The Panama Papers scandal, if as such it can be termed, was a convenient excuse for Michel Sapin, the fiscal Saint Nicklaus, to publicly instigate the French Register of Trusts, and to somewhat deviously encourage other countries to do the same.  Slight double take: the Register will not contain details as to any company owned by a trust on the Register - yet. Why? Because it draws upon entirely confidential information provided on that basis, in bona fodes,  to a tax adminstration, on the 2181 Trust1. That in itself should render the decree invalid. Will it? Not without a French indiviudal complaining. This is a complete democratic black hole!

My point is that it is hardly a beacon of light nor a beaten path to follow, as the French were and remain unable to correctly apprehend a trust as a property right, and have chosen to continue to misrepresent it as a form of fiduciary contract, not as a creature of the law of property.  Given the number of French University professors who have confirmed that it is indeed a creature of the law of property as opposed to the now marinated fiduciary contract as which it was portrayed, one could be pardoned for querying the intellectual honesty of the French administration.  Hardly the most Cartesian approach known to man. I note in passing that the correct rendering of Descartes maxim, developed whilst hidden in a Poêle alsacienne in the Low Countries evading French agents sent to capture him,  is "I doubt, therefore I think, therefore I am", rather than the recent neo-cartesian circumscision to  "I think , therefore I am".  The only lesson to be learned from this expedition into the unknown is that it is perhaps better to philosophise in absolute sooty darkness than to attempt to overwrite foreign laws behind the relative comfort of a desk. That painfully blinkered attempt at pruning tends to excuse semi-conscious ignorance as a form of thought process subject only to peer review by those of the same civilian mindset.

Here, that is exactly what has happened to the English Trust.  T i incredible gthat no foreign orgnaistion has raised even the slightest hint of protst at eh mannerin whicg this decree was formulted, and the lack of any justifictaion for using infiormation declared under a process of conidntiality, in good faith to a tax administration is now being used as a form of public "outing" as if the French fiscal definition of a trust as such rendered it a property right.

The French State is now the first to have taken a foreign property right, which is defined as such, not as any French equivalent,  by the article 792-0 bis I CGI to which this bedlam refers,  and then metamorphosed it into some form of quasi-fiduciary mandate, and made a public register of the fiscal - not legal - fiction thus created. This is not law in any shape or form.  What is more the information on the Register has been gleaned from declarations made under a constitutional principle of confidentiality, and the law and the decree was passed with no reference to a democratic mandate: in short the French plebiscate did not function, or if it did on the basis of media frenzy, not on an advised knowledge of the trust as a property right of significant importance in other jurisdictions.

The implementing  decree was signed by Mssrs. Sapin and  Valls on 10th May, and published in the JOE of 11th May, 2016.

The actual "ergonomie" of the register from the digital point of view has been  in preparation for some time.  Whilst it is clear that whilst the actual tax declarations themselves will not be published, the data carried to the Register will not be sufficient to clarify the real legal position of the beneficiary and the Constituants for example.  In shotry oiformation gibve on apurey cnfidentioal basis by individuals living abroad has been made public in breach of the constitutional oblgation of confidentiality under which it was given. One  loi for the French;  a complete lack of it for anyone else.

Before commenting on the ramifications of this  decision, the decree can be found here

What does it achieve?

From 30th June, 2016, anyone can consult the register. Initially it was only to be approved journalists who could be called on not to commit acts of kidnapping or to promote abuse of the details held on the register. That elementary curb has been dropped.

The information contained on the Register will be:

1. La dénomination du trust et son adresse; The name of the trust and its address

2. La date de constitution, la date d'extinction du trust; the date of constitution, and the date of extinction of the trust

3. La date et la nature de la déclaration de trust mentionnée à l'article 1649 AB du code général des impôts;The date and the nature of the declaration of trust mentioned at article 1649AB of the Code général des impôts: this can only be the 2181 Trusts 1 Declaration.

4. Les éléments d'identification du constituant, du bénéficiaire et de l'administrateur du trust: the identification details of a Constituant, and of a beneficiary, if individuals, are their name, first name,  date and place of birth; and the date of their decease;

Les éléments d'identification de l'administrateur sont son nom, son prénom, sa date et son lieu de naissance: the identification details of the administrator of the trust are their name, first name, date and place of birth;

Les éléments d'identification d'une personne morale sont sa dénomination sociale et son numéro SIREN: the identification details of a legal person are their legal name, and their SIREN number.

Please note that the SIREN number is a purely insular French ID system.

Given that article 1649AB CGI is the basis for this, it might be possible for a foreign trustee, setttlor or beneficiary now to argue that this only applies to trusts with  French resident trustees, as these are under a specific obligation to report introduced in 2013. However, that is unlikely to be heard as the insertion of the Register is immediately after the first paragraph of article 1649AB, whilst the 2013 insertion as to French resident trustees appears further down.

As the trust has no legal personality, except in Louisiana, the trustees individual addresses will not therefore appear, it will be necessary to take care here, as the notification of an address will have tax consequences. Neither the French administration, nor the average French hack lawyer or journalist will have no idea as to how to allocate the legal fiscal residence of a trustee, apart from this element.  The reason is that they do not see it as a property  mechanism but as a form of societal contract, which means that they presume elusiveness where here is none.

The minister will periodically send a copy of the register to French Customs, the Tax administration and other administrative bodies in France.  That will include the DGFSE.

The right to object to publication provided for in article 38 of the enabling loi has been removed.

The only right to have alterations made is by a rectification procedure, which is yet to be identified.

The information to be published stops short of a full asset disclosure, which renders its advertised published utility in tracking beneficial ownership of companies a complete hoax.

The mechanism adopted is therefore an obstacle to the freedom of movement of persons within Europe and also to that of capital taken in deliberate ignorance and with no other thought process  than political complication.

The details will be archived for a period of 10 years after he declaration of extinction of the trust.  it is unclear whether the archives will be available for public on line consultation during that period.

The search engine will enable the use of defined search criteria:

1. The name of the trust:
2. The identity of the constituant, the beneficiary, or the "adminstrateur", using either their name, in the case of an individual, or in the case of a corporate body, their legal name or Siren number.

 

To which the "researcher" may add:

1. The commune, or the country of constitution of the trust, and the date of its constitution;
2. For the constituant or the beneficiaries, their first name, date of birth, the commune, department or country of birth.

In short this is a snoopers charter designed not to ensure fiscal compliance, which will already have taken place for the Register to be compiled out of tax declarations n° 2181 Trust1 ,  but simply to enable third parties to research, then to name and shame.  There is a real risk of individuals in less reputable states such as Mexico or elsewhere becoming the subject of kidnapping threats as a result of this little cartesian caper.

The only restrictions on the enquirer are that the following details will be held for a year:

1. Their identifier, which can of course be faked;
2. The IP address of the user; and
3. The date and time of the search.

The user will of course be alerted to the general conditions of user of the search engine, but let us be under no illusion as to whether those will be understood in French or respected if so.

Perhaps the only real manner of bringing the French Senate to reason is by some "charity" or better offshore foundation  setting up a trust for unre-elected French politicians specifically naming these impoverished individuals as discretionary beneficiaries, and refusing to make any payment out to them when they find their ISF and their deemed successions are artificially uplifted accordingly, at a rate of 60% of course.

To quote a French republican poet and politician, again a generously titled individual - Alphonse Marie Louis de Prat de Lamartine - "It is not only the slave or serf who is ameliorated in becoming free... the master himself did not gain less in every point of view,... for absolute power corrupts the best natures."  The absolute power peppered with a Republican soupçon of contempt for elementary logic and reason exhibited by the French legislative draftsman knows no such ethical limitation. The master / ministre in this case has not gained anything except a reputation for undemocratic and sensationalist megalomania.  Seriouslmy, legislating  for foreigners is hardly the responsibility or the remit of the French Parliament.

Overseas Chambers has developed certain perfectly legitimate mechanisms for changing certain types of trust to non reportable arrangements in France, please contact Peter Harris for more details if this is of interest.