Where asset protection for a principal with the CIS exposure stands now

A principal whose wealth originates in the Commonwealth of Independent States and whose family, assets and operating interests span multiple jurisdictions faces a structuring problem that no single legal system resolves cleanly. The question is not whether to protect assets. The question is which instruments survive scrutiny across the CIS home jurisdiction, the holding-centre layer – typically Hong Kong, the British Virgin Islands or the Cayman Islands – and the family's country of residence, which may be a third state entirely.

Asset protection for a principal with CIS (Commonwealth of Independent States, the grouping of successor states to the former Soviet Union, including Russia, Kazakhstan, Ukraine, Azerbaijan and their neighbours) exposure turns on three intersecting problems: the reach of home-jurisdiction enforcement, the recognition of foreign trust and holding structures across jurisdictions the family actually inhabits, and the interaction between succession law – including forced heirship (the civil-law doctrine mandating minimum shares of an estate to specified heirs, irrespective of testamentary intent) – and the common-law trust instruments used at the holding layer. Since the Trustee Ordinance reform took full effect on 1 December 2013, Hong Kong has offered a codified statutory answer to several of these problems. Whether that answer holds depends on the specific jurisdictions engaged and the sequence in which the structure was built.

This analysis covers what is actually at stake commercially, the governing instruments and where the cross-border interface bites, the comparative position across CIS home jurisdictions and Hong Kong, and our read on where the risk concentrates now. We draw on our cross-border practice advising principals, family offices and their counsel on private wealth structures with Greater China and offshore exposure.

What is commercially at stake for a CIS principal today?

The stakes are not abstract. A CIS-origin principal who has built operating businesses over two or three decades typically holds those assets through a layered structure: onshore operating entities in one or more CIS states, a mid-layer holding company in a European or offshore jurisdiction, and a top-layer trust or foundation. The purpose of that structure is to separate legal ownership from beneficial enjoyment, to compress succession complexity, and – critically – to put assets beyond the reach of adverse judgment creditors or political actors in the home jurisdiction.

That purpose is under pressure from several directions at once. Enforcement reach has extended materially. Several CIS jurisdictions have amended civil procedure legislation to facilitate recognition of foreign judgments, expanding the theoretical pool of creditor tools. At the same time, Western European and offshore jurisdictions have tightened beneficial ownership (the regime requiring disclosure of the natural person who ultimately owns or controls an asset or entity) registers and reporting obligations, reducing the practical opacity that many structures historically relied upon.

The family dimension compounds the legal one. A CIS principal in their late fifties or sixties frequently has children with different nationalities and domiciles: one in London, one in Dubai, one still running operations in Almaty or Kyiv. Each of those children sits in a different forced-heirship regime or, if in a common-law state, in no forced-heirship regime at all. A structure that resolves succession for the English-domiciled child may create a forced-heirship claim for the Kazakhstan-domiciled one. Our desk sees this cross-family map problem regularly, and it is rarely addressed comprehensively at the time the structure is established.

The commercial question is therefore not only whether the structure holds at the point of enforcement. It is whether the structure holds at the point of death, at the point of divorce, and at the point of a political or regulatory event in the home jurisdiction – three distinct stress tests that do not always load from the same direction.

What are the governing instruments and how does the cross-border interface bite?

The primary instrument for Hong Kong-law asset protection structures is the Trustee Ordinance (Cap. 29), as substantially reformed with effect from 1 December 2013. The reform introduced three provisions that matter specifically to the CIS-exposure principal.

First, the rule against perpetuities and excessive accumulations was abolished for Hong Kong trusts. A trust governed by Hong Kong law can now run indefinitely, which matters for structures designed to hold operating-business interests across generations rather than for a fixed term.

Second, the reformed Ordinance provides statutory protection for settlor reserved powers. A trust is not invalidated solely because the settlor (the person who establishes and funds a trust) has reserved certain powers – including, in defined circumstances, powers to direct investments, add or remove beneficiaries, or revoke the trust. This is commercially critical for a CIS-origin principal who is also the operating head of the business and is unwilling to cede complete control at the moment of settlement.

Third, and most consequentially for CIS exposure, the 2013 reform strengthened Hong Kong's statutory firewall against foreign forced-heirship claims. A Hong Kong-law trust is not invalidated, and its terms are not overridden, by the forced-heirship or legitime (the minimum compulsory share of an estate under civil law) rules of a foreign jurisdiction, provided the Ordinance's conditions are met. Hong Kong law has no domestic forced-heirship regime. That combination – a firewall provision plus no domestic equivalent rule – is materially more protective than the position in many European or civil-law-adjacent jurisdictions.

The cross-border interface bites at several points. First, the firewall is only as effective as the governing law selection in the trust deed. If a trust purports to be governed by Hong Kong law but the settlor's domicile or the asset situs creates a connecting factor that a foreign court applies to override the governing law clause, the protection erodes. CIS states generally apply their own conflict-of-laws rules to succession, and those rules may treat the law of the deceased's last habitual residence or citizenship as governing, regardless of the trust deed.

Second, the reserved-powers protection in the Ordinance applies to the trust's validity under Hong Kong law. A separate question – one frequently missed by structures built without specialist cross-border input – is whether a CIS home jurisdiction treats the reserved-powers trust as a trust at all, or whether it re-characterises the arrangement as a disguised agency or sham, bringing the assets back within the settlor's taxable or attachable estate. Several CIS states do not have a domestic trust concept and their courts apply an analogy-based approach that is difficult to predict.

Third, interim enforcement. Even if a Hong Kong-law trust is ultimately upheld on its merits, a creditor with a judgment from a CIS home jurisdiction may seek interim measures – asset freezes, injunctions – in jurisdictions where the trust's assets or sub-entities are registered. The BVI and the Cayman Islands have both seen applications of this kind. The procedural contest around interim measures, rather than the substantive trust dispute, is often where the cost and disruption is felt.

How does the CIS legal environment compare with the Hong Kong position?

The starting point is that most CIS states are civil-law jurisdictions with inheritance codes that include forced-heirship entitlements for children, spouses and, in some states, parents of the deceased. The percentage varies by state and by the circumstances of the estate, but the concept is structurally the same: certain heirs have a claim that cannot be defeated by testamentary disposition alone.

That forced-heirship rule operates differently depending on how the CIS state characterises the asset. If the state characterises assets held through a foreign trust as still belonging beneficially to the settlor – because the trust concept is unfamiliar or because the reserved powers are read as inconsistent with a genuine transfer – then those assets fall within the forced-heirship calculation on death. The trust wrapper is simply disregarded. The 2013 Hong Kong reform was designed precisely to resist this outcome under Hong Kong law, but Hong Kong law is not the law of Kazakhstan or Russia or Ukraine.

The practical consequence is a structural gap between the legal protection the trust appears to offer and the protection actually available when enforcement is attempted in the CIS home jurisdiction. A creditor or an aggrieved heir does not need to attack the trust directly in Hong Kong if the operating assets or the principal's personal residence remain within CIS-jurisdiction reach. The attack comes at the asset level, not the trust level, and the trust's governing law does not resolve it.

Kazakhstan illustrates the position. It has codified rules on the recognition of foreign judgments and has a forced-heirship regime covering children and spouses. It does not have a domestic trust statute, though it has introduced limited fiduciary-management concepts. A Kazakh-origin principal who settles a Hong Kong-law trust but retains Kazakh operating assets, holds Kazakh real property personally, and is treated as habitually resident in Kazakhstan for civil-procedure purposes has a structure whose protection is, at best, partial in the jurisdiction where the most significant assets and the most credible enforcement risk actually sit.

Russia presents a different but related set of issues. The enforcement environment has shifted materially over the period since 2022. Principals with significant Russian-nexus assets and international holding structures have faced a set of pressures – regulatory, political and judicial – that are factually distinct from the trust-and-forced-heirship issues, though they interact with them. Our desk does not advise on circumventing any legal or regulatory regime; we advise on the compliance and structural position as it actually stands.

Hong Kong sits in a different tradition. As a common-law jurisdiction with no forced-heirship rule, no capital gains tax, no withholding tax on dividends, and a profits tax regime based on territorial sourcing, it offers a structurally distinct environment for the holding and succession layer. The question for the CIS-origin principal is how effectively the Hong Kong-law structure connects to, and provides genuine protection from, the home-jurisdiction risks. That question cannot be answered by examining the trust deed alone.

Where does the risk actually concentrate now?

In our cross-border practice, the risk concentrations we see in CIS-exposure structures tend to cluster in three areas. They are not always the areas that received the most attention when the structure was originally built.

Domicile and residence misalignment. The Hong Kong trust's firewall protection operates on the assumption that Hong Kong law governs succession to the trust assets. But if the principal dies domiciled in a CIS state – or if a CIS court characterises the principal as domiciled there, which is a factual determination that can differ from the principal's own view – that court may apply its own succession law to determine what, if anything, the trust can hold free of forced-heirship claims. The mismatch between where the principal thinks they are domiciled and where a court of enforcement concludes they were domiciled at death is one of the most consistent sources of structural failure we encounter. It is also one of the least glamorous to address, because it requires sustained attention to the principal's physical presence, social and business ties, and documentary record over years rather than a single structuring transaction.

The reserved-powers problem at the interface. The statutory reserved-powers protection in the Trustee Ordinance has made Hong Kong-law trusts significantly more commercially viable for operational principals who cannot practically relinquish control of the underlying business. But the same reserved powers that make the trust workable for the settlor in practice are the features that give a CIS enforcement creditor the strongest argument for re-characterisation. If the settlor directs every investment decision, can add and remove beneficiaries, and holds a power of revocation, the practical reality of control may lead a CIS-jurisdiction court to look through the trust structure entirely. The risk is not that the Hong Kong court will agree with that characterisation – it likely will not, if the trust is properly drafted. The risk is that the CIS creditor does not need the Hong Kong court's agreement to freeze or seize the assets that sit within its jurisdiction.

The document and substance audit gap. Effective asset protection requires not only the right instruments but the right factual record to support them. A trust that exists on paper but whose minutes are not maintained, whose trustee has not exercised genuine discretion, whose letters of wishes are identical across multiple settlors handled by the same service provider, and whose bank accounts are operated entirely at the settlor's direction will be vulnerable under the laws of almost any jurisdiction. We regularly act on cross-border asset protection matters where the original structure was well designed in legal terms but the operational record supporting it is thin. Reconstructing that record retrospectively is difficult and, in an adversarial context, frequently unconvincing.

The enforcement route is a fourth area, distinct from the three above. Under the private wealth advisory work our desk carries out, enforcement-risk mapping is increasingly part of the initial structuring conversation rather than an afterthought. The question of whether a Hong Kong-court judgment, an offshore trustee's decision, or a foreign arbitral award can actually be given effect in the jurisdiction where the relevant assets sit is foundational. It is not resolved by the trust deed's choice of law.

What does this mean in practice for a principal re-examining their structure now?

The sequence of analysis we apply to a CIS-exposure structure that comes under review is deliberately jurisdictional-first rather than instrument-first. The instrument – the trust, the holding company, the family constitution – is assessed in light of what each relevant jurisdiction will actually do with it, not in light of what its governing law says about it.

Step one is mapping the jurisdictions engaged. Not the jurisdictions named in the trust deed or the holding-company register, but the jurisdictions where assets sit, where the principal is physically present, where family members are domiciled, and where a creditor or aggrieved heir could realistically bring a proceeding. For a CIS-origin principal, that map often runs to five or six jurisdictions – home state, holding centre, residence state, states of family members' domicile, and states where real property or significant financial assets are held.

Step two is assessing the conflict-of-laws position in each enforcement jurisdiction. Which law will that court apply to the question of whether the trust is valid, whether the forced-heirship claim succeeds, and whether the reservation of powers is consistent with a genuine trust? The answers vary materially across the CIS states and between civil-law and common-law jurisdictions.

Step three is reviewing the factual record against the legal structure. This is the substance audit: trustee minutes, investment decisions, letters of wishes, bank account operation, asset segregation. A structure that passes step two in legal analysis but fails step three on the factual record is not meaningfully protected.

Step four is enforcement mapping: if a dispute arises, who can sue where, under what procedural rules, and with what interim-measures tools? For Hong Kong-seated structures, the interim-measures Arrangement between Hong Kong and the Mainland – in effect since 1 October 2019 – is a relevant tool in the hands of a party seeking to preserve assets pending a Hong Kong arbitration. But most CIS-exposure disputes will not run through the Mainland courts; the relevant enforcement jurisdictions are different, and the available tools differ accordingly.

A micro-scenario illustrates the sequencing. A Central Asian industrial group principal, resident in a European jurisdiction but with Kazakh operating assets and a BVI-held Hong Kong-law trust settled some years earlier, came to our desk after a commercial dispute with a former partner threatened enforcement proceedings across multiple jurisdictions. The trust deed was well drafted; the Hong Kong-law reserved-powers provision was clearly engaged; the governing-law clause was unambiguous. The problem was the principal's domicile characterisation and a thin trustee minute-book that gave the opposing party a credible re-characterisation argument. We identified the sequence of steps – domicile analysis first, trustee-record reconstruction second, interim-measures assessment third – and prioritised the actions accordingly. The outcome was a stabilised position rather than a resolved one, which is the realistic objective when enforcement proceedings are already in motion.

A second illustration. A multi-generational Caucasian-origin family with members in three different states – one a common-law jurisdiction, two civil-law – had established a Hong Kong-law trust with a view to neutral-forum succession. The interaction between the Hong Kong trust's firewall provision and the civil-law forced-heirship claims of the two civil-law-resident family members had not been stress-tested. We modelled the conflict-of-laws outcome in each civil-law state and identified that one state's courts would likely apply their own succession law to assets situated there, regardless of the trust's governing law. The structuring response was to adjust the asset-holding layer so that the most significant assets in that jurisdiction were held through a corporate vehicle rather than directly in the trust, shifting the characterisation question from succession to company law and narrowing the forced-heirship exposure materially.

What foreign advisers and home-jurisdiction counsel frequently miss

We act alongside home-jurisdiction counsel and foreign advisers on a substantial number of CIS-exposure structures. The misunderstanding we encounter most often is not about the content of any particular law; it is about the scope of the legal question being answered.

Home-jurisdiction counsel in a CIS state may correctly advise that a foreign trust is valid under the law of the state governing the trust. That advice is accurate but incomplete. It does not address whether the trust will be recognised in the CIS state, whether the forced-heirship rules of the CIS state can reach the trust assets through the conflict-of-laws rules applied by the CIS courts, or whether the interim-measures tools available in the CIS state can freeze the assets pending a succession dispute.

Conversely, Hong Kong counsel may correctly advise that a Hong Kong-law trust with a reserved-powers provision is valid and that the firewall provision protects it from foreign forced-heirship override under Hong Kong law. That advice is also accurate but also incomplete. It does not address the enforcement position in the jurisdiction where the assets actually sit, or the domicile characterisation question, or the substance of the trustee's operational record.

The gap between these two accurate-but-incomplete pieces of advice is where the structure fails. Filling that gap requires a cross-border analytical layer that holds both positions simultaneously and tests each instrument against each enforcement jurisdiction's approach. That is the work our desk does on these matters.

A further point that home-jurisdiction counsel sometimes overlook: the beneficial ownership disclosure obligations now imposed by BVI, Cayman and European holding jurisdictions have materially changed the practical anonymity of layered structures. This does not affect the legal validity of the trust or the holding entity. It does affect the enforcement creditor's ability to identify the assets and the enforcement route. A structure designed in an environment of high documentary opacity may need to be reassessed in light of the current disclosure environment.

For principals who have reviewed their reserved-powers trust position in the context of a founder-controlled business, the CIS-exposure analysis adds a further dimension: the home-jurisdiction recognition question. The reserved-powers analysis appropriate for a trust holding a Hong Kong operating business is not the same analysis required when the operating assets are in Almaty or Baku and the enforcement risk runs through courts that have no trust statute.

The intersection with succession, residence and forced heirship across the family's map

The centre of gravity for the CIS-exposure private wealth practice is succession. Asset protection that works during the principal's lifetime but fails at death – or that is eroded by the costs of a succession dispute – has not achieved its purpose.

Succession planning for a CIS-origin principal requires a clear view of the law that will govern succession to each category of asset in each jurisdiction. That determination depends on the principal's domicile at death, the situs of each asset, and the conflict-of-laws rules of each relevant jurisdiction. These are not static. A principal's domicile changes with physical and intentional relocation. Asset situs changes with restructuring. The conflict-of-laws rules of CIS states have been amended over time, and the direction of travel has generally been towards greater assertion of home-jurisdiction succession rules over foreign-held assets.

The forced-heirship interaction is the most consistent pressure point. A principal with children in both common-law and civil-law jurisdictions faces a structurally asymmetric forced-heirship position: the common-law-resident children have no forced claim against the estate under their own jurisdiction's law, while the civil-law-resident children may have a claim under the CIS home jurisdiction's law, or under the civil-law residence jurisdiction's law, or both, depending on which conflict-of-laws rule prevails.

The structural response – building the Hong Kong-law trust's firewall provision into the asset-holding layer, achieving genuine trustee discretion over the distribution of assets, and maintaining a clean domicile record that supports the desired succession-law outcome – is well understood in principle. It is less well executed in practice, for the reasons this analysis has set out. The execution gap is where the risk now sits.

For principals who have considered the analysis in our extended treatment of reserved-powers trusts for founder-controlled businesses, the CIS dimension adds the home-jurisdiction recognition layer to what is already a complex structure. Addressing that layer requires specific analysis of the home jurisdiction's approach to foreign trusts, its succession and forced-heirship rules, and its enforcement-creditor tools. It cannot be done generically.

Our read: where the risk sits now and what to do about it

The enforceability of a CIS-origin principal's asset protection structure has become harder to take for granted. Several developments have converged: enhanced beneficial ownership disclosure in offshore holding jurisdictions, greater enforcement reach by sophisticated creditors using interim-measures tools across borders, heightened attention by CIS home-jurisdiction courts to foreign trust structures, and a general tightening of the documentary standards expected of trustee and company service providers.

Against that backdrop, the most consistent structural weaknesses we identify in existing CIS-exposure structures are: a domicile position that has not been maintained with the rigour required; a trustee minute-book that does not evidence genuine discretion; a reserved-powers architecture that was not tested against the home-jurisdiction re-characterisation risk; and a succession plan that addresses the common-law-resident family members but leaves the civil-law-resident family members' forced-heirship position unresolved.

The practical response is a structured review across those four dimensions before an enforcement event, not after it. The distinction matters. Once a creditor or aggrieved heir has commenced proceedings, the options narrow, the timelines compress, and the evidential record is fixed. A review conducted in advance – stress-testing the structure against the specific enforcement jurisdictions engaged, identifying the weakest points, and addressing them in the right order – is materially more effective and materially less costly than a defensive response to proceedings already under way.

The sequence that makes structural sense: domicile audit first, because it governs the succession-law outcome; substance review second, because it determines how a CIS court will characterise the trust; enforcement-route mapping third, because it identifies where the creditor can actually strike and what interim tools are available; and documentation alignment fourth, ensuring that the factual record supports the legal position across every jurisdiction where it matters.

The contextual bridge is important here. The sequence above describes the standard analytical approach. Your specific position will turn on the precise jurisdictions engaged, the specific CIS home state, the family's residence and domicile map, the documents in place, and the current factual record of trustee conduct. That specificity is where the route is won or lost – and it is where our desk focuses when we assess a cross-border structure of this kind.

If you are reviewing an existing structure or building a new one and the CIS exposure is a material factor, the time to conduct the analysis is now, not when enforcement proceedings are filed. Write to us at info@lockhartyip.com to discuss how the governing instruments and the cross-border enforcement position apply to your specific situation.

If an earlier structuring transaction, a trustee change, or a prior enforcement attempt has produced a stalled or adverse position, a fresh cross-border read can identify what the structural error was and which routes remain open. Email info@lockhartyip.com to start that conversation.

Related practices

• Private Wealth – succession, trust structures and asset protection across borders
• Holding Structures – offshore and Hong Kong holding vehicles for cross-border principals
• Disputes & Arbitration – enforcement and interim-measures strategy across jurisdictions

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This publication is general information and does not constitute legal advice. For advice on your situation, contact info@lockhartyip.com.