Academic article published in the Oxford Business Law Blog.
By: Sergio Rodríguez, Founding Partner of CMS Rodríguez Azuero Contexto Legal.
Many business and financial transactions in Latin America are designed through business trusts (‘fideicomiso’). The Latin American trust is generally used for different business purposes, including investments, real estate, management, security interests, and infrastructure projects. By the end of 2015, the total value of assets managed under business trusts in Mexico and Colombia was about 55% and 47% of their GDPs, respectively. Therefore, this legal institution represents a very significant vehicle for conducting business in Latin America. It is thus worth exploring the origins, nature and features of this particular institution.
In a recent paper based on a comparative analysis of the Latin American ‘fideicomiso’, with particular focus on the Colombian experience, I confirmed that, unlike what has traditionally been assumed, the Latin American ‘fideicomiso’ has an Anglo-American origin, despite the fact that most Latin countries (including Colombia) have civil law origins. More importantly, I show that this finding may have several implications for the interpretation of the features and nature of the Latin American trust.
My conclusions rely on several arguments. First, the Anglo-American notion of trust recognizes that the assets under management are not part of the trustee’s patrimony. They are independent. And this feature is not found in the ‘fideicomiso’ of the Roman-Germanic legal tradition. The trust introduced in Latin America, and specifically in the Colombian Commercial Code, entails the existence of an independent patrimony that is managed and legally owned by the trustee. But these assets are not part of the trustee´s own patrimony. Second, the law in most Latin American countries derives from the Napoleonic Code. However, the trust is not found in the Napoleonic Code. Third, after analyzing the particular features of the trust, I also find that other elements of the Anglo-American trust are found in the Latin American ‘fideicomiso’. These elements include the structure of the agreement, the parties to the agreement, and the duties imposed on the trustee. So, the ‘fideicomiso’ implemented in Latin America has the most important features of the Anglo-American trust.
In my opinion, the fact that the Latin American ‘fideicomiso’ has common law origins may have several implications. First, even though most Latin American countries have always been classified as ‘civil law countries’, a deeper analysis may show that some of their legal institutions – such as the business trust – may have ‘common law’ origins. Second, and perhaps more important for the Latin American legal practice (taking into account the magnitude of assets managed under a business trust), if the Latin American ‘fideicomiso’ has Anglo Saxon origins, courts, scholars, and practitioners should no longer interpret this legal device according to its Roman-Germanic counterpart. It should be interpreted according to the Anglo-American trust. This may have several implications for the legal nature of the institution, the structure of the agreement, and the duties imposed on the trustee.
Read this article online at Oxford Business Law Blog here