There are now four major offshore multinational law firms with dedicated trust and private client departments in the British Virgin Islands ("BVI"), three of whom have established trust and private client departments in one or more other offshore jurisdictions. This surely reflects the view, increasingly widely held, that the BVI is coming of age as a trust and private client jurisdiction - a particularly appropriate metaphor considering that the first steps towards modernizing the Trustee Ordinance of 1961 (now called the Trustee Act) were taken in the Trustee (Amendment) Act 1993, some seventeen years ago. This article seeks to identify the principal reasons for this view. Four factors, in particular, may be highlighted.

First, all of these firms have long experience of the BVI and have seen how much the Government of the islands and its Financial Services Commission are prepared to do in order to facilitate development of the jurisdiction generally but especially in relation to trust and private client. There has been a very fruitful partnership between the public and private sectors particularly in the promulgation of necessary and desirable trust law reform. Significant modernising amendments were made to the 1961 legislation (itself based closely on the English Trustee Act 1925) in 1993 and again in 2003, the result, in each case, of governmental responsiveness to the expressed needs of the flourishing trust industry. Of considerable importance also was the establishment on Tortola in early 2009 of the Commercial Court of the Eastern Caribbean Supreme Court to which a distinguished Chancery Silk was appointed as its first judge and to which all disputes concerning trust funds of US$500,000 or more are automatically assigned. The considerable financial commitment of the BVI government to this project reflects recognition that, as BVI trusts enter their second generation, the jurisdiction will need and should have a Chancery specialism.

Second, the BVI has developed a very substantial trust industry over the last two decades as is evidenced by the presence on island of over 100 active trust companies. Some of these entities are very significant players on the international trust and private client field. Whatever the size of its client base, a trust company is likely to have a need for specialist advice from time to time on such matters as how best to achieve the wishes or meet the needs of its settlor clients in non-standard cases and, on an ongoing basis, as to the extent of its own powers and duties as trustee under existing structures. It is a sign of the jurisdiction's maturity that that advice can now be provided on island and that there are sufficient service providers to ensure both a reasonable choice for consumers, including where professional conflicts arise, and that all demand is supplied. The BVI trust need never leave home again. It can be established, administered, amended, otherwise tended and adjudicated upon by trust law specialists entirely within the BVI.

Third, it is less than optimal that a law firm which, for example, has given specialist advice to and represented corporators in their dealings with BVI public authorities at the beginning of a company's existence and which can offer specialist litigation services in relation to disputes arising between shareholders thereafter cannot give equally specialist advice on what happens to the shares of a shareholder who dies unexpectedly, including on the likely international elements in that sort of situation or, indeed, BVI estate planning advice in advance of it ever arising. A considerable amount in terms of the life of the company may turn on BVI rules as to succession in a conflict of laws context or planning based upon them. An increasing awareness, therefore, of the need to offer the full range of services which might reasonably be required by way of complement to existing corporate and litigation services is no doubt a significant motivation behind some of the current private client expansion.

Fourth but in no sense least, the BVI trust has established itself as a credible and versatile concept for which there has been considerable take up in recent years. This take up looks likely to continue since sophisticated and well advised settlors no longer identify the offshore trust with any particular jurisdiction. There is now real choice to be had between trust jurisdictions in terms of difference in trust product and commensurability of legal infrastructure. Even time zones no longer dictate the trust forum as is evidenced by the very considerable Hong Kong and Russian interest in BVI trusts and trust related structures such as private trust companies.

As regards trust product, in addition to purpose trusts which have been possible since 1993 but which, since 1 March 2004, have been capable of being structured so as to benefit particular persons and may be established without limit in time (allowing a settlor to establish a trust whose purpose it is to benefit individuals, at the trustee's discretion or otherwise, but which is not subject to the perpetuities regime applicable to trusts for persons), the unique and innovative 2003 provisions facilitating commercial dealings between trustees and third parties and the Virgin Islands Special Trusts Act 2003 ("VISTA") are worthy of special mention.

The 2003 provisions relating to dealings with third parties apply to trusts created on or after 1 March 2004. They are based on reforms proposed in 1999 by the English Trust Law Committee (but as yet unenacted in England) and are aimed at making dealings between trusts and third parties better conform to modern, commercial expectations. They assimilate, to a considerable degree, the BVI trust to the case of the corporate entity with distinct legal personality. This is done in a number of ways. First, section 95 of the Trustee Act contains a useful statutory articulation of the bona fide purchaser doctrine which deems a transaction properly entered into if the third party takes reasonable steps to establish that the trustee has power to enter into a transaction of the kind in question and clarifies that he need not enquire whether its exercise by entering into the particular transaction in question would amount to a breach of duty other than such as would be committed by failing to comply with any requirements expressly set out in the terms of the power (in particular, the consent of a specified person). Second, a settlor may specify that section 97 of the Trustee Act applies to his trust in which case his trustee will have no personal liability on any contract properly entered into in a disclosed or known fiduciary capacity but a claim based on that contract may be asserted by a third party in a judicial proceeding against the trustee in his fiduciary capacity. In addition, a claim based on any obligation arising from ownership or control of trust property or tort committed in the administration of the trust may likewise be asserted whether or not the trustee is liable in a personal capacity. In each of these cases (contract, property, tort), the third party is entitled to satisfaction out of the trust fund directly rather than by way of subrogation to any right of indemnity of the trustee – a very useful provision which avoids the problem of unconnected indebtedness of the trustee to the trust fund which might diminish or extinguish his right of indemnity in respect of the (properly incurred) liability to the third party. Third, where a settlor does not specifically apply section 97, section 98 will apply (unless the settlor stipulates otherwise) so that where a trustee properly enters into a contract in a disclosed or known fiduciary capacity, the trustee is liable for any sum payable under the contract only to the extent of the value of the trust fund when payment falls due. Each of these provisions, separately and together, facilitates dealings with the trust fund as though it were an entity with distinct legal personality.

A VISTA trust is one which may be for persons, purposes or both, the subject matter of which is shares in a BVI incorporated company. Uniquely in the trust world, it gives legislative sanction to a trust in which the trustee has neither a duty nor the power to intervene in the management of the company. It also allows a settlor to specify in advance how appointments to the Board shall be made. Both these features have made it highly attractive to wealth-creating settlors who wish to benefit their families through a trust but retain control of the business in which they have been so successful.

These appear to be the principal reasons why law firms have seen the need and opportunity to develop trust and private client practices in the BVI.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.