14 November 2014

The potential cost of jurisdiction in cross-border divorce

Brett Frankle
Partner | UK

In the latest blog from the Withers family law team, we explore the potential costs of handling divorces in different jurisdictions, how a specific jurisdiction can benefit one party, and also look at a recent case where millions has been spent just to settle where the divorce should be heard. In 2000, English family law changed. Out went the concept of limiting a financially weaker party to a sum sufficient to meet their reasonable needs on divorce and in came the “yardstick of equality”. If marriage was truly a partnership of equals then there should be no place for discrimination between the contributions each party makes, so went the logic. In practice we now talk about an equal division of the assets being the starting point. That said, in cases where there are more assets than required to meet needs arguments might be able to be run to seek a departure from equality. Those reasons vary. The duration of a marriage, a special contribution made by one party to a marriage, the provenance of assets i.e. where they were acquired before a marriage or after separation or by way of inheritance of gift (such that the other party cannot be said to have contributed to their creation) and the existence of a pre-nuptial or post-nuptial agreement have all been found, in the right cases, to justify a departure. The position abroad Contrast this with the law elsewhere though. In lots of continental jurisdictions parties may enter into marriage contracts at the start of their marriage electing how their assets shall be held and divided on death and divorce. Parties can choose not to share what they build up together or they can have true community of property. It is their choice. Looking further afield, in Malaysia for example, the Court makes a distinction between assets acquired jointly by spouses during a marriage (which are generally shared equally) and assets acquired by only one of the spouses, which can be shared on divorce, having regard to the contribution to the marriage of the other party, but which tend to be divided unequally. Where should the divorce be heard? Given the different ways countries deal with assets on divorce there is often a dispute as to where a divorce should be heard. That decision can have significant financial consequences which is why forum shopping a very real issue. For European countries the first in time wins i.e. the Member State in which divorce proceedings are first lodged (providing steps are then taken to effect service) will hear the divorce, but what about outside Europe? Chai v Peng That issue recently arose in the case of Chai v Peng [2014] EWHC 3519. In that case the High Court in England was asked to consider whether it had jurisdiction to hear a divorce and whether it was more appropriate for it, rather than the Court in Malaysia, to do so. The case made headlines for the wife's evidence that given her collection of 1,000 pairs of shoes kept at her English home, she was clearly habitually resident here. The English Court agreed, although not because of the shoes (!) Having decided it could deal with the divorce, the Court then had to consider whether the case was more closely connected to England than Malaysia, where the husband said the case should proceed. Looking at the couple's connections with both countries the Court concluded that the connecting factors to each jurisdiction panned out fairly equally, with a small bias in the wife's favour. This arose from the presence of an estate here and the English court's ability to handle a 'needs case' i.e. to ensure the wife would have sufficient money to meet her needs on divorce, unlike in Malaysia.Geniales Aufblasbare Wasserpark So the wife is now able to pursue her divorce here, but what about the husband? As reported in the press, proceedings continue in Malaysia where the Court there is being asked to determine whether they also have jurisdiction. The risk is therefore that there will be concurrent jurisdictions over the same divorce and over the same finances. A costly exercise? Some £2.7m has already been spent by the parties in order to determine where their divorce should be held. What the wife should actually receive has not even been considered by the Court yet. An extreme case perhaps, but it just shows the lengths parties will go to in order to secure what they perceive to be a more favourable jurisdiction.

Category: Blog