Mandatory Arbitration of Internal Trust Disputes : Improving Arbitrability and Enforceability Through Proper Procedural Choices

Trusts and their civil law equivalents, often known as foundations or associations, play a large and increasing role in the global economy, holding trillions of dollars worth of assets and generating billions of dollars worth of revenue and trustees' fees annually. Once considered nothing more than “mere” estate planning devices, trusts are now more often seen in commercial rather than in private contexts, and often feature sophisticated financial institutions as professional trustees. With favorable tax laws in various off-shore jurisdictions making international trusts increasingly popular and hostile trust litigation reaching epidemic proportions, arbitration would seem to be many parties' dispute resolution mechanism of choice. To some extent, this is very much the case, with arbitration often being used to resolve conflicts between trusts and external third parties. However, arbitration of internal trust disputes – by far the more common type of concern in this area of law – is much more controversial and has been the subject of extensive and vigorous debate in the trust industry.Although trust experts have written extensively on mandatory trust arbitration, the arbitration community has been strangely silent in these discussions, and this Article is among the first to consider the unique challenges facing future arbitration of internal trust disputes from the arbitral perspective. In so doing, this Article provides new insights on the types of procedures that are necessary to ensure procedural fairness in what is often a complex, multiparty proceeding. This Article also considers what steps settlors can take to improve the enforceability of an arbitration provision located in the trust itself and analyzes the only set of institutional rules targeted specifically toward trust disputes – the AAA Trust Arbitration Rules – by comparing the AAA approach to the newly identified best practices in this field and to certain related initiatives from the ICC and the DIS