Cyprus Ratifies the Hague Convention Applicable to Trusts

The Cyprus House of Representatives ratified the Hague Trust Convention by passing the Law N. 4(ΙΙΙ)/2017 referring to the Hague Convention on the legislation related to trusts and the recognition of the ratifying Legislation. The Hague Convention on the legislation related to Trusts is a treaty that was developed by the Hague Conference on Private International Legislation on the Law Applicable to Trusts. This law was completed on the 1st of July 1985 and was introduced on the 1st of January 1992. Since today twelve countries have ratified the Hague Convention on the Law Applicable to Trusts including Hong Kong, Luxemburg, Australia, Canada (eight provinces), Australia, United Kingdom, Monaco, Malta, San Marino, Italy, Switzerland, the Netherlands (EU territory), and Liechtenstein.

Cyprus legislation is recognised as a common law jurisdiction whereby the Cyprus Trust legislation is in accordance to the English judicial system. The Cyprus Trust legislation is based on its statutes as provided by the Trustee Law of 1955 Chapter 193 and the International Trust Law (69(I) of 1992) as amended. Through the principles of equity and case law both the civil and criminal Courts in Cyprus follow the English common law and equity principles, provided that these will not be contrary with the Constitution of Cyprus.

It is important to note that it is not anticipated that the Convention will introduce or establish the trust concept into the Cyprus domestic legislation, or any member state that does not already have the trust concept implemented in its legal system. The aim of the Convention is to create a harmonisation on any legal conflicts concerning the law applicable to trusts and implement certain principles that will be applied by both trust states as well as non-trust states. Moreover, through the Convention non-trust states will be able to effectively treat in a fair manner and resolve any trust issues raised within their jurisdiction. Hence, the Convention does not only intend to harmonise the definitions of a trust, as set on a national level, but also to set the rules where a conflict of law arises in trust related cases.

The most significant provisions of the Convention are the following:

  • Recognition of the validity and existence of the trusts. It is important to note that, in accordance to Article 3 of the Convention, it is only relevant to trusts with a written trust instrument.
  • Article 2 of the Convention defines the characteristics of the trust.
  • Chapter II of the Convention clearly defines the regulations that determine the governing legislation of trusts regarding cross-border cases.

Important Note

With the increased mobility of individuals and capital, there is an increased number of beneficiaries, trustees and trust assets found within non-trust states. At present, non-trust states handle trust issues differently. Each of these jurisdictions comes to diverse conclusions concerning the nature of a trust settlement as well as about their domestic analogues which might or might not be appropriate in granting partial effect to a trust. The Convention resolves all these problems by preventing any possible conflicts between the Convention parties as well as establishing legal certainty and protection concerning property rights.

Cyprus, as party to the Convention, falls within the most favourable trust jurisdictions for establishing International Trusts which will ensure asset protection.

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