Trusts: An Option for Switzerland?

In Switzerland, the question often arises as to whether the Anglo-Saxon legal institution of trusts should also be introduced here. But what exactly is a trust and what arguments are there for or against Swiss trust law?

The Anglo-Saxon Trust in a nutshell

A so-called trust is a legal institution of Common Law, in which the settlor transfers assets to another person (the trustee) with the instruction to manage them separately from their own assets according to his directives, and to use them for the benefit of a specific purpose or specific persons (the beneficiaries). The trust differs from the foundation commonly known in this country by lacking its own legal personality. The legal holder of the trust assets is the trustee, who has the formal legal ownership. As a special asset, the trust assets are therefore essentially protected from forced execution by private creditors.

Arguments for and against Swiss Trust Law

Switzerland recognizes trusts established under foreign law based on the Hague Trust Convention. As a result of the convention, provisions about trusts have already entered into numerous Swiss legal areas. With the Financial Institutions Act, trustees were subjected to the licensing requirement for the first time. Due to the increasing importance of trusts, voices are also increasingly being raised calling for independent trust law for Switzerland.

1. Strengthening the financial center

The main argument put forward by proponents of Swiss trust law is that it would open new opportunities for the Swiss financial center. Indeed, the possibility of discreet asset management without state intervention could generally be well accommodated with the liberal-influenced Swiss legal order. As discussions about the abolition of bank client confidentiality have shown, the Swiss place great value on privacy when it comes to their finances. Yet, this discourse has also made it clear that ever louder voices are demanding more transparency. Switzerland is also not immune to international pressure and is therefore increasingly tightening disclosure obligations in the financial sector.

2. Not without risk of abuse

Opponents of Swiss trust law like to point out that the Anglo-Saxon legal institution is susceptible to abuse and could encourage tax evasion. Indeed, the fact that many states known as tax havens have their own trust law does not enhance the reputation of the institution. Ultimately, however, the susceptibility to abuse depends on how trust law is structured and applied. d

3. Legal difficulties

Although the trust has already entered the existing legal system in one form or another, the difficulties associated with creating its own trust law should not be underestimated. As an instrument of Anglo-Saxon origin, trusts have various peculiarities such as split ownership or tracing rights that would need to be translated into Swiss law. The numerous open legal questions that arise in view of the concrete design of a local trust law create uncertainties and relativize its appropriateness.

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