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Divorce tourism, a spanner in the works?18th November 2019 Family Law
There is a widely-held perception that London is the “divorce capital of the world”. Once a catchy phrase like this enters the public consciousness, it starts to take on the status of fact. There certainly have been many high-profile individual examples of very large financial awards made to (usually) wives of the internationally super-rich. England and Wales isn’t the only jurisdiction in the world making generous discretionary awards but it is definitely has a reputation for it, leading to accusations that individuals are setting up home in England to take advantage of the family court here, in a word, engaging in “divorce tourism”.
Why England and Wales?
There are many possible explanations for the English courts’ reputation for ordering large divorce settlements. The City of London is a huge draw for financiers and investors from across the globe. Add to that the fact that the top end of the London property market is highly-prized, supercharged by capital originating in Russia and the Middle East. Simply because there are a lot of very wealthy individuals based – at least partly – in London, it follows that when their marriages break down, the financial provision associated with the divorce will be substantial.
Internationally mobile wealthy individuals may have connections with a number of different countries, potentially opening up a range of legal systems in which to conduct their divorce. England and Wales is often an attractive choice for the financially weaker party because the law does not discriminate between financial and non-financial contributions made to the family, leading to financial awards based on equal sharing in many “big money” cases. There may be reasons to depart from 50/50 such as need, the presence of a properly formulated prenuptial agreement, or certain situations where wealth is held in trust, is pre-acquired or inherited. However, there needs to be a good reason to depart from a 50/50 division of assets.
It is often very important for a financially weaker party to act quickly and ensure that, if eligible, their divorce takes place in England and Wales. Some, sensing that their marriage might be in trouble, may well arrange their affairs so that “when the time comes” they can establish jurisdiction in England and Wales.
Part III of the Matrimonial and Family Proceedings Act 1984 – a second bite of the cherry?
The reputation of the English courts for attracting “divorce tourism” is not restricted to awards made at the time of the actual divorce. There is legislation (Part III of the Matrimonial and Family Proceedings Act 1984) which allows a party with a sufficient connection to England and Wales to obtain a financial award here after an insufficient award overseas. The mere fact that an English court might have been more generous is not enough to get a financial order under this legislation. It isn’t simply a charter for divorce tourists.
The ability to apply for financial provision in this way fills an important gap, especially in cases where someone has been left in substantial hardship by the (lack of) award from a foreign court or if there are legal reasons why it court could not deal with a major asset such as a pension located here. Nevertheless, there is potential for parties to see how their divorce pans out and, if it doesn’t go well, set up home in England and seek a “top-up” award.
Potanin v Potanina – a bad day for divorce tourism?
“Divorce tourists” were arguably dealt a blow this month by the case of Potanin v Potanina. Natalia Potenina is the ex-wife of a Russian oligarch worth in the region of $20bn. Russian divorce law – judged to have been “properly applied” in this case – was only able to calculate her divorce settlement on the basis of the couple’s personal assets, therefore excluding assets held on trust or in the names of third parties. The exact size of her award was an area of disagreement due to currency fluctuations over time and other disputes but it was in the range of $41.5m to $84m: a fortune by any reckoning but a long way short of what might have been awarded by a court in England.
Ms Potanina obtained an investor visa and bought a house in London in 2014 and stated that she had lived permanently in London since “at least the beginning of 2017”. She applied to the court for leave (permission) to make a Part III application for provision after a foreign divorce. Leave was initially granted but challenged once Mr Potanin received notification of the decision.
The court found that there were significant matters of law and fact that had been misrepresented to the court, either by omission or deliberately, when the wife’s application was first made. Cases of this type can often be extremely technical and there can be very complex arguments around the interplay between the circumstances of the original award, the strength of the connection with this country and the location and type of available assets.
Highly significant was the court’s finding that the wife “had no significant, if any, connection [with England Wales] during the marriage.” In fact, “her first contact with England after the marital breakdown appears to have been to obtain advice from London divorce lawyers.” The husband’s lawyers argued that if this case were allowed to proceed, “there is effectively no limit to divorce tourism”. Once the court had all the available information, it found against the wife and prevented her from applying for financial provision, even though she was, by the time of the hearing, habitually resident here.
There were some really important principles stated by the judge:
“…it is not the job of the English courts to correct what might be thought to be the deficiencies of the legal systems of another country…It would be arrogant for this court to assume that England and Wales is the sole arbiter of fairness.”
I understand that the wife is appealing the decision and so this may not be the last we hear of this case. However, the decision shows that the court is prepared to take a robust approach and will not make an order just because things might have been different if the divorce had been granted here.