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American Trust Law in a Chinese Mirror

By Frances H. Foster. Full text here.

Comparative law scholars use the term “legal transplant” to refer to the transfer of legal rules, institutions, and norms from one legal system to another. This Article identifies a valuable, previously unrecognized, feature of legal transplants. The transplant process can generate intensive study of the donor legal system by scholars and reformers in the recipient country. The result can be a rich critique that can enable donor-country scholars and reformers to see flaws in their own system and to enact necessary reforms.

The Article begins with a review of the extensive legal transplants literature and demonstrates that this literature has failed to recognize the significance of legal transplants for donor-country scholars and reformers. It then uses one example—China’s recent efforts to introduce the common law trust system—to illustrate the value of legal transplants as “mirrors.” The Article shows that during this legal transplant process, Chinese drafters and scholars have produced an important critique of American trust law, drawn from close analysis of U.S. statutes, case law, model acts, treatises, and scholarly articles. This critique has been overlooked in the United States because it is published only in Chinese. Yet, as this Article reveals, the Chinese critique offers unique and troubling insights into our own system that U.S. scholars and reformers need to consider. A Chinese mirror exposes American trust law as out of balance both in its favoritism of trustees over settlors, beneficiaries, and third parties and its acceptance of trust secrecy.

The Chinese critique comes at a time when leading American scholars and reformers are seeking to move trust law in the wrong direction. By characterizing trusts as contracts and trust law as default rules, they would further enhance the rights of trustees and increase the already high level of trust secrecy. The Article concludes that American scholars and reformers should respond to the Chinese critique and reevaluate their reform agenda.