Jersey Introduces New Legislation To Protect Trusts

The Trusts (Amendment No 5) (Jersey) Law 2012 is the latest in a series of amendments to the Trust (Jersey) Law 1984 designed to maintain Jersey's position as an attractive repository for private wealth and a leading trusts jurisdiction.

In 2006, Article 9 of the 1984 Law was amended to increase the protection afforded to Jersey Law trusts under attack by foreign courts. Article 9(1), as amended in 2006, provided that questions relating to the validity and administration (including capacity of Settlors, exercise of powers and dispositions of property) of Jersey trusts should be determined in accordance with Jersey law and without reference to foreign law.

Almost immediately, questions were raised as to the effect of these amendments. In Re B (heard the day after the 2006 amendments came into force) the Court held that, notwithstanding the new law, the principle of comity still applied in respect of enforcing an English order 'varying' a Jersey trust and that, in any event, Article 51 directions could be used to give substantial effect to an English Court order requiring variation of a trust irrespective of whether the trust was variable under Jersey Law.

A degree of judicial clarity was afforded by the 2008 judgment in Mubarak v Mubarak [2008] JLR 250 which sought to distinguish between variation and alteration of a trust. Here, the Jersey Court held that under Articles 9(1) and 9(4) an English order 'altering' a Jersey trust could not be enforced irrespective of comity (although the trust in that case was altered on other grounds). The Court confirmed, however, (that had the English decision amounted to a variation as in Re B), and not an alteration, the Court could have given the trustee directions so as to achieve the objectives of the English Court order as the giving of directions would not amount to enforcement for the purposes of Art 9(4). An alternation of a trust involves making changes which are outside of the powers of that trust. Variation...