Arbitration of Trust Disputes: Two Bodies of Law Collide S.I. Strong* ABSTRACT Once considered nothing more than “mere” estate-planning devices, trusts play a large and growing role in the international economy, holding trillions of dollars of assets and generating billions of dollars of income each year. However, the rising popularity of both commercial and noncommercial trusts has led to an explosion in hostile trust litigation, leading settlors and trustees to search for new and less expensive ways to resolve trust-related disputes. One possible solution involves use of a mandatory arbitration provision in the trust itself. However, the unique, multiparty nature of trust disputes often makes this sort of arbitration highly controversial. This Article considers the various issues that arise when two separate bodies of law—trust law and arbitration law— collide, using recent developments in the field of international commercial arbitration to address some of the more intransigent problems facing trust arbitration. In so doing, this Article introduces a number of new judicial decisions not previously considered in the scholarly literature and brings a uniquely comparative and international perspective to the debate regarding the jurisprudential propriety of mandatory trust arbitration. * D.Phil., University of Oxford (UK); Ph.D., University of Cambridge (UK); J.D., Duke University; M.P.W., University of Southern California; B.A., University of California, Davis. The author, who is admitted to practice as an attorney in New York and Illinois and as a solicitor in England and Wales, is the Henry G. Schermers Fellow at the Hague Institute for the Internationalisation of Law and Associate Professor of Law at the University of Missouri. The author is a member of the American Law Institute (ALI) Consultative Groups for both the Restatement (Third) of Trusts and the Restatement (Third) of the U.S. Law of International Commercial Arbitration. Many thanks are due David Horton and John H. Langbein for comments and insights provided on earlier drafts of this Article. All errors of course remain the author’s own. 1157 1158 vanderbilt journal of transnational law [vol. 45:1157 TABLE OF CONTENTS I. INTRODUCTION .............................................................. 1159 II. AN INTRODUCTION TO TRUSTS AND TRUST LAW THEORY .................................................................. 1168 A. What Is a Trust? ................................................. 1169 B. Types of Trusts, Including Commercial Trusts .................................................................. 1171 C. The Theoretical Basis of Trusts ......................... 1174 1. The Donative Theory of Trusts ................... 1174 2. The Contract Theory of Trusts .................... 1177 3. Other Theories of Trusts ............................. 1180 III. ARBITRATION OF TRUST DISPUTES ................................ 1181 A. Benefits of Arbitration ........................................ 1181 B. Trustees’ Powers to Arbitrate ............................. 1187 C. Settlors’ Powers to Compel Mandatory Trust Arbitration ................................................ 1193 1. Legislation in Favor of Mandatory Trust Arbitration ......................................... 1193 2. Elements Required for Mandatory Trust Arbitration Under Common Law Principles .............................................. 1195 a. No Impermissible Ouster of the Court’s Jurisdiction ............................... 1196 i. Arbitration as a Litigation Substitute ........................................ 1197 ii. Special Issues Regarding Judicial Accounting and Instruction ........... 1203 b. An Arbitration Clause That is Operable, Effective, and Capable of Performance ........................................... 1208 i. Solutions Suggested Under National Law ................................... 1209 ii. Solutions Suggested Under International Law ........................... 1212 c. An Arbitral Clause That is Binding on the Party Seeking to Avoid Arbitration ............................................. 1219 i. Settlor Consent ............................... 1219 ii. Consent of Parties Other Than the Settlor ........................................ 1228 d. Proper Representation .......................... 1231 e. Subject Matter Arbitrable ..................... 1236 IV. CONCLUSION .................................................................. 1245 2012] arbitration of trust disputes 1159 I. INTRODUCTION Trusts and their civil law equivalents, often known as foundations or associations,1 play a large and growing role in the international economy. Not only do trust vehicles hold assets valued in the trillions of dollars and generate billions of dollars each year in income, but administrators and trustees accumulate similarly massive amounts in annual fees.2 With a rising number of trusts 1. Although trusts developed historically as a common law device, civil law jurisdictions are becoming increasingly involved in this field, either through the development of their own domestic forms of trusts or the recognition of trusts formed in common law countries. See Henry Christensen III, Foreign Trusts and Alternative Vehicles, 1902 PLI/CORP. 323, § 4 (Aug. 18–19, 2011); Adair Dyer, International Recognition and Adaptation of Trusts: The Influence of the Hague Convention, 32 VAND. J. TRANSNAT’L L. 989, 1013–18 (1999) (describing attempts in some civil law countries to adopt trusts or similar devices); Dante Figueroa, Civil Law Trusts in Latin America: Is the Lack of Trusts an Impediment for Expanding Business Opportunities in Latin America?, 24 ARIZ. J. INT’L & COMP. L. 701, 703–07, 721–51 (2007) (comparing the Anglo-American and the Latin-American inter vivos trust); Frances H. Foster, American Trust Law in a Chinese Mirror, 94 MINN. L. REV. 602, 637–50 (2010) (describing the Chinese interpretation of American trust law); Henry Hansmann & Ugo Mattei, The Functions of Trust Law: A Comparative Legal and Economic Analysis, 73 N.Y.U. L. REV. 434, 437–45 (1998) (contrasting the common law and civil law approaches to “trust-like relationships”); Michael Hwang, Arbitration for Trust Disputes, in GUIDE TO THE WORLD’S LEADING EXPERTS IN COMMERCIAL ARBITRATION 83, 84 (Legal Media Group ed., 2009) (discussing a model arbitration clause developed by the International Chamber of Commerce (ICC) for use in trust disputes); John H. Langbein, The Contractarian Basis of the Law of Trusts, 105 YALE L.J. 625, 629, 632– 43, 669–71 (1995) [hereinafter Langbein, Contractarian] (describing how civil law jurisdictions confront the types of issues handled in common law jurisdictions by trusts); John H. Langbein, The Secret Life of the Trust: The Trust as an Instrument of Commerce, 107 YALE L.J. 165, 186 (1997) [hereinafter Langbein, Commercial Trusts] (“The Japanese have built a trust industry with assets amounting to $2 trillion.”); Maurizio Luponi, The Civil Law Trust, 32 VAND. J. TRANSNAT’L L. 967, 970–73 (1999) (describing the essential elements of a trust and how these elements have been adapted in civil law countries); Julien Perrin, The Recognition of Trusts and Their Use in Estate Planning Under Continental Laws, 10 Y.B. PRIVATE INT’L L. 629, 630 (2008) (“[T]he increasing mobility of persons and assets fuelled the use of trusts in circumstances connected to civil law countries.”); Steven L. Schwarcz, Commercial Trusts as Business Organizations: An Invitation to Comparatists, 13 DUKE J. COMP. & INT’L L. 321, 322 (2003) (“[T]rusts or variations on the trust form are beginning to be embraced worldwide.”); Tina Wüstemann, Arbitration of Trust Disputes, in NEW DEVELOPMENTS IN INTERNATIONAL COMMERCIAL ARBITRATION 2007, at 33, 33–35 (Christoph Müller ed., 2007) (“With increasing mobility of individuals in a shrinking world, trusts are no longer confined to the Anglo-saxon world but are also often used in civil law jurisdictions.”). For ease of discussion, the term “trust” will be used to refer to both civil law and common law devices, unless otherwise indicated. 2. See David Horton, The Federal Arbitration Act and Testamentary Instruments, 90 N.C. L. REV. 1027, 1070 (2012) (noting irrevocable trusts in the United States “generated $142.5 billion in income and $3.7 billion in trustees’ fees” in 2007 1160 vanderbilt journal of transnational law [vol. 45:1157 moving into the international realm so as to take advantage of favorable tax laws in various offshore jurisdictions, trusts have become an issue of global importance.3 Furthermore, trusts are becoming increasingly commercial in nature, leaving behind their reputation as mere estate-planning devices.4 The combination of international and commercial characteristics might suggest that arbitration would be an appropriate means of resolving trust disputes, since arbitration is very much the preferred means of resolving other types of international commercial controversies.5 Indeed, such an approach might already appear to be standard procedure, given the number of trusts that currently appear in arbitrations in the United States and elsewhere.6 However, the vast majority of these arbitrations cannot really be considered “trust disputes” per se, since they arise out of contractual relationships alone); Langbein, Commercial Trusts, supra note 1, at 177–78 (estimating in 1997 that commercial trusts held assets in the range of $11.6 trillion, with noncommercial trusts holding an additional $672 billion). 3. See Wüstemann, supra note 1, at 33–34 (noting the extent to which trust litigation has become internationalized in recent years). The expanded use of international trusts has been facilitated by the enactment of the Hague Convention on the Law Applicable to Trusts and on Their Recognition (Hague Convention on Trusts). See Convention on the Law Applicable to Trusts and on Their Recognition, July 1, 1985, 23 I.L.M. 1389, 1389–92 (1984) [hereinafter Hague Convention on Trusts]. The Hague Convention on Trusts has been ratified or acceded to by Australia, Canada, Italy, Liechtenstein, Luxembourg, Malta, Monaco, the Netherlands, San Marino, Switzerland, and the United Kingdom. See HCCH Status Table, HCCH, http://www.hcch.net/index_en.php?act=conventions.status&cid=59 (last updated Aug. 17, 2010). It has been signed but not ratified by Cyprus, France, and the United States. See id. 4. See Langbein, Commercial Trusts, supra note 1, at 166 (“[W]ell over 90% of the money held in trust in the United States is in commercial trusts as opposed to personal trusts.”). 5. See GARY B. BORN, INTERNATIONAL COMMERCIAL ARBITRATION 68–71 (2009) (presenting statistics that demonstrate the growing caseload of arbitral institutions and increasing popularity of international commercial arbitration). 6. Evidence of trust-related arbitration can be found in various judicial opinions. See Laughton v. CGI Tech. & Sol’ns, Inc., 602 F. Supp. 2d 262, 263–64 (D. Mass. 2009) (concerning the enforceability of an arbitration clause in an agreement involving a trust); U.S. Trust Co., N.A. v. Cavalieri, No. HHDCV075013653S, 2008 WL 1822721, at *1–2 (Conn. Super. Ct. Apr. 1, 2008) (concerning the arbitrability of an employment dispute involving a trust); Delaney Elec. Co. v. Schiessle, 601 N.E.2d 978, 980 (Ill. App. Ct. 1992) (concerning a dispute involving the trustee of a land trust); Dallah Real Estate & Tourism Holding Co. v. Ministry of Religious Affairs, Pakistan, [2010] UKSC 46, [1]–[2], [7] (appeal taken from Eng.) (concerning the enforceability of an arbitration clause in an agreement involving a trust); Premium Nafta Prods. Ltd. v. Fili Shipping Co., [2007] UKHL 40, [3]–[5], on appeal from Fiona Trust & Holding Corp. v. Privalov, [2007] EWCA Civ 20, [2007] 1 All E.R. (Comm.) 891; Trustees of the Edmond Stern Settlement v. Levy, [2009] EWHC (TCC) 14, [1]–[2] (Eng.) (adjudicating an appeal from a trust arbitration). 2012] arbitration of trust disputes 1161 between the trust and unrelated third parties and typically involve matters that are entirely external to the trust itself.7 However, these kinds of external, third-party disputes are not the only type of trust-related conflicts that exist, nor indeed are they the most common. Instead, “[m]ost trust disputes are internal disputes”8 that address matters relating to the inner workings of the trust and involving controversies between some or all of the various parties to a trust, including trustees, protectors, and beneficiaries.9 These types of matters are quite different from external trust disputes, not only in terms of their subject matter (which can involve specialized questions of trust law), but also in terms of the manner in which arbitration arises. Arbitration with external third parties is typically based on an arbitration clause found in an individual contract made between the trust and the third party. Arbitration of internal trust disputes, on the other hand, usually arises as a result of a mandatory arbitration provision found in the trust itself.10 This latter type of arrangement is much more controversial than arbitration with an external third party pursuant to a contract existing outside the trust.11 Indeed, some courts have concluded that mandatory arbitration provisions contained in a trust are 7. Such proceedings are largely uncontroversial, particularly in jurisdictions with legislation giving trustees the explicit power to enter into nonjudicial means of dispute resolution. This type of legislation has long been available, but is becoming increasingly popular. See infra notes 154–77 and accompanying text. 8. Hwang, supra note 1, at 83. Different commentators define internal and external trust disputes differently. See Paul Buckle & Carey Olsen, Trust Disputes and ADR, 14 TR. & TRUSTEES 649, 651 (2008); Wüstemann, supra note 1, at 38. 9. See Hague Convention on Trusts, supra note 3, art. 2 (describing the legal relationships that make up a trust); UNDERHILL AND HAYTON: LAW RELATING TO TRUSTS AND TRUSTEES ¶¶ 8.157–8.167 (David Hayton et al. eds., 18th ed. 2010) [hereinafter UNDERHILL AND HAYTON] (discussing the enforceability of trusts by and against trustees, beneficiaries, and third parties); Langbein, Contractarian, supra note 1, at 664 (discussing which parties have standing to enforce a trust); Wüstemann, supra note 1, at 36 (distinguishing parties to an internal dispute, namely trustees, settlors, protectors, and beneficiaries, from parties who are external to the trust, including creditors and unnamed spouses and heirs). 10. Parties to an internal trust dispute could also enter into an arbitration agreement after the dispute has arisen (i.e., a submission agreement or compromis), but it is usually easier to obtain an arbitration agreement before legal controversies arise rather than afterward, regardless of whether the matter is related to a trust or not. See GARY B. BORN, INTERNATIONAL ARBITRATION AND FORUM SELECTION AGREEMENTS: DRAFTING AND ENFORCING 37 (2010) (“It is difficult to negotiate a submission agreement once a concrete dispute has arisen and litigation tactics have been explored.”). 11. Although the current interest in mandatory arbitration of trust disputes makes it seem as if the procedure is relatively new, these issues have been discussed at various times in the past. See, e.g., Arnold M. Zack, Arbitration: Step-Child of Wills and Estates, 11 ARB. J. 179 (1956) (discussing historical takes on the interplay between arbitration and wills and trusts law); Blaine Covington Janin, Comment, The Validity of Arbitration Provisions in Trust Instruments, 55 CAL. L. REV. 521 (1967) (describing the increase in interest toward arbitrating trust disputes in the mid-1960s ). 1162 vanderbilt journal of transnational law [vol. 45:1157 unenforceable.12 However, the potential difficulties associated with mandatory trust arbitration have not diminished the appeal of this particular procedure. Hostile trust litigation is reaching “near epidemic” levels, and many settlors and trustees view arbitration as an excellent means of limiting spiraling litigation costs.13 Anecdotal evidence suggests that relatively few trusts currently contain arbitration provisions.14 However, it is unclear why this is so, given the significant amount of national and international interest in mandatory arbitration of internal trust disputes.15 One reason might be that some residual prejudice against arbitration still exists among some members of the trust bench and bar.16 For example, questions have been raised about the adequacy of due process protections in arbitration as well as the ability of arbitrators to handle the kind of complex, multiparty disputes that often arise in trust law,17 even though every other area of law has 12. See Diaz v. Bukey, 125 Cal. Rptr. 3d 610, 614–15 (Ct. App. 2011) (holding that the arbitration clause of a trust agreement was unenforceable against a third- party beneficiary), rev. granted, 257 P.3d 1129 (Cal. 2011); Rachal v. Reitz, 347 S.W.3d 305, 310 (Tex. App. 2011) (holding that the type of trust at issue was not a contract and thus its arbitration clause was unenforceable), rev. granted, 2012 Tex. LEXIS 487 (Tex. June 8, 2012). 13. Lawrence Cohen & Marcus Staff, The Arbitration of Trust Disputes, 7 J. INT’L TR. & CORP. PLAN. 203, 203 (1999); see also AM. COLL. OF TRUST & ESTATE COUNSEL, ARBITRATION TASK FORCE REPORT 22–23 (Sept. 18, 2006) [hereinafter ACTEC], available at http://www.mnbar.org/sections/probate-trust/ACTEC%20 Arbitration%20Task%20Force%20Report-2006.pdf (proposing alternatives to trust litigation); Georg von Segesser, Arbitrability in Estate and Trust Litigation, in PAPERS OF THE INTERNATIONAL ACADEMY OF ESTATE AND TRUST LAW–2000, at 21, 21 (Rosalind F. Atherton ed., 2001) (proposing arbitration as a possible solution to increased “hostile litigation in estate and trust matters”); Wüstemann, supra note 1, at 33–34 (discussing contemporary interest in arbitration of trust disputes). 14. See Wüstemann, supra note 1, at 41 (“Arbitration clauses in trust deeds still appear to be rare.”); see also Erin Katzen, Arbitration Clauses in Wills and Trusts: Defining the Parameters for Mandatory Arbitration of Wills and Trusts, 24 QUINNIPIAC PROB. L.J. 118, 119 (2011) (suggesting that the current law on the enforceability of arbitration clauses in trust disputes is “thin and underdeveloped”). 15. See Michael P. Bruyere & Meghan D. Marino, Mandatory Arbitration Provisions: A Powerful Tool to Prevent Contentious and Costly Trust Litigation, but Are They Enforceable?, 42 REAL PROP. PROB. & TR. J. 351, 352–53 (2007) (discussing deficiencies of resolving trust disputes through litigation and noting alternative solutions, including arbitration); Horton, supra note 2, at 1029 (“Recently . . . there has been a surge of interest in arbitration in a different field: wills and trusts.”); Katzen, supra note 14, at 118–19 (noting increased commentary on trust arbitration and an increase in legislative and judicial discussion of related issues); Wüstemann, supra note 1, at 41 (stating that Switzerland has taken a leading role regarding the arbitration of trust-related disputes). 16. See ACTEC, supra note 13, at 5 (discussing the “blinding prejudice” to arbitration in contemporary trusts and estates practice). 17. See Gerardo J. Bosques-Hernández, Arbitration Clauses in Trusts: The U.S. Developments and a Comparative Perspective, INDRET, no. 3, 2008 at 1, 5, 15 , available at http://www.indret.com/pdf/559_en.pdf (describing the hostility of nineteenth century judges toward arbitration); E. Gary Spitko, Gone but Not Conforming: Protecting the 2012] arbitration of trust disputes 1163 overcome these kinds of worries about the legitimacy of the arbitral process.18 However, the root of the problem may simply be that “[m]any trust practitioners have never encountered arbitration.”19 While trust lawyers are often proud of the specialized nature of their practice, this may be one instance where the traditional isolation of the trust bench and bar has resulted in trust specialists’ not being exposed to some of the more positive advances that have been made recently in arbitration law.20 Alternatively, the minimal use of mandatory arbitration provisions in trusts may be due to concerns about the enforceability of such clauses. This hesitancy is often said to be the result of the relatively small number of judicial opinions in this area of law 21 and the wide publicity given to the few negative decisions that exist.22 No lawyer wants his or her client to be the precedent-setting test case in a developing area of law, even if the outcome is ultimately in the client’s favor. However, the situation may not be as problematic as is commonly believed. Indeed, there are a number of signs that mandatory trust arbitration is gaining momentum in the United States and elsewhere. For example, a growing number of jurisdictions are addressing issues relating to mandatory trust arbitration through legislative means.23 Furthermore, several older cases, including In re Abhorrent Testator from Majoritarian Cultural Norms Through Minority-Culture Arbitration, 49 CASE W. RES. L. REV. 275, 307–14 (1999) (detailing concerns regarding the potential bias of the arbitrator); Wüstemann, supra note 1, at 40–41 (addressing concerns regarding whether arbitrators have enough expertise to handle complex trust law). 18. See BORN, supra note 5, at 775 (discussing the erosion of skepticism over the ability of arbitration to adequately resolve disputes); Horton, supra note 2, at 1039–40, 1042–44 (explaining that the nonarbitrability doctrine has been scaled back in many areas of law as the court has adopted a broad policy in favor of arbitration). 19. Cohen & Staff, supra note 13, at 206. 20. This isolation arises as a result of the specialized nature of trust law and procedure. See James W. Martin, Ten Tips for Handling Complex Probate, 84 FLA. B.J. 45 (2010) (identifying many of the elements that make trust law so complex). Some jurisdictions even require trust disputes to be brought in specialized probate or chancery courts. See WILLIAM M. MCGOVERN ET AL., WILLS, TRUSTS AND ESTATES: INCLUDING TAXATION AND FUTURE INTERESTS 626 (4th ed. 2010) (discussing the delays inherent in the probate and administration process). 21. See Katzen, supra note 14, at 118–19 (stating that few courts or legislatures have addressed the enforceability of arbitration clauses in wills and trusts); Wüstemann, supra note 1, at 34, 49 (“[T]he enforceability of arbitration clauses in trust deeds is still largely unchartered territory.”). 22. See Diaz v. Bukey, 125 Cal. Rptr. 3d 610, 614–15 (Ct. App. 2011) (holding that the arbitration clause of a trust agreement was unenforceable against a third- party beneficiary), rev. granted, 257 P.3d 1129 (Cal. 2011); Rachal v. Reitz, 347 S.W.3d 305, 310 (Tex. App. 2011) (holding that the type of trust at issue was not a contract and thus its arbitration clause was unenforceable), rev. granted, 2012 Tex. LEXIS 487 (Tex. June 8, 2012). 23. See infra notes 154–77 and accompanying text. 1164 vanderbilt journal of transnational law [vol. 45:1157 Estate of Jacobovitz,24 In re Meredith’s Estate,25 and Schoneberger v. Oelze,26 that have been frequently cited for the proposition that arbitration of trust disputes is impermissible, have all been abrogated legislatively or judicially, even though those subsequent decisions have not received the same kind of attention that the negative precedents have. Finally, the amount of law concerning arbitration of trust disputes is not perhaps as “thin and underdeveloped” as it is said to be, since a number of relevant judicial decisions appear to have been largely overlooked by legal commentators.27 Indeed, the perceived scarcity of what might be considered “clear” authority in this field appears to have led some judges and practitioners to adopt a view that is “more conservative towards ADR than the law actually is today,” even though the lack of subject- specific precedent would normally seem to suggest “that the general principles of arbitration law . . . should apply equally to trust cases.”28 This observation leads to another reason why mandatory trust arbitration may appear to be a somewhat questionable proposition: very little analysis of the issues relating to the arbitration of internal trust disputes has been conducted by experts in arbitration.29 Instead, most of the commentary in this field has come from the trust community. While it is true that trust arbitration gives rise to a number of challenges not seen in other areas of law, many modern trusts do not reflect any “necessary element of the probate court, or family wealth transfer, or even of donative transfer”30 that would make the 24. Compare In re Estate of Jacobovitz, 295 N.Y.S.2d 527, 531 (Sur. Ct. Nassau Cnty. 1968) (holding that probate cases cannot be arbitrated), with In re Blumenkrantz, 824 N.Y.S.2d 884, 887 (Sur. Ct. Nassau Cnty. 2006) (holding that a trustee is bound by an arbitration clause in the trust agreement). 25. Compare Campbell v. Detroit Trust Co. (In re Meredith’s Estate), 266 N.W. 351, 357 (Mich. 1936) (holding that the jurisdiction of the probate court cannot be ousted by a stipulation to arbitrate), with In re Nestorovski Estate, 769 N.W.2d 720, 732 (Mich. Ct. App. 2009) (explicitly abrogating In re Meredith’s Estate and holding that will contests may be resolved by arbitration). 26. See Schoneberger v. Oelze, 96 P.3d 1078, 1082–83 (Ariz. Ct. App. 2004) (holding that arbitration clauses are only enforceable when part of a valid contract and not as part of a trust agreement), superseded by statute, ARIZ. REV. STAT. ANN. § 14- 10205 (2012) (“A trust instrument may provide mandatory, exclusive and reasonable procedures to resolve issues between the trustee and interested persons with regard to the administration or distribution of the trust.”), as recognized in Jones v. Fink, No. 1 CA-SA 10-0262, 2011 WL 601598, ¶¶ 9–10 (Ariz. Ct. App. Feb. 22, 2011). 27. Katzen, supra note 14, at 118–19. These newly discovered decisions are introduced and discussed throughout this Article. 28. Cohen & Staff, supra note 13, at 211. 29. For example, the leading database on international arbitration, kluwerarbitration.com, does not appear to include any articles focusing on the arbitration of trust disputes. See KLUWER ARBITRATION, kluwerarbitration.com (last visited Sept. 29, 2012) (searching for the word “trust” as a title of any piece of commentary). 30. Christensen, supra note 1, § 2. 2012] arbitration of trust disputes 1165 participation of commercial and arbitration lawyers in this discussion inappropriate. Indeed, the large number of commercial trusts currently in use31 and the significant degree of overlap between commercial trusts, corporations, and other business associations suggest that commercial lawyers should be integrally involved in the debate about mandatory arbitration of internal trust disputes.32 This is not to say that the arbitral community has been actively excluded from the discussion in any way. Instead, the problem seems to be that experts in arbitration appear somewhat unaware of the unique issues associated with mandatory trust arbitration.33 In many ways, the arbitration community appears to be as isolated from other areas of practice as the trust community is. 31. See Robert Flannigan, Business Applications of the Express Trust, 36 ALBERTA L. REV. 630, 631 (1998) (identifying the types of commercial trusts that can arise). 32. Numerous similarities exist between commercial trusts and other types of business associations. See Christensen, supra note 1, § 2; Hansmann & Mattei, supra note 1, at 479 (discussing the similarities between private trust law and corporate law); Langbein, Contractarian, supra note 1, at 650 (highlighting the similar traits of trusts and contracts); Paul B. Miller, The Future for Business Trusts: A Comparative Analysis of Canadian and American Uniform Legislation, 36 QUEEN’S L.J. 443, 452–55, 474–78, 482, 499 (2011) (discussing similarities between commercial uses of trusts in Canada and the United States); A. Joseph Warburton, Trusts Versus Corporations: An Empirical Analysis of Competing Organizational Forms, 36 J. CORP. L. 183, 188 (2010) (comparing trust and company law in the United Kingdom). 33. Although two leading arbitral institutions—the International Chamber of Commerce (ICC) and the American Arbitration Association (AAA)—have both taken steps to address the special needs of parties involved in the arbitration of trust disputes, these efforts appear to be isolated events. See AAA WILLS AND TRUSTS ARBITRATION RULES (2009), available at http://www.adr.org/cs/idcplg?IdcService=GET_ FILE&dDocName=ADRSTG_004135&RevisionSelectionMethod=LatestReleased; see also ICC ARBITRATION CLAUSE FOR TRUST DISPUTES, 19 ICC INT’L CT. OF ARB. BULL. 9 (2008), available at http://www.iccdrl.com (search “ICC Arbitration Clause for Trust Disputes” and follow “Commission Report” hyperlink). Indeed, neither the AAA Wills and Trusts Arbitration Rules nor the ICC Model Trust Clause have yet been mentioned in any judicial opinion. Furthermore, these initiatives have been largely ignored in commentary generated by the trust bar, with the AAA and ICC’s recent efforts only being discussed in passing. See Horton, supra note 2, at 1031 (citing, without further discussion, the ICC Model Trust Clause); Katzen, supra note 14, at 130–32 (discussing briefly the AAA’s wills and trusts reference procedures). But see Christopher P. Koch, A Tale of Two Cities!—Arbitrating Trust Disputes and the ICC’s Arbitration Clause for Trust Disputes, 2 Y.B. INT’L ARB. 178, 199 (2012) (discussing ICC Model Trust Clause). However, the author analyzes the AAA and ICC initiatives in detail in two forthcoming articles. See S.I. Strong, Empowering Settlors: How Proper Language Can Increase the Enforceability of a Mandatory Arbitration Provision in a Trust, 47 REAL PROP. TR. & EST. L.J. (forthcoming 2012) [hereinafter Strong, Enforceability] (comparing AAA and ICC model trust clauses); S.I. Strong, Mandatory Arbitration of Internal Trust Disputes: Improving Arbitrability and Enforceability Through Proper Procedural Choices, 28 ARB. INT’L (forthcoming 2012) [hereinafter Strong, Procedures] (analyzing the effectiveness of AAA Trust Arbitration Rules). The AAA is currently in the process of revising its rules, although the scope of those changes was not known at the time this Article went to press. 1166 vanderbilt journal of transnational law [vol. 45:1157 This type of practical and jurisprudential segregation cannot continue. Instead, it is high time that these two areas of specialization—trust law and arbitration law—came together to address questions relating to the arbitration of internal trust disputes through inclusion of an arbitral provision in the trust instrument. Indeed, as discussed below, several recent developments in arbitration law offer new solutions to some of the more intransigent problems facing mandatory arbitration of trust disputes.34 This Article therefore aims to unite the two bodies of law in a way that is useful to courts, commentators, and counsel in both fields. The structure of the Article is as follows. First, Part II sets the stage by describing the basic requirements for a trust as well as the wide variety of commercial and other types of trusts that currently exist. This analysis is important because it identifies some of the qualities of trusts that can prove problematic for arbitration while also dispelling the myth that trusts are used only in the testamentary or estate-planning context. This discussion also provides those who do not specialize in trust law with a basic understanding of the relevant principles of law and practice, although there are some elements that trust law experts may find intriguing as well. Part III forms the core of the Article. This discussion introduces the various problems that can arise when parties attempt to incorporate arbitration provisions into trusts and analyzes whether and to what extent mandatory trust arbitration is enforceable as a matter of law. The focus here is on: (1) the potential for arbitration to oust the jurisdiction of the courts impermissibly; (2) questions about the operability and effectiveness of the arbitration provision itself; (3) whether and to what extent the arbitration provision will be binding on the party seeking to avoid arbitration; (4) proper representation of parties, particularly those who may be unborn, unascertained, or legally incompetent at the time the dispute arises; and (5) arbitrability of internal trust disputes.35 In considering these issues, the text not only focuses on solutions that have been proposed as a matter of trust law but also introduces several new ideas based on arbitration law. Part IV pulls the various strands of discussion together and concludes the Article with some final observations. This Part also contains several suggestions about future areas of research concerning mandatory arbitration of internal trust disputes. Before beginning, it is important to describe the parameters of the current analysis. First, this Article focuses on the enforceability of mandatory arbitration provisions found in trusts. While there are a 34. See infra notes 281–320, 322–378, 433–90 and accompanying text. 35. See Cohen & Staff, supra note 13, at 209 (discussing necessary requirements for arbitrating future trust disputes).