¶ 901
Overview
Purpose of the chapter. This chapter examines the three devices by which a settlor of a Belize trust may influence the trust after it is made: the office of protector, the powers a settlor may reserve to himself, and the letter of wishes. Each device answers the same need. A settlor who transfers assets to a professional trustee in another country wants some assurance that the trustee will administer the fund as he intends and can be replaced if it does not. Each device also carries the same risk. The more influence the settlor keeps, the stronger the argument that he never parted with the assets, and the easier it is for a foreign court to order him to bring them back. The design of a Belize trust is in large part the allocation of powers among the settlor, the protector and the trustee so that the first purpose is served without inviting the second risk.
The statutory provisions. The Trusts Act deals with the three devices in different places and in different degrees of detail. Part III opens with the protector. The terms of a trust "may provide for the office of protector of the trust," and the protector has by default "the power to remove a trustee and to appoint a new or additional trustee" together with any further powers the trust or the Act confers. Trusts Act, Cap. 202, s. 16(1)–(2) (rev. ed. 2020) (Belize). Subject to the terms of the trust, the protector owes "a fiduciary duty to the beneficiaries of the trust or to the purpose for which the trust is created." Id. s. 16(5). Section 13 provides for letters and memoranda of wishes and states that the trustee is not bound by them. Id. s. 13(1)–(5). The Act has no section listing the powers a settlor may reserve, of the kind found in the Cook Islands and Jersey statutes. The settlor's powers are instead authorized piecemeal: the settlor may also be a trustee, a beneficiary or a protector, id. s. 9(2); the trust may provide for the addition and exclusion of beneficiaries, id. s. 10(2)(a); a power of appointment may be conferred on "any other person," id. s. 42; and a trust may be made revocable or variable, id. s. 43(1). Chapter 5 described these provisions in the context of the Act as a whole (see supra ¶¶ 540.05, 540.07). This chapter examines how they operate together.
The two audiences. A Belize protector clause must work for two audiences. The first is the Belize court, which will apply the Act and the terms of the trust to decide whether the protector acted within his powers, whether a power is fiduciary and whether the trust is valid. The second is a foreign court, most often in the United States, which has jurisdiction over the settlor or a protector and is asked by a creditor to order that person to bring the assets home. The Belize court reads section 16(5) as a default rule that the deed may vary. The foreign court reads the deed to decide whether the person before it can, in practice, cause the trustee to act. A clause that is sound under Belize law may still give a foreign court the means to compel repatriation. Section 7(6) prevents the Belize court from recognizing a foreign order against the trust property (see supra ¶ 160; see infra ch. 11), but it does not prevent a foreign court from imprisoning a settlor who holds a power and refuses to use it.
Three questions. The chapter is organized around three questions. The first is who should hold power over the trust after it is made. Paragraphs 910 and 920 examine the protector: the statutory office, the persons who may hold it, the default fiduciary duty, and the decisions on whether a protector's powers are fiduciary or personal, led by the English decision in JSC Mezhdunarodniy Promyshlenniy Bank v. Pugachev, which considered the Belize provision. The second is what the settlor may keep. Paragraphs 930 and 940 examine the powers a settlor may reserve under the Act and the three ways in which a trust fails because of the settlor's control: sham, ineffective disposition and control for the purposes of a court order. Paragraphs 950 and 960 examine two clauses designed for the period after a claim arises, the flight clause and the duress clause, and the treatment of those clauses by the United States courts. The third is how the settlor may communicate his intentions without reserving powers. Paragraph 970 examines the letter of wishes under section 13 and its confidentiality. Paragraph 980 examines the related offices of enforcer and consenter, the place of the protector in the 2023 transparency regime and the United States tax consequences of the powers discussed. Paragraph 990 gathers the drafting points into model provisions and a checklist.
Relationship to other chapters. Chapter 7 examines the trustee, including the protector's statutory power to appoint and remove trustees (see supra ch. 7). Chapter 8 examines beneficiaries and their rights to information (see supra ch. 8). Chapter 6 examines sham and the Privy Council's decisions in Webb v. Webb and Tasarruf Mevduati Sigorta Fonu v. Merrill Lynch as questions of formation (see supra ¶¶ 610.07, 610.09, 630.08). Chapter 12 examines migration of a trust into and out of Belize (see infra ch. 12). Chapter 26 examines the foreign proceedings in which these questions are most often decided (see infra ch. 26), and chapter 27 assembles the structuring decisions (see infra ch. 27). This chapter refers to those discussions and does not repeat them.
Sources. No reported Belize decision on the powers of a protector, the reservation of powers by a settlor or the status of a letter of wishes has been located. The Belize court will draw on English authority and on decisions of other offshore courts, which are persuasive in Belize (see supra ch. 2). The chapter therefore relies on the text of the Trusts Act, on English, Jersey, Cayman, New Zealand and Privy Council decisions, and on the United States decisions in which Belize and other offshore trusts have been tested.