New ‘no-fault’ divorce laws may stimulate rise in amicable splits among the wealthy
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It’s rare for divorce to get more vicious, or indeed deadly, than in the 1980s Hollywood film, War of the Roses — where Michael Douglas and Kathleen Turner play a wealthy husband and wife living in Washington, DC in America. After 17 years of marriage, the couple can’t stand the sight of each other and fight so hard they fall from their home’s chandelier and end up dead on their living room floor.
Fortunately for today’s society, even the most bitter couples behave better than this fictional duo, but few can manage an entirely peaceful decoupling. The divorce attorney played by Danny DeVito in this darkly comic film warns the couple, “There is no winning! Only degrees of losing.” This still rings true.
The good news for couples who want to divorce, say lawyers, is that legislation is being updated in an effort to make a painful process less traumatic. The new “no-fault” divorce law that was introduced in England and Wales in April this year has already captured the attention of wealthy people around the globe. Lawyers say it has triggered thousands of enquiries.
“London has long been heralded as the ‘divorce capital of the world’ and the introduction of the no-fault divorce laws is adding to its desirability,” says Katharine Landells, a divorce lawyer in the London office of Withers. “Wealthy people, first and foremost, want their lawyers to find the best financial outcome for them. But, if that can be achieved without blaming each other, then that’s even better, especially if there are children involved.”
Lawyers argue that finding fault with the other party sets a bad tone to proceedings from the outset and this may not be overcome by the time the couple is trying to finalise a financial deal.
Another benefit of the new legislation is that it eliminates the possibility that one party could “refuse” a divorce. Previously, if one spouse declined consent, the unhappy couple were condemned to live separately for five years before they could legally split.
One high profile example of this was the case of Tini Owens from Worcestershire, who brought a divorce fight to the Supreme Court in 2018 when her estranged husband contested her petition after 40 years of marriage, saying he thought they had a “few years” left to enjoy together. The judges sympathised with Owens but said they could do nothing until the law was changed. In light of the introduction of no-fault divorce, she said: “No one should have to remain in a loveless marriage or endure a long, drawn out and expensive court battle to end it.”
The revised law is good for people who want to move things forward, including wealthy people with easy access to legal advisers. “These days, entrepreneurs have made their money by acting quickly and being nimble in the choices they make,” says Landells. “Now, they have licence to do that without having to say something mean about their former partner or cook up some allegations of behaviour as the reason why a relationship has foundered.”
Lawyers say attitudes in many societies have changed and these laws are catching up with the zeitgeist. “In the early 2000s, everyone was focused on the big divorce battles — the bloodier the better — and would go to dinner parties and relate all the juicy details about the breakdown of their own marriages to the other guests,” says Landells.
Today, in comparison, she says, people are focused on “conscious uncoupling”, as coined by actress Gwyneth Paltrow and Coldplay musician Chris Martin when they split up in 2014 after 10 years of marriage. Instead of a dramatic, stressful, acrimonious divorce, such people seek to separate amicably.
“Nowadays, it’s more acceptable for people to talk about being best friends with their ex than how much they dislike them. People talk about co-parenting ‘beautifully’ with their former partners,” says Landells. “This is the goal everyone is striving towards and these new no-fault laws fit into this.”
A number of other jurisdictions, such as Australia, Canada and part of the US, already have no-fault divorce laws in place but there are reasons why these countries are not as desirable to some individuals as the UK, say lawyers.
London’s big attraction is its global reputation for awarding generous payouts to the financially weaker party, often women. Generally speaking, awards made elsewhere are more limited because judges in England and Wales have wide discretion when deciding how assets should be divided, lawyers say.
The no-fault rule change brings the UK closer into line with the US, where, of the 50 states, 17 allow only no-fault divorces including New York City, which introduced the law in 2010. In the 33 remaining states, spouses can file for a no-fault divorce or choose to apportion blame for a variety of reasons, which vary from state to state.
Acting promptly to start divorce proceedings in the favoured country may be vital as it is hard to switch to another jurisdiction once the process has been started. But, Sarah Anticoni, partner at Charles Russell Speechlys, says being the first to file for divorce is not a foolproof way of securing an English hearing. She says: “It’s important to bear in mind that when somebody tries to divorce in England, if the other party sees it as a deliberate attempt to obtain more money, then they can challenge it in the English court.”
Patricia Astley, managing director at Julius Baer International, the bank, says often English courts do not discriminate between the homemaker and breadwinner — so the English courts are considered nowadays to be a particularly fair jurisdiction. Although rare, courts in England and Wales can still order one spouse to pay maintenance to the other for the rest of their lives.
“From past court experiences, the UK courts are more likely to divide assets equally, even if one spouse has brought more to the marriage than the other,” says Astley. “The laws in London give judges the freedom to be flexible in maintenance awards versus other jurisdictions which give a more formulaic approach.”
In a high-profile case last year, Princess Haya, the estranged wife of Dubai’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, secured more than half a billion pounds in what is thought to be the largest post-divorce financial settlement awarded in England and Wales. London’s High Court ruled that Sheikh Mohammed pay about £554mn in child maintenance and security costs.
According to Elizabeth Doherty, a partner in the private client disputes team at Macfarlanes, the case demonstrates “the willingness of the English judiciary to use the various tools available to it to ensure adequate protection for the financially weaker party in a divorce — even where complex offshore structures are involved”.
This also applies to married couples who run a business together. In a divorce between Russian billionaire Farkhad Akhmedov and his ex-wife Tatiana Akhmedova, the English courts awarded Akhmedova a large share of Akhmedov’s fortune in 2016. When he failed to pay, the High Court issued a global order freezing his assets, including the superyacht Luna, which has now been seized.
Lawyers have long sought out the best place for their clients to get divorced, often leading to a situation where each spouse issues a petition in a different jurisdiction — the “jurisdiction race”.
Wealthy people are more likely to have complex financial arrangements and be highly mobile, with ties to more than one country. So they often have more choice over where to divorce. Someone who lives in France but was born in the UK and operates a business out of Germany could potentially file for divorce in any of those jurisdictions.
However, there are traps for the unwary. For most European countries, the criteria for filing for divorce include having a physical presence in that country for some time before the commencement of any proceedings. “To apply for a divorce in the courts of England and Wales, both or one of the parties have to be habitually resident in England and Wales for a period of time before they can issue legal proceedings,” says Jan Galloway, partner and family lawyer at Moore Barlow.
US forum shopping is hard. For example, California, a no-fault divorce state, has strict jurisdictional requirements to filing locally. Samantha Klein, who leads the Family Law team at Withers Bergman in Los Angeles, says that the right to file is “based on a person’s connections to California and includes documents such as a driving licence”.
Galloway says: “It used to come down to the date and time one party filed their petition for a divorce. But now, in addition to that and having to satisfy the criteria, there is a more in-depth analysis of the parties’ connection to a country and of where they have their greatest connection, such as the majority of their assets, home life, where the children live and so on.”
While financially weaker parties tend to favour London, the financially stronger half of the couple — often men — prefer to file for divorce in countries where the system of law is still patriarchal, including Spain and France.
In England and Wales, as in the US, the rules are based on precedent, giving judges leeway and evolving over time to give greater rights to non-working spouses. In countries with a civil code that has stricter codified rules — such as most of continental Europe — the regimes tend to favour each person keeping their premarital property in a divorce.
Even if people file for divorce in one jurisdiction it doesn’t necessarily guarantee the case will be heard there — nor that the financial settlement will be sealed there.
“A jurisdictional challenge from a spouse who does not wish to be divorced in England and Wales is not uncommon, so where their spouse is forum shopping and is not able to make out a genuine connection to England and Wales through their domicile or habitual residence, the court can and will stay or dismiss a divorce application,” says Nicola Harries, partner and head of family law at Stevens and Bolton.
“It should be noted that if a spouse succeeds in stopping the divorce proceeding in England and Wales, there may still be litigation in this country concerning finances,” says Harries. “In certain circumstances, the English court can make further financial orders even where another country has dealt with the divorce, if it is considered that the financial provision made for a spouse by the overseas court is inadequate.”
That said, there have been an increasing number of cases where high court judges have been very vocal about costs incurred by warring spouses in financial remedy litigation. So the laws are edging closer to making it possible to follow Paltrow and Martin in consciously uncoupling. But they still require the partners to play their part. Not everybody will.
This article is part of FT Wealth, a section providing in-depth coverage of philanthropy, entrepreneurs, family offices, as well as alternative and impact investment
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