International Trust Arbitration Organisation

ITAO: Welcome

The International Trust Arbitration Organisation (ITAO) is an independent body promoting ADR for fiduciary arrangements of mostly Commonwealth jurisdictions. It was set up by an Anglo-Swiss family office specialising in trust protectorships. Through the work of its Council, ITAO has direct access to the world's leading experts on common law trust arbitration.

FAQS ON THE ARBITRATION OF TRUST DISPUTES

1. What is trust arbitration, and why is it increasingly favoured in the Bahamas?

Trust arbitration is a method of resolving trust disputes outside the public court system. The Bahamas as an arbitral seat has enacted specific statutory reforms within its arbitration code to facilitate this process. It provides a private forum for high-net-worth families to resolve complex fiduciary matters away from the 'shame of publicity' often associated with traditional litigation.

2. Is a trust deed considered a contract for the purposes of arbitration?

This is a point of significant doctrinal debate. Whilst experts like Langbein suggest a contractual parallel, most common law jurisdictions maintain that a trust is a gift-based relationship rather than a consensual contract. However, the Bahamas resolved this technicality in 2011 by enacting legislation which deems an arbitration clause within a trust deed to be an 'arbitration agreement' as a matter of law, ensuring it fits within the modern arbitral framework.

3. How does the ‘mutual assent’ approach bind a beneficiary to an arbitration clause?

The ‘mutual assent’ approach, famously upheld in the Texan case of Rachal v Reitz (2013), posits that no person is required to accept the status of a beneficiary. If he chose to assert an entitlement under the trust, he would signify his implicit wish to take the benefit of the instrument. In doing so, he is deemed to have agreed to all its terms, including the mandate to arbitrate.

4. Can an arbitration clause in a trust bind minor or unborn beneficiaries?

This remains one of the thorniest of issues. Because a minor or an unborn person lacks the capacity to signify assent, his interests must be protected through representation. Legislation, such as in the Bahamas and New Zealand, allow for the appointment of representatives to bind such a party, thereby ensuring that the resulting arbitral award were conclusive and incapable of being reopened once the minor reached majority.

5. Does the Bahamas provide for the stay of court proceedings in favour of arbitration?

Yes. Where a trust governed by Bahamian law contained an express arbitration provision, the courts would have the statutory power to stay any litigation commenced in defiance of that clause. This option would ensure that the settlor’s intent were respected and that the 'interlocking obligations' of the trust were resolved in the chosen private forum.

6. What are the primary advantages of arbitrating a trust dispute over litigating it?

The primary advantages include:

Confidentiality: Avoiding the 'shame of publicity' and the trend toward 'open justice' in courts.
Expertise: The ability to select an adjudicator who understood complex fiduciary law and cultural sensitivities.
Speed: A process that could be much quicker than court proceedings, especially if appeals were restricted.
Enforceability: The potential for global recognition under the New York Convention 1958.

7. What is the significance of the New York Convention 1958 for trust awards?

The New York Convention provides a framework for the recognition of arbitral awards across 168 jurisdictions. For a trust award to be enforceable, it must be seen as arising from a 'written agreement'.

8. Is Liechtenstein a suitable venue for arbitration even if it were not the arbitral seat? Liechtenstein is increasingly regarded as a premier venue for the physical conduct of proceedings, even when the legal seat of arbitration were located elsewhere. Whilst the 'seat' determines the procedural law and the court of supervisory jurisdiction, the 'venue' is merely the geographical location where hearings occurred. Arbitration is already routine within the Principality, particularly concerning foundations (Stiftungen); indeed, the Liechtenstein Code of Civil Procedure explicitly recognises the validity of arbitration clauses in foundation and trust deeds under Section 634(2). The jurisdiction offers a developed infrastructure of specialist practitioners with a tradition of confidentiality.

9. What is the role of the ‘Trust Protector’ in these disputes?

A trust protector is given specific powers to oversee trustees. In a contentious context, he could be a party to the arbitration or the one to trigger the arbitration clause. His involvement would add a layer of bespoke governance which would be difficult to replicate in standard court proceedings.

ITAO: About