Arbitration for family offices

The advantages of arbitration over litigation as a form of dispute resolution are well-known in the commercial field. Family offices and fiduciaries are increasingly looking at arbitration to resolve private wealth disputes too, including disputes over family businesses and trusts. The confidential nature of the arbitration process makes it particularly attractive to family offices, family members and businesses, especially in jurisdictions where it can be difficult to obtain privacy and confidentiality orders from the court. Arbitration avoids publicity which might have a detrimental effect on the underlying business and which can be reputationally damaging to the individuals involved. A private arbitration also helps to protect minor children and young adults from public proceedings and public disclosure of family wealth. 

Arbitration is typically more flexible, faster and cheaper as a process. It allows parties to choose their arbitrator, who may be a specialist in the subject-matter of the dispute (and respected as such by the parties) rather than a judge assigned by the court who may have a more general expertise. It also allows the parties to tailor the process to their particular needs, for example arbitration can be considered on the papers alone so as to limit evidence and, when appropriate, levels of family participation.

Although there are many advantages to arbitration, family offices should be careful to recognise that arbitration is not a one-size-fits all and is still a developing area in the field of trust disputes in particular.

Planning

Private wealth disputes can arise in many situations. One of the most common themes is succession, when a prominent family member dies or wishes to exit the business due to retirement or ill-health. Here, disputes can arise over management and control rights or over the valuation of a family member’s stake in the business. 

Other reasons include trust disputes where beneficiaries may fall out with their Trustees and other fiduciaries or disputes in relation to the running of the family business. Changing family dynamics can lead to disputes which need to be handled sensitively and where there may be a consequential detrimental effect on the management and operation of the business. Finally, family offices may want to consider arbitration if they become involved in commercial disputes with third parties but want to shield the family from the publicity and distress of those disputes.

Family offices should plan carefully to make the arbitration process as useful as possible.

Firstly, arbitration can be costly (in the same way as court proceedings can be costly), so should only be used at the right time. There may be space for an alternative dispute resolution mechanism such as guided meetings with a respected family member or mediation to take place before the arbitration process is started. A ‘stepped’ dispute resolution clause in a family constitution may oblige disputing parties to mediate or negotiate in good faith for a period of time before arbitration can commence. 

Mediation, where a third party mediator facilitates negotiations through a shuttle process, is another effective option. Settlement agreements resulting from mediations can be made binding and potentially enforceable across borders thanks in part to the 2019 United Nations Convention on International Settlement Agreements Resulting from Mediation (the Singapore Mediation Convention), which had been signed by 57 countries by May 2025.

As arbitration cannot happen unless the parties sign up to the process (either through a contractual document or specific agreement), and those facing adverse claims may refuse to engage after a dispute has arisen, family constitutional documents should make specific provision for arbitration. There should be a single document that identifies that the members of the family agree to arbitrate their differences, and the scope of the agreement to arbitration. Similarly, Trust deeds should contain clear arbitration clauses and say expressly who they are binding upon. These can be reinforced by a no-contest clause elsewhere in the Trust deed if necessary.

An arbitrator in a family enterprise dispute may have a wider jurisdiction to consider matters so that a fair decision can be reached across a variety of issues and grievances (unlike a Court’s decision which will be limited by the Court’s powers). The contract must be legally binding to make the arbitration agreement enforceable, and it should set out the high-level rubrics of the arbitration including any institutional procedural rules that are to be followed, the number of arbitrators, the legal place or ‘seat’ of the arbitration, and the laws that govern the arbitration (whether or not they are the same as the laws that govern the substance of the family agreement).

Preparation

As a dispute crystallises, it generally helps to identify early on the appropriate professional advisors who may assist with the dispute, such as legal representatives in appropriate jurisdictions, accountants and property valuers.

Advisers should be able to assist with the next pressing task, namely the choice of an appropriate arbitrator. Commercial arbitrators are often well-identified in industry guides and peer publications, but experienced private client arbitrators may not be so easy to find from public sources. 

Many family business arbitrators are appointed through informal connections, such as recommendations from trusted lawyers. Some arbitral institutions may be able to recommend an arbitrator on their roster who has particular knowledge and experience of family arbitrations, where family and personal relationships are mixed up with more conventional legal issues and may need to be addressed at the same time.

Legal advisers will then assist on the practicalities of running the arbitration with which family enterprises may not be familiar, such as collecting and preserving appropriate documents and information.

Outcomes

Arbitrations are usually single-stage processes, geared to the rendering of an arbitral award that is impossible to appeal and generally difficult to set-aside. This means that once the decision is made to fight, proper resources and time need to be allocated so that the arbitration is prosecuted as thoroughly and effectively as possible. No dispute is resolved if the dispute resolution process does not lead to a final, defined and binding outcome.

Consideration should be given to the enforcement of the award in appropriate jurisdictions. An award rendered by a tribunal conducted in accordance with the laws and practice of one jurisdiction may need to be enforced in other places depending where the family assets, including bank accounts and shareholding registrations, are located. Moreover the Court generally has a wide jurisdiction to supervise and decide matters in relation to Trusts.  Prior to entering into an arbitration process the parties need to be sure that the remedies they might wish to seek can be obtained through arbitration.  The English case of Grosskopf identified such a gap where an arbitrator did not share the Court’s power to appoint a judicial trustee (although in that case the Court held that the dispute was still capable of arbitration – Grosskopf v Grosskopf [2024] EWHC 291 Ch).

The ease of enforcement under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards is a major benefit of arbitration as a process as opposed to litigation, where a wide variety of rules and principles are applied by common and civil law jurisdictions and where local firewall legislation and complex appeal processes may complicate the enforceability of another court’s decision.  It is important to ensure that arbitral awards will bind all relevant parties in the context of trust disputes in particular.  The Bahamian case of Volpi v Volpi established, in that jurisdiction, that an arbitration clause bound not only the parties to the Trust Deed, but also the Trust’s beneficiaries.  However the exact wording of any arbitration clause needs to be considered in the context of the jurisdictions involved.