Reflections on The Hague Trusts Convention after 30 years

Abstract

The head of the UK Delegation for the XVth Session of The Hague Conference on Private International Law that agreed the Trusts Convention considers why more countries have not ratified or acceded to the Convention 30 years after its entry into force. The efficacy of the Convention's articles is examined with suggestions for clarifying their meaning or even for revising them if the opportunity arises. The conclusion is that the Convention largely reflects the position for validity of common law trusts, providing little incentive for a common law jurisdiction to ratify the Convention except as evidence of being a good respectable trust jurisdiction. However, the increasing use of, and familiarity with, the concept of ring-fenced funds in non-trust jurisdictions ought to lead more of them to implement the Convention. Such funds amount to “obligational trusts” of property requiring the beneficiaries' rights to have priority over the trustee's private creditors, heirs and spouse. The Convention requires trusts to have such preferential obligational effects as a minimum even though in a trust jurisdiction such trusts would have proprietary effects to bind third parties who were not bona fide purchasers for value.