Laws defining the jurisdiction of Swiss courts in proceedings against Swiss domiciled trustees
In 2005, Switzerland ratified the Hague Convention on the Law Applicable to Trusts (The Hague Convention) and amended its domestic law in accordance with the Convention. As a result, the Swiss courts recognize and enforce foreign trusts. It should be pointed out that, when adopting The Hague Convention, Switzerland decided against limiting recognition to the trust law of other Contracting States. In 2007, the Swiss tax administrators agreed that non-Swiss resident settlors and beneficiaries would not be subject to Swiss tax. Consequently, in fiscal terms, a Swiss trust is comparable to trust in other low-tax jurisdictions.
This article discusses:
- the Lugano Convention on the Enforcement of Judgments in Civil and Commercial Matters (the Lugano Convention) defining the jurisdiction of Swiss courts in proceedings against Swiss domiciled trustees (Section 2), and
- the Hague Convention defining the jurisdiction of Swiss courts in matters falling outside the Lugano Convention (Section 3).2. The Lugano Convention
At first sight, it seems that Switzerland’s Federal Code on Private International Law (PIL), as amended after the ratification of the Hague Convention, will provide an answer to the question which courts have jurisdiction in a dispute about trust with a connection to Switzerland. Article 149 b (1) of PIL states that “In matters concerning trust law, the choice of jurisdiction under the terms of the trust shall be determinative.” However, cases involving a Swiss domiciled defendant trustee will seldom fall into the scope of this provision. This is because Switzerland ratified the Lugano Convention as well as the 2007 revision of the Lugano Convention that provides the rules applicable in EU and EFTA states on jurisdiction and on the recognition and enforcement of foreign judgments.
The Lugano Convention determines whether the domicile of a trustee in Switzerland or the administration of a trust in Switzerland requires a Swiss court to exercise jurisdiction. The Lugano Convention also determines the situations in which a Swiss court will enforce a foreign judgment of another Convention State against a Swiss domiciled trustee defendant.
Article 2 (1) of the Lugano Convention contains the basic principle of jurisdiction. It states that persons domiciled in a Convention State shall be sued in the courts of that State. Consequently, if a trustee is domiciled in Switzerland, the appropriate forum to exercise jurisdiction is a Swiss court. It should be added that Article 2 only requires the defendant to be domiciled in a Convention State. Therefore, the claimant can be domiciled elsewhere.