The arbitration of commercial disputes is now a common means of dispute resolution worldwide, and it appears as though resort to arbitration as a means of resolving trust disputes will become more of a feature of trust litigation in years to come.

The enactment of draft legislation in the Bahamas recognizing arbitration as a means of resolving trust disputes is further evidence of a trend emerging in which trust instruments will be drafted to include “arbitration clauses” – allowing for the arbitration of trust disputes.

That trend was recently demonstrated in Guernsey, through the enactment of the Guernsey Trusts Law, 2007. Section 63(1) of that law recognizes the arbitrability of trust disputes in situations in which: “the terms of a trust direct or authorize, or the Court so orders, that any claim against a trustee founded on breach of trust may be referred to alternative dispute resolution”. “Alternative dispute resolution” is defined to include arbitration.

That law also deals explicitly with some of the issues which had previously been raised questioning the arbitrability of trust disputes. For instance, it allows for the independent representation of beneficiaries that are not yet ascertained or in existence, minors and those under a legal disability (which representation has to be certified by the arbitrator conducting the proceedings) by a person appointed by the Courts.

The draft Bahamas legislation (which is not available for review yet, but the existence and details of which are provided by David Brownbill QC of XXIV Old Buildings) accords a provision in a trust instrument, allowing for arbitration of a trust dispute, the status of an “arbitration agreement” for the purposes of Bahamas Arbitration Act 2009.

The draft legislation envisages that all court matters relating to a trust will be susceptible to arbitration. Like other arbitral awards, one disposing of a trust dispute will be enforceable under the Bahamas Arbitration Act, allowing a party to seek a stay in instances in which another party attempts to bring proceedings before the Courts. The legislation also foresees the arbitral tribunal being vested with all the powers of the court in administration proceedings.

As regards the issue of representation for minors, the unascertained, the not yet in existence or those under a legal disability, the draft legislation empowers the arbitral tribunal to appoint litigation friends to represent the interests of these parties.

Consequently, the successful passage of this legislation through parliament in the Bahamas will see the emergence of this jurisdiction as another one in which parties, through their Bahamian choice of law, might seek to arbitrate trust disputes.