The Duty of Loyalty in Chinese Trust Laws

Abstract

This article examines the meaning of the duty of loyalty as stipulated in the Trust Law of the People’s Republic of China and its supplementary regulations. The analysis of the ‘meaning’ here is based on an exploration of three specific questions: what is the content and scope of the duty of loyalty; what function(s) does the duty of loyalty perform; and, what remedies are available for breach of the duty of loyalty? Where appropriate, comparisons with the duty of loyalty in the Chinese Company Law and common law jurisdictions will be conducted to delineate the unique characteristics of the duty of loyalty in Chinese trust laws. Based on such analysis, this article then illustrates the relationship between the function(s) of the duty of loyalty and existing remedies available for breach of this duty. The aim of doing so is two-fold: to better understand what it is that distinguishes the duty of loyalty from other kinds of duties, and to identify the shortcomings that can be observed in the operation of the duty of loyalty in the current legal framework.