Using arbitration to resolve trust disputes

For settlors who want to ensure that "internal" trust litigation – that is to say litigation involving settlors, trustees, beneficiaries or others with an interest in the trust property as opposed to third parties – can be resolved effectively and in confidence, arbitration is a potentially attractive option. Proponents of trust arbitration highlight various advantages, including:

Confidentiality

In recent times, major trust litigation (such as Grand View v Wong) has often found itself in the public eye. Arbitration represents a means of resolving a trust dispute in a confidential setting.

Choice of forum

An arbitration agreement allows parties to choose the jurisdiction in which the dispute can be resolved, which may be different from the jurisdiction of the governing law of the trust.

Choice of representation

Parties are free to choose their legal representatives, avoiding restrictive rights of audience rules in various offshore jurisdictions.

Speed and finality

Arbitration can offer a streamlined form of dispute resolution, giving the parties the ability to opt out of certain procedural steps, although the Volpi litigation in the Bahamas shows that this is far from guaranteed. The arbitral award itself is intended to be final and binding, with fewer available grounds for appeal.

Despite these potential benefits, trust arbitration has faced obstacles which have proven difficult to overcome. In England these include, for example:

Limits on relief available

Certain forms of relief cannot presently be granted by an arbitral tribunal, meaning a trip to Court may be required after a dispute has been arbitrated. These limits on relief mean that some of the wider and more frequent requests to the court by trustees, like (non-contentious) Public Trustee v Cooper blessings of momentous decisions, variations and rectifications can only ever be resolved in court under current rules.

Binding non-parties

Non-parties such as minor or unborn beneficiaries cannot be bound by an arbitration agreement or an arbitration clause in a trust instrument, potentially undermining the finality of an arbitral award and raising the possibility of parallel court proceedings.

Public policy concerns

It has been argued that upholding an agreement to arbitrate in all cases would oust the Court’s supervisory jurisdiction over trusts. 

These obstacles have historically hindered the uptake of arbitration as a means of resolving trust disputes. Arbitration of commercial disputes has, however, been on the rise for some time and there has also been a growing interest in arbitration as a means of resolving disputes which would otherwise play out in the family courts, particularly since the permanent introduction of open reporting provisions following the completion of the Family Court Reporting Pilot.

Growing interest?

The time is therefore ripe for a reappraisal of the use of arbitration in the trusts context and the decision last year of the English High Court in Grosskopf v Grosskopf ([2024] EWHC 291 (Ch)) may encourage practitioners to look again at trust arbitration.

Grosskopf involved a dispute between a claimant beneficiary and defendant trustees over the administration of a family trust. The parties entered into an arbitration agreement for the dispute to be determined by the Beth Din of the Federation of Synagogues, but the claimant became dissatisfied with the arbitral proceedings and issued a claim in the High Court for removal of the defendants. The defendants applied to stay the claim pursuant to s.9 Arbitration Act 1996.

Despite the claimant’s arguments raising all the issues identified above, the court found that the arbitration agreement between the parties was operative and the claimant was not entitled to relitigate the issues before the High Court. In particular, the court found that even though the specific relief sought (the appointment of a judicial trustee) could not be granted by the tribunal, the tribunal could still determine the substance of the dispute and grant similar relief. The fact that non-parties to the arbitration agreement might not be bound did not prevent the tribunal from reaching a decision. An agreement to submit a dispute about the removal of a trustee to arbitration was also not contrary to public policy.

The decision in Grosskopf reflects the recent "pro-arbitration" attitude of the English High Court. While England is yet to follow certain offshore jurisdictions in offering further legislative support for arbitration (examples offshore include ss.91A and 91B of the Bahamas Trustee Act 1998 and s.63 of the Trusts (Guernsey) Law 2007), and while the prevailing view remains that that an arbitration clause in an English law trust deed is not capable of binding beneficiaries, Grosskopf suggests that the English courts are increasingly willing to recognise the arbitrability of internal trust disputes. 

With anecdotal evidence suggesting that the use of arbitration clauses in trust instruments is on the rise, this is an area which is likely to see further interest and development in the coming years.

Please note this content was originally published in WealthBriefing, see here.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, March 2025