Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition
- Type: Convention
- Date of signature: 01/07/1985
- Place of signature: The Hague, The Netherlands
- Depositary: Ministry of Foreign Affairs of the Netherlands
- Date of entry into force: 01/01/1992
What is it about?
This Convention specifies the law applicable to trusts and governs their recognition. The term "trust" refers to the legal relationships created 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. The Convention determines that the law chosen by the settlor shall govern the trust. 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 no applicable law has been chosen, the law that is most closely connected with shall govern the trust. To determine the closest connection, reference shall be made in particular to: a) the place of administration of the trust designated by the settlor; b) the location 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. The State parties to the Convention recognize a trust that is in compliance with these provisions. 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.
Why is it relevant?
Trusts have their origin in the common law system. The Convention of 1985 allows for the international recognition of trusts also by countries with a civil law system and it provides for rules to determine the applicable law to ensure their functioning.
The provisions of the Convention may be disregarded when their application would be manifestly incompatible with public policy (ordre public)