London’s reputation as a divorce capital could be tested by legal changes

There seems to be a slew of amazing divorce settlements in London which has cemented the city’s reputation as the divorce capital of the world, especially for the wealthy.

And in first place came the amount of 554 million pounds sterling that Sheikh Mohammed bin Rashid Al Maktoum, the billionaire ruler of Dubai, ordered to spend. He paid his ex-wife, Princess Hayain December 2021.

Not far from that was the £454m that Russian oligarch Farkhad Akhmedov was asked to hand over to his ex-wife Tatyana Akhmedova. And in third place, Kirsty Bertarelli, former Miss UK and writer of a successful song, won a prize of 350 million pounds sterling, after her separation from her husband, the Swiss-Italian billionaire Ernesto Bertarelli.

These settlements are exceptional but not surprising to legal scholars: over the decades, London has gained momentum as the venue for divorce, especially for the financially weaker partners of wealthy breadwinners.

But that may now change after the UK government announced earlier this year that the Law Commission would review the way a couple’s finances are handled in a divorce.

“While the courts have done a good job of keeping up with the times, the rules are 50 years old and each judge still has a great deal of discretion as to how assets are divided,” says Renato Lappi, partner at Hughes Fowler Carruthers. London.

While the Law Commission, the independent agency that reviews legislation, deliberates privately, lawyers say it is likely to take a closer look at the preferential treatment accorded to the wife of the main breadwinner — who is often, but not always, a non-working spouse.

The commissioners are also expected to give weight to the growing importance of prenuptial and postnuptial agreements, which are increasingly used by wealthier partners to limit potential future claims from the less affluent spouse. And with public concern growing about litigation costs, divorce attorney bills are likely to come under increased scrutiny.

The English (and Welsh) legal system is particularly attractive to the financially weaker spouses because it focuses on dividing equally the combined marital wealth of the divorcing spouses, even if one of the partners is the money lord.

This approach differs from Scotland and other European countries where the prize money is much less generous and maintenance is often awarded for only a limited number of years, with the expectation that both parties become financially independent.

These discrepancies often lead to a “race” to file for divorce, with the financially weaker husband – usually the wife – looking to London, while the main breadwinner heading elsewhere.

“When the marriage of an international couple falls apart, there is likely to be a rush to secure jurisdiction in the form most appropriate to that spouse,” says Jacqueline Julian, solicitor and solicitor at 5 St Andrews Hill. “The Russian husband will try to secure jurisdiction in Russia, while the Russian wife wants to secure jurisdiction.” In England this is known as “forum shopping”.

While London Divorce Court rulings often draw on decades of precedent and important legislation such as the Matrimonial Causes Act 1973, husband-friendly divorce rulings are of more recent origin. Julian says the appeal of England and Wales in this region only accelerated after a case called Wyatt v Wyatt, in 2000, changed the law and allowed wives to claim 50 per cent of marital assets.

“Before that, wives were limited to asking for their reasonable needs only,” she says. “This ushered in an era of increasingly big money issues with huge payouts to wives as huge sums of money were made on marriage.”

Deborah Geoff, partner and head of family at London-based law firm Simkins, says the driving force has been spousal equality: “Whites for whites have overcome this discriminatory approach in England, but it still exists in some other jurisdictions around the world.” “.

However, critics of the current 50-50 approach say it is now outdated. “It’s hard to think of any other rules that were so recent and relevant to our ancestors that we would still consider relevant and applicable today,” says Nicky Hunter, partner at Stowe Family Law.

She says society has undergone dramatic changes over the past few decades: “A large number of women now go to university and work full time, and couples tend to marry and have children at an older age.”

In today’s world, women are becoming more financially independent and dual-income couples are the norm, so there is less focus on women needing support from their ex-husbands for the rest of their lives.

The new legislation could narrow the definition of marital assets and exclude certain assets from any division. Jennifer Dixon, partner in Withers’ International Family Law team, says that Scotland, for example, defines marital property as all assets acquired during marriage but before a relevant date, plus any home used as a family home, but with some exceptions including That is assets before marriage, inheritance and gifts from third parties.

But this is a sensitive area. As Dixon puts it: “Stepping away from the starting point of a 50/50 split of marital assets is likely to be considered discrimination.”

The law as it currently stands is very flexible with regard to how spouses divide their finances. Emily Brand, Head of Family Law at Boodle Hatfield, says: “The wide range of variables—financial circumstances, age, children and cultural differences, to name a few—means that the way couples handle their finances is as unique as any. relationship.

She says this difference is one of the strengths of current divorce legislation and explains: “It offers customized and flexible solutions to the unique and complex circumstances that inevitably arise when two people free themselves from their married lives.”

However, this flexibility can give rise to uncertainty because some aspects are open to debate where the factual matrix of the case to be decided does not “fit” the facts of a previous case with similar but different circumstances.

Moreover, the outcome depends on the judge’s discretion. “Each judge is a human being with their own personal views of what is fair and reasonable, and is often burdened with limited court time,” says Hunter.

Although people can appeal the decision, many parties will not have the desire or financial resources to risk an appeal. Most attorneys will warn their clients at the outset of their case of the litigation risks of an uncertain and potentially unfavorable outcome before proceeding with an appeal.

“It can be very difficult to challenge an appeal decision and overturn an unfavorable decision,” Hunter says. “Unless it can be shown that the judge made a misapplication of the law or that the decision was unfair because of a serious procedural or other irregularity.”

Brexit has made English courts less attractive

Not every wealthy international couple facing difficulties in their marriage can file for divorce in London. In order for an individual to file for divorce in the capital, they must be able to prove their connection to the UK.

Patricia Astley, Managing Director at Julius Baer International, says: “International families often travel through the UK or own property in the UK. Wealthy divorces include property owned in the UK, which allows both parties to initiate divorce proceedings.

Also, just because people are able to secure London as their preferred jurisdiction, doesn’t mean it always works out for the best. If assets are held overseas, consideration must be given to the ability to enforce any divorce settlement.

Brexit also created an additional layer of complexity. The EU legislation means that EU citizens can choose any EU jurisdiction and file for divorce if they get there first. While England and Wales (like Scotland and Northern Ireland) are no longer bound by these rules, the countries of the European Union are.

“Brexit has already made English courts less attractive to international wealthy couples than any of the proposed reforms, because there is now a very real risk that English judgments will not be recognized or enforced,” says James Rippey, partner at law firm Charles Russell Speeches. Abroad, enforcement against foreign assets is often crucial in wealthy cases if the court’s decision is to have any hope of actual enforcement.

Many of the cases resulted in significant legal costs

Another driver of change is High legal costs – which was so striking that at times it was attacked even by the judges.

“Although these cases are in the minority and do make headlines, in general they are only cases involving wealthy parties and complex assets that are heard at the higher levels of the family court system,” says Hunter of Stowe.

When a judge heard, in 2021, that a Russian businesswoman and her Greek ex-husband had racked up £5.4m lawyers’ bills in their divorce battle at London’s High Court with “enormous sums of future costs”, he described the sum as “appalling”. Justice Mostin said the legal expenses stemming from the dispute between Russian retail executive Alla Rakshina and her ex-husband Lazarus Xanthopoulos “were difficult to accept even in a conflict between the wealthy.”

“In my opinion, the Minister of Finance should consider whether it is possible to take legal measures that limit the size and rate of costs accrued in these cases,” the judge added.

Legal guidelines need reform

High-ranking figures support calls for reform. Conservative Baroness Shackleton of Belgravia, who has represented royals and celebrities including Paul McCartney, told parliament earlier this year that she and her legal colleagues were “making a fortune on controversy” because the guidelines are 50 years old and in need of reform.

Baroness Deitch, a member of the House of Lords, is also calling for the change. She noted that the law “lags 50 years behind almost every other country in the Western world.”

Under the bill, pre- and post-nuptial agreements will be binding provided certain conditions are met. The marital property (basically all property acquired after the parties’ marriage, except for gifts and inheritance) will be divided equally, and spousal maintenance will be limited to five years unless the husband is in serious financial hardship.

However, even if the rules change, lawyers say they expect the financially weaker spouse to still choose London as a destination for their divorce. In Withers, Dixon argues that with the English court increasingly willing to respect prenuptial and postnuptial agreements, and moving away from offering joint prizes to sustain life as a “meal ticket for life”, London is not quite as generous as it once was. “But in my experience, it is rare for another jurisdiction to be more generous to a financially weaker spouse.”

She adds: “England also has strict disclosure obligations, so if you are concerned about your spouse not disclosing assets, England can feel like a safe place to be.”

Others agree: “Even if there is a reformation, London remains a wealthy, world-class and cosmopolitan city, attracting people and money from all over the world. Some of these people are going to marry and divorce, and I suspect London’s divorce courts She will be busy for a long time to come.”

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