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Dependencies


FINDING A PURPOSE


Steve Meiklejohn outlines recent amendments to Jersey’s trusts law


The Trusts (Amendment No. 5) (Jersey) Law 2012, which came into force on 2 November 2012, has made further enhancements to the Trusts (Jersey) Law 1984 (the Trusts Law). More amendments are in prospect, and a brief mention of these is included in this article.


STEVE MEIKLEJOHN TEP IS A PARTNER AT OGIER IN JERSEY


New defi nition of ‘purpose’ Jersey introduced the concept of the non- charitable purpose trust in 1997. This type of purpose trust has proved popular as an alternative to the charitable trust for the purpose of holding corporate entities, such as private trust or private protector companies. The accepted view of such purpose trusts was that the purpose needed to be external to the trust and could not simply be to hold the relevant shares in the underlying company. This often created a need to have a purpose that was wider than the settlor (or indeed the trustees) actually wanted. Amendment No. 5 introduced a defi nition of ‘purpose’ for the fi rst time, which includes the acquisition, holding, management or disposal of property, and accordingly ‘ownership only’ purpose trusts (i.e. trusts to merely hold shares) are now permitted. However, notwithstanding the change, care needs to be taken when drafting the purposes. Invariably the company to be owned by the trust will be intended to perform a service or engage in some activity. In my view, it is sensible and logical for the purposes of the trust to embrace that service or activity. Apart from anything else, if a foreign court were to consider the terms of the trust, a more extended purpose (particularly one that was external to the trust itself) would make the trust more robust.


Protection from foreign interference Article 9 of the Trusts Law, introduced by Amendment No. 4 in 2006, contains provisions that protect Jersey trusts from attacks by foreign courts. Since that amendment, the Royal Court has delivered a helpful judgment in the case of Mubarak v Mubarak [2008] JLR 250 by confi rming that a judgment of an overseas court that purports to alter (i.e. do something the trustee itself could not do) a Jersey trust cannot be enforced by the Royal Court. Building on that decision, Amendment No. 5 has clarifi ed and taken account of observations


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made by commentators and has sought to improve the Article. The changes are:


• An extension to Article 9(1), which sets out the matters that must be determined in accordance with Jersey law and not by foreign law (the validity of the trust, for instance), including, fi rst, any exercise by a foreign court of a statutory or non-statutory power to vary the terms of the trust, and, second, the nature and extent of any benefi cial rights or interests in the property.


• The creation of a new Article 9(2A), which sensibly makes clear that there are limits to the protection Article 9 can give. The protection of Article 9 cannot: i)


validate a transfer of property that was neither owned by the settlor nor the subject of a power of disposition vested in the settlor


ii) aff ect the recognition of the law of any other jurisdiction in determining the questions at (i)


iii) displace express provisions to the contrary in the terms of the trust


iv) in determining the capacity of a corporation, aff ect the recognition of the law of its place of incorporation


v)


aff ect the recognition of the law of any other jurisdiction prescribing the formalities for the disposition of property


vi) validate any trust or disposition of immovable property situated in a jurisdiction other than Jersey that is invalid under the law of that jurisdiction; or


vii) validate any testamentary disposition that is invalid under the law of the testator’s domicile at the time of his death.


Amendment No. 5 restates the restrictions in Article 9(4) on the enforcement of foreign judgments to include, explicitly, other decisions of foreign tribunals (such as arbitration awards). The amendment also seeks to prevent the court from giving eff ect in Jersey (whether or not by enforcement) to such foreign court or tribunal decisions. In addition, the defi nition of ‘personal relationship’ in Article 9(6) is widened to explicitly include relationships with benefi ciaries.


‘Protector’ defi ned


An amendment to Article 9A of the Trusts Law has the eff ect of defi ning a ‘protector’ by replacing that expression (which was used in Article 9A, but was previously undefi ned) with a reference to a person (other than a trustee, enforcer or


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FOCUS ON Crown


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