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V Concluding Thoughts, 22 The Future of Trust Arbitration: Quo Vadis?

SI Strong

From: Arbitration of Trust Disputes: Issues in National and International Law

Edited By: SI Strong, Tony Molloy (Consultant Editor)

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 06 June 2023

Arbitrability — Arbitral agreements — Arbitral tribunals — Arbitrators

(p. 531) 22  The Future of Trust Arbitration

Quo Vadis?

I.  Introduction

22.01  As the preceding pages have shown, internal trust arbitration is an issue that is of increasing interest to courts, legislatures, practitioners, and academics around the world.1 Comparative analysis in this field is common, since no-one wants their country to be left behind in the move toward modernization2 and policy-makers (p. 532) are eager to identify judicial, legislative, and procedural ‘best practices’ in this nascent area of law.3

22.02  When considering the future of internal trust arbitration, it is important to recall its past. Interestingly, the history of this procedure is remarkably short. Most activity has occurred since 2004, when Schoneberger v Oelze was decided in the US State of Arizona, a jurisdiction that is not generally known for being a leader in trust law.4 Although the Arizona appellate court rejected the possibility of internal trust arbitration under the facts at issue, the decision not only triggered a legislative override in Arizona but also acted as a catalyst for pro-trust arbitration legislation in several other US states, including Florida (in 2007), New Hampshire (in 2014), Missouri (in 2014), and South Dakota (in 2015).5 Additional reforms in the United States could come about through amendments to the Uniform Trust Code, a model act that has been adopted in whole or in part in thirty US states and the District of Columbia.6

22.03  Schoneberger’s effect was not limited to the United States.7 Instead, the decision, which was extensively discussed internationally, seems to have inspired several countries to adopt legislation specifically authorizing arbitration of internal trust disputes.8 For example, Guernsey (in 2007)9 and the Bahamas (in 2011)10 have both adopted statutes that deal directly with trust arbitration, while Switzerland has addressed the matter indirectly through new conflict of laws provisions enacted (p. 533) in 2007.11 Other countries, such as the Cayman Islands, are currently contemplating legislation in the area of internal trust arbitration.12

22.04  Notably, all of the legislative activity in this field has been positive in nature. No country is known to have adopted statutory language prohibiting arbitration of internal trust disputes in the years since Schoneberger was rendered,13 and numerous commentators from around the world have called for the adoption of this type of legislation in their home jurisdictions. A significant number of observers also believe that internal trust arbitration can develop through judicial means. Although some difference of opinion exists regarding the proper scope of internal trust arbitration (ie what issues should be considered amenable to arbitration) and how such procedures can develop within a particular country (ie whether and to what extent courts can act independently of subject-specific legislation), the depth and breadth of support for the procedure is remarkable.

22.05  The coming years will doubtless see continued debate on these and other questions. However, the issue of judicial versus legislative reform is particularly pressing and was discussed in this book on numerous occasions, with several contributors suggesting that the best if not only way to promote internal trust arbitration is through statutes specifically addressing the procedure.14 Other authors took the view that legislation is not the only way for internal trust arbitration to develop15 and cited a growing number of jurisdictions, including India, Liechtenstein, and the US states of California, Michigan, New York, and Texas, that have embraced internal trust arbitration (or certain aspects thereof) even in the absence (p. 534) of subject-specific legislation.16 Contributors also noted that the legal framework of several other jurisdictions, including Australia, England, Hong Kong, New Zealand, and a number of other US states, would appear to support judicial development of these sorts of proceedings.17 As a result, it appears possible that the coming years could see an increase in positive court decisions relating to internal trust arbitration.

22.06  Further examination of the history of internal trust arbitration suggests that Schoneberger’s influence extended beyond the judicial and legislative realms.18 For example, in 2004, the same year that Schoneberger was handed down, the American College of Trust and Estate Counsel (ACTEC) convened a National Task Force on Arbitration of Trust and Estate Disputes, subsequently publishing a position paper supporting internal trust arbitration and providing various suggestions on how the procedure could develop occur in the United States.19 Four years later, in 2008, the English Trust Law Committee undertook its own study and in due course published its own position paper favouring the development of internal trust arbitration.20 2008 also saw the International Chamber of Commerce (ICC) convening a taskforce on trust arbitration and adopting a model clause meant to facilitate internal trust arbitration.21

(p. 535) II.  Areas of Concern

22.07  The rapid rise of internal trust arbitration over the last ten years could be taken to suggest that the procedure has a bright future. While that may in fact be true, forward progress in this field may depend on the legal community’s ability to overcome certain challenges. The various contributions to this book have discussed a number of these issues, including:

  • •  the extent to which internal trust arbitration can be said to oust the court’s jurisdiction in an unacceptable fashion;

  • •  whether language contained in a trust and purporting to require arbitration can be considered operable, effective, and capable of being construed as an arbitration agreement;

  • •  whether such language can be used to bind a party seeking to avoid arbitration;

  • •  whether internal trust arbitration can ensure proper representation of all interested parties, including those who are unascertained, unborn, or legally incompetent at the time the dispute arises; and

  • •  whether and to what extent internal disputes are arbitrable.22

22.08  These issues are critical and have been considered in detail in the preceding pages, both in the abstract and in the context of particular national and international laws. However, the materials contained in this book suggest that there are a number of additional, overarching concerns that need to be addressed if internal trust arbitration is to flourish. Perhaps the three most pressing problems arise as a result of over-specialization within the relevant fields, over-emphasis on private trusts over commercial trusts, and underappreciation for the importance of international matters.

Over-Specialization within the Relevant Fields

22.09  Trust law and arbitration law are both highly specialized areas of law, and practitioners and academics spend decades developing the expertise necessary to resolve complex questions of law and procedure. Unfortunately, this type of proficiency can lead to overconfidence in situations that require a more interdisciplinary approach. For example, rather than recognizing the need for collaboration between specialists in arbitration and trust law, many people involved in internal trust arbitration work in isolation, without input from experts in other fields. This sort of intellectual isolationism fails to incorporate ‘best practices’ from both fields and not only creates a mechanism that may be unattractive to potential users but (p. 536) also facilitates development of a procedure that is inconsistent with existing legal principles.23 This phenomenon is troubling as both a matter of practice and policy, since legal inconsistencies often lead to litigation.

22.10  The lack of coordination between the arbitral and trust law communities is already apparent on a number of levels. These result in at least three types of disparities: those relating to perception, procedures, and practice.

(a)  Disparities in perception

22.11  Close examination of the law and commentary relating to internal trust arbitration demonstrates a noticeable disparity in how experts in arbitration law and trust law view the future development of the procedure. Though commentators across the board are in favour of the expanded use and availability of the procedure, a significant (though not universal)24 number of experts in trust law take the view that internal trust arbitration cannot develop in the absence of explicit legislation.25 Specialists in arbitration law, on the other hand, tend to look favourably on the judicial development of trust arbitration.26

22.12  The difference in perspective stems from differences in how each group frames the issue, based on long-standing legal doctrines and judicial rulings within their field. Thus, trust law experts who have spent years contemplating principles such the ‘irreducible core’ duties of a trustee or other fiduciary27 and the inherent jurisdiction of the court to supervise trust proceedings often argue that there is simply no room for an arbitrator to act absent explicit statutory authority.28

22.13  Experts in arbitration law view the issue very differently, based on years of experience in seeing arbitration expand from one subject matter area to another without the need for explicit subject-specific legislation.29 Indeed, most countries have (p. 537) adopted such a strong policy in favour of arbitration that particular issues are only considered non-arbitrable if there is an explicit statutory provision to that effect.30

22.14  Specialists in arbitration are also likely to support judicial development of internal trust arbitration because they are familiar with various legal principles that can resolve some of the problems that trust specialists have with internal trust arbitration. Thus, for example, trust lawyers’ concerns about whether and to what extent arbitration can be used to determine issues relating to the validity of the trust itself31 can easily be resolved through recourse to the arbitral doctrine of separability.32

22.15  Although both approaches to internal trust arbitration can and indeed should be considered equally valid, given the interdisciplinary nature of the proceeding, the trust law perspective has been more widely discussed in the past ten years. This phenomenon can be attributed to several factors.

22.16  First, the arbitral community has not really engaged with the issue of internal trust arbitration yet, although that situation is changing rapidly. In the past, virtually all of the commentary concerning internal trust arbitration was found in sources aimed exclusively at trust lawyers. Many of these analyses simply reiterated material found in earlier articles without undertaking any independent research to determine whether the underlying authorities, which were often critical of internal trust arbitration, were still good law.33 However, more recent commentators have not only pointed out various shortcomings in these analyses as a matter of trust (p. 538) law,34 they have also published their findings in a number of generalist and arbitral publications, thereby bringing new participants into the debate and diversifying the discussion.35

22.17  Second, much of the existing caution regarding issues such as the judicial development of internal trust arbitration may be attributed to position papers published by trust law organizations like ACTEC and the English Trust Law Committee.36 The Trust Law Committee’s influence has been particularly strong, given the role that English law plays in the legal systems of many leading trust law jurisdictions.37 However, a number of issues that provided the basis for the Committee’s final conclusions as a matter of English law are not necessarily applicable in those other jurisdictions.38 Thus, the Trust Law Committee’s views may have been given more weight than the circumstances merited.

(b)  Disparity in proposed procedures

22.18  Another way in which the lack of coordination between arbitration and trust law specialists has become apparent involves the disparity in proposed procedures. Over the years, a number of individuals and organizations have concluded that the best way to promote internal trust arbitration would be to create a standardized set of arbitral rules and/or model arbitration clauses. This approach would not only eliminate many of the costs and problems associated with drafting arbitral procedures on an ad hoc basis,39 it would also suggest that internal trust arbitration was a sufficiently sophisticated and mature mechanism for parties to adopt.

(p. 539) 22.19  Unfortunately, many of these groups decided to proceed independently, without gaining a truly cross-disciplinary perspective. As a result, many of the proposed rule sets, including those from the American Arbitration Association (AAA) and ACTEC, suffer serious shortcomings.40 Furthermore, those proposals that do incorporate expertise from both the arbitration and trust law communities (most notably, the ICC’s model clause for trust arbitration) may not go far enough.41 Thus, there is still a great deal of work to be done in the area of arbitral procedure by specialists in both trust law and arbitration, working in tandem.

22.20  If the two groups cannot find a way to coordinate efforts, the field may see a proliferation of procedures that are unattractive to one group or another.42 This phenomenon could lead to the stagnation of the field despite a widespread desire by users to create a workable process.

(c)  Disparity in practice

22.21  Although the divide between specialists in trust law and arbitration law is perhaps the most pressing problem facing the future development of internal trust arbitration, there is another division that bears mention. In this case, the issue involves the distinction between practitioners and scholars.

22.22  At this point, much of the support for internal trust arbitration comes from those who have spent at least some time as practising lawyers. Indeed, commentators who are or were practitioners appear largely if not universally in favour of internal trust arbitration. This sentiment is most likely due to their experience with hostile trust litigation, which leads them to speak of the need for arbitration as a matter of urgency.43 Academic authors, on the other hand, do not seem to consider the issue to be anywhere near as pressing.

22.23  Although this type of disparity is not problematic at a conceptual level, it could lead to difficulties if courts or legislatures adopt a ‘go-slow’ approach based on scholarly caution. While it would be equally inappropriate to rush to resolution (p. 540) on certain issues, policymakers need to be aware of the significant difficulties currently facing parties and practitioners in jurisdictions that do not yet offer internal trust arbitration and to act accordingly.44

Over-Emphasis on Personal Trusts

22.24  The second overarching concern that can be identified in the various contributions to this book involves a preoccupation with personal trusts. In many ways, the focus on these types of mechanisms is understandable, given the historical development of trusts as a common law device meant to promote the intergenerational transfer of wealth. However, trusts have expanded beyond their traditional function and have become increasingly popular in other contexts as well. Indeed, from a financial perspective, commercial trusts may be more important than private interfamily and charitable trusts.45

22.25  At this point, very few commentators have explored the distinction between commercial and non-commercial (ie personal and charitable) trusts, either in general or in the arbitral context.46 The shortage of information on this subject makes it very difficult to determine whether internal trust arbitration can or should be considered differently by courts or legislatures depending on the nature of the trust at issue. Distinctions could exist not only between commercial trusts (which can include trusts meant to protect private wealth)47 and conventional interfamily trusts, but also between the two types of private trusts and charitable trusts. However, (p. 541) these distinctions are largely ignored in debates about internal trust arbitration. Instead, the focus is predominantly if not exclusively on traditional interfamily trusts.

22.26  In many ways, this approach is understandable, given the traditional structure of both law firms and law faculties.48 However, continuing to emphasize interfamily trusts could skew analyses regarding the viability and shape of internal trust arbitration, particularly since arguments for arbitration may be clearer in the commercial context than in other settings.49 Indeed, internal trust arbitration has long been available in the context of certain types of business trusts.50

22.27  While more work needs to be done in this regard, these preliminary observations suggest that courts, commentators, and policy-makers need to be aware of the various types of trusts and how they are used in practice so that determinations about arbitration are made with full knowledge of the ramifications of those decisions. In particular, it will be interesting to see whether the trust arbitration task force currently convened by the ICC, one of the world’s leading commercial organizations, makes any attempt to distinguish between various types of trusts.

Underappreciation for International Concerns

22.28  The third overarching concern in this field relates to the relatively low level of awareness and analysis regarding the potential for and challenges of arbitration in international trust disputes. Some people may question why it is necessary to study international disputes when internal trust arbitration has not yet gained a firm foothold in many domestic systems. The answer lies in the highly internationalized nature of contemporary trusts.51 Many settlors—including but not limited to those who could be classified as among the ‘ultra-wealthy’—are consciously choosing to create foreign or offshore trusts as a means of protecting their assets.52 It is also possible for a trust to be unintentionally classified as ‘international’ through (p. 542) the inadvertence of one of the parties to the trust.53 As a result, a significant and increasing number of trusts are now international or have the potential to become so.

22.29  Furthermore, experience shows that there is no need to wait for the procedure to win universal acceptance at the national level before considering cross-border matters. To the contrary, there is evidence suggesting that progress on the international front can help drive domestic development of a particular procedure.54

22.30  At this point, very few courts have been asked to consider matters relating to international trust arbitration,55 and most commentators who have referred to cross-borders concerns have done so only in passing.56 However, several experts in the field have taken the view that various treaties concerning international trusts and international arbitration do in fact apply to internal trust disputes, thereby suggesting that internal trust arbitration is capable of proceeding on a cross-border basis.57

(p. 543) 22.31  Many of the issues that arise in an international analysis, including those relating to consent, representation, arbitrability, separability, and the definition of an arbitration agreement, initially appear very similar to those that exist in the domestic realm. However, international inquiries involve a number of additional considerations.

22.32  First, international trust arbitration is most likely to be affected by the strong worldwide policy in favour of international commercial arbitration.58 Numerous courts have agreed that arbitration agreements and awards should be upheld in the international commercial context, even if a contrary result might arise in the domestic setting, thereby placing international arbitration on a somewhat different plane than domestic arbitration.59 While debate will doubtless arise as to whether some or all types of trusts can be considered commercial in nature,60 it is useful to consider whether and to what extent the rationales justifying widespread enforcement in the international commercial realm can or should be extended to trust disputes.61

22.33  Second, courts, commentators, and policy-makers have noted an increase in the need and desire for consistency in the area of international law, particularly with respect to the interpretation and application of various treaty provisions and (p. 544) international model laws.62 While it is far too early to speak of consensus in the area of international trust arbitration, predictability is very important to parties and practitioners. As a result, scholars and practitioners need to find a way to help courts and legislatures appreciate how their actions fit into the existing international legal environment and what the ramifications of a particular decision might be. For example, a country might want to avoid adopting a position regarding domestic disputes that differs radically from the international position, since such disparities can create numerous difficulties for both courts and parties.63

III.  Forecast for the Future

22.34  Crystal balls are in short supply in legal circles, but all signs appear to suggest that the future of internal trust arbitration is largely positive. As the contributions in this book have shown, courts and legislatures around the world are increasingly likely to permit or promote this particular procedure, which in turn encourages parties and practitioners to include arbitration provisions in their trust deeds. The inherently circular nature of the law, combined with the highly competitive and comparative world of international trusts, suggests that the cycle of party demand and judicial or legislative supply will result in the further expansion of trust arbitration around the world.

22.35  This sort of prediction leads naturally to questions about how quickly internal trust arbitration will develop and in what manner. The first thing to appreciate in this regard is that growth will not be linear, since there is a significant time lag between the point at which an arbitration provision is inserted into a trust and the moment at which that provision is triggered.64 Instead, the expansion of internal (p. 545) trust arbitration is likely to start slowly and then gain increasing momentum, with the rate of development contingent on how quickly positive publicity about trust arbitration spreads within the relevant communities.

22.36  Second, predictions about the growth of internal trust arbitration should not be taken to suggest that the procedure will develop inexorably, simply through the passage of time. Instead, a number of factors influence whether and to what extent arbitration becomes a routine part of the law and practice relating to internal trust disputes.

22.37  First and foremost, arbitration will only develop to the extent a need is perceived to exist. At this point, the need for arbitration is directly linked to a number of widely acknowledged problems with judicial resolution of trust-related disputes. Industry experts from around the world believe that hostile trust litigation has reached crisis levels and that the process involves significant delays, costs, and procedural problems.65 Indeed, the concept of internal trust arbitration was only raised as a possibility when trust litigation became unworkable.

22.38  Second, further expansion of internal trust arbitration will depend on the ability of the legal community to develop arbitral procedures that adequately reflect the unique nature of internal trust disputes. Although numerous mechanisms have been proposed in recent years, many of these processes have been developed in isolation by either the trust law or arbitral communities working in isolation. Seldom have members of the two groups worked together, which means that most if not all of these procedures fail to take into account the best practices of both fields of law.66 If arbitration is to offer a realistic alternative to hostile trust litigation, then arbitral procedures must be equal or superior to what is available in court. At this point, more work is necessary in this regard.67

22.39  Third, growth of internal trust arbitration will likely be affected by certain unrelated elements found in the larger legal environment. Up until now, commentators seeking to ascertain the growth potential for internal trust arbitration have focused primarily, if not exclusively, on the presence or absence of subject-specific legislation. While internal trust arbitration will obviously be facilitated by the presence or absence of supportive subject-specific statutes, the procedure can also develop through judicial means. Thus, analyses regarding the future of internal trust arbitration must consider how case law (including case law relating to both arbitration and trusts) will affect the common law development of this particular procedure. Such investigations should focus not only on the letter of the law but (p. 546) on the overarching policies and principles reflected in that jurisdiction’s legislative and judicial pronouncements.

22.40  However, the analysis cannot stop there, since neither of these inquiries recognize the extent to which other aspects of a national or international legal system drive parties to adopt particular dispute resolution processes. Recent research has suggested that merely having a statute that permits a particular dispute resolution procedure may not provide sufficient incentive for litigants to choose that process. Instead, parties are often influenced by a range of elements that may not initially appear relevant to internal trust arbitration but that make a particular procedure more or less attractive.68 Relevant factors include the presence of particular default rules as well as various incentives and disincentives regarding certain behaviour.69

IV.  Conclusion

22.41  As this and the other chapters in this book suggest, this is an exciting time for members of both the trust industry and the arbitral community. Internal trust arbitration appears to be on the rise in a number of jurisdictions, with support coming from both the public and private sectors. While much remains to be done as a matter of both practice and policy, the breadth and the depth of interest in this particular procedure is very promising.

22.42  As internal trust arbitration moves forward, advocates will need to address a number of critical questions. For example, what is the nature and type of consent that is required in internal trust arbitration? How are vulnerable parties to be protected? What aspects of so-called ‘standard’ arbitration may or must be retained in matters involving internal trust disputes and what elements may or must be changed to take into account the special nature of trust disputes? How far can settlor autonomy be respected? Is there any sort of public interest in the resolution of trust disputes, and if so, what does it cover? Finally, do different rules or standards need to apply to personal interfamily trusts, charitable trusts, and commercial trusts?

(p. 547) 22.43  Critics of internal trust arbitration may believe that these issues deny the possibility of internal trust arbitration. However, these questions, though difficult, are not insoluble. Instead, the many excellent contributions to this book suggest that it is likely that these matters can be resolved and that numerous countries around the world will come not only to recognize but embrace arbitration of internal trust disputes as a matter of national and international law.


1  The phrase ‘internal trust arbitration’ (also sometimes referred to as ‘mandatory trust arbitration’) involves the arbitration of matters involving the internal operation of the trust and requiring the participation of settlor(s), trustee(s), protector(s), and/or one or more beneficiaries. SI Strong, ‘Arbitration of Trust Disputes: Two Bodies of Law Collide’ (2012) 45 Vanderbilt Journal of Transnational Law 1157, 1164, 1223–25 (hereinafter Strong, Two Bodies Collide).

2  Much of this impetus appears to be economic. Indeed, several commentators have noted concerns on the part of legislatures and trust law practitioners that the failure to support internal trust arbitration would be detrimental to the trust industry in their jurisdictions. See eg Mark Herbert, ‘Trust Arbitration in England and Wales: The Trust Law Committee’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 10.36; Lee-ford Tritt, ‘Legislative Approaches to Trust Arbitration in the United States’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 7.57. See also Christopher M Reimer, ‘International Trust Domestication: Migrating an Offshore Trust to a US Jurisdiction’ (2012) 25 Quinnipiac Probate Law Journal 170, 171 (noting state legislatures are aware of innovations in other jurisdictions and change their own laws to keep pace).

3  Numerous comparative analyses can be found in the pages of this book. Other comparative commentary also exists. See eg Grant Jones and Peter Pexton (eds), ADR and Trusts: An International Guide to Arbitration and Mediation of Trust Disputes (Spiramus Press Ltd 2014) 135–72 (providing responses to a standard questionnaire issued to practitioners from Australia, the Bahamas, Barbados, the British Virgin Islands, Canada, the Republic of Cyprus, England and Wales, the US State of Florida, France, Gibraltar, Guernsey, Hong Kong, India, Ireland, the Isle of Man, Israel, Italy, Jersey, Liechtenstein, Malaysia, Mauritius, New Zealand, Panama, Scotland, Singapore, Switzerland, and the United Arab Emirates).

4  Schoneberger v Oelze, 96 P3d 1078, 1082-83 (Ariz Ct App 2004), superseded by statute, Ariz Rev Stat Ann s14-10205 (2011), as recognized in Jones v Fink, No CA-SA 10-0262, 2011 WL 601598 (Ariz Ct App 2011).

5  Fla Stat Ann s 731.401(2); Mo Rev Stat s 456.2-205.1; NH Rev Stat s 564-B:1-111A; SD Codified Laws s 55-1-54. Hawai‘i contemplated legislation in this field in 2006, but ultimately did not take action. Tritt (n 2) paras 7.35–7.38.

6  David M English, ‘Arbitration and the Uniform Trust Code’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) paras 6.01–6.14.

7  Schoneberger, 96 P3d at 1082-83.

8  Although legislators in these countries may not have discussed Schoneberger per se, the case was (and is) well-known to trust law experts outside the United States and thus appears to have had an indirect effect on foreign legislation. ibid.

9  Paul Buckle, ‘Trust Arbitration in Guernsey’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) paras 12.01–12.64.

10  David Brownbill, ‘Arbitration of Trust Disputes Under The Bahamas Trustee Act 1998’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) paras 13.01–13.71.

11  Tina Wüstemann and Roman Huber, ‘Trust Arbitration in Switzerland’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 17.10. See also Thomas Mayer, ‘Switzerland’s New Regime on Trusts’ STEP Journal 36–39 (April 2008).

12  Anna Peccarino and Tom Lowe, ‘Arbitration of Trust Disputes in the Cayman Islands’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 14.59.

13  Schoneberger, 96 P3d at 1082-83. Indeed, it is unclear whether there is any legislation anywhere in the world explicitly prohibiting arbitration of internal trust disputes. No such statute has ever been mentioned in any of the legal literature concerning internal trust arbitration.

14  Brownbill (n 10) para 13.71; Johannes Gasser and René Saurer, ‘Trust Arbitration in Liechtenstein and Austria’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 18.93; Robert W Goldman, ‘ACTEC’s Simplified Trial Resolution Option With Model Laws and Clauses’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 4.32; Herbert (n 2) paras 10.38–10.42; Tang Hang Wu and Paul Tan, ‘Singapore: Trust Disputes and Arbitration’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 15.34.

15  Several commentators have suggested that the English Trust Law Committee’s recommendation that legislation is required to effectuate change in England sets the bar too high. Tony Molloy, ‘Trust Arbitration in New Zealand’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 16.41; Matthew Conaglen, ‘The Enforceability of Arbitration Clauses in Trusts’ (2015) 74 Cambridge Law Journal 450, 466–67.

16  Sarah Ganz, ‘Enforcement of Foreign Arbitral Awards Arising From An Internal Trust Arbitration: Issues Under the New York Convention’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) paras 21.33, 21.41; Mary F Radford, ‘Trust Arbitration in United States Courts’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) paras 8.01–8.69; Strong, Two Bodies Collide (n 1) 1164, 1223–25 (discussing several US federal cases and an international matter involving a Liechtenstein arbitration concerning an internal foundation (trust) dispute). US support for internal trust arbitration is not limited to state courts. To the contrary, a number of US federal courts have also adopted a positive approach towards internal trust arbitration. Radford (n 16) paras 8.05, 8.08; Strong, Two Bodies Collide (n 1) 1178, 1224–25.

17  Daniel Clarry, ‘The Removal of Trustees by Arbitration in England and Australia’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) paras 11.01–11.80; Lawrence Cohen and Joanna Poole, ‘Trust Arbitration—Is It Desirable and Does It Work?’ (2012) 18 Trusts and Trustees 324; Lawrence Cohen and Marcus Staff, ‘The Arbitration of Trust Disputes’ (1999) 7 Journal of International Trust and Corporate Planning 203, 209; Herbert (n 2) para 10.09; Molloy (n 15) paras 16.47–16.48; Radford (n 16) paras 8.01–8.69; See also Matthew Conaglen, ‘Trust Arbitration Clauses’ in Richard Nolan, Tang Hang Wu, and Kelvin Low (eds), Trusts and Modern Wealth Management (Cambridge University Press 2016). The issue will likely be decided in the United States on an individual state level unless and until the US Federal Arbitration Act is found to govern such issues. David Horton, ‘Donative Trusts and the Federal Arbitration Act’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) paras 9.01–9.62.

18  Schoneberger, 96 P3d at 1082–83.

19  Goldman (n 14) paras 4.02–4.04.

20  Herbert (n 2) paras 10.23–10.24.

21  SI Strong, ‘Institutional Approaches to Trust Arbitration: Comparing the AAA, ACTEC, ICC, and DIS Trust Arbitration Regimes’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 5.06 (hereinafter Strong, Institutional Approaches). The ICC has recently convened a second taskforce to consider internal trust arbitration in light of the many judicial and legislative developments that have taken place since 2008.

22  This list of issues was enunciated in an article which has become highly influential in the field. Cohen and Staff (n 17) 209. However, internal trust arbitration has moved forward significantly since this article was written, and future commentators will need to consider which of these issues has been resolved and whether any additional matters require attention. Strong, Two Bodies Collide (n 1) 1245–48.

23  Strong, Two Bodies Collide (n 1) 1163–65.

24  A number of trust law specialists believe that internal trust arbitration can develop even without subject-specific legislation. See eg Conaglen (n 15) 466–67; David Hayton, Paul Matthews, and Charles Mitchell (eds), Underhill and Hayton: Law Relating to Trusts and Trustees (18th edn, LexisNexis 2010) paras 11.1, 11.79 (suggesting some trust-related disputes can be decided pursuant to a standard arbitration statute, including the English Arbitration Act 1996); Molloy (n 15) 16.47–16.48.

25  See eg Brownbill (n 10) para 13.71; Goldman (n 14) para 4.32; Herbert (n 2) paras 10.38–10.42.

26  Ganz (n 16) paras 21.91–21.92; Horton (n 17) para 9.62; Margaret L Moses, ‘International Enforcement of An Arbitration Provision in A Trust: Questions Involving the New York Convention’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 20.76; Strong, Institutional Approaches (n 21) paras 5.01–5.135.

27  Tritt (n 2) para 7.67. The definition of the irreducible core duties of a trustee varies by jurisdiction. David Fox, ‘Non-excludable Trustee Duties’ (2011) 17 Trusts and Trustees 17, 26.

28  See eg Brownbill (n 10) para 13.71; Herbert (n 2) paras 10.38–10.42; Peccarino and Lowe (n 12) para 14.65.

29  Although arbitration typically does not exist without a general grant of legislative authority, courts have read most arbitration statutes as permitting arbitration of a wide and ever-increasing range of disputes. Gary B Born, International Commercial Arbitration (2nd edn, Kluwer Law International 2014) 957–59.

30  ibid 958–59 (focusing primarily on international matters); SI Strong, ‘Mandatory Arbitration of Internal Trust Disputes: Improving Arbitrability and Enforceability Through Proper Procedural Choices’ (2012) 28 Arbitration International 591, 617 (hereinafter Strong, Arbitrability); Strong, Two Bodies Collide (n 1) 1236–44. See also ‘France’ in Grant Jones and Peter Pexton (eds), ADR and Trusts: An International Guide to Arbitration and Mediation of Trust Disputes (Spiramus Press Ltd 2014) 236, 236; SI Strong, ‘Beyond the Self-Execution Analysis: Rationalizing Constitutional, Treaty and Statutory Interpretation in International Commercial Arbitration’ (2013) 53 Virginia Journal of International Law 499, 515 (discussing the McCarran–Ferguson Act in the United States, which allows individual US states to bar arbitration of insurance disputes in the domestic but not the international realm).

31  See eg Tritt (n 2) para 7.67.

32  Strong, Two Bodies Collide (n 1) 1219–28.

33  Many of these discussions (which were found not only in the United States but elsewhere as well) focused on negative decisions such as In re Meredith’s Estate (from 1936), In re Estate of Jacobovitz (from 1968), and Schoneberger v Oelze (from 2004) without mentioning that those cases had been superseded by statute or abrogated by subsequent case law. Thus, Campbell v Detroit Trust Co (In re Meredith’s Estate), 266 NW 351, 357 (Mich 1936) (holding that the jurisdiction of the probate court cannot be ousted by a stipulation to arbitrate), was explicitly abrogated by In re Nestorovski Estate, 769 NW2d 720, 732 (Mich Ct App 2009) (holding that will contests may be resolved by arbitration). In re Estate of Jacobovitz, 295 NYS2d 527, 531 (Sur Ct Nassau Cnty 1968), held that probate cases cannot be arbitrated, although the later case of In re Blumenkrantz, 824 NYS 2d 884, 887 (Sur Ct Nassau Cnty 2006), which was coincidentally in the precisely the same court, held that a trustee is bound by an arbitration clause in a trust agreement. Schoneberger v Oelze was of course reversed by the legislature. 96 P3d 1078, 1082-83 (Ariz Ct App 2004), superseded by statute, Ariz Rev Stat Ann s14-10205 (2011), as recognized in Jones v Fink, No CA-SA 10-0262, 2011 WL 601598 (Ariz Ct App 2011).

34  See eg Strong, Two Bodies Collide (n 1) 1181–248.

35  See eg David Horton, ‘The Federal Arbitration Act and Testamentary Instruments’ (2012) 90 North Carolina Law Review 1027 (appearing in a journal aimed at general audiences); Michael Hwang, ‘Arbitration for Trust Disputes’ in Legal Media Group (ed), Selected Essays for International Arbitration (Academy Publishing 2013) 743 (appearing in a journal aimed at the international commercial arbitration community); SI Strong, ‘Mandatory Trust Arbitration in the US and Abroad’ (2013) 6 New York Dispute Resolution Lawyer 23 (appearing in a journal aimed at domestic arbitration specialists); Strong, Two Bodies Collide (n 1) (appearing in a journal aimed at the general international legal community).

36  Herbert (n 2) paras 10.23–10.24. See also Brownbill (n 10) para 13.71 (reflecting a view of an early member of the English Trust Law Committee considering trust arbitration in England).

37  Many of the world’s leading trust law jurisdictions have a strong connection to English law, either by virtue of their status as current or former members of the Commonwealth or as territories that owe some sort of political allegiance to the United Kingdom. This book contains contributions discussing several Commonwealth nations, including Australia, the Bahamas, New Zealand, and Singapore. Guernsey and the Cayman Islands are also sensitive to developments in English law as a result of their status as a British dependency and overseas territory, respectively.

38  For example, the Trust Law Committee enunciated a number of concerns relating to the role that Article 6.1 of the European Convention for the Protection of Human Rights and Fundamental Freedoms would play in internal trust arbitration. European Convention for the Protection of Human Rights and Fundamental Freedoms, Rome, 4 November 1950, TS 71 (1953) Cmd 8969; Herbert (n 2) para 10.32. However, that convention is not applicable outside Europe.

39  Strong, Arbitrability (n 30) 628. See also Strong, Two Bodies Collide (n 1) 1247 n499 (listing sources discussing alleged ‘best practices’ regarding the drafting of arbitration provisions in trusts).

40  Goldman (n 14) paras 4.36–4.42; E Gary Spitko, ‘A Critique of the American Arbitration Association’s Efforts to Facilitate Arbitration of Internal Trust Disputes’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) paras 3.01–3.63; Strong, Institutional Approaches (n 21) para 5.04. See also ICC Arbitration Clause for Trust Disputes, 19 ICC Bulletin 9, Explanatory Notes 4–6 (2008), <www.iccdrl.com/CODE/LevelThree.asp?page=Commission%20Reports&tocxml=ltoc_CommReportsAll.xml>. The same misgivings exist with respect to the ACTEC proposed statutes. Goldman (n 14) paras 4.32–4.35; Strong, Institutional Approaches (n 21) paras 5.01–5.135.

41  Strong, Institutional Approaches (n 21) paras 5.01–5.135. Other alternatives, particularly those based on an innovative procedure developed by the Deutsche Institution für Schiedsgerichtsbarkeit, exist and are extremely promising. ibid para 5.133.

42  For example, the AAA Wills and Trust Arbitration Rules, which were developed by arbitral specialists, are unappealing to many trust law specialists, while the ACTEC proposals, which were developed by trust specialists, are largely unattractive to arbitral experts. ibid paras 5.124–5.134.

43  Goldman (n 14) para 4.04; Molloy (n 15) paras 16.13–16.19; Peccarino and Lowe (n 12) paras 14.18–14.20.

44  Goldman (n 14) para 4.04; Molloy (n 15) paras 16.13–16.19.

45  John H Langbein, ‘The Secret Life of the Trust: The Trust as an Instrument of Commerce’ (1997) 107 Yale Law Journal 65, 166 (noting ‘well over 90% of the money held in trust’ in the United States is held ‘in commercial trusts as opposed to personal trusts’). See also Mark Kantor, ‘The Use of Trusts in Financing Transactions: Special Issues Relating to Arbitration of Commercial Trusts’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) paras 2.01–2.101; SI Strong, ‘Global Developments in Trust Arbitration’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) para 1.04.

46  Strong, Two Bodies Collide (n 1) 1167–68. This is not to say that arbitration is not possible in the context of a commercial trust. Indeed, several decisions exist regarding arbitration of internal trust disputes involving a business trust. San Juan v Corporación para el Fomento Económico de la Ciudad Capital, 597 F Supp 2d 247, 248–49 (D PR 2008); Stender v Cardwell, No 07-cv-02503, 2009 WL 3416904, *2 (D Colo 2009). Arbitration of internal trust matters involving commercial relationships has also arisen in cases where (1) a side agreement that includes an arbitration provision has been explicitly incorporated by reference into a trust or (2) a side agreement that includes an arbitration provision explicitly refers to disputes arising out of an associated trust. New South Federal Savings Bank v Anding, 414 F Supp 2d 636, 639 (SD Miss 2005) (granting plaintiff’s motion to compel arbitration where a home loan was accompanied by a deed of trust rider); Decker v Bookstaver, No 4:09-CV-1361, 2010 WL 2132284, *1–2 (ED Mo 2010) (enforcing an arbitration provision found in an account agreement).

47  Liz Moyer, ‘Private Trusts for the Very Rich: Chartered Trusts Give Families More Control Over Their Wealth’ Wall Street Journal (14 December 2014) (noting that ‘[m]ega-rich families increasingly are setting up their own trust companies to manage and invest their wealth’), <www.wsj.com/articles/private-trusts-for-the-very-rich-have-advantages-1418619049>.

48  Work involving business trusts is usually lodged in most law firms’ corporate department while work involving interfamily or charitable trusts is housed in the trust and estates department. This distinction is apparent in the backgrounds of two contributors to this book, Mark Kantor and Tina Wüstemann. Though both are experts in trust law, their law firm practices were completely different. Similar distinctions are seen in academia, in that most trust law experts teach in the area of equity and property law rather than in corporate or commercial law.

49  Kantor (n 45) paras 2.99–2.101; Strong, Arbitrability (n 30) 596; Strong, Two Bodies Collide (n 1) 1165, 1167, 1227. See also Horton (n 17) para 9.24.

50  See Strong, Institutional Approaches (n 21) paras 5.125–5.127 (discussing regulatory trust arbitration in the context of pension trusts in the United States and New Zealand).

51  Denis A Kleinfeld, ‘Offshore Trusts’ in Administration of Trusts in Florida (8th edn, The Florida Bar 2015); Strong, Two Bodies Collide (n 1) 1159–60.

52  Evan Metaxatos, ‘Thunder in Paradise: The Interplay of Broadening United States Anti-Money Laundering Legislation and Jurisprudence With the Caribbean Law Governing Offshore Asset Protection Trusts’ (2008) 40 University of Miami Inter-American Law Review 169, 171.

53  Brian R Bassett, ‘Foreign Trusts: Intentional and Unintentional’ SN025 ALI-ABA 419 (Sophisticated Estate Planning Techniques, 6–7 September 2007). For example, a settlor may be unaware that a change in the residency of a trustee could result in a domestic trust being reclassified as foreign.

54  For example, experience suggests that international commercial arbitration helped drive the development of domestic arbitration in at least some countries. Born (n 29) 61–62; David W Rivkin, ‘The Impact of International Arbitration on the Rule of Law’ (Transcript of 11th Clayton Utz Sydney University International Arbitration Lecture, 2012) Part III.III (discussing effects of international arbitration on national law), <//claytonutz.com/ialecture/2012/speech_2012.html>; Catherine A Rogers, ‘International Arbitration, Judicial Education, and Legal Elites’ (2015) Journal of Dispute Resolution 71, 75. Furthermore, empirical studies show that international actors will only be inclined to adopt certain procedures if they have some degree of confidence that the process is enforceable. SI Strong, ‘Realizing Rationality: An Empirical Assessment of International Commercial Mediation’ (forthcoming 2016) 73 Washington and Lee Law Review.

55  At this point, only two courts are known to have addressed internal trust arbitration in the international context. Both cases are from the United States, and both deal with questions of capacity, which are among the most difficult for a court to consider, even under a broad reading of the separability doctrine. Strong, Two Bodies Collide (n 1) 1221–28. The first case, Lo v Aetna International, Inc, refused to enforce an arbitration clause in a trust in a dispute regarding lack of capacity. 2000 WL 565465 (D Conn 2000) (involving a trust governed by Hong Kong law). The second case, Weizmann Institute of Science v Neschis, considered whether and to what extent an arbitral award rendered in Liechtenstein should be given preclusive effect in a US court proceeding involving claims that were very similar to those determined in the arbitration, including those relating to lack of capacity. 421 F Supp 2d 654, 674-83 (SDNY 2005) (recognizing the arbitral award). At the time the case was heard, Liechtenstein was not a state party to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), although that has since changed. ibid 674–75; Gasser and Saurer (n 14) para 18.53. See also Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 10 June 1958, 330 UNTS 38 (hereinafter New York Convention).

56  Most of these analyses focused on other issues of national law. See eg Brownbill (n 10) paras 13.38, 13.40, 13.68 (discussing the Bahamas); Gasser and Saurer (n 14) paras 18.53–18.54, 18.70–18.74; Peccarino and Lowe (n 12) paras 14.28, 14.45, 14.47–48 (discussing the Cayman Islands); Wüstemann and Huber (n 11) paras 17.28, 17.62 (discussing Switzerland).

57  Ganz (n 16) paras 21.01–21.92; Moses (n 26) paras 20.01–20.76; Georg von Segesser, ‘Arbitrating Trust Disputes: Effect of the Hague Convention on the Law Applicable to Trusts and Their Recognition’ in SI Strong (ed), Arbitration of Trust Disputes: Issues in National and International Law (Oxford University Press 2016) paras 19.01–19.81; Strong, Two Bodies Collide (n 1) 1201, 1214–18.

58  Born (n 29) 957–58.

59  See eg Mitsubishi Motors Corp v Soler Chrysler-Plymouth, Inc, 473 US 614, 629 (1985) (concluding ‘that concerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce the parties’ agreement, even assuming that a contrary result would be forthcoming in a domestic context’); Born (n 29) 957 (noting ‘the fact that a particular matter is nonarbitrable in a domestic setting under a particular national law does not necessarily mean that it will be nonarbitrable in an international setting’).

60  Some commentators continue to characterize trusts, particularly private interfamily trusts, as donative rather than commercial, while other observers have suggested that certain types of business trusts, most notably those relating to pensions, are more akin to consumer relationships than commercial bargains. Strong, Arbitrability (n 30) 599–600, 615; Strong, Two Bodies Collide (n 1) 1174–80. Many countries have defined the concept of a commercial transaction very broadly, at least for purposes of international arbitration, which may allow internal trust arbitration to fall within the scope of the New York Convention. New York Convention (n 55); Ganz (n 16) paras 21.03–21.14; Horton (n 17) 9.24; Moses (n 26) para 20/75; Strong, Two Bodies Collide (n 1) 1186.

61  For example, liberal enforcement of arbitration agreements and awards has been promoted as a means of promoting international trade. UNCITRAL Recommendation Regarding the Interpretation of Article II, Paragraph 2 and Article VII, Paragraph 1, of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, UN Doc A/61/17, Annex II (2006) (noting that UNCITRAL was created to ‘promot[e] the progressive harmonization and unification of the law of international trade’ and that the New York Convention ‘has been a significant achievement in the promotion of the rule of law, particularly in the field of international trade’). See also Born (n 29) 63–64 (‘The driving force behind these various developments [in international commercial arbitration] was the international business community, … which found ready audiences in national legislatures and judiciaries eager to promote international trade, investment and peace by providing workable, effective international dispute resolution mechanisms. It was the combination and active collaboration of these two communities—public and private—that produced the contemporary legal framework for international commercial arbitration.’).

62  Born (n 29) 957 (noting ‘in international cases, national conceptions of public policy and mandatory law should be moderated, in light of the existence of competing public policies of other states and the shared international policy of encouraging the resolution of international commercial disputes through arbitration’); SI Strong, International Commercial Arbitration: A Guide for US Judges (Federal Judicial Center 2012) 16, 23, 93 (hereinafter Strong, Guide) (discussing the need for courts to consider international consensus in interpreting various international instruments involving arbitration). International trust arbitration may require consideration of two different treaties, the New York Convention and the Hague Convention on Trusts. New York Convention (n 55); Convention on the Law Applicable to Trusts and on Their Recognition, 1 July 1985, 23 ILM 1389 (1984). The United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration may also be relevant. UNCITRAL Model Law on International Commercial Arbitration of 1985 with amendments as adopted in 2006, <www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf>.

63  Born (n 29) 97–98. For example, the United States has experienced numerous problems involving the question of whether the doctrine of manifest disregard of the law, which is arguably applicable as a means of overturning arbitral awards in the domestic context, applies to awards arising out of international proceedings. Strong, Guide (n 62) 69, 85.

64  This delay is particularly notable in cases involving testamentary trusts, although delays can also arise in inter vivos trusts in both the commercial and private context.

65  Molloy (n 15) 16.13–16.19, 16.47–16.48; Strong, Two Bodies Collide (n 1) 1162, 1183–84; Wüstemann and Huber (n 11) 17.01.

66  The ICC working groups have been the one exception to the rule. Strong, Institutional Approaches (n 21) para 5.08; Wüstemann and Huber (n 11) para 17.05.

67  At this point, the most promising model comes from the DIS supplementary rules on corporate law disputes. Strong, Institutional Approaches (n 21) para 5.133.

68  Incentive-based analyses have been conducted in a variety of fields, including class action litigation, large-scale arbitration (ie those involving class, mass, and collective claims), and international commercial mediation, just to name a few. See eg Deborah R Hensler, ‘The Globalization of Class Actions: An Overview’ in Deborah Hensler, Christopher Hodges, and Magdalena Tulibacka (eds), The Globalization of Class Actions, 622 The Annals of the American Academy of Political and Social Science (2009) 7; SI Strong, ‘Beyond International Commercial Arbitration? The Promise of International Commercial Mediation’ (2014) 45 Washington University Journal of Law and Policy 11; SI Strong, ‘Incentives for Large-Scale Arbitration: How Policymakers Can Influence Party Behaviour’ in Bernard Hanotiau and Eric A Schwartz (eds), Dossier XIII: Class and Group Actions in Arbitration (ICC Institute of World Business Law 2016) (hereinafter Strong, Incentives).

69  Strong, Incentives (n 68) (discussing each of these issues in the context of large-scale arbitration, which can include internal trust arbitration).(p. 548)