Achieving the best financial outcome
Resolving financial matters following your separation can be one of the more difficult areas to agree with your husband, wife or civil partner.
There are lots of different ways in which financial disputes can be resolved and your own personal circumstances will largely dictate the best approach for you.
As well as advising on financial outcomes on divorce and the dissolution of civil partnerships or unmarried relationships, we can also address the enforcement of foreign financial orders in relation to property, other assets and maintenance, and the powers of the English courts to make financial orders after an overseas divorce.
How do I decide where to issue family court proceedings?
First, it is necessary to ascertain in which countries proceedings could be issued. This includes states or territories in some countries which have a federal basis. This is what is known as the 'countries with jurisdiction'.
Secondly, it is necessary to ascertain the outcomes in those countries with jurisdiction. This includes the final financial settlement, interim financial arrangements, the available injunctions to preserve the assets, the timetable and grounds for obtaining a divorce, any arrangements for children, the legal costs, the personal inconvenience of the proceedings being in that country, language barriers, the recognition of any orders in other countries in which one spouse may be likely to live or work, opportunities for enforcement of any orders and a number of similar factors.
The outcome, timetable and procedure in the various countries with which an international family may have connections can be very different indeed. Some countries may seem to favour men or local applicants and others seem to support women applicants and/or mothers. Some countries can be very slow from the start of the separation or the start of proceedings until the conclusion and outcome. Some countries are perceived as very generous to the weaker financial party, whereas some grant only short term alimony (spousal maintenance) or none at all. Some countries have exceptional powers to obtain full disclosure including finding out about assets offshore or held in the name of third parties and trusts, whereas other countries have very limited disclosure powers and permit easy evasions of full disclosure.
Proceedings in some countries can be very expensive in costs although this must be balanced against better outcomes. Whilst many countries now encourage people to act in person in family court proceedings without a lawyer, these international aspects are an area in which specialist legal advice should always be urgently taken before you embark on any action. The early stages of a case where two or more countries might have jurisdiction can be vital.
What is the difference within Europe? How is it decided which country will deal with a divorce?
Prior to 31 December 2020, if two European Union countries had jurisdiction e.g., UK and France, it depended only on where the proceedings were lodged first in time. That country’s courts would then usually deal with all matters concerning the family including divorce, and ancillary financial matters.
Since 31 December 2020 (when the UK left the EU) the standard discretionary 'closeness of connection' will apply to EU and non-EU countries outside the UK. (For forum disputes within the UK jurisdiction is often determined on where the parties last lived together).
Can proceedings started in one country be transferred to another?
Yes, the English court can and does sometimes transfer the entire proceedings or part of proceedings to another country if the courts of the other country are better placed to deal with issues e.g., interpretation of local law or practice.
Prior to 31 December 2020, in certain circumstances, it was compulsory for courts to transfer maintenance claims (defined as 'needs') where another country has prior jurisdiction for maintenance or the couple have years previously agreed that the other country should deal with maintenance. Issuing first for divorce in these circumstances does not ensure all the financial issues are resolved in that country.
Now, prior agreements do not prevent the English courts being able to make orders for maintenance but might still be a factor in the English Court’s approach to determining the quantum and term of maintenance.
How differently are financial issues dealt with abroad?
Some countries operate a system informally known as community of property. In its basic form, the assets accruing during the marriage up until the date of separation are divided equally. Premarital and post separation assets and all inheritances and gifts are taken out of account. This inflexibility can sometimes produce, to English perceptions, quite unfair outcomes. It gives no account to commitments made within a marriage often to one spouse’s prejudice e.g. giving up a career for child raising or moving countries to be with the other spouse. It gives no account of the needs of the parent, often not the primary earner, who has responsibility for day-to-day care of the children as an ongoing prejudice to their own career and earning.
Some countries have an additional discretionary lump sum on top to produce a more just outcome. Often however this adjustment is quite a small amount.
Spousal Maintenance may be in addition to this division. However an increasing number of countries do not grant spousal maintenance for more than a few years after the divorce. This can be irrespective of the length of the marriage, the disparity in the financial circumstances of the spouses, and the inability of one spouse post separation to recover earning capacity and after the commitments to the marriage. This can seem very unfair.
Some countries apply not their own domestic law but the law of the country with which the couple have the closest connection, known as 'choice of law' or 'applicable law'. England only ever applies English law. Most English lawyers consider applying the law of other countries makes settlements harder to achieve and more costly, even more uncertain and slower. Moreover continental European countries using applicable law do not do so consistently or comprehensively; applying their own domestic law to procedural matters and anecdotally applying their own domestic law if they find it difficult to ascertain or understand the foreign law.
Some countries have binding pre-marriage agreements as a cultural and legal norm. Sometimes these are entered into without separate independent legal advice, without disclosure and without any opportunity of reviewing what is fair. Nevertheless these countries very rarely deviate from these sorts of agreements at a time of subsequent divorce, irrespective of the changes that may have subsequently occurred and however unfair the agreement may now appear with changing circumstances.
Ascertaining the assets to be divided in some countries, even if to be divided equally, can be hard work, very frustrating and often simply impossible. Some countries rely on self disclosure without any opportunity of corroboration or investigation. Some countries have minimal investigation powers. Some countries ignore assets put within trusts or companies, even if done so to evade marital responsibilities. Some countries ignore offshore assets i.e. resources outside the country. In short, ascertaining disclosure reliably in some countries is impossible, leading to much frustration and injustice.
Many international spouses have to balance the predictability, certainty, low legal costs and possibly inadequate disclosure of some countries, with the more flexible fairness-discretion, more tailor-made, yet uncertain outcomes, the greater likelihood of full disclosure, higher legal costs and possibly greater financial settlements in countries such as England.
In countries with any significant Islamic influence, the division of marital assets is often based on mahr, dowry or similar arrangements reached at the time of the marriage and with reference to the Qur’an. Whilst to some observers the arrangements can seem very unfair especially to the woman, Muslims including some female Muslims argue its fairness. Nevertheless it is a feature that has to be taken into account in comparing financial outcomes between countries with which international families have a connection and choosing where a divorce will take place.
Generally England is perceived as a very generous country with applicant wives obtaining substantial orders. London is described as 'the divorce capital of the world', in part because of its very multinational population but in part due to the very substantial settlements redistributing assets and making orders against assets held behind trusts, companies and otherwise hidden. With many international families having some connections with England, it has been a forum for many big money divorces in recent years. There are much lower divorce settlements abroad.
Why do I need to be cautious about admitting residency or domicile?
Each has tax implications under English tax law including liabilities for income tax, capital gains tax and/or inheritance tax. They can have tax and nationality implications under the laws of other countries. Great care is needed. Often tax advice as well as family law advice should be taken before admitting either residency or domicile.
What will happen to our finances if we have a divorce in England?
England does not have an automatic percentage division of assets on divorce. It seeks to produce a just and fair outcome in each case. It takes into account a number of factors. It is discretionary. This has the considerable advantage of flexibility and individual justice. However it has the significant disadvantage of uncertainty and lack of predictability of outcome and so potentially increasing costs.
The objective is to produce a fair outcome, taking account of needs, compensation, sharing and any agreement. Although there is no automatic division of assets, the courts have stated that the principle of English divorce financial provision law is equality of sharing. Assets acquired during the marriage ('marital acquests') will be divided equally unless the needs of the parties, especially reasonable accommodation for any children, are greater. In these circumstances, and inevitably many cases come into this category, the courts will look to provide for needs. This will dominate ('trump') any equality sharing. In relation to non-maritally acquired assets, these cannot be shared although again reasonable needs will dominate. Non-maritally acquired assets includes pre-marriage assets, inherited assets, some post separation assets and also has regard to length of marriage, particular contributions, the mixing of non-marital with marital assets, illiquid assets and other special factors to produce a fair outcome.
Spousal maintenance, also known as alimony, may be in addition to this division of capital. It takes the form of monthly or other periodical payments. It may continue for a term of years e.g., to allow opportunities to retrain and become self-sufficient, or it may be for life, although this is increasingly rare. Alimony ends on remarriage. It may be reduced or suspended during cohabitation. Sometimes alimony can be capitalised to produce a clean break. England does not have automatic short term alimony orders as found in some countries. In addition there is child support. England has a Child Support Agency (now CChild Maintenance Service) but it does not apply if one parent or a child is abroad. It has fixed calculations based on the income of the paying party.
If the financial resources are limited, the priority tends to be provision of accommodation for children for their minority with the primary residential parent. This may be the former family home. Sometimes this may involve the other parent receiving their 'interest' in property many years later when the child has reached 18 or ceased full time education.
What happens about pensions?
The English family court can make orders sharing pensions including transferring part of a pension to the other spouse. However this can only be against pension companies in England. This is relevant to an international family if the pension is abroad, when advice from the pension company or a foreign lawyer should always be taken in advance of the settlement to make sure an effective order can be made and implemented. Similarly, if the pension is in England and the divorce is abroad, a separate English order may often be needed to give effect to any foreign family court pension sharing arrangement. English legal advice should be taken before the foreign final financial settlement is made abroad to make sure it is in fact enforceable against the English pension fund.
How will the English family court know what are the assets to be divided?
There is an obligation on each spouse to give full and complete disclosure of all their resources worldwide. However this applies in most countries! In our international experience, England is a leading country in its intensive and effective investigation of disclosure, with very wide international powers to obtain documents and information. England requires, and often obtains, disclosure of personal assets held in the name of trusts, companies, other family members or in other ways designed to conceal true ownership and wealth. England’s leading family court judges and lawyers are very used to dealing with international spouses who hide assets behind offshore trusts and companies, who give dishonest disclosure or who simply will not answer questions. Ultimately, the court will infer a level of wealth and make financial orders accordingly.
How does the court preserve assets?
An important aspect is to make sure that any asset against which it is intended to seek a family court order stays in place until the final settlement and is not transferred out of reach including to another country. Freezing injunctions against bank accounts, real properties etc and similar precautionary steps are crucial. They are often made if there is any risk of dissipation or disposal of assets.
English lawyers and English judges frequently work closely with lawyers, judges and others abroad to ascertain details of worldwide financial resources in a case.
The English family courts make worldwide freezing orders against assets abroad. The orders are invariably made without notice, very quickly and enforced in a matter of hours. The English courts ask other country’s courts to investigate disclosure including to undertake a cross examination of a spouse or third parties to ascertain the truth of ownership of assets, particularly if the spouse or third party will not travel to England or cooperate.
Is it better to reach an agreement?
Yes. Although the English court is not bound by any agreement, in practice a couple who, post separation, reach an agreement or settle after legal advice and disclosure will invariably have that agreement embodied into a final court order. This significantly saves costs and time, and reduces distress to everyone involved, including children..
We strongly recommend the use of mediation and other forms of dispute resolution (DR), once forum for the proceedings has been established in international cases, as a preferable means of settling cases.
Financial contributions made may also alter the legal ownership and can alter the legal position and can rebut the above presumption. Do we need to have agreed to this?
No, the court can imply a joint intention based on behaviour. Here again, the financial contributions may evidence a joint intention as can assurance made by one partner to the other’s reliance and detriment. This can include express promises or words or conduct that encouraged the other partner to believe that he or she will obtain an interest in the property.
Can I enforce my English final financial order abroad?
First, the English family court has power to make an order in respect of assets abroad including real properties abroad.
Enforcement depends on the order and where it is going to be enforced. Many international enforcement arrangements distinguish between maintenance and other financial obligations. Maintenance is interpreted widely, beyond pure alimony, spousal maintenance provision. It is interpreted often as 'needs'. However it does not cover division of assets based on fairness sharing rather than providing for needs. Enforcing such fairness-sharing division of property arrangements against foreign assets can be more difficult.
There is some international co-operation with many reciprocal arrangements on recovery of maintenance obligations. Some reciprocal arrangements are rather historic, outmoded and only occasionally exercised.
In contrast there are reciprocal arrangements across Europe (the EU Maintenance Regulation) although only for a maintenance (needs) order made before 1 January 2022. For maintenance (needs) orders made after that date there is the 2007 Hague Convention on the international recovery of child support and other forms of family maintenance which applies to all EU member states and some other countries including the USA.
Between some countries, it is possible to pursue claims quickly in the country in which the payer is working. Between some other countries, there can be a relatively complicated procedure involving the government organisations of the two countries. Good legal advice needs to be taken, including in advance of the final settlement if possible. It is important to be conscious of the costs of the exercise in relation to the likely recovery. There is a very good Government Department, known as REMO, which gives assistance on reciprocal enforcement abroad.
Many countries cooperate on orders regarding the transfer of real property. In practice, this is made much easier if, in advance of the final financial order, any dealings with the real property have been prevented or frozen.
Within Europe, cross-border laws have made it relatively easier directly to enforce consent lump sum orders in the country in which relevant assets are situated.
Although the English Child Support Agency (now Child Maintenance Service) rarely deals with international families, there is co-operation between such agencies in other countries.
Whilst there is increasing international co-operation on enforcement, there is still no substitute for freezing assets in advance and/or seeking orders against onshore assets. Planning implementation and any enforcement before the final settlement is very wise.
