The recent Swiss case of Rybolovlev v. Rybolovleva is
frequently referred to as a trust or asset protection case, without
looking at the underlying private international law issues.
The couple married in Russia in 1987, and did not sign any form
of prenuptial arrangement in Russia, nor for that matter, more
importantly a matrimonial property régime. The distinction is
important.
They then moved to Switzerland in 1995, where, in the absence of
specific arrangement, the mandatory régime for matrimonial property
is the separation of assets, with a participation in those assets
acquired during the marriage.
The Husband did not propose any change in or for that matter a
redefinition or reassertion of the matrimonial property régime at
the time they moved to Switzerland.
After taking legal advice in Switzerland, ten years after
they moved there, in 2005, the Husband proposed a
modification to their matrimonial property régime to his spouse,
which curtailed or removed certain of her entitlement under the
Swiss régime.
As the common law trained lawyer will by now have noticed, this
is neither cricket, nor the MCC rules, nor for that matter a
cricket pitch as the English would understand it.
The then spouse refused on the basis that it was derisory, and
as a result, the Husband transferred most of his personal assets
into trust, with a view to 'carving' these out of his personal
fortune.
In other words to the extent that the assets had been acquired
during the couple's marriage the wife by then had an participating
interest in them, under the Swiss matrimonial property régime,
which he was effectively attempting to attenuate through asking her
to sign a specific contract, and then seeking to defeat by removing
assets from the régime through a trust.
Had the couple adopted specifically a different matrimonial
property régime prior to taking up domicile or habitual
residence in Switzerland, the result could have been
different. Once they had arrived and established the
matrimonial home and residence there, the new deal was deemed
"done".
The husband as far as the Swiss were concerned, on those facts,
had retained Durchscrift over the assets he had attempted to place
in trust. Durchscrift is the same term employed in the concept of
direct effect in European Law. In other words, the husband was
considered to have retained full power and dominion over the assets
he had placed in trust , which remained in fact subject to the
Swiss régime de la participation aux acquêts he was trying to
avoid. It is not merely a means of "piercing corporate veils" or
any other form of trust arrangement. Certain comparisons to re
Esteem: In the matter of the Esteem Settlement (Abacus (CI)
Limited as Trustee [2003 JLR 188] and the judgement of the Jersey
Court have been made, but rather miss the point.
The Swiss Supreme Court in effect found that the criticism's
made by the Husband of the lower Court's decisions, and his attempt
to adduce the Hague Convention as introduced in Switzerland,
did not amount to sufficient to overturn those decisions, and
should have been made at the level of the lower Court concerned
Rather than seeing the judgement as a misapplication of the
Hague Convention on the Recognition of Trusts, which the Swiss have
ratified and brought into force, it should rather be seen as a
warning as to the risks of not taking legal advice prior to moving
to a jurisdiction where the matrimonial property régime is
mandatory and actually modifies each spouse's capacity to dispose
of property independently, without regard for the other's new
rights in the state of residence.
For example, another jurisdiction, spouses moving to France,
after ten years continuous residence there. Unless they have
specifically opted or stated to the contrary can be considered to
have submitted their marriage to the French default régime, the
communauté légal, which in this case would have had a similar
effect to the Swiss régime.
In other words, beware of moving to a jurisdiction where
in time, "what was yours is no longer all yours and what is
mine remains my own".