Until now, Czech citizens have not been able to take advantage of the unique features of trust structures – which include greater flexibility than some of the structuring alternatives – because the courts have viewed trustees as the owner of trusts, a legacy of the country’s civil law origins.
The new Czech Civil Code contains 3,081 sections that comprehensively govern personal rights, family law, property rights, and succession law.
This forms part of a wider reform that revokes almost 100 pre-existing laws, including the existing civil code, commercial code, private international law, various real estate laws and the civil procedure code.
The recodification has been described as the largest single change in the Czech legal order since the fall of Communism in 1989. It took place quietly at midnight on 31 December, after more than 13 years of work on the part of the country’s lawmakers.
In the lead-up to that moment, a number of Czech Republic-based trust law experts spent several months fine-tuning the trust element of the code, to help make the raw legislation workable in practice.
They included Christopher Lean, a British financial adviser with OpesFidelio, the overseas network arm of UK wealth manager Aisa, who is an expert on trusts, and who is based near Prague,; Howard Chapman, a solicitor registered in England and Wales, as well as the Czech Republic; and Jan Matejka, who holds a law degree and owns a management consultancy company, HM Personal Progress.
A Prague law firm, Ueltzhöffer Klett Jakubec & Partners, was also involved.
Chapman said he and the others “felt it was important to build practical instruments that the international market and investors would understand and recognise" in addition to being compliant with Czech law.
Lars Klett, a partner of Ueltzhöffer Klett Jakubec & Partners, said he and the other trust industry practioners had had to overcome "a number of linguistic and legal hurdles that initially stood in the way of drawing up the first trusts", which they have now done.
The new provisions relating to the new Czech trusts were modelled on those of the Canadian province of Quebec, which, like the Czech Republic, is a civil law jurisdiction, Lean said.
As a general rule, trusts have tended to be used in countries like the UK, which have a history of common law.
“The lawyers are now satisfied that they have produced the first useable trust instruments on the Czech market that not only meet the requirements of the new code but are, importantly, cost effective and understandable to non-Czech legal practitioners," Lean added.
