The Special Drafting Committee was constituted by:

  • Sophie Nappert, Task Force Co-Chair, Arbitrator, 3 Verulam Buildings Chambers, London
  • Tina Wüstemann, Task Force Co-Chair, Partner, Bär & Karrer, Zurich
  • David Brownbill QC, Barrister, XXIV Old Buildings, London
  • Hussein Haeri, Partner, Withers, London
  • Christopher Koch, Partner, Landolt & Koch, Geneva
  • Hélène van Lith, Secretary to the ICC Commission on Arbitration and ADR

The adjudication of trust disputes has traditionally been the exclusive preserve of national courts, typically in common law or related jurisdictions, such as in the United Kingdom and other Commonwealth countries and the United States. The increased use of trusts for commercial purposes and the Hague Convention of 1 July 1985 on the Law Applicable to Trusts and on their Recognition have facilitated the greater recognition of trusts beyond the preserve of those jurisdictions. However, arbitration has thus far remained a relatively rare means of resolving trust disputes, except where disputing parties have entered into an arbitration agreement after the dispute has arisen.

The potential for the increased utilisation of arbitration to adjudicate trust disputes is significant. Many of the characteristic features of international arbitration, such as the possibility of confidentiality, procedural flexibility, having a decision-maker in one forum (rather than multiple fora) and speed and costs considerations, make arbitration highly attractive as a potential means of resolving trust disputes - including to settlors who establish trusts and to the trusts industry. Confidentiality is a particular concern given the sensitive nature of many trust disputes and unwelcome publicity frequently attendant to trust disputes that are adjudicated in courts.

However, notwithstanding the demand for the arbitration of trust disputes, there have until recently been two primary inhibitors:

  • The first was the dearth of suitable national legislative frameworks underpinning the arbitration of trust disputes.
  • The second was the lack of an effective mechanism that could address a perceived impediment to the arbitration of such disputes, namely how to bind to arbitration beneficiaries of a trust who are unlikely to sign the trust deed (and may moreover be unborn, lacking capacity or indeed unascertained).

The first of these obstacles has to an extent been resolved over the last decade by legislation in a number of jurisdictions around the world establishing respective frameworks for the arbitration of trust disputes. This includes Guernsey, the Bahamas, Malta, Liechtenstein and U.S. States such as Arizona and Florida, with initiatives ongoing in other jurisdictions such as New Zealand.

The second obstacle was admirably tackled, at an earlier stage, by the ICC Task Force on Trusts and Arbitration in 2008, which was newly convened in 2016 and produced the revised 2018 ICC Arbitration Clause for Trust Disputes and Accompanying Explanatory Note.

The Clause is drafted as an agreement between the settlor of the trust and original trustees and any other original power-holders for the arbitration of trust disputes. This is important, since a family trust involves a unilateral act of disposition; it is not a contract.

By establishing an arbitration agreement, the ICC Arbitration Clause for Trust Disputes provides a solid foundation for the arbitration of trust disputes, where many arbitration laws around the world are stated to apply specifically to ‘arbitration agreements’ (absent a statutory arbitration scheme). Establishing an arbitration agreement would not, however, be sufficient to bind (non-signatory) beneficiaries of a trust to the arbitration agreement. Accordingly, the ICC Arbitration Clause includes an important deeming mechanism, which provides that any beneficiary claiming or accepting any benefit, interest or right under the trust will be bound by and be deemed to have agreed to the provisions of the Arbitration Clause.

The Explanatory Note accompanying the Clause addresses the importance of having a suitable mechanism for the representation in arbitration of beneficiaries who are minor, unborn, unascertained or lacking in capacity. Without such representation, usually done in court proceedings through the appointment of a litigation friend, the award may not be binding on those categories of persons.

The ICC Arbitration Clause also expressly addresses the confidentiality of the arbitration with stated exceptions, and subject to the law governing the trust or any other confidentiality obligation that may apply. This is significant, since confidentiality is a particularly salient draw of arbitration for the adjudication of trust disputes.

The Explanatory Note explains the important distinction between internal disputes, i.e. between two or more trustees, power-holders and/or beneficiaries, and external disputes, i.e. between trustees and third parties such as persons with whom the trustee has contracted or persons claiming the trust assets or otherwise challenging the existence of the trust. While the former internal disputes would be covered by the ICC Arbitration Clause, the latter external disputes would not, although in some cases, they may be subject to arbitration under the terms of a contract.

The broad reference in the ICC Arbitration Clause to ‘all disputes arising out of or in connection with this Trust’ is intended to cover internal disputes, as well as situations where administrative directions are needed, most often to authorise (and sometimes to order) the trustee to do or not do something in the running of the trust. In the latter case, the Arbitration Clause would enable reference to an Arbitral Tribunal for the purposes of obtaining such directions.

The Aide-Memoire highlights the particular importance of choice of arbitral seat. In addition to the usual considerations on suitability of seat, there is also the matter of choosing a seat that is supportive of the arbitration of trust disputes. Such a choice would complement the appropriate tailoring of the ICC Arbitration Clause.