The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamian financial services industry may obtain a competitive advantage from a recent precedent established by the Supreme Court, which proves the judiciary will “honour” the law enabling old trusts to continue ‘in perpetuity’.

Chief Justice Sir Michael Barnett, in a May 21, 2013, ruling, granted a Bahamas-based trustee an Order declaring that the Rule Against Perpetuities (Abolition) Act 2011 (RAPAA) applied to the disposition of a trust created before December 30, 2011.

Heather Thompson, attorney and partner at Higgs & Johnson, which represented the trustee in the application, said the Bahamas - unlike many competitor jurisdictions - now had a court ruling determining what happed to trusts created before the new Act came into being.

Legal precedent now backed the Bahamas’ Rule Against Perpetuities (Abolition) Act 2011, which allows trusts to continue ‘in perpetuity’ and prevents their assets from being ‘dissipated’ to beneficiaries at the end of their life. Essentially, the law allows trusts to continue ‘in perpetuity, or for ever.

“What we’re trying to signal is the legislation has been passed, but this is the first application to disapply the existing rule against perpetuities so the trust is now perpetual,” Ms Thompson told Tribune Business.

The trust involved in the action before the Chief Justice was created before 1995, when the initial Perpetuities Act was passed to limit the life of Bahamian trusts to 80 years. That period was subsequently extended to 150 years, before the 2011 legislation was enacted.

Explaining the impact of the Chief Justice’s ruling, Ms Thompson said: “What it does is that it says: ‘OK, we passed the legislation, and the courts will honour it’.

“This can be extremely useful in assisting clients interested in not having trusts come to an end, as previously would have been the case.

“In would assist, in particular, with US dynasty trusts - transferring Bahamian trusts to a US dynasty trust that does not have perpetuity.”

Higgs & Johnson added: “The passing of the RAPAA has been hailed as a progressive and significant instrument in the legal landscape of the Commonwealth of the Bahamas.

“Together with the passing of the Executive Entities Act and the recent amendments to the Trustee Act and Purpose Trust Act, the RAPAA bolsters the Bahamas’ renowned brand as a competent, innovative, competitive and relevant jurisdiction.”

The law firm added: “The rule against perpetuities has been affected by both the amendments to the Trustee Act and the passing of the RAPAA.

“These pieces of legislation have addressed the oftentimes inescapable restrictions caused by any applicable rule against perpetuities.”