A specially constituted Italian Supreme Court (Corte Suprema di Cassazione) rejected on 20.06.2014 the proposed application of a foreign jurisdiction clause in a foreign trust deed, where such trust conflicted with the Italian “forced heirship rules” (Successione necessaria) – this is Italian legislation which grants to the members of the Deceased`s family a minimum, statutory share of his Estate.

The Italian courts will now have jurisdiction to declare void a foreign trust and disregard the settlor`s transfer of shares and other securities to the trust where this breached his minor daughter`s succession rights. This in turn, is likely to affect how the Italian Estate of the deceased settlor will be distributed in Italy, as the Italian courts have power to make the necessary adjustments. Unfortunately, this judgment does not provide details of the factual background of this case.

It would appear that an application was made by the mother on behalf of her minor daughter to the Italian Supreme Court, to establish the jurisdiction of the Italian courts in this matter. The father who had recognised the child, created the trust and then transferred shares and other securities to the trust, during his lifetime.

Because the daughter was not a beneficiary of the trust, this depleted the Estate out of which her succession rights would be calculated, thus reducing the overall value of her statutory entitlement (Quota di legittima) under the Italian forced heirship rules. This application was quite separate from the substantive inheritance proceedings pending in Udine (Italy) at the same time.

Although detailed information and documentation on the shares and securities involved was not available, the Italian Supreme Court held that this claim was viable and that the daughter was not bound by the foreign jurisdiction clause in the trust deed, under article 23 of Council Regulation (EC) 44/2001.

Quite independently and separately from the trust deed, this minor daughter was claiming her inheritance rights under Italian law. The foreign jurisdiction clause in the trust deed would only bind the settlor, the trustees and the beneficiaries under the trust, but not a totally independent party.

The Italian Supreme Court noted that some of the persons sued in the proceedings were definitely domiciled in Italy (presumably the beneficiaries of the trust). Therefore under article 2 of the said Council Regulation (EC) 44/2001 the Italian courts had jurisdiction, being the courts of the country of domicile of persons being sued and will now adjudicate this matter.

Care should be where trusts are created, as they may interfere with the operation of Italian succession laws, and cause problems on the client`s death.

Avv. Claudio Del Giudice

25.06.2014 – Copyrights reserved