INTERNATIONAL ISSUES FOR PRE-NUPTIAL AGREEMENTS AND MARRIAGE CONTRACTS: THE ENGLISH PERSPECTIVE Mark Harper [email protected] 16 Old Bailey www.withersworldwide.com London EC4M 7EG England ________ Paper submitted to IAML Cape Town Annual Meeting, September 2008 ________ Rules regarding recognition of foreign pre-nuptials and marriage contracts 1. The starting point is that even pre-nuptials under English law are not binding or recognised as such; an agreement between spouses cannot ‘oust the jurisdiction’ of the court. However, at least our Law Commission has announced their intention to publish a draft Bill by 2012, proposing a change in the law. 2. Under the present law in England, for any pre-nuptial agreement, whether under English law or foreign law to carry weight with the court, four requirements have to be satisfied: 2.1 full financial disclosure; 2.2 independent legal advice in all relevant jurisdictions; 2.3 the agreement should be signed at least 21 days prior to the wedding – case law does not require this but it is the best practice; 2.4 the most difficult of all, the terms of the agreement have to be regarded as fair in the eyes of the judge as at the date of the divorce. 3. Many foreign law pre-nuptials may well contain financial provision which, in the eyes of an English judge, depending on the facts at the time, would be regarded as unfair, and so carry no weight with a judge in the exercise of their discretion, taking into account all the relevant statutory factors. document number: 90000/1-EU-5169155/4 4. This is a particular problem with marriage contracts, since these are an alien concept under English law. A marriage contract usually elects a particular form of matrimonial property regime which governs division of assets in the event of divorce. Such contracts exist throughout most continental Europe, Russia, Latin America, South Africa and elsewhere. In most cases, provision in such a contract as to what claims for maintenance can be made is contrary to public policy and so unenforceable. 5. We have had cases in which pre-nuptials entered into abroad have carried significant weight on divorce, such as in the 2002 case of M v M1, in which the existence of a Canadian pre-nuptial agreement, signed only a few days before the wedding, helped to significantly reduce the wife’s entitlement on divorce in England. 6. The existence of a foreign pre-nuptial, especially one electing a foreign jurisdiction for divorce and/or foreign law to apply, may help to block a divorce in England. Under English law in forum disputes involving countries outside the EU, it should be possible to run an ‘inconvenient forum’ argument and seek to stay/block the English divorce in favour of more appropriate foreign proceedings. The New York law prenuptial prepared in the 1997 case of S v S2 was successful in blocking an English divorce. 7. More recently, in the 2007 cases of both Ella3 and Bentinck4, the existence of Israeli and Swiss marriage contracts respectively helped to block the English divorce. 8. The only example in which any part of a foreign law pre-nuptial may be binding in England, is if an election is made under Article 23 of the Brussels I Regulation, electing jurisdiction for maintenance claims. Such a ‘prorogation of jurisdiction’ is binding, but as yet, in England largely untested in practice or in case law. 9. The EU draft Regulation known as Rome III (to which the UK did not opt in) would have enabled a binding choice of divorce jurisdiction as well as a binding choice as to what law would be applied to the divorce itself. Since unanimity has been impossible 1 [2002] 1 FLR 654 2 [1997] 1 WLR 1200 3 [2007] 2 FLR 35 4 [2007] I.L.A. 32 document number: 90000/1-EU-5169155/4 2 to achieve, Rome III in its present form will not pass into law, but there remains the possibility of a smaller number of EU Member States choosing to adopt a modified form of Rome III. In what circumstances, if any, would the English court apply a foreign law on issues to do with pre-nuptials and marriage contracts? 10. Although other areas of English law routinely apply foreign law, the basic rule is that on divorce, only English law is ever applied. This is irrespective of whether there is a foreign law marriage contract or pre-nuptial even if both spouses hold the same foreign nationality. 11. There have been examples in which the existence of either foreign law, or a foreign law agreement has carried some weight. In the 2002 case of Otobo5, the Court of Appeal held that in a divorce in England between two Nigerians, it was appropriate to take into account ‘Nigerian factors’, namely that in Nigeria, the wife would receive a much smaller financial award. 12. In the 2004 case of A v T6, Baron J took into account the terms of an Iranian marriage contract, on divorce in England in assessing the amount to be paid to the wife. 13. In the unreported case of C v C, again Baron J took into account the existence of a Spanish marriage contract electing separate property which was entered into by two Spanish nationals. She held that it meant that the wife was entitled to the very bottom of the bracket in terms of what was fair under English law. 14. Although other English Fellows may disagree, I believe that there is a growing trend amongst many members of the judiciary in favour of pre-nups. Therefore, especially in a short marriage case, or involving a second marriage, for example an Italian marriage contract entered into by two Italian nationals, who were married in Italy, spent time living there and only more recently moved to England, may carry very significant weight on divorce in England. 5 [2003] 1 FLR 192 6 [2004] 1 FLR 977 document number: 90000/1-EU-5169155/4 3 15. In the 2007 Court of Appeal decision of Crossley7, the couple had entered into an English pre-nuptial stating that on divorce they would make no claims against each other. Both had been divorced before (the wife three times), the wife having assets of £18m and the husband £45m. Lord Justice Thorpe said – “I would classify, in the circumstances of this case, the contract into which the parties entered in December 2005 as in many respects akin to a marital property regime into which parties enter in civil law jurisdictions in order to provide for the property consequences of a possible future divorce. It can be categorised as something akin to a contract for the separation of goods within the French legal system. It does seem to me that the role of contractual dealing, the opportunity for the autonomy of the parties, is becoming increasingly important.” 16. As a result in effect the wife was held to the terms of the pre-nuptial. Drafting and practical issues 17. Very real difficulties remain in achieving satisfactory Anglo-European/Latin American solutions involving both a pre-nuptial agreement and a marriage contract. Many English judges, (and English divorce lawyers) would regard a separate property regime, preventing any claims for capital on divorce, as fundamentally unfair and even grotesque. In contrast, an Anglo-US style pre-nuptial, which provides as to what payment should be made regarding maintenance on divorce, may be in whole or in part, contrary to public policy in continental Europe. 18. Trying to achieve the protection that the wealthier spouse wants, and the security that the less well-off spouse also wants, can be costly, time consuming and emotionally draining. In substantial cases, it may be possible to set up a trust, funded by the husband prior to marriage which would pay to the wife in the event of divorce. 19. The most effective use of foreign pre-nuptials or marriage contracts is to try to block a divorce in England. Recitals in the pre-nuptial may record how close the couple’s connections are with another country, possibly their home country. 7 [2008] 1 FLR 1467 document number: 90000/1-EU-5169155/4 4 20. In the past, many people have said that in Anglo-European cases, two agreements are necessary, a marriage contract and a pre-nuptial agreement. There may be no alternative, but difficulties will always remain where the clauses in each are somewhat different or inconsistent. Therefore, it is usually better to have one agreement if possible. 21. Choice of jurisdiction and governing law again may help to prevent divorce in England. However, given that pre-nuptials are not binding at present under English law, it could be dangerous to elect that English law is the governing law of any agreement. As explained above, an election as to jurisdiction for maintenance claims will be binding within the EU and in Switzerland, Norway and Iceland (under the Lugano Convention). 22. Of course choice of divorce jurisdiction may be of no use if at the time of the divorce that country does not retain jurisdiction for divorce. Moreover such a choice may be ineffective if a period of separation is required before being able to file for divorce (Australia – one year; Italy – three years) and so it would be impossible to file for divorce in the race to file first. document number: 90000/1-EU-5169155/4 5