Lost in trustlation: Enforcement of English judgments against trust assets held in jurisdictions that do not recognise trusts

Enforcing an English judgment abroad can often be challenging, especially when it involves trust assets located in jurisdictions that do not recognise trusts (or do not recognise them in the same way as in England and other common law jurisdictions). This issue is particularly pertinent in non-common law countries. In this article, we explore the enforcement challenges in two such jurisdictions: France and Saudi Arabia.

The complexities arise from fundamental conceptual differences in legal systems. Common law jurisdictions, such as England and Australia, have a long-established history with trusts, whereas non-common law jurisdictions, like France and Saudi Arabia, may not recognise or enforce them in the same manner or at all. This divergence creates significant hurdles for practitioners aiming to enforce judgments against trust assets held in such jurisdictions.

Given our increasingly interconnected world, understanding these nuances is crucial. Reconciling different legal frameworks and concepts, particularly between common law and non-common law jurisdictions, remains a complex task. This article underscores the importance of addressing these challenges to ensure the effective enforcement of judgments involving foreign trust assets.

France: an overview

France is a civil law country that does not afford the same meaning to trusts as England does.  In 2007, France introduced the concept of the fiducie which adopts the notion of segregated assets but is notably narrower because of its more restrictive regulatory framework (it is founded in contract law and limited in application) and scope (it still does not distinguish between legal and beneficial ownership that is fundamental to the concept of the English trust).¹

France has signed, but not ratified, the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition, meaning that it cannot be applied by French courts. Nevertheless, French courts recognise the effects of trusts settled under a foreign law – either through an assimilation to notions of French Law, or directly by applying the foreign law to questions concerning the trust. The approach taken appears to depend on the purpose of the trust.

For example, in cases related to trusts settled for inheritance or succession planning purposes, the trustee has been equated to an executor² and the trust to an indirect donation taking effect upon the death of the settlor.³ Yet, in other cases related to loans and securities, the French courts have confirmed that the trustee could bring claims in that capacity under the foreign law governing the trust. For example, the French courts have confirmed that a trustee could file a claim in French insolvency proceedings as creditor of “parallel debts” under a secured loan subject to New York Law⁴ or claim the rights associated to the assets of a trust governed by English Law against the guarantor of a loan in France as the sole “legal owner” of the trust’s assets and not merely an agent of the beneficiaries, the names of which the trustee did therefore not have to disclose to the court.⁵

Trusts settled under a foreign law are also defined and regulated by French tax law.⁶

Saudi Arabia: an overview

The Kingdom of Saudi Arabia (KSA) is a shari’ah law country that does not recognise the English trust.  Saudi courts also do not apply foreign law and so, even if there is a valid trust concerning trust property in Saudi Arabia, those courts would apply onlySaudi law to determine its effect. Saudi law however does recognise concepts similar to the English trust such as waqf (an Islamic endowment) and amaana (the moral responsibility to safeguard property entrusted by another).⁷

Waqf

A waqf is a charitable trust (or endowment) under Islamic law that is inalienable, irrevocable, and perpetual. The term waqf directly translates to “detain,” and a waqf can be thought of as detaining property for charitable or religious purposes for the sake of Allah. An essential component of waqfs is that the assets being donated cannot be consumable. In other words, money can be donated, but it will be invested, and the interest from that investment will go towards the charitable cause. There are two main types of waqf:⁸

Waqf al-Khairi: Dedicated to public or quasi-public charitable causes, such as mosques, schools, or hospitals.

Waqf al-Dhurri: Benefits the founder’s family members while also serving a charitable purpose.

Amaana

“Amaana” originates from the Arabic and means trust or loyalty. In the context of Islamic banking and finance, it refers to a transaction where a person entrusts property or an asset to another person or institution, with the expectation that it will be handled in a manner consistent with the owner’s intentions. As in other jurisdictions governed or influenced by shari’ah law, this emphasises integrity and trustworthiness in dealing with the owner’s property or asset, concepts which are very familiar to the English trustee.

Enforcement challenges in France

Following the United Kingdom’s withdrawal from the European Union, the European enforcement regime ceased to apply to the enforcement of English judgments in Member States.  Unless and until new arrangements are made (for example, the European Council agreeing to the UK’s accession to the Lugano Convention), the enforcement of English judgments in France will be governed by one of the following regimes:

Hague Convention on Choice of Court Agreements

The Hague Convention on Choice of Court Agreements, which both France and the UK have ratified, applies only to judgments in civil and commercial matters given by a court designated in an exclusive choice of court agreement.  It ensures that such judgments are recognised and enforced in other Contracting States.  However, the Convention excludes a broad range of areas including family law, wills and succession, insolvency and rights in rem in land.⁹ If the ruling involving trust assets concerns any of these areas in which trusts are frequently used, the Convention does not apply.   

It is worth noting that the UK has (relatively) recently ratified the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters (shortened to ‘the Hague Judgments Convention’), to which France is also a party.¹⁰ This Convention aims to provide a uniform framework for the recognition and enforcement of judgments in civil or commercial matters across different jurisdictions, regardless of whether they are based on choice of court agreements. 

The Convention implicitly confirms that it is applicable to trusts.  Article 5.1(k) states that a judgment concerning the validity, construction, effects, administration or variation of a trust created voluntarily and evidenced in writing, is eligible for recognition and enforcement if it is rendered by a court of a Contracting State that was, at the time the proceedings were instituted, designated in the trust instrument as a State in the courts of which disputes about such matters are to be determined or in which the principal place of administration of the trust is situated.  Consequently, its article 7.1(d) states that recognition or enforcement of a judgment by a different court may be refused. 

However, like the Hague Convention on Choice of Court Agreements, the Hague Judgments Convention also excludes various matters, including family law, wills and succession and insolvency; it does however not exclude rights in rem in immovable property.¹¹

Any reciprocal enforcement regime

France and the UK have a bilateral treaty in place for the reciprocal enforcement of judgments.¹² If the treaty applies and there are no objections to recognition of the judgment according to its article 3 that are similar to those under French Law (see below), the judgment holder can obtain an exequatur (declaration of enforceability) from the French court.  However, only money judgments are enforceable under this treaty.  This means a judgment over rights in rem in land or an injunction would not be enforceable under the treaty. 

French law

If none of the above instruments applies, enforcement of a foreign judgment is subject to the general principles developed by the French courts.  For a foreign (English) judgment to be recognised and declared enforceable in France, the French court must be satisfied of the following three conditions:¹³

1. The foreign court must have had “indirect” jurisdiction over the matter giving rise to the judgment; this condition is satisfied if there is a significant connection between the case and the foreign court and if the French courts do not have exclusive jurisdiction; for instance, French courts have exclusive jurisdiction over rights in rem in immovable property located in France included in a succession commenced abroad.¹⁴
2. The foreign judgment must be compatible with French international public policy. 
3. Absence of fraud; in other words, the foreign judgment must not have been sought with an intention to defraud, such as to bypass French law or the French courts’ jurisdiction.

English judgments rendered in succession matters with close ties to France, either because the succession is governed by French Law or certain inheritors are French, may face a hurdle of satisfying the condition of compatibility with French public policy.  This is because French Law protects the rights of certain inheritors under the principle of réserve héréditaire (hereditary reserve).¹⁵ While it is not per se a principle of international public policy, French courts may in specific circumstances consider that it bars the application of a foreign law or the enforcement of a foreign judgment. 

An illustrative case¹⁶ concerns a challenge to the validity of the will of Maurice Jarre, a famous French composer best known for composing the scores to Lawrence of Arabia and Doctor Zhivago. Mr Jarre made a will in California, in which he bequeathed all his property (including real property in California, movable property, royalties and copyrights to musical compositions in France) to his family trust. The bequeathal would benefit his wife and, upon her death, their children, but not the couple’s children from other marriages, which conflicts with French law on heriditary reserve. Ultimately, the French Court of Cassation held that the Californian law governing the will did not contravene French public policy because it was not demonstrated that the absence of heriditary reserve under Californian Law would leave the other children in a state of precariousness or need. However, one can see that if there was any suggestion that such children would have been left in a state of precariousness or need, then the court would probably have reached a different conclusion.  Whilst this case involved the validity of a foreign will, a French court will likely look at a foreign judgment seeking to enforce against trust assets in France in the same way if the succession has close ties to France.

French courts may also look at the purpose for which the trust has been settled. Transfers of assets of a succession to foreign trusts may be held to be fraudulent and therefore invalid towards inheritors if it is found that they were intended to deprive and defraud them of their heritage¹⁷ or to bypass the application of French Law and in particular the hereditary reserve.¹⁸ A foreign judgment admitting the trust and the rights of the trustee and beneficiaries may in such case be subject to scrutiny by French courts on whether it has been sought with an intention to bypass French law or the French courts’ jurisdiction. If this is found to be the case, recognition and enforcement will be refused.

Enforcement challenges in Saudi Arabia

As already mentioned, KSA will only recognise and apply Saudi law.  There are several conditions that need to be satisfied before a Saudi court will recognise and enforce an English judgment.

For a foreign (English) judgment to be recognised and enforced in KSA, the enforcement judge responsible for determining the enforcement of any such decision cannot enforce it unless a ‘basis of reciprocity’ has been established.¹⁹ After verifying the same, the enforcement judge must be satisfied of the following five conditions:

1. That the courts of KSA do not have jurisdiction to hear the dispute in which the judgment or award was issued, and that the issuing foreign courts have jurisdiction according to the rules of international jurisdiction set forth in law. 
2. That the litigants subject to the proceedings in which the judgment or award was issued were notified and duly represented and allowed to defend themselves.  If the award was made in absentia, then proof that the respondent was notified of the proceedings is required. 
3. That the judgment or award has become final according to the rules of the Court or Tribunal that promulgated it. 
4. That the judgment or award is not in violation of any principles of shari’ah law.  For example, an award of interest in a judgment would be unenforceable (though severable, leaving the balance of the judgment capable of enforcement). 
5. That the judgment or award is not contrary to a judgment or order issued under the same subject matter by a competent judicial authority in the Kingdom.

There are some cases which, as a matter of KSA law, the Kingdom has sole jurisdiction to determine such disputes, such as, for example, in disputes involving real estate located in the Kingdom.

Insofar as an enforcing an English judgment against trust assets in Saudi Arabia is concerned, it is likely that a Saudi court would recognise a trust because its familiarity with concepts like waqf and amaana could be sufficient without needing to find a precise analogue in Islamic law.  This was precisely the conclusion that Mr Justice Fancourt reached on consideration of the expert evidence in Byers v Samba.²⁰ This was an English High Court case involving a claim by liquidators of an investment company (the beneficiary of Cayman Island trusts) against a Saudi bank for knowing receipt of shares in five Saudi companies that were transferred to the Saudi bank by the investment company’s trustee in breach of trust. Fancourt J concluded (at [181]) that a Saudi court would characterise the investment company’s interest under the Cayman Island trusts as an ownership interest because of the court’s “familiarity with concepts such as waqf, amaana and muhassa, which to varying degrees recognise and give effect to different rights of parties in the same property”.²¹ Therefore, the court would “be able to understand that [the investment company] would have ownership rights in the trust property, even though [the trustee] was the apparent owner of it.”²²

Key takeaways and alternative solutions?

Practitioners should be mindful of the following when considering the enforcement of an English judgment against trust assets abroad.

First, it is essential to understand the specific hurdles presented by the jurisdiction where enforcement is sought.  This will usually require engagement with local counsel.  Doing so early can prevent major headaches later.

Second, think outside the box and consider alternative strategies such as applying pressure on the trustees to bring in the assets voluntarily from the non-common law jurisdiction into the (usually common law) jurisdiction in which the trust is settled.  Where they refuse, consider applying to the court of that jurisdiction in order to compel the transfer of (cash) assets into court or, where the transfer of the asset itself is not possible (for example, it concerns land or shares), to appoint a co-trustee and transfer ownership in the asset and prohibit the original trustee from dealing with the asset except jointly with the co-trustee.

Conclusion

Navigating the enforcement of English judgments against trust assets in jurisdictions that do not recognise trusts evidently presents challenges.  The fundamental differences between common law and non-common law systems, as seen in France and Saudi Arabia, require a nuanced understanding and strategic approach.  Practitioners must be well-versed across these shifting legal landscapes and engage with local counsel early to mitigate potential obstacles.  Additionally, exploring alternative strategies, such as leveraging the trustees’ cooperation or seeking judicial intervention, can be crucial in overcoming these enforcement hurdles.  As the world’s diverse legal climates continue to converge and intertwine, staying informed and adaptable will be key to successfully enforcing judgments across them.

This article is based on a presentation delivered by Tom Serafin at the TL4 Private Client Contentious Trusts conference in Dublin, Ireland in September 2024, and further developed with Frédéric Creuset and Abdullhaleem Ahmed Ammar.

This article was originally published in ThoughtLeaders4 FIRE magazine and can be accessed in full here.

Footnotes

1. French Law n°2007-211 of 19 February 2007.
2. Cour de cassation [French Court of Cassation], Chambre civile 1, 3 November 1983 (n° 82-14.003).
3. Cour de cassation, Chambre commerciale, 15 May 2007 (n° 05-18.268); Chambre civile 1, 20 February 1996, n°93-19.855.
4. Cour de cassation, Chambre commerciale, 13 September 2011, n°10-25.533.
5. Cour d’appel de Paris [Paris Court of Appeal], 11 March 2005, n° 03/16917.
6. French Law n°2011-900 of 29 July 2011; article 792-0 bis of the French Tax Code (Code Général des impôts).
7. See Paul Stibbard, David Russel KC and Blake Bromley, ‘Understanding the waqf in the world of the trust’ (2012) 18(8) Trusts & Trustees 785 for an interesting journal article on Islamic jurisprudence and parellels with the English trust.
8. Law of the General Authority of Endowments, Issue Date1437/02/26 H Corresponding To : 08/12/2015 G.
9. Convention on Choice of Court Agreements, opened for signature 30 June 2005, MS 11/2018 (entered into force 1 October 2015), Article 2(2)(d).
10. The Hague Judgments Convention is due to enter into force in England and Wales on 1 July 2025 and will apply only to judgments handed down in proceedings after that date.
11. Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters, opened for signature 2 July 2019, MS 7/2024 (not yet in force), Article 2.1(d).
12. Convention between His Majesty in respect of the United Kingdom and the President of the French Republic providing for the Reciprocal Enforcement of Judgments in Civil and Commercial Matters with Protocol, signed 18 January 1934, [1936] TS 18/1936 (entered into force 16 May 1936).  Note there is still ongoing debate amongst academics whether or not this bilateral treaty was superseded or merely suspended and revived following the UK’s exit from the EU.
13. Cour de cassation, chambre civile 1, 20 February 2007, n° 05-14.082. 
14. Cour de cassation, Chambre civile 1, 14 March 1961; Cour de cassation, Chambre civile 1, 10 October 2012, n° 11-18.345.
15. Articles 912 to 917 of the French Civil Code.
16. Cour de cassation, Chambre civile 1, 27 September 2017 (no.  16-13.151).
17. Cour de cassation, chambre civile 1, 18 May 2022, n° 20-20.609.
18. Cour de cassation, chambre civile 1, 20 March 1985, n°82-15.033 regarding real estate located in France that had been transferred to a foreign trust.
19. Article 11 Enforcement Law in 2013 through Royal Decree Number M53 Dated 13/8/1433H Corresponding 03/07/2012G.
20. [2021] EWHC 60 (Ch).
21. Ibid at [177].
22. Ibid.