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Ban on Liechtenstein trusts in connection with the Russia sanctions

As already informed in this Blog, the EU decided on further sanctions against Russia in mid-April. These sanctions have now also been incorporated into Liechtenstein law with LGBl 2022/138 of 2.5.2022. The Ordinance on Measures in Connection with the Situation in Ukraine, thus adapted, now accordingly contains a prohibition on “establishing a trust or similar legal arrangement” as well as on “providing a registered office, business or administrative address or administrative services for trusts or similar legal arrangements”, as well as a prohibition “to act as trustee, nominal shareholder, manager, secretary or in a similar capacity for a trust or similar legal arrangement or to enable any other person to do so”, if the settlor or beneficiary of the trust or similar legal arrangement a) is a Russian citizen or b) is resident in Russia (besides this, this also applies to legal entities, etc.).

However, the prohibition does not apply if the respective settlors or beneficiaries of Russian origin “are nationals of an EEA Contracting State or Switzerland or hold a temporary or permanent residence permit of an EEA Contracting State or Switzerland”.

It is worth to note, that, according to the current findings, the prohibition (currently…) does not apply to Liechtenstein foundations or (foundation-like) establishment, etc.: the government appears to be basing this on a European Commission report of 16.9.2020 on the subject of “trusts and similar legal arrangements”. Indeed, it states that ” Foundations, however, have their own legal personality and as such cannot fall into the category of legal arrangements similar to trusts”. See https://eur-lex.europa.eu/legal-content/DE/TXT/PDF/?uri=CELEX:52020DC0560&from=PT

This view can be shared – even though foundations and trusts are treated equally under FATCA or the automatic exchange of information. In this regard it should be noted, however, that under FATCA, for example, foundations were explicitly designated as equivalent to trusts (FATCA Agreement, Annex II, ciff. VI, lit. C).

The prohibition on establishing trusts is effective immediately. The prohibition to continue to act as a trustee is effective as of May 29. The transitional provisions of LGBl 2022/138 state in Art. 37 para. 15 that Art. 29d para. 1 and 2 (and thus the above-mentioned prohibitions) are “not applicable” to transactions “which are absolutely necessary in order to terminate contracts concluded before 2 May 2022” ( e.g. a fiduciary relationship) that are not compatible with the provisions of Art. 29d “by 29 May 2022”.

In our view, it can therefore be assumed that transfers of a trusteeship to other trustees (provided they are permitted to accept the mandate) and distributions from a trust for the purpose of termination (provided distributions are permitted, e.g. the persons are not sanctioned) are permissible to that extent.

This and other questions, such as whether a temporary or permanent residence title is sufficient if it is still valid but the person is (also) resident in another (non EU/EEA-) state, or the question of what the passage “to enable another person to do so” means (in relation to the activity as trustee, nominal shareholder, managing director, secretary or in a similar function), are to be answered relatively soon (possibly this week) in FAQs published by the authorities / the government.

However, the need for action is now definitely given for corresponding structures…