Fiduciary Property Management and the Trust by ORAC Kiadó

Istvรกn Sรกndor

Fiduciary Property Management and the Trust

Istvรกn Sรกndor

Fiduciary Property Management and the Trust Historical and Comparative Law Analysis

ISBN 978 963 258 283 2

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or by any information storage and retrieval system, without the prior written permission of the publisher. Published by HVG-ORAC Publishing House Ltd. Responsible publisher: Ádám Frank, managing director Typesetting and technical editing by Éva Harkai Printed by Multiszolg Bt. – Vác

Contents Abbreviations.........................................................................................................11 Foreword............................................................................................................... 13

I. On the trust in general 1. Fiduciary property management â&#x20AC;&#x201C; the trust...................................................... 18 2. Comparative law............................................................................................... 20 3. Structure of the work........................................................................................ 23 4. Terminology...................................................................................................... 24 5. Main references relating to the trust................................................................. 26

II. Development of the trust 1. Chief historical aspects of the English legal system......................................... 29 2. The Court of Chancery and equity.................................................................... 33 2.1. Development and operation of the Court of Chancery.............................. 33 2.2. Characteristics of the law of equity........................................................... 37 3. Use.................................................................................................................... 42 3.1. Main characteristics of English property law........................................... 43 3.2. Origin of use.............................................................................................. 48 3.3. The Statute of Uses.................................................................................... 59 4. The trust............................................................................................................ 62 4.1. The use is replaced with the trust.............................................................. 62 4.2. Early rules of the trust............................................................................... 64 4.3. Evaluation of the trust in legal literature.................................................. 67 5. Non-Anglo-Saxon elements of the trust........................................................... 70 5.1. Influence of Roman law............................................................................. 72 5.2. The salmann............................................................................................... 86 5.3. The wakf..................................................................................................... 89

CONTENTS

III. Regulation of the English trus 1. Definition of the trust........................................................................................ 95 1.1. Definitions of the trust............................................................................... 96 1.2. Descriptions of the trust............................................................................. 98 1.3. A functional approach to the trust........................................................... 102 1.4. Distinction of the trust from certain Anglo-Saxon legal institutions....... 103 1.5. Main terms of the trust............................................................................. 104 2. Forms of the trust............................................................................................ 105 3. English statutory laws relating to the trust.......................................................112 4. Brief description of the rules of the trust.........................................................115 4.1. Creation of the trust..................................................................................116 4.2. Termination of the trust............................................................................ 121 4.3. Legal status of the trustee........................................................................ 122 4.4. Liability of the trustee.............................................................................. 132 4.5. Liability of third parties........................................................................... 136 4.6. The beneficiary......................................................................................... 139 5. Special forms of the trust................................................................................ 156 5.1. The charitable trust.................................................................................. 160 5.2. The family settlement............................................................................... 162 5.3. Trust established for associations............................................................ 163 5.4. The business trust.................................................................................... 163 5.5. The investment trust................................................................................. 164 5.6. The corporate trust, trust company......................................................... 165 5.7. The voting trust........................................................................................ 166

IV. Problems underlying the adoption of the trust 1. The medieval Continental European legal systems........................................ 167 2. Views put forth in legal literature relating to the adoption of the trust........... 173 2.1. Sceptical views of the adoption of the trust............................................. 178 2.2. Views favouring the possibility of adopting the trust in civil law............ 182 3. Legal instruments in civil law similar to the trust........................................... 188 3.1. The trust and the contract........................................................................ 189 3.2. Protection of minors, persons with disabilities........................................ 190 3.3. Gift, legate............................................................................................... 191 3.4. Third party beneficiary contract.............................................................. 191

CONTENTS

3.5. The fiducia............................................................................................. 192 3.6. Agency, representation.......................................................................... 193 3.7. Usufruct................................................................................................. 194 3.8. The perpetual usufruct........................................................................... 195 3.9. Annuity contract.................................................................................... 195 3.10. Dowry.................................................................................................... 195 3.11. The entailment........................................................................................ 196 3.12. The testamentary executor..................................................................... 196 3.13. Unjust enrichment.................................................................................. 197 3.14. The foundation....................................................................................... 198 3.15. Comparison of the business association and the trust from an economic perspective........................................................................ 199 4. Structural components of the trust relationship, translated into relationships existing in Continental legal systems........................................ 213 4.1. Analysis of legal relationships based on the three main contractual positions................................................................................................... 213 4.2. Legal relationship between persons in the three principal contractual positions and their creditors.................................................................... 214 4.3. Legal relationship between the persons in the three principal contractual positions and creditors who assert claims for the trust property...................................................................................... 216 4.4. Legal relationship between persons in the three principal contractual positions and persons who purchase trust property for value or gratuitously.......................................................................................... 216

V. The trust and similar structures in the laws of different countries 1. America........................................................................................................... 217 A) North American countries............................................................................ 217 1.1. The United States of America.................................................................. 217 1.2. Louisiana................................................................................................. 225 1.3. Canada..................................................................................................... 230 1.4. QuĂŠbec..................................................................................................... 231 B) Central and South America......................................................................... 238 1.5. Panama.................................................................................................... 239 1.6. Puerto Rico.............................................................................................. 239 1.7. Some other Latin American countries..................................................... 241

CONTENTS

C) The hypermodern trust, i.e. the private purpose trust................................. 242 1.8. Cayman Islands..................................................................................... 242 1.9. British Virgin Islands............................................................................. 245 1.10. The purpose trust and similar legal instruments in other countries...... 246 2. Australia.......................................................................................................... 249 2.1. Australia................................................................................................... 249 2.2 New Zealand............................................................................................. 249 2.3. Some islands............................................................................................ 250 3.Africa............................................................................................................... 250 3.1. Trust regulation in South Africa.............................................................. 250 3.2. Aspects of the trust in the tribal laws of African countries...................... 258 4. Asia................................................................................................................. 262 4.1. Israel..................................................................................................... 264 4.2. Japan..................................................................................................... 266 4.3. China..................................................................................................... 268 4.4. Hong Kong............................................................................................ 273 4.5. Taiwan................................................................................................... 274 4.6. Singapore.............................................................................................. 275 4.7. South Korea.......................................................................................... 276 4.8. Malaysia............................................................................................... 278 4.9. Labuan.................................................................................................. 278 4.10. Indonesia................................................................................................ 279 4.11. The Philippines...................................................................................... 280 4.12. Regulation of the trust in India.............................................................. 280 4.13. Some remarks......................................................................................... 284 5. Europe............................................................................................................. 284 A) Property management models based on rules of the English trust........... 284 5.1. The Channel Islands................................................................................ 284 5.2. Cyprus...................................................................................................... 288 5.3. Malta........................................................................................................ 289 5.4. Gibraltar.................................................................................................. 291 B) Property management based on the Treuhand model.................................. 291 5.5. Germany.................................................................................................. 291 5.6. Austria...................................................................................................... 298 5.7. Switzerland.............................................................................................. 299

CONTENTS

5.8. Poland.................................................................................................... 306 5.9. Spain...................................................................................................... 306 5.10. Greece.................................................................................................... 307 C) The French fiducie......................................................................................... 309 5.11. France.................................................................................................... 309 5.12. Luxembourg........................................................................................... 315 D) Individual paths of trust regulation............................................................ 316 5.13. Scotland................................................................................................. 316 5.14. Liechtenstein.......................................................................................... 328 5.15. Italy, alternative to the trust in Italian legal practice............................ 334 5.16. San Marino............................................................................................ 338 5.17. Dutch regulation and the bewind........................................................... 339 E) Central and Eastern European trust laws, the newcomers....................... 343 5.18. Russia..................................................................................................... 343 5.19. Georgia................................................................................................... 345 5.20. Lithuania................................................................................................ 345 5.21. Ukraine.................................................................................................. 346 5.22. Romania................................................................................................. 346 5.23. Czech Republic...................................................................................... 347

VI. International efforts to unify law 1. The Hague Convention................................................................................... 349 2. The Principles of European Trust Law........................................................... 355 3. Efforts to unify law under the aegis of the European Union.......................... 359

VII. Fiduciary property management in the Hungarian legal system 1. Property management instruments before the new Civil Code of Hungary... 363 2. Management of state-owned property and privatisation................................. 364 3. Property management instruments evolving in legal practice........................ 367 3.1. Legal arrangement of ownership............................................................. 368 3.2. Legal arrangement of representation...................................................... 370 4. Requirements applicable to fiduciary property management.......................... 371 5. An ownership based approach to the trust based on the analysis of Gyula Eรถrsi.. 373 6. The property management contract under Act CXX of 2009......................... 375

CONTENTS

7. Regulation in the new Hungarian Civil Code................................................. 378 7.1. The fiduciary asset management contract............................................... 379 7.2. Contractual status of the settlor.............................................................. 380 7.3. Rights and obligations of the trustee....................................................... 380 7.4. Legal status of the trust property............................................................. 384 7.5. Legal status of the beneficiary................................................................. 385 7.6. Legal relationships between the parties.................................................. 385 7.7. Creditors.................................................................................................. 387 7.8. Fiduciary property management versus trust.......................................... 391 7.9. Some comparative remarks to the Central and Eastern European trust laws.................................................................................................. 392

VIII. Review of the different legal instruments of the trust (conclusions) 1. Instruments of fiduciary property management.............................................. 408 1.1. The settlor remains the owner.................................................................. 409 1.2. The trustee is the owner........................................................................... 409 1.3. The beneficiary is the owner.....................................................................411 1.4. South Africa – intermediate solution........................................................411 1.5. Québec – right without entity, appropriated property..............................411 2. The purpose trust............................................................................................. 412 3. Exercise of the right of disposition................................................................. 413 4. Unique aspects of Italian legal practice.......................................................... 414 5. The new Hungarian Civil Code...................................................................... 414 Literature............................................................................................................. 417 List of cited legislation and other legal sources.................................................. 447 Cited cases.......................................................................................................... 459 Sources of Roman law........................................................................................ 465

Abbreviations ABGB

Allgemeines Bürgerliches Gesetzbuch (1811. 6. 1. Austria)

ALI

The American Law Institute

ALR

Allgemeines Landrecht für die Preußischen Staaten (1794)

ÁPV Rt.

Állami Privatizációs és Vagyonkezelő Részvénytársaság (Hungarian State Privatisation and Holding Company)

BGB

Bürgerliches Gesetzbuch vom 18. August 1896, Germany

Bírósági Határozatok (Court Decisions), journal of the Curia of Hungary

Hungarian Privatisation Act Hungarian Act XXXIX of 1995 on the Sale of State-Owned Entrepreneurial Assets COBS

Conduct of Business Sourcebook

Digesta Iustiniani

DCFR

Draft Common Frame of Reference

FATF

Financial Action Task Force

Gai. Inst.

Gaius: Institutionum commentarii IV

Hague Convention Convention on the Law Applicable to Trusts and On Their Recognition Inst.

Institutiones Iustiniani

Hungarian Code of Commerce Code of Commerce (Hungarian Act XXXVII of 1875) MiFID

Markets in Financial Instruments Directive

Hungarian Private Law Bill Hungarian Bill on the Code of Private Law (1928) Nov.

Novellae Iustiniani

Obligationenrecht (Switzerland 1881/83)

ABBREVIATIONS

PECL

Principles of European Contract Law

Hungarian Civil Code

Act V of 2013 on the Civil Code of Hungary

old Hungarian Civil Code

Act IV of 1959 on the Civil Code of the Republic of Hungary

TJL

Trust Jersey Law

UTC

Uniform Trust Code

ZGB

Schweizerisches Zivilgesetzbuch (1907. 12. 10., Switzerland)

XII t.t.

Lex XII tabularum

Foreword “If we were asked what is the greatest and most distinctive achievement performed by Englishmen on the field of jurisprudence I cannot think that we should have any better answer to give that his, namely the development from century to century of the Trust idea.”1 In the history of law, the English institution of the trust is one of the most original and least straightforward institutions in the theory of private law, which rests on the foundations of Roman law. The exploration of this topic may provide indispensable value and substantial benefits for economic operators. A jurist who studies legal systems based on the traditions of Roman law applies the rules of property law and the principle of the numerus clausus of property rights. Therefore, in the theory of civil law, the Anglo-Saxon institution of the trust appears to be an alien concept. This work aims to provide a comprehensive description of the emergence and development of the trust, its underlying rules, and problems arising in connection with its adoption in the systems of civil law. The contemporary relevance of this work is attributable to an outstanding accomplishment in Hungarian legislation: the drafting of the new Civil Code. The new code of private law introduces the category of the fiduciary property management contract in Hungarian law. My studies of the institution of the trust date back to 1998. In the course of codifying the new Civil Code, I was a member and secretary of the “Property law” working group headed by Professor Tamás Sárközy. In the working group I was responsible for preparing a study on changing international trends in property law, which was eventually discussed at one of the meetings of the group.2 In the study, I also made note of the rapid spread of the trust. At the time, we were confronted with a dogmatic premise: Can the Anglo-Saxon institution of the trust – manifesting rights in others’ ownership – be integrated within Hungarian law? The advantages of the trust, namely, had been quite obvious. In the working group, I was given the distinguished task of exploring this question as well. In the research and writing of the work required for the new preparatory study, I also relied on my colleague Norbert Czizmazia, who at the time was a demonstrator at the Department of Roman Law of ELTE University, Faculty of Law. In the course of preparing the study, we concluded that the institution of the trust is foreign to Hungarian legal F. W. Maitland, Selected Essays, Cambridge, 1936, 129. For the abridged version of the study see I. Sándor, A dologi jog története és legújabb fejlődési tendenciái Nyugat-Európában (History of Propety Law and Newest Development Trends in Western Europe), Állam- és Jogtudomány XL/3-4 (1999), 283 ff. 1

FOREWORD

regulation, which stipulates the indivisibility of ownership. Although the institution of the Treuhand in Germany and Switzerland is, to a certain degree, similar to the trust, the related case law there, drawing purely on the law of obligations, was showing encouraging signs. Thus, the working group was firm in its view that the adoption of the trust in Hungarian law, establishing rights in others’ ownership, would require a breakthrough in the traditional dogmatic foundations of private law of such proportions, that this alternative was dismissed. In the concept of the new Hungarian Civil Code, the possibility of regulating the trust within a contractual framework was raised. At the time, my research principally focused on the historical development of company law, therefore I lacked the time necessary for analysing the issues underlying the adoption of the trust. In 2009, this Anglo-Saxon institution reemerged in the view of the Chief Codification Committee with a “reduced scope” – as a type of contract – in the ministerial version of the new Civil Code bill; at the time, it was not supported by the Chief Codification Committee headed by Professor Lajos Vékás. Act CXX of 2009 eventually regulated the Hungarian version of the trust, fiduciary property management, as an independent type of contract. The possible regulation of laws of English origin, and of a prominent legal institution of such law, within the framework of Hungarian law, constituting one of, if not the largest exceptions to the legal system of civil law, and an obstacle to legal harmonisation, prompted me to resume my suspended research of a law which I have always thought highly of. My intention was bolstered by the fact that the draft of the new Hungarian Civil Code – edited once again under the guidance of Professor Vékás – included this legal institution as a sub-type of agency. I did not participate in drafting the rules of the “fiduciary property management contract”, regulated in Act V of 2013 on the Hungarian Civil Code, thus my approach to the text of the law is that of an outsider. I did, however, resume my research, which was kindly supported by the Institute of Advance Legal Studies in London and the Institut suisse de droit comparé in Lausanne in the summer of 2012. I wish to express my gratitude for their hospitality and their substantial assistance in the writing of this book. I resumed my research with the main objective of assessing the institution of the trust and the efforts relating to its adaptation in civil law. I was curious to learn the reasons and the ways in which the trust evolved, to understand the essential function of the trust, and how it can be adapted to legal systems resting on the traditions of Roman law. After studying the related literature, there is only one thing we can declare with certainty: There is no single or general answer to this question. The deeper we dig into the relevant literature and sources, the more questions we confront; there are no absolute points of reference. Hungarian literature on the trust, published in Hungarian by Hungarian authors, offers little on the topic. In contrast, international literature, published predominantly in the Anglo-Saxon countries, is so vast, that its reading could amount to a lifetime

FOREWORD

undertaking. I chose the middle of the road, concentrating my focus on central issues relating to the trust. Works of great scope always face a certain risk, because “grasp all, lose all”. Manuals that “only” discuss the English regulation of the trust are generally two thousand pages long, and review over one hundred cases. There is also a high number of articles addressing the problem of adopting the trust in civil law systems – probably too many to count. The number of trust and similar laws within an international context would fill an entire manual. Thus, an outsider, a novice researcher of trust, with a background in civil law, should have no other ambitions than to provide a comprehensive overview of the trust, to raise problematic issues and seek a path leading to their resolution. Efforts to find answers to all questions are futile. The study of a topic so broad in scope cannot be completed conclusively, only suspended. When I was writing this book, my purpose was to emulate the efforts of Károly Szladits Jr, and define the cornerstones and principal rules of the trust. Following the introduction of a legal institution similar to the trust in a few articles of the new Hungarian Civil Code, numerous unresolved questions and problems remain. In this respect, the new Hungarian Civil Code is not unique in leaving the interpretation of these rules – defined as foundations – to legal practice. To this end, legal practice should operate with a background where support is available. Jurisprudence has the responsibility of contributing to the interpretation of legal rules and to provide background materials for this purpose. Scientific works represent genuine value only if they can be applied in practice. This work aims to provide such value. The work was originally published in Hungarian in March 2014.3 The English translation is a revised, modified version of this work. I would like to express my sincere gratitute to Mr András Hopp for the indispensable contribution and help in the English language translation. Budapest, August 2015

The author

3 I. Sándor, A bizalmi vagyonkezelés és a trust. Jogtörténeti és Összehasonlító jogi elemezés (Fiduciary property management and the trust. Historical and comparative law analysis), Budapest, 2014.

I. On the trust in general “The institution resulting from the forced national adoption of the trust would be divested of so many substantial characteristics of its Anglo-Saxon sister institution, that the remains would vegetate in the form of a passive, ‘eternally alien’ institution.”4 The new Hungarian Civil Code regulates the fiduciary property management contract in Book VI., Chapter XLIII. The specific type of contract, to be introduced as a special subsidiary type of the agency contract, had been defined in one instance as fiduciary property management in Act CXX of 2009, approved by the Hungarian Parliament, but not enacted. The new regulation, however, is different in many respects.5 The statutory regulation of this type of contract may result in substantial changes in Hungarian legal practice; the numerous benefits may be accompanied by some uncertainties. In addition to the Hungarian Civil Code, another law was enacted, which regulates the persons involved in fiduciary property management, stipulating a registration obligation.6 Even the Bible contains many references relating to the temporary transfer and management of property.7 Since the beginnings of ancient law, the history of law gives evidence – within various legal frameworks – of the regulation of economic demand, where certain, whether natural or legal, persons cannot or do not wish to personally carry out the administration or use of their property for whatever reason. To this end, they are essentially offered the choice of two main forms of regulation: firstly, property management provided through organisations with an entity separate from the owner of the property, where the property is owned indirectly, and the share – mostly held in a business association – incorporates the rights of the owner, and secondly, contractual property management based on an in personam relationship. In the latter case, there is the question as to how the legal 4 K. Szladits Jr, Az angol jogi trust-intézmény (The English Legal Institution of the Trust), Budapest, 1939, 171. 5 For regulation in the new Hungarian Civil Code not enacted, see I. Sándor, A bizalmi vagyonkezelés az új Ptk.-ban. (Fiduciary Property Management in the New Hungarian Civil Code) in A. Grad-Gyenge (ed), Egy új korszak hajnalán. Konferenciakötet az új Polgári Törvénykönyv tiszteletére. (On the verge of a new era. Conference manual to celebrate the new Hungarian Civil Code), Budapest, 2013, 37 ff. 6 Act XV of 2014 on Trustees and on the Regulation of Their Activity. Beyond the foregoing, Government Decree No 87/2014 (III. 20.) on certain rules concerning the financial security of fiduciary property management undertakings also sets out particular rules. 7 E.g. Book of Exodus 22:6 – 14., Gospel of Luke 16:1 – 13.

I. ON THE TRUST IN GENERAL

relationship between the owner and the trustee can be expressed vis-á-vis third parties, whether this may have an in rem effect, i.e. how rights granted to the trustee under contract may be given effect vis-á-vis third parties. This thesis essentially aims to describe the types of legal instruments evolving in the course of the history of law with respect to the management of third party property, and the regulations that serve to fulfil this economic objective in foreign legal systems.

1. Fiduciary property management – the trust The legal instrument of fiduciary property management can serve numerous purposes in the economy. It is suitable, in particular, to serve people who are unable or incompetent to manage their property, or who do not wish to make public their ownership, for charitable purposes, the administration of investments, remuneration of staff, the uniform management of financing sources (e.g. for the optimisation of a seller’s position in terms of tax laws), protection of property, tax planning, the management of jointly owned property etc. The trust plays an important role in the economy of England and in other Anglo-Saxon territories (United States, Canada etc.). The rules of the Anglo-Saxon trust are clearly the most appropriate to fulfil the above objectives. Fratcher defines the essential and central element of the trust as the bound ownership of the trustee, on the basis of which he has the duty to manage the property for the benefit of the beneficiary.8 In older English literature (e.g. Blackstone, Holdsworth, Maitland etc.), attempts were made to trace the development of the trust to the institutions of the fideicommissum in Roman law, the medieval Germanic salmann and the Islamic wakf. Recent research, however, suggests agreater likelihood thata legal institution of explicitly English origin that developed from the tenants-in-chief – under-tenants legal relationship relating to land ownership in the Middle Ages.9 We may establish with certainty, however, that similar legal institutions existed in Continental legal systems, principally in laws of succession. Such examples include the role of the familiae emptor in Roman law, in addition to the fideicommissum, the fiducia; the mandatum, and its surviving forms in modern law; the Dutch bewind, the similar foundation ( fondation, Stiftung, stichting), and the German Nachbarfolge or Treuhand instruments. The trust is not a relic of feudal times; in the modern economy it often offers an adequate device for the fulfilment of important economic objectives and purposes 8 “The trust is a legal device developed in England whereby ownership of property is split between a person known as a trustee, who has the rights and powers of an owner, and a beneficiary, for whose exclusive benefit the trustee is bound to use those rights and powers.” W. F. Fratcher, Trust, in International Encyclopedia of Comparative Law, Vol VI, Trust and Property, Tübingen, 1973, 3. 9 Fratcher, op. cit. 9 ff.

I. ON THE TRUST IN GENERAL

within the scope of private law. In Continental European legal systems, most of the problems arising from the interpretation of the trust involve the uniform approach to ownership. As a further impediment to the interpretation of the legal institution of the trust within the context of Continental European legal dogma, due to the numerus clausus of property rights, the establishment of a legal basis for the recourse of both the trustee and the beneficiary to absolute in rem protection in connection with trust property is possible only through statutory provisions. The rules under agency, foundation, succession laws do not provide sufficient instruments to this end.10 In Continental European laws, the regulation of a property management contract that is similar to the English trust poses a major challenge. The basic problem lies in the principles established in property law. The most obvious solution raises the question whether by way of the establishment of independent trustee rights regulated by law, based on the numerus clausus of property rights, it would be possible to implement such a legal institution.11 Due to the principle of substantive limitation, it is not possible for entities to modify already existing rights in others’ ownership so as to ensure that these are appropriate for fulfilling this economic objective. The division of ownership is also in breach of the principle of publicity, as the person of the owner recognised by law can be identified in the certified and public records, while the person of the actual ultimate beneficial owner remains concealed. With respect to the adoption of the trust, or of any modified instrument thereof, it helps to examine this institution with a functional approach. For this, we need to answer certain questions, such as the following:12 – What is the role of the trust in Anglo-Saxon legal systems? – Can the role of the trust in Anglo-Saxon economies be implemented indifferent legal systems and regulations based on the traditions of Roman law? – Would the introduction of the trust in Continental European legal systems amount to a reform? Would it fill a gap and play a beneficial role? There are major efforts on an international level and within the European Union to approximate the rules of private law in the Anglo-Saxon and Continental European legal systems.13

Fratcher, op. cit. 89 ff. See B. Lenkovics, A dologi jog vázlata (Outline of property law), Budapest, 19995, 3. 12 H. Hansmann – U. Mattei, The Functions of Trust Law:A Comparative Legal and Economic Analysis, 73 New York University Law Review (1998) 435. 13 For example, the Convention on the Law Applicable to Trusts and On Their Recognition (Hague Convention), adopted by the Hague Conference on Private International Law at its 15th Session, the Principles of European Trust Law, chapter X of the Draft Common Frame of Reference (DCFR) drawn up by the working group organised at the faculty of law at the University of Nijmegen, etc. 10 11

I. ON THE TRUST IN GENERAL

In view of the international trends, it would seem appropriate to also regulate trustee rights and the property management contract in Hungarian private law. This, however, would be a legitimate need only if a legal framework suitable for the fulfilment of the above objectives is available, and legislators are able to assure guarantees to prevent circumstances giving rise to misuse and the circumvention of the objectives.

2. Comparative law This work partly draws on the history of law and partly contains brief country studies relating to the trust. Both approaches and analyses aim at producing an overall legal synthesis within the framework of comparative law, on the basis of certain forms of the trust and property management in civil law. In a free interpretation, comparative law may mean the comparison of rules established within the legal system of a given country and the use of such comparison to perfect the given legal system. Comparative law, however, means much more: it also covers the comparison of the world’s different legal systems. In the definition of Zweigert and Kötz, comparative law involves the comparison of the spirit or style of different legal systems, and the comparison of comparable legal institutions and legal problems.14 As in the case of any other science, the principle aim of comparative law is to gain knowledge. This, however, should not be an end in itself. Comparative law can serve as a vehicle for increasing the number of solutions available for certain situations and problems in life, hence it is an école de vérité, and it can also support the improvement and criticism of national legislation. Comparative law provides the professional background for legislation, and for legal harmonisation as well. Jhering argues that the adoption of foreign legal institutions depends not on nationality, but whether such adoption is necessary. No one wants to borrow something from somewhere else, if what he has at home is the same or even better.15 Nevertheless, methods of regulation existing in other countries should not be ignored only because these are not drawn up within the framework of our own laws. Comparative law also provides support in the interpretation of rules within the national legal system. Pursuant to the Swiss ZGB Section 2, for example, the judge applies customary law if legal provisions are not laid down in relation to the given case; where there is no customary law, he will act as legislator and take into account the generally accepted doctrines and traditions.

14 See A. Badó – S. Loss (eds), Betekintés a jogrendszerek világába (Overview of the world of legal systems), Budapest, 2003, 11 ff. 15 R. von Jhering, Geist des römischen Rechts auf den verschiedenen Stufen seiner Entwicklung I–III, Leipzig, 1858–66, I, 8.

I. ON THE TRUST IN GENERAL

Comparative law is also essential for the unification and harmonisation of law, as is the case in relation to various international model policies, treaties, and legal acts of the European Union. The words of Roscoe Pound carry eternal wisdom with respect to the purpose of comparative law: “It is not the function of comparative law to furnish us with ready made rules to be taken over from the corpus of one system and embodied in another exactly as they stand. Rather it may furnish us an important mass of raw material for creative law making, and afford us a critique of rules and technique and received ideals, when a period of transition requires us to take stock of our legal armory and see how far our weapons are equal to their tasks in a new economic order.”16 Comparative law may also be distinguished as micro- and macro-comparative law, depending on the depth of research and the number of countries and legal systems covered. In the case of a macro-comparison, the methodologies, spirit, philosophy and style of different legal systems are compared. In the case of a micro-comparison, research focuses on comparing the regulation of specific legal institutions and situations. It is also important to place emphasis on the study of how certain laws are applied in legal practice, that is, the extent towhich practised law relies on codified law. Legal practice often represents a separate layer of law, hence the study of laws does not in itself provide a full view of a country’s legal system.17 This work basically functions as a micro-comparison, as it studies the different manifestations of a concrete legal institution. In the course of studying the adoption of the trust in civil law, it was also necessary to consider substantial differences relating to the whole of the legal system. Nevertheless, I limited the analysis of general differences between the legal systems in Anglo-Saxon countries and in civil law only to the extent necessary. Scholars of comparative law divide the world’s countries into different legal families. Among these categories, I relied on the classification of René David, who identified the following legal families:18 − Western legal family (the Romano-Germanic and Anglo-Saxon groups as separate legal systems) − Soviet legal family, − Muslim legal family, 16 R. Pound, Revival of Comparative Law, Tulane Law Review 15 (1930)8. See also G. Hamza, Jogösszehasonlítás és antikvitás, Jogösszehasonlítás és az antik jogrendszerek (Comparative Law and Antiquity, Comparative Law and Antique Legal Systems), Budapest, 1998, 13 ff. Montesquieu, A törvények szelleme (The Spirit of the Laws), Budapest, 2000, 349 ff. 17 The study of contracts, for example, is much more effective in reflecting the given legal system than analysis limited to codified law. É. Jakab, Humanizmus és jogtudomány. Brissonius szerződési formulái (Humanism and Jurisprudence. The Contract Formulas of Brissonius), Szeged, 2013, 14 ff. 18 Les grands systèmes de droit contemporains. In English: David: Major Legal Systems in the World Today. In Hungarian R. David, A jelenkor nagy jogrendszerei (Major legal system in the world today), Budapest, 1977.

I. ON THE TRUST IN GENERAL

− Hindu law, − Chinese law. I also took into account the classification drawn up by Zweigert and Kötz. Zweigert and Kötz considered several factors for defining the legal families. Such factors include the historical background, mode of thought, different institutions, recognition of the sources of law, and the dominant ideology. They defined six legal families on the basis of these factors: − Roman legal family, − German legal family, − the legal family of common law, − Nordic legal family, − laws of Far Eastern countries (China, Japan), − religious legal family (Islamic, Hindu law). In Hungarian legal literature, the work of Professor Gyula Eörsi, Összehasonlító polgári jog (Comparative Civil Law), is worth noting. With a focus on the Hungarian aspects of the given age, Gyula Eörsi applies the primary distinction between socialist and bourgeois legal systems.19 Currently there are certain signs of dissolution among the legal families, necessitating a change of perspective.20 This holds particularly true on the basis of findings made in the comparison of the trust and similar institutions of civil law. Comparative law does not apply a doctrinal methodology that is uniformly applicable to all cases. The main principle of the methodology is functionality. Only comparable things lend themselves to comparison, that is, things for which the central question is functional similarity between different laws (praesumptio similitudinis). If such similarity does not exist, the comparison of laws will be in vain. It follows that in addition to the study of laws relating to specific situations, it is also necessary to examine the legal system and legal culture of the given foreign state, otherwise the result is limited to a descriptive approach, which does not amount to comparative law. It is also necessary to consider that some legal systems often rely on the existing rules of other legal systems (parent systems, affiliated legal systems). It is important to think within a systematic framework; certain rules should not be studied out of context. I attempted to apply this approach in the process of comparing the different forms of the trust. That is, the study aims to identify the differences observed in countries with an Anglo-Saxon legal system, and to gauge the depth of similarity with methods applied in civil law. Evaluation is part of the result of comparative law – serving as the measurement of the efficiency of different legal systems in regulating the given legal institution. K. Zweigert – H. Kötz, Introduction to Comparative Law, Oxford, 19872. T. K. Graziano – J. Bóka, Összehasonlító szerződési jog (Comparative Contract Law), Budapest, 2010, 36 ff. 19