Civil law and trust-like arrangements in Europe

Jurisdiction: European national private law, EU law, and cross-border recognition rules.

Trust-like arrangements allow one person to hold or manage assets for another person or for a defined purpose. They are used for investment management, commercial security, family wealth, charitable purposes, and the administration of property.

Europe has no single, uniform law of trusts. An English trust, a French fiducie, and a German Treuhand can perform similar functions while creating different ownership rights, duties, and remedies. The legal result depends on the national system, the documents, the assets involved, and the applicable cross-border rules.

“Civil law” also has two meanings here: private law governing civil disputes, and the legal tradition based on civil codes. This explanation covers both, while distinguishing continental arrangements from English trust law.

1. What makes an arrangement “trust-like”?

A typical arrangement involves:

• The settlor or transferor: the person who contributes the assets.
• The trustee or fiduciary: the person who holds or administers them.
• The beneficiary: the person entitled to benefit.
• The assets: money, shares, land, securities, or other identifiable property.
• The purpose: investment, security, maintenance, distribution, or another authorised objective.

The central question is whether the beneficiary has rights over specific assets, or merely a personal claim against the manager.

For example, suppose a manager holds €500,000 for an investor and becomes insolvent. If the money forms a legally protected separate fund, the investor may be able to recover it outside the manager’s general insolvency estate. If the arrangement creates only a repayment obligation, the investor may instead have to compete with unsecured creditors.

Separate accounting helps establish what happened to the money, but accounting separation alone does not necessarily create legally protected ownership rights.

2. Main forms found in Europe

A German fiduciary investment arrangement was examined directly by the Court of Justice in VKI v TVP, discussed below. Its contractual obligations were treated separately from the underlying partnership’s company-law structure. eur-lex.europa.eu

3. The French fiducie: a civil-code example

Articles 2011–2030 of the French Civil Code provide a structured example of a trust-like institution.

Under Article 2011, assets, rights, or security interests are transferred to a fiduciary who keeps them separate from the fiduciary’s own patrimony and acts for a specified purpose benefiting one or more beneficiaries.

Important features include:

• Express creation: Article 2012 requires the arrangement to be express.
• Restricted eligibility: Article 2015 identifies the professionals and institutions permitted to act as fiduciaries.
• Required contractual content: Article 2018 requires identification of the assets, parties, beneficiaries or selection rules, duration, and fiduciary powers.
• Restriction on gifts: Article 2013 makes a fiducie contract void where it proceeds from an intention to make a gratuitous gift to the beneficiary.
• Personal liability: Article 2026 makes the fiduciary liable from their own patrimony for faults committed in carrying out the mission.
• Replacement: Article 2027 permits judicial intervention in specified circumstances involving failure of duties or endangered interests.

Article 2024 protects the fiduciary patrimony from the fiduciary’s insolvency proceedings. Article 2025 preserves important qualifications concerning creditors and fraud. Consequently, a French fiducie requires its own statutory analysis; English trust principles cannot simply be substituted. Légifrance

4. Recognition of foreign trusts

The 1985 Hague Convention on the Law Applicable to Trusts and on their Recognition supplies rules for participating states. European parties include Italy, the Netherlands, Switzerland, and the United Kingdom; participation is not universal across Europe. #30 - Status table

Its principal rules are:

• Article 2 describes a trust through a separate fund, title held by or for the trustee, and accountable management duties.
• Article 3 ordinarily limits its application to voluntarily created trusts evidenced in writing.
• Articles 6 and 7 identify the governing law through a valid choice or the closest connection.
• Article 11 provides for recognition, including separate-fund treatment.

Recognition has limits. Article 15 preserves relevant mandatory rules, including succession, matrimonial property, creditor protection, and insolvency. Article 13 also permits refusal of recognition in certain arrangements predominantly connected with non-trust systems. Third-party asset holders remain subject to the applicable conflict-of-laws rules.

Therefore, choosing a foreign trust law does not automatically settle ownership, creditor priority, or inheritance disputes in another country. #30 - Full text

5. How civil disputes arise

Common disputes concern the following issues:

These questions often require different answers within the same transaction. A contract may govern the manager’s duties, while another law governs title to land or shares.

6. Seven relevant cases

The following are genuine cases. Three concern EU rules affecting trusts or fiduciary arrangements; four concern English trust law decided by the UK Supreme Court. The English decisions do not establish uniform rules for continental Europe.

Case 1: Webb v Webb — personal obligations concerning foreign land

Court: Court of Justice
Citation: Case C-294/92
Date: 17 May 1994

Facts: A father financed the purchase of an apartment in France registered in his son’s name. He brought proceedings in England seeking a declaration that the son held it for him and an order requiring the son to execute documents transferring ownership.

Decision: The claim did not fall within the Brussels Convention’s exclusive jurisdiction rule for proceedings concerning rights in rem in immovable property. It sought enforcement of a personal obligation against the son.

Significance: A dispute involving foreign land does not automatically belong exclusively to the courts where the land is situated. The court must examine the nature of the claim and relief sought.

Limit: This was a jurisdiction decision. It did not establish that every foreign trust interest must be recognised by the country where land is located. EUR-Lex

Case 2: Verein für Konsumenteninformation v TVP — consumer protection in a Treuhand arrangement

Court: Court of Justice of the European Union
Citation: Case C-272/18
Date: 3 October 2019

Facts: Austrian investors participated indirectly in German limited partnerships through a German fiduciary manager. Standard agreements selected German law. An Austrian consumer organisation challenged that clause.

Decision: The fiduciary agreement’s contractual obligations were not excluded from the Rome I framework merely because the arrangement concerned partnership interests. Services provided remotely to consumers in their home country did not fall within the exception for services supplied exclusively abroad.

A non-negotiated choice-of-law clause could be unfair if it misled consumers into believing that only the selected law applied, without explaining the protection of mandatory rules otherwise applicable.

Significance: Fiduciary investment structures remain subject to relevant consumer protections. Selecting foreign law cannot automatically remove those protections.

Limit: The judgment addressed contractual and consumer-law questions, rather than harmonising ownership or insolvency consequences of all Treuhand arrangements. eur-lex.europa.eu

Case 3: Trustees of the P Panayi Accumulation & Maintenance Settlements — cross-border movement

Court: Court of Justice of the European Union
Citation: Case C-646/15
Date: 14 September 2017

Facts: Changes in trustees caused the management of trusts to move from the United Kingdom to Cyprus. UK rules imposed tax on unrealised gains arising from that change.

Decision: Trusts of the kind involved could qualify as “other legal persons” for the relevant EU freedom-of-establishment provisions. Immediate collection of the exit tax, without an option to defer payment, was disproportionate in the circumstances examined.

Significance: A trust’s classification under national private law does not conclusively determine its treatment under EU economic-freedom rules.

Limit: This was a tax and EU-law case. It did not make every trust a legal person for all purposes, or determine beneficiaries’ civil remedies. Its UK context also predates Brexit. EUR-Lex

Case 4: FHR European Ventures LLP v Cedar Capital Partners LLC — secret commissions

Court: UK Supreme Court
Citation: [2014] UKSC 45
Date: 16 July 2014

Facts: An agent acting for buyers in a hotel purchase received a €10 million secret commission from the seller.

Decision: A bribe or secret commission received by an agent in breach of fiduciary duty is held on constructive trust for the principal under English law.

Significance: The remedy extends beyond a personal demand for repayment. A proprietary claim may permit recovery of the benefit or identifiable substitutes and can matter in insolvency.

Application: Similar issues arise where an asset manager receives undisclosed payments for selecting investments or service providers.

Limit: Continental courts must apply their own rules on fiduciary duties, restitution, ownership, and creditor priority. They do not automatically impose the English constructive trust. supremecourt.uk

Case 5: AIB Group (UK) plc v Mark Redler & Co Solicitors — compensation and causation

Court: UK Supreme Court
Citation: [2014] UKSC 58
Date: 5 November 2014

Facts: Solicitors administering mortgage funds failed to discharge an existing mortgage fully. The lender consequently obtained less effective security than intended and later suffered a substantial loss.

Decision: Equitable compensation reflected the loss caused by the breach. The lender could not recover its entire lending loss merely because the funds had been administered in breach of trust.

Significance: Establishing a breach and measuring compensation are separate exercises. The court examines what would have happened had the duties been properly performed.

Application: Where a fiduciary investment loses value, the claimant must distinguish loss attributable to misconduct from loss that would have occurred anyway.

Limit: The decision concerned compensation in its particular commercial trust setting; it does not eliminate other remedies, such as recovery of unauthorised profits. supremecourt.uk

Case 6: Akers v Samba Financial Group — trust interests and foreign transfers

Court: UK Supreme Court
Citation: [2017] UKSC 6
Date: 1 February 2017

Facts: Shares in Saudi Arabian companies were held under arrangements benefiting a Cayman Islands company. The registered holder transferred the shares to a bank. Liquidators sought relief under section 127 of the UK Insolvency Act 1986.

Decision: The extinguishment of the company’s equitable interest through the transfer was not a disposition of its property within section 127.

Significance: The law governing a trust relationship and the law governing the effect of an asset transfer can differ. Recognition of the relationship does not automatically preserve beneficiaries’ interests against third parties.

Limit: The ruling concerned a specific insolvency provision and foreign shares. It did not declare foreign trusts generally unenforceable. supremecourt.uk

Case 7: Byers v Saudi National Bank — limits of knowing receipt

Court: UK Supreme Court
Citation: [2023] UKSC 51
Date: 20 December 2023

Facts: In subsequent litigation arising from the same share transfer, the company and its liquidators alleged knowing receipt of property transferred in breach of trust.

Decision: A knowing-receipt claim could not succeed where the claimant’s equitable interest had been extinguished by the time the defendant received the property. Saudi Arabian law governing the transfer had extinguished that interest.

Significance: Knowledge of a breach alone does not satisfy every requirement of knowing receipt. The survival of the beneficiary’s proprietary interest is essential.

The Court distinguished dishonest assistance, which concerns participation in a trustee’s breach and has a different legal foundation.

Limit: Failure of knowing receipt does not itself establish that every other possible claim must fail. Each claim requires its own elements and evidence. supremecourt.uk

7. Remedies and their practical limits

Depending on the applicable law, a claimant may seek:

• An account: disclosure of receipts, payments, investments, and distributions.
• Compensation: payment for loss legally attributable to a breach.
• Restitution or surrender of profits: recovery of unauthorised benefits.
• Recovery of assets: where a proprietary interest survives and the relevant recovery rules permit it.
• An injunction: restraint of threatened disposal or misuse.
• Removal or replacement: appointment of a suitable administrator.
• A declaration: clarification of ownership, powers, or beneficiary rights.

These remedies serve different purposes. Compensation addresses loss; surrender of profits addresses an unauthorised gain. Asset recovery requires an entitlement to the property concerned.

Under English law, tracing identifies what happened to property or its substitutes. It is an evidential process supporting a claim, rather than an independent cause of action. The available recovery still depends on the claimant’s rights and applicable defences.

8. Cross-border litigation

Choosing a governing law and choosing a court are separate matters.

Within the scope of Brussels I bis, Article 7(6) provides a special jurisdiction rule for certain disputes against a settlor, trustee, or beneficiary in the courts of the Member State where the trust is domiciled. Article 63(3) directs the court to its private international law rules when determining that domicile.

The rule operates within the Regulation’s conditions; it does not supply jurisdiction for every arrangement described as trust-like. EUR-Lex

A claimant should therefore establish:

1. The legal form and validity of the arrangement.
2. The exact assets and rights involved.
3. The duties allegedly breached.
4. The law governing each issue.
5. Whether third-party rights or insolvency rules intervene.
6. The appropriate remedy and evidence supporting it.

9. Practical illustration

Assume an investor places €1 million with a fiduciary manager. The manager purchases shares, receives an undisclosed commission, and later transfers the shares without authority.

Three distinct questions arise:

• Commission: Must the manager surrender the payment?
• Investment loss: What loss did the breach actually cause?
• Transferred shares: Does the investor retain rights enforceable against the recipient?

FHR illustrates the English proprietary response to secret commissions. AIB illustrates the importance of causation in compensation. Akers and Byers show why foreign transfer law may defeat recovery against a recipient.

The strongest analysis begins with the arrangement’s actual legal effects: who owns the assets, what duties the manager owes, and whether those rights survive insolvency or transfer.