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A. GENERAL
I. THE LAWS APPLICABLE TO TRUSTS – GENERAL PROVISIONS
The Laws
The legal framework governing trusts in Cyprus is based on The Trustees Law, Cap. 193, ("The Trustees Law"), which is largely based on the English Trustee Act of 1925 and on The International Trusts Law, No. 69(I)/92, ("The International Trusts Law"), enacted in July 1992 and amended with the International Trusts (Amending) Law, No. 20(I)/2012.
In addition to the above enactments, Cyprus has ratified with law No. 4(III) / 2017 the Hague Convention on the law applicable to trusts and on their recognition, hereinafter referred to as "The Hague Convention on Trusts" which is a convention related to conflict of laws issues and sets out rules as to the recognition of trusts of one jurisdiction to another.
Common Law1 and the Principles of Equity2, are also applicable, being one of the sources of the Cyprus legal system as per article 29 (1) (c) of the Courts of Justice Law no. 14/60 as amended, provided they do not come in conflict with domestic statutes.
Types of trusts established in Cyprus
The main types of trusts that may be established in Cyprus are the Cyprus "Domestic trust" and the "Cyprus international trust". A domestic trust is a trust of which either the settlor or one of the beneficiaries are residents of Cyprus. A Cyprus international trust is a trust which is established under the provisions of The International Trusts Law and meets the conditions mentioned there in and explained further below.
A third type of trust is the foreign or offshore trust which is set up by foreigners for the benefit of foreigners and does not meet the conditions to be classified as domestic trust or Cyprus international trust but has as chosen proper law applicable to it, Cyprus law.
Applicability of the various enactments to the various types of Cyprus trusts
The Trustees Law, the Common Law and the Principles of Equity, apply to domestic trusts and to Cyprus international trusts. The provisions of The International Trusts Law apply exclusively to the Cyprus international trusts.
In case there is any inconsistency between the provisions of The Trustees Law, Common Law or Equity and the provisions of The International Trusts Law, the provisions of the International Trusts Law prevail as to Cyprus international trusts as being a special law regulating particular type of trusts.
In case of a foreign trust which has chosen as its proper law the law of Cyprus, then what legal environment is applicable to domestic trusts applies as well to this type of trusts. The subject matter of this publication With this publication we shall deal initially with the general legal environment on trusts, and then we shall deal extensively with the Cyprus international trust.
II. DEFINITION AND NATURE OF TRUST
The trust is the most important legal concept created by Equity and one of the greatest achievements of English jurisprudence. It has been created by Equity to prevent injustice administered by the rigid application of Common Law or statute.
The gist and magnificence of trusts is that they permit a division in the ownership of the property subject matter of the trust, between the trustee and the beneficiaries in such a way that the trustee is compelled to act to the best interest of the beneficiaries in relation to the use and management of that property.
It is very difficult to construct a comprehensive definition of what a trust is and this is because of the variety of the trusts that can exist and the variety of ways that can be created.
In view of the above-mentioned complications, there is not yet a satisfactory definition in the various laws applicable to trusts as to the meaning of trust.
Having in mind the various attempts, laws and court decisions in place as to what it might be the meaning of trust and taking also into consideration the Common Law and Equity approach, it may be said that a trust is the relationship which arises, expressly, impliedly or constructively, where a person called the trustee, is compelled in Equity by the courts or by the terms of a particular trust deed or will, to hold property, whether real or personal and whether by legal or equitable title,
(i) for the benefit of some persons, the beneficiaries, irrespectively if the trustee is also a beneficiary of the trust; and/or,
(ii) for any purpose, but in such a case of a "purpose trust" not exclusively to the benefit of the trustee but to the beneficiaries or for other objects of the trust.
Also based on the general nature of the trust, a simpler definition may be put forward, that a trust is the relationship by which, a person to whom property is vested is compelled in Equity to hold the property for the benefit of another person or for some purpose other than his own.
III. CLASSIFICATION OF TRUSTS
There are mainly three principal types of trusts: the express trusts, the resulting trusts and the constructive trusts. All trusts that are not express, may be classified as implied trusts.
Subject to their purpose, trusts may be classified as purpose trusts or charitable trusts and subject to the discretion and powers granted to the trustee, may be also classified as fixed or discretionary. Trusts may be created during life time, (inter – vivos), or on death by a will.
Main types of trusts
Express trusts are those created by the express clear intention of the settlor (intentionally), or the express and clear declaration of the person to whom the property is vested, the trustee, to the benefit of a particular beneficiary or for a purpose.
Resulting trusts are implied by the court – they are not created intentionally by the settlor. In this type of trust the beneficial interest in the property comes back (results) to the person, (settlor), who provided the property or to his estate and for this reason are classified as resulting trusts.
Constructive trusts arise by operation of law. Such trusts are created irrespective of the intention of the parties in order to satisfy the demands of justice. When property is held by a person in such circumstances which constitutes an abuse to hold it or creates injustice, then Equity converts the holder into a constructive trustee for the benefit of the person the property should be.
Other types of express trusts
Charitable trusts are those which are created for a charitable purpose or purposes. There is though no legal definition of what constitutes a charity as per The Charities Law Cap.41.
Charitable trusts may be created by any deed, will or other document provided it has as its object charitable purposes. Such document is registrable as per the provisions of The Charities Law Cap. 41. The trustees may apply to the Council of Ministers to be registered with the aim to receive legal personality for such charitable institution.
A charitable trust may be set up as well as per the provisions of The International Trusts Law provided, it meets the requirements mentioned therein.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
