A number of cases involving ultra-wealthy couples put a spotlight on divorce law and how it is being affected by forces as varied as cross-border legal disputes and the UK's bid for independence from the EU. Here is a range of legal commentaries.

There are a lot of divorce cases involving high net worth individuals out there and for understandable, if not always defensible, reasons they attract media attention. The fights over seven-figure or higher sums of money, yachts, houses and other possessions fascinate people even while they also repel. But beyond the gossip, there are serious issues around property rights, enforcement of contract and predictability of law. (And, of course, the welfare and best interests of children and other dependents.) Wealth advisors cannot afford not to be aware of these issues. 

The UK has moved towards “no-fault” divorce. Another prominent case is that of the singer Adele. She and her husband Simon Konecki, have split after eight years together and three years of marriage. There’s the question of Adele’s $180 million fortune. This publication is told that Adele reportedly didn’t get a prenup, which might mean that her wealth could be cut. If the pair choose to divorce in California, where they own property and Konecki’s business is based, then he might be entitled to half of her earnings, lawyers say. 

The biggest case by far, however, is that of Amazon creator Jeff Bezos and his ex-wife, MacKenzie. As far as one can tell, the matter has been settled relatively amicably.

According to UK firm Succession Wealth, as many as 550 UK couples each with net financial wealth of £1 million ($1.28 million) or more, will divorce this year. It estimates that collectively they have around £1.91 billion of net wealth, or £3.48 million per couple. There is a lot at stake.

In these technological times with crypto-currencies, there are also new avenues for some warring couples to hide money. And the shifting fortunes of offshore financial centres and changing rules for trusts and other structures means that vehicles that once might have been used to hold wealth out of the clutches of a divorcee may not now be fit for purpose. (They may not have been fit for purposes in those senses in the first place.)

And just in case readers think they can avoid the topic, there’s Brexit. The UK’s departure (well, possible departure) from the European Union has an impact. 

Below are a number of cases to have hit the news pages recently, along with commentaries from lawyers about the implications. This is the first of a two-part feature gathering views on divorce cases. We welcome further feedback. Email tom.burroughes@wealthbriefing.com and Jackie.Bennion@clearviewpublishing.com

No-fault divorce
Toby Yerburgh, partner and head of the Family Team at Collyer Bristow
A few weeks ago, the UK government announced historic reforms to divorce laws, removing the need to assign fault for the end of the marriage and the right to contest a divorce. It follows a consultation paper last autumn which received more than 600 responses, the majority of which supported reform. What will this change mean in practice? Consider the scenario below. 

My client is an English banker in Frankfurt. His English wife has left him for her tennis coach and, despite his upset, for the sake of the children he was negotiating a financial agreement with her upon the basis of German law (as both parties intend to stay in Germany for the foreseeable future - Brexit willing!) His wife, however, has other ideas. She knows she will receive a more generous settlement in the English courts (as she will receive spousal maintenance at a higher level for longer and will look to share his pension in a way that is alien in Germany.) Unbeknownst to him, while they are negotiating in Germany, she therefore files a divorce petition in London (the so-called “divorce capital of the world”) which means that the court in England will seize jurisdiction under the Brussels II (revised) Regulations, as she is first in time to file. What, if anything, can my client do about this?

Well, at the moment, my client can defend the petition issued by his wife here and, if the allegations in the petition are entirely spurious (which he will say that they are), there is a realistic chance that he will be successful. If he is, he will be able to bring proceedings in Germany and the division of financial resources will be dealt with by the country in which both parties have chosen to make their lives. 

If the government’s new proposals on no-fault divorces are enacted, my client and others like him will have no opportunity of defending a petition for divorce brought in this jurisdiction, however fallacious the grounds may be and, in the scenario above, there would be no opportunity to return the matter to Germany. 

It might be thought that this is so rarefied an issue that it is unlikely to impact most people (less than 5 per cent of divorces are defended - and most of those settle before they go to court for determination), but no fault divorces do open the door to any married person wanting to take advantage of the English divorce jurisdiction whatever the circumstances of the case. For example, a wealthy UK-based individual, who has the benefit of a prenuptial agreement, will be able to petition for divorce just before the terms of the prenup require a substantial uplift in the required payment, irrespective of the fact that their spouse is entirely blameless and they are entirely at fault.

The proposed change in the law follows an outcry at the fact that a long-time but unhappily married British couple, Mr and Mrs Owens, found themselves in the Supreme Court as a result of Mrs Owens’ failure to come up with sufficiently strong grounds to persuade the lower courts that she should be allowed a divorce. The Supreme Court found that under the law as it currently stands Mrs Owens could not insist upon a divorce in such circumstances. This seems to have taken some observers by surprise (including many family lawyers) who had rather supposed that despite the very clear wording of the statute, couples in such situations were not going to be forced to remain married by the courts. This is even though the statute provides for a divorce after five years in such circumstances (which seems to suggest that this is exactly what parliament intended back in 1973 when the present version of the Matrimonial Causes Act was enacted.) 

So, will the law change? Well, we have in fact been here before with no fault divorces. The Conservative [Party]'s Family Law Act 1996 contained provision for blameless divorces after an information meeting. It was piloted, then scrapped by Labour as “unworkable” (for which read: too resource heavy and expensive). It remains to be seen whether the same fate will await the current proposed legislation.This is particularly likely to happen once those looking to support marriage as an institution start campaigning in earnest against it. One suspects that there are relatively few votes in making divorce easier these days.
 

Brexit
Julian Hawkhead, senior partner at Stowe Family Law and Holly Lamb, head of international, at the same firm.
The jurisdiction of England and Wales and particularly London has over recent years acquired the title of “divorce capital of the world.” A place where the wives of foreign oligarchs make a home for themselves and then bring their claims for divorce and financial awards following the breakdown of their marriage.  

EU law, known as Brussels II, establishes the basis for jurisdiction and requires a party to have a significant connection with a country to issue there, based on residence requirements (known as habitual residence) and/or the parties’ domicile. 

Brussels II also determines which country should take control of a case if parties issue competing proceedings in two different countries. In those circumstances, the court of the country in which the divorce was issued first shall be ‘first seised’ and the second country shall stay its proceedings, hence there is often a ‘forum race’ to secure the most financially advantageous jurisdiction.

The reasons for choosing England over other jurisdictions include:
-- The prospects of equally sharing in matrimonial property; 
-- Potentially lifelong maintenance for the financially dependent spouse;
-- All assets in the world are considered;  
-- Wide-ranging investigative powers to obtain full financial disclosure of resources both domestic and international;
-- An ability to see through corporate and trust structures to identify ownership and call upon such resources to achieve a financial award; and 
-- An overarching discretionary power to achieve a fair outcome that sees beyond overly restrictive or unfair premarital agreements.

Other jurisdictions adopt a more formulaic approach which could lead to less favourable, if not financially prejudicial, outcomes for the more financially vulnerable party. 

The recent case of Pierburg v Pierburg however put the brakes on internationally transient individuals claiming jurisdiction in England. In that case, Mrs Pierburg, a German national wanting to divorce her billionaire husband, issued her divorce petition in England before her husband issued his in Germany. 

In doing so she was first out of the blocks. However, her case fell at the hurdle of claiming habitual residence in England. Despite having friends in high places (one of her witnesses was the Countess of Chichester), she was unable to persuade the court that she had been habitually resident for a sufficient period or domiciled in England when she filed her divorce papers. 

This leaves Mrs Pierburg vulnerable. The reason for this litigation was that Mr Pierburg prefers the German jurisdiction where, due to the existence of a prenup and a strict interpretation by the German courts of such a contract, Mrs Pierburg is likely to receive very little by way of a financial award. 

In contrast, the English courts would be very unlikely to find such an “agreement” fair and would provide a more generous settlement that reflected the length of the marriage and the high standard of living enjoyed by the parties. 

Brexit brings uncertainties on many levels and it is not currently known whether there will be a hard or soft Brexit. Current thinking is that a hard Brexit is unlikely. A hard Brexit would likely mean an end to our legal arrangements with Europe, including the Brussels treaties.

In that case and with a transitional period, it is likely that the current regulations will continue to apply - at least for a couple more years. 

Beyond that transitional period, however, we move to the same arrangement that we have with the rest of the world, namely an assessment of which is the most appropriate forum when there is more than one competing jurisdiction. 

It is arguable that this approach could enable parties to be more willing to embrace non-litigious routes including international collaborative law, mediation or arbitration. This will help couples avoid spending large sums of money and time disputing jurisdiction instead of racing off to their chosen court to issue.

The Bezos divorce
Fraser Wright, senior partner, Quanta Capital
While it is generally accepted that the higher the net worth of one or both of divorcing spouses, the more litigious and drawn out the divorce proceedings are likely to be, this was surprisingly not the case in the Bezos separation. Both parties in this case were involved in the very early days of Amazon, so it would have been very difficult for either side to argue that the other was not entitled to a significant settlement.

Despite the uniqueness of this case, it doesn’t mean that more divorcing couples can achieve a fair and quick settlement. This can be easier to achieve if the parties seek legal and financial advise at the very start of the process. This can be crucial in keeping costs in order and having a realistic expectation of settlement, it can also aid what is usually a stressful and emotive time.

For the financially dominant party it is likely that they will instruct the best lawyers they can afford to protect their wealth and interests. So where does this leave the financially dependent party? Legal Aid has all but disappeared from Private Family Law since the reforms of 2012, and lawyers offering deferred fee arrangements or “Sears Tooth” agreements have become increasingly rare as they no longer have the cashflow to support such arrangements.

The newest and increasingly common option for the financially dependent spouse is a “divorce loan” or a “matrimonial finance” loan. These are loans from specialist providers solely intended for covering legal fees and disbursements in divorce proceedings. They generally offer a facility that is sufficient to cover the fees until settlement is achieved, the most popular products available on the market offer the total amount over an agreed drawdown schedule, with interest only being charged on the drawn down amounts. The loan is typically only repaid at the end of the financial proceedings when the settlement amount has been awarded.

The benefits to these clients is immediately apparent but the key benefit is being able to instruct a suitably qualified and reputable law firm that will create symmetry in the proceedings and could, as in the case of Bezos, achieve a quick and fair settlement without making proceedings unnecessarily contentious and prolonged. 

Combined with the upcoming “no-fault divorce” reforms there could be a real possibility that the divorce process could actually be less acrimonious and remove a lot of the stress and frustrations that can lead to a more aggressive approach to litigation.

Independent financial advisors are very well placed to provide guidance on this type of facility, as it can be done very early on in the divorce process and should be done in tandem with the initial discussions with lawyers to ensure that legal fees do not start to mount up before affordability has been discussed.