For marketing teams at the family bar it’s been a tough wait but at last the Law Commission has issued its long-trailed proposals on matrimonial property laws.
Private practice teams across London have been lightening quick to respond to the report, published today (27 February), which proposes new legislation to take out the uncertainty surrounding the enforcement of pre-nuptial agreements, an issue that has dogged divorce cases of wealthy couples, setting London at a disadvantage to the majority of countries in Europe.
Following the 2010 Supreme Court ruling Radmacher v Granatino, the UK courts already recognise prenuptial agreements as enforceable in some circumstances. However, the Law Commission’s proposals would codify and clarify the position of such contracts, calling for the introduction of a standard formula to resolve disputes, and stringent qualifying tests.
An agreement will ‘qualify’ if it meets the usual contractual criteria (as Irwin Mitchell succinctly puts it, ‘no fraud, undue influence, etc’); the agreement is signed as a deed no less than 28 days before the wedding; and contains a statement that the couple understand that the agreement is a qualifying nuptial agreement that will largely remove the court’s discretion to make financial orders.
Provided a pre-nup qualifies and provides for the needs of the parties and any children, the court will have little discretion to make an order that differs from the terms of the agreement.
According to Charles Russell family partner Sarah Anticoni, the impact of the proposals would be far-reaching. For starters, it would reverse the decision of many wealthy couples not to become ‘habitual residents’ of the UK by virtue of working here, thereby establishing the UK as the binding jurisdiction for their divorce.
Anticoni says: ‘For jurisdictions where pre-marital agreements are binding it is a great shock to find the agreement doesn’t work here. Sometimes people decide not to come here because they don’t want to put themselves at risk.’
The proposals are also expected to lead to pre-nuptial agreements widening out from the very wealthy to the ‘professional classes,’ such as those with a mortgage-free home, second homes or who are likely to inherit large sums of money.
Anticoni uses a comparison with the insurance industry, commenting that people are used to paying insurance up front, but you need some assurances that it is going to work.
But while the pool of people turning to lawyers may widen, the high profile, high value disputes may decrease, as Irwin Mitchell’s Alison Hawes comments: ‘This report provides clarity after years of uncertainty and will turn case law into law, as well as changing the emphasis so that the court has no power to interfere if the agreement “qualifies”.
‘This long overdue decision to make pre-nups binding under the right circumstances will bring clarity to how these agreements are dealt with in the courts and provide couples with more certainty over the whole process.’
For London’s status as arguably the world’s biggest hub for resolving wealthy divorce cases, the proposals would end one of the strongest incentives for wealthy spouses to avoid the UK courts. Conversely, this boost to London’s family bar may be offset by the loss of ‘divorce tourism’ where the poorer spouse fights to bring marginal cases before the UK courts. But if certainty is bad for lawyers in the long-term they can at least litigate the points out for a good five years.
As Charles Russell’s Anticoni concludes: ‘Today may also start an extended period of research and consultation which could, if swiftly implemented, have far reaching consequences for couples divorcing in England and Wales. London might become not just the divorce capital of the world but its epicentre.’