Recent decision of the Swiss Federal Administrative Court and its implications for the future of trusts in Switzerland

Abstract

In its decision dated 18 March 2011, the Swiss Federal Administrative Court delivered a landmark ruling on characterization of rights of beneficiaries of a discretionary trust governed by a foreign law. The Court considered whether a bank account held in the name of trustees with UBS AG was within the ambit of a disclosure request received from the US Government investigating unpaid tax. Notwithstanding the fact that the plaintiff was within the class of objects/beneficiaries named in the trust instrument the court ruled that since the beneficiary/object had no control over the assets and income of the trust, he should not be treated as the beneficial owner of assets owned by the trust. In reaching its conclusion the Swiss Federal Administrative Court relied on the ratification in 2007 of the Hague Convention on the Law Applicable to Trusts and on Their Recognition and confirmed the wide recognition of the institution of trust in the Swiss legal order.