[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Akers & Ors v Samba Financial Group [2014] EWCA Civ 1516 (04 December 2014) URL: http://www.bailii.org/ew/cases/EWCA/Civ/2014/1516.html Cite as: [2015] 1 Ch 451, [2015] WTLR 931, [2015] 2 WLR 1281, [2014] EWCA Civ 1516, [2015] Ch 451, [2015] 1 CH 451, [2015] BPIR 411, 17 ITELR 921, [2014] WLR(D) 521

[New search] [Printable RTF version] [Buy ICLR report: [2015] Ch 451] [View ICLR summary: [2014] WLR(D) 521] [Buy ICLR report: [2015] 1 Ch 451] [Help]

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
SIR TERENCE ETHERTON, THE CHANCELLOR OF THE HIGH COURT
Case Number: HC13E03490

		Royal Courts of Justice Strand, London, WC2A 2LL
		04/12/2014

Lord Justice Vos:

Overview

1. This is the judgment of the court, which I am delivering at the invitation of Lord Justice Longmore.
2. The application that came before the Chancellor of the High Court, Sir Terence Etherton, was in substance a strike out or summary judgment application dressed up as an application for a stay on the grounds of forum non conveniens. It was notionally based on the contention that the Saudi Arabian courts were clearly and distinctly a more appropriate forum for the claim to be brought. But in fact the claim is under section 127 of the Insolvency Act 1986 (the "IA 1986") for a declaration that the relevant transaction was a void disposition. It is a claim that could not and will not be brought either in substance or in form in Saudi Arabia. England is, therefore, in reality the only available forum for the claim (apart perhaps from the Cayman Islands), and the question is and was whether the claim has any realistic prospect of success.
3. Despite the procedural infelicities, the appeal raises some important questions as to the law applicable to and the validity of trusts which purport to comprise shares registered in civil law countries, whose laws do not themselves recognise either the trust concept or the division of a legal and beneficial interest. These questions have involved a close analysis of the Hague Convention on the Law Applicable to Trusts and on their Recognition (the "Convention"), which was given statutory effect in the United Kingdom by the Recognition of Trusts Act 1987 (the "1987 Act").
4. The argument before this court has also been markedly different from the argument before the Chancellor. Before us, the focus has been on the meaning and effect of article 4 of the Convention, whereas that article played almost no part in the first instance hearing.
5. In the broadest outline, the trusts concerned arose from what we shall refer to as the "6 transactions" which took place between 2002 and 2008. In each of the 6 transactions, Mr Maan Al-Sanea ("Mr Al-Sanea"), who is a citizen of and resident in Saudi Arabia, declared himself a trustee of certain Saudi Arabian shares for the 4^th claimant company, Saad Investments Company Limited, a Cayman Islands company which is now in liquidation ("SICL"). SICL was Mr Al-Sanea's family investment vehicle, which was managed in Geneva.
6. SICL is massively insolvent. When its winding up began, it owed US$2.815 billion plus interest to a syndicate of banks including the defendant, Samba Financial Group ("Samba").
7. In these proceedings, the 1^st, 2^nd and 3^rd claimants, the liquidators of SICL (the "liquidators") seek to challenge the validity of a disposition to Samba of the shares that were the subject of the 6 transactions, made just before SICL's winding up order was made. The effect of the disposition, if the liquidators are right, was to deprive SICL's creditors of shares to which it was entitled worth some US$318 million. The underlying issue, put shortly, is whether it was at least arguable that the shares were indeed held on trust for SICL.
8. The Chancellor decided on 28^th February 2014 that each of the relevant trusts was governed by either Saudi Arabian law or Bahraini law, neither of which will enforce foreign laws or recognise any division of the legal and beneficial interests in shares. He held that these proceedings should be stayed on the grounds that the courts of Saudi Arabia were clearly and distinctly a more appropriate forum. The effect of that decision was to bring an end to these proceedings and to any future challenge to the validity of the transfer that lies at the heart of these proceedings.
9. The liquidators challenge the Chancellor's decision principally on the basis that they contend he should not have decided that the trusts were governed by Saudi Arabian or Bahraini law, and should instead have accepted, for the purposes of the stay application, that it was arguable that the trusts were governed by Cayman Islands law, and therefore valid.

Factual introduction

10. The shares in question are in 5 publicly quoted Saudi Arabian banks, including Samba itself (the "Shares"). Samba and some of the other 4 banks are listed on the Tadawul, the Saudi Arabian stock exchange. Samba is an international bank with operations in the United Kingdom, the United Arab Emirates, Qatar and Pakistan. Mr Al-Sanea was a director of Samba from 2004 to 2006. The Shares were all originally registered in Mr Al-Sanea's name at either the Securities Depository Centre ("SDC") operated by the Tadawul or, in the case of the shares in National Commercial Bank, in its Saudi Arabian share register.
11. The transfer of the Shares from Mr Al-Sanea to Samba took place on 16^th September 2009 to discharge Mr Al-Sanea's indebtedness to Samba (the "Transfer"). The liquidators contend that at the date of the Transfer, the Shares were, as we say, held by Mr Al-Sanea on trust for SICL.
12. In these proceedings, SICL and its liquidators seek a declaration under section 127 of the IA 1986 that the Transfer of the Shares on 16^th September 2009 was a void disposition as having been made after the commencement of the winding up of SICL. The winding up of SICL commenced on 30^th July 2009, when a petition was presented to the Grand Court of the Cayman Islands. The winding up order was made on that petition on 18^th September 2009, two days after the Transfer.
13. As the Chancellor explained, the effect of the Cross Border Insolvency Regulations 2006 ("CBIR") was to give the force of law in the United Kingdom to the UNCITRAL Model Law on Cross-Border Insolvency, as set out in schedule 1 to the CBIR. It was those provisions and the Companies Court's recognition orders dated 20^th August and 25^th September 2009 that allowed SICL's liquidators to seek to invoke in England the provisions of section 127 of the IA 1986 in relation to the Transfer. The UNCITRAL Model Law has not been adopted in Saudi Arabia.
14. The Chancellor said that the critical issue between the parties in relation to section 127 was whether, applying the relevant law, SICL had any proprietary interest in the Shares at the date of the Transfer.
15. It is perhaps worth noting at the outset that we are not at this stage concerned with whether or not the liquidators will ultimately prove to be entitled to a declaration that the Transfer was void or with what other relief they might otherwise obtain. Nor are we concerned with whether Samba might be entitled (as it will no doubt claim) to a validation order in respect of the Transfer on the grounds that Samba was a good faith purchaser of the Shares for value without notice of the trusts. All that will, if the matter proceeds, have to be determined at what one might call the substantive stage of the section 127 application.

The 6 transactions

16. The Chancellor summarised what he described as "the seven transactions" at paragraphs 26-40 of his judgment. It is now common ground that there were, in fact, only 6 transactions, which we can summarise briefly as follows:-

i) Under the 1^st transaction originally entered into on 30^th November 1998, but replaced by an agreement of 17^th December 2002, SICL bought shares in Samba from Mr Al-Sanea. The agreement provided that the "beneficial ownership" in the shares should be transferred from Mr Al-Sanea to SICL, but that the "nominal ownership" in the shares should remain registered in Mr Al-Sanea's name "in order to comply with legal requirements in Saudi Arabia". Mr Al-Sanea was to have no interest whatever in the shares after the completion of the sale except in his capacity as registered owner. The agreement referred repeatedly to Mr Al-Sanea as a trustee, but had a choice of law clause that provided for "[t]his Agreement and the relationship of the parties in connection with the subject matter of this Agreement" to be governed by the laws of Bahrain.

ii) Under the 2^nd transaction of 17^th December 2003, Ahmad Hamad Algosaibi & Brothers Company ("ALGME") sold SICL certain shares (the "ALGME shares") on terms that Mr Al-Sanea would hold them for SICL as nominee again "in order to comply with legal requirements in Saudi Arabia". The agreement again refers repeatedly to Mr Al-Sanea as a trustee, and had a choice of law clause that provided for "[t]his Agreement and the relationship of the parties in connection with the subject matter of this Agreement" to be governed by the laws of Saudi Arabia.

iii) The 3rd transaction was given effect by a bill of sale and a separate declaration of trust both dated 5^th June 2006. The sale of the shares in question by Mr Al-Sanea to SICL was evidenced by the bill of sale, which referred to the sale being "subject to that certain 2005 Share Sale Agreement". That agreement is dated 2^nd July 2005 and has an identical Saudi Arabian jurisdiction clause to the 2^nd transaction dated 17^th December 2003. The trust in relation to the 3^rd transaction is declared by a declaration of trust in simple common law terms. The shares are said to stand in the name of Mr Al-Sanea as trustee, but in fact to belong to the buyer, and Mr Al-Sanea undertakes to hold the shares on trust for SICL. The declaration of trust contains no choice of law clause.

iv) The 4^th transaction was also given effect by a bill of sale and a separate declaration of trust, these being dated 24^th January 2007. They were in substantially the same terms as the 3^rd transaction, but without any reference to the terms of the 2^nd July 2005 share sale agreement. This transaction related to a large parcel of 8,523,000 shares in Samba.

v) The 5^th transaction was again effected by a bill of sale and a separate declaration of trust both dated 12^th October 2008 in substantially the same terms as the 4^th transaction.

vi) Finally, the 6^th transaction was given effect by a bill of sale and a declaration of trust both dated 16^th October 2008, again in substantially the same terms as the 4^th and 5^th transactions. This transaction related to another large parcel of 9,750,000 shares in Samba.

17. It is clear from what we have already said that there is a distinction to be drawn between the 1^st and 2^nd transactions (the "early transactions") on the one hand, and 3^rd to 6^th transactions on the other hand (the "later transactions"). The early transactions are governed by a choice of law clause that expressly purports to govern "the relationship of the parties" in connection with the subject matter of the agreement which includes the creation of an express trust. Plainly there is a conundrum produced by the purported establishment of a trust governed by a choice of law which does not recognise the concept of a trust. We will return to that conundrum. The later transactions are not, however, affected by it, since they all have separate declarations of trust that neither include nor refer to any express choice of law. We acknowledge here that the 3^rd transaction is in a slightly different position in that the bill of sale referred to an agreement containing a choice of law clause, which could be argued at least to incorporate the choice of Saudi Arabian law by reference. Since the separate declaration of trust in the 3^rd transaction did not contain any such reference, we have assumed for present purposes that it did not incorporate any choice of law. This will no doubt be the subject of further argument if the matter goes further.
18. We were told that shares worth some 72% of the total value of the 6 transactions were represented by the later transactions, in relation to which the declarations of trust contained no express choice of law clause.

The stay application

19. On 16^th September 2013, Samba issued an application to stay the proceedings under CPR Part 11, which provides as follows:-

"(1) A defendant who wishes to –

a) dispute the court's jurisdiction to try the claim; or

b) argue that the court should not exercise its jurisdiction,

may apply to the court for an order declaring that it has no such jurisdiction or should not exercise any jurisdiction that it may have."

20. The claim form was issued on 14^th August 2013 and served as of right on Samba at its registered branch office in London. Samba acknowledged service on 2^nd September 2013 indicating that it intended to contest the court's jurisdiction. The application to that effect was filed within the 14 days allowed by CPR Part 11(4)(a). Samba might just as well have issued an application for summary judgment and/or to strike out the claim on the ground that the action was bound to fail, since this was the ground on which the application for a stay was argued.
21. The arguments for Samba have, as we have said, been modified since the case was before the Chancellor. What is now said by Samba is, in essence, that:-

i) The 6 transactions including the declarations of trust executed by Mr Al-Sanea in favour of SICL were all governed by either Saudi Arabian or Bahraini law, it being common ground that there is no material difference between the two for these purposes.

ii) Article 4 of the Convention excludes from its ambit preliminary issues relating to the validity of acts establishing trusts. The purported transfers of the beneficial interest in the Shares from Mr Al-Sanea to SICL under the relevant declarations of trust were such preliminary issues and were, therefore, governed by the law indicated by English conflict of law rules. That law was the law of Saudi Arabia as the lex situs of the Shares.

iii) Since it was common ground that the concept of a trust is unknown to Saudi Arabian law, and that law does not recognise any division between legal and equitable interests in shares, the 6 transactions including the declarations of trust cannot have resulted in any equitable interest in the Shares passing to SICL.

iv) SICL, therefore, had no proprietary interest in the Shares at the date of the Transfer, and Samba must have obtained good title under Saudi Arabian law.

v) In the circumstances, any claim under section 127 founded on SICL having a proprietary interest in the Shares is bound to fail.

vi) The same result is achieved by the sequential application of article 15 of the Convention, articles 6 and 7 of the Convention, and article 5 of the Convention pointing to the common law rules as to the determination of the governing law of a trust by reference to the law with which the trust has its closest and most real connection.

The Convention

22. Section 1 of the 1987 Act gives effect to the Convention in the following provision:-

"1  Applicable law and recognition of trusts

(1)     The provisions of the Convention set out in the Schedule to this Act shall have the force of law in the United Kingdom. …

(3)     In accordance with Articles 15 and 16 such provisions of the law as are there mentioned shall, to the extent there specified, apply to the exclusion of the other provisions of the Convention."

23. The preamble to the Convention highlights its purpose as follows: "Considering that the trust, as developed in courts of equity in common law jurisdictions and adopted with some modifications in other jurisdictions, is a unique legal institution, Desiring to establish common provisions on the law applicable to trusts and to deal with the most important issues concerning the recognition of trusts".
24. The argument before us has revolved around the detail of the wording of the Convention, which is not entirely straightforward. In these circumstances, we shall set out the relevant parts of the Convention as given effect by the 1987 Act, so that the articles relied upon can be seen in their proper context:-

Chapter I

Scope

Article 1

This Convention specifies the law applicable to trusts and governs their recognition.

Article 2

For the purposes of this Convention, the term "trust" refers to the legal relationship created— inter vivos or on death— by a person, the settlor, when assets have been placed under the control of a trustee for the benefit of a beneficiary or for a specified purpose.

A trust has the following characteristics—

(a)     the assets constitute a separate fund and are not a part of the trustee's own estate;

(b)     title to the trust assets stands in the name of the trustee or in the name of another person on behalf of the trustee;

(c)     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.

Article 3

The Convention applies only to trusts created voluntarily and evidenced in writing.

Article 4

The Convention does not apply to preliminary issues relating to the validity of wills or of other acts by virtue of which assets are transferred to the trustee.

Article 5

The Convention does not apply to the extent that the law specified by Chapter II does not provide for trusts or the category of trusts involved.

Chapter II

Applicable Law

Article 6

A trust shall be governed by the law chosen by the settlor. The choice must be express or be implied in the terms of the instrument creating or the writing evidencing the trust, interpreted, if necessary, in the light of the circumstances of the case.

Where the law chosen under the previous paragraph does not provide for trusts or the category of trust involved, the choice shall not be effective and the law specified in Article 7 shall apply.

Article 7

Where no applicable law has been chosen, a trust shall be governed by the law with which it is most closely connected.

In ascertaining the law with which a trust is most closely connected reference shall be made in particular to—

(a)     the place of administration of the trust designated by the settlor;

(b)     the situs of the assets of the trust;

(c)     the place of residence or business of the trustee;

(d)     the objects of the trust and the places where they are to be fulfilled.

Article 8

The law specified by Article 6 or 7 shall govern the validity of the trust, its construction, its effects and the administration of the trust. In particular that law shall govern—

(a)     the appointment, resignation and removal of trustees, the capacity to act as a trustee, and the devolution of the office of trustee;

(b)     the rights and duties of trustees among themselves;

(c)     the right of trustees to delegate in whole or in part the discharge of their duties or the exercise of their powers;

(d)     the power of trustees to administer or to dispose of trust assets, to create security interests in the trust assets, or to acquire new assets;

(e)     the powers of investment of trustees;

(f)     restrictions upon the duration of the trust, and upon the power to accumulate the income of the trust;

(g)     the relationships between the trustees and the beneficiaries including the personal liability of the trustees to the beneficiaries;

(h)     the variation or termination of the trust;

(i)     the distribution of the trust assets;

(j)     the duty of trustees to account for their administration.

…

Chapter III

Recognition

Article 11

A trust created in accordance with the law specified by the preceding Chapter shall be recognised as a trust.

Such recognition shall imply, as a minimum, that the trust property constitutes a separate fund, that the trustee may sue and be sued in his capacity as trustee, and that he may appear or act in this capacity before a notary or any person acting in an official capacity.

In so far as the law applicable to the trust requires or provides, such recognition shall imply in particular—

(a)     that personal creditors of the trustee shall have no recourse against the trust assets;

(b)     that the trust assets shall not form part of the trustee's estate upon his insolvency or bankruptcy;

(c)     that the trust assets shall not form part of the matrimonial property of the trustee or his spouse nor part of the trustee's estate upon his death;

(d)     that the trust assets may be recovered when the trustee, in breach of trust, has mingled trust assets with his own property or has alienated trust assets. However, the rights and obligations of any third party holder of the assets shall remain subject to the law determined by the choice of law rules of the forum.

Article 12

Where the trustee desires to register assets, movable or immovable, or documents of title to them, he shall be entitled, in so far as this is not prohibited by or inconsistent with the law of the State where registration is sought, to do so in his capacity as trustee or in such other way that the existence of the trust is disclosed.

…

Article 14

The Convention shall not prevent the application of rules of law more favourable to the recognition of trusts.

Chapter IV

General Clauses

Article 15

The Convention does not prevent the application of provisions of the law designated by the conflicts rules of the forum, in so far as those provisions cannot be derogated from by voluntary act, relating in particular to the following matters—

(a)     the protection of minors and incapable parties;

(b)     the personal and proprietary effects of marriage;

(c)     succession rights, testate and intestate, especially the indefeasible shares of spouses and relatives;

(d)     the transfer of title to property and security interests in property;

(e)     the protection of creditors in matters of insolvency;

(f)     the protection, in other respects, of third parties acting in good faith.

If recognition of a trust is prevented by application of the preceding paragraph, the court shall try to give effect to the objects of the trust by other means.

Article 16

The Convention does not prevent the application of those provisions of the law of the forum which must be applied even to international situations, irrespective of rules of conflict of laws.

Article 17

In the Convention the word "law" means the rules of law in force in a State other than its rules of conflict of laws.

Article 18

The provisions of the Convention may be disregarded when their application would be manifestly incompatible with public policy."

The Chancellor's decision

25. The Chancellor's decision is admirably succinct. He said first that section 127 was only relevant if SICL had a proprietary interest in the Shares as at the date of the Transfer, so that the critical issue was to determine which law governed whether or not, at the date of the Transfer, SICL had a proprietary interest in the Shares. He held that Samba was plainly right to contend that Saudi Arabian or Bahraini law governed that issue both under common law conflict of law principles and under the Convention.
26. The ownership of shares under common law principles is governed by the law of the place where the shares are situated (see Macmillan Inc v. Bishopsgate Investment Trust plc (No 3) [1996] 1 WLR 387). The Shares were all in companies incorporated in Saudi Arabia, registered with the SDC or in the relevant companies' registers.
27. The common law rule as to the governing law was applicable under article 15 of the Convention, because:-

i) According to the liquidators, the seven transactions vested the beneficial entitlement to the Shares in SICL removing that beneficial title from Mr Al-Sanea.

ii) Such a process falls within the words "transfer of title to property" in article 15(d); the seven transactions did not operate to create a beneficial interest as opposed to transferring one. The dictum of Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v. Islington London Borough Council [1996] AC 669 at page 706E-F did not support the contrary view, since when he had said that it was meaningless to talk about the transferor "retaining its equitable interest", he had not been considering "the vesting of a beneficial interest as a consequence of the creation of an express trust".

iii) Thus article 15 was engaged and operated so as to allow the application of provisions of the law designated by the conflicts rules of the forum (English law) in relation to the seven transactions. English conflicts rules provided for Saudi Arabian law to apply to the seven transactions.

28. Even if the seven transactions gave rise to the creation of beneficial interests rather than the transfer of beneficial interests, articles 6, 7 and 8 mandated the same conclusion (i.e. that Saudi Arabian law applied) because:-

i) Article 8 provides that the law specified by articles 6 and 7 will govern the validity and construction of the trust, its effects and administration;

ii) Article 6 is not determinative since the governing law of the trusts cannot be determined at this stage because (a) only the first four of the seven transactions contained express choices of law, and, though there were strong grounds for concluding that the same law applied to the other transactions by implication, the Chancellor was reluctant to reach a final conclusion on that point, (b) even if all seven transactions were governed by Saudi Arabian or Bahraini law, those chosen laws did not allow for trusts, so article 7 applied, and (c) although Samba contended that the seven transactions gave rise to an amaana (a kind of bailment) under Saudi Arabian law (which is a kind of trust under article 2 of the Convention, thus making article 6 conclusive), those questions could not be determined without cross-examination of the experts.

iii) The governing law of the seven transactions under article 7 is Saudi Arabian law, because (a) there was no express designation of the place of administration of the trusts, but in practice administrative, investment management and advisory services for the beneficiary of the trusts, SICL, was habitually carried out in Geneva, but the benefits and obligations of ownership of the Shares were enjoyed and suffered by Mr Al-Sanea in Saudi Arabia, where he was resident, the companies were incorporated and he was registered as owner, (b) the situs of the Shares as assets of the trusts was Saudi Arabia, (c) the place of residence of the trustee was Saudi Arabia, where he was also domiciled and a citizen, and (d) in relation to "the objects of the trusts and the places where they are to be fulfilled", the beneficiary was SICL which was incorporated in the Cayman Islands. But the wider purpose of the trusts was to circumvent the restrictions under Saudi Arabian regulations on foreigners investing in Saudi Arabian companies, and the provisions of some of the seven transactions made it appear that the parties believed that the seven transactions were consistent with Saudi Arabian law.

29. It was possible to reach a final conclusion on this application as to the governing law of the seven transactions, because the only relevant disputed matter was as to whether the seven transactions constituted an amaana, and, even assuming they did not, article 7 still overwhelmingly supported the conclusion that the governing law was Saudi Arabian.
30. Although the court will be cautious in concluding that the governing law of a trust is one which does not provide for the trust envisaged, such a conclusion is possible (see paragraph 61 of Professor von Overbeck's Explanatory Report on the Convention, and Martin v. Secretary of State for Work and Pensions [2009] EWCA Civ 1289).
31. Since it was common ground that, if Saudi Arabian law governed the seven transactions, the claim under section 127 failed because SICL will not have had a proprietary interest in the Shares at the date of the transfer, there was nothing to be gained from proceedings in England.
32. If the Chancellor had concluded that it was reasonably arguable that the governing law under article 15(d) or article 7 was the law of the Cayman Islands rather than Saudi Arabia, he would have refused a stay because (a) article 18 did not indicate that in this case the Convention should be disregarded for reasons of illegality and public policy, (b) even though a number of Saudi Arabian law issues would still arise, and even though some documents, records and witnesses were present in Saudi Arabia, and even though the seven transactions and the Transfer were connected with Saudi Arabia, the conditions for a stay contained in Spiliada Maritime Corp v. Cansulex Ltd [1987] AC 460 had not been met, (c) in particular, the relevant documents were all in English, any proceedings in Saudi Arabia would inevitably fail as the courts there do not recognise foreign laws, and conversely the English courts do recognise and can hear evidence of applicable foreign laws, so that Saudi Arabia would not be a clearly and distinctly more appropriate forum than the English court, and anyway, it was more suitable for the case to be tried in England having regard to the interests of all the parties and the ends of justice.

The issues

33. Against this rather lengthy background, the six main issues that arise on this appeal as it has been argued are as follows:-

i) Whether (as Samba contends by Respondent's Notice), even assuming that the governing law of the trusts was Cayman Islands law, the effect of article 4 was to exclude the application of the Convention to the purported transfers of the beneficial interest in the Shares from Mr Al-Sanea to SICL under the declarations of trust, so that English conflicts rules applied Saudi Arabian law to them as the lex situs and SICL obtained no proprietary interest under them.

ii) Whether, even if article 4 did not achieve that result, article 15 did so, because it required the application to "the transfer[s] of title to property" of mandatory rules of Saudi Arabian law, as the law designated by English conflicts rules as the lex situs of the purported transfers of the beneficial interest in the Shares from Mr Al-Sanea to SICL under the relevant declarations of trust.

iii) Whether it was right to form a final view on the applicability of article 15 on this application.

iv) Whether the sequential application of article 6 and article 7 anyway resulted in Saudi Arabian law being the governing law of the declarations of trust.

v) Whether it was right to form a final view on the governing law of the declarations of trust on this application.

vi) Whether (as Samba contends by Respondent's Notice), even if articles 6 and 7 applied Saudi Arabian law to the trusts, article 5 disapplied the Convention so that common law rules would (i) have respected the express or implied choices of Saudi Arabian or Bahraini law, and would (ii) anyway have applied Saudi Arabian law as the law with which the trusts had their closest and most real connection.

The implications of our decision

34. Both sides have submitted that any outcome, other than that for which they contend, would be startling or have monumental consequences. We think that, to some extent, the hyperbole was justified. We do find it surprising that the questions raised by this appeal have seemingly never been fully addressed before.
35. There must be large numbers of trusts established under the laws of common law jurisdictions, onshore or offshore, that comprise registered shares in civil law countries amongst their assets. Mr Mark Howard QC, counsel for the liquidators, opened this appeal by pointing out that it would be remarkable if all those trusts were to be held to be ineffective. Mr Mark Hapgood QC, counsel for Samba, responded by pointing out that there was nothing to stop people purporting to put shares registered in civil law jurisdictions into common law trusts; it was just that the trusts would create only personal remedies in those jurisdictions and not proprietary remedies against third parties to whom the shares were transferred or in the event of the trustee's bankruptcy.
36. We have taken full account of these competing positions and of the vast volume of academic material that has been generated around, but perhaps not specifically on, the points that are raised here. But ultimately we think we must ascertain the meaning of the Convention adopting the appropriate purposive construction. That process may bring into account the consequences of particular meanings that have not previously been foreseen, but cannot altogether be governed by them.

Issue 1: Does article 4 apply to exclude the application of the Convention?

37. This became Samba's central argument. It proceeds on the footing that the liquidators can establish that it is at least arguable that the governing law of the declarations of trust in the later transactions and of the trusts in the early transactions is Cayman Islands law. Even then, Samba submits that article 4 mandates that the question whether the equitable interest in assets may be alienated in the first place is determined by the law of the situs of those assets and not by the law applicable to the trust (see the view expressed at page 186 of the first supplement to the 15^th edition of Dicey, Morris and Collins on The Conflict of Laws in relation to paragraph 29-015 of the main work).
38. The question is really about when the Convention kicks in. Its provisions are obviously aimed in part at establishing the law applicable to trusts (see articles 6 and 7 that relate to identifying that law, and article 8 that defines what the law specified shall govern). But article 4 acknowledges that there are some preliminary issues to which the Convention and its applicable law rules will not apply. These are what the academics have referred to as the "rocket-launching" issues. We find that terminology unhelpful, but at least it emphasises that article 4 is about matters that are preliminary to the final establishment of the trust (presumably when the rocket is in orbit).
39. The competing positions, as they apply to the circumstances of this case, are as follows. The liquidators say that only issues concerning the validity of the transfers of assets to the trustee are covered by article 4, and that both the capacity of the trustee to alienate the property at all by way of declaration of trust or otherwise, and the transfer of the beneficial interest to the beneficiary effected by the declaration of trust are governed by the governing law of the trust identified by the Convention. Samba says that each of these matters is governed by the law identified by English conflicts rules, which is the lex situs of the trust property, namely Saudi Arabian law.
40. We start with the only recent case that has directly addressed article 4 in this context, which was the Scottish case of Joint Administrators of Rangers Football Club plc, Noters 2012 SLT 599 in the Outer House. There, Lord Hodge had to decide on the effect of agreements governed by English law between Rangers Football Club and a ticket agency, whereby the Club had forward sold four seasons' tickets, and was to act as the ticket agency's agent to prioritise the sale of them. The judge heard expert evidence that, in English law, the agreements would give the ticket agency a proprietary right, but determined that, under Scottish law, proprietary rights were governed by the lex situs, rather than the law governing the trust determined by articles 6 to 8 of the Convention (which was English law); under Scottish law, such future rights could not be alienated.
41. Lord Hodge said this at paragraph 24 in relation to article 4:-

"I am therefore persuaded that the [1987 Act] does not have the effect of making the law chosen by the settlor the governing law of the steps needed to create the trust. Were it otherwise, the results would be startling as a settlor would be able to alienate property which he could not dispose of under the lex situs. It would create significant problems for the operation of insolvency law in the jurisdiction in which the asset was located. Additionally by virtue of s1(2) of the 1987 Act it might be argued that a constructive trust arising from a judicial decision in one legal system would prevail over the lex situs if a foreign settlor could be identified."

42. A number of commentators support Lord Hodge's views as to the effect of article 4. The editors of Lewin on Trusts changed their view in the third supplement to the 18^th edition so as to opine under paragraph 11-63A that "[i]t seems … that the law pointed out by the forum will govern the formal and substantive validity of the declaration, so that, for example, in the case of realty or chattels the intending settlor would not be able by making a declaration to defeat a rule of the lex situs preventing the alienation of property." It is important, however, to understand precisely what the commentators are saying is actually excluded by article 4.
43. Professor David Hayton has been a regular commentator on the Convention. He sat on the Convention's drafting committee, and expressed what might be regarded as his most extreme view at page 268 in an article about the Convention at that time in (1987) 36 I.C.L.Q. 260. He said that "… if a Frenchman purported to declare himself trustee of specific French movables for certain English beneficiaries and stated that English law was to be the applicable law, the Convention would not apply to the preliminary issue of the validity of the declaration of trust which would be ineffective by French law under English conflicts rules."
44. More recently, however, Underhill and Hayton's 18^th edition said this at paragraph 100.121:-

"Technically, one could argue that two questions arise as to the passing of property: (i) the transfer of legal title to the trustee; (ii) the transfer of equitable title to the beneficiary. However, civil law systems know nothing of equitable title and, once legal title has validly been transferred to B, the 'rocket-launching' process is concluded. It follows that the sole question with which the lex situs should concern itself is whether legal title to an interest may be alienated. It should not be a reason to invalidate the rocket-launching process that the situs does not know the trust concept. The particular interest which the beneficiary acquires under the trust should be seen as an aspect of the relationship between trustee and beneficiary, and governed by the applicable law of the trust, as determined by the rules of The Hague Trusts Convention. In a common law country a beneficiary will obtain an equitable proprietary interest binding third parties but in a civil law country, not knowing such a proprietary interest, a beneficiary will only obtain a ring-fenced interest binding the trustee's creditors and heirs but not third parties to whom the trustee had transferred trust property."

45. Professor Hayton has also recently explained his views on the Rangers case in "Trusts in Private International Law" (2014) 36 Recueil des Cours de l'Académie de droit international de la Haye 9, where he said this at page 83 in relation to article 4:-

"Whether the settlor has capacity to alienate property at all must be distinguished from the settlor's capacity to create the trust structure over property which he had capacity to alienate. … However [in the Rangers case], where an English lender made a loan to a Scots Football Club in an agreement governed by English law with future season ticket monies paid by the Club's supporters to be held as soon as received for repaying the lender, the Scots court held that the Scots Club had no capacity to alienate future Scots assets, the Scots lex situs governing the non-assignability of Scots future property. … In the case of a settlor declaring himself sole trustee of designated property of his it seems that if he has full power to alienate such property he should be able unilaterally to declare himself such a trustee if the applicable law of the trust allows this.  The Italian courts have recognized such unilateral declarations of trust under a foreign trust law governing Italian immovables and the Quebec courts have recognized a unilateral declaration under Californian law over a Quebec immovable."

46. Thus, it appears that Professor Hayton would say that Rangers was correctly decided because under Scottish law (the lex situs) it was not possible to alienate future receipts at all, so that the Club's capacity to do so was governed by the lex situs under article 4. In supplemental written submissions after the hearing, Samba submitted expressly that Professor Hayton was wrong on this point, and that Lord Hodge had actually decided that Scottish law as the lex situs governed the validity of the declaration of trust, which failed because, under Scottish law, it was impossible to create a trust of future assets.
47. Professor Jonathan Harris has also been a frequent commentator on issues arriving from the Convention. He draws a clear distinction between the capacity to alienate property (which is governed by the lex situs) and the capacity to create the trust structure (which is governed by the law of the trust). He wrote this in an article entitled "Launching the rocket – capacity and the creation of inter vivos transnational trusts" (in Chapter 2 of Hayton's The International Trust (3^rd edition 2011)) at paragraph 2.44:-

"There will then be a second question as to whether the settlor, who has capacity to alienate property according to the lex situs, has capacity to create the trust structure with that property… the interest of the lex situs can sensibly be confined to the question whether the settlor can dispose of his property at all. Once he is able to do so, it should not be that law's concern whether he makes an outright transfer of the property or transfers on trust… The restrictions upon a settlor seem legitimately targeted at the question whether he may dispose of property at all, not whether he may dispose thereof on trust."

48. The travaux preparatoires for the Convention in 1987 entitled "Explanatory report by [Professor] Alfred E von Overbeck" includes the following important distinction in paragraph 57: "[t]he words 'assets [are transferred] to the trustee' [in article 4] are completely clear when the settlor and the trustee are distinct persons. In contrast, one may doubt whether they cover the case of the declaration of trust in which these two persons are mingled: the owner of the assets declares that henceforth he will hold these assets as a trustee". He then explained how in the drafting process a clearer reference to the declaration of trust appears not to have been approved. Thereafter at paragraph 58, he says: "[f]inally, the word 'preliminary' [in article 4] expresses the idea that the instrument of transfer such as the will pre-exists the trust; a proposal to delete this word was rejected by a large majority".
49. The decision of Eve J in Re Pearse's Settlement [1909] 1 Ch 304 at page 310 is interesting, though the parties referred to it only in passing. In that case the lex situs (Jersey) was applied when it rendered inoperative a transfer to trustees, under a covenant to transfer after-acquired property contained in an English marriage settlement. There, it was possible for the wife to alienate the Jersey property but only with the concurrence of her husband and for consideration. It seems to us that the issues raised by this decision were rather different, and of course the case was long before the Convention.
50. It is important to start the evaluation of the parties' competing positions by reference to the words of article 4 itself, in the context of the entirety of the Convention. Article 8 makes clear that the law specified by articles 6 or 7 "shall govern the validity of the trust, its construction, [and] its effects". Thus, one would not expect a trust governed by the law of a common law country to be invalidated because it purported to transfer the beneficial interest in the trust property to the beneficiary. Moreover, article 4 provides only that "[t]he Convention does not apply to preliminary issues relating to the validity of wills or of other acts by virtue of which assets are transferred to the trustee". Those words, in our judgment, should be construed as meaning what they say, namely that the article is concerned with "preliminary issues" (as Professor von Overbeck pointed out) relating to acts by virtue of which "assets are transferred to the trustee" (our emphasis). The declarations of trust do not actually or purportedly transfer anything to the trustee. Adopting the most purposive possible construction, one is forced to the conclusion that the line is to be drawn once the assets have been transferred to the trustee, whether or not that distinction is entirely logical for all purposes.
51. We have no difficulty accepting the dictum of Lord Hodge in Rangers as explained in the latest views of Professors Hayton and Harris when they opine that the lex situs must govern whether the trustee has the capacity to alienate the property at all. It would, as they say, make no sense to hold that a trust could be created by a person who owned inalienable property. But in our judgment, once it is clear that the trust property can be alienated in some form according to the lex situs, that law cannot govern the trust or its validity or effects. All that must be a matter for the law identified by Chapter II of the Convention.
52. Applying these conclusions to this case, it is relatively clear that the declarations of trust in the later transactions cannot sensibly be described as "act[s] by virtue of which assets are transferred to the trustee", since Mr Al-Sanea always owned the shares in question, and was merely declaring that he now held them beneficially for SICL.
53. We should not leave this aspect of the case without making reference to the Chancellor's approach and to the cases of Macmillan supra and Glencore International A.G. & others v. Metro Trading International Inc. [2001] 1 Lloyd's Rep 284. The Chancellor's perspective was that Macmillan decided that the lex situs applied to the ownership of shares, and that that should apply as much to the purported alienation of an equitable interest as to an outright transfer. The formal requirements of the Saudi Arabian Tadawul and SDC seem to have been uppermost in his mind (see paragraph 56). He was, however, only considering article 15 (to which we shall come under issue 2 below) not article 4. For our part, we would not question his conclusion that English law requires the court to look to the lex situs to determine the ownership of shares. Even though Macmillan concerned priority issues, support for the Chancellor's conclusion is found in the dicta at pages 399F, 405B, 411E and 424G-H of the Court of Appeal's judgments.
54. In our judgment, however, the Chancellor was addressing the wrong question because of the way the argument had been addressed to him. The question ought not to have been the one, at large, of whether English conflicts rules would generally require the ownership of shares to be determined by the lex situs, but the specific one of whether the alienation of the equitable interests under the declarations of trust in the later transactions (and the trusts in the earlier transactions) were excluded from the provisions of the Convention by article 4. In our judgment, for the reasons we have given, they were not.
55. In Glencore, Moore-Bick J (as he then was) also had cause to consider the lex situs rule. He said this at page 294 (2^nd column): "[t]he lex situs rule has been justified on two main grounds. The first is that it accords with the natural expectations of reasonable men and facilitates business. In Re Anziani [[1930] 1 Ch. 407] Mr Justice Maugham pithily observed that "business could not be carried on if that were not so". This reflects the natural expectation that a transaction which is effective to transfer title to goods by the law of the country in which they are situated will vest a good title in the transferee which will be recognised generally". These are powerful observations. But we do not think they impact on what has to be decided here. Provided that the property that is made the subject of a trust can be alienated at all under the lex situs, questions as to the validity and effect of placing such assets in trust, even though the assets are shares in a civil law jurisdiction, can be determined by the governing law of the trust. To put the matter in the context of this case, the declarations of trust will not be dividing the equitable and legal interests in the Shares under Saudi Arabian law. That is not possible. But the declarations of trust may give SICL rights under the trust in respect of those shares that will have to be determined by the governing law of the trust, taking into account that, under Saudi Arabian law, a division of equitable and legal interests is not possible. All these matters will have to be worked out at the next stage of this litigation when the court comes to consider the effect on the rights granted by the declarations of trust of the Transfer to Samba which took effect under Saudi Arabian law.
56. Since the lex situs only governs the transfer of assets to the trustee, and the 6 transactions either validly transferred some of the Shares to Mr Al-Sanea under Saudi Arabian law or left others of the Shares validly in his name, it is not necessary for us to consider the other rules of Saudi Arabian law that Samba asked us to take into account. The rules about foreigners not being able to own shares and the need for registration of shares do not deprive Mr Al-Sanea of the right to alienate the Shares at all under Saudi Arabian law. They cannot, therefore, invalidate the trusts by virtue of article 4.
57. In our judgment, therefore, this issue must be answered in favour of SICL. Assuming that the governing law of these trusts is Cayman Islands law, article 4 does not operate to exclude the application of the Convention to the declarations of trust under the 6 transactions. The validity and effect of the trusts will, on that assumption, be governed by Cayman Islands law. That law will, therefore, govern the capacity of Mr Al-Sanea to alienate an interest in the Shares by way of declaration of trust, and the transfer of the beneficial interest to SICL effected by the declarations of trust. For the reasons we have given, we do not accept the liquidators' submission that the capacity of the settlor to alienate the property at all is governed by the law of the trust.

Issues 2 and 3: Does article 15 mean that mandatory rules of Saudi Arabian law must be applied to the purported transfers of the beneficial interests in the Shares under the declarations of trust? Ought a final view to have been formed on a stay application?

58. We can consider these two issues together. The Chancellor considered issue 2 at paragraphs 59-63 of his judgment concluding that, since it was the liquidators' case that the effect of the seven transactions was to vest the beneficial entitlement to the Shares in SICL, that process fell within the words "transfer of title to property" in article 15(d) of the Convention, making the common law conflicts rules applicable to the transactions and, therefore, to the title to the Shares.
59. Mr Mark Hapgood QC, counsel for Samba, supported the Chancellor's reasoning, but ultimately argued before us that article 4 was determinative, and that it seamlessly merged into the application of article 15, which had the same effect even if article 4 did not.
60. There is some academic support for Mr Hapgood's argument. The Chancellor referred to Professor Harris's 2002 text on "The Hague Trusts Convention: Scope, Application and Preliminary Issues", where he said at page 373 that "[t]his important provision [article 15(d)] preserves the application of mandatory rules concerning transfer of title to property and security interests in property". Professor Harris continued at page 374 as follows:-

"Article 15(1)(d) cannot be concerned solely with the transfer of property to the trustee, since this is a "rocket-launching" matter and outside the scope of the Convention. For common law trusts, it is more naturally to be applied to questions of transfer of equitable title to the beneficiary. Questions such as whether equitable title has vested in the beneficiary and at what stage, whether the beneficiary's interest in the property transferred is immediate, contingent or determinable and whether a beneficiary absolutely entitled can terminate the trust and call for the trust property to be transferred to him might be covered by this provision. In the case of transfers of beneficial title to land, the lex situs may well have something to say. However, since the concern is only with questions appertaining to the transfer and the interest that it creates, not with property more generally, it would appear that many questions which one might naturally wish to refer to the lex situs, such as whether the beneficiary has a right to occupy the land, are not within the scope of Article 15(1)(d)."

61. Moreover, in the Rangers case, Lord Hodge also considered article 15 obiter saying this at paragraph 25:-

"… I am inclined to accept … [the] submission that in the context of a Convention which covered both civilian and common law systems it would not be appropriate to take a technical view of the concept of property in art.15(d). It would therefore include the change in the capacity in which a person held assets if that change could have "proprietary" effects in an insolvency."

62. In our judgment, it is important to see article 15 in context. It is certainly concerned with the operation of the trust after it has been established as Professor Harris pointed out. But to understand article 15, one needs to look at the other sub-articles that are concerned, for example, with the protection of minors, the effects of marriage, succession rights, and protection of creditors. The objective is plainly to preserve the application of mandatory rules of the lex situs as distinct from the law governing the trust. In other words, the law of the trust is not to override the non-derogable rights of, for example, a wife or a child entitled to an inheritance. Equally, the law of the trust is not to override the mandatory rules of the lex situs concerning "transfers of title to property". Thus, if there were formal requirements for conveyancing of real property, the law of the trust could not be used to say that such formalities did not need to be complied with in order to transfer property situated in a country with such mandatory rules.
63. In this case, Samba contends that the Chancellor ought to have held that 4 mandatory rules of Saudi Arabian law were applicable under article 15. First, the rule that the Chancellor did purport to apply, namely that applicable to the disputed title to shares; secondly, the rule that no equitable title separate from the legal title is recognised; thirdly, the rule that foreigners cannot own shares in Saudi Arabia and that fronting arrangements are illegal; and fourthly, that the registration of shares in Saudi Arabian listed companies is conclusive evidence of title. All these mandatory rules of Saudi Arabian law, according to Samba, lead to the conclusion that SICL can have had no proprietary interest in the Shares.
64. The problem with these arguments is that they require a detailed and specific understanding of Saudi Arabian law that was never explored before the Chancellor. We cannot imagine how such questions could have been determined without cross-examination of the expert witnesses. Whilst the points are all in themselves prima facie arguable, there was no evidence at all before the Chancellor as to whether the rules of Saudi Arabian law in question were mandatory or not; in other words, whether there was anything stopping a Saudi Arabian citizen under Saudi Arabian law from declaring a trust of Saudi Arabian assets under a regime governed by another law.
65. In our judgment, each of the alleged rules raises more questions than it answers:-

i) Saudi Arabian law may judge that the Shares are owned indivisibly by Mr Al-Sanea as much after the 6 transactions as before. But it is by no means clear that that is because of a mandatory or non-derogable rule of Saudi Arabian law. Nor is it clear, as we have said, that it is not open to a Saudi Arabian citizen in Mr Al-Sanea's position validly to enter into arrangements like the 6 transactions, and in particular the declarations of trust.

ii) It may be that the rule of Saudi Arabian law that no equitable title separate from the legal title is recognised would prevail in Saudi Arabia. But again, that does not answer the question of whether it is possible for a Saudi Arabian citizen validly to enter into the 6 transactions, nor whether the rule in question is mandatory.

iii) The same points apply to the Saudi Arabian rule that foreigners cannot own shares in Saudi Arabia and that fronting arrangements are illegal. It could not have been determined at this stage in the proceedings whether it was possible validly to circumvent the rule by entering into the 6 transactions or whether the rule was mandatory. The Chancellor himself acknowledged that the 6 transactions appeared to contemplate their own validity and legality, which makes it all the more important that these questions are determined at a trial.

iv) Finally, one may not doubt that the Saudi Arabian rule that the registration of shares in Saudi Arabian listed companies is conclusive evidence of title would be applied in Saudi Arabia, but that does not answer either of the two questions we have raised in relation to the other points above.

66. In these circumstances, we do not think it was satisfactory on a stay or a summary judgment application to determine whether article 15 applied in this case. The mandatory nature of the supposed Saudi Arabian law rules was not explored in the expert evidence. Moreover, it seems to us that it would be better for the interaction between (i) the application of the governing law of the trust to the validity, construction and effects of the trust under article 8, and (ii) the supposed application of article 15(d) to the transfer of the beneficial interest in the Shares to SICL, to be decided at a trial after all appropriate evidence had been heard.
67. Again, we would emphasise that the Chancellor was in a difficult position, since he did not hear argument on article 4, which would have highlighted where preliminary matters in relation to a trust ended and the validity, construction and effects of the trust began. The scope of article 15 needs to be determined in the light of that starting point. For that reason, we think it preferable to leave over any final determination of article 15's applicability to the transfer of the equitable interest under these declarations of trust until a determination on full evidence.

Issues 4 and 5: Did articles 6 and 7 apply Saudi Arabian law anyway? Ought a final view to have been formed on a stay application?

68. The liquidators' main submission under these issues was that, applying articles 6 and 7, it was at least arguable that Cayman Islands law applied as the governing law of each of the declarations of trust. Mr Howard freely acknowledged that he would have something of an uphill struggle under article 6 to establish that the specific choice of law clause incorporated into the early transactions should be overridden, bearing in mind its express reference to "the relationship of the parties in connection with the subject matter of this Agreement" being governed by Saudi Arabian or Bahraini law. He contended, however, that there was no such difficulty with the free-standing declarations of trust in the later transactions, which were drafted in common law language and had no express choice of law at all.
69. Mr Howard submitted that, where the Chancellor had concluded in paragraph 66 of his judgment that there were "strong grounds for concluding that [the last three of the later transactions] contained an implied choice of Saudi Arabian or Bahraini law", it was an inevitable inference that it was at least arguable that there was an implied choice of Cayman Islands law in relation to those transactions instead. That, he submitted, was enough for his purposes. But he went on to criticise the Chancellor for then assuming in favour of Samba that all the transactions contained an express or implied choice of Saudi Arabian or Bahraini law, so as to allow him to move from article 6 to article 7 because of the provision in article 6 that "[w]here the law chosen under [article 6] does not provide for trusts …, the choice shall not be effective and the law specified in article 7 shall apply". Mr Howard submitted that the assumption should have been against Samba, not in its favour, when it was the party seeking to put an end to the proceedings.
70. In relation to the application of the "most closely connected test" in article 7, the liquidators contend, in essence, that the Chancellor confused the 6 transactions with the trusts themselves. The four factors in article 7 have nothing to do with the underlying transactions, only with the trusts established by them. They submit that he gave insufficient weight to the fact that the declarations of trust are written in English and in common law style, and to the fact they obviously intended to create a common law style trust. He should have construed the "objects of the trust" as referring only to the beneficiaries. Finally, the Chancellor relied inappropriately on the case of Martin v. Secretary of State for Work and Pensions [2009] EWCA Civ 1289, and paragraph 61 of Professor von Overbeck's Explanatory Report on the Convention.
71. In our judgment, the Chancellor was right to think that disputed questions of Saudi Arabian law could not be determined on a stay application. The question, however, was whether the exercise under articles 6 and 7 was inevitably going to result in the application of Saudi Arabian or Bahraini law to each of the declarations of trust. In our judgment, it was not.
72. We start by considering the free-standing declarations of trust under the later transactions. These documents contained, as we have said, no express choice of law. The first step under article 6 is to seek to identify the law chosen by the settlor. That choice must be "express or be implied in the terms of the instrument creating or the writing evidencing the trust, interpreted, if necessary, in the light of the circumstances of the case". The Chancellor accepted that he could not reach a final decision as to the implied choice for the later transactions. We think he was right. It must at least be arguable that it is to be implied from the terms of the declarations of trust in the later transactions that they were to be governed by a common law legal regime that would validate them, most likely Cayman Islands law. This question needs, as we have said, to be determined in the light of "the circumstances of the case". Such an exercise cannot sensibly be undertaken in the absence of full evidence and cross-examination as to the circumstances in which the transactions came about.
73. In the event that there was an implied choice of Cayman Islands law in the declarations of trust for the later transactions, there would be no occasion to move to consider article 7 at all, because Cayman Islands law does provide for "trusts or the category of trusts involved". In relation to the later transactions, that would therefore be an end of the matter.
74. We accept that the matter is less clear cut in relation to the two early transactions, but it seems to us that it would be undesirable to stay a part of the proceedings even if it looked likely that one third of the trusts concerned representing some 28% by value would turn out under article 6 to be governed by Saudi Arabian or Bahraini law. The background to the early transactions and the later transactions are likely to be intimately inter-related.
75. If Saudi Arabian law applied under article 6, of course, it would be necessary to proceed to consider article 7 in respect of those early transactions because Saudi Arabian law probably does not provide for "trusts or the category of trusts involved". But even that is uncertain, as the Chancellor said, because of Samba's contention that the transactions could amount to an amaana under Saudi Arabian law, and an amaana might fall within the definition in article 2.
76. We would prefer to express no view on the outcome of an application of article 7, since in our judgment there needs to be a trial of the questions raised by the liquidators' application in any event. The factors mentioned in article 7 would be better applied to the facts as found after the evidence has been heard than on the limited factual material available at this stage of the proceedings.
77. There was a lively debate before us as to the proper construction of the fourth factor under article 7, namely "the objects of the trust and the place where they are to be fulfilled". The Chancellor took those words to mean or to include the wider purpose of the trusts which he said was to circumvent the restrictions under Saudi Arabian foreign investment regulations on foreigners investing in Saudi Arabian companies. We would prefer to express no concluded view for the reasons we have given. At the very least, however, it seems to us that the objects of the trust must include the intention to benefit the beneficiaries (see Snell's Equity 32^nd edition at paragraphs 22-021ff).
78. In our judgment, bearing in mind our decisions under articles 4, 15 and 6, it was not necessary to decide the difficult factual question of the applicable law of the trusts under article 7 on this application. Even assuming, however, that the Chancellor was right to hold that article 7 pointed to Saudi Arabian law, that was not an end of the matter, because article 5 was then arguably engaged. We turn then to consider article 5 under issue 6.

Issue 6: Did article 5 anyway disapply the Convention, so that common law rules applied, and they mandated the application of Saudi Arabian law?

79. The Chancellor did not consider article 5 that excludes the application of the Convention "to the extent that the law specified by Chapter II does not provide for trusts or the category of trusts involved". Samba submits that, on the assumption that the trusts were not amaana, the Chancellor should have gone on to decide the applicable law under the common law rules that look to the law with which the trusts have their closest and most real connection. It is said that that law is obviously Saudi Arabian law.
80. In our judgment, this question also cannot be determined on a stay application. It will require evidence as to the background to the 6 transactions. Like the other disputed matters we have already alluded to, it will be better decided at a full evidential hearing if it arises at all.

Conclusions

81. Ultimately Samba did not proceed with its challenge to the Chancellor's alternative determination that, if it had been reasonably arguable that Cayman Islands law applied, he would not have granted a stay. We think that was a sound decision, since it would have been extremely difficult to displace the Chancellor's discretion on the point.
82. For the reasons we have given, therefore, we have concluded as follows:-

i) On the assumption that the governing law of the declarations of trust is Cayman Islands law, article 4 does not operate to exclude the application of the Convention to the declarations of trust under the 6 transactions. Whilst Saudi Arabian law as the lex situs would still govern the question of whether Mr Al-Sanea had capacity to alienate the Shares at all, Cayman Islands law would govern the capacity of Mr Al-Sanea to alienate an interest in the Shares by way of declaration of trust, and the transfer of the beneficial interest effected by the declarations of trust.

ii) It was not appropriate in this case to determine on a stay or summary judgment application whether article 15 applied to the transfer of the equitable interests under the declarations of trust, because (i) the mandatory nature of the Saudi Arabian law rules was not explored in the expert evidence, and (ii) it would be better for the interaction between the application of the governing law of the trust to the validity, construction and effects of the trust under article 8, and the application of article 15(d) to the transfer of the beneficial interest in the Shares to SICL, to be decided after a full evidential hearing.

iii) It is at least arguable that it is to be implied from the terms of the declarations of trust in the later transactions that they were to be governed by Cayman Islands law under article 6. In that event, article 7 would not be engaged for those later declarations of trust. It would be better for all questions under articles 5, 6 and 7 to be determined after a full evidential hearing in the light of all the circumstances of the case.

83. Before leaving this appeal, we would like to pay tribute to the most helpful and insightful arguments of leading counsel on both sides of this appeal and to the industry of their juniors and solicitors. We have derived great assistance from the parties' lawyers and could not have dealt with this case nearly as expeditiously without it.
84. For the reasons we have given, we will allow the appeal, and lift the stay imposed by the Chancellor.