On 10 August, 2012 the National Assembly of Panama approved Law 44 of 2012, which ratifies the Convention on the Law Applicable to Trusts and their Recognition, commonly known as the "Hague Trust Convention". Through this new regulation, Panama legitimizes international standards applicable to Trusts, already regulated in Panama by Law 1 of 1984. Panama´s legal Concept of Trusts just to lack recognition and acceptance by the international community for not being Panama a signatory of this Convention.
The most important advantages of the Convention are:
- Definition of the Trusts 'characteristics, which has been a very difficult task, even for the pioneers in the field of Trust as England. These features are:
1. The assets constitute a separate fund and are not a part of the trustee's own estate;
2. Title to the trust assets stands in the name of the trustee or in the name of another person on behalf of the trustee;
3. The trustee has the power and the duty, in respect of which he is accountable, to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed upon him by law. The reservation by the settlor of certain rights and powers, and the fact that the trustee may himself have rights as a beneficiary, are not necessarily inconsistent with the existence of a trust.
- Clear rules for determining the law applicable to the "Cross Border Trusts".
- The Convention applies only to express trusts, voluntarily created.
- The conditions for the appointment, resignation and removal of trustee as well as his rights and obligations are defined by the Convention.
- The Convention provides that its provisions do not apply in case of conflict with local legislation.