On 9 March 2017, the Arbitration Amendment Bill (the Bill) was introduced to Parliament. The purpose of the bill is to amend the Arbitration Act 1996 (the Act) to: • ensure arbitration clauses in trust deeds are given effect; • extend the presumption of confidentiality in arbitration to a rebuttable presumption of confidentiality in related court proceedings under the Act; • clearly define the grounds for setting aside an arbitral award and bring New Zealand’s approach into line with foreign arbitration legislation; and • confirm the consequence of failing to raise a timely objection to an arbitral tribunal’s jurisdiction.
Trust related arbitration Trusts and their civil law equivalents contribute significantly to the global economy generating billions of dollars of revenue and trustee’s fees. In recent decades, the increasing use of onshore and offshore trusts has led to increased litigation as arbitration has been viewed by many as too risky due to uncertainty about the enforceability of arbitration agreements in trust deeds. Arbitration can be a most appropriate and suitable process for resolving disputes relating to trusts and in particular, it has in the international context, the added advantage of enforceability of awards under the New York Convention. However, the nature of trusts has resulted in uncertainty as to whether an arbitration conducted pursuant to an arbitration clause in a trust deed would be binding under the Act for reasons, including that trust deeds incorporating arbitration agreements are not contracts, that there may be a lack of privity to bind non-signatory beneficiaries, and that the interests of certain beneficiaries of a trust ie minors/those lacking capacity and unnamed and unascertained beneficiaries may not be represented.
This uncertainty has tended to limit the effective use of arbitration in trust disputes. Nevertheless, it can be removed by ensuring that arbitration clauses in trust deeds are treated as arbitration agreements for the purposes of the Act. By clarifying that arbitral tribunals have the same power as the High Court to appoint persons to conduct litigation on the part of minor, unborn, or unascertained beneficiaries (or classes of beneficiaries), those who are unable to represent themselves will be effectively represented ensuring that any decision of an arbitral tribunal will bind all interested parties. Arbitration can be a suitable mechanism for resolving disputes involving trusts as its inherent privacy is more suited to the private nature of most trusts. Support for trust arbitration is spreading. In recent years, other jurisdictions have moved to reform legislation to expressly provide for arbitration of trust disputes including five states in the USA, the Supreme Court in Texas upheld an arbitration provision in a trust in the absence of specific legislation, Guernsey and the Bahamas enacted reforms in 2007 and 2011 respectively to allow for arbitration of trust disputes, and Switzerland will enforce arbitral awards in respect of trust arbitrations under its conflict of laws provisions.