Trusts instruments are nowadays widely used for commercial purposes. Although news coverage surrounding offshore leaks have had a negative impact on the public perception of trusts, this is but one very specific aspect of trusts and disregards the fact that trusts are used for many legitimate purposes and with full fiscal transparency. The article explains the characteristics of trusts and the fact that in recent years they have reached civil law legal systems and are no longer confined within their traditional borders of common law. The Hague Convention on the Law Applicable to Trusts and their Recognition has promoted an increased acceptance of trusts in many countries across civil law and common law jurisdictions.
Trust disputes broadly fall into three categories: (i) internal trust disputes, i.e. disputes with regard to the trust based on which the trustee holds the subject matter of the settlement; (ii) disputes between the trustee and the beneficiaries regarding e.g. a breach of trust by the trustee, the exercise of power by the trustee; and (iii) disputes with third parties who are not beneficiaries. Only the first two categories are dealt with in this article, as they create interesting and challenging issues to be addressed in arbitration proceedings. Such issues are, in particular, the effectiveness of arbitration clauses placed in the trust instrument which is typically only signed by the settlor. Other specific topics related to the arbitration of trust disputes are the arbitrability of trust matters, e.g. the dispute about information rights of a beneficiary or the application by the trustee pertaining to the interpretation of a trust provision, and the representation of beneficiaries in the proceedings including unascertained, unborn, minor or incapable beneficiaries. As trust disputes frequently involve complex legal and financial issues with connections to different countries and their laws, and with parties and assets in various jurisdictions, arbitration appears to be a viable method to resolve such disputes, in particular as it allows to concentrate the proceedings in one forum and provides for an individually structured process capable of dealing with the specific issues related to trust disputes.
The article refers to a number of trust laws and arbitration laws of different jurisdictions that address arbitration in the trust context, providing examples how the specific issues of trust arbitration can be dealt with.ASA Bulletin