LONDON (FIRMS): An Introduction to Private Wealth Law

Family Law Matters in CIS Jurisdictions  

Introduction 

The jurisdiction of England and Wales can, in some cases, provide an opportunity to re-examine the results of the financial proceedings obtained in courts in another country, which may be specifically relevant to CIS countries.

Divorce-related matters can usually be settled in CIS jurisdictions both relatively quickly and at a moderate cost. Yet, local courts do not usually decide on the distribution of assets outside the jurisdiction. All this makes a local court in a CIS country a sensible choice for resolving local uncomplicated family matters. At the same time, legal systems in CIS countries do not always provide the best results for international families.

We have been receiving an increasing number of enquiries from international private client lawyers on specific procedural and substantive issues under domestic laws in cross-border family matters. These often relate to the legal status of assets in trusts or reviewing opponents’ statements under domestic laws in support of English litigation. A concise expert opinion under respective law would often help overturn an argument made by the other party as to, for example, the title to property or validity of a transfer, based on an incorrect, if not twisted, interpretation of domestic law. This is equally relevant to divorce and inheritance cases.

In this overview, however, we would like to focus on nuptial agreements, as this reveals some of the fundamental differences between English and domestic legal systems.

A “marriage contract” 

In case of a cross-border family law matter involving a CIS jurisdiction, it is necessary to ascertain from the outset if there is a nuptial agreement in place and where it was made. The legal effects will be considerably different depending on whether it is governed by English or domestic law.

While English law provides for different types of agreements including pre-nuptial, post-nuptial and cohabitation agreements, the laws of CIS countries (for example, Russia, which will be referred to as domestic jurisdiction in this overview) only provide for a “marriage contract”.

A marriage contract can be concluded at any time before or after the registration of marriage. In many cases, spouses will conclude the contract on their marriage date. In future, this could lead to a situation where the family will have relocated and settled outside the CIS, however, there will still be a valid domestic marriage contract in place that may apply to their domestic assets.

Currently, there is also a trend for spouses to consider a marriage contract as part of settling their differences resulting from a long married life. A marriage contract could serve as an instrument in the overall conflict management strategy aimed to prevent divorce.

Regardless of whether there is already a domestic marriage contract in place or spouses only consider entering into one, it is important to distinguish the scope and enforceability under English and domestic laws.

Legally binding by law  

Unlike nuptial agreements under English law, domestic marriage contracts are legally binding by law, and a domestic court in divorce proceedings will, generally, enforce a marriage contract if it is duly signed by the parties and meets the formal validity requirements.

There may be certain exceptions, for example, if a marriage contract indirectly purports to override mandatory minimum maintenance provisions for a child or a disabled spouse required under domestic law. In this case, a domestic court could review the terms of the marriage contract and order additional maintenance required by law. Please note that maintenance required by law is a statutory minimum and does not take into account previous lifestyle and actual needs.

Financial disclosure and fairness 

In contrast with the principle of full financial disclosure under English law, there is no requirement under domestic law for the parties to make any enquires about each other’s financial circumstances or have any knowledge about each other’s financial affairs. The parties are not required to disclose their property, liabilities and sources of income and they do not have to conduct a detailed assessment of the fairness of the terms of a marriage contract.

A domestic marriage contract will usually define, in principle, which categories of assets shall be each spouse’s separate property. For example, it may simply state that all real property and (or) all shares acquired by a spouse during marriage shall remain that spouse’s separate property.

As a result, domestic marriage contracts generally lack a detailed description of assets and are often limited to just a few pages. In practice, a marriage contract would often be concluded with a view to protect the financial interests of the wealthier spouse, providing for practically all matrimonial property to be that spouse’s separate property. Consequently, the legal title will only vest in one spouse who may dispose of the property throughout marriage without the other spouse’s consent and retain the property upon divorce.

In benefiting one spouse, a domestic marriage contract would often put a less financially strong party (eg, a non-working spouse) in a very disadvantageous position, effectively depriving them of almost any recourse to matrimonial property.

By law, a domestic court may invalidate a marriage contract in full or in part upon an application by a spouse if the terms of the marriage contract place that spouse in an “extremely unfavourable position”. The threshold, however, is very high. Besides, in practice, the application on this basis can be undermined by including specific language in a marriage contract confirming the spouses’ agreement that the marriage contract provides for “fair and mutually beneficial conditions” and “does not prejudice either party”.

In practice, cases of invalidation of domestic marriage contracts are exceedingly rare. A domestic court is likely to enforce them, at least in respect of the domestic assets.

Enforceability issues 

As it follows from the above, domestic marriage contracts are largely unenforceable in England and Wales and tend to be used in respect of local property only.

At the same time, to the extent that there are any valuable domestic assets, it is recommended to consider concluding a domestic marriage contract.

This is because spouses who only have a foreign law nuptial agreement are likely to face difficulties seeking to enforce it locally.

First, there is a formal validity requirement that a nuptial agreement shall be notarised. The scope of notarisation requirement is complex, particularly, a notary is required to verify that the agreement complies with domestic law. This may sometimes be interpreted as a requirement of a nuptial agreement to be certified by a domestic notary only. Whether or not a marriage contract notarised by a foreign notary is enforceable depends on the law of a specific CIS country and should be assessed on a case-by-case basis.

Another issue that may arise when enforcing a foreign nuptial agreement in a domestic court is overriding imperative norms and public policy exceptions, particularly, in cases involving cohabitation, civil partnership or same-sex couples. This is equally relevant to inheritance proceedings.

Conclusion  

Nuptial agreements serve as a useful example of the specifics of family law matters in CIS jurisdictions in comparison with those of England and Wales. As noted above, similar issues arise in cross-border inheritance cases and other private client matters. Expert law advice is often crucial for the success of a client’s case.