The Situation Before and After the Hague Convention on the Law Applicable to Trusts

Until the ratification of the Hague Convention of 1 July 1985 on the Law applicable to Trusts and on their recognition, the Italian legal system had always been wary about trusts.

One of the main problems was that the trustee’s creditors in Italy could have a direct access to the Trust assets regardless to the existence of the trust, because there was no space for the equitable property (or interest) concept and the trustee was consequently regarded as the owner of the asset as if it was his own property.

Said ratification has finally made possible for a foreign trust to fully operate in Italy and more importantly to separate the trust property from the trustee’s personal property (article 2).

Limits to a Trust that operates in Italy

It is important to remark that the said Convention states that a trust must comply with the State’s rules and that the trust provisions cannot be derogated from by a voluntary act. As article 15 states, in fact: “the Convention does not prevent the application of provisions of the law designated by the conflicts rules of the forum, in so far as those provisions cannot be derogated from by voluntary act, relating in particular to the following matters –

a) the protection of minors and incapable parties;

b) the personal and proprietary effects of marriage;

c) succession rights, testate and intestate, especially the indefeasible shares of spouses and relatives;

d) the transfer of title to property and security interests in property;

e) the protection of creditors in matters of insolvency;

f) the protection, in other respects, of third parties acting in good faith.

If recognition of a trust is prevented by application of the preceding paragraph, the court shall try to give effect to the objects of the trust by other means”.

Final Observations

In conclusion, nowadays a foreign trust with links to Italy (being those links a beneficiary, a subject matter or simply the trustee) can operate, but its content must be carefully drafted and/or checked in order to be sure that it complies with article 15 of the said Convention, and therefore be recognized in Italy.