21 August 2014

Divorce tourism - why England is the destination of choice


Laura Winterbottom
Special counsel | UK

It is August and the streets of London are experiencing that familiar lull with most people getting away from the city for a holiday. Whilst London and the rest of Britain generally might not be the holiday destination of choice for most jet setters — it continues to be the destination of choice all year round for getting divorced. What is it about the English family justice system that is attractive to the financially weaker spouse? 1.  Discretion The English Family Court eschews formulae and tariffs. It operates a discretionary system, which means that the Judges have ultimate discretion to decide the appropriate division of assets on divorce, having regard to all of the circumstances of the case and the statutory checklist in Section 25 of the Matrimonial Causes Act 1973. In contrast, other jurisdictions apply a much more rigid/mathematical division. The advantage of the discretion is that it provides the opportunity of fairness, as the Court is not bound by the restrictions of hard law. However, it also makes the range of possible outcomes broad which makes life more difficult for family law practitioners and of course for their clients as there is rarely a certain outcome.  Further, discretion has historically enabled Judge's to adopt a paternalistic approach, and outcomes that seem to have as much to do with likeability as they do the law. It may be that financially weaker parties to a divorce would rather take their chances with the English Court's discretionary approach than the fixed outcomes of other jurisdictions. 2. The Presumption of 50:50 In England, the starting point for the Court in exercising its discretion is an equal division of the marital assets. Since the landmark case of White v White in 2000, domestic contributions are regarded in equal pegging to financial contributions, and the ceiling of “reasonable needs” for wives was abandoned in favour of a starting point of equality. In contrast, in many European counties, spouses have to ‘opt in' to this approach to the division of assets on divorce by electing that they wish their marriage to be governed by the “community of property” matrimonial regime prior to their wedding day. Many chose instead to elect for the matrimonial regime of separate property which means they are not required to share their assets in the same way on divorce. 3.  Maintenance Some countries limit spousal maintenance to, at most, a couple of years post divorce. In contrast, the English Court often exercises its power to award lifelong spousal maintenance. It is in this area particularly that family practitioners see that divorce tourism is alive and kicking within the confines of England and Wales as the London court has a reputation for being more generous in their spousal maintenance awards than the Courts are up north which means parties are sometimes selective of where they start divorce and the resultant financial remedy proceedings. 4.  Pre-Nuptial Agreements Pre-nuptial agreements whilst highly persuasive (and since the landmark case of Granatino v Radmacher presumptively enforceable), are not legally binding in England and Wales. In other jurisdictions, not only are they binding, but they are binding without question, which can result in parties entering into bad bargain and being bound by it.  In order for a pre-nuptial agreement in England to be implemented, certain safeguards must be met such as obtaining separate independent legal advice and providing full financial disclosure. There must also be the absence of undue pressure and duress. Further, it is not possible in England to contract out of ‘needs' and so even if the other safeguards are met, a bad bargain is unlikely to be enforced. 5.  The Assets The English Court has extensive powers to obtain financial disclosure. Unlike other jurisdictions, it has the power to make worldwide orders and not just orders in respect of assets located in the jurisdiction. The English Court analysis of assets on divorce is wide-ranging — and will include a consideration of pre-marital, post-separation acquired assets, inheritances and gifts. Admittedly, these types of assets are generally regarded as non-matrimonial and so are a likely reason to depart from equality but ultimately they may be re-distributed to meet a party's needs. Full disclosure is also required of remote and potential interests — for example deferred/unvested remuneration, interests under a trust, and assets that were disposed of some considerable time prior to the divorce — which is a contrast to other jurisdictions. Although not exhaustive, the above gives some flavour of the attractiveness of theEnglish Courtfor the financially weaker party to a divorce. It remains to be seen whether the increasing presence and reporting powers of the English Press in the English family Courts will put off divorcing spouses from seeking to establish divorce proceedings in this jurisdiction, although given the above and the difference that this can mean in terms of a financial outcome on divorce, I suspect not.

Laura Winterbottom Special counsel | London

Category: Blog