Is this the last Christmas?
There remains a huge amount of uncertainty about the UK’s future legal relationship with the EU. Not only will the New Year decide the fate of the UK’s relationship with EU, it is also a time of reflection for individuals in respect of relationships and families which the politics that may now influence. The consequence of Brexit on relationship breakdown and how matrimonial assets are shared cannot be understated.
As we all know, divorces can be costly for a number of different reasons. The intention of this article is to walk you through some of the key parts of divorce that affect your personal finances and, more importantly, how these could change as a result of Brexit.
Brussels II Regulation
The key piece of legislation in the area of cross-border divorce and children matters is Brussels II(a) (Regulation 2201/2003). In dealing with jurisdictional issues relating to divorce and children matters, the Regulation uses habitual residence as a key factor. When there are competing jurisdictions, the court where proceedings are first begun can seize jurisdiction in accordance with the Regulation. There are advantages with this Regulation in providing certainty about jurisdictional issues, creating a system where enforcement of court orders is straightforward, promoting cooperation between Central Authorities (government agencies assisting in linking foreign lawyers and courts) in Member States and providing protective interim measures where there are disputes. If Brussels II(a), were to fall away without adequate replacement, this could create a vacuum of legal uncertainty that could adversely affect children, families and how assets are treated in cross-border disputes.
“Forum Shopping” is the term used to describe the period of time where people consider the countries where they could commence legal proceedings and deciding which favors them. In the context of divorce/dissolution, with people having connections to multiple countries there may be a range of options as to where proceedings can start. If there are forum options, there may be a race for separated spouses/civil partners to consider these and then commence proceedings. In an increasingly mobile society, international work/investments and international marriages, divorces/dissolutions have an ever increasing international aspect to them. By way of example, if a person was born with French parents but in Spain where they lived and worked up to the date of marriage before moving to England and then spent long periods of time working in Germany, forum options arise.
When considering if people have choices where to commence divorce/dissolution proceedings a number of factors need to be considered and the most important being:
- The current country where the couple are ordinarily settled (habitual residence).
- The last country where the couple were settled.
- Where a person is said to have a permanent home (i.e. being domiciled) which can be determined by:
- Nationality at birth
- The choice of a person to move to a new country and with the intention to permanently reside there.
- The dependency of a parent (applicable only to children under the age of 16).
Where there are forum options available to people about to embark on divorce/dissolution proceedings it is imperative that there is a swift assessment of the range of financial outcomes in the various potential countries so that proceedings can start in the one that it the most advantageous.
Courts in certain countries may be more favorable to a person’s case than others but this will vary from case to case. If there are forum options within the European Union (EU) and a person starts proceedings in a particular member state that suits them, the courts there will retain exclusive jurisdiction to determine matters. Once proceedings have started in an EU state, the recipient of divorce papers may have no choice but to accept its jurisdiction. In a post Brexit world without reciprocal or transitional arrangements there is a possibility that there could be competing divorce proceedings being conducted at the same time. If there is a risk of competing jurisdictions, financial advisors will have to consider where assets are held and how they will be treated by different courts.
Quickly and carefully shopping for the forums for divorce is a critical step in commencing divorce/dissolution proceedings if a person is to secure the most favorable jurisdiction and also avoid costly legal arguments in respect of forums of convenience. In considering the best forum for divorce litigants should also take advice on where assets are and also their potential relocation too.
Post-Brexit the effectiveness of a transitional arrangement could be undermined by the fact that the UK would likely no longer have access to the judicial structures of the EU, and would not benefit from the cooperative nature of organisations in cross-border issues; there are therefore inherent problems in retaining EU laws in the UK legal system while no longer having access to the structure within which these provisions were designed to work. Those already in divorce proceedings seeking to recover foreign assets could find themselves in difficulty without reciprocal European arrangements being in place. Litigants have to consider the quality and value of assets they seek to retain/recover and what they may be worth post-Brexit. What may be classed as a ‘copper-bottom asset’ now could be considered toxic in a post-Brexit no deal scenario where enforcement issues may arise.