LATAM Focus: Litigating Trusts Disputes In The BVI

The British Virgin Islands has long been hailed as a leading offshore jurisdiction for wealth management and asset protection amongst Latin American high net worth families and individuals. Over the next four years, Latin American HNWIs, family offices and fund managers are predicted to drive an increase in offshore business of approximately 24 per cent.

Much of the BVI's appeal to Latin American end-user clients derives from its economic and political stability, its commitment to business and the financial services industry and its independent legal system based primarily on English common law and equitable principles. The BVI also has modern legislation often based on the statutes of leading onshore jurisdictions. Disputants have access to a well-established court system including a specialist court modeled on the London Commercial Court, and an appellate framework within which a final appeal lies to the Judicial Committee of the Privy Council.

The provisions of the BVI Trustee Ordinance (Cap 303) (the Ordinance) facilitate the principal advantages of using an offshore trust which are to hold, preserve and transfer wealth while maintaining flexibility and confidentiality. The Ordinance contains comprehensive provisions regarding reserved powers, purpose trusts, conflict of laws and trustee powers, including the power to delegate investment strategy to agents.

Powers of investment and delegation are ordinarily prescribed by express provisions of the trust instrument, however paragraph 2 of the Second Schedule of the Ordinance, which is commonly applied to a BVI trust by express reference in the trust instrument pursuant to s.93 of the Ordinance, authorises a trustee to invest any portion of the trust fund and s.3 of the Ordinance protects a trustee in respect of investment activities provided he exercises the diligence and prudence that a reasonable person would be expected to exercise in making the investment as if it were his own money. Section 24 of the Ordinance permits a trustee to appoint agents to transact any business or do any act required to be done in the execution of the trust, and provided the appointment is made in good faith (ie honestly), the trustee is not responsible for the agent's defaults. Paragraph 4(q) of the Second Schedule to the Ordinance specifically empowers a trustee to engage the services of an investment adviser without incurring liability for any action taken in good faith in accordance with the advice of...