Bermuda statute strengthens trust firewall provisions

Thursday, 30 July 2020
Amendments to Bermuda's Trusts (Special Provisions) Act 1989 (the 1989 Act), passed by Bermuda's House of Assembly on 24 July, strengthen the jurisdiction's firewall provisions protecting trust assets from orders of a foreign court under foreign law.
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The Trusts (Special Provisions) Amendment Act 2020 is intended to clarify the jurisdiction of the Supreme Court in respect of Bermuda trusts and foreign trusts with a connection to Bermuda, and to limit the application of foreign laws and foreign orders to Bermuda trusts. They also make consequential amendments to the Conveyancing Act 1983.

A new section has been added to the 1989 Act to allow for the possibility that Bermuda law may apply to a part of a trust only. An amended s.9 specified that the Bermuda Supreme Court has express jurisdiction over all trust matters where the trust instrument provides for it.

The key section, s.10, improves firewall protections by specifying the circumstances under which any foreign law shall be excluded from application to a Bermuda trust, as opposed to providing for a blanket application of Bermuda law subject to exceptions. It states that no foreign law shall apply to the determination of any question concerning the validity, construction, effects or administration of a Bermuda trust, unless foreign land is concerned, or if foreign law has been chosen to apply to any severable aspect of a Bermuda trust.

These protective measures are further supplemented by s.11, which prevents the enforcement or recognition of any foreign court order that conflicts with s.11's provisions.

'These amendments ensure that Bermuda trust structures remain competitive with those of other jurisdictions,’ commented Peter Pearman TEP, Director, Global Head of Private Client and Trust, at law firm Conyers, adding that they ‘add to the robustness of Bermuda's Trusts Law, by giving the parties clarity on their rights and standings, and will be of great support to the trustee in the decision-making process.'

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