A trust contract is the main basis for regulating the rights and obligations among the trustor, beneficiary and trustee, in which the trustee often holds the dominant position in the whole trust scheme. As the legal owner of the trust property, the trustee shall actually possess the trust property and operate, manage and dispose of it at his/her discretion. Beneficiaries can only realise trust interests indirectly based on the legal relationship with the trustee.

The trustee is usually the actual creator of the trust scheme and, apart from the trust contract that binds the trustee and his/her fiduciary duty, it seems that there is no other effective constraint to the trustee. The greater the trustee’s right, the higher the risk involving the beneficiary’s right to the trust property.

Article 10 of the Trust Law provides for the system of trust property registration, and takes trust registration as a prerequisite for granting trust validity when laws and administrative regulations have so provided. Chapter 3 of the Trust Law stipulates the principle of relative independence of the trust property, which distinguishes the trust property from the trustee’s own property.

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Wang Yan is a case manager at the Beijing Arbitration Commission/Beijing International Arbitration Centre (BAC/BIAC).

Gao Zhuang, a case manager at BAC/BIAC, also contributed to the article

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