The Role of Offshore Jurisdictions in the Development of the International Trust
Brownbill, David, Vanderbilt Journal of Transnational Law
The past twenty years have seen a vast amount of legislative activity on trust law in various offshore countries. Several countries--Belize, Dominica, Guernsey, Jersey, St. Vincent and the Grenadines, the Turks and Caicos Islands, and Samoa among them, while not formally codifying trust law, have adopted complete trust statutes offering a more or less comprehensive body of modern laws addressing all aspects of the trust relationship.(1)
Since the early 1960s, numerous other countries such as the Bahamas, Bermuda, the Cayman Islands, the Isle of Man, the British Virgin Islands, and Gibraltar have seen the steady adoption of England's Trustee Act 1925 with important variations. Several have also enacted the equivalent of England's Variation of Trusts Act 1958 and a smaller group has enacted the Trustee Investments Act 1961 and the Perpetuities and Accumulations Act 1964.(2) In the past ten or so years, these countries have adopted a highly targeted approach through the introduction of special legislation addressing specific issues, such as conflict of laws, fraudulent dispositions, purpose trusts, and perpetuities.(3)
This legislation creates a number of difficult policy issues and raises a host of technical challenges to many traditional or accepted constructs of trust law.
The objects of offshore jurisdictions in promulgating modern trust laws are quite different than those that most onshore countries have had in mind when enacting more traditional trust legislation. Whereas statutory developments in the onshore jurisdictions are almost always a response to the needs of domestic users of trusts, offshore legislation has little or nothing to do with domestic needs. The primary, if not sole purpose of the legislation is to create or enhance international trust business in the particular country. Therefore, the political context of the legislation is quite the reverse of that in most onshore countries. Historically, the difficulty faced by reformers in securing any political interest in their legislative proposals and the necessary parliamentary time for their enactment have been major impediments to the development of the law in most onshore jurisdictions.
There tends not to be such difficulty in the offshore jurisdictions. The starting point is a combination of private sector pressure to enhance business opportunities and governmental desire to enhance employment and increase revenues. In such an environment, trust legislation will be high on the political agenda. At the same time, there is in most offshore centers relatively little domestic trust activity, so the need to protect the interests of beneficiaries under wholly domestic trusts will be minimal. Thus, not only will there be pressure for the legislation, but there will also be little if anything militating against it. Several jurisdictions have, in any case, adopted a "ring fencing" policy restricting the application of the new legislation. For example, see Bermuda's purpose trust law,(4) the Cayman Islands' STAR trusts legislation,(5) and Jersey's statutory trust law,(6) all of which exclude trusts of land situated in their respective countries. In addition, several statutes establish a creature known as the "international trust" to which is accorded all the benefits of the modern statute but from which residents or nationals of the country in question are excluded.(7) Even in these instances, the exclusion is more likely to reflect a desire to preserve a limited land supply or the local tax base rather than to protect local trusteeships.
Policy issues raised by modern offshore legislation extend well beyond the single question of economics. There is, on the one hand, the morality of some of the highly targeted "product" legislation and, on the other hand, the wider question of the proper employment of sovereign power. There can be no question that legislation that …
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Publication information: Article title: The Role of Offshore Jurisdictions in the Development of the International Trust. Contributors: Brownbill, David - Author. Journal title: Vanderbilt Journal of Transnational Law. Volume: 32. Issue: 4 Publication date: October 1999. Page number: 953. © 1999 Vanderbilt University, School of Law. COPYRIGHT 1999 Gale Group.
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