The immediate context involves an analysis of the New Zealand discretionary trust, Trust O|…|, focusing on the seizability of distributions and a villa in Vésenaz, financed by trust distributions. The central legal framework includes Articles 17 and 18 of the Swiss Private International Law Act, the 1985 Hague Convention, and Swiss confiscation law. The analysis employs a mosaic theory methodology. A key finding is that while the separation of trust assets is generally respected, Swiss public order, including criminal law, can override this to protect fundamental values like combating organized crime and ensuring financial integrity. This allowed for the criminal seizure of the villa, financed by traced criminal funds, despite the trust’s discretionary distributions. Notably, unvested distributions remain generally non-seizable, but assets already acquired with traced criminal proceeds lose that protection.
1. Precise Legal Framework and Fundamental Distinctions
Under Swiss law, the application of foreign law is limited by Articles 17 and 18 of the LDIP (Federal Act on Private International Law). Article 17 (negative public order) excludes foreign law if its application leads to a result incompatible with Swiss public order. Article 18 (loi de police/imperative provisions) reserves Swiss mandatory provisions that apply regardless of the law designated by conflict rules, due to their specific purpose. A critical distinction exists: lois de police (Art. 18) allow direct and immediate application (e.g., certain AML/CFT rules, sanctions, penal confiscation provisions, minimal creditor protection in specific contexts). Conversely, public order (Art. 17) is a negative exception, used only to exclude foreign law when the concrete result offends fundamental Swiss values; it is narrower than lois de police. Regarding the Hague Trusts Convention, recognition of a trust’s minimum effects (e.g., separate patrimony, protection from trustees’ creditors) is subject to Swiss public order (Art. 21 of the Convention and Art. 17 LDIP). Additionally, Articles 15-18 of the Convention allow reservations for imperative provisions of the forum, which Switzerland implements via the LDIP.
2. Concrete Criteria of Swiss Public Order (Casualistic and Doctrinal Analysis)
Swiss public order is not an exhaustive list; it is a flexible, evolving, and casuistic concept, assessed in concreto by the judge (ATF). The main criteria, derived from case law and doctrine, are as follows:
2.1 Constitutional principles and fundamental rights
– Rule of law, legality, separation of powers, good faith (Art. 5 and 9 Cst.),
– Protection of property (Art. 26 Cst.) and prohibition of arbitrariness,
– Human rights (ECHR integrated),
– Prohibition of abuse of rights (Art. 2 CC) and fraud on the law.
2.2 Protection against fraudulent or sham structures
– A trust (even validly constituted abroad) that is a sham or used to evade mandatory Swiss rules (e.g., concealment of proceeds of crime, aggravated tax evasion, infringement of creditors’ rights) falls under public order.
– Relevant example in the Otiv case: tracing criminal funds through the Trust → distributions → Mareches SA → villa makes full respect for trust separation incompatible.
2.3 Combating serious crime and money laundering
– Impunity or effective protection of proceeds from serious offenses (corruption, large-scale banking fraud such as the Moldovan “Theft of the Century”) is incompatible with Swiss public order.
– The law on confiscation (Art. 70 ff. CP) and international judicial assistance often take precedence via Art. 18 LDIP or directly through public order.
2.4 Protection of third parties and creditors (in certain contexts)
– Minimum protection of creditors against fraudulent transfers (revocatory actions under LP or equivalents).
– In inheritance matters: compulsory portions generally do not fall under Swiss international public order (ATF 102 II 136 Hirsch v. Cohen and consistent case law). A foreign trust can therefore circumvent them if the applicable law allows. However, the action for reduction (Art. 522 ff. CC) remains possible and is not hindered by recognition of the trust (ATF 151 III 361).
2.5 Other recurring criteria
– Harm to the integrity of the Swiss financial system (reputation of the financial center → WEF/BIS lens). – Violation of binding international norms integrated (FATF, UNCAC via “transnational” public order).
– “Manifest” incompatibility (high threshold for recognition of foreign decisions – equivalent to Art. 27 LDIP).
Relevant ATF examples:
– ATF 135 III 614: The prohibition of family trusts (Art. 335 para. 2 CC) does not fall under international public order.
– ATF 151 III 361 (2025): Recognition of a Liechtenstein Treuunternehmen (analogous to a trust) without conflict with public order, but without hindering Swiss rules on protection of compulsory portions.
– Case law on confiscation: Public order systematically allows tracing and confiscation of proceeds of crime, even when held in recognized foreign structures.
