of a discretionary trust is not subject to wealth tax. However, since the court’s decision is not a binding precedent, as emphasised by J.M. Tirard, the question as to whether a French resident beneficiary of an Anglo-American trust is subject to wealth tax will still depend in the future on the circumstances of each case and on the ability of the tax authorities to identify the beneficiaries of the trust.
Nevertheless, the decision of the TGI has another important characteristic which is not emphasised by Tirard but is of great significance. When referring to the foreign trust, the court used, knowingly or unknowingly, the same terminology used by the Hague Convention in Article 2. The courts definition was as follows:
...as a general rule, it [the trust] contemplates legal relationships created by one person – the settlor [le constituant] – by an instrument during his lifetime or upon death, where property is placed under the control of a trustee [the same word is used in French] for the benefit of a beneficiary [b’n’ficiaire] or for a given purpose. The rights of the beneficiaries can be varied by the deed establishing the trust.  (translation and comments added by J.M. Tirard)
A comparison between the court’s definition of trusts and the definition of trusts under Article 2 of the Hague Convention reveals a striking similarity. Yet the court referred neither to the Convention nor to its definition. One cannot help but wonder that the Hague Convention has had a greater influence on the terminology used in the legal practice in civil law jurisdictions than it is commonly given credit for. Moreover, the fact that a French court used the same terminology to define “trusts" as used in the Convention which is implemented in civil law jurisdictions which ratified the Convention is a strong indication that a harmonisation of Conflict of Laws rules on trusts, one of the main objectives of the Convention, is not an impossible goal to achieve as some commentators claim.
In 2003 the parliament of Luxembourg enacted a law concerning trusts and fiduciary contracts (hereinafter “the law of 2003")  . This law ratified the Hague Convention and abrogated the Grand-Ducal Regulation of 1983 (hereinafter “the law of 1983")  , including the restructuring of the legal institution of the fiduciary contract which was first introduced under the law of 1983.
The law of 1983 introduced the concept of fiduciary ownership almost two years before the Hague Convention was concluded. This led some commentators to suggest that the drafters of the Convention used the definition of the Luxembourg fiduciary contract when considering the definition under Article 2 of the Convention  . The law of 1983 defined a fiduciary contract as ‘a contract by which a person, the fiduciant, agrees with another person, the fiduciary, that, subject to the obligations determined by the parties, the fiduciary becomes the owner of assets which shall form a fiduciary property’  . This legal framework served as the basis of certain legislative initiatives, which have built upon it and extended its range of applications. An example of this is the law on transfer of title by arrangement  , which implies the transfer of title and the related creation of a segregated fund, expressly intended to compete with the corresponding trust-based solutions of Anglo-American origin  .
Nonetheless, it took 18 years for Luxembourg to ratify the Convention. Its reluctance to do so for so long might be connected to the prominent role of the fiduciary contract under the law of 1983 in the development of Luxembourg as a major financial centre and a “hub jurisdiction" for financial institutions, conducting a considerable amount of inter-European banking, mortgaging, insurance and other business on behalf of clients who were located internationally  .
Despite the popularity of the fiduciary contract institution and in order to increase its success, the Government of Luxembourg decided in 2003 to ratify the Hague Convention in order to benefit from the international recognition system of the Convention and compelling other contracting States of the Convention to recognise Luxembourg’s fiduciary contract  . Moreover, by allowing foreign trusts to enter into the Luxembourgian financial market the Government sent a strong indication to the financial industry that it could resort with greater confidence to foreign trusts  .
Accordingly, several adjustments had to be made in the fiduciary contract structure in order for it to meet the criteria laid down in Article 2 of the Convention  . The adjustments included the incorporation into the existing definition of two prime principles of the trust concept which are featured in the Hague Convention and were not part of the fiduciary contract definition under the law of 1983: the conferment upon the fiduciary (trustee) of fiduciary ownership  and the notion of segregation of fiduciary assets from the personal creditors of the fiduciary  .
Nevertheless, the fiduciary contract remains exclusive to the financial industry, just as it was under the law of 1983. However, under the law of 2003 it was stretched to also include credit institutions, investment enterprises, investment companies of fixed or variable capital, securitisation companies, fund management companies, pension funds, insurance or reinsurance enterprises and national and international public organisations operating in the financial sector  .
Moreover, a comparative analysis conducted by Professor Matthews on the differences between the French fiducie and the Luxembourgian fiduciary contract under the law of 2003 reveals that the French fiducie is less contractual in its characteristics than his Luxembourgian “older brother"  . Matthews suggests that whereas the fiduciary under the law of 2003 accounts only to the constituant, the French fiduciarie accounts also to the beneficiaries, as with Anglo-American trusts. Furthermore, under the French fiducie, parties may not revoke the fiducie once the beneficiaries have accepted it without the consent of the court; moreover, they hold the right to terminate the fiducie whereas beneficiaries under the law of 2003 do not possess these powers.
Nonetheless, the fact that the law of 2003 does not impose any specific requirements on Luxembourgian professionals willing to act as trustees is a further indication and a strong incentive for practitioners to establish a promising practice in the field of trust administration under the proper foreign law for foreign resident clients. This might abolish the current segregation of the fiduciary contract to the financial market and also offer it to the private sector, which may, eventually, lead to the development of a Luxembourgian domestic trust.
Following the experience of Luxembourg, Switzerland decided to take positive steps to improve their understanding of trusts by giving them official recognition, primarily in order to counter money laundering and to safeguard Switzerland’s important financial industry  . Thus, in 2007, Switzerland joined Italy, The Netherlands and Luxembourg and ratified the Hague Convention save for Articles 5 and 13, and extended the scope of the Convention to also include trusts made orally  . However, no domestic law on trust has yet been introduced.
But the influence of the Hague Convention did not stop at the ratification of the Convention. Consequently, new provisions were introduced into the Swiss Private International Law Act as well as the Swiss Debt Enforcement and Bankruptcy Act. Moreover, the Swiss Federal Tax Administration issued new rules for income tax and for inheritance tax of trusts and in addition, the Federal Tax Administration issued new sets of rules related to the VAT treatment of trusts  . Other changes could be seen in the legislation related to real estate, which could be now be owned and managed by a trustee, and in the Swiss Bank Code of Conduct, which was updated to include a specific form for use when opening a bank account for a discretionary trust.
Although Switzerland has still not enacted a domestic law of trusts the level of legal certainty surrounding trust matters has risen significantly. In light of these developments, commentators expect this trend to continue because of its popularity, flexibility and practicality for family estate planning and wealth management  . Nevertheless, it is yet to be seen how Switzerland will face applications of trusts in matters concerning matrimonial law or succession law which are governed by domestic law, and will therefore be subjected to Swiss public policy. This is a matter which has yet to be challenged  .
(or: A pathway to an EC Regulation on the law applicable to trusts)
There is no doubt that the remarkable steps taken by civil law States in ratifying the Hague Convention demonstrate a sincere effort to introduce the trust concept into their legal systems and to recognise foreign trusts. These efforts included, inter alia, changes and modifications to their domestic laws (The Netherlands, Luxembourg); judicial decision aimed to reconcile the concept of trust under the Convention with public policy rules (Italy); judicial recognition of domestic trusts governed by foreign law (Italy); and the establishment of public associations for the purpose of developing and regulating the operation of domestic trustees (Switzerland). France, though reluctant to ratify the Convention, was not indifferent to it; As discussed above, in reaction to the Convention and amid the growing popularity of the trust concept both in neighbouring countries and worldwide, France decided to create the institution of the fiducie, which was perceived by the French legislator as its answer to the trust and Luxembourgian fiduciary contract. However, despite being contractual in nature, the French fiducie bears similar core elements of the Anglo-American trusts and its definition is very close to the definition of trust under Article 2 of the Convention.
The question remains as to whether these developments are significant enough for the European Council to consider introducing an EU regulation on the law applicable on trusts which is similar to Rome I.
The experience of Rome I suggests that the main motivation behind its conclusion (and that previously of the Rome Convention  ) was the need to increase the level of legal certainty and protection of rights in the field of private law  . According to the Giuliano and Lagarde Report on the Rome Convention, it was clear from the beginning that the ‘unification of the rules of conflict of laws would be more practicable especially in the field of property law, because the rule of conflict apply solely to legal relations involving an international element’  . In other words, even in the field of contractual obligations, wherein all European legal systems share common ground, it was clear that the harmonisation of the substantive law of contractual obligation would be too ambitious and would not necessarily keep pace with the constant changes of the economic world  .
Similarly, any regulation on law applicable to trust should not set its objectives on the harmonisation or unification of the substantive law of trusts, but should rather focus on the unification of rules of conflicts between the different legal systems in the same manner as the Italian court decision in the case of Casani. Therefore, neither the criticism that the Hague Convention abandoned what was perceived to be the core elements of the Anglo-American trust in favour of a wider definition that would include civil law trust-like devices, nor the prediction that the Convention will be unable to fulfil its objectives, is justified. Firstly, common law jurisdictions have failed to reach a consensus amongst themselves as to how they define a trust. A pertinent example of this is the current debate on the Cayman Island’s non-charitable purpose trust (“Special Trust" or “STAR Trust") which is considered to be a significant departure from the traditional Anglo-American trust. Secondly, following ratification of the Hague Convention, civil law jurisdictions such as The Netherlands and Luxembourg had to introduce changes in their domestic law in order to comply with the provisions of the Convention, mainly with regards to the separation of property. Hence the definition of trust under the Convention is not too wide. Finally, if Rome I and the Rome Convention are considered a success, it should be remembered that one of the considerations which guided its drafters was that ‘to try to unify everything is to attempt too much and would take too long’  .
This pessimism notwithstanding, in order to introduce a regulation on the law applicable to trusts, all European states (as opposed to just the five members of the EU which have ratified the Convention) must accept the Hague Convention principles. In order to achieve this goal, the Convention must be ratified worldwide, starting with common law jurisdictions such as The United States, Canada and Australia. If this is achieved, an economic incentive will be created for civil law jurisdictions which did not sign nor ratified the Convention, such as Germany, to follow.