2. Trusts
a. The modernisation of the trust law
In recent years, demand for investment and finance schemes in
the commercial trust sector has grown, while the advent of an
increasingly aged society has led to an increase in the possible
use of family trusts, for the purposes of asset management and
inheritance transfers.
It was against this background that the government started to
consider a review and modernisation of the trust law, and in
September 2004, the Minister of Justice consulted with the
Legislative Council of the Ministry of Justice about a review of
the law. The Council established a subcommittee on the trust law,
and proceeded with their deliberations. The results of these
deliberations were decided upon by the Legislative Council in the
form of ‘The Outlines on Revision of the Trust Law’ in February
2006, and relayed to the Minister of Justice. In March 2006, a
draft trust law and supplementary bill based on the outlines was
submitted to the 164th ordinary session of the Diet (the Japanese
parliament), and after continued deliberation they became law at
the 165th extraordinary Diet session in December 2006.
b. An outline of the new trust law
The main points of the new trust law are summarised below.
i. Rationalisation of the details of trustees’
obligations under appropriate conditions
- Rationalisation of provisions concerning duty of loyalty
- Rationalisation of provisions concerning duty not to
delegate
ii. Development of rules to improve the
effectiveness and mobility of beneficiaries’ execution of
rights
- Rationalisation of methods for making decisions in trusts in
which there are multiple beneficiaries
- Creation of a trust supervisor and beneficiary proxy
system
- Development of rules relating to the creation and maintenance
of account ledgers
- Creation of rights to file injunctions against trustees’
actions
iii. Development of systems to respond to a
variety of formats for using trusts
- Creation of a system for the merger and break-up of trusts
- Creation of beneficiary security-issuing trusts, limited
liability trusts and declaration of trust
c. Issues surrounding the new law
While much is expected of the new trust law, there are also
criticisms that it overemphasises commercial trusts, and the
difference between the law and company law is opaque; the
definition of trust is vague, and the discrepancies with
traditional trust law considerable; and it does not emphasise
family trusts, the needs for which are expected to grow.
The extent to which the new law is used will remain an important
issue in the future, and it is likely that further amendments will
become a topic for discussion if use of the law proves to be
infrequent.
- Right of lien – the right of obligees to control the assets
(things or rights) of obligors or third parties to secure a claim.
This is treated as a real right because the person possessing the
right of lien is entitled to receive the performance from the
subject matter with priority over any other obligees: