Asset Protection

7.1 Here there are two aspects to consider.  First, whether the Courts in the Offshore jurisdiction will grant reciprocal enforcement (over Trust assets) of an insolvency award of a United States Court setting aside a Transfer into Trust on either of the grounds explored in Part 6 above.  Second, whether the creditor will be able to commence proceedings direct in the Courts of the jurisdiction seeking to set aside the Transfer into Trust, and thereby obtain direct enforcement over the Trust Fund.

7.2.1 On the question of reciprocal enforcement, it is of course a long standing rule of Private International Law that foreign penal or revenue Laws will not be enforced.

Govt. of India v. Taylor (1955) AC 491
But see: Bullen and Garner v. UK 533 So.2d (Fla. App. 4 Dist. 1989)

7.2.2 Thus, only purely Civil (i.e. non-penal or revenue) awards may be enforceable on common law principles of comity, or under reciprocal civil judgments conventions.

7.2.3 The United Kingdom position on enforcement of foreign judgments is explained in Dicey and Morris on The Conflict of Laws, 11th Edition in Chapter 14.

7.2.4 Enforcement of United States judgments in foreign countries is primarily dependent upon the comity (generosity) of the foreign jurisdiction, as the United States is not a party to any Treaties of enforcement of foreign judgments (other than the Inter-American Agreement dealing with South America).

7.2.5 The Offshore jurisdiction may treat a United States judgment in one of three possible ways.  First, it may as a matter of internal law or policy totally preclude the enforcement of foreign judgments (unless there is a mutual enforcement treaty with the United States, which, as noted above, is unlikely).  Second, there may be a limited recognition short of granting the United States judgment a conclusive or binding effect: in this situation, the United States judgment may be wholly or partly reopened and its issues subjected to further findings of fact and law.  Thirdly, some jurisdictions will readily recognize the United States judgment, on being satisfied that their own judgments will be similarly recognized in the United States.

7.3.1 Proceedings may be commenced under the substantive laws of the Offshore jurisdictions either under its Fraudulent Conveyance or its Bankruptcy laws . Fraudulent Conveyance proceedings may be available if the creditor can establish the Transferor's intent to defraud.  Jurisdiction to commence bankruptcy proceedings is generally narrower, requiring either the Transferor to be resident or domiciled in the Offshore jurisdiction, or an "act of bankruptcy" to be committed there.  The detailed provisions relating to both aspects are considered further in Part 8 below for various of the Offshore jurisdictions.

7.3.2 Selection of the Offshore jurisdiction to site the CPT is thus of critical importance, as different Offshore jurisdictions will lead to different results in terms of Offshore enforcement of a United States judgment.

7.3.3 Part 8.7 enumerates Offshore jurisdictions that have not (or not yet) introduced new laws relating to Creditor Protection Trusts.  It is possible that some of these may well "give aid" and enforce a United States judgment containing a purely Civil damages award.

7.3.4 Conversely, Part 8.2-8.6 below enumerate Offshore jurisdictions that have introduced new laws relating to Creditor Protection Trusts.  It is unlikely that the Courts of any of these Offshore jurisdictions would contradict their new laws and "give aid" or enforce a United States judgment.  To do this would run counter to the policy and intent of their own tailor-made legislation.

7.3.5 Indeed, some of this latter group of jurisdictions have gone further, and given statutory effect to the "Ouster" of foreign judgments (e.g. Cook Islands, see Part 8.2.8).  Clearly, from the Settlor's point of view, it is most desirable to select an Offshore jurisdiction where enforcement of a United States judgment is a near-impossibility.

7.3.6 If the Offshore jurisdiction is not one that will recognize or enforce a United States judgment, then the only alternative may be to commence proceedings in the Offshore jurisdiction.

7.4 If a United States Trustee in Bankruptcy is acting, then the "Doctrine of Universality" may apply.  This operates to pass all moveable property of the debtor, wherever located, to the Trustee in Bankruptcy.  Many of the Offshore jurisdictions will recognize and apply the Doctrine of Universality in respect of property of a debtor located in their jurisdictions.  However, assets held in a CPT will not be subject to the Doctrine, as the debtor (the Settlor) will not normally retain any interest in the Trust Fund.

7.5 The detailed provisions relating to these aspects are considered further in part 8.