The document provides recommendations for Ukraine's accession to the 1985 Hague Trust Convention. It summarizes the key aspects and values of the convention, including defining trusts, recognizing choice of law, and minimum effects that must be recognized. It addresses challenges for non-trust jurisdictions in implementing the convention and balancing recognition of trusts with protecting domestic laws. The recommendations are for Ukraine to carefully consider reservations/declarations and defining trust concepts in its laws, and to potentially adopt a form of trust. It also recommends Ukraine explore joining the Lugano Convention or creating a new judgments treaty with the EU.

1. Recommendations on
Ukraine’s Accession to
Hague Trust Convention
(1985)
prepared by Natalia Perestyuk, Attorney at Law,
MBA
to be presented at the Ministry of Justice on
Nov’08 2018

2. Trusts as “Children of Equity”
“Legal systems that have not developed their
own trust law have generally failed to develop
conflict rules specifically aimed at trusts.
Insufflcient knowledge of trusts and the difficulty
of designing adequate rules of conflicts for a
legal entity (that is not weIl understood account)
for the lack of appropriate private internationallaw
rules on trusts in non-trust jurisdictions”
(Thévenoz, p.3, 4, 6)

3. HTC* Target (without Equity)
HTC is an example of preferred means of introducing
meaningful rules on the conflicts of laws and conflicts of
jurisdictions
Its chief purpose is to allow non-trust legal systems to
identify trusts and recognise their proper effects through
the incorporation of specific rules on conflict
By creating uniform private international law HTC:
enhances legal certainty and
facilitates
cross-border transfer and investment of trust funds,
the protection of trust beneficiary resident in non-trust
jurisdictions, as well as
the provision of trust services in non-trust jurisdictions
(Thévenoz, p. 6-7)
*Hague convention on the law applicable to trusts and on their recognition
(1985), or used in the literature as Hague Trust Convention (hereinafter –
“HTC”)

4. HTC Key Values (in
general)
Defines trusts for the purposes of its application,
Recognises the choice of law made by the settlor in the trust
instrument,
Lists four criteria to be considered in determining the proper
law of the trust absent a valid choice oflaw,
Defines the scope of the proper law of the trusts and lists
the effects of a trust that every Contracting State must
recognise as a minimum, and
Allows Contracting States to safeguard the integrity of their
legal system by limiting in a number of ways the effects of a
trust that would contradict mandatory rules and principles
(Thévenoz, p. 6-7)

5. HTC Values for Civil Countries
HTC defines trusts in such a way that trust-like vehicles may
qualify and thus benefit from the same recognition as trusts in
the Contracting States
HTC Member States to be guided by two (sometimes
conflicting) principles:
the need to protect its fundamental principles such as the
protection of creditors and/or heirs, and
the need to enhance legal certainty and predictability as to
the recognition of the effects of trusts
The many options give significant leeway states where HTC
applies (to retreat partially if they so wish):
choices can be made at the time of signature and ratification
(reservations due to Art.16) or
later on by the courts when deciding cases (Art.13)
(Thévenoz, p. 6-7)

6. Trust as Function &
Structure
HTC defines trusts
functionally:
“assets are placed under the control of A for the benefit
of B”
&
structurally:
“a separate fund,
in the name of the trustee
who has powers and duties in respect of these assets”
Scope of Art.2 is much wider thah that of a typical Anglo-
American trust

7. Autonomous Trust Notion in
HTC
It was wise nonetheless not to characterise trusts by
reference to the Anglo-American model.
Equity notions (such as: equitable rights, interests, or
remedies)
would almost inevitably have failed in civil law
jurisdictions
For example:
the mere distinction between legal and equitable interest
is not only unknown, but appears to contradict head-on
the numerus clausus of property rights principle
Only a deftnition using words and notions not overburdened
with domestic legal connotations can be applied with some
consistency in trust and non-trust jurisdictions alike
(Thévenoz, p.9)

8. Key Challenges HTC Responds
to
(1) lack of tools to determine jurisdiction in trust matters
(2) the growing practical need for guidance as to what
law governs a trust that has property both in trusts and
non-trust jurisdictions
=> topic of “the law applicable to trusts”, as priority project in
the agenda for Hague Conference15th Plenary Session
=> 16 countries are parties to HTC today, it is in force in 14
(including 2 not HCCH members)
Challenge (2) is especially vital for Ukraine today

9. Two Separate Questions as to
HTC
(1) ratification of or accession to the HTC by non-trust country
as one independent of
(2) whether such a country should itself adopt a form of trust
in its domestic law
Implementation of the HTC in a non-trust country may
require careful consideration in advance of the issues
that will be raised in domestic law, but the benefits of
adherence to a transnational framework of cooperation
may be well worth the effort required

10. Scope of HTC as PIL*
Instrument
HTC not considered to be a treaty unifying
substantive law, but to unify international rules of
conflict of laws (for trusts)
Nevertheless unification of substantive fiduciary (trust)
law may be seemed in “minimum trust recognition set”
(Art.11)
“Express trusts” only are within HTC scope as “trusts
created voluntarily and evidenced in writing”, however
it may be extended to the others (“resulting”?,
“constructive”, “statutory”) as well (via declaration
under Art.20(1))
*private international law

11. HTC & Property Law
Concepts
Art.2 of HTC vs. Art.1 of Principles of European Trust Law
Principles are for unification of substantive law while the
HTC is an operational instrument intended “to bridge the
gap between differing systems of fiduciary and property
law”
Principles use the verb “to own” as to the trustee, and the
words “personal rights” and “proprietary rights” as to the
beneficiary
The failure of HTC Art.2 to require that the trustee own
the assets in the trust fund is counterbalanced by its
statement that “the assets constitute a separate fund and
are not a part of the trustee's own estate” (Dyer, p.1002)

12. Trust Recognition & Advantages
Key advantages are following and promoting the globalization of
business activities and wealth transfers (through trusts as methods
meeting fiduciary needs)
“Minimal trust recognition set” implies “that the trust property
constitutes a separate fund, that the trustee may sue and be sued in his
capacity as trustee and may appear or act in this capacity before a notary
or any person acting in an official capacity”
However, these effects are weaken by the categories laid down in Art.15
(to protect the operation of the mandatory rules of the law designated by
the conflicts rules of the forum to govern certain non-trust questions)
HTC Atr.11 … “determines that the assets of the trust are separate
from those of the trustee. This is an essential element of the trust
without which its recognition would have no meaning” (von Overbeck
Report, p.108)
HTC is “to build bridges between legal systems and to prevent injustice
arising inadvertently from the differences between them” (Dyer Note,
p.182)

13. HTC Risk Factors & Balances
Key risk is a difficulty (for the local legal system) to implement trust
essential features properly (not to result into injustice arising
inadvertently)
“Detriments for a jurisdiction that tries to keep its property system
isolated from the broad transnational developments in this field may
outweigh the inconveniences”
(Dyer, p.1008)
Art.13 as a “concession by the drafters to the fears of non-trust
jurisdictions that trusts, like Trojan horses, might be used to compel
national courts to give effects to purely or mostly domestic operations
that would be unenforceable had they not been shaped as trusts for the
only purpose of taking advantage of the HTC’s liberal principles.
Art.l3 is a powerful and dangerous provision, however its application
might substantially hamper the predictability the whole Convention tries
to create”

14. Risks Mitigation to Recognise
Trust
HTC embedded “natural obstacles” to neutralize some
trust recognition disadvantages:
Art.13: choice of law as a sole connection (“shapeless trusts”)
Art.15: mandatory rules (domestic interests via lex fori)
Art.16: mandatory rules (transnational interests/lois de police)
Art.18: public policy (odre public)
Art.19: fiscal sovereignty
Reservations available under HTC Art.16(3), Art.21, Art.22
+ Draft New Hague Convention on Jurisdictions (2001)
developed under Hague Judgements Project

15. Recommended (as HTC
Benefits)
On UA PIL Law and HTC itself: consider “non-trust” countries’ lessons
learned
(among Italy, the Netherlands, Luxembourg, Switzerland, France + maybe
Liechtenstein, San Marino, Monaco, Panama) in order to define:
(1) HTC reservations/declarations (among HTC Art.16(3), 20(1), 21, 22)
(2) “trust”, “trustee”, “trust domicile” notions to amend UA PIL Law
(3) trust recognition approach implementation (deep HTC 15(2) analysis)
On Ukrainian domestic law: whether to adopt a form of trust
(at least to the extent required by “minimal trust recognition set” HTC
Art.11(3))
On jurisdictions: two alternatives initiating (in paralel to HTC and
Ukraine’s envolvement into Hague Judgement Project since 2000) either
(1) Ukraine’ accession to Lugano Convention 2007, or
(2) creation of new treaty on jurisdictions and recognition and
enforcement of judgements between EU and East Partnership Countries

16. Thank you for your
attention!
With kind regards,
Natalia Perestyuk, Attorney at Law, MBA
+ 38 067 215 3737
natalia@perestyuk.com
ua.linkedin.com/in/NataliaPerestyuk