Any discussion of ADR inevitably also raises the question of arbitration. Like mediation, arbitration is a private forum in which disputes can be resolved outside of the courts. However, unlike mediation, it is a binding process where a decision is made by an individual or individuals called the arbitrators.
The parties to the dispute can choose their arbitrators based on their specific expertise in the field of the dispute. For those seeking finality and to put a dispute behind them, arbitration offers fewer opportunities for appeal than traditional litigation. In complex international disputes, arbitration also allows for a hearing to take place anywhere in the world.
This is as big a draw for commercial parties involved in international structures as it is for modern families scattered throughout the globe. Arbitration in many ways therefore seems to be a perfect tool for tackling a modern trust dispute.
However, the extent to which the arbitration of trust disputes is possible in practice in England and Wales remains unclear. The reason for this is a legal but important one: parties to arbitration usually agree to arbitrate. However, in the case of trusts, some of the most important parties and likely participants in a dispute, the beneficiaries, are not parties to the underlying agreement that creates the trust.
So, the question remains whether they can be bound by a document that they did not sign up to and may never have even seen. The class of beneficiaries may, in some cases, also be comprised of hundreds or even thousands of unnamed individuals, including those that have not yet even been born.
There are also additional complications in that some other likely participants in disputes involving trusts, such as tax authorities, may be reluctant to arbitrate where the arbitrators have been chosen by the parties, rather than proceeding through what they may see as a more neutral and established court process.
Some jurisdictions, including the Bahamas and Guernsey, have specifically legislated to ensure that beneficiaries can be brought into the arbitral process. Although the topic of debate and recommendation, England and Wales are yet to legislate in such a way.
At the moment, there remains a risk that the courts would consider that agreements to arbitrate in a trusts context are not binding on the beneficiaries, and so are not capable of fully and finally resolving a trust dispute.
The future of trust disputes
The arbitration of trust disputes is therefore complicated and there are undoubtedly issues that would need to be overcome if arbitration was to become a mainstream way of resolving trust disputes.
However, given how well suited the overriding nature of arbitration could be to the resolution of such disputes, it seems likely that sooner or later England and Wales will take steps to embrace arbitration in this context.
