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DIFC Trust Law No. 11, as amended

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TRUST LAW
DIFC LAW No. 11 of 2005

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Consolidated Version
(May 2010)

CONTENTS

P
ART 1 GENERAL …………………………………………………………………………………………………………….. 1

1. T
ITLE ……………………………………………………………………………………………………………………… 1
2. L
EGISLATIVE AUTHORITY …………………………………………………………………………………………. 1
3. A
PPLICATION OF THE LAW ………………………………………………………………………………………… 1
4. S
COPE OF THE LAW ………………………………………………………………………………………………….. 1
5. D
ATE OF ENACTMENT ………………………………………………………………………………………………. 1
6. C
OMMENCEMENT …………………………………………………………………………………………………….. 1
7. I
NTERPRETATION ……………………………………………………………………………………………………… 1
8. A
DMINISTRATION OF THIS LAW …………………………………………………………………………………. 1
9. T
HE POWER OF THE DFSA TO MAKE RULES ………………………………………………………………… 1
10. D
EFAULT AND MANDATORY RULES ……………………………………………………………………………. 1
11. C
OMMON LAW AND PRINCIPLES OF EQUITY ………………………………………………………………… 2

P
ART 2 : CHOICE OF GOVERNING LAW; PLACE OF ADMINISTRATION ……………………. 3

12. G
OVERNING LAW …………………………………………………………………………………………………….. 3
13. P
ROVISION FOR CHANGE OF GOVERNING LAW ……………………………………………………………… 3
14. M
ATTERS DETERMINED BY GOVERNING LAW ………………………………………………………………. 4
15. L
IMITATIONS IN FOREIGN LAW …………………………………………………………………………………… 4
16. H
EIRSHIP RIGHTS ……………………………………………………………………………………………………… 5
17. F
OREIGN JUDGMENTS ……………………………………………………………………………………………….. 5
18. P
LACE OF ADMINISTRATION ……………………………………………………………………………………… 5

P
ART 3 : JUDICIAL AND NON JUDICIAL PROCEEDINGS ……………………………………………… 6

19. R
OLE OF THE COURT IN ADMINISTRATION OF TRUST …………………………………………………….. 6
20. J
URISDICTION OF THE COURT …………………………………………………………………………………….. 6
21. A
PPLICATION TO AND CERTAIN POWERS OF THE COURT ……………………………………………….. 6
22. P
AYMENT OF COSTS ………………………………………………………………………………………………….. 7

P
ART 4 : CREATION, VALIDITY AND MODIFICATION OF A DIFC TRUST ………………….. 8

23. C
REATION OF A TRUST ……………………………………………………………………………………………… 8
24. R
EQUIREMENTS FOR CREATION ………………………………………………………………………………….. 8
25. T
RUST PURPOSES ……………………………………………………………………………………………………… 8
26. D
URATION OF A TRUST ……………………………………………………………………………………………… 9
27. V
ALIDITY AND INVALIDITY OF A TRUST ………………………………………………………………………. 9
28. C
HARITABLE TRUST …………………………………………………………………………………………………. 9
29. N
ON -CHARITABLE TRUSTS OR PURPOSE TRUSTS …………………………………………………………. 10
30. V
ARIATION AND REVOCATION OF A TRUST ………………………………………………………………… 11
31. F
AILURE OR LAPSE OF INTEREST ………………………………………………………………………………. 12
32. T
ERMINATION OF A TRUST ………………………………………………………………………………………. 12
33. D
ISTRIBUTION OF PROPERTY ……………………………………………………………………………………. 13

P
ART 5 : THE BENEFICIARIES OF A DIFC TRUST ……………………………………………………….. 14

34. B
ENEFICIARIES OF A TRUST ……………………………………………………………………………………… 14
35. D
ISCLAIMER ………………………………………………………………………………………………………….. 14
36. I
NTEREST OF BENEFICIARY AND DEALINGS THEREOF ………………………………………………….. 14

P
ART 6 : PROTECTIVE TRUSTS AND CREDITORS ’ CLAIMS …………………………………………………….. 15

37. P
ROTECTIVE TRUSTS ………………………………………………………………………………………………. 15
38. C
REDITORS CLAIMS IN RELATION TO A DISCRETIONARY TRUST ……………………………………. 15

P
ART 7 : OFFICE OF TRUSTEE ………………………………………………………………………………………. 16

39. A
CCEPTING OR DECLINING TRUSTEESHIP …………………………………………………………………… 16
40. V
ACANCY IN TRUSTEESHIP ; APPOINTMENT OF A NEW TRUSTEE ……………………………………. 16
41. R
ESIGNATION OF TRUSTEE ………………………………………………………………………………………. 17
42. R
EMOVAL OF TRUSTEE BY COURT OR UNDER THE TERMS OF A TRUST …………………………… 17
43. P
OSITION OF OUTGOING TRUSTEE …………………………………………………………………………….. 18
44. R
EMUNERATION OF A TRUSTEE ………………………………………………………………………………… 18

P
ART 8 : DUTIES AND POWERS OF TRUSTEES ……………………………………………………………. 19

45. D
UTY TO ADMINISTER A TRUST ………………………………………………………………………………… 19
46. D
UTIES OF TRUSTEES ………………………………………………………………………………………………. 19
47. D
UTIES OF CO -TRUSTEES TO ACT TOGETHER ……………………………………………………………… 20
48. I
MPARTIALITY OF A TRUSTEE …………………………………………………………………………………… 20
49. C
OST OF ADMINISTRATION ………………………………………………………………………………………. 20
50. E
NFORCEMENT AND DEFENCE CLAIMS ………………………………………………………………………. 20
51. C
OLLECTING TRUST PROPERTY ………………………………………………………………………………… 20
52. D
UTY TO INFORM AND REPORT ………………………………………………………………………………… 20
53. P
OWERS OF TRUSTEE ………………………………………………………………………………………………. 22
54. S
PECIFIC POWERS OF TRUSTEES ……………………………………………………………………………….. 22
55. P
OWER OF ACCUMULATION AND ADVANCEMENT ……………………………………………………….. 24
56. D
ELEGATION BY A TRUSTEE …………………………………………………………………………………….. 25
57. C
OMBINATION AND DIVISION OF TRUSTS …………………………………………………………………… 25

P
ART 9 : LIABILITY OF TRUSTEES AND RIGHTS OF PERSONS DEALING WITH A
TRUSTEE 26

58. L
IABILITY FOR BREACH OF TRUST …………………………………………………………………………….. 26
59. R
EMEDIES FOR BREACH OF TRUST …………………………………………………………………………….. 27
60. D
AMAGES IN ABSENCE OF A BREACH ………………………………………………………………………… 27
61. L
EGAL FEES AND COSTS ………………………………………………………………………………………….. 27
62. L
IMITATION OF ACTION AGAINST TRUSTEE ………………………………………………………………… 27
63. R
ELIANCE ON TRUST INSTRUMENT ……………………………………………………………………………. 28
64. E
XCULPATION OF TRUSTEE ……………………………………………………………………………………… 28
65. B
ENEFICIARY ’S CONSENT , RELEASE OR RATIFICATION ………………………………………………… 28
66. L
IMITATION ON PERSONAL LIABILITY OF TRUSTEE ……………………………………………………… 29
67. P
ROTECTION OF PERSONS DEALING WITH TRUSTEES …………………………………………………… 29

P
ART 10 : THE PROTECTOR ……………………………………………………………………………………………….. 30

68. T
HE PROTECTOR …………………………………………………………………………………………………….. 30

PART
11: PROVISIONS APPLICABLE TO A FOREIGN TRUST ……………………………………. 31

69.
ENFORCEABILITY OF A FOREIGN TRUST …………………………………………………………………….. 31

S
CHEDULE 1 INTERPRETATION ………………………………………………………………………………………….. 32

LIST
OF AMENDMENTS MADE TO THIS LAW SINCE ENACTMENT
(This list does not form part of the Law)

This Law was enacted and came into force on 9 November 2005 and was subsequently
amended by :

(a) DIFC Laws Amendment Law, DIFC Law No.2 of 2007on 15 February 2007; and

(b) DIFC Laws Amendment Law DIFC Law No.1 of 2010 on 2 May 2010

1 PART 1GENERAL

1. Title

This Law may be cited as the “Trust Law 2005”.

2. Legislative authority

This Law is made by the Ruler of Dubai.

3. Application of the Law

This Law applies in the jurisdiction of the Dubai International Financial Centre.

4. Scope of the Law

This Law applies to express trusts, charitable or non-charitable, and trusts created
pursuant to law or judgment that requires the trust to be administered in the manner of
an express trust.

5. Date of Enactment

This Law is enacted on the date specified in the Enactment Notice in respect of this
Law.

6. Commencement

This Law comes into force on the date specified in the Enactment Notice in respect of
this Law.

7. Interpretation

Schedule 1 contains:

(a) interpretative provisions which apply to this Law; and

(b) a list of defined terms used in the Law.

8. Administration of this Law

This Law is administered by the DFSA.

9. The power of the DFSA to make Rules

The DFSA Board of Directors may make Rules for the purposes of this Law pursuant to
the power conferred upon it under Article 23 of the Regulatory Law 2004.

10. Default and mandatory rules

(1) Except as otherwise provided in the terms of the trust, this Law governs the
duties and powers of a trustee, relations among trustees and the rights and
interests of a beneficiary.

(2) The terms of a trust prevail over any provision of this Law, except:

(a) the requirements for creating a trust;

(b) the duty of a trustee to act in good faith and in accordance with the
purposes of the trust;

2
(c) the requirement that a trust and its terms be for the benefit of its
beneficiaries, and that the trust have a purpose that is lawful, not
contrary to public policy in the DIFC, and possible to achieve;

(d) the power of the Court to modify or terminate a trust in accordance with
this Law;

(e) the effect of a protective trust as provided in Part 6;

(f) the power of the Court under Article 44 to adjust a trustee’s
compensation specified in the terms of the trust which is unreasonably
low or high;

(g) the effect of an exculpatory term under Article 64;

(h) the rights under Articles 67 and 68 of a person other than a trustee or
beneficiary;

(i) periods of limitation for commencing a judicial proceeding;

(j) the power of the Court to take such action and exercise such
jurisdiction as may be necessary in the interests of justice; and

(k) exclusive jurisdiction of the Court under Article 20.

11. Common Law and Principles of Equity

The common law of trusts and principles of equity supplement this Law, except to the
extent modified by this Law or any other DIFC Law or by the Court.

3 PART 2: CHOICE OF GOVERNING LAW; PLACE OF ADMINISTRATION

12. Governing Law

(1) 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 Article 12 (1)(a) and (b) to “failing that” or “failing either”
include references to cases:

(a) where no law is expressed or implied under Article 12(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 Article 12(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 he is resident in the DIFC, expressly declare in
the trust instrument that the laws of the DIFC shall be the governing law of the
trust.

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

13. 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 DIFC, in the manner prescribed by the terms of the trust,
if:

(a) in the case of a change to the laws of the DIFC, such change is
recognised by the governing law previously in effect; or

(b) in the case of a change from the laws of the DIFC, the new governing
law would recognise the validity of the trust and all the trusts, powers
and provisions of the trust remain enforceable, capable of being
exercised and so taking effect.

(2) Where the governing law of the trust changes to DIFC Law, that trust shall be
for all purposes a DIFC 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 14. Matters determined by governing law

(1) Subject to Article 14(2), all matters arising in regard to a trust which is for the
time being governed by the laws of the DIFC or in regard to any disposition of
property upon the trust thereof shall be determined in accordance with the laws
of the DIFC.

(2) Subject to Articles 15,16 and 17, Article 14(1) shall:

(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;

(b) not validate any trust or disposition of immovable property situated in a
jurisdiction other than DIFC in which such trust or disposition is
invalid according to the laws of such jurisdiction;

(c) not validate any testamentary trust or disposition which is invalid
according to the laws of the testator’s last domicile;

(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;

(e) not affect the recognition of the laws of its place of incorporation in
relation to the capacity of a corporation; and

(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.

15. Limitations in foreign law

Without limiting the generality of Article 14(1), no trust governed by the laws of the
DIFC and no disposition of property to be held in trust that is valid under the laws of the
DIFC 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 right, by reason that:

(a) the laws of any foreign jurisdiction prohibit or do not recognise the concept of a
trust;
or

(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 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, claim s
or interest.

5 16. Heirship rights

An heirship right conferred by foreign law in relation to the property of a living person
shall not be recognised as:

(a) affecting the ownership of immovable property in the DIFC and movable
property wherever it is situated for the purposes of Article 14(2)(a)and(b) or for
any other purpose; or

(b) constituting an obligation or liability for any purpose.

17. Foreign Judgments

A foreign judgment shall not be recognised or enforced or give rise to any estoppels
insofar as it is inconsistent with Articles 15 and 16.

18. 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 Article 18(2), the trustee may
transfer the trust’s place of administration to another jurisdiction outside the
DIFC.

(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 designated
in the terms of the trust.

6
PART 3: JUDICIAL AND NON JUDICIAL PROCEEDINGS

19. Role of the Court in administration of trust

(1) The Court may intervene in the administration of a trust to the extent its
jurisdiction is invoked by an interested person or as provided by Law.

(2) A trust is not subject to continuing judicial supervision unless so ordered by the
Court.

(3) A judicial proceeding involving a trust may relate to any matter involving the
trust’s administration, including a request for instructions and an action to
declare rights.

20. Jurisdiction of the Court

The Court has jurisdiction where:

(a) the trust is a DIFC trust;

(b) a trustee of a foreign trust is resident in the DIFC;

(c) any trust property of a foreign trust is situated in the DIFC but only in respect of
property so situated; or

(d) administration of any trust property of a foreign trust is carried out in the DIFC.

21. Application to and certain powers of the Court

(1) A trustee may make an application to the Court for direction, opinion or advice
concerning the manner in which he may or should act in connection with any
matter concerning the trust and the Court may make such order, if any, as it
thinks fit.

(2) The Court may if it thinks fit:

(a) make an order concerning:

(i) the execution or the administration of any trust;

(ii) the trustee of any trust, including an order relating to the
exercise of any power, discretion or duty of the trustee, the
appointment or removal of a trustee, the remuneration of a
trustee, the submission of accounts, the conduct of the trustee
and payments, whether payments into Court or otherwise;

(iii) the vesting of trust property;

(iv) a beneficiary or any person having a connection with the trust
as the Court may determine; or

(v) the appointment or removal of an enforcer in relation to any
non- charitable purposes of the trust;

(b) make a declaration as to the validity or the enforceability of a trust; or

(c) rescind or vary any order or declaration made under this Law, or make
any new or further order or declaration.

7
22. Payment of costs

The costs and expenses of and incidental to an application to the Court under this Law
shall be paid out of the trust property or be borne and paid in such other manner or by
such other person as the Court may order.

8
PART 4: CREATION, VALIDITY AND MODIFICATION OF A DIFC TRUST

23. Creation of a trust

(1) A trust may be created by:

(a) transfer of property to another person as trustee during the settlor’s
lifetime or by will or other disposition taking effect upon the settlor’s
death;

(b) the transfer of property from one trust to another;

(c) declaration by the beneficial owner of property that the legal owner
holds identifiable property as trustee; or

(d) exercise of a power of appointment in favour of a trustee.

(2) A trust shall come into existence by an instrument in writing including a will or
codicil.

24. Requirements for creation

(1) A trust is created if:

(a) the settlor has the capacity to create a trust;

(b) the settlor indicates an intention to create the trust;

(c) the trust either:

(i) has a definite beneficiary;

(ii) is a charitable trust, as provided for in Article 28; or

(iii) is a non-charitable purpose trust, as provided for in Article 29;

(d) the trustee holds or has vested in him or it property for the benefit of a
beneficiary or for a purpose;

(e) the trustee has duties to perform; and

(f) the same person is not the sole trustee and sole beneficiary.

(2) A beneficiary is definite if the beneficiary can be ascertained now or in the
future.

(3) A trust may have at the same time a definite beneficiary and a purpose.

25. Trust purposes

(1) A trust may only be created to the extent its purposes are sufficiently certain to
allow the trust to be carried out, lawful and not contrary to public policy in the
DIFC.

(2) A trust and its terms shall be for the benefit of its beneficiaries or in furtherance
and support of its purposes.

9 26. Duration of a trust

A trust may continue indefinitely or terminate in accordance with this Law or with the
terms of the trust.

27. Validity and invalidity of a trust

(1) Subject to Article 27(2) and (3), a trust shall be valid and enforceable in
accordance with its terms.

(2) A trust shall be invalid to the extent that:

(a) it purports to do anything which is contrary to DIFC Law;

(b) it is created for a purpose in relation to which there is no beneficiary,
not being a charitable purpose, unless it complies with Article 29;

(c) its creation was induced by fraud, duress, undue influence or
misrepresentation;

(d) the trust is immoral or contrary to public policy in the DIFC; or

(e) the terms of the trust are so uncertain that its performance is rendered
impossible.

(3) Where a trust is created for two or more purposes of which some are lawful and
others are unlawful:

(a) if those purposes cannot be separated the trust shall be invalid; or

(b) where those purposes can be separated the Court may declare that the
trust is valid as to the purposes which are lawful.

28. Charitable trust

(1) A charitable trust may be created for the relief of poverty, the advancement of
education or religion, the promotion of health or art, the protection of the
environment, or any other purposes which are beneficial to the general public.

(2) If the terms of a charitable trust do not indicate a particular charitable purpose
or beneficiary or a means by which a particular charitable purpose or
beneficiary may be selected, the Court may select one or more charitable
purposes or beneficiaries in accordance with the settlor’s intention to the extent
it can be ascertained.

(3) Subject to Article 28(4) if a particular charitable purpose becomes unlawful,
impracticable, impossible to achieve, contrary to public policy in the DIFC, or
obsolete in that, by reason of changed circumstances, it fails to achieve the
purpose of the trust:

(a) the trust does not fail, in whole or in part;

(b) the trust property does not revert to the settlor or the settlor’s successors
in interest; and

(c) the Court may apply cy pres to vary or terminate the trust by directing
that the trust property be applied or distributed, in whole or in part, in a
manner consistent with the settlor’s intentions.

10 (4) A provision in the terms of a charitable trust that would result in distribution of
the trust property to a non-charitable beneficiary prevails over the power of the
Court under Article 28(3) to apply cy pres to vary or terminate the trust only if,
when the provision takes effect, the trust property is to revert to the settlor and
the settlor is still living.

(5) A charitable trust may be enforced by the settlor of the trust, is still living,
maintaining a proceeding to enforce such trust or by the Court.

29. Non-charitable trusts or purpose trusts

(1) A trust shall not be invalid by reason of Article 27(2)(b) if the terms of the trust
provide for the appointment of an enforcer in relation to its non-charitable
purposes and for the appointment of a new enforcer at any time when there is
none.

(2) Subject to Article 29(1), a trust may be declared by trust instrument for a non-
charitable purpose, including the purpose of holding or investing in shares in a
company or juridical person or any other assets constituting the trust property
if:

(a) the purpose is possible and sufficiently certain to allow the trust to be
carried out;

(b) the purpose is not contrary to public policy in the DIFC or unlawful
under the laws of the DIFC; or

(c) the trust instrument specifies the event upon the happening of which the
trust terminates and provides for the disposition of surplus assets of the
trust upon its termination.

(3) It shall be the duty of an enforcer to enforce the trust in relation to its non-
charitable purposes.

(4) The appointment of a person as enforcer of a trust in relation to its non-
charitable purposes shall not have effect if he is also a trustee of the trust or has
a conflict of interest.

(5) Except as permitted by this Law or expressly provided by the terms of the trust,
or with the approval of the Court an enforcer shall not:

(a) directly or indirectly profit from his appointment;

(b) cause or permit any other person to profit directly or indirectly from
such appointment; or

(c) on his own account enter into any transaction with the trustees or
relating to the trust property which may result in profit to him or the
trustee.

(6) Subject to Article 29(7), an enforcer may resign his office by notice in writing
delivered to the trustee. Such resignation shall take effect upon delivery of
notice.

(7) A resignation given in order to facilitate a breach of trust shall be of no effect.

11 (8) An enforcer shall cease to be an enforcer of the trust in relation to its non-
charitable purposes immediately upon:

(a) the enforcer’s removal from office by the Court;

(b) the enforcer’s resignation becoming effective;

(c) the coming into effect of a provision in the terms of a trust under which
the enforcer is removed from office or otherwise ceases to hold office;
or

(d) the enforcer’s appointment as a trustee of the trust.

(9) A trustee of a trust for non-charitable purposes shall, at any time when there is
no enforcer in relation to them, take such steps as may be necessary to secure
the appointment of a new enforcer.

(10) Where the trustee of a trust for non-charitable purposes has reason to believe
that the enforcer in relation to such purposes is unwilling or refuses to act, or is
unfit to act or incapable of acting, he shall apply to the Court for the removal of
the enforcer and the appointment of a replacement.

30. Variation and revocation of a trust

(1) A trust may expressly provide that:

(a) its terms are capable of variation; or

(b) the trust itself or a power exercisable under the trust is revocable either
in whole or in part.

(2) Where a trust provides that the terms of the trust may be varied, such power to
vary shall be without prejudice to the power vested in the Court by this Law for
the variation of the terms of the trust.

(3) No variation of the terms of the trust or revocation of a trust or a power
exercisable under a trust shall prejudice anything lawfully done by a trustee in
relation to a trust prior to his receiving a notice of such variation or revocation.

(4) Subject to the terms of the trust, where a trust is revoked, either in whole or in
part, the trustee shall hold the trust property affected by the revocation for the
settlor absolutely or if the settlor is dead, for the settlor’s personal
representative or estate.

(5) For the purposes of this Article, the “settlor” is the particular person who
provided the property which is the subject of revocation.

(6) The Court may vary the terms of a trust:

(a) even if unambiguous, to conform the terms to the settlor’s intention if it
is provided by clear and convincing evidence that both the settlor’s
intent and the terms of the trust were affected by a mistake of fact or
law, whether in expression or inducement;

(b) if, because of circumstances not anticipated by the settlor, modification
will further the purpose of the trust; or

(c) if continuation of the trust on its existing terms would be impracticable
or wasteful or impair the trust’s administration;

12
(7) An application under Article 30(6) may be made by the settlor, the trustee, the
beneficiary or the guardian or representative of a beneficiary who is a minor,
incapacitated, unascertained or unborn.

31. Failure or lapse of interest

(1) Subject to the terms of a trust and to any order of the Court, the trust property or
interest under the trust shall be held by the trustee for the settlor absolutely or if
the settlor is dead, for the settlor’s personal representatives or estate where:
(a) the interest in question lapses;
(b) the trust property is vested in a person otherwise than for his sole
benefit but the trusts upon which he is to hold the property are not
declared or communicated to him; or
(c) the trust terminates otherwise than in pursuance of Article 32(1)(d).
(2) For the purposes of this Article, the “settlor” is the particular person who
provided the property affected by the failure or lapse.
32. Termination of a trust

(1) Without prejudice to the powers of the Court under this Law a trust terminates:

(a) if the trust is revoked or expires pursuant to its terms;
(b) if there is no beneficiary or person who can become a beneficiary in
accordance with the terms of the trust or if no purpose of the trust
remains to be achieved;
(c) if the purposes of the trust have become unlawful, or impossible to
achieve; or
(d) notwithstanding the terms of the trust, upon consent of all the
beneficiaries in existence who have been ascertained and none of whom
is a minor or a person under a legal disability.
(2) The Court may terminate a trust:

(a) because of circumstances not anticipated by the settlor, if termination
will further the purposes of the trust; or

(b) if the value of the trust property is insufficient to justify the cost of
administration.

(3) An application to the Court under this Article may be made by a settlor, a
trustee or a beneficiary as the case may be.

13 33. Distribution of property

(1) Without prejudice to the powers of the Court under Article 33(3), on the
termination of the trust the trustee shall distribute the trust property to the
persons entitled thereto within a reasonable time and in accordance with the
terms of the trust.

(2) The trustee may retain sufficient assets or obtain satisfactory security to make
reasonable provision for liabilities, whether existing, future, contingent or
otherwise, before distributing the trust property under Article 33(1).

(3) The Court may, on the termination of a trust or at any time thereafter, upon an
application made by a trustee or any beneficiary as the case may be:

(a) require the trustee to distribute the trust property;

(b) direct the trustee not to distribute the trust property; or

(c) make such other order as it thinks fit.

14
PART 5: THE BENEFICIARIES OF A DIFC TRUST

34. Beneficiaries of a trust

(1) A beneficiary shall be:

(a) identifiable by name; or

(b) ascertainable by reference to:

(i) a class; or

(ii) a relationship to some person whether or not living at the time
of the creation of the trust or at the time which under the terms
of the trust is the time by reference to which members of a class
are to be determined.

(2) The terms of a trust may provide for the addition of a person as a beneficiary or
the exclusion of a beneficiary from benefit.

(3) A settlor or a trustee of a trust may also be a beneficiary of a trust.

35. Disclaimer

(1) A beneficiary may disclaim his whole interest.

(2) A disclaimer made under Article 35(1) shall be in writing and shall be
irrevocable.

(3) Subject to the terms of a trust, a beneficiary under a trust may disclaim part of
his interest, whether or not he has received some benefit from his interest.

(4) A disclaimer made under Article 35(3) may, subject to the terms of the trust, be
revocable and it shall be exercisable in the manner and under the circumstances
so expressed.

36. Interest of beneficiary and dealings thereof

(1) The interest of a beneficiary shall constitute movable property.

(2) Subject to the terms of a trust, a beneficiary may, by instrument in writing, sell,
charge, transfer or otherwise deal with his interest in any manner.

15
PART 6: PROTECTIVE TRUSTS AND CREDITORS’ CLAIMS

37. Protective Trusts

(1) The terms of a trust may make the interest of the beneficiary liable to
termination.
(2) Without prejudice to the generality of Article 37(1), the terms of a trust may
make the interest of a beneficiary in the income or capital of the trust property
subject to:
(a) a restriction on alienation or disposal; or
(b) a diminution or termination in the event of the beneficiary becoming
bankrupt or any of his property becoming liable to sequestration for the
benefit of his creditors.
(3) A trust under which the interest of a beneficiary is subject to restriction,
diminution or termination under Article 37(2) is a protective trust.
(4) A provision in the terms of a trust requiring the interest of a beneficiary in trust
property to be held upon a protective trust shall be construed as a requirement
that the interest of the beneficiary be subject to restriction, diminution or
termination as mentioned in Article 37(2).
38. Creditors claims in relation to a discretionary trust

(1) In the case of a discretionary trust, whether or not such trust contains a
protective provision, a creditor of a beneficiary may not compel a distribution
that is subject to the trustee’s discretion, even if:
(a) the discretion is expressed in the form of a standard of distribution; or
(b) the trustee has abused the discretion.
(2) To the extent a trustee has not complied with a standard of distribution or has
abused a discretion:
(a) a distribution may be ordered by the Court to satisfy a judgment or
Court order against the beneficiary for support or maintenance of the
beneficiary’s child, spouse or former spouse; and
(b) the Court shall direct the trustee to pay to the child, spouse, or former
spouse such amount as is equitable under the circumstances but not
more than the amount the trustee would have been required to distribute
to or for the benefit of the beneficiary had the trustee complied with the
standard or not abused the discretion.

16
PART 7: OFFICE OF TRUSTEE

39. Accepting or declining trusteeship

(1) Except as otherwise provided in Article 39(3) a person designated as trustee
accepts the trusteeship:

(a) by substantially complying with a method of acceptance provided in the
terms of the trust; or

(b) if the terms of the trust do not provide a method or the method provided
in the terms is not expressly made exclusive, by accepting delivery of
the trust property, exercising powers or performing duties as trustee, or
otherwise indicating acceptance of the trusteeship.

(2) A person designated as trustee who has not yet accepted the trusteeship may
decline the trusteeship. A designated trustee who does not accept the
trusteeship within a reasonable amount of time after knowing of the designation
is deemed to have rejected the trusteeship.

(3) A person designated as a trustee, without accepting the trusteeship, may without
liability for loss:

(a) act to preserve the trust property if, within a reasonable time after
acting, he sends a written rejection of the trusteeship to the settlor or, if
the settlor is dead or lacks capacity, to a named beneficiary;

(b) inspect or investigate trust property to determine potential liability
under any other law or for any other purpose; or

(c) apply to the Court for directions or advice.

(4) A person who knowingly does any act or thing in relation to the trust property
consistent with the status of a trustee of that property shall be deemed to have
accepted appointment as a trustee, but he shall not be remunerated for acting in
such capacity as provided in Article 44, unless the trustee appointed under the
terms of the trust otherwise agrees.

40. Vacancy in trusteeship; appointment of a new trustee

(1) A vacancy in a trusteeship occurs if:

(a) a person designated as trustee rejects the trusteeship;

(b) a person designated as trustee cannot be identified or does not exist;

(c) a trustee resigns;

(d) a trustee is removed;

(e) a trustee dies; or

(f) a guardian is appointed for an individual serving as trustee.

(2) Where the terms of a trust contain no provision for the appointment of a new
trustee, the trustee for the time being may appoint a new trustee or failing that
the Court may appoint a new trustee.

17 (3) Subject to the terms of the trust, a trustee appointed under this Article shall
have the same powers, discretions and duties and may act as if he had been
originally appointed a trustee.

(4) A trustee having power to appoint a new trustee who fails to exercise such
power may be removed from office by the Court and the Court may appoint a
new trustee.

(5) If one or more co-trustees remain in office, a vacancy in a trusteeship need not
be filled.

(6) A vacancy in trusteeship shall be filled if the trust has no remaining trustee.

(7) Where there is no trustee a trust shall not fail on that account.

41. Resignation of trustee

(1) Subject to the terms of the trust, a trustee may resign his office:
(a) by giving at least 30 days notice in writing to the beneficiaries, the
settlor, if living, and all his co-trustees. Such resignation shall take
effect termination of such 30 day notice period or such earlier date as
shall be agreed between the trustee resigning and the settlor, if living,
and his co-trustees;

(b) with the approval of the Court; or

(c) otherwise in accordance with the terms of the trust.

(2) A resignation given in order to facilitate a breach of trust shall have no effect.

42. Removal of trustee by Court or under the terms of a trust

(1) The settlor, an enforcer, a co-trustee, or a beneficiary may request the Court to
remove a trustee, or a trustee may be removed by the Court on its own
initiative.

(2) The Court may remove a trustee if:

(a) the trustee has committed a breach of trust;

(b) lack of cooperation among co-trustees substantially impairs the
administration of the trust;

(c) because of unfitness, unwillingness, or persistent failure of the trustee
to administer the trust, the Court determines that removal of the trustee
best serves the interests of the beneficiaries; or

(d) there has been a substantial change of circumstances or removal is
requested by all of the beneficiaries, the Court finds that removal of the
trustee best serves the interests of all the beneficiaries and is not
inconsistent with a material purpose of the trust, and a suitable co-
trustee or successor trustee is available.

(3) Pending a final decision on a request to remove a trustee, or in lieu of or in
addition to removing a trustee, the Court may order an appropriate relief under
Article 59.

18 43. Position of outgoing trustee

(1) A trustee who resigns or is removed shall proceed expeditiously to deliver the
trust property within the trustee’s possession to the co-trustee, successor trustee
or other person entitled to it.

(2) Unless a co-trustee remains in office or the Court otherwise orders, and until the
trust property is delivered to a successor trustee or other person entitled to it, a
trustee who has resigned or been removed has the duties of a trustee and the
powers necessary to protect the property.

(3) A trustee who resigns or is removed may require to be provided with reasonable
security for liabilities whether existing, future, contingent or otherwise before
surrendering trust property.

(4) A trustee who resigns or is removed and has complied with Article 43(1) shall
be released from liability to any beneficiary, trustee or person interested under
the trust for any act or omission in relation to the trust property or the trustee’s
duty as a trustee except liability:

(a) arising from any breach of trust to which such trustee was a party or to
which the trustee was privy; or

(b) in respect of actions to recover from such trustee trust property or the
proceeds of trust property in the possession of such trustee.

44. Remuneration of a trustee

(1) Unless authorised by:

(a) the terms of the trust;

(b) the consent in writing of all of the beneficiaries; or

(c) an order of the Court;

a trustee shall not be entitled to remuneration for his services.

(2) If the terms of a trust specify the trustee’s remuneration, the trustee is entitled to
be remunerated as specified, but the Court may allow more or less remuneration
if:

(a) the duties of the trustee are substantially different from those
contemplated when the trust was created; or

(b) the remuneration specified by the terms of the trust would be
unreasonably low or high.

(3) A trustee may reimburse himself out of the trust property for or pay out of the
trust all expenses and liabilities properly incurred in connection with the
administration of the trust.

19 PART 8: DUTIES AND POWERS OF TRUSTEES

CHAPTER 1 – DUTIES OF TRUSTEES

45. Duty to administer a trust

(1) Upon acceptance of a trusteeship, the trustee shall in the execution of his duties
and in the exercise of his powers and discretions:

(a) act with due diligence as would a prudent person to the best of his
ability and skill; and

(b) observe the utmost good faith;

in accordance with the terms and purposes of the trust and this Law.

(2) A trustee shall administer the trust solely in the interest of the beneficiaries or in
furtherance or support of the purposes of the trust.

46. Duties of trustees

(1) Subject to the terms of the trust, a trustee shall so far as is reasonably practical
preserve the value of the trust property.

(2) Except with the approval of the Court or as permitted by this Law or expressly
provided by the terms of the trust, a trustee shall not:

(a) directly or indirectly profit from his trusteeship;

(b) cause or permit any other person to profit directly or indirectly from
such trusteeship; or

(c) on his own account enter into any transaction with the trustees or
relating to the trust property which may result in such profit.

(3) Subject to Article 67, a sale, encumbrance, or other transaction involving the
investment or management of trust property entered into by the trustee for the
trustee’s own personal account or which is otherwise affected by a conflict
between the trustee’s fiduciary and personal interests is voidable by a
beneficiary affected by the transaction unless:

(a) the transaction was authorised by the terms of the trust;

(b) the transaction was approved by the Court;

(c) the beneficiary did not commence judicial proceedings within the time
allowed by Article 66; or

(d) the beneficiary consented to the trustee’s conduct or ratified the
transaction.

(4) A trustee shall keep accurate accounts and records of his trusteeship.

(5) A trustee shall keep trust property separate from his personal property and
separately identifiable from any other property of which he is a trustee.

20 47. Duties of co-trustees to act together

(1) Subject to the terms of the trust, where there is more than one trustee all the
trustees shall join in performing the trust.

(2) Subject to Article 47(3), where there is more than one trustee no power or
discretion given to the trustees shall be exercised unless all the trustees agree on
its exercise.

(3) The terms of a trust may empower trustees to act by a majority but a trustee
who dissents from a decision of the majority of the trustees may require his
dissent to be recorded in writing.

48. Impartiality of a trustee

Subject to the terms of the trust, where there is more than one beneficiary, or more than
one purpose, the trustee shall act impartially and shall not execute the trust for the
advantage of one at the expense of the other.

49. Cost of administration

In administering a trust, the trustee may incur only costs that are reasonable in relation
to the trust property, the purposes of the trust and the skills of the trustee.

50. Enforcement and defence claims

A trustee may take reasonable steps to enforce claims of the trust and to defend claims
against the trust.

51. Collecting trust property

A trustee shall take reasonable steps to compel a former trustee or other person to
deliver trust property to the trustee, and, subject to the terms of the trust, to redress a
breach of trust known to the trustee to have been committed by a former trustee.

52. Duty to inform and report

(1) Subject to the terms of a trust and any order of the Court, a trustee shall, on
application in writing by a beneficiary, disclose to the applicant all documents
which relate to or form part of the accounts of the trust.

(2) A trustee shall not be required to disclose to any person, any document which:

(a) discloses his deliberations as to the manner in which he has exercised a
power or discretion or performed a duty conferred upon him;
(b) discloses the reason for any particular exercise of such power or
discretion or performance of duty or the material upon which such
reason shall or might have been based; or
(c) relates to the exercise or proposed exercise of such power or discretion
or the performance or proposed performance of such duty.
(3) Notwithstanding the terms of the trust:

(a) the Court may on application made to it declare that in particular
circumstances of the trust its terms do not render the trustees
sufficiently or appropriately accountable to the beneficiaries or any of
them; and

21 (b) the Court may pursuant to such declaration extend or restrict the rights
of all or any beneficiaries to information regarding the trust or may
make such other order as it thinks fit.

22 CHAPTER 2 – GENERAL POWERS OF TRUSTEES

53. Powers of trustee

(1) Subject to the terms of the trust and duties under this Law, a trustee shall in
relation to the trust property have:

(a) all the same powers as a natural person;

(b) any other powers appropriate to achieve the proper investment,
management, and distribution of trust property; and

(c) any other powers conferred by this Law.

(2) A trustee shall exercise his powers only in the interest of the beneficiaries and
in furtherance and support of the purposes of the trust and in accordance with
the terms of the trust.

54. Specific powers of trustees

Without limiting the generality of Article 53, and subject to the terms of the trust, a
trustee may:

(1) collect trust property and accept or reject additions to the trust property from a
settlor or any other person;

(2) subject to the terms of a trust, a trustee may, without the consent of any
beneficiary, appropriate trust property in or towards satisfaction of the interest
of a beneficiary in such matter and in accordance with such valuation as he
thinks fit;

(3) acquire or sell property, for cash or on credit, at public or private sale;

(4) exchange, partition, or otherwise change the character of trust property;

(5) deposit trust money in an account in a regulated financial services institution;

(6) borrow money, with or without security, and mortgage or pledge trust property
for a period within or extending beyond the duration of the trust;

(7) where the terms of a trust so permit, exercise a discretion in relation to the
manner in which and to whom trust property is distributed;

(8) with respect to an interest in a partnership, limited liability company, business
trust, corporation, or other form of business or enterprise, continue the business
or other enterprise and take any action that may be taken by shareholders,
members, or property owners, including merging, dissolving, or otherwise
changing the form of business organisation or contributing additional capital;

(9) with respect to stocks or other securities, exercise the rights of an absolute
owner, including the right to:

(a) vote, or give proxies to vote, with or without power of substitution, or
enter into or continue a voting trust agreement;

(b)
hold a security in the name of a nominee or in other form without
disclosure of the trust so that title may pass by delivery;

23 (c) pay calls, assessments, and other sums chargeable or accruing against
the securities, and sell or exercise stock subscription or conversion
rights; and

(d) deposit the securities with a depositary or other regulated financial
services institution;

(10) with respect to an interest in immovable property, construct, or make ordinary
or extraordinary repairs to, alterations to, or improvements in, buildings or other
structures, demolish improvements, raze existing or erect new party walls or
buildings, subdivide or develop land, dedicate land to public use or grant public
or private easements, and make or vacate plots and adjust boundaries;

(11) enter into a lease for any purpose as lessor or lessee, including a lease or other
arrangement for exploration and removal of natural resources, with or without
the option to purchase or renew, for a period within or extending beyond the
duration of the trust;

(12) grant an option involving a sale, lease, or other disposition of trust property or
acquire an option for the acquisition of property, including an option
exercisable beyond the duration of the trust, and exercise an option so acquired;

(13) insure the property of the trust against damage or loss and insure the trustee, the
trustee’s agents, and beneficiaries against liability arising from the
administration of the trust and the insurance proceeds shall belong to the trust
fund;

(14) abandon or decline to administer property of no value or of insufficient value to
justify its collection or continued administration;

(15) pay or contest any claim, settle a claim by or against the trust, and release, in
whole or in part, a claim belonging to the trust;

(16) pay remuneration of the trustee, protector or enforcer and of employees and
agents of the trust, and other expenses incurred in the administration of the
trust;

(17) indemnify outgoing trustees;

(18) select a mode of payment under any employee benefit or retirement plan,
annuity, or life insurance payable to the trustee, exercise rights thereunder,
including exercise of the right to indemnification for expenses and against
liabilities, and take appropriate action to collect the proceeds;

(19) make loans out of trust property, including loans to a beneficiary on terms and
conditions the trustee considers to be fair and reasonable under the
circumstances, and the trustee has a lien on future distributions for repayment
of those loans;

(20) pledge trust property to guarantee loans made by others to the beneficiary;

(21) appoint a trustee to act in another jurisdiction with respect to trust property
located in the other jurisdiction, confer upon the appointed trustee all of the
powers and duties of the appointing trustee, require that the appointed trustee
furnish security, and remove any trustee so appointed;

(22) pay an amount distributable to a beneficiary who is under a legal disability or
who the trustee reasonably believes is incapacitated, by paying it directly to the
beneficiary or applying it for the beneficiary’s benefit, or by:

24
(a) paying it to the beneficiary’s guardian and the receipt by such guardian
shall constitute a full discharge of the trustee’s obligation;

(b) if the trustee does not know of a guardian, or custodial trustee, paying it
to an adult relative or other person having legal or physical care or
custody of the beneficiary, to be expended on the beneficiary’s behalf
and the receipt of such person shall constitute a full discharge of the
trustee; or

(c) managing it as a separate fund on the beneficiary’s behalf, subject to
the beneficiary’s continuing right to withdraw the distribution;

(23) on distribution of trust property or the division or termination of a trust, make
distributions in divided or undivided interests, allocate particular assets in
proportionate or disproportionate shares, value the trust property for those
purposes, and adjust for resulting differences in valuation;

(24) resolve a dispute concerning the interpretation of the trust or its administration
by mediation, arbitration, or other procedure for alternative dispute resolution;

(25) prosecute or defend an action, claim, or judicial proceeding in any jurisdiction
to protect trust property and the trustee in the performance of the trustee’s
duties;

(26) sign and deliver contracts and other instruments that are useful to achieve or
facilitate the exercise of the trustee’s powers; or

(27) on termination of the trust, exercise the powers appropriate to wind up the
administration of the trust and distribute the trust property to the persons
entitled to it.

55. Power of accumulation and advancement

(1) Where the terms of a trust so authorise, a trustee may accumulate for a period
part or all of the income of the trust.

(2) Subject to Article 55(3), income of the trust which is not accumulated under
Article 55(1) shall be distributed.

(3) Subject to the terms of the trust and subject to any prior interests or charges
affecting the trust property, where a beneficiary is a minor and whether or not
the beneficiary’s interest:

(a) is a vested interest; or

(b) is an interest which will become vested:

(i) on attaining the age of majority;
(ii) at any later age; or
(iii) upon happening of any event;
the trustee may:
(c) accumulate the income attributable to the interest of such beneficiary
pending the attainment of the age of majority or such later age or the
happening of such event;

25
(d) apply such income or part of it to or for the maintenance, education or
other benefit of such beneficiary; or

(e) advance or appropriate to for the benefit of any such beneficiary such
interest or part of such interest.

(4) The receipt of a parent or the lawful guardian of a beneficiary who is a minor
shall be a sufficient discharge of the trustee’s obligations for a payment made
under Article 55(3).

56. Delegation by a trustee

(1) A trustee shall not delegate his powers unless permitted to do so by this Law or
by the terms of the trust.

(2) Subject to Article 56(1), a trustee may delegate duties and powers that a prudent
trustee of comparable skills could properly delegate under the circumstances.
The trustee shall exercise reasonable care, skill, and caution in:

(a) selecting a competent and qualified agent;

(b) establishing the scope and terms of the delegation, consistent with the
purposes and terms of the trust; and

(c) periodically reviewing the agent’s actions in order to monitor the
agent’s performance and compliance with the terms of the delegation

(3) In performing a delegated function, an agent owes a duty to the trust to exercise
reasonable care to comply with the terms of the delegation.

(4) A trustee who complies with Article 56(1) is not liable to the beneficiaries or to
the trust for an action of the agent to whom the function was delegated.

(5) For the purposes of this Article an “agent” may include investment managers,
accountants, lawyers, bankers, brokers, custodians, investment advisers,
nominees, property agents, solicitors and other professional agents or persons to
act in relation to any of the affairs of the trust or to hold any of the trust
property.

(6) A trustee may authorise a person referred to in Article 56(5) to retain any
commission or other payment usually payable in relation to any transaction.

57. Combination and division of trusts

(1) Subject to the terms of the trust, a trustee may combine two or more trusts
into a single trust or divide a trust into two or more separate trusts, if the
result does not impair rights of any beneficiaries or adversely affect
achievement of the purposes of the trusts.
(2) Subject to the terms of the trust, where a trustee divides a trust into two or
more separate trusts, he shall have the power to appoint trustees for such
trusts.

26
PART 9: LIABILITY OF TRUSTEES AND RIGHTS OF PERSONS DEALING WITH
A TRUSTEE

58. Liability for breach of trust

(1) Subject to this Law and to the terms of the trust, a trustee shall be liable for a
breach of trust committed by the trustee or in which the trustee has concurred.

(2) A trustee who is liable for a breach of trust shall be liable for:

(a) the loss or depreciation in value of the trust property resulting from
such breach; and

(b) the profit, if any, which would have accrued to the trust property if
there had been no such breach.

(3) Where there are two or more breaches of trust, a trustee shall not set off a gain
from one breach of trust against the loss resulting from another breach of trust.

(4) A trustee shall not be liable for a breach of trust committed prior to his
appointment, if such breach of trust was committed by some other person.

(5) A trustee shall not be liable for a breach of trust committed by a co-trustee
unless:

(a) he becomes aware or ought to have become aware of the commission
of such breach or of the intention of his co-trustee to commit a breach
of trust; and

(b) he actively conceals such breach or such intention or fails within a
reasonable time to take proper steps to protect or restore the trust
property or prevent such breach.

(6) A beneficiary may:

(a) relieve a trustee of liability to him for a breach of trust; or

(b) indemnify a trustee against liability for a breach of trust.

(7) Article 58(6) shall not apply unless the beneficiary:

(a) has legal capacity;

(b) has full knowledge of all material facts; and

(c) is not improperly induced by the trustee to take action under Article
58(6).

(8) Where two or more trustees are liable in respect of a breach of trust, they shall
be liable jointly and severally.

(9) A trustee who becomes aware of a breach of trust under Article 58(4) shall take
all reasonable steps to have such breach remedied.

(10) Nothing in the terms of a trust shall relieve, release, or exonerate a trustee from
liability for breach of trust arising from his own fraud, wilful misconduct or
gross negligence.

27 59. Remedies for breach of trust

To remedy a breach of trust that has occurred or may occur, the Court may:

(a) compel the trustee to perform the trustee’s duties;

(b) restrain the trustee from committing a breach of trust;

(c) compel the trustee to redress a breach of trust by paying money, restoring
property, or other means;

(d) order a trustee to account;

(e) appoint a special fiduciary to take possession of the trust property and
administer the trust;

(f) suspend the trustee;

(g) remove the trustee as provided in Article 42;

(h) reduce or deny compensation to the trustee;

(i) subject to Article 67, invalidate an act of the trustee, impose a lien or a
constructive trust on trust property, or trace trust property wrongfully disposed
of and recover the property or its proceeds; or

(j) order any other appropriate relief.

60. Damages in absence of a breach

(1) Except as expressly provided in the terms of the trust, a trustee is accountable to
the trust for any profit made by the trustee arising from the administration of the
trust, even absent a breach of trust.

(2) Except as expressly provided in the terms of the trust, absent a breach of trust, a
trustee is not liable for a loss or depreciation in the value of trust property or for
not having made a profit.

61. Legal fees and costs

In a judicial proceeding involving the administration of a trust, the Court, as justice and
equity may require, may award costs and expenses, including reasonable lawyers’ fees,
to any party, to be paid by another party or from the trust that is the subject of the
controversy.

62. Limitation of action against trustee

(1) A person may not commence a proceeding against a trustee for breach of trust
more than 3 years after the date such person or a representative of such person
receives a report from the trustee that adequately disclosed information that
could form the basis for a potential claim for breach of trust and informed such
person or his representative of the time allowed for commencing a proceeding.

(2) A report adequately discloses the existence of a potential claim for breach of
trust if it provides sufficient information so that such person or representative
knows of the potential claim or should have inquired into its existence.

28 (3) If Article 62(1) does not apply, a judicial proceeding by such person against a
trustee for breach of trust shall be commenced within 7 years after the first to
occur of:

(a) the removal, resignation, or death of the trustee;

(b) in relation to a claim by a beneficiary, the termination of the
beneficiary’s interest in the trust; or

(c) the termination of the trust.

(4) No period of limitation shall apply to an action brought against a trustee:

(a) in respect of any fraud to which the trustee was a party or to which the
trustee was privy; or

(b) to recover from the trustee trust property:

(i) in the trustee’s possession;
(ii) under the trustee’s control; or
(iii) previously received by the trustee and converted to the trustee’s
use.
(5) This Article applies also to proceedings brought against an enforcer.

63. Reliance on trust instrument

Any person who acts in reasonable reliance on the terms of the trust as expressed in the
trust instrument is not liable for a breach of trust to the extent the breach resulted from
the reliance.

64. Exculpation of trustee

A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the
extent that it:

(a) relieves the trustee of liability for breach of trust committed in bad faith or with
reckless indifference to the purposes of the trust or the interests of the
beneficiaries; or

(b) was inserted as the result of an abuse by the trustee of a fiduciary or
confidential relationship to the settlor.

65. Beneficiary’s consent, release or ratification

Subject to Article 58(10), a trustee is not liable to a beneficiary for breach of trust if the
beneficiary consented to the conduct constituting the breach, released the trustee from
liability for the breach as provided in Article 58(6) or ratified the transaction
constituting the breach, unless:

(a) the consent, release, or ratification of the beneficiary was induced by improper
conduct of the trustee; or

(b) at the time of the consent, release, or ratification, the beneficiary did not know
of the beneficiary’s rights or of the material facts relating to the breach.

29 66. Limitation on personal liability of trustee

(1) Except as otherwise provided in the contract, a trustee is not personally liable
on a contract properly entered into in the trustee’s fiduciary capacity in the
course of administering the trust if the trustee in the contract disclosed the
fiduciary capacity.

(2) A trustee is personally liable for torts committed in the course of administering
a trust, or for obligations arising from ownership or control of trust property
only if the trustee is personally at fault.

(3) A claim based on a contract entered into by a trustee in the trustee’s fiduciary
capacity or an obligation arising from ownership or control of trust property, or
on a tort committed in the course of administering a trust, may be asserted in a
judicial proceeding against the trustee in the trustee’s fiduciary capacity,
whether or not the trustee is personally liable for the claim.

67. Protection of persons dealing with trustees

(1) A person other than a beneficiary who in good faith assists a trustee, or who in
good faith and for value deals with a trustee, without knowledge that the trustee
is exceeding or improperly exercising the trustee’s powers is protected from
liability as if the trustee properly exercised the power.

(2) A person other than a beneficiary who in good faith deals with a trustee is not
required to inquire into the extent of the trustee’s powers or the propriety of
their exercise.

(3) A person who in good faith delivers assets to a trustee need not ensure their
proper application.

(4) A person other than a beneficiary who in good faith assists a former trustee or
who in good faith and for value deals with a former trustee, without knowledge
that the trusteeship has terminated is protected from liability as if the former
trustee were still a trustee.

(5) Comparable protective provisions of other DIFC laws relating to commercial
transactions or transfer of securities by fiduciaries prevail over the protection
provided by this Article.

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PART 10: THE PROTECTOR

68. The Protector

(1) A trust instrument may contain provisions by virtue of which the exercise by
the trustees of any of their powers shall be subject to the previous consent of the
settlor or some other person as protector, and if so provided in the trust
instrument the trustees shall not be liable for any loss caused by their actions if
the previous consent was given and he acted in good faith.

(2) The trust instrument may confer on the settlor or on the protector any power,
including without limitation the power to:

(a) determine the law of which jurisdiction shall be the governing law of
the trust;

(b) change the forum of administration of the trust;

(c) remove trustees;

(d) appoint new or additional trustees;

(e) exclude any beneficiary as beneficiary of the trust;

(f) add any person as a beneficiary of the trust in addition to any existing
beneficiary of the trust;

(g) give or withhold consent to specified actions of the trustee either
conditionally or unconditionally; or

(h) release any of the protector’s powers.

(3) A person exercising any one or more of the powers set forth in Article 68(2)
shall not by virtue only of such exercise be deemed to be a trustee.

(4) A person may charge reasonable remuneration for his services as protector
unless otherwise provided by the trust instrument.

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PART 11: PROVISIONS APPLICABLE TO A FOREIGN TRUST

69. Enforceability of a foreign trust

(1) Subject to Article 69(2), a foreign trust shall be regard as being governed by, and
shall be interpreted in accordance with its governing law.
(2) A foreign trust shall be unenforceable in the DIFC:
(a) to the extent that it purports:
(i) to do anything which is contrary to DIFC Law; or
(ii) to confer any right or power or impose any obligation the exercise
of which is contrary to DIFC Law; or
(b) to the extent that the Court declares that the trust is immoral or contrary to
policy in the DIFC.

32 SCHEDULE 1
I
NTERPRETATION

1. Rules of interpretation

(1) In the Law, a reference to:

(a) a statutory provision includes a reference to the statutory provision as
amended or re-enacted from time to time;

(b) a person includes any natural person, body corporate or body
unincorporate, including a company, partnership, unincorporated
association, government or state;

(c) an obligation to publish or cause to be published a particular document
shall, unless expressly provided otherwise in the Law, include
publishing or causing to be published in printed or electronic form;

(d) unless stated otherwise, a day means a calendar day. If an obligation
falls on a calendar day which is either a Friday or Saturday or an
official state holiday in the DIFC, the obligation shall take place on the
next calendar day which is a business day;

(e) a calendar year shall mean a year of the Gregorian calendar; and

(f) a reference to the masculine gender includes the feminine.

(2) The headings in the Law shall not affect its interpretation.

2. Legislation in the DIFC

References to legislation and Guidance in the Law shall be construed in accordance
with the following provisions:

(a) Federal Law is law made by the federal government of the United Arab
Emirates;

(b) Dubai Law is law made by the Ruler, as applicable in the Emirate of Dubai;

(c) DIFC Law is law made by the Ruler (including, by way of example, the Law),
as applicable in the DIFC;

(d) the Law is the Trust Law, DIFC Law No.10 of 2005 made by the Ruler;

(e) the Rules are legislation made by the DFSA under the Law and are binding in
nature;

(f) Guidance is indicative and non-binding and may comprise (i) guidance made
and issued by the Chief Executive as notations to the Rules; and (ii) any
standard or code of practice issued by the DFSA Board of Directors which has
not been incorporated into the Rules; and

(g) references to “legislation administered by the DFSA” are references to DIFC
Law and Rules conferring functions and powers on the DFSA.

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3. Defined Terms

In the Law, unless the context indicates otherwise, the defined terms listed below shall
have the corresponding meanings:

Term Definition
beneficiary means a person entitled to benefit under a trust or in
whose favour a discretion to distribute property held on
trust may be exercised.
breach of trust means a breach of any duty imposed on a trustee by the
Law or by the terms of the trust.
charitable trust means a trust or portion of a trust, created for a
charitable purpose described in Article 28.
Court DIFC Court as established under Dubai Law No. 12 of
2004.
DFSA the Dubai Financial Services Authority.
DIFC the Dubai International Financial Centre.
DIFC trust means a trust whose governing law is DIFC law.
discretionary trust is a trust in which the settlor has delegated complete or
limited discretion to the trustee to decide, amongst other
things:
(a) when and how much income or property is
distributed to a beneficiary; and
(b) which of the beneficiaries may benefit.
enforce in relation to a trust means to require or compel trustees
to execute, carry out and perform their duties under the
trust instrument in relation to its non-charitable
purposes and to bring and prosecute proceedings to
enforce the terms of the trust.
enforcer shall be construed in accordance with Article 29.
express trust is a trust created with the settlor’s express intent
declared in writing or a written declaration of trust by
the trustee.
foreign law any law other than DIFC Law
foreign trust is a trust whose governing law is the law of a
jurisdiction other than DIFC.
governing law has the meaning given in Article 12.

34
Term Definition
heirship right means any right, claim or interest in, against or to
property of a person arising, accruing or existing in
consequence of, or in anticipation of, that person’s
death, other than any such right, claim or interest
created by will or other voluntary disposition by such
person or resulting from an express limitation in the
disposition of the property of such person.
income includes rents and profits.
Law the Trust Law 2005.
minor means a person who has not attained the age of majority
under the governing law of trust or the law of his
domicile.
non-charitable trust (or purpose
trust) has the meaning given in Article 29.
person has the meaning given in Article 1 of the Schedule.
personal relationship includes every form of relationship by blood or
marriage, including former marriage and in particular a
personal relationship between two person which exist if:
(c) one is the child of the other, natural or adopted,
whether or not the adoption is recognised by
law, legitimate or illegitimate;
(d) one is married to the other, whether or not the
marriage is recognised by law;
(e) one cohabits with the other or so conducts
himself or herself in relation to the other
as to
give rise in any jurisdiction to any rights,
obligations or responsibilities analogous to
those of parents and child or husband and wife;
or
(f) personal relationships exist between each of
them and a third person,
but no change in circumstances cause personal
relationship once established to terminate.
President the president of the DIFC appointed by a decree of the
Ruler pursuant to Dubai Law No. 9 of 2004.
property means any movable or immovable property, and
includes rights and interests, whether present or future
and whether vested or contingent.
protective trust is a trust that is designed to protect the trust property to
ensure the continued support of the beneficiary.

35
Term Definition
protector shall be construed in accordance with Article 77.
Ruler the ruler of the Emirate of Dubai.
Rules has the meaning given in Article 2 of Schedule 1 to the
Law.
Schedule a schedule to the Law.
settlor means a person who provides trust property or makes a
testamentary disposition on trust or to a trust.
terms of the trust means the written or oral terms of a trust or any other
terms applicable under its governing law.
trust is a right, enforceable solely in equity, to the beneficial
enjoyment of property to which another person holds
the legal title
trust instrument means an instrument by which a trust is created and
includes a unilateral declaration of trust and any
instrument varying the terms of the trust.
trust property means the property for the time being held in trust.
trustee means a person appointed to act as a trustee of a trust in
accordance with the provisions of this Law.
unit trust means any trust established for the purpose, or having
the effect, of providing, for persons having funds
available for investment, facilities for the participation
by them as beneficiaries under the trust, in any profits or
income arising from the acquisition, holding,
management or disposal of any property whatsoever.

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