Jurisdiction: Shall we make this exclusive?

Jurisdiction clauses in trust deeds are critical in determining the forum for resolving disputes. These clauses can be either exclusive, conferring jurisdiction to a specific court, or non-exclusive, allowing for flexibility in choosing the appropriate forum. This article briefly summarises the implications of using exclusive versus non-exclusive jurisdiction clauses in trust deeds and briefly considers their application in five of our core trust jurisdictions: Bermuda, the British Virgin Islands (the BVI), the Cayman Islands (Cayman), Guernsey and Jersey.

Why should one be included?

These are usually included where the parties want all disputes arising under the relevant instrument or deed to be determined in a particular jurisdiction. A party expressly submitting to the courts of that jurisdiction will find it difficult to argue that those courts are not the appropriate forum for dispute resolution. 

There are three principal reasons for specifying which court has jurisdiction: 

• Convenience: A party may prefer to sue or be sued in the country in which they are located
  
  
• Preferred judicial system: Court systems vary and some systems are recognised as being preferable to others depending on whether you are a claimant or defendant. For example, if you are the party most likely to sue (e.g. a purchaser or lender) then you will want any dispute to be heard in a jurisdiction which has an efficient judicial system and offers a good range of interim and final remedies
  
  
• Enforcement: The state in which any judgment is obtained will affect how easily it can be enforced

If there is no effective jurisdiction clause the correct forum for the determination of a dispute will be decided by reference to rules of private international law. This can cause uncertainty and inconvenience and can lead to additional costs and delay in progressing any proceedings.

Which jurisdiction to choose?

The starting point will often be to consider the same jurisdiction as the governing law of the trust. This is arguably even more appropriate if the trust in question is a 'special' kind of trust established under the provisions of a particular statute (for example STAR Trusts in the Cayman Islands, VISTA Trusts in the BVI and non-charitable purpose trusts in Bermuda, the BVI, Guernsey or Jersey). 

A summary of the approach taken in five of our most common jurisdictions for trusts is below:  

Bermuda

• The Bermuda Courts generally respect choice of forum in a trust instrument, where the exclusive jurisdiction clause is clearly drafted
  
  
• However, such a clause will not be strictly binding and will operate as a starting presumption which can be departed from for good reason, i.e. In the Matter of the E Trust, the Bermuda Court emphasised convenience in favour of a trust action already commenced in Jersey
  
  
• While the Trusts (Special Provisions) Act 1989 (as amended) established firewall provisions that function as a statutory "governing law clause", the Act does not confer exclusive jurisdiction
  
  
• Section 9 of that Act nonetheless takes an expansive approach to the Bermuda Courts' jurisdiction in deciding claims concerning the validity, construction, effects or administration of a Bermuda trust or even a foreign trust where: 

(a) a clause in the instrument confers jurisdiction
(b) a trustee is resident in Bermuda
(c) where any trust property is in Bermuda (but only to the extent of that property); or 
(d) where the administration of a trust is carried out in Bermuda

The BVI

• If the choice of law is not expressed or implied in the trust instrument, then the applicable law will be the law that the trust is most closely connected (i.e., by application of Art 7 of the Hague Convention)
  
  
• The Trustee Act, 1961 (as amended) does not confer exclusive jurisdiction to the BVI courts but provides that:

(i) subject to the terms of the trust, any matters relating to a BVI trust, or a disposition of property involving a BVI trust, will be subject to BVI law;
(ii) the BVI Court have supervisory jurisdiction to deal with trusts governed by BVI law; and
(iii) the BVI Courts have jurisdiction in relation to a trust if its governing law is BVI law, even if the trust has no real connection with the Territory and its settlor, trustees, and beneficiaries are resident elsewhere.

Cayman

• Section 90 of the Trusts Act (2021 Revision) does not confer exclusive jurisdiction to the Cayman courts but serves as a governing law clause (the 'firewall provisions')
  
  
• Geneva Trust Company v IDF clarified that foreign courts could adjudicate disputes concerning Cayman trusts if they apply Cayman law.  However, trustees should act promptly to seek declarations from the Cayman courts to avoid foreign jurisdiction
  
  
• Flexibility of non-exclusive jurisdiction clauses

Guernsey

• The Trusts (Guernsey) Law, 2007 does not automatically confer exclusive jurisdiction for disputes
  
  
• The Courts are likely to respect the parties' choice of forum, provided it is explicitly stated
  
  
• Flexible - the courts may consider factors such as the location of the trust assets and the convenience of the parties involved as relevant factors

Jersey

• The courts respect the parties' choice of jurisdiction but also ensure that beneficiaries' rights are not unduly restricted
  
  
• Crociani v Crociani JRC 194A held that an exclusive jurisdiction clause did not restrict beneficiaries' rights to pursue claims against former trustees in Jersey
  
  
• Balanced approach considering factors such as the connection of the issues to the forum, the convenience of witnesses, and the location of evidence

What is the difference between exclusive and non-exclusive jurisdiction clauses?

Exclusive jurisdiction clauses limit disputes to the courts of one jurisdiction. This will achieve relative certainty: you know where you can sue and be sued. They also offer greater protection as it is less likely that another court will accept jurisdiction if faced with an exclusive jurisdiction clause. 

Non-exclusive jurisdiction clauses will, in principle, provide for disputes to be heard in the courts of a particular jurisdiction but without prejudice to the right of one or other of the parties to bring a claim in the courts of another jurisdiction. This will achieve certainty to the extent that you know that disputes can be heard in a particular jurisdiction, whilst also offering the flexibility to bring proceedings elsewhere, if preferred. This does, however, run the risk that parallel proceedings are brought which may cause delay and increase costs.

Exclusive or non-exclusive?

Whichever option is chosen, the clause should clearly reflect the choice (i.e. there should be no ambiguity as to whether the court is to have exclusive or non-exclusive jurisdiction). For example, an exclusive jurisdiction clause should use language which is imperative (i.e. shall) rather than permissive (i.e. may). The converse is also true. Any ambiguity could create a preliminary issue as to construction of the document in order to determine the appropriate forum for a dispute. This will cause delay to the substantive disputes and will only serve to increase costs.  

Conclusion 

Trustees and settlors must carefully consider the implications of exclusive versus non-exclusive jurisdiction clauses.  Each jurisdiction will offer different levels of flexibility and protection, and the choice of clause can significantly impact the administration and options for dispute resolution.  By understanding the nuances of each jurisdiction, trustees can make informed decisions that align with their objectives and the best interests of the beneficiaries.  Trustees and settlors must carefully consider the implications of these clauses and seek legal advice to ensure the chosen forum aligns with their intentions and provides the desired level of certainty and protection.

How we can help

We apply the same integrated and innovative services that we offer to global financial institutions to private clients. HNWIs, UHNWIs, families and their advisors look to us to help them navigate the complexities of global jurisdictions efficiently for asset protection and succession planning. From trusts to foundations, and from family offices to club investments, our team is a trusted guide to the key investment hubs of Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Ireland and Jersey. Get in touch with any of the contacts listed on this page to learn how we can assist you.