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trusts and choice of law November 2, 2008

Posted by Bradley in : Uncategorized , trackback

In Jose Gonzalez Gomez V Encarnacion Gomez-Monche Vives (Court of Appeal Oct. 3, 2008) the Court of Appeal was faced with figuring out the domicile of a trust for the purposes of Article 5(6) of the Jurisdiction and Judgments Regulation which provides that:

A person domiciled in a Member State may, in another Member State, be sued… as settlor, trustee or beneficiary of a trust created by the operation of a statute, or by a written instrument, or created orally and evidenced in writing, in the courts of the Member State in which the trust is domiciled

The trust in question was established under a declaration of trust by a Jersey corporation (specifying English law as the proper law), the settlor was a Spanish domiciliary, the main assets were shares in a corporation incorporated in the Cayman Islands, and the trust was administered in Liechtenstein. At the time of the litigation the trustees were corporations incorporated in BVI and Liechtenstein. The only connection with England was the choice of English law as the proper law.

Lord Justice Lawrence Collins says that other factors are not to be taken into account where there is an express choice of English law. Choice of law with respect to trusts is different from choice of law with respect to contracts:

The connection between a trust and its proper law is in every sense real and close. A trust is not like a commercial contract where it is only necessary to consider the content of the applicable law in exceptional circumstances. trustees in particular have to be intimately aware of their responsibilities under the general law applicable to the trust. They may have to know whether they can lawfully accumulate income. Resort to the law governing the trust is central to their responsibilities.

But the Lord Justice also states that a choice of foreign law to govern a trust which would otherwise be governed by English law might be treated differently!

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