The feudal system existing in medieval England led to a system where the ultimate beneficiary was always the King. Between the possessor and the King there existed many intermediaries who acted as lessors and lessees at the same time. Each of these intermediary tenants would pass the benefit derived from the land to the lord immediately above him.
The device of use arose as a counter movement to some of the more unfavourable effects of the feudal system. In fact, land could not be left by will, but could only be passed on from the father to the first son of every family. This is identified as the rule of primogeniture. Land could on the other hand be disposed of during the lifetime of the testator i.e. by inter vivos title. The transferor could give property to another person or persons to use the land for the benefit of another person. This was known as the cestui que use. The beneficiary could either be a third party or else the one who transferred the land himself. Already here we may identify certain key features that will recur in the institute of trusts. The trust was and is still an institution founded upon conscience. If the conscience of the owner is not affected, then there is no benefit for the beneficiary of the trust.
In this way the restrictions of the feudal system were avoided and other persons besides the first sons of a family could acquire property. Eventually a system of second use was adopted whereby a first person would give on use to a person and this person in turn gives again on use to the third person. A middle man in this relationship was therefore the one who was being trusted. The trustee held legal title, and the third person was the beneficiary who enjoyed equitable title. In any way an examination of the development shows clearly that at every stage the basic foundation was that there existed a relationship of trust based upon fiduciary duties. The practical evolution of the legal instrument resulted in the fact that no real written norm exists that regulates its constitution and operation.
The trust is a product of the Roman Law fiducia. Inevitably therefore there are some similarities in common law and Roman Law on the basic elements of this institute.
Fiducia was essentially an agreement that acted as an appendix to a transfer of property, involving a direction or trust as to what was to be done with it. It was a separate agreement to the main contract and need not be in writing. It is indeed debatable whether its nature was that of a contract since it never featured in the list of nominate contracts. Some authors considered it to have been a pactum. Lee comments that fiducia does not occur except as an incident of the conveyance of a person or a thing. It was regarded as a parasitic institution since it could only be constituted in relation to a transfer.
Indeed one can draw a parallel with the present day trusts where we say that the trust does not come into effect until there is the transfer of property to the trustee.
The main applications where the fiducia featured were in the fiducia cum creditore, and the fiducia cum amico. The fiducia cum creditore was the root of the security law of pledges and hypothecs whilst the fiducia cum amico led to the contracts of deposit, loan and mandate. These contracts are bonae fidei contracts and as such demand a higher level of care.
Since fiducia was not constituted by a written instrument it was difficult to enforce and so the Romans decided that if fiducia is proved then it could be enforced through the actio bonae fidei. In this action the judge would have a lot of discretion. Therefore the exercise of judicial discretion based on the performance of fiduciary obligations was needed. Fiducia in its own right gave rise to the actio fiduciae which gave the right to the recovery or withdrawal of the property.
Evidence exists that the testamentary secret and semi-secret trusts were used in Europe in the sixteenth and seventeenth centuries. These were called confidentia immediately connoting the main principle that is of trust being placed in another person. The trust is a relationship of a fiduciary character. Judgments of the Roman Rota, France, Piedmont, and authors from Europe all concur on the notion that the confidentia existing at the time has the identical core principles of trusts. In this institute one finds rules and characteristics that eventually became rules in English law on trusts. Lupoi interestingly delves deep into the origins of the trusts institute and clearly explains that there is astounding evidence pointing towards trusts as an institute with civil law origins but concealed by the fact that English Chancellors having a sound knowledge of civil law used these principles without acknowledging their sources.
A trust exists where a person (called a trustee) holds, as owner or has vested in him property under an obligation to deal with that property for the benefit of persons (called the beneficiaries), whether or not yet ascertained or in existence, which is not for the benefit only of the trustee, or for a charitable purpose, or for both such benefit and purpose aforesaid.
The definition offered by our law incorporates the core principles of the concept of trusts into one comprehensive definition. This definition identifies the trustee and the beneficiary as two of the main constitutive elements of trusts. The third player in this relationship is the settlor, who is the person who settles property in trust.
As soon as the settlor puts the property in trusts, then he loses all control over that property and from that moment onwards the ownership thereof vests in the trustee:
a trustee shall, in relation to the trust property, have all the powers of a natural person having the absolute title to such property.
The settlor may himself be the beneficiary or the trustee. If he declares himself to be holding property on trust, he automatically becomes a trustee through the coming into effect of a unilateral declaration of trust. He continues to hold the same property but in a different capacity as trustee with fiduciary duties instead of as owner with full ownership rights and powers.
This last point is subject to significant debate. What kind of ownership does the trustee have? Under Common law, the settlor transfers legal title to the trustee, and equitable title to the beneficiary. Until an equitable interest is created, and legal and equitable ownership are separated, the owner is considered to own, at law, the whole undivided property. This situation is not found under Maltese law, since the Trusts and Trustees Act clearly states that ownership by the settlor is transferred exclusively to the trustee, and that the trustees absolute ownership is then in turn controlled rigorously through the imposition of fiduciary obligations. Some examples of these obligations are the duties of the trustee to keep and render accounts, to preserve, invest prudently and enhance the trust property. The article of the law worth reproducing here is Article 1124A (1):
Fiduciary obligations arise in virtue of law, contract, quasi-contract, trusts, assumption of office or behaviour whenever a person (the ”fiduciary”) –
(a) owes a duty to protect the interests of another person; or
(b) holds, exercises control or powers of disposition over property for the benefit of other persons, including when he is vested with ownership of such property for such purpose; or
(c) receives information from another person subject to a duty of confidentiality and such person is aware or ought, in the circumstances, reasonably to have been aware, that the use of such information is intended to be restricted.
Subarticle (b) specifically mentions the instance where a person is vested with ownership of assets for a specific purpose. This is the case of the trustee, who holds property on trust for a specific purpose, which is the destination of the trust. The trustees role in the trust scenario is one that must be necessarily governed by fiduciary duties since all the powers given to the trustee must be in some way or another limited in the sense that there is some form of supervision.
A trust is only completely constituted when there is the actual transfer of the assets to be held on trust. Before creating a trust the settlor has absolute ownership in the property. If the settlor does not have this absolute title over the property then he is unable to set up this trust. Nemo dat quod non habet is a maxim that epitomises the very notion of ownership. One cannot give what one does not have. Therefore, in order for the trustee to gain legal interest according to Common Law and absolute ownership according to Maltese Law, the settlor must have transferred a good title.
In this regard the settlor must be able to set up a valid trust by transferring a good title. Hudson says that it is not possible for a person who does not have rights in property to transfer good title in that property to another person. The settlor must therefore have proprietary rights over the property which he intends to put in a trust, because he cannot declare trusts over property in which he has no interest. A mere intention to transfer property into trust, which will be the settlors at a future time, is not sufficient to create a valid trust. Therefore ownership of the property must exist at the time when the trust is sought to be created.
The legal title to the trust property must be vested in the trustee either through a trust deed between the settlor and the trustee or else in a unilateral declaration of trust by the trustee, where he declares that he is holding a particular estate or specific assets on trust. These are the two modes of creating express trusts.
When the settlor settles the trust property in trust he must constitute the trust in two stages. In the first stage the actual ownership of the assets is transferred from the settlor who is the initial owner to the trustee who gains ownership by virtue of trust. The second stage would be the creation of the terms of the trust. Since the trust can be constituted in any form, whether written or verbal, the ultimate aim is to delineate the powers of the trustee. In testamentary trusts, the settlor would be transferring his estate to the trustee upon his death and instituting the persons he intends to benefit as the trusts beneficiaries.
A declaration of trusts without the actual transfer of the assets is not effective. On the other hand, if there is a transfer of the assets but not a declaration that the transferee is holding on trust, then this would be an outright gift.
Upon transfer of the trust assets the trustee becomes the outright owner of the assets and therefore he is the legal owner and not an agent or a representative of the beneficiaries or of the trust. Upon a transfer of title or a unilateral declaration of trust, the actual management of the trust property vests in the trustee. The powers of the trustee with regards to the trust assets and the counter-balance to these powers are the fiduciary duties which the trustee is bound to fulfil. These fiduciary duties imply that the trustee must prefer the interests of the beneficiaries to his own interests. In fact even though ownership and possession of the trust assets vest in the trustee, yet one of the consequences of ownership does not persist in this case: the trustee cannot benefit from the trust property. These benefits are vested in turn in the beneficiaries who, although unable to deal directly with the trust property, yet they can enforce the terms in the trusts instrument, agreement or declaration against the trustee.
This indirectly implies that the trustee does not have absolute title over the trust property, because although he is the legal owner, yet he cannot enjoy the property for his own benefit. But indeed the trustee is not a partial owner and that is why civil lawyers tend to say that the trustee is still the absolute owner despite the fact that he does not benefit from the trust. The word absolute is not incorrect because the trustee has all the property rights that the beneficiary can enjoy. This derives from the fact that the beneficiary can only enforce his beneficial rights against the trustee. The obligation with regards to performance of the trust rests with the trustee who must act in the best interests of the beneficiary. This is why the trustee is said to have a fiduciary power i.e. a power that belongs to a person, but which cannot be exercised in his own interest, but only in the interest of others. This protection due to the beneficiary extends also to the trustee having to enforce rights against third parties. If the trustee fails to enforce such rights, then the beneficiaries have the legal right to act of their own initiative against third parties and force the trustee to join them in this legal action.
On the other hand, it is the trustee who must be sued for claims against the trust property, since trusts do not have a separate legal personality. It therefore cannot enter into contracts in its own name.
These observations are in line with the modern and authoritative line of thought, according to which the so called absoluteness of the right of the trustee, seen as erga omnes efficacy, is a general prerogative of all the advantageous juridical situations, in as much as this safeguard intervenes following any unjust violation of the interests protected through these rights.
Il nucleo dei trust la segregazione.
The trust property shall constitute a separate fund owned by the trustee, distinct and separate from the personal property of the trustee and from other property held by the trustee under any other trust.
Once the trust does not have separate legal personality, it is essential that trust property is kept separate and distinct from other property pertaining to the trustee since, as opposed to absolute ownership, fiduciary ownership is limited in a number of ways. This means that there must be a separate identifiable trust property. A binding link is created between the patrimony and its aim, in force of which the patrimony cannot any longer literally and functionally be separated from the latter. This means that the ring-fenced patrimony exists from the moment of constitution of the trust onwards for one sole purpose.
In the same Act we find another article which deals with the same subject-matter:
Trustees shall keep trust property distinct and separate from their own property as well as from any other property held by them under any other trust or title, and separately identifiable therefrom:
Provided that trustees may, if expressly permitted by the terms of the trust, or in any case where the trust property consists of fungible things, place and keep trust property in a common pool of identical assets or in a clients or common account.
The legal effects inherent upon this segregation of property are mainly three: firstly personal creditors shall have no claim against the trust property; secondly, in the eventual insolvency or bankruptcy of the trustee the trust property does not form part of the trustees estate, and lastly the trust property shall not form part of the matrimonial property of the trustee or his spouse nor part of the trustees estate upon his death. In this sense, every trust carries out a protective function because the segregation of assets settled in favour of the trustee, unaffected by any personal happening, ensures that the assets in trust are destined according to the intention of the settlor when he instituted the trust.
Lelemento pi strutturalmente pi significativo senza dubbio rappresentato dal fatto che i beni del trust costituiscono come detto un patrimonio separato rispetto a quelli del trustee e come tali non possono essere aggrediti dai suoi creditori neppure in caso di fallimento, sono esclusi dalla sua successione e dal regime patrimoniale proprio del matrimonio.
The first two instances out of these three are specifically dealt with in Article 40A (2) of the Act. In the event that the trustee becomes bankrupt, or insolvent, or upon his property being liable to seizure or a similar process, his creditors do not have any right or claim against the trust property. Nevertheless in this instance we find an exception because the law lays down that the creditors shall have a claim against the trust property but only to the extent that the trustee himself has a claim against the trust.
The holding of the trust assets in a separate patrimony and therefore in a separate fund is also listed as a separate duty of the trustee under fiduciary obligations in the Civil Code. One may compare this situation with the regime of the community of acquests, where there are also two separate patrimonies vested in the same person. In this regime, paraphernal property is kept separate from community property and can be administered freely by the owner.
The administration of community property contrasts with that of paraphernal property it is limited in a number of ways, mainly tied with the consent of the other spouse. This consent is a requisite for the validity of transactions relating to this property when the spouse is performing an act of extraordinary administration. In the trust scenario, the limitations are found in the fact that although the trustee enjoys full ownership, he is not free to make any use of the property, since he must have the beneficiaries interests in mind at all times.
Therefore the trust assets are not part of the trustees patrimony and consequently the trust property is best kept separate from the other assets that appertain to the personal estate of the trustee. The title of ownership that the trustee holds over the trust property is not complete and therefore the trust assets cannot be incorporated into the whole of the trustees estate, i.e. with the other assets he holds under full ownership.
In this way the trust assets are protected from the creditors of the trustee or the claimants upon the property of the trustee, except those claims in respect of trust obligations.
The notion of the unity of the patrimony is a recent development dating from the French Civil Code and indeed was never meant to encompass all that one was to own. There was always the intention that it would exclude such assets that were meant to be handed over or meant only to be kept for safety or management purposes. Fiduciary ownership finds its place also in the civil law concept of the testamentary trust of the ius commune. In Liechtenstein law, this nature of ownership is considered to be a real right and consequently can be enforced against anyone.
As has already been discussed the trustee can exercise his right only in furtherance of the interest of the beneficiaries. Indeed the beneficiaries may enforce obligations on the trustee. These obligations can in no way be enforced by the settlor since at the exact moment that he settles assets in trust he loses all title, control or claim over these. The settlor therefore has no further interest in the assets and only the beneficiaries may enforce the trust. This right given to the beneficiary effects directly the rights and powers given to the trustee and the way in which the trustee can use the same. Inherent in a power is a duty. The trustees powers are extensive when considering that property is being transferred from the original owner to another person in full ownership without any consideration, but they are limited when considering that the trustee is the absolute owner and yet he does not have rights of enjoyment. Fiduciary duties in this scenario are the abstract limit to these powers.
The judgment in Morice vs. Bishop of Durham highlights the necessity of someone with legal standing to take the trustees to court to enforce the trust with all its inherent rights and obligations pertaining to all parties. The parties having the legal standing are the objects of the trusts because it is they who are intended to benefit qua beneficiaries.
The application of a Common Law concept based entirely upon the system of equity, to a Civil Law jurisdiction, will inevitably cause great concern in as much as it causes evident incongruencies with various aspects of a legal system. Core principals may be challenged or even undermined in this respect if no adequate measures are taken to ensure respect for the basic concepts of a system whilst moving towards the implementation of new institutes that offer alternative modes of dealing with estates. This notion was eloquently expressed in an Italian judgement of the Tribunale di Oristano:
Se si volessero attribuire al trust tutti gli effetti che esso produce nellordinamento giuridico inglese indubbiamente si violerebbero fondamentali princpi di ordine pubblico dellordinamento giuridico italiano
In fact, since the trust has matured in a juridical environment completely different from that of continental law, the attempt at reconstruction of the trust by the use of typical institutes of the civil law system would be destined to failure. Problems may occur if the implementation of a new institute is undertaken with the assumptions that are valid in a common law system. Some of the assumptions inherent in this system are totally invalid in a civil law scenario. The adoption of an alien institute into a civil law system presents an extraneous notion to the legal system. It is perceived as offering the answer to questions that the legal system leaves unanswered or unsatisfied.
In order to carry out a structured discussion to this effect, one must first consider what is meant by trusts and secondly one must examine the main principles of the basic notions and principles in a civil law system. Only after this analysis is concluded can one then look at the incongruencies of the institute of trusts with a civil law system. When commenting on the implications of this analysis, Lupoi submits that there is a common core with Anglo-American trusts (laws of United States, England, Australia, Canada, New Zealand, the laws of offshore jurisdictions, and others) and that indeed this common core is not unique to the common law systems. This can surely be seen in the implementation of the institute of trusts into our domestic system. The legislator has retained the common law core principles of the trusts whilst subjecting them to civil law system principles primarily to be found in mandatory rules.
Indeed there is a distinction between three types of trusts: the English-model trusts, the international-model trusts and the civil law model trusts. Nevertheless they have core principles which are common to all notably: the transfer to the trustee, the obligation of the trustee, and the reference to purposes.
At the outset one must point out that any legal title may be the subject of trusts and therefore not only ownership. The most important implication to this transfer of title is not that it must necessarily be a title in full ownership, but that it is wholly transferred whatever is the nature of the title be it possession, detention, or even factual control. What cannot be done on the other hand is that the settlor transfers more than he has a legal right to. Nemo dat quod non habet, finds a very appropriate application in this context.
If therefore on the one hand the settlor divests himself of the title of ownership over the property settled in trust, then the trustee becomes the sole proprietor of the assets with unique powers to administer and dispose of the assets. These powers are always inevitably qualified by the fiduciary duties inherent in the office of trusteeship.
The notion of the divided ownership i.e. that of legal ownership being vested in the trustee and equitable ownership being vested in the beneficiary is sometimes used by civil lawyers to support the argument that trusts are incompatible with a civil legal system. By means of the amendments to Maltese law in order to incorporate trusts as one of the institutes in the domestic legal infrastructure, this transfer of ownership from the settlor to the trustee has been envisaged in a new clear dimension. It mainly encompasses the following acts which by no means are found to be incompatible within the Maltese civil law system.
First of all, the Civil Code was amended in order that the law of things was made to recognise the various transactions inherent in the operation of trusts. The various transactions which are mostly evident in this scenario are the settlement of property in trust, a transfer between trustees, and a distribution to a beneficiary. These are all valid modes of transfer of ownership. These transfers create enforceable interests and are valid erga omnes. 
The mere fact that the Chancellors used civil law notions in order to construct a basic working system of trusts implies that in reality when one goes beyond the superficial incompatibilities of form, one finds a common ground of understanding. So the fulcrum of the discussion should be centred not only around identifying this notion of lack of incompatibility of trusts with a civil law system but also of stressing the fact that the incompatibilities do not exist with respect to the origin of the legal system but with respect to the inherent rules of a domestic system which vary with each jurisdiction. Proposing that there are incongruencies and showing them at face value is not enough. A comparative law exercise from both civil lawyers and common lawyers of the others systems of basic tenets and trusts as based on these tenets would probably show the clearest picture that one can achieve.
Lupoi confirms that there is no basic incompatibility since trusts do not centre around the beneficiaries, but around trustees and that trusts centre around ownership rather than management. Paul Matthews on the other hand submits that the apparent incompatibility between trusts and the civil law system stems only from an incomplete and superficial analysis. Matthews, like many others, claims that the mere fact that many legal systems based on the civilian tradition inherited from Roman law now provide for the institution of trusts shows indeed that express legislation to this effect did not cause an upheaval in the existing civilian framework. These legal systems are mainly the following: Qubec, Japan, Liechtenstein, Jersey, Malta, Louisiana, Taiwan and China.
Some civil lawyers and researchers object to the introduction of trusts into a civil law system because it may be used to try to disregard or indeed breach rules of a legal system which are so important to the fundamentals of the same that they are termed as being mandatory. In this sense inheritance rules are one such main area. As already discussed legitim rules exist in order to safeguard complex but deeply socially embedded issues of loyalty, protection and maintenance of familial relationships.
These mandatory rules need not prohibit the introduction of trusts into a civil law system. There are ways and means by which mandatory rules can still be respected. Attempts at subversion of fundamental rules through the use of the trust do not only take place in civil law systems but also in the English and USA systems. A simple solution is envisaged in this respect in these two systems: where a trust infringes rules of public policy derived from mandatory rules of law, then it is void.
In the Maltese Trusts and Trustees Act such a situation is remedied by Articles 6A (based on Article 15 of the Hague Convention) and Article 6 B. Article 6A reads as follows:
(1) Subject to the provisions of subarticle (2), in the case of a trust governed by Maltese law, where the law of Malta contains provisions with regard to the following matters –
(i) the protection of minors or incapable parties;
(ii) the personal and proprietary effects of marriage;
(iii) succession rights, testate and intestate, especially the indefeasible shares of spouses, ascendants and descendants;
(iv) the transfer of title to property and security interests in property;
(v) the protection of creditors in matters of insolvency;
(vi) the protection, in other respects, of third parties acting in good faith, which cannot be derogated from by voluntary act,
such laws shall prevail over the terms of the trust unless otherwise expressly provided in this Act or in other provisions of applicable law relating to trusts and related matters. 
It is immediately evident that in listing these areas of law, the legislator attributes to them utmost importance and that therefore they need protection to avoid their breach. Succession rights is the third in the list and covers all rights granted to all through Maltese succession rules. The law uses the words especially the indefeasible sharesas a direct reference to the reserved portion provisions in the Civil Code.
The Act therefore expressly lays down that legitim rights should prevail over provisions in a trust. This means that the institute of trust cannot in any way be used to circumvent Maltese rules of succession, especially those related to the reserved portion. The right to legitim is so important under Maltese Law that it is treated as a matter of public policy. Indeed, it must be pointed out that even though the settlor at the time of the institution of the trust has the ability of making an express choice of law as to the governance of the trust, yet this choice cannot in any way violate the rights of the legitimaries at the time of his death. Therefore the two main issues which are of utmost importance in a Civil Law system seeking to incorporate trust law, is to make sure that in the interaction between the institute of trust and the rights created by reserved portion provisions, the validity of the trust is not jeopardised and the rights of the legitimary are not diminished and even more so, not obliterated. This is achieved through a system of management of conflict provisions. 
Indeed Article 6B of the Act seeks to ensure that the validity of the trust is preserved by laying down that the enforcement of the mandatory rules being protected under Article 6A should not produce the failure or the invalidity of the trust 
The law also adds that where possible the trust must continue to operate on the same terms and conditions even though there may be some condition in the trust which is being declared invalid because it goes against the mandatory rules of the Maltese legal system.
A power is given to the trustee to vary the terms of the trust and do acts which are necessary and legally permissible in cases where there is a conflict with the mandatory rules in our law, but the trustee must always keep in mind the intention of the settlor upon the settlement of the assets in trusts.
Moreover, in order to solve these conflicts the law lays down three presumptions. These presumptions are deemed to be conditions existing within the terms of the trust if the trust is silent in this regard. First of all the trustee is given the power to reduce the trust assets if these exceed the disposable portion according to the law of succession. As long as the trustee acts honestly, reasonably and in good faith in the exercise of these powers, this does not constitute a breach of trust. Secondly the law imposes the presumption that the trustee has the power to enter into arbitration and mediation agreements in order to reach a compromise to disputes and claims by third parties. The third presumption is that giving the power to the trustee to seek direction from the Courts on the matter of conflict with mandatory rules of the legal system. This is the presumption that has relevance with regards to the topic under discussion.
It is very important to establish the importance of avoiding abusive uses of the trust. By means of Article 6B, one can only hope in the sensibility of the judges for the preservation of the particular characteristics of the trust at the exact moment where he values the conformity to the norms of public policy inherent in the domestic system. This shows that it is not only through the operation of the law that the abusive use of the trust can be precluded but also through its interpretation by the judges.
Mandatory rules do not apply in cases where the settlor is domiciled in a country which does not embrace the rules of reserved portion or testamentary incapacities which are connected to reserved or maximum portions. These rules do not apply even when the settlor has settled in trust immovable property in Malta. Reference is made here to Article 958 (1) (b) in the Civil Code which clearly sets out the non-applicability of such rules.
Where movable or immovable property situated in Malta has been settled in trust, under the laws of Malta or otherwise, by a person who is not domiciled in Malta at the time of settlement
(b) no provision in this Code relating to inheritance or succession to such property including, but without prejudice to the generality of the foregoing, rights to legitim or similar rights applicable under this Code shall apply to such trust property, at such time or subsequently; 
Also if then the settlor is a civil law domiciliary, the courts may apply the law of their domicile and any rules relating to reserved portion and other succession rules must be inevitably respected to the extent that they are mandatory. This application of foreign law rules is then subjected to conflict management rules according to Article 6B of the Trusts and Trustees Act.
In order to ensure that trusts may operate in civil law systems as well as they operate in a common law system, there must be a structure in the law which ensures that public policy rules of the jurisdiction are not infringed. Under Maltese law the possibility of conflicts with public policy rules in the cases where foreign domiciliaries use Maltese trusts was expressly dealt with in some provisions of the Trusts and Trustees Act. For instance, the Maltese Civil Code provisions prohibiting entails do not prohibit the creation or recognition of trusts. There is then Article 6 (5) which lays down that Article 586 of the Civil Code shall not affect any term of trust in as much as it relates to the inheritance of the settlor or because a disposition under trust is to take effect after the death of the settlor. Another instance is that found in Article 9 (16) where the Act renders ineffectual the provisions with regards to the invalidity of fiduciary dispositions and discretions in wills.
An instance where the Maltese courts have succeeded in smoothing out any differences between an essentially novel institute and Maltese mandatory rules of public policy was where it pronounced that essentially a trust is bound to fail if it violated the rules with regards to the acquisition of immovable property in Malta by non-residents.
In spite of all that has been said it must always be pointed out that the same conception of public order and public policy is susceptible of undergoing modifications, whether slight or radical, in time and indeed in space. Therefore the concept of public policy does not render itself apt at any attempt of crystallisation. Principles that at one time where considered inderogable have undergone a successive process of more or less rapid erosion in their treatment by the domestic system of law so that they are no longer today considered to form part of public policy rules.
The definition of the trust laid down in the Hague Convention can be found in 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 trustees 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.
It can be said with certainty that the tricky and debatable notion of the ownership of the trusts assets was not dealt with in this definition. This can be uniquely explained by the notion that it was intentionally left out of the definition in order to refrain from injuring the sensibility of civil law jurists in this regard. In my opinion, this does not favour clarity. A more sensible option would have been to offer a definition that would cater for both a situation where the trustee has the absolute ownership and where the trustee is said to have the legal ownership. This would mean that such a basic concept in the sphere of trusts would have been defined the concept but at the same time the signatory countries would have had the option to adopt either one or the other definition according to their legal and juridical background.
When considering the general tendency of The Hague Convention on the Recognition of Trusts one may immediately notice that as a private law instrument it is rather one-sided since it binds civilians to apply common law rules whilst in its application common lawyers will rarely have to apply civil rules. The Hague Convention requires that in order to be applicable to trusts, this trust must be governed by a foreign law.
An in-depth analysis of all the implications of The Hague Convention lead some authors to declare that in some respects the Convention did nothing to help clear the view as to the inexistence of incompatibilities between trusts and civil law systems.
The Hague Convention of 1984 did its best to further confuse the issues, with considerable success. 
This statement is supported by arguments that point to the vagueness and uncertainty created by certain provisions of the Convention. Indeed the declaration that a trust takes effect when assets have been placed under the control of a trustee is one such instance. As already described above there must necessarily be a transfer of title in order for a trust to be properly constituted. The placing under the control of another person, in no way implies that there is divestiture of the settlor of his rights. Lupoi calls this type of trust the Convention trust or shapeless trust.
In the exercise of creating a workable trust in a civil law system, the Hague Convention makes use of Article 15 in order to lay down that the application of a trust in a civil law system cannot undermine the imperative dispositions that belong to the juridical system competent to govern the trust. These mandatory rules will inevitably limit the ambit within which the juridical relationships deriving from the trust will be allowed. This works out therefore as a limit to the recognition of the effects produced by the trust, because it precludes the violation of mandatory rules through the express choices of the settlor. The struggle between the autonomy of the individual (in this case the settlor) and the mandatory rules of a legal system comes again in perspective when discussing the express choices of the settlor. Mandatory rules are there to moderate and make sensible in the eyes of society the choices of the settlor and therefore the trust cannot be an instrument which provides a leeway wherein the individual can violate the basic tenets of a legal system.
Dr Priscilla Mifsud-Parker is a senior associate at Chetcuti Cauchi Advocates. [profile]