Convention on the Law Applicable to Trusts and on Their Recognition

CONVENTION ON THE LAW APPLICABLE TO TRUSTS AND ON THEIR RECOGNITION

(Concluded 1 July 1985)

(Entered into force 1 January 1992)

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;

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 -

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.

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