Information rights in Liechtenstein foundations, reloaded: back to the future?

Johannes Gasser

doi:10.1093/tandt/ttw095

Abstract

Why should the founders and beneficiaries of Liechtenstein foundations revisit the foundation documents and consider varying the provisions relating to the next generation’s rights to information? A recent, groundbreaking Liechtenstein Supreme Court decision extends such rights back into the past—unlike previous case law which was understood to limit such rights to the time from which the applicant became a beneficiary and denied requests for historic information. While many may welcome the court’s reaffirmed undertaking to ensure ‘foundation governance’, others will certainly wake up and ask themselves, looking into the future, whether their next generation should really be able to learn all about the past.

Highlights

A famous Swiss watchmaker’s advertisement suggests that ‘you never really own’ their luxury watch, but ‘you merely look after it for the generation’
The same may be true for assets in a Liechtenstein foundation: it is the foundation, rather than the founder, which owns its assets
With many thousands of foundations created in the last century, it seems to be the era in which this generation verifies whether their father’s luxury watch, and his business holdings, bank accounts, yachts, and real estate were properly managed and nurtured through the many ‘black’ Mondays, Wednesdays, and Fridays of recent decades, when the stock markets rode a downhill rollercoaster

Summary

The new Liechtenstein law on information rights in foundations

A famous Swiss watchmaker’s advertisement suggests that ‘you never really own’ their luxury watch, but ‘you merely look after it for the generation’. One of the reasons why information proceedings have come into fashion is the fact that, unlike under English or US law, there is no pretrial discovery in Liechtenstein court proceedings.[16] Liechtenstein is a member of the 1970 Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters,[17] Liechtenstein courts will refuse to provide assistance to foreign courts seeking the pretrial discovery of documents.[18] Liechtenstein is not a member of the Lugano Convention and its courts consider recognizing and enforcing foreign judgements only from Austrian[19] or Swiss courts[20] and (foreign) arbitral tribunals.[21] foreign courts may seek to subpoena Liechtenstein parties to litigation and coerce them into producing documentary evidence Such coercive measures must fail, as they may expose the Liechtenstein party to criminal liability in Liechtenstein under the Liechtenstein equivalent[22] of Article 271 Swiss Criminal Code—a provision which, since 1937, has aimed at defending state sovereignty and bans unlawful foreign interference (including the taking of evidence), and which has once again attracted attention in recent investigations and legal proceedings instigated by foreign tax and law enforcement authorities against Swiss banks. It may not be what you get in ‘normal’ discovery, but, hey, it is alright for the lucky litigants that are able to get their hands on one or more ‘smoking guns’ delivered in information proceedings; they may obtain so much more than they would possibly get in regular court proceedings in Liechtenstein.[23]

The new Supreme Court precedent

What you could do to prevent beneficiaries travelling back in time