1 November 2009 | Private Client Practitioner www.eprivateclient.com

ince the Hague Convention on thelaw applicable to trusts and on theirrecognition (Hague Convention)

entered into force for Switzerland in July2007, the trust industry has been growingrapidly in this country. This positivedevelopment should continue in light ofthe strategic importance of this segmentfor the renewal and the future success ofSwiss private wealth management.

One of the challenges for this trustindustry is the absence of businessregulation in Switzerland, trustees beingcontrolled only under the limited scopeof anti-money laundering legislation. Ithas been recognized at an early stage thatthis lack of regulation was not in theinterest of Switzerland as a trustjurisdiction. This has prompted trustprofessionals to create the SwissAssociation of Trust Companies (SATC)in July 2007, which aims at developing arecognized system based on the qualityand integrity of its members and on theiradhering to the principles

SPhilippe De Salis of the Swiss Association ofTrust Companies (SATC) and Stonehage

Group gives an update on the state of theSwiss trust market.

Philippe De Salismember of SATC’s tax

working group anddirector and head ofSwiss trust division,

Stonehage Group

How Swiss

Private ClientPractitioner

2Private Client Practitioner | November 2009www.eprivateclient.com

swiss trust update

and rules set by the SATC. In theabsence of an immediate intention toregulate the industry, the regulatory gapshould therefore be filled by theinitiatives of the SATC.

Another challenge for professionaltrustees is the absence of Swisssubstantive trust law and the fact thatlegal professionals, administrations and inparticular judges may be less familiarwith the concept of trust and the rulesapplicable to it in Switzerland than in a traditional trust jurisdiction.

To the contrary of other civil lawjurisdictions such as Liechtenstein,Switzerland has not introduced asubstantive trust law, which means that a “Swiss trust”, i.e. a trust with a Swiss-based trustee, will necessarily be governedby the laws of another jurisdiction.However, this was by no means anoversight or neglect on the part of the Swiss legislator, but the result of a conscious decision not to codify trust law at this stage.

Article 6 of Hague ConventionUnder article 6 of the Hague Convention,the settlor can freely choose the lawgoverning the trust. This choice will ofcourse have to take into account therequirements of each particular case,relating, for example, to the place ofresidence of the settlor and/or of thebeneficiaries, or to the situs of the trustassets. Apart from these specificrequirements, the law to be chosen shouldbe that of a recognized trust jurisdictionhaving a modern trust law and a highlyregarded corpus of jurisprudence. In theevent of litigation before a Swiss court, itmight be an advantage if the jurisdictionhas also ratified the Hague Convention.Finally, more practical considerations arealso of importance, such as the access toqualified legal professionals or the costs andpracticalities of a potential litigation in thatforeign jurisdiction.

The risk of having to litigate before aSwiss judge, who might not be familiarwith the concept of trust and would have toapply a foreign law, can be of concern tothe settlor of a “Swiss trust”. This concernis legitimate, but should be consideredfactually. Even if not frequently, Swissjudges have been confronted with casesinvolving trusts over a long period of time,the first trust case in Switzerland (heard inGeneva) dates back to 1874. Importantly,Swiss judges at all levels are used toapplying foreign law, as they have to do thisregularly under the internal rules onconflicts of laws. In such cases, the Swissjudges can rely on the expertise of theSwiss Institute of Comparative Law inLausanne in order to assist them

establishing the content of the foreign law.They may also have recourse to opinionsfrom foreign state agencies or private legalexperts. The choice of the governing lawand the drafting of the trust deed can bemade so as to ensure that the courts in thejurisdiction of the governing law will alsobe competent. This competence could evenbe designed as an exclusive one (exclusivityapplies by default under article 149bparagraph 1 of the Swiss PrivateInternational Law), in which case the Swisscourts would in principle deny theircompetence should they be seized of amatter. However, the exclusivity would notbe upheld if the case does not constitute a“trust matter” but rather a matrimonial oran inheritance matter. Also, this exclusivityis not binding on persons who are notparties to the trust relationship and it isuncertain whether it would be consideredas binding on beneficiaries. While measurescan be taken to mitigate this “risk”, thesettlor of a “Swiss trust” should thereforeaccept that if the trustee is based inSwitzerland and the trust effectivelyadministered in this country, a potentiallitigation before a Swiss court cannot be completely excluded. In certain cases, the jurisdiction of the Swiss courts,potentially even to the exclusion of anyother courts, is considered as an advantage.

With the growing importance of the trustindustry in Switzerland, exposure to trustmatters will continue to increase and thepragmatic approach of Swiss judges andtheir experience in applying foreign law willallow them to respond positively to thisnew challenge.

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In a bid to encourage the professional and ethical developmentof an industry in full expansion in Switzerland The SwissAssociation of Trust Companies (SATC) was formally launchedin Zurich and in Geneva in September 2007.

The primary objective of this association is to encourage thegrowth of the trust industry while upholding a high standard ofquality, integrity, and professionalism. It also aims to bringtogether entities active in the trust industry with operativeoffices in Switzerland for the exchange of know-how,information and ideas on trust related matters.

It is by enhancing the reputation of trustee activities and byincreasing the acceptance of the services of those engaged inthe trust business that the SATC will strengthen the standing ofthe trust industry in Switzerland.

Founding Members are:

Barclaytrust (Suisse) SA, Geneva

Bonhôte Trust SA, Neuchâtel

Close Summit Trust CompanySA, Geneva

Experta AG, Basle, Zurich &Geneva

Investec Trust (Switzerland) SA,Geneva

Julius Baer Family Office & TrustLtd, Zurich

KENDRIS private AG, Zurich

L & S Trust Services SA, Zurich & Geneva

Paicolex Trust Management AG,Küsnacht – Zurich

Quiltrust Ltd., Zurich

Rothschild Trust (Schweiz) AG,Zurich & Geneva

VALUEworks AG, Zurich

Since its founding, theassociation has welcomed ten new members:

ACE International SA, Geneva

ATC (Switzerland) Sàrl, Geneva

CISA Trust Company(Switzerland) SA, Geneva

Fiduciaire Equity Trust AG,Geneva

HSBC Guyerzeller TrustCompany AG, Zurich & Geneva

Maitland Switzerland SA,Geneva

Rawlinson & Hunter Trustees SA,Geneva

RBS Coutts Trustees(Switzerland) SA, Geneva

Schroder Trust AG, Zurich &Geneva

Stonehage SA, Neuchâtel SATC SecretariatPO Box 2521Baarerstrasse 756302 Zug

Phone: +41 (41) 727 05 25Fax: +41 (41) 727 05 21E-mail: info@satc.chwww.satc.ch