Commercial trusts in an international context

A trust is an arrangement whereby one person holds the most public title to an asset for a beneficiary but so that the asset is immune from the private creditors of the title holder if the holder becomes bankrupt. Bailment or deposit of goods is the most ancient form of this device and is recognized probably everywhere. But about two-thirds of the world's jurisdictions do not recognize the immunity of the asset from the private creditors of the title holder in the case of other assets, typically land and intangible movables, such as securities, although there are patchy exceptions. In the business arena trusts are used, for example, for custodianship of securities, settlement systems for securities, pensions and bondholder representatives and for the holding of collateral for syndicates of banks or for bondholders. The amounts involved are enormous and dwarf the private use of the trust in settlements and wills. The objections to the trust are considered out of date. These include the old doctrine of false credit, interference with predictable priorities, tax evasion and tying up land. The trust is one of the trilogy of super-priority claimants on bankruptcy honoured by English-based common law systems but not by other families of law, such as the Napoleonic and Roman-Germanic. The other two super-priority claimants are creditors with a set-off and holders of security interests. The author explains why he will not be writing a book on trusts.