We can illustrate these challenges with an example. For instance, once divorce proceedings begin, Spouse A may find that the domestic court has limited powers to compel disclosure from third parties concerning Spouse B’s interests in foreign assets, particularly if those assets are held in trust.
One option for Spouse A is to apply to the foreign court directly to compel the trustee to disclose details of Spouse B’s interest in the trust and the potential value of that interest. If Spouse A is not a beneficiary of the trust, however, this request places the trustee in a dilemma, because it has a duty to its beneficiaries to keep information about the trust and its beneficiaries confidential.
In the face of such an application, courts in offshore jurisdictions likely will support the trustee’s decision to refuse disclosure without the beneficiaries’ consent. Trustees in offshore jurisdictions may seek the protection of local firewall legislation, which most offshore jurisdictions have implemented in recent decades. Firewall legislation provides that any foreign judgments purporting to alter the terms of the trust or beneficial interests will not be enforced in the offshore jurisdiction. This ensures that the offshore court retains its supervisory jurisdiction over the trustee’s administration of the trust, and that any changes to the trust are made considering the interests of all of the beneficiaries.
Spouse A also has the option to serve a letter of request. Such a letter does not have the status or force of a court order, but instead is a request from the domestic court to the foreign court for assistance in obtaining evidence from a person (the trustee) in that jurisdiction. Typically, the letter of request seeks the foreign court’s permission to propound written interrogatories, request disclosure of specified documents, or take oral testimony through a deposition or similar means. The Hague Evidence Convention 1970 governs the letter of request process for contracting states, which include the United States and the United Kingdom (including Jersey, Guernsey, Isle of Man, Cayman Islands, British Virgin Islands and Gibraltar). Provided that the request is relevant to the proceedings before the domestic court and does not amount to a “fishing expedition,” the recipient jurisdiction should deal with the request expeditiously.
Contracting states’ courts usually respect the foreign requests based on principles of comity. However, the recipient court must balance the principle of comity with the need to protect confidential information or privilege in the context of its domestic law. Does this mean that foreign courts will require trustees to disclose information to a stranger to the trust? Maybe not.
Offshore courts have previously refused to require trustees to disclose privileged documents, including evidence filed in trustee court applications concerning the administration of the trust. However, in respect of non-privileged information, the Jersey/Guernsey courts considered that the public interest in comity likely outweighed any claim to confidentiality. In J v. K [2016 JLR 110], the Jersey court also rejected the trustee’s objection to providing information to a court in Missouri on grounds that the court should uphold the Jersey firewall provisions on public policy grounds. The court accepted that the firewall legislation would prevent it from recognizing any foreign judgment purporting to exercise the court’s supervisory jurisdiction over a Jersey trust, but that did not prevent it from assisting the requesting court on receipt of a proper request.
While Jersey lawyers have questioned whether this case was correctly decided, it remains the leading decision on the issue until the matter is reconsidered. It further remains to be seen whether other offshore jurisdictions will take a more robust position and deploy their firewall legislation to resist requests for trust information from foreign courts.
US courts tend to view letters of request through the lens of their local laws governing the disclosure of information. US courts likely will look to the particular facts of a case to determine whether a disclosure is appropriate. For instance, if it appears that Spouse A is intentionally concealing marital assets in a US trust to avoid the division of such assets with Spouse B, or if review of the assets held in trust for the benefit of Spouse A is necessary to decide on an equitable allocation of marital assets, a US court may be more likely to order the disclosure of information relating to such assets.