Ep. 25 - International finances on divorce

Tim: Today, we're going to have an international focus to the podcast and talk about financial claims for international couples. And we've got the perfect guest. Melissa Lesson is a partner in our London office who specialises in international cases.

She's a dual French and English national and she speaks both French and Italian. You can't get more international than that. It's just a shame that we're not recording in the south of France or on the Amalfi Coast.

Melissa: Thank you very much.

Jen: So the myth that we're hoping you can help us bust today, Melissa, is this. London is the divorce capital of the world therefore, it's going to be best for me to get my financial settlement here. Any initial thoughts?

Melissa: Well, my initial thought is it depends whether you are the one with all the money or the one who needs to get some money. I think that certainly if you are the more financially vulnerable of the two, England is generally a very generous jurisdiction.

So it may well be the divorce capital if that's the boat you're in. But with all international cases, I think the first question that needs to be answered really is which jurisdiction is best. So, when you have competing jurisdictions, that tends to be certainly from my perspective, the first question that you're looking to answer is, okay, we've got these two competing jurisdictions, what is the outcome going to be in each of them? And therefore, depending on which side you are, you know, you're going to take a view as to where you want to issue proceedings.

Tim: And just sort of talking about that point practically so that everybody's clear. That would mean, I assume, taking early advice from lawyers in those jurisdictions.

Melissa: Yes.

Tim: And getting and getting a ballpark with it, or how does that normally work?

Melissa: Well, I mean, because I've been doing this a long time, I've got a very good network of lawyers in other countries, particularly in France and Italy. So if a client comes to me and I immediately know what the competing jurisdictions are going to be, I will organise by the end of that meeting with the client, I will be saying to the client, right, the next step is we need to have a meeting with X in Rome or Paris or wherever it is.

And we do that as soon as possible so that we can have a very joined up approach. And it'll be me, the client, the lawyer in that jurisdiction. And we're going to talk through the approach of the courts in both jurisdictions, and we're going to look at what the asset base is or what we know of the asset base, and try and work out what the best approach is going to be and which jurisdiction is going to provide that.

Tim: And I can remember a case that I had not too long ago where we did the same thing and then produced for the client a document that had columns for each of the jurisdictions with an indication of what the likely outcome would be, because what tended to happen was that on certain issues, one jurisdiction might be better, but then on another issue it might be sort of not as favourable. 

And so that allowed the client to compare the total sort of overall picture, in I think there were three jurisdictions in that case. So it gave them an easy way of just seeing as a summary what these what it could look like if you went down either on those routes.

Melissa: It's a really good idea. Yeah.

Jen: And I've had it in the past where actually the difference on outcome hasn't been quite as stark. There's not been as much contrast between the two different outcomes. And then parties have felt that they're more able to explore things like practical considerations, you know, which jurisdiction is going to resolve the dispute more quickly? Is there one jurisdiction that perhaps favours resolving matters outside of court, or do you have to go through a court based process?

But would you say that it's probably outcome is the first consideration, and then these other points kind of flow from that? 

Melissa: I think for a lot of people, it's outcome first. They want to know what the difference is going to be, which is going to be more favourable for their particular circumstances.

I do have some clients. I mean, you're saying that actually there wasn't a very big difference in the outcome, it's made me think of a case that I had recently where the outcome in each jurisdiction was not that different, but actually the client decided that he wanted to use the jurisdiction that was back home effectively for him.

So there's, you know, I think there's a bit of that. People feel more comfortable if it's going to be in their native language or, you know, they feel more culturally understood by the lawyer in their country. So that sometimes can be a factor. But I do think generally it is outcome. People want to know what's going to happen.

Tim: And I suppose the other I guess the other point would be the technical powers of the courts if you had. Well, how much does the location of the assets, how much is that a factor when you're, when you're weighing this up?

Melissa: I think it can be because you're going to start looking at enforcement. So if you're already thinking the other party is going to be difficult, they're going to be non-disclosing, they're not going to want to comply with orders, they're not going to want to be parted from their assets easily, then you are going to be looking at that as well. And that's going to be a consideration. You're going to be exploring how that's going to be done.

But I do think you can still, for example, have proceedings in England where you've got assets in other jurisdictions. And yes, you are going to be consulting with lawyers in those jurisdictions to understand actually how you are going to dismantle the company or transfer the property or whatever it is. You know, you've got that advice already there, what's prepared. And actually that will then help you in terms of the proceedings in England, to be able to go to the judge and say, okay, we understand that you're going to do this with this asset, but you need to understand how that's going to work in France, Italy or wherever it is.
And, you know, this is what we're going to need and actually judge, you're going to need to put this into the order and so on and so forth.

So I think having that, you know, wherever you're going to do it, if there is another jurisdiction or as you said, Tim, a couple of jurisdictions involved, you just you get the advice really early on and throughout. And quite often it'll be, you know, you'll have it. You'll have a very much a team approach with the lawyers and in that other country.

I've got a couple of cases on at the moment where France is the other jurisdiction and part of the proceedings are happening in England, because of where the parties are living or where they commence the divorce proceedings. And then the other part relating to the children, for example, is happening in France. So we're having parallel proceedings.

Tim: Yeah, yeah. And I think, I mean, there's a strong theme of network and contacts and team isn't there because you're whether consulting with the lawyers early on in the process, whether it's later on as the case progresses, maybe using experts from other countries, whether it's people to value property in other countries or companies in other countries, or, as you say, whether it's thinking about enforcement or how the local court will deal with the order.

I suppose more than purely domestic cases, it's about that team and it's about you as the lawyer based in England, coordinating that and being the sort of centre point of saying to the client, don't worry, I've got the network, I know the people, I can liaise with them and it will feel to them as though it's all one team, even though you might have four or five different companies or organisations.

Melissa: Very much so. And actually, the cases that I've got where I was just saying we've got parallel proceedings, most of the communications the lawyers in both countries are copied in. So everybody knows. The left hand knows what the right hand's doing, basically. Everybody knows what they're doing.

And sometimes we're being asked to produce documentation or produce opinions that are going to be used in the French court and vice versa. You know, when you've got a good team and that team has been established right at the beginning, it feels very seamless, I think, for the clients. And they know that they can ask questions in both jurisdictions, and everybody is working together for the common good, as it were.

Jen: I think having that team can be really important when it comes, even just to the practicalities of dealing with things. I mean, I've had cases where there's been issues about what disclosure can actually be obtained, even just kind of understanding what publicly available information is available in a different jurisdiction.

Melissa: Yeah, that's very much the case, I think. And I always think, even if you've been doing this for a long time, and even if you're familiar with the jurisdictions and how they work, things change everywhere and rapidly. 

And so, even though I've got a sort of a very basic knowledge because I've been doing this a long time, I will still say to my clients, right, we need to have that meeting straight away, because you just never know. Things have changed. You know, there's been case law, there's been whatever, there have been developments. You just need to keep checking. You need to keep checking in. You need to keep having those meetings and having that dialogue back and forth so that everybody knows where they stand and what's achievable.

Tim: So just changing the topic slightly. We've dealt with in previous podcasts, marital agreements, and we've spoken about how those are drafted and their legal status in the UK.

I suppose thinking about that from an international perspective at the other end where the parties are separating. How would you say that they play a role in international cases and where proceedings are going to be dealt with? 

Melissa: I think they're quite significant, actually, especially from European countries, because in a lot of European countries they apply the Napoleonic Code. There is that concept of having a matrimonial regime, but it won't be as detailed as what we're used to in England. And so, you will have these couples where they've elected the matrimonial regime when they've got married, and it has been literally ticking a box or signing in the register.

And that can obviously have a very significant impact because you will have one spouse who's saying, well, we've entered into this matrimonial regime and that's how that should be, and that should be applied to our divorce. And you've got the other one who's saying, I had no idea what I was signing. I thought I was signing the marriage register. I didn't know that. I don't speak French, Italian, whatever.

And I get that a lot. And obviously, you've then got a couple who are poles apart on the approach that should be taken. You're then going to notwithstanding Brexit and the fact that we're no longer supposed to be having jurisdiction races, you are still going to have a jurisdiction race. You are still going to have quite often, a judge being asked to take a view as to which is the appropriate jurisdiction, and you are going to be there saying, well, actually it shouldn't be X, because this would be the outcome. And this poor person doesn't know what they were signing, and they had no idea, and they just ticked a box it's not in their language and they didn't know. And if you apply that and if the divorce goes through in that jurisdiction, they will get nothing or a very small award compared to what would happen if it was happening in England.

But then I think that obviously is being balanced with the English court that is slowly changing and slowly getting to a point where they are saying, well, we can't just go in and say England is best because we do it in a more detailed way. And everybody has a separate lawyer and everybody's got their own legal, you know, we're not doing it through another or whatever. 

We can't just say, oh, well England knows best and we're just going to completely discount that. So, the tide is changing. But I still think the judges, are finding themselves faced with situations where the outcome for a client would be so manifestly unjust if the foreign prenuptial agreement was applied that, you know, there then find themselves in a very difficult position because they do have to balance up, you know, the sort of “Oh, well, we're not going to say that England knows best, but actually if we don't, if we don't apply English law, this client is going to be in a terrible situation”.

I also think that, you know, looking at the prenuptial point, I get a lot of clients who come to me and say, oh, well, I'm French and my wife is Spanish, and we got married in Jamaica or whatever. You know, no connection to England other than we're actually living here now. And they will say to me, well, we're getting divorced, but it's okay, because neither of us are English, we didn't get married in England. And by the way, we ticked the box for separation of assets, so we're fine.

And you then have to say, well, actually, you probably are not fine. And actually you're getting divorced here, and so it's going to be through the English law lens. And we need to be running off and getting advice in those other jurisdictions because, you're ticking the box for separation of assets. There's now a strong chance it won't be upheld because it will be considered unfair.

Tim: I mean, we could spend hours, I think, talking about the fact that ultimately, international couples who have potentially not lived in one jurisdiction or chosen to be in one jurisdiction, but find themselves in court there, you know, the sort of complications when it comes to expectations, when it comes to whether it's heritage or what they've grown up thinking and how that plays into the court's thinking, there's a huge amount that, unfortunately, is probably beyond the scope of today.

Just the point to pick up on is you mentioned a jurisdiction race. I think, just to explain that point. It is what it says on the tin largely, which is that there used to be a race to whoever issued first, would then win the jurisdiction race, and that court would continue. And post-Brexit, in broad terms, that's no longer the case. And it's meant to be the court that's most convenient.

But I think the point you were making, Melissa, is that ultimately, if you're if you issue first, then your argument of saying, well, look, isn't it convenient because we're further along than we are in other jurisdictions, sort of still plays a factor doesn't it?

Melissa: It does. And also in the other jurisdictions in Europe, it is still a consideration for them. So they will still look at that. And so even though it's not quite the jurisdiction race that it used to be, it's still important.

Jen: So in terms of cases that we're dealing with in England, but where there are assets in different jurisdictions overseas, what are some of the core challenges that you come across? 
Melissa: I suppose. You know, we're used to what the court is able to do in England and that may not be feasible in some other jurisdictions. It may simply not be the way that things are done, assets may be held in in different ways.

For example, if you think about in France, quite often you will have properties where there is effectively somebody who is a bit like freehold and leasehold. You will have somebody that effectively owns the freehold part as a sort of similarity, and then you've got somebody who owns what is effectively the use of the property.

And so you've got what we might think of in England as “oh okay, we're just going to have an order that says the property is transferred.” You've then got to look at actually, how will that work if that property is in France, and that's just how that property is held. How do you unpick that?

And so it goes back to my earlier point about, you may decide or it may be decided that proceedings are going to be here, but given that assets are in another jurisdiction, you are going to get that advice early on to understand how to dismantle assets, how to transfer assets so that you can then say to the judge, well, actually, we need it to be phrased like this. And we need the court to do this.

And also, I suppose, you've got to look at the fact that just because you've got an English order doesn't mean that the court in whichever jurisdiction is going to say, “okay, fine, great, you've got an English order”. You're going to have to go through a procedure. And it's different in different countries as to what they expect and some jurisdictions, obviously, you need to actually then start proceedings to have the order enforced and recognised and so on and so forth.

So you, again, are going to be relying on lawyers in other jurisdictions for advice on that, on how you enforce it, on how you make an English order recognisable.

Jen:  I've certainly had it in the past as well, perhaps with countries outside of Europe where you're even struggling to be able to get what is the property address? You know, it is known as one thing, but it doesn't actually have a legal title, and that makes it incredibly difficult to actually sort of deal with and be specific about within the divorce proceedings or the finance proceedings.

Melissa: And it's the same for disclosure. You know, country different countries deal with disclosure requirements in different ways. And if you have a case where the other side is not engaging in the proceedings, and therefore you are going to be going to the court and asking the court to ask various entities to provide disclosure. It's going to be it can be very complicated and very difficult, and you are going to be looking at those jurisdictions to say, well, what do we actually do? You know, how do you get that information? What kind of order do you have?

I mean, I'm just thinking about, just even going to Jersey. You want to get information from a trust, you're going to do letters Rogatory, which is not something that we do every day. But you're going to be looking at those sort of processes and thinking, okay, and then we've got to send somebody to Jersey to ask those questions to go to court… Every country has its own has its own process, and you are going to have to engage with that and know what it is that's required. 

Tim: I suppose the other point that it plays into is when you're thinking about sort of outcomes and strategy, it's what assets your client wants to be left with and what your client might say. Well, actually, I don't want I just don't want anything to do with that property in Bali that we haven't quite got the address to or the pension in Australia that no one really understands whether or not they'll implement the order or whatever it is.

I mean, I'm just giving some made up examples, but there's an element of actually one way of dealing with it is to say, well, in the settlement, you pick how you divide the assets and it is more important in the international case to think about who ends up with those assets than it probably is in a domestic case where everything is just a bit more straightforward. 

Melissa: Yes I agree. And certainly when you've got that sort of case and again, if you've got, you know, the other side, not necessarily compliant or engaging. You are going to be thinking about definitely first step one, how you secure the assets in this jurisdiction, because you want to make sure you get those because they're the easiest ones to enforce against, and then you're going to be looking at the assets in the other countries and thinking, you know, what do we do?

And, you know, there was a time where you could go along and get a freezing injunction. But actually the reality of freezing injunction is that it sounds better than it is, and you've still got to then get it recognised in the various jurisdictions and get it enforced and you've got the cost. You've got the complications. So it's very difficult. So you know, I think sometimes people sort of think, oh well it'll be okay, we'll just get a single injunction, we'll make sure everything's stays where it's supposed to be. And it's not that simple, unfortunately.

Jen: I think there's also the other point around, we're talking here a lot about the actual assets, but you've also got an income consideration as well. If everybody was in England and there would be a spousal maintenance award, you might feel quite secure on that if everyone's based in England with a PAYE salary coming in.

But if you've got an international earner, what enforcement issues could you have on that? Are you going to try and look at capitalisation because that banks the money here and now, rather than relying on what might happen in the future?

Melissa: You've also got the tax implications, because you've got to think about what happens when you bring money onshore and that's quite often the case I find with those who are earning internationally, they are often paid in a different currency and they're often paid offshore. And so you've got to look at the tax implications of how you're going to bring that onshore or what you're going to do, or whether, your client is then going to have to open an account offshore and have it paid offshore. And then, it goes back to Tim's point. You are then going to have various experts who are going to be involved in the case throughout and advising you as to how you're going to do these various things so that you can then inform the judge.

Tim: Lots and lots to think about, right? I think before we ask you for your top tips, I thought it might just be worth mentioning that from a process point of view, just because it's an international case, I don't think that it necessarily changes the processes that are available to clients, i.e. you can still reach an agreement between the two of you. You can work with your lawyers to reach an agreement.

You can certainly go to mediation. And I think mediation can be a very good option where you've got numerous different jurisdictions, different advisers and sort of having a place to collate all of that. And again, arbitration is an option. So, I think just to make sure everybody's clear that from a process point of view, the processes we've dealt with on previous podcasts are still available to international couples.

Melissa: The only thing I would say is that what may be different is how you start off. Because whereas when you've got a domestic case, you might write what we would call a letter before action and at least, you know, write to the other side and say, we're very sorry, but we are going to be issuing divorce proceedings. You're not going to do that if there's an international element, because you want to make sure that you've seized the right jurisdiction and you've seized it first as far as you can.

So yeah, and that can sometimes come across as quite aggressive. And it can obviously upset the other spouse who doesn't understand why they're getting this out of the blue. But it's just important to then be able to back it up and say look you know we're sorry we had we had to do this. But it doesn't mean that we don't want to try and deal with things relatively amicably. And you know, as you say, go explore the different avenues to reach a settlement. 

Tim: Yeah, that's a good point. So, to sort of bring everything together, what would you say your top tips for international clients at the outset

Melissa: Get advice ASAP and get joined up advice. If you're in England, go and see a lawyer who is I would say a specialist or at least has broad experience of international cases so that you are not going to spend several weeks umming and worrying about what you're going to do, and when you're going to do it. You are going to go and see somebody who is going to get another lawyer involved in the competing jurisdiction so that you know what your options are, what the outcome is, and what your best steps are, and then you can make a decision. But you do that quite quickly.

Tim: Brilliant.

Jen: Well, thank you very much for joining us today, Melissa. It's been really insightful and really enjoyed talking about these slightly trickier legal issues. As always, if you have any questions that you want us to consider in future episodes of the podcast, do get in touch via the usual social media channels.

Melissa: Thank you very much for inviting me.