        RECOGNITION  OF  TRUSTS    [ CAP. 374.        1
CHAPTER 374
RECOGNITION OF TRUSTS ACT
To enable Malta to ratify the Convention on the law applicable to Trusts
and on their recognition, and to make certain amendments to the Offshore
Trusts Act, Cap.331.
(23rd September, 1994) *
Enacted by ACT XX of 1994.
Short title.
Interpretation.
"the Convention" means the Convention on the law applicable to
trusts and on their recognition which was adopted by the Hague
Conference on Private International Law on 20 October, 1984, and
which came into force on 1 January, 1992;
"trust" means a trust as referred to in Article 2 of the Convention.
 (2) In this Act, if there is any conflict between the English and
Maltese texts, the English text shall prevail.
Applicable law and 
recognition of 
trusts.
3. (1) The provisions of Articles 1 to 12, 14, 15, 16 (the first
paragraph only), 17, 18 and 22 (the first paragraph only) of the
Convention as set out in the Schedule to this Act shall have the
force of law in Malta.
 (2) In accordance with Article 15 of the Convention, where
Maltese conflicts rules require the application of the laws of Malta
or of a foreign state with regard to any of 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,
then, save as provided by the following subsection, such laws shall
be applied by the Maltese courts to the exclusion of the provisions
of the Convention in so far as such laws cannot be derogated from
by voluntary act and are incompatible with the Convention.
 (3) If a person domiciled outside Malta transfers or disposes of
movable property during his lifetime to a trust -
( a ) such person shall be deemed to have had capacity to do
* See  subsection (2) of section 1 of the Act as originally enacted, which subsection has
been omitted under the Statute Law Revision Act, 1980, and Legal Notice 118 of 1994.
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so if at the time of such transfer or disposition he was
of full age and of sound mind under the law of his
domicile; and
( b ) no rule relating to inheritance or succession to such
movable property (including, but without prejudice to
the generality of the foregoing, forced heirship,
legitim or similar rights) of the law of his domicile or
of any other system of foreign law applicable under
Maltese conflicts rules shall affect the recognition of
such trust by the courts of Malta.
For the purposes of this subsection, "forced heirship"
means a legal rule restricting the right of a person to dispose of his
property during his lifetime so as to preserve such property for
distribution at his death, or having similar effect.
(4) In accordance with the first paragraph of Article 16 of the
Convention, the courts shall not give effect to a trust in so far as the
provisions of the trust are incompatible with the rules of Maltese
law which are mandatory regardless of Maltese conflicts rules.
(5) Without prejudice to the generality of Article 18 of the
Convention, the courts shall not give effect to a trust to the extent
that to do so would be inconsistent with the fundamental public
policy of the law of Malta.
(6) In Article 17 of the Convention, the reference to a State
includes a reference to any country or territory (whether or not a
party to the Convention) which has its own system of law.
(7) Article 22 of the Convention shall not be construed as
affecting the law to be applied in relation to anything done or
omitted before the coming into force of this Act.
(8) Nothing in the Convention shall have any effect on the
interpretation or application of the laws of Malta relating to fiscal
matters.
        RECOGNITION  OF  TRUSTS    [ CAP. 374.        3
SCHEDULE
(Section 3)
CONVENTION ON THE LAW APPLICABLE TO TRUSTS AND ON THEIR 
RECOGNITION
CHAPTER 1- SCOPE
Article l
This Convention specifies the law applicable to trusts and governs their
recognition.
Article 2
For the purposes of this Convention, the term "trust" refers to the legal
relationship created -  inter vivos  or on death - by a person, the settlor, when assets
have been placed under the control of a trustee for the benefit of a beneficiary or for
a specified purpose.
A trust has the following characteristics:
( a ) the assets constitute a separate fund and are not a part of the trustee’s own
estate;
 ( b ) title to the trust assets stands in the name of the trustee or in the name of
another person on behalf of the trustee;
 ( c ) the trustee has the power and the duty, in respect of which he is accountable,
to manage, employ or dispose of the assets in accordance with the terms of the trust
and the special duties imposed upon him by law.
 The reservation by the settlor of certain rights and powers, and the fact that the
trustee may himself have rights as a beneficiary, are not necessarily inconsistent
with the existence of a trust.
Article 3
The Convention applies only to trusts created voluntarily and evidenced in
writing.
Article 4
The Convention does not apply to preliminary issues relating to the validity of
wills or of other acts by virtue of which assets are transferred to the trustee.
Article 5
The Convention does not apply to the extent that the law specified by Chapter II
does not provide for trusts or the category of trusts involved.
CHAPTER II - APPLICABLE LAW
Article 6
A trust shall be governed by the law chosen by the settlor. The choice must be
express or be implied in the terms of the instrument creating or the writing
evidencing the trust, interpreted, if necessary, in the light of the circumstances of the
case.
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Where the law chosen under the previous paragraph does not provide for trusts or
the category of trust involved, the choice shall not be effective and the law specified
in Article 7 shall apply.
Article 7
Where no applicable law has been chosen, a trust shall be governed by the law
with which it is most closely connected.
In ascertaining the law with which a trust is most closely connected reference shall
be made in particular to:-
( a ) the place of administration of the trust designated by the settlor;
( b ) the situs of the assets of the trust;
( c ) the place of residence or business of the trustee;
( d ) the objects of the trust and the places where they are to be fulfilled.
Article 8
The law specified by Article 6 or 7 shall govern the validity of the trust, its
construction, its effects, and the administration of the trust.
In particular that law shall govern -
 ( a ) the appointment, resignation and removal of trustees, the capacity to act as a
trustee, and the devolution of the office of trustee;
 ( b ) the rights and duties of trustees among themselves;
 ( c ) the right of trustees to delegate in whole or in part the discharge of their
duties or the exercise of their powers;
( d ) the power of trustees to administer or to dispose of trust assets, to create
security interests in the trust assets, or to acquire new assets;
( e ) the powers of investment of trustees;
( f ) restrictions upon the duration of the trust, and upon the power to accumulate
the income of the trust;
( g ) the relationships between the trustees and the beneficiaries including the
personal liability of the trustees to the beneficiaries;
( h ) the variation or termination of the trust;
( i ) the distribution of the trust assets;
( j ) the duty of trustees to account for their administration.
Article 9
In applying this Chapter a severable aspect of the trust, particularly matters of
administration, may be governed by a different law.
Article 10
The law applicable to the validity of the trust shall determine whether that law or
the law governing a severable aspect of the trust may be replaced by another law.
        RECOGNITION  OF  TRUSTS    [ CAP. 374.        5
CHAPTER III - RECOGNITION
Article 11
A trust created in accordance with the law specified by the preceding Chapter
shall be recognised as a trust.
Such recognition shall imply, as a minimum, that the trust property constitutes a
separate fund, that the trustee may sue and be sued in his capacity as trustee, and that
he may appear or act in this capacity before a notary or any person acting in an
official capacity.
In so far as the law applicable to the trust requires or provides, such recognition
shall imply, in particular -
( a ) that personal creditors of the trustee shall have no recourse against the trust
assets;
( b ) that the trust assets shall not form part of the trustee’s estate upon his
insolvency or bankruptcy;
( c ) that the trust assets shall not form part of the matrimonial property of the
trustee or his spouse nor part of the trustee’s estate upon his death;
( d ) that the trust assets may be recovered when the trustee, in breach of trust,
has mingled trust assets with his own property or has alienated trust assets. However,
the rights and obligations of any third party holder of the assets shall remain subject
to the law determined by the choice of law rules of the forum.
Article 12
Where the trustee desires to register assets, movable or immovable, or documents
of title to them, he shall be entitled, in so far as this is not prohibited by or
inconsistent with the law of the State where registration is sought, to do so in his
capacity as trustee or in such other way that the existence of the trust is disclosed.
Article 14
The Convention shall not prevent the application of rules of law more favourable
to the recognition of trusts.
CHAPTER IV - GENERAL CLAUSES
Article 15
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
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court shall try to give effect to the objects of the trust by other means.
Article 16
The Convention does not prevent the application of those provisions of the law of
the forum which must be applied even to international situations, irrespective of
rules of conflict of laws.
Article 17
In the Convention the word "law" means the rules of law in force in a State other
than its rules of conflict of laws.
Article 18
The provisions of the Convention may be disregarded when their application
would be manifestly incompatible with public policy ( ordre public ).
Article 22
The Convention applies to trusts regardless of the date on which they were
created.
