Family law questions answered: divorcing with assets in foreign jurisdictions
In this series of articles, ‘Family law questions answered’, the family team at Penningtons Manches Cooper provides practical answers to some of the tricky family law issues facing individuals and families.
Separating your finances on divorce is rarely straightforward, but when a case involves international parties and assets, the process becomes significantly more complex. For high net worth individuals in particular, property, investments, and business interests held overseas can provide significant hurdles in cases and barriers to settlement and resolution.
Jurisdiction: can the English court decide your case?
The first consideration for international families is whether the court has jurisdiction to resolve the parties’ financial separation (where the parties cannot reach agreement) or approve a financial settlement (where the parties have achieved consensus). The courts will consider where you or your spouse live, your ultimate, permanent home, and where the marriage took place (less commonly decisive). For peripatetic and international families, that may have bases in various countries, there could be competing jurisdictions, meaning that the courts in more than one location could have the ability to deal with the case. In these circumstances it is key to obtain advice swiftly and, often, take affirmative action.
How do English courts treat overseas assets?
The courts of England and Wales’ primary aim is to achieve ‘fairness in all the circumstances’ of a case. As part of the financial proceedings both parties must provide full and frank financial disclosure of all assets, regardless of where in the world they are located. There is no distinction, at the computation stage, between the treatment of UK and foreign assets. The court can make orders dealing with the distribution of the majority of foreign assets. The most difficult problem to address in cases with international assets is the implementation and, if necessary, enforcement of any order made.
Hiding assets in financial proceedings can lead to costs orders, findings of contempt of court, and even the reopening of financial settlements.
Do you have to disclose overseas assets?
Yes, the courts of England and Wales place a strong emphasis on financial transparency. Both parties are required to provide full and frank disclosure of their financial circumstances, including assets held both within and outside the jurisdiction.
This may include:
- bank accounts;
- property interests;
- company shareholdings;
- investment portfolios;
- trust interests;
- overseas assets.
The purpose of this disclosure is to ensure that the court has a complete and accurate picture of the parties’ financial resources before making any decisions.
The duty of disclosure is ongoing throughout the proceedings. Where a party fails to provide complete, accurate or honest information, the court may draw adverse inferences against them and make decisions based on the evidence available.
For individuals with complex international wealth structures, this emphasis on transparency can provide reassurance that all relevant financial resources will be scrutinised carefully.
What can be done about hidden assets in international cases?
When concealment or dissipation of assets is suspected in international cases, it is essential to move quickly to take steps to prevent the assets being put beyond effective reach of the court. Common warning signs include the frequent or sudden transfer of assets between accounts, complex offshore structures or trusts, discovery of undisclosed accounts, or unexplained reductions in asset values.
Enforcement challenges with international assets
Even if an English court awards a share of overseas assets, enforcing that order abroad can be difficult. The ease of enforceability will depend on various factors, including whether the foreign country recognises English court orders, the local laws governing property and ownership, and the political and legal stability in the relevant jurisdiction.