Summary of "Webinar on AIFC Trust law regulations"

Summary of Webinar on AIFC Trust Law Regulations

Presenters: - David Gallo (Director, AIFC Academy of Law) - Professor Alexander Vandeput (Chairman of Academic Council, AIFC Academy of Law; Chief Strategy Officer at IE Business School) - David Russell QC (Outer Temple Chambers; drafter of DIFC and AIFC trust laws; expert on trust law regulations)

Key Business-Specific Content

1. Strategic Importance of Trusts and Foundations in AIFC

Trusts and foundations serve as legal vehicles for asset management, estate planning, charitable purposes, and special purpose transactions. The AIFC offers both trusts and private foundations, providing flexibility for asset holding and governance.

Trusts are relationships without legal personality, supervised by courts.
Foundations are corporations without shareholders.
Trusts allow separation of asset ownership from beneficial interests, enabling better governance and reducing family disputes over assets.

2. Frameworks and Legal Foundations

The AIFC Trust Law is a comprehensive, modern trust law framework inspired by multiple jurisdictions:

Draws from DIFC Trust Law (2005, amended 2016-17)
Incorporates elements from Singapore, Belize, Bahamas, and the US Uniform Trust Code
Aligns with the Hague Convention on the Recognition of Trusts for international enforceability

Key legal concepts include:

Equity and trust obligations (trustee duties are enforceable by courts)
No rule against perpetuities in AIFC (unlike English law)
Advisory trustees allowed to ensure Sharia compliance, critical for Islamic clients
Court powers include variation, rectification, enforcement, and trustee removal
Arbitration can be mandated in trust disputes, enhancing dispute resolution options beyond courts

3. Operational and Governance Provisions

Trusts must be clearly documented and actively managed (“live your documents”) to avoid being disregarded as sham structures.
Trustees have fiduciary duties and can seek court guidance to limit liability.
Courts have wide jurisdiction over AIFC trusts and can enforce judgments both inside and outside Kazakhstan.
The law protects trust assets from creditors except in cases of proven fraudulent intent or insolvency at the time of asset transfer.
Settlor powers to vary or revoke trusts are recognized but must consider Sharia implications where applicable.

4. Comparative Advantages of AIFC Trust Law

AIFC trust law is more advanced and flexible than English law and many GCC jurisdictions.
It offers enhanced protection for trustees and beneficiaries, wider powers for courts to rectify and vary trusts, and stronger asset protection provisions.
The AIFC regime supports confidentiality better than many European or offshore jurisdictions, which are moving toward public beneficial ownership registers.
The AIFC framework is integrated with Kazakhstan law, ensuring enforceability of trust court decisions nationally.
It supports international recognition and enforcement through conventions like the Hague Trust Convention and New York Arbitration Convention.

5. Tax and Regulatory Considerations

Trusts are generally not trading vehicles but can hold operating companies or assets.
Tax implications must be carefully considered, especially regarding gift taxes, capital transfer taxes, and potential double taxation in multi-jurisdictional structures.
The AIFC adheres to international regulatory standards including the Common Reporting Standard (CRS) and OECD BEPS initiatives, reducing risks of artificial or abusive structures.
Non-resident beneficiaries can be excluded irrevocably to avoid disclosure and reporting obligations under Kazakhstan’s central bank regulations.

6. Use Cases and Practical Recommendations

Trusts and foundations are ideal for:

Estate and succession planning
Asset protection and segregation from operational business risks
Ensuring compliance with Sharia law via advisory trustees
Managing family wealth with governance structures that minimize disputes

Additional recommendations:

Advisors should ensure clients understand the legal commitments and actively manage their trust structures to avoid “sham” risks.
Trustees should utilize court powers proactively to seek guidance and protect themselves from liability.
Consider the location of trustees and assets carefully to ensure jurisdictional control and enforceability.

Key Metrics, KPIs, and Timelines

No explicit financial KPIs or growth targets were discussed.
Emphasis on legal robustness, enforceability, and regulatory compliance as key success factors.
No specific timelines, but references to ongoing regulatory developments (e.g., CRS implementation, BEPS compliance) imply continuous evolution.

Frameworks / Playbooks Highlighted

Trust Law Framework: Combination of English common law principles, US Uniform Trust Code, Singapore trust law, and Hague Convention
Governance Framework: Trustee fiduciary duties, court supervision, settlor powers, advisory trustees for Sharia compliance
Regulatory Compliance: CRS, OECD BEPS, AIFC regulatory registration for trust service providers
Dispute Resolution: Court supervision plus optional mandatory arbitration under trust regulations
Asset Protection: Firewall provisions requiring proof of fraudulent intent or insolvency to challenge trust assets

Case Studies / Examples

Historical evolution of trust law from English Chancery courts and Islamic Waqf concepts
Use of trusts in Islamic contexts with advisory trustees to ensure Sharia compliance
Comparison with other GCC jurisdictions (DIFC, Bahrain, Qatar) and offshore centers (British Virgin Islands, South Dakota)
Reference to UK Supreme Court 2017 decision affirming trust validity despite foreign property location

Actionable Recommendations

Legal advisors should ensure clients “live their documents” and actively comply with trust terms to avoid invalidation.
Use AIFC trusts for international families and businesses seeking robust asset protection with enforceability in Kazakhstan and beyond.
Consider Sharia advisory trustees when serving Muslim clients to ensure compliance and trust acceptance.
Structure trusts to avoid tax pitfalls, especially regarding settlor’s ownership and double taxation risks.
Leverage AIFC’s arbitration provisions to enable efficient dispute resolution outside courts.
Monitor international regulatory trends (CRS, BEPS) to maintain compliant and sustainable trust structures.

Conclusion

The AIFC Trust Law Regulations provide a modern, flexible, and internationally aligned framework for trusts and foundations that supports asset protection, governance, and cross-border enforceability. It is positioned as a superior jurisdiction within the GCC region, combining common law trust principles with local legal requirements and Sharia considerations, making it highly relevant for regional and international clients.

Sources: - David Gallo, Director of AIFC Academy of Law - Professor Alexander Vandeput, Chief Strategy Officer, AIFC & IE Business School - David Russell QC, Outer Temple Chambers, drafter of DIFC and AIFC trust laws

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Summary of "Webinar on AIFC Trust law regulations"