Rural traditional village home. Photo by Mary Papoutsy.

The petitioners, with their petition, as legal representatives of the L.L.³ Trust, ask that the No **** KLERONOMITIRIO⁴ of the First Instance Court of Sparta, is annulled and for a new one to be issued, that will verify that the sole heir of the deceased L.L. is the L.L. Trust.

However, from the case file it is clear that the L.L. Trust is not a legal person, neither does it constitute an association of persons that pursue a certain purpose, or a company without legal personality, but rather it is a kind of a will of the American law.

Therefore, the aforesaid Trust and its abovementioned representatives are not actively legalized to exercise the right to petition as above.

FOR REASON THEREOF
The petition is overruled.⁵

Unfortunately this means that if there is property or land located in Greece which is placed into a foreign trust (created outside of Greece) the property is locked into an entity which does not exist. This non-existent entity in turn cannot follow the required legal procedures necessary under the civil law, thereby severing the chain of title to the land. The clear chain of title which may have existed for decades is broken by this interloper called a trust, and the property may be tied up for years, damaging the chain of title and rendering the land unsalable and thus devalued.

Common Law vs. Civil Law

To begin, the US, the UK and Australia operate under a framework of law called “common law.” Most European countries operate under a framework of law called “civil law.” Civil law is codified law based on Roman law as opposed to common law which is based on the English common law. While common law changes over time through judgments and precedence and legislation, civil law is codified, often called black letter law in that it does not change except through legislation. While this is a simplification, you can understand how issues could arise across borders.

The issue of trust recognition is a classic conflict of law problem resulting in differences in laws. In regard to land, civil law and common law view ownership rights in different ways. Under common law land has two rights, legal rights and equitable rights. Civil law recognizes only the legal right. To this must be added the special status that codes, especially civil codes, possess in civil law countries. In these codes ownership and possession are the central concepts around which property revolves.⁶

Trusts are common law creations. They are prevalent in common law countries. Recently some European civil law countries have signed the Hague Convention, the Recognition of Trusts 1985,⁷ however Greece has not. Additionally, some other European countries have created parallels to the common law trust and adopted the concept into their countries’ civil codes.

The convention is…meant to deal with problems of private international law, for instance the choice of law governing a trust and the recognition in civil law countries of trusts created in common law countries. Since trust investments are often located in a number of jurisdictions this recognition is clearly desirable for the point of view of the trustees and beneficiaries. But the impulse behind the Hague Convention was also partly one of attracting investment. If trustees, who are charged with the investment of great sums, are to invest with confidence in civil law countries, it encourages them to know that the trust institution is recognized in the country in which they intend to invest.⁸

The concept of a trust eludes Greek administrators and judges who may be presented with a trust and asked to recognize its purpose and intent.⁹ "Judges in civil law countries…might stand perplexed before the pure and simple affirmation of a trust . . . (and that it) should deploy effects in their countries . . . ."¹⁰

In technical terms, real problems arise when a civil law jurisdiction is faced with a common law trust. The common law perspective views the trust as an entity created for the trust’s beneficiaries and the preservation and protection of their equitable rights. However, under Greek civil law, whose perception does not include equitable rights but solely legal rights, when faced with “I leave all my estate to the Trust,” civil law sees only that the trust inherits. In civil law system the most important question in inheritance cases is “who inherits what.”

Assumptions when creating a foreign trust and the interpretation of the trust in Greece

Unfortunately, many who currently have their Greek land or immovable property in a trust may not have been informed that Greek law does not recognize trusts. Since it is not viewed as a “legal person” in the eyes of the Greek legal system, the trust is not entitled to any rights. Therefore, any property placed into the trust will damage the chain of title. In most cases, the trust severs the chain of title to the land and devalues the property the settlor was attempting to protect for his/her beneficiaries.

While many foreign lawyers may not even consider that they could be harming their clients by including their client’s Greek real property in a trust, similarly just as many Greek lawyers have no idea what a trust is and will register a will containing a trust as a matter of course into the Greek legal system, not realizing the eventual impact. Even though within a trust document there is usually a statement as to which law controls, if the country where it is being filed will not even acknowledge the trust entity, the controlling law will have little effect.

While creating a trust with the best of intentions to secure the land, one should always check the laws where the property is located to determine if a conflict of law exists.

So what should one do with their Greek property? If you own property in Greece you should exclude it from any trust. If you have created a testamentary trust or a pour over will, you should list your Greek property separately within your will to pass directly to the beneficiaries of your choice. This will secure the chain of title. In this way you will save beneficiaries an enormous amount of work and legal fees trying to free the property from the unrecognized trust through multiple filings in the Greek courts.

There is a certain arrogance that goes with the assumption that all legal instruments and entities translate across borders. Needless to say, once a testamentary trust is filed with the Greek courts, it might take a long time to work out. However, with competent representation, it sometimes can be done through careful examination of the trust documents.

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