Trusts in Swiss law: recognition since 2007

The long period before ratification

The trust is an institution of English equity, and Swiss private law never adopted it. The Civil Code of 1907 and the Code of Obligations of 1911 know the fiduciary transfer of ownership, the mandate, the foundation and the usufruct, but they contain no institution in which one person holds property as owner while being bound by equitable duties towards others whose interests bind third parties. Swiss banks nevertheless dealt with trusts throughout the twentieth century. Trustees in Jersey, Guernsey, the Bahamas or the Cayman Islands opened accounts in Zurich for trusts settled by clients from Latin America, the Middle East and continental Europe, and Swiss courts had to decide how such arrangements should be treated. They did so by characterisation, fitting the trust into Swiss categories such as mandate, fiduciary transfer or gift subject to conditions. The results were uneven and unpredictable. In a centre whose private banks held a large share of the world’s cross-border private wealth, the lack of a reliable rule became a competitive handicap.

The Hague Trust Convention and Articles 149a to 149e PILA

Switzerland ratified the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition on 20 December 2006. The Convention entered into force for Switzerland on 1 July 2007. On the same date amendments to the Federal Act on Private International Law (PILA) and to the Federal Act on Debt Enforcement and Bankruptcy entered into force in order to implement it. The Federal Office of Justice explains the purpose of ratification by the economic importance of trusts in Switzerland, particularly in private banking and corporate financing, and by the need for predictable rules on recognition.¹ The Convention does not introduce the trust into the domestic law of the ratifying state. It determines which law governs a trust and requires the recognition of trusts validly created under that law, with the consequence that the trust property constitutes a separate fund that is not part of the trustee’s own estate.

The new ninth chapter of the PILA, Articles 149a to 149e, provides the Swiss framework around the Convention. Article 149a defines trusts by reference to the Convention, which also covers trusts that are not evidenced in writing. Article 149b governs jurisdiction and gives effect to a choice of court in the trust instrument, which is then exclusive unless the instrument provides otherwise. Article 149c refers to the Convention for the applicable law. Article 149d allows a trust relationship to be noted in the land register, the ship register or the aircraft register when trust property is registered there in the name of the trustee. Article 149e governs the recognition of foreign decisions on trusts.² The amendment of the Debt Enforcement and Bankruptcy Act complements these rules by allowing trust property to be separated from the estate of a bankrupt trustee. With these instruments, a trust governed by the law of Jersey whose trustee is a Zurich trust company can be administered in Switzerland with the same certainty as in its home jurisdiction.

The Convention leaves room for the mandatory rules of other legal systems. Article 15 preserves the application of the rules designated by the conflict rules of the forum in fields such as succession, matrimonial property and the protection of creditors in insolvency. A settlor who places his wealth in a trust does not thereby escape the compulsory portions of his heirs if the succession is governed by Swiss law. Article 18 allows recognition to be refused where it would be manifestly incompatible with public policy. Switzerland ratified the Convention without any reservation or declaration, so that it did not limit the recognition rules to trusts governed by the law of a Contracting State under Article 21.³ The interaction between trust law and Swiss forced heirship is one of the most litigated questions in this field and is discussed further in section X.

The trust in Swiss legal practice

Nearly two decades after ratification, the trust has become a routine element of Swiss legal practice without becoming a Swiss institution. Zurich courts hear disputes between trustees and beneficiaries, apply English or Jersey law with the help of expert opinions and grant interim measures against trust assets deposited in Swiss banks. Zurich banks open accounts for trustees and treat the trust, in their know-your-customer processes, as a relationship in which the settlor, the protector and the beneficiaries must be identified. Zurich notaries record the transfer of Swiss real estate to trustees and the notation of the trust relationship in the land register. Swiss family law has had to address trusts in divorce proceedings where the assets of one spouse have been settled on trust. Each of these contacts requires the practitioner to translate between two legal cultures. Swiss lawyers who practise in the field usually hold a qualification or significant experience in a common law jurisdiction, or work closely with counsel from Jersey, Guernsey or London.

Notes

1. Federal Office of Justice (BJ), “Haager Trust-Übereinkommen”, https://www.bj.admin.ch/de/haager-trust-uebereinkommen. ↩
2. Arts. 149a–149e PILA (SR 291), bilingual edition, https://www.droit-bilingue.ch/de-fr/2/29/291-149a-174.html, https://www.droit-bilingue.ch/de-fr/2/29/291-149c-176.html, https://www.droit-bilingue.ch/de-fr/2/29/291-149d-177.html and https://www.droit-bilingue.ch/de-fr/2/29/291-149e-178.html. Art. 149c para. 1 refers to the Hague Convention of 1 July 1985 for the applicable law. ↩
3. Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition (SR 0.221.371), Articles 15, 18 and 21, https://www.hcch.net/en/instruments/conventions/full-text/?cid=59. HCCH status table, recording Swiss ratification on 26 April 2007 and entry into force on 1 July 2007 without reservations or declarations, https://www.hcch.net/en/instruments/conventions/status-table/?cid=59. ↩

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 September 2025.