The Hague Trusts Convention five years on: the Swiss Federal Supreme Court's decision in Rybolovlev v Rybolovleva

Abstract

On 26 April 2012 the highest court in Switzerland handed down judgment in Rybolovlev v Rybolovleva. This was one of the first since Switzerland’s ratification on 1 July 2007 of the Hague Convention on the Law Applicable to Trusts and on their Recognition to consider foreign trusts in the context of its matrimonial property regime. It serves as an important signal of the country’s willingness to respect the settlor’s chosen law. It is likely that the judgment will be viewed as a disappointment. Whilst the Swiss Courts considered the trusts were valid, they concluded that the husband was the sole beneficial owner or in a position of control. The reason for these conclusions is not properly explained, making it impossible to divine whether these conclusions are confined to the facts of the case, or might be of wider application. Cypriot trusts law, which is supposed to determine questions over the nature and extent of a beneficiary’s interest under a trust, was overlooked. Basic consideration of Cypriot trust concepts suggest that the husband did not own or control trust property. The Federal Court invoked Article 15 of the Hague Trusts Convention when there must be some basis for doubting whether this article was engaged. The Federal Court applied concepts of Swiss law that relate to companies, but the Royal Court’s decision in Re Esteem suggests that these have no application to trusts. The Federal Court paid little or no regard to the interest of third parties, such the trustees or the other beneficiaries of the trusts. Swiss Courts have moved—from ‘fortress Switzerland’—onto the other end of the spectrum, assuming exorbitant jurisdiction, and disregarding norms of comity.