Conceptualising the Chinese Trust: Some Thoughts from Europe

Research output: Working paper

Abstract / Description of output

Today it is common to find trusts in civil law jurisdictions, a recent and significant example being the Chinese trust, introduced in 2001. Yet civil law trusts are not the same as their common law counterparts, and the Chinese trust departs in some respects even from the model often found in the civil law. In particular, the Chinese trust allows for the possibility of title to trust assets being held, not by the trustee, but by the settlor. The paper examines this arrangement and concludes that, while it could be made to work and would justify the name of “trust”, the Chinese legislation fails to provide sufficient restraints on the power of the settlor. The paper then turns to consider the immunity of trust funds from the private creditors of the trustee. How can this immunity be explained? A traditional analysis is that, as the beneficiaries apparently “prevail” over the private creditors, so the explanation must be found in the nature of the beneficiaries’ rights, which are said to be real or quasi-real. But this overlooks the position of trust creditors. They too “prevail” over private creditors or, to state the position more accurately for civil law trusts, they have a direct right of recourse against trust assets. Any explanation of immunity must thus account for trust creditors as well as for beneficiaries, and there can be no doubt that the claims of the former are (usually) personal and not real. The solution is to be found in the idea of dual patrimony. In a civil law trust there is segregation not only of assets but of liabilities as well. A trustee has both a private and a trust patrimony. Private creditors may claim only from the former, trust creditors (including beneficiaries) only from the latter. Trust funds are thus immune from private creditors because they are held in a patrimony in respect of which the creditors have no rights.
Original languageEnglish
Place of PublicationSSRN
PublisherUniversity of Edinburgh, School of Law, Working Papers
Volume2011/06
DOIs
Publication statusPublished - 2011

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