Trusts have historically been used as vehicles to protect and guide family wealth, but in recent years they have increasingly been arising in sophisticated multi-national commercial structures.
As part of that process, an international industry to administer trusts has developed and trusts have gained global attention through leaks like the recent Pandora Papers. In short, trusts have never been so topical.
But what happens when things go wrong? And how do legal systems adapt to cope with trust disputes in the modern age?
Trust disputes are moving out of the courts and into alternative processes like mediation, and this can be a benefit to those who find themselves embroiled in trust disputes – and what the future holds for the resolution of such disputes, including the use of arbitration, is an interesting discussion.
The rise of alternative dispute resolution
The concept of alternative dispute resolution is not new. The Courts of England and Wales' rules encourage parties to consider ADR in all disputes and parties can be penalised by courts for failing to do so.
In July 2021, the Civil Justice Council published a report that considered making ADR a compulsory step in the court process in the future. Far from being 'alternative', ADR has become an increasingly integral and desirable part of the resolution of trust disputes. Mediation (essentially a private settlement meeting with a third-party facilitator) is particularly well suited for trust disputes, which may explain its rise over recent years.
One of the main appeals of ADR is privacy. As a result of the practice of open justice in England and Wales, generally speaking the parties’ names in litigation are public, reporters are allowed to attend hearings, and judgments are published. Even where privacy orders are obtained, anonymised judgments may still be available. In contrast, ADR is entirely private.
This makes ADR an attractive option, particularly where disputes involve sensitive personal issues and complex family dynamics. Resolving disputes entirely in private without the formality of a court room or the glare of media attention can also help parties find a middle ground in the most entrenched of disputes.
Parties of difficult and emotionally demanding disputes (as trust disputes often are) also increasingly prefer the speed with which disputes can be resolved through ADR. Commercial parties and families are often unwilling, and indeed unable, to wait for their day in court.
The speedy resolution of highly charged family disputes can enable the individuals involved to put the dispute behind them and focus instead on healing complex personal relationships and on addressing the underlying issues that caused the dispute in the first place.
At the very least, mediation tends to open parties’ eyes to the reality of their positions and what a contested court hearing would be like. Unlike a court hearing, ADR can also be paused, taken in stages and reconvened as attitudes shift and evolve.
Can you arbitrate a trust dispute?
