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The Future of Trust Disputes: Arbitration vs. Litigation
The Future of Trust Disputes: Arbitration vs. Litigation
Introduction:
Trust arbitration has gained renewed interest following the Volpi decision in The Bahamas. This decision, along with the evolving recognition of arbitration in various jurisdictions, prompted a debate during the London International Disputes Week. Chaired by Stella Mitchell-Voisin, CEO of Summit Trust International, the debate featured Anthony Poulton and Richard Molesworth of Baker McKenzie arguing for arbitration, and Dakis Hagen KC and Stephanie Thompson of Serle Court Chambers opposing it. The debate shed light on the potential advantages and challenges of trust arbitration.
The Current Landscape of Trust Disputes:
The traditional method of resolving trust disputes has been through litigation. Trust litigation involves a range of issues, from breach of trust claims and validity challenges to applications for trustee removals and the court’s supervisory jurisdiction over trustees' decisions. These disputes often span multiple generations and jurisdictions, making them complex and lengthy.
Arguments for Trust Arbitration:
Speed, Confidentiality, and Finality
Proponents argue that arbitration offers speed, confidentiality, and finality, which are crucial for trustees who seek discretion and swift resolution. Arbitration can provide a confidential forum for trust disputes, shielding sensitive family matters from public scrutiny. Additionally, arbitration awards are typically final and enforceable across borders under the New York Convention.
Flexibility in Arbitrator Selection
Another advantage is the freedom to choose arbitrators with specific expertise relevant to the trust dispute. This can lead to more informed and tailored decisions compared to traditional courts.
Challenges in Trust Arbitration:
Binding Beneficiaries
One of the central challenges is ensuring that all beneficiaries, including unborn or unascertained ones, are bound by the arbitration agreement. In traditional trust litigation, courts appoint representatives for these beneficiaries, but there is no similar mechanism in arbitration without express legislation.
Enforcement Issues
There are concerns about the enforceability of trust arbitration awards outside the jurisdiction of the trust. The New York Convention requires written agreements to submit disputes to arbitration, which may not include all beneficiaries in a trust context, posing a risk of parallel proceedings and unenforceable awards.
Practical Concerns
Practical issues arise from the need for specialized advice. Private client lawyers, who typically advise on trust deeds, may lack experience in the nuances of arbitration compared to litigation. This could lead to uninformed decisions by settlers.
Arguments Against Trust Arbitration:
Lack of Precedent and Tested Processes
Opponents argue that trust arbitration remains relatively untested and may not be suitable for the unique characteristics of trust disputes. Traditional courts have a wealth of precedent and procedural experience, making them better equipped to handle these complex cases.
Confidentiality Concerns
While arbitration offers confidentiality, this advantage may be compromised if an award is challenged in court, potentially exposing sensitive information.
Representation Issues
In arbitration, parties have the freedom to choose their representatives, but this may be difficult to achieve fairly for minors or unascertained beneficiaries, potentially disadvantaging them.
Conclusion:
The debate highlighted that while arbitration offers potential benefits such as speed, confidentiality, and flexibility, it also faces significant challenges in the context of trust disputes. The existing litigation system, with its established precedents and procedural expertise, remains robust. However, as interest in trust arbitration grows, it may become a viable alternative in specific circumstances, provided that the challenges can be adequately addressed. The future of trust dispute resolution may well see a more balanced approach, incorporating the strengths of both arbitration and litigation.
- Arbitration can provide a confidential forum for trust disputes, shielding sensitive family matters from public scrutiny.
- This can lead to more informed and tailored decisions compared to traditional courts.
- The New York Convention requires written agreements to submit disputes to arbitration, which may not include all beneficiaries in a trust context.
