The Government of Jersey has recently issued a consultation paper, canvassing views on proposed amendments to parts of the Trusts (Jersey) Law 1984. In all there were 12 ‘areas’ of proposals, and below we summarise and comment upon some of the key proposals trustees need to be aware of. Emma Jordan, Head of Contentious Trusts at Taylor Wessing, has provided comments to the legislative committee on the amendments and specifically those in relation to insolvent trusts.

Areas 1 – 3

The consultation proposes three amendments to the Trusts (Jersey) Law, which largely follow the case law on the key subjects of the validity of a trust, rights to information and reserved powers. These are as follows:

1. An amendment to allow for a valid trust to be created without the existence of a beneficiary at all times, so long as it is possible for a beneficiary to be alive or in existence at some future time during the existence of that trust;

2. That the terms of a trust can restrict or remove beneficiaries’ rights to information about the trust, such an amendment would likely provide necessary flexibility for the settlor, who could prescribe who gets what information and when, subject to the terms of the trust, any court orders and specific qualifications for guaranteeing accountability; and

3. A series of amendments to put beyond all doubt the ability of settlors to reserve or grant to others powers in relation to the trusts. Whilst likely to prove useful to provide certainty, these amendments may lead to challenges outside of Jersey as to whether the trust itself is genuine.

Area 4 – Arbitration provisions

After much debate in Jersey, the legislative committee is proposing following Guernsey and permitting a settlor to include an arbitration clause in the trust deed which is binding on any beneficiary, settlor, trustee, successor trustee, protector and other third parties.

This could lead to a significant change to the way trust disputes are resolved in Jersey. The primary advantage of adding an arbitration clause is matters are kept confidential between the parties. However concerns do arise as to the decline in case law and the development of key legal principles, should arbitration be the norm. This is particularly given the strength of Jersey law in trusts law in recent years. It would remain to be seen how many settlors decide to include such a clause, or indeed whether the clause is in fact binding on all parties.

Area 7 – Extension of indemnity provisions

The consultation asks whether the existing statutory provisions should be extended to expressly permit (1) a former trustee’s officers and employees to enforce an indemnity in their own right; (2) that a former trustee may hold the benefit of such indemnity for themselves and for their officers and employees, and; (3) a provision to include within the scope of the indemnity, distributions made during the life of the trust.

These are likely to be useful clarification for the market and would largely follow the corporate trustees practice of indemnifying officers and employees, as well as insurance policies which provide for the same.

Area 10 – Variation of trusts

The consultation also asks whether it would be desirable to introduce a power for the court to effect a variation of the terms of a trust without the consent of all beneficiaries. This may lead to concerns by settlors of the terms being changed but in reality it will assist in cutting down costs.

Area 12 – Insolvent trusts

Further consideration is given to ‘other matters’, none of which will progress as legislative amendments at this time. In particular, Emma Jordan has provided comment on area 12E to the legislative committee, namely that there is currently no formal insolvency regime applicable to trusts in Jersey. The question for the committee is whether in fact that subject should be dealt with by legislation and if so, what regime should be put in place as regards an insolvent trust? The alternative for the committee will be to allow the case law to lead any amendments (or indeed a separate law) and decide whether legislation should be enacted later.