Warring across waters

Thursday October 5, 2006

Mark King

Breaking up may be hard to do, but for married expats it can be fraught with danger. Where couples choose to divorce can have a major impact on both parties? financial health, so getting it right is crucial. Despite advances in gender equality in recent decades, the partner with the least assets remains the wife in most divorce cases, so do not be surprised to hear lawyers talk mainly of the female of the species as the potential victim.

In expat circles, it is even more likely that the wife will have fewer assets than the husband as women often move abroad when their husband?s work takes them there. Marilyn Stowe, a family law expert at Grahame Stowe Bateson, believes many women are even coerced into moving abroad by conniving husbands intent on protecting their wealth. She says: ?It is not unknown for moves abroad to be the central component of a carefully planned campaign to divorce in the most financially advantageous way possible and start a new life with the other party in an extra-marital affair.

?All too often, such affairs only come to light when the move abroad has been made and it is all too late to turn back. Usually, but not always, it is the husband who engages in such fiendish plotting ? no doubt because it is husbands who stand to lose the most from divorce under UK law. Sometimes the extent of the hard-heartedness that has gone into planning and executing the plot is genuinely shocking. The wife generally has no idea her husband has a mistress and even less that all ? or at least most ? of their English assets have been ?sorted? and put beyond her reach in some tantalizing tax haven. She had foolishly trusted her husband to work it all out.?

In the EU, the Brussels II Convention, introduced in March 2001, has harmonised the rules regulating divorce jurisdiction across all EU member countries except Denmark. Brussels II states that wherever divorce proceedings are first issued is where the divorce will take place. Clearly, expats living abroad may fulfil the criteria needed to file in either country (see below), but one of the main reasons concerns residency and domicile: for example, if they are resident in France but remain domiciled in England.

Residency relates to the country in which you are living for income tax and capital gains tax purposes and is generally determined by the length of time you have spent there. HM Revenue & Customs says you are regarded as resident in the UK if you spend more than 183 days (six months) in the country in the tax year ? the six month rule also applies to most EU states.

Domicile denotes a more permanent association with a country and is generally determined at birth and will remain that country unless you resettle with a firm intention to live in a different country for the rest of your life. ?If you never lose your UK domicile, as long as you fulfil residency requirements abroad, you can file for divorce there,? says Stowe.

To change domicile, you generally must sever all ties with the UK. So the Revenue would probably consider you still to be UK-domiciled if you had moved to Spain but returned to Britain to visit friends or family.

Anne Thomas of law firm Boodle Hatfield says: ?The problems come when you ?make the grade? in two countries. It can lead to a petition race, with each party trying to file for divorce in the most advantageous country before the other. The person who wins is generally in a better position, so the simple advice is to file for divorce first ? it?s the paramount consideration.?

Charlotte Bradley of lawyers Kingsley Napley agrees: ?We call it the ?Eurostar divorce?, because of the race to issue proceedings in England if you are the wife, or in France if you are the husband. This is because the person with the least assets, usually the wife, is better off issuing in England and Wales, because English and Welsh law (though it is not the same in Scotland) is much more favourable for them. This is why England is known as the ?wives? jurisdiction.??

Another family law expert, Katharine Shaw of Wilsons Law adds: ?England or Wales is wonderful for the wife or partner with the least assets. It?s the best jurisdiction in Europe and possibly the world.?

This is because in England and Wales maintenance is open-ended, meaning it must continue to be paid until the person dies or their financial circumstances change. In Scotland there is in most cases a three-year maximum and in most other EU states you have to show the court why it is that you need the ongoing money. ?Essentially, in mainland Europe they believe that you should get back to standing on your own after a divorce as quickly as possible,? states Thomas.

?If you are a wife living in the South of France, you will not be entitled to lifetime maintenance, but you would if the divorce was held in England,? says Marilyn Stowe. ?Clearly, if this was the case then the husband would use a French lawyer and the wife should get on the first plane to the UK. The first out of the starting blocks wins, though in the example above the wife could challenge the French court, but it would be expensive and the proceedings would be conducted in French.

?Most expats never become truly French, so the wife would struggle and be at a huge disadvantage. We had a case of an English couple living in Spain and the wife flew to us and we initiated divorce proceedings straight away. It was the best thing she could have done. Having a tax-free income for life is such an asset and to lose it by not acting quickly enough is frightening.?

Expat wives should remember that prenuptial agreements (known as prenups) are not legally binding in England and Wales, which is another reason why it remains a safe haven for the wealthier partner in a divorce because they are designed to protect their wealth. Though prenups are not recognised in England and Wales, the judge may take it on board when making a decision. In a very short marriage, the judge may well allow the prenup to stand, but in a longer marriage where the passage of time means the contents of the prenup are considerably out of date, the judge will almost always discount it.

?I had a case recently of an American guy who had married a British woman and was now worth £90 million,? reveals Thomas. ?They had signed a prenuptial agreement in the US but had been in the UK for a number of years. The husband persuaded the wife to spend a year in France then, after 12 months, issued divorce proceedings in France where the prenup was upheld. Because the judge upheld the contents the wife only got £1 million from that guy?s £90 million. Prenups are a big reason for getting your divorce petitions in at the right time and in the right place.?

Disclosure of assets is also crucial. English divorce law requires a full and frank disclosure of a person?s financial position under oath. If they lie, they could be convicted of perjury. The husband may be unwilling to contemplate such expense, and so decide to seek a settlement under the laxer regimes of other countries. In Italy, for example, individuals give disclosure merely ?on their honour?. Assets are much harder to trace without the full force of court orders to oblige disclosure. Remember, across the EU, different procedures, different laws and different levels of disclosure apply. It is, without doubt, a legal maze and minefield rolled into one.

The divorce situation is different in the US and other non-EU countries, where you generally have a court hearing to decide where to hear a dispute. If a man starts proceedings in the US, but his English wife files in England, for example, there would be a court hearing to decide which country to go ahead in. ?If there were lots of witnesses in the UK and children were at school in the UK it?s likely that the divorce would be heard here. But it also depends where the evidence and experts are located,? Thomas explains.

Whatever your situation, you are not alone. A failing marriage usually includes one party who is in shock, deeply traumatized by what is happening, unwilling and unable to face the future. ?That initial period is precisely the one in which they must act, and act decisively. Delays could result in a disastrous outcome,? warns Stowe. ?Noone facing the devastating loss of a much-loved and trusted spouse wants to pull the plug on the marriage until its end is beyond doubt. But by then, when realization finally and cruelly dawns, it could be much too late.?

Experienced divorce lawyers are all familiar with cross-border cases, and the complexities which make these divorces so difficult. Stowe says that if it happens to you, you should find that all good divorce lawyers will be anxious not to let you leave their office without at least agreeing to issue a petition, but don?t worry. ?You can always withdraw the petition later if you wish but please, protect yourself. No-one else will.?

How marriage can turn sour for expat wives

Marilyn Stowe says: ?Let?s take Spain as a typical example. As Spain is a member of the EU, it is possible, at least in theory, to issue proceedings in both England and Spain. The relevant law is complex and depends on whether the parties are ?domiciled? (legally resident) in England or one of them can demonstrate a form of habitual residence in England or Spain.

In our example, if the husband registered in Spain as non-resident to obtain tax exemptions, he cannot hope to prove to an English court that he is now domiciled in Spain. So the English court, if it is petitioned first by the wife, will proceed with the case and she will succeed. The husband?s chances of success would have been greater if he had been more honest in the first place and had registered as a Spanish resident and tax-payer.

However, if the non-tax-paying husband issues his petition first in Spain, the Spanish court could well consider his application favourably as an actual, if not fully legal, resident of Spain, and if that happens then his finances will probably remain forever shrouded in mystery. He will be slow to progress his divorce and the hapless wife will be at his mercy.

Of course, there are some remedies available under Spanish and other European laws ? and ironically, they can include attempts by a Spanish court to apply English law if two English nationals are involved. But there are some major differences in European law - principally the ?disclosure burden? (the legal obligation to disclose financial assets), which is much lower in some countries.?

Brussels II: When you can file for divorce in more than one EU country

• You both live in that country

• It is the last country in which you both lived as a couple and one of you still lives there

• The recipient of the divorce petition (usually called ?the Respondent?) lives in that country

• The person initiating the divorce (called ?the Petitioner?) lives in that country or has lived there for at least a year before the divorce petition

• The Petitioner has lived in that country for at least six months before the divorce petition and the Petitioner is a national of that country

• You are both nationals of that country or (for the United Kingdom and Eire only) you are both domiciled in the United Kingdom

If you have an inkling that your partner has gone off you or the marriage is failing, call a lawyer straight away. It?s vital if you?re English that you call an English lawyer rather than a local one. You could always hide the marriage certificate ? it might buy you some time.

Contacts:

Boodle Hatfield
www.boodlehatfield.com

Grahame Stowe Bateson
www.grahame-stowe-bateson.co.uk

Kingsley Napley
www.kingsleynapley.co.uk

Wilsons Law
www.wilsonslaw.com

 

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