中国信托法:两个法律体系的折衷之作(上)

THE CHINESE LAW OF TRUSTS

——A COMPROMISE BETWEEN TWO LEGAL SYSTEMS

Introduction

The Chinese Law of Trusts, which, since August 1993, China had engaged experts and scholars to draft, was enacted on April 28th, 2001, in the 21st session of the Standing Committee of the Ninth Chinese National People’s Congress, after the drafts of the law had been revised three times. The Law came into force on October 1st, 2001. The Law has a total of 74 articles and is divided into seven chapters, namely General provisions, Creation of Trusts, Trust Property, Trust Parties, Variation and Termination of Trusts, Charitable Trust, and Supplementary Provisions.

The Chinese legal system, which stems from the Civil Law System, is quite different from that of the Common Law System with its duality of Common Law and Equity. Trusts have been developing as part of Equity for centuries and they have become the most important institution of Equity. In the course of accepting and transplanting trusts into China, Chinese law drafters had to face the conflicts between the two different legal systems and they made a compromise by accepting the trust concept from the Common Law countries in order to mingle it with the Chinese civil law legal system, and to let it function optimally in China.

To understand the Chinese Law of Trusts deeply and to understand what compromises have been made, an outline of that Law will be introduced, followed by a comparative study of the Chinese Law of Trusts and the law of trusts in the Common Law countries, such as Australia, Britain and the United States. But first of all, it will be helpful to give the history of the making of the Chinese Law of Trusts.

Ⅰ The History of the Making of the Chinese Law of Trusts

The history of the making of the Chinese Law of Trusts was filled with drama. The process of law-making was divided into two stages and the task was given to two different drafting bodies, which represented the different guiding ideologies which were reflected in the great changes made to the drafts of the trusts law in China during these two different stages. The first stage began in August 1993 and ended in December 1996.

Since the 1990s, Chinese economic growth has developed fast, coupled with the rapid development of the business trust. By the end of 1995, the trust investment companies in China had multiplied to 392, with a total capital of 600 billion Yuan Chinese RMB. However, these trust investment companies have encountered some problems, such as the uncertainty of their business range and of their legal status, the serious breaches of business regulations, the unsoundness of capital structure, the inefficiency in controlling market risk, and the grossly inadequate self-regulation that resulted in chaotic management. To solve these problems, the suggestion of enacting a law of trusts was presented and listed in the legislation plan of the Eighth Chinese National People’s Congress of China. The Economic Committee of the Standing Committee of the Chinese National People’s Congress had been engaging experts and scholars to draft the law of trusts in China since August 1993. They spent three years in doing so and finished the first draft at the end of 1996. This draft had 125 articles and was divided into six chapters: General Provisions, Trust Relationship, Charitable Trust, Trust Companies, Legal Liabilities and Supplementary Provisions. The guiding philosophy of the draft was to resort to legal means to regulate trusts, to intensify the supervision and management of trust businesses and to promote the sound development of Chinese trust businesses. This draft was examined in the 23rd session of the Standing Committee of the Eighth Chinese National People’s Congress in December 1996, but it was rejected because it contained too many controversial propositions. (edited by trustlaws.net)

The second stage of making the law of trusts lasted from the end of 1996 to April 2001. After the failure of the first draft of the law of trusts to win approval, the drafting task was transferred from the Economic Committee to the Legal Committee of the Standing Committee of the Chinese National People’s Congress. The second drafting group spent four years in preparing the second draft of the law of trusts which was completed in June 2000. This draft, which had provisions on only the basic concepts of trusts, deleted the parts relating to trust businesses and readjusted its structure as follows: Chapter one, General Provision; Chapter two, Creation of Trusts; Chapter Three, Trust Property; Chapter Four, Trust Parties; Chapter Five, Variation and Termination of Trusts; Chapter Six, Charitable Trusts; Chapter Seven, Supplementary Provisions. According to the explanation given by the spokesman for the Legal Committee, there were three reasons for deleting the provisions relating to trust businesses. Firstly, the Chinese government had been administering and standardizing trust companies since 1997, yet it was not then ready to regulate trust companies by a law of trusts. Secondly, a further study on how to regulate the range of trust companies should first be made, and this had not been done. Again, because in China the law of trusts would operate under the civil law, it was more reasonable to provide only for the basic concepts of trusts in the Chinese Law of Trusts. As far as the supervision and administration of trust businesses were concerned, it was decided to carry out further studies.

The second draft of the law of trusts was presented for examination to the 16th session of the Standing Committee of the Ninth Chinese National People’s Congress in July 2000 and was again rejected in that some members of the committee disagreed with one another on some aspects of the draft. In accordance with the suggestions made by the examiners of the second draft, the Legal Committee began to revise the second draft and finished the third draft a year later. On April 28th, 2001, in the 21st session of the Standing Committee of the Ninth Chinese National People’s Congress, the third draft of Chinese Law of Trusts was enacted and came into force on October 1st, 2001. After the second draft of the law of trusts had been rejected, the Chinese People’s Bank made Regulations on the Management of Trust and Investment Companies while the third draft of the law of trusts was being prepared. The Regulations, with eight chapters and 78 articles, came into force on January 19th, 2001. The basic concepts, the legal terminology and the principles of trusts law used by the Regulations have been borrowed from the second draft of the Chinese law of trusts. The Regulations became an impetus to the enactment of the Chinese Law of Trusts.

The first stage of making the Chinese law of trusts, which was not undertaken by the Legal Committee of Standing Committee of the Chinese National People’s Congress, whose main task is to make laws, was undertaken by the Economic Committee, whose function is not to make laws. This shows that the law of trusts has not been given much attention by China and that the purpose of enacting a law of trusts was just to supervise and administer the trust companies in China. During the second stage of making the Chinese law of trusts, the Legal Committee adopted the experiences of Japan and Taiwan, which had legislated their law of trusts and law of trust businesses respectively. They deleted the regulations on trust businesses in the second and third drafts of law of trusts, but added one article, namely article 4. This article provides that the regulations on supervision and management of the trustee, which conducts trust activities in the form of trust organization, shall be regulated by the State Council of China. (edited by trustlaws.net)

The view of the Legal Committee is correct. It is not pragmatic in China to make a law which regulates trusts as well as trust companies, because the supervision and management of Chinese trust companies are likely to change with the economic reforms in China. Furthermore, the trust companies are not really companies which engage in the business of administering trusts. Again, the law of trusts is not only unfamiliar to Chinese people, but also unfamiliar in Chinese legal circles. To legislate for a law of trusts without regulations on trust companies is more appropriate for the Chinese legal system. In addition, although the Regulations on the Management of Trust and Investment Companies are only administrative rules at present, they will be made into legislation in the future, namely there will be a law of trust businesses, when it becomes necessary to do so. When that time comes, the law of trusts and the law of trust businesses will push the Chinese economy forward together.

Ⅱ The Outline of the Chinese Law of Trusts

The Chinese Law of Trusts comprises seven chapters and 74 articles. The first chapter is General Provisions which has 5 articles. It stipulates the purpose of this law, the concept of trust, the adjusting range of this law and the basic principles that should be followed in trust activities. The purpose of making the Chinese law of trusts is stipulated in article 1 as follows: ‘This law is formulated to adjust the trust relationship, to regulate trust acts, to protect lawful rights and interests of the trust parties, and to improve the development of Chinese trust business.’ Article 2 provides the concept of trust as:

The ‘trust’ within the meaning of this law shall signify that a settler/testator, on the basis of trusting a trustee, vests his/her property rights in the trustee who administers or disposes of the trust property according to the interests of the beneficiary or for other specific purpose or purposes.

The range of this law, according to article 4, covers civil trusts, business trusts and charitable trusts. The basic principles of this law are borrowed from the Chinese civil law. Article 5 provides that: ‘while undertaking trust affairs, trust parties must observe laws and administrative rules, observe the principles of voluntary, fairness, honesty and good faith, and must not infringe upon the interests of the state and the public.’

Chapter two, which deals with the creation of a trust has 8 articles (from article 6 to article 13). It provides for the conditions for and methods of creating a trust, for the three certainties for the creation of a trust and invalid trusts. It emphasizes the written formalities as well as the lawful trust purpose for creating a trust. Article 6 provides that: ‘To create a trust requires the lawful trust purpose’. Article 8 clearly provides that: ‘The creation of a trust shall be effected in writing. The written formalities include trust contract, will or other written instruments stipulated by laws or by administrative rules….’

Article 11 provides for void trusts such as trusts lacking one of three certainties, trusts for the purpose of litigation or for demanding the payment of debts. This article also provides that a trust will be void if the circumstances, which are stipulated by other laws and administrative rules and can result in the invalidity of the trust, have occurred. Again, Article 12 provides that the creditor of the settler/testator may apply court to revoke a trust if it is to be prejudicial to the interests of him/her. In addition, Article 13 provides that ‘a trust by will shall be created in compliance with the relative provisions of the law of succession.’

Chapter three, which has 5 articles (from article 14 to article18) are provisions concerning trust property. Article 14 defines the range of trust property. It provides that the trust property refers to property obtained by a trustee through accepting the trust, and any property obtained by the trustee through managing on, disposing of trust property or through other means shall be deemed as trust property. It also provides that property whose transferability is prohibited cannot constitute trust property, and that property whose transferability is restricted cannot be created as trust property unless it has been approved by the relevant authorities. This chapter explicitly stipulates that trust property is distinct from the trustee’s own property and that the trust property shall be set apart from the property owned by the settler/testator. Furthermore, no set-off shall be effected between the rights obtained by virtue of managing or disposing of trust property by the trustee and the obligations pertaining to the trustee’s own property. Also, no set-off shall be effected between the rights and obligations pertaining to the management and disposal of trust properties of different settlers by the trustee. (edited by trustlaws.net)

Chapter four is about trust parties and is divided into three sections. Section one (from article 19 to article 23) defines the capacity of settler/testator and his/her rights after the creation of a trust. The settler has, in addition to those rights which he/she has reserved in the trust instrument, a wide range of rights, such as the right to inspect, note down or copy trust accounts of trust property and other documents relevant to the conduct of the trust affairs; the right to know the revenue and the expenditure, the management, disposal of the trust property, and the right to demand the explanation of the trustee as to the conduct of the trust affairs. He/she even has the right to require the trustee to adjust the methods of managing the trust property; the right to apply to the court to nullify the actions of the trustee; the right to demand of the trustee indemnification for losses or restitution of trust property if the trustee has inflicted losses upon the trust property through mismanagement, or disposal of the trust property in violation of the duty of a trustee; or the right to apply the court to dismiss the trustee if the trustee disposes of trust property in violation of the purpose of the trust, or manages or disposes of the trust property with gross negligence. Section two (from article 24 to article 42) contains provisions on the trustee. It provides for the capacity to be a trustee, the rights and duties of a trustee and the liabilities of the trustee for breaches of his/her duties. This section also provides for the means and methods by which the co-trustees perform their duties. Section three (from article 43 to article 49) stipulates the range of beneficiary, the beneficial right of beneficiary, the co-beneficiaries and their rights. A beneficiary has the same rights as those of a settler provided from article 20 to article 23. Apart from these rights, a beneficiary has also the right to disclaim or transfer his beneficial right (beneficial interests) and perform his debts with beneficial right. Chapter five deals with the variation and termination of trusts and it has 9 articles (from article 50 to article 58). It provides for the conditions under which the settler or his/her heir revoke the trust and the conditions under which the settler vary the beneficiaries or the beneficial rights of beneficiaries. It also provides for the conditions for terminating a trust and the result of the termination. Article 53 provides that:

A trust shall be terminated under any of the following circumstances: the causes of termination provided in the trust document have occurred; the continued existence of the trust will violate the purpose of the trust; the aim of the trust has been achieved or has become impossible to be achieved; the parties to the trust agree to terminate the trust; the trust has been revoked; and the trust has been rescinded.

Chapter six, which deals with charitable trusts, has 15 articles (from article 59 to article 73). It specifies for the categories of charitable purposes as follows: the relief of poverty; the assistance to victims of natural calamities; the assistance to the disabled; the advancement of education, science and technology, culture, arts and sports; advancement of medical and hygienic business; advancement of environmental protection to maintain or protect ecological environment; the advance of other public interests. Article 62 of this chapter stringently provides that a charitable trust cannot be created without the approval of the charitable trust administrative office. To intensify the supervision and administration of charitable trusts, this chapter provides for the appointment of a trust curator. This chapter also provides for the cy-pres doctrine. Article 69 provides that:

upon the termination of charitable trust, if there are no vested persons of the trust property or such vested persons are public who are not specific, with the approval of the administrative office of trust business, the trustee shall use the trust property for a purpose, which is similar to the purpose of the original charitable trust, or transfer the trust property to another charitable organization or other charitable trust, which has the similar purpose to the original charitable trust.

Chapter Seven has only one article, which stipulates that the Chinese Law of Trusts would come into operation as from October 1st, 2001. (Edited by www.trustlaws.net)

(FROM:bond.edu.au)