Readers are asked to inquire why to opt to set up a trust and why to govern the same by Maltese law. The Maltese private law regime is essentially based on the civil law approach, having its roots in the Napoleonic Code, with sparse influences from the common law system, the latter being more profuse in the commercial legislation. Indeed, prior to the adoption of trusts via the 2004 Maltese Trusts and Trustees Act, trusts were considered as anathema to the civil law nature of the Maltese legal system, with issues, such as the split ownership question (the distinction between equitable and legal ownership characteristic of UK trusts) raising serious concern, in a milieu whereby ownership was largely construed in an absolutist and unitary manner. In many ways, this reminisces the resistance that other jurisdictions such as Italy and France have made to the adoption of local trust legislation. This, and other kindred considerations, were concluded when the Trusts and Trustees Act, Chapter 331 of the Laws of Malta was promulgated. The end result has been the adoption of the trust legislation within the parameters established by the tenets underlying Maltese private law. Thus, there is no split ownership in Maltese trusts - instead reference is made to the absolutist concept of ownership. This example is indicative of the legislative approach, whilst also making clear the sui generis nature of Maltese trust law.
Why trusts and why Malta? The unique nature of Maltese trusts legislation can properly be understood given the legal milieu wherein Maltese trust law has developed. Malta can boast of a highly developed civil law system, having all the institutes that are well known to practitioners in a civil law system, and recently has come to offer a broad array of institutes that were traditionally the province of common law systems. The present legal milieu has been characterized by the evolution of fiduciary obligations, as well as the recent enactment of a law governing foundations which has crystallized the position at law of an institute that has been employed locally since time immemorial, but has only in the recent years received formal recognition. The trust system in Malta has been introduced in a manner that sought to retain the balance of the entire civil law system, thereby preserving the hallmarks of a private law regime. The Maltese civil law system offers security insofar as it is characterized by formality and adherence to the dictates of an elaborate civil law system. Thus, one can know in advance the legal position in relation to a matter. Maltese trust law is at once malleable and flexible, not being burdened by the requirements of excessive formalities, whilst also permitting the option to settlors and investors considering this institute to have recourse to a notarial procedure in such a manner as to secure proper preservation and conservation of the relative documentation. Moreover, the regulator of financial services in Malta (Malta Financial Services Authority) has amply regulated the licensing of trustees, thereby ensuring a high standard of practice amidst practitioners in the field-to the advantage of beneficiaries under Maltese trusts.
Maltese trust law, based on the Trusts (Jersey) Law, 1984, allows the setting up of trusts with beneficiaries, fixed or discretionary, in the latter instance, provided they are identifiable, as well as the setting up of charitable trusts. No other purpose trusts are allowed. In such instances, that is, if the investor desires to set up what would broadly be referred to as a 'purpose trust' other than a charitable trust, recourse could possibly be made to other institutes offered in the Maltese legal system such as purpose foundations. This is not to suggest that trusts and foundations are identical but rather, that in as highly a developed legal system as Malta, the shortcomings of one institute are supplanted by possibilities offered by another, provided a proper appreciation of the distinctiveness of each institute is made as a precondition for the application thereof.
Maltese trusts can be private or commercial trusts. The former deal with the inter vivos or causa mortis needs of private individuals as they set out to plan their estates. Thus, it is an increasingly popular trend to have recourse to Maltese legislation on trusts in order to shape one's estate administration, entrusting the powers stipulated in the trust deed in the hands of a Maltese professional corporate trustee, with the option of appointing a Protector to oversee the workings of the same.
The commercial trusts that can be set up under Maltese law range from security trusts that can operate in conjunction with the elaborate private law of security existing in Malta; to the use of trusts in the setting up of collective investment schemes; to trusts used in the context of securities offerings. Commercial trusts, differently from private trusts, are secured a degree of latitude and flexibility in terms of Maltese trust law, which ensure that the terms of the trust derive from the ad hoc trust deed, allowing the parties participating in setting up the commercial trust the possibility to shape their instrument in the mode most apt to suit their commercial needs, thereby lessening the stricture imposed by the strict word of the law and offering the security and certainty as to outcome necessary among parties in a commercial transaction.
Analogously to the strategic position of Malta in the midst of the Mediterranean, likewise can Maltese trust legislation be defined as being strategically conceptually located and operative in a hybrid legislative system, offering at once an option and a solution to potential investors, foreign or local.
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.
