8. Governing Law

The meaning and effect of the terms of a Trust are:

• (a) determined by the law of the jurisdiction expressed by the terms of the Trust as the Governing Law; failing that
• (b) to be implied from the terms of the Trust; or failing either
• (c) to be determined by the law with which the Trust at the time it was created had the closest connection.

(2) The references in subsection 8(1)(a) and (b) to “failing that” or “failing either” include references to cases:

• (a) where no law is expressed or implied under subsection 8(1)(a) or (b); and
• (b) where a law is so expressed or implied, but that law does not provide for Trusts or the category of Trusts concerned.

(3) In ascertaining, for the purpose of subsection 8(1)(c), the law with which a Trust had the closest connection, reference shall be made in particular to:

• (a) the place of administration of the Trust designated by the Settlor;
• (b) the situs of the assets of the Trust;
• (c) the place of residence or business of the Trustee; and
• (d) the objects of the Trust and the places where they are to be fulfilled.

(4) A Settlor may, whether or not it is an AIFC Participant, expressly declare in the Trust Instrument that the laws of the AIFC shall be the Governing Law of the Trust.

(5) A term of the Trust expressly declaring that the laws of the AIFC shall govern the Trust is valid, effective and conclusive regardless of any other circumstance.

9. Provision for change of Governing Law

(1) Where a term of a Trust so provides, the Governing Law may be changed to or from the laws of the AIFC, in the manner prescribed by the terms of the Trust, if:

• (a) in the case of a change to the laws of the AIFC by a Foreign Trust, such change is recognised by the Governing Law previously in effect; or
• (b) in the case of a change from the laws of the AIFC, the new Governing Law would recognise the validity of the Trust and either all the Trusts, powers and provisions of the Trust remain enforceable, capable of being exercised and so taking effect or, prior to the change, the Trustee obtains the approval of the Court to the change.

(2) Where the Governing Law of the Trust changes to the laws of the AIFC, that Trust shall be for all purposes an AIFC Trust.

(3) A change in the Governing Law shall not affect the legality or validity of, or render any person liable for, anything done before the change.

(4) If a Foreign Trust becomes a AIFC Trust, notwithstanding subsection 6(2) (Default and mandatory rules) the Trustee may:

• (a) Exercise any power conferred upon the Trustee to postpone the date of termination of the Trust without reference to any limitations expressed upon that power by reference to a perpetuity period of any other jurisdiction; and
• (b) If no power is conferred upon the Trustee to postpone the date of termination of the Trust, apply to the Court for an order conferring such power which application the Court may grant absolutely or subject to such conditions as to the Court seem fit.

10. Matters determined by Governing Law

(1) Subject to subsection 10(2), all matters arising in regard to a AIFC Trust or in regard to any disposition of Property held upon the Trust thereof including questions as to:

1. (a) the capacity of any Settlor;
2. (b) any aspect of the validity of the Trust or disposition or the interpretation or effect thereof;
3. (c) the administration of the Trust, whether the administration be conducted in the AIFC or elsewhere, including questions as to the powers, obligations, liabilities and rights of Trustees and their appointment and removal; or
4. (d) the existence and extent of powers, conferred or retained, including powers of variation or revocation of the Trust and powers of appointment, and the validity of any exercise thereof, shall be determined in accordance with these Regulations and the other laws of the AIFC without reference to the laws of any other jurisdiction with which the Trust or disposition may be connected.

(2) Subject to sections 11 (Limitations in Foreign Law), 12 (Heirship Rights) and 13 (Foreign Judgments), subsection 10(1) shall:

1. (a) not validate any disposition of Property which is neither owned by the Settlor nor is the subject of a power in that behalf vested in the Settlor;
2. (b) not validate any Trust or disposition of immovable Property situated in a jurisdiction other than AIFC in which such Trust or disposition is invalid according to the laws of such jurisdiction;
3. (c) not validate any testamentary Trust or disposition which is invalid according to the laws applicable to succession to the testator’s estate;
4. (d) not affect the recognition of Foreign Laws in determining whether the Settlor is or was the owner of the settled Property or is or was the holder of a power to dispose of such Property;
5. (e) not affect the recognition of the laws of its place of incorporation in relation to the capacity of a corporation; and
6. (f) not affect the recognition of Foreign Laws prescribing generally, without reference to the existence or terms of the Trust, the formalities for the disposition of Property.

11. Limitations in Foreign Law

(1) Without limiting the generality of subsection 10(1) (Matters determined by Governing Law), no AIFC Trust and no disposition of Property to be held in Trust that is valid under the laws of the AIFC is void, voidable, liable to be set aside or defective in any manner by reference to a Foreign Law; nor is the capacity of any Settlor in relation to the Trust or disposition to be questioned nor is the Trustee or any Beneficiary or any other person to be subjected to any liability or deprived of any power or right, by reason that:

• (a) the laws of any foreign jurisdiction prohibit or do not recognise the concept of a Trust;
• (b) the Trust or disposition voids or defeats any rights, claims or interest conferred by Foreign Law upon any person by reason of a Personal Relationship to the Settlor or any Beneficiary or by way of Heirship Rights or contravenes any rule of Foreign Law or any foreign, judicial or administrative order, arbitration award or action intended to recognise, protect, Enforce or give effect to any such rights, claims or interest; or
• (c) the Foreign Law or foreign judicial or administrative order or arbitration award imposes any obligation or liability on the Settlor, Trustee, Enforcer, Protector, Beneficiary or any other party in relation to the Trust or the Trust Property.

(2) Subject to subsection 11(3), a transfer of Property to a Trust shall not be void, voidable or liable to be set aside by reason of a Settlor’s bankruptcy, the liquidation of a Settlor, or any action or claims made against a Settlor by any creditor, notwithstanding any foreign statute providing otherwise.

(3) Notwithstanding subsection 11(2), where the Court determines that, at the time when the Property was transferred to a Trust, a Settlor was insolvent or intended to defraud any creditor of the Settlor it may declare that the transfer of Property was void.

(4) In making claims to set aside transfers of Property to a Trust under subsection 11(3), the burden of proof shall rest with the creditor.

(5) Where a husband and wife transfer Property to a Trust and, immediately before being transferred, such Property or any part or any accumulation thereto is, pursuant to the law of its situs or the law applicable to the property of the parties to the marriage or other recognised personal relationship, determined to be community Property, then, notwithstanding such transfer, that Property and any accumulation thereto shall, for the purpose of giving effect to that law, be deemed to be community Property and be dealt with in a manner consistent with that law but in every other respect shall be dealt with in accordance with the terms of the Trust.

(6) Nothing contained in subsection 11(5) shall be construed so as to cause the Trust or any Trustee to be liable or obliged to pay for any debt or responsibility of the Settlor.

12. Heirship Rights

An Heirship Right conferred by Foreign Law in relation to the Property of a living person shall not be recognised as:

1. (a) affecting the ownership of immovable Property in the AIFC and movable Property wherever it is situated for the purposes of subsection 10(2)(a) and (b) (Matters determined by Governing Law) or for any other purpose; or
2. (b) constituting an obligation or liability for any purpose.

13. Foreign Judgments

A foreign judgment shall not be recognised or enforced or give rise to any estoppels insofar as it is inconsistent with sections 11(Limitations in Foreign Law) and 12 (Heirship Rights).

14. Place of Administration

(1) Without precluding other means for establishing a close connection with the designated jurisdiction, terms of a Trust designating the place of administration are valid and conclusive if:

• (a) a Trustee’s principal place of business is located in or a Trustee is resident of the designated jurisdiction; or
• (b) all or part of the administration occurs in the designated jurisdiction.

(2) A Trustee is under a continuing duty to administer the Trust at a place appropriate to its purposes, its administration, and the interests of the Beneficiaries or in furtherance of its purposes and in accordance with the terms of the Trust.

(3) Without precluding the right of the Court to order, approve, or disapprove a transfer in furtherance of the duty prescribed in subsection 14(2), the Trustee may transfer the Trust’s place of administration to another jurisdiction outside the AIFC.

(4) In connection with a transfer of the Trust’s place of administration, the Trustee may transfer some or all of the Trust Property to a successor Trustee selected in accordance with or designated in the terms of the Trust.