The handling of Trusts under the Lugano Treaty

The handling of Trusts under the Lugano Treaty. The 1988 Lugano Convention on jurisdiction and enforcement is a very important treaty

and the accession of Switzerland to the Lugano Convention on 1 September 1996 ensured a better guidance to Swiss practitioners and judges for dealing with contentious trust matters.

Where the Lugano Convention applies, the jurisdictional rules of the SPILA are not applicable. Article 1 par. 2 SPILA expressly states that the SPILA does not affect international treaties.

The qualification of trusts as "company-like organised asset unites" (see above B) rather than contracts is furthered by the Lugano Convention. Therein, it gives trust matters specifically a place of jurisdiction under Article 5 No.6 in addition to the general jurisdiction rules under Articles 2 et seq. It provides for jurisdiction at the domicile of a trust, if located in a member state. It states that persons domiciled in a contracting state can be sued in another contracting state in their capacity as settlor, trustee or beneficiary of a trust created by the operation of a statute, or by a written instrument, or created orally and evidenced in writing, in the courts of the contracting state in which the trust is domiciled. Art. 53 par. 2 of the Lugano Convention  provides that in order to determine whether a trust is domiciled in the contracting state whose courts are seized of the matter, the court shall apply its rules of Private International Law. Thus the conflict rules of Lugano states must find a way of determining the domicile of a trust. The Convention itself does not provide any further guidance on this. Article 151 par. 1 SPILA (see above B) provides that in the event of disputes pertaining to trusts, Swiss courts have jurisdiction at the entity's registered office in order to entertain actions against it, its member or other persons liable under chapter 10 of the SPILA (company law). It is generally admitted that the seat of a trust is in the country where the trustee is resident or domiciled . As a result, if the trustees are domiciled in a foreign jurisdiction, the Swiss courts will have no jurisdiction. As regards disputes covered by Art. 151 SPILA, the cases where Swiss courts have jurisdiction are therefore quite limited. However, according to Limburg/Supino plaintiffs may tray to gain access to Swiss courts by seeking to exploit other causes of action against Swiss based beneficiaries, protectors or trustees. Such actions will mainly be based on inheritance law or contractual mandate or nominee relationships, with the argument that the trust was a sham, that a Swiss based beneficiary has control over the trust assets or that the assets have not been transferred properly to the trustees at the outset.

Furthermore, one should bear in mind that even where Swiss courts have no jurisdiction to entertain the merits, the Swiss judicial or administrative authorities may still grant interim relief (such as injunctions, freezing of assets, and also disclosure of information) by virtue of Art.

10 SPILA and, to a limited extent, Art. 24 Lugano Convention.

Where Mareva- Injunctions are granted against trustees in offshore jurisdictions, it should be noted that Swiss courts have also gained experience in enforcing world wide Mareva­Injunctions under Article 24 of the Lugano Convention .

The Lugano Convention also recognises the binding role of forum selection clauses in Trust documents: Art. 17 par. 2 says that the court or courts of a contracting state on which a trust instrument has conferred jurisdiction shall have exclusive jurisdiction in any proceedings brought against the settlor, trustee or beneficiary, if relations between these persons or their rights or obligations under the trust are involved. It only requires that one of the parties to a jurisdiction agreement have domicile in a contracting state. Scholarly opinion is divided as to whether there is a further requirement of a link between the dispute and another contracting state. The majority opinion would seem to be that no such requirement is necessary.

Finally, it has to be noted that the Lugano Convention is not applicable on any issues of inheritance law according to Art. 1 par. 2 No. 1 of the Convention. 

M.Vasold