Trustees under FinIA and the Hague Trust Convention

A country without its own trust law

Switzerland has no trust in its domestic law. Swiss civil law knows the fiduciary transfer (negozio fiduciario), the foundation and the contract of mandate, but not the division between legal ownership by a trustee and beneficial interest of beneficiaries that characterizes the common law trust. Swiss trustees nevertheless administer a large number of foreign trusts governed by the laws of England, Jersey, Guernsey, the Cayman Islands or other common law jurisdictions. Lugano has a share of this business that reflects its Italian clientele. The legal basis for recognizing these trusts is the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition. Switzerland signed it on 3 April 2007, ratified it on 26 April 2007 and has applied it since 1 July 2007. Italy had ratified it on 21 February 1990 and has applied it since 1 January 1992. The Convention has fourteen contracting parties.¹ With the ratification Switzerland inserted provisions on trusts into the Federal Act on Private International Law (Art. 149a–149e PILA) and into the Debt Enforcement and Bankruptcy Act, which allow the creditors of a trust to enforce their claims against the trust assets alone and require these assets to be separated from the estate in the bankruptcy of the trustee.²

The Federal Parliament asked the Federal Council in Motion 18.3383 to create a Swiss trust in the Code of Obligations. The Federal Council presented a draft for consultation in January 2022. After the consultation it concluded on 15 September 2023 that there was "currently no sufficient political consensus" for a Swiss trust and proposed that Parliament write off the motion. The majority of participants in the consultation had clearly rejected the proposed tax rules and preferred the existing practice under Circular Letter No. 20 of the Swiss Tax Conference of March 2008, and many doubted that the proposed model was suitable, although they acknowledged that Swiss law lacked an adequate instrument for wealth and succession planning.³ For the foreseeable future Swiss trustees will therefore continue to administer foreign trusts recognized under the Hague Convention.

The trustee as a financial institution

Before 2020 trustees in Switzerland were, in the words of one commentator, "regularly not recognised as such on a supervisory basis".⁴ They were subject to the AMLA as financial intermediaries and joined self-regulatory organisations, but their core activity, the administration of trust assets for beneficiaries, was not supervised. FinIA changed this. A trustee is anyone who, on a commercial basis, manages or disposes of separate assets for the benefit of a beneficiary or for a specific purpose on the basis of the instrument creating a trust within the meaning of the Hague Convention (Art. 17 para. 2 FinIA).⁵ The trustee needs a FINMA licence on the same conditions as a portfolio manager. These are the legal form and commercial register entry of Article 18, two qualified managers or one with guaranteed continuity under Article 20, adequate organization and risk management under Article 21, the minimum capital of CHF 100,000 under Article 22 and own funds under Article 23 FinIA. The qualified manager of a trustee must have five years of experience in trust administration and forty hours of training in that field (Art. 25 FinIO).⁶ The ordinance defines the trustee's duties. The trustee must act in the best possible interests of the beneficiaries, with the necessary skill, care and diligence, and must take organizational precautions against conflicts of interest. The rules on the form of authorizations apply to trustees as well (Art. 24 para. 4 FinIO).⁷ A trustee that also manages the trust's investments itself, beyond the administration of the trust, does not need a separate portfolio management licence, since its licence as trustee covers the management of the trust assets. When the trust assets are deposited with a bank and the investment decisions are delegated to an independent manager, the manager needs his own licence. Since many Lugano firms combine both functions, the typical structure is a firm licensed as portfolio manager and trustee, which the licensing cascade of Article 6 FinIA does not allow a portfolio manager to achieve without a second application.⁸

Notes

1. Hague Conference on Private International Law, Status table: Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition, https://www.hcch.net/en/instruments/conventions/status-table/?cid=59; SR 0.221.371. ↩
2. Federal Act on Private International Law of 18 December 1987 (PILA), SR 291, Art. 149a–149e (Chapter 9a), https://www.droit-bilingue.ch/en-it/2/29/291-index.html; Federal Act of 11 April 1889 on Debt Enforcement and Bankruptcy (DEBA), SR 281.1, Art. 284a (enforcement against a trust through the trustee, bankruptcy limited to the trust assets) and Art. 284b (separation of the trust assets in the bankruptcy of the trustee), https://www.droit-bilingue.ch/de-fr/2/28/281.1-284a-320.html and https://www.droit-bilingue.ch/de-fr/2/28/281.1-284b-321.html. ↩
3. "Schweizer Trust: Einführung derzeit nicht mehrheitsfähig", law.ch, September 2023, https://law.ch/lawnews/2023/09/schweizer-trust-einfuehrung-derzeit-nicht-mehrheitsfaehig/. ↩
4. Arter, MLL News (above). ↩
5. FinIA (above), Art. 17 para. 2. ↩
6. FinIA (above), Art. 18–23; FinIO (above), Art. 25; FINMA, "Trustees", https://www.finma.ch/bewilligung/vermoegensverwalter-und-trustees/trustees/. ↩
7. FinIO (above), Art. 24 para. 4. ↩
8. FINMA, "Trustees" (above), noting that additional authorization is required if the trustee also provides portfolio management services to third parties; FinIA (above), Art. 6. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of October 2026.