“the first serious attempt in 600 years to bridge the gap of the “English Channel” (known in French as La Manche) in the field of fiduciary law" D.W.M.Waters, 1995

1. Recommendations on
Ukraine’s Accession to
Hague Trust Convention
(1985)
prepared by Natalia Perestyuk, Attorney at Law, MBA
to be presented to the PIL Chair at the IIR in May 2018

2. Reasons for “Bridge via La Manche”
1957 EEC* (=> EU**) set up by 6 countries (FR, FRG, IT, BeNeLux):
Common Market => to establish multinational operations in Western
Europe on a much broader scale than it had been possible in the past (for
businesses from UK, US & Canada)
1973 UK, Ireland & Denmark joined EEC:
⇒business people came to be based and domiciled in a country other than
that of their nationality for many years
⇒English, Irish and US citizens tended to do their estate planning in “their
traditional way” (inter vivos trusts or trusts in their wills) while acquiring
property in non-trust countries
⇒notaries and courts faced “trustee as unknown and unrecognized player in
the context of the settlement of an estate”
*European Economic Community ** European Union

3. Legal Text for Growing Problem
1968 Brussels Convention as treaty on jurisdiction and on the recognition
and enforcement of judgements (=> EU Regulation “Brussels I Recast”)
1978 UK, Ireland & Denmark accessed it (Accession Convention):
=> Need to handle jurisdiction for “internal relationships” in trust
(between trustees, beneficiaries or settlors) resolved by:
+ “trust domicile” as special jurisdictional basis for such lawsuits
+ settlor may choose an exclusive forum in the trust instrument
The concepts “trust”, “trustee” and “domicile” have not been translated
into other EEC languages (since they relate to a distinctive feature of
English and Irish law, and Member States may use their legislation
implementing Accession Convention to give a more detailed definition of
the concept of trust in their national language – see Schlosser report,s.116)

4. Brussels Convention & “Trust Domicile”
Brussels Convention version of 1978 (as consolidated by Accession Convention):
“domicile of the defendant” left as a general basis jurisdiction
(applicable to external trust relationships, in particular)
“domicile of the trust” as a special "connecting factor" for jurisdiction (special jurisdiction) over
litigation concerning any of the internal relationships among settlor-trustee and beneficiary (to exist in
the absence of exclusive choice of another forum by the settlor in the trust instrument)
Which law to determine “domicile of the trust”:
? by legal system to which the trust is subject (lex causae) or
? court concerned should decide by lex fori
? maybe other alternative (like “HTC”* may respond such challenge later)
And that time only Scotland knew “domicile of the trust” (first targeted to conflict of laws however
replicable for jurisdiction purposes also)
and only UK knew “the trust” among participating parties…
*Hague convention on the law applicable to trusts and on their recognition (1985), or used in the
literature as Hague Trust Convention (hereinafter – “HTC”)

5. Two Challenges to Launch HTC
(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 vital for Ukraine today as well

6. 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

7. 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 (like “resulting”, “constructive”) as well
(via declaration under Art.20(1))
*private international law

8. 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)

9. 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)

10. Trust Recognition Disadvantages
HTC Art.4: image of “rocket and the launcher” to illustrate
the necessity of distinguishing the trust itself - defined as a
set of relationships - from the instrument (e.g. assignment,
deed or will) which set it into motion. (Dyer Note p.279)
Key disadvantage 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)

11. Risks Mitigation to Recognise Trust
HTC embedded “natural obstacles” to neutralize some trust
recognition disadvantages:
Art.13: choice of law as a sole connection
Art.15: mandatory rules (domestic interests via lex fori)
Art.16: mandatory rules (transnational interests)
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

12. 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
On Ukrainian domestic law: whether to adopt a form of trust
(at least to the extent required by “minimal trust recognition set”)
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

13. 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