A better understanding of dual ownership of trust property and its introduction in China

Abstract

A main characteristic of the common law trust is the concept of dual ownership. This concept establishes a distinction between a trustee’s legal ownership of the assets of the trust and a beneficiary’s equitable title to those same assets. In civilian systems, however, because ownership is considered absolute and indivisible, no similar division of legal and equitable title is possible. This difference in the conception of ownership between the civilian and common law systems raises great challenges in fitting the concept of trusts into civilian systems such as China’s. This article attempts to provide readers with a better understanding of the system of dual ownership of trust property. It discusses the best way that the trust can be incorporated in China. It argues that the concept of dual ownership is not an obstacle to the introduction of the trust in civilian jurisdictions. Using an analysis that focuses on comparing function, rather than form, the article argues that the key to understanding the interpretations of dual ownership in China is through an explanation that can be called the ‘binary system of real rights and personal claims’. Using this approach, the common law’s legal ownership corresponds to a civilian trustee’s unitary ownership in real rights, and the common law’s equitable ownership corresponds to a special kind of personal claim.