Trusts are common particularly in states with Anglo-Saxon legal traditions. The term describes a legal relationship in which certain assets are transferred on a fiduciary basis to one or more trustees, who manage these assets and use them for a purpose determined in advance by the settlor. A large volume of assets belonging to trusts or managed in the name of trusts is also held in Switzerland. More and more banks have their own trust departments, while increasing numbers of Swiss-domiciled companies specialise in their management. Fiduciary companies and law firms are other players which are becoming increasingly involved in trust planning and administration.

Creating greater legal certainty

Although trusts are already broadly recognized under current Swiss law, the present legal situation is still encumbered with considerable uncertainty. The recognition of trusts is thus to be given a firm foundation, with more legal certainty created for all concerned. Both the parties involved in trusts and the relevant authorities have a vested interest in a system that sets out with the greatest degree of certainty the legal provisions which apply to trusts in individual cases. There is also a significant economic interest in greater legal certainty, as a sound legal basis improves conditions for the establishment and management of trusts and thereby boosts the appeal of Switzerland as a business location.

Towards rapid ratification

For the reasons given above, Switzerland is planning to ratify the Hague Convention on the Law Applicable to Trusts in the near future. The FDJP bill also provides for an amendment to Swiss federal legislation on international private law, which currently contains no special provisions on trusts. The bill proposes that regulations on the jurisdiction and recognition of foreign decisions be incorporated in to the Swiss international private law act (IPRG), as should a number of additions relating to disclosure under private law. At the same time, the Swiss debt enforcement and bankruptcy act (SchKG) would be amended to take account of the segregation of trust and trustee assets provided for under trust law.

In informal pre-consultation talks business associations, selected authorities and representatives of law faculties came out in favour of rapid ratification of the Hague Trust Convention and approved in principle the amendments to current Swiss law.

Switzerland to ratify Hague Trust Convention - FDJP opens consultation proceeding