Alternative Dispute Resolution is at the heart of recently approved Guernsey Trust Law reforms

In May 2026, and after extensive industry consultation, the States of Guernsey voted 39-0 to adopt important proposed reforms to the Trusts (Guernsey) Law, 2007 (‘Guernsey Trust Law’). The genesis of these reforms can be seen in the recently published ‘Financial Sector Strategy 2035: Driving Growth for Guernsey’. This identified the global fiduciary sector as experiencing strong growth driven by rising personal financial wealth. It noted that Guernsey has positioned itself as a trusted jurisdiction for the fiduciary sector, offering a broad range of private wealth and corporate services. The proposed Guernsey Trust Law reforms aim to ensure that the Guernsey Trust Law continues to play a key role in the development and success of Guernsey’s fiduciary sector globally, now and into the future. 

Whilst the timing of the implementation of these reforms is now largely in the hands of the legislative draftsmen, these reforms are coming soon, and need to be understood.

Of particular interest and importance are the changes in relation to the extent to which parties involved in internal trust disputes will be expected to engage in ‘Alternative Dispute Resolution’ (ADR) of those disputes and the breadth of trust disputes henceforth to be included. 

The proposed changes to Section 63 of the Trust law provides that the settlement of actions against trustees by ADR will, in certain circumstances, be binding on all the beneficiaries. The circumstances being where the trust deed so provides, or the Court so orders. This will remove the need for there to be a settlement recorded in a single document signed on behalf of all the parties, as not all forms of ADR will result in such a document. This considerably widens the scope of ADR methods available to settle disputes, which will now be extended to include evaluations, adjudication, expert determination and arbitration.

Further, section 63 will be broadened beyond disputes founded on a breach of trust action, which is a fairly limited class of disputes. It will increase the types of disputes which may be determined by way of arbitration to include internal trust disputes between trustees, beneficiaries and/or other power holders. 

The Guernsey Trust Law will also recognise that, if the Settlor wishes to stipulate for future disputes to be settled by arbitration, that will be permitted. Indeed, the Law will provide a basis for the recognition and enforcement of such an arbitration provision, subject to appropriate safeguards. As a corollary, not only the Trust Law but also the Arbitration (Guernsey) Law 2016 (‘Arbitration Law’) will be amended to provide a comprehensive code for the arbitration of Trust disputes. Although a trust is not a contract, an arbitration clause shall be treated as an arbitration agreement for the purposes of the Arbitration Law. The rights of third parties to the trust to access the Court are unaltered. 

These reforms, along with the Court’s growing willingness to direct the parties to engage in ADR, mark exciting and imaginative steps forward in encouraging parties to use ADR methods to settle a wide range of trust disputes. 

Other reforms of particular note

·      For holders of trust powers, the previous presumption is overturned, so that now there is a presumption in favour of powers being deemed fiduciary powers, unless the terms of the trust itself provides otherwise. This is particularly important in light of the recent Re X Trusts Case [civil number 2632 22.05.26] where the scope of the Protector powers will be assumed to be ‘wide’ unless narrowed by the terms of the trust deed. [section 15]

·      The requirement for a minimum number of trustees will drop from two to one unless the trust deed expressly provides otherwise. [section 17]

·      Individual trustees will be removed from office automatically if they lose necessary capacity [section 20]

·      The confidentiality of trust documents is extended, giving protection of disclosure, not only to trustees, but to ‘trust officials’, including Protectors, who have been provided with documents by trustees [section 38]

·      A person, acting in the capacity of trustee for one trust will be able to enter into a contract, or other transaction, with themselves in the capacity of trustee for another trust, amending the self-dealing rule [section 41]

·      The priority of trustee interests in relation to their non-possessory lien over trust property (for the purpose of securing their right to pay and be reimbursed from the trust property for expenses and liabilities, properly incurred in connection with the trust) is clarified. It is also clarified that the lien will not take priority over security granted to banks or other third-party lenders. This is to ensure that lenders have confidence that security granted to them over trust assets is effective [section 44] Also clarified is the trustees entitlement for ‘reasonable’ security for liabilities (existing, future, contingent or otherwise) before surrendering trust property [section 48]

·      The scope of the rule in Saunders v Vautier in Guernsey law is clarified. It will now be the same as that applying in other Commonwealth jurisdictions ie the rule will only apply where the relevant class of beneficiaries is closed and there is no power to add new beneficiaries [section 53]

·      Applications for variation can be made by a broader class of persons, without the leave of the Court. The Court’s power to vary beneficial interests without the consent of all beneficiaries is also extended. This prevents one beneficiary alone from affecting the interests of the others [section 57].

·      The prescription period will now run from the date of the delivery of accounts of the trust, provided they are complete and accurate, or the date on which the claimants first have knowledge of the relevant breach [section 76].

·      The definition of a ‘trust official’ will be clarified. It will not include a person that merely provides a contractual service to the trust, such as an accountant [section 80].

·      Following Jersey’s lead, the so-called Rule in Hastings Bass will be given a statutory footing. This means the Court will be able to intervene to unwind a transaction mistakenly entered into by the trustees, where it has had a negative result for the trust, without requiring the trustee’s actions to be sufficiently serious to amount to a breach of duty, as required in Futter v HMRC [2013] UKSC 26. This reform is desirable as it reinstates the rule as it was understood and enforced before the UK decision in Futter. Also, the application for relief may now be made by a wider range of persons [section 80].

·      As for privacy in trust administration proceedings, the important role of the Court’s supervisory jurisdiction means that the trust law should expressly permit the Court to make provision for private hearings and ancillary matters (such as anonymisation of the names of the parties) This will provide greater certainty for all concerned and should save costs and delay.

These changes make the importance of carefully drafted and thought through trust deeds of vital importance, so that they properly reflect the genuine aims and wishes of the Settlor.

These reforms, once enacted, will therefore represent an important milestone in maintaining Guernsey’s place at the very heart of the leading global trust jurisdictions, and at the cutting edge of the use of ADR as a means of settling trust disputes.