Arbitration clauses in trusts

Abstract

The recourse to Alternative dispute resolution processes whereby disputes are resolved away from the traditional channels of the court room has been the subject of recent debate and interest of a number of jurisdictions considering such alternatives in various fields of disputes. This interest has not been left unnoticed in the context of trust disputes. As the trust institute is gaining recognition, disputes concerning the trust are also an inevitable occurrence. Disputes arise both as between the trust and third parties referred to as external trust disputes and also as between persons in the internal relation to the trust which involves disputes betw~en trustees, protectors and beneficiaries what are referred to as internal trust disputes. As arbitration of external trust dispute arise by virtue of an arbitration agreement or an arbitration clause entered by third parties and the trust, arbitration of internal trust disputes may arise by means of an arbitration clause inserted by a settlor in the trust instrument. A settlor aware of the possible disputes which may arise in the internal relationship and also aware that once disputes arise it may be difficult to obtain the consent for arbitration, provides an arbitration clause which is binding on the parties before the dispute arises. In this manner settlor requires the mandatory subjection of trust disputes to arbitration which is binding on all trustees, protectors and any beneficiary. Due to the difficulties which are inherent in imposing arbitration on the parties, legislative action is essential in this regard. Difficulties such as the formal validity of an arbitration agreement and the manner as to how beneficiaries are bound by an arbitration clause most particularly when beneficiaries may not even be aware of the existence of the trust instrument are raised in this regard. An analysis as to how the Maltese legislator by means of Article 15A has sought to eliminate these doubts is undertaken. The issue of representation of particular interests in the proceedings is also analysed, a concern which unlike other jurisdictions has been left unaddressed by Article 15A. A view of the approaches taken by other jurisdictions in this regard is considered. After delving into the issue of arbitration clauses in trusts, this thesis concludes that by statutorily legislating on arbitration clauses it has removed doubts as to the validity or otherwise of such clauses. It is however a matter to be seen whether such clauses may be contested and the approach to be taken by the courts.