Consultation Paper No. 17 Trust Law
DIFC Law NO.[ ] OF 2005
This Draft Law is Published for Consultation Purposes only. the DFSA Reserves the Right to Amend this Draft at its Sole Discretion.
Trust Law of the Dubai International Financial Centre
Summary of the Law
1. Part 1 - General
This part provides articles of general application such as the power of the DFSA to make Rules for the purposes of this Law and limits the scope of the Law to express trusts and trusts created pursuant to a law or judgment that requires the trust to be administered in the manner of an express trust.
2. Part 2 - Choice of governing law place of administration
This part provides for the governing law of a trust and its place of administration. Article 14 allows for the migration of trusts to and from the DIFC. Articles 15, 16 and 17 deal with DIFC trusts in relation to foreign laws and heirship rights.
3. Part 3 - Judicial and non judicial proceedings
This part addresses selected issues involving judicial proceedings concerning trusts, the jurisdiction of the Court, the role of the Court in the administration of trusts and application and powers of the Court and the payment of costs.
4. Part 4 - Creation, validity and modification of a DIFC trust
This part specifies the requirements for the creation, validity and modification of a DIFC trust. Most of the requirements for creating, modifying and terminating trusts track traditional doctrine, including requirements of intent, capacity, Property and valid trust purpose. I have prescribed two types of trusts: charitable trusts and non-charitable or purpose trusts. Non charitable trusts or purpose trusts, the most common type, require the appointment of an enforcer to enforce the trust in relation to its non-charitable purposes and the purpose should be possible and sufficiently certain to allow the trust to be carried out. Charitable trusts are instead created to benefit the public at large. Articles 32 to 36 provide grounds on how a trust may be modified or terminated other than by its express terms and how trust Property should be distributed following termination.
5. Part 5 - Beneficiaries of a trust
This part describes who can be the beneficiary of a trust, what Property constitutes the interest of a beneficiary under a trust, and how a beneficiary can disclaim his interest.
6. Part 6 - Protective Trusts
This part addresses the validity of a protective trust and the rights of creditors to reach the beneficiary's interest. Certain Categories of claims are exempt from the protection such as claims for child support and alimony if supported by a Court order.
7. Part 7 - Office of trustee
This part contains a series of default rules dealing with the office of trustee, all of which may be modified by the terms of the trust. The role of a co-trustee is addressed, including the extent that one co-trustee may delegate to another and the extent to which one co-trustee can be held liable for actions of another trustee. Also covered are changes in trusteeship, including the circumstances when a vacancy must be filled, the procedure for resignation, the grounds for removal and the process for appointing a successor trustee. Finally, standards are provided for trustee compensation and reimbursement of expenses.
8. Part 7 - Part 8 - Duties and powers of trustees
This part states the fundamental duties of a trustee and enumerates the trustee's powers. In addition to a general power of a trustee in Article 59, a list of more specific powers is provided in Article 60 to give an indication of type of powers a trustee can exercise.
9. Part 9 - Liability of Trustees
This Part deals with the rights of persons dealing with a trustee. Articles 64 to 76 list the remedies for breach of trust, describe how Money damages are to be determined, provide a statute of limitations on claims against a trustee, and specify other defenses, including consent of a beneficiary and Recognition of and limitations on the effect of an exculpatory clause. Articles 72 and 74 address trustee relations with persons other than beneficiaries. The objective is to encourage third parties to engage in commercial transactions with trustees to the same extent as if the Property were not held in trust.
10. Part 10 - The Protector
Article 80 allows a settlor to include in the trust provisions which subject the exercise of the trustees' powers to the previous consent of the protector; Article 80(2) lists a series of powers which may be conferred on the protector such as the power to remove trustees or to exclude a beneficiary for the trust.
Submission of Comments
The draft Law is published for consultation purposes only. Please note, that although the draft is in near final form, the DFSA reserves the right to amend the draft at its sole discretion and as it is still "work in progress" it may therefore undergo further amendments prior to enactment.
Any persons wishing to submit comments should, where applicable, provide details of the organisations they represent. In addition, persons suggesting alternative approaches are encouraged to submit the proposed text of possible amendments that would be necessary to incorporate their suggestions.
Please note that the names of the commentators and the content of their submissions may be published on the DFSA Website and in other documents to be published by the DFSA. If you wish your name to be withheld from publication by the DFSA, please indicate this when you make your submission.
Any comments should be addressed to:
PO Box 75850
All comments should be provided in writing, on or before 14 September 2005.
or e-mailed to firstname.lastname@example.org
DUBAI Financial Services AUTHORITY
14 August 2005