Thursday, March 01, 2007

A globe-trotters guide to Divorce


For richer and poorer

Mar 1st 2007
From The Economist print edition

Rich people with wobbly marriages need to think hard about where they live

MARRIAGE may be about love, but divorce is a business. For global couples—born in different countries, married in a third, now working somewhere else and with children, pensions and other assets sprinkled over the world—a contested divorce is bliss for lawyers and a nightmare for others.

Divorce laws vary wildly, from countries (such as Malta) that still forbid it to Islamic states where—for the husband, at least—it may be obtained in minutes. Rules on the division of property and future financial obligations vary hugely too. France expects the poorer party, usually the wife, to start fending for herself almost immediately; England and some American states insist on lifelong support. Some systems look only at the “acquest” (assets built during the marriage); others count the lot. A few, like Austria, still link cash to blame (eg, for adultery). Japan offers a temptingly quick cheap break, but—for foreigners—little or no enforceable contact with the kids thereafter, notes Jeremy Morley, a New York-based “international divorce strategist”. Other places may be mum-friendly when it comes to money but dad-friendly on child custody.

The European Union (home to 875,000 divorces a year, of which a fifth are “international”) is trying to tidy up its divorce laws. A reform in 2001 called Brussels II tried to stop forum shopping, in which each party sought the most favourable jurisdiction, by ruling that the first court to be approached decides the divorce. That worked—but at the cost of encouraging trigger-happy spouses to kill troubled marriages quickly, rather than trying to patch them up. This, says David Hodson, a specialist in international divorce law, favours the “wealthier, more aggressive, more unscrupulous party”. It goes against the general trend towards counselling, mediation and out-of-court settlement.

An EU measure called Rome III, now under negotiation and pencilled in to come into force in 2008, tries to ensure that the marriage is ended by the law that has governed it most closely. It may be easy for a Dutch court to apply Belgian law when dealing with the uncontested divorce of a Belgian couple, but less so for a Spanish court to apply Polish rules, let alone Iranian or Indonesian, and especially not when the divorce is contested.

Such snags make Rome III “laughably idiotic—a recipe for increasing costs”, according to John Cornwell, a London lawyer. Britain and Ireland say they will opt out. That, says Mr Hodson, will give a further edge to London. Since a judgment in 2000 entrenched the principle of “equality” in division of marital assets, England, home to hundreds of thousands of expatriates, has become a “Mecca for wives”, says Louise Spitz of Manches, a London law firm. David Truex, who runs a specialist international divorce outfit, reckons that at least a fifth of divorce cases registered in London's higher courts now have an international element.

That trend is accelerating as more and more foreign professionals move to Britain: the latest bunch of customers, says Ms Spitz, are from the former Soviet Union: hugely wealthy and based in London for political reasons. That may protect their assets from being grabbed by the Kremlin; but it does not shield them from their wives. English courts are slowly edging towards the principle (already entrenched in some American states) that the wife's efforts during the marriage to boost her husband's earning power must be compensated, meaning that future income, as well as current assets, must be shared.

Compared with most other jurisdictions, English courts are not just wife-friendly but sharp-toothed and clear-sighted. A case to be heard next week by the Court of Appeal will determine the fate of the huge offshore fortune of John Charman, a financier. A lower court ruled that his wife was entitled to her share of the assets held in a Bermuda trust. Rich couples with troubled marriages and a London connection are watching with a mixture of glee and foreboding.

For the typical global couple, such high-profile, big-money cases matter less than the three basic (and deeply unromantic factors) in marriage planning. According to Mr Truex, a rich man should choose his bride from a country with a stingy divorce law, such as Sweden or France, and marry her there. Second, he should draw up a pre-nuptial agreement. These are binding in many countries and have begun to count even in England. Third, once divorce looms, a wife may want to move to England or America (but should avoid no-alimony states such as Florida); for husbands, staying in continental Europe is wise.

Outside Europe, the country—or American state—deemed the most “appropriate” in terms of the couple's family and business connections will normally get to hear the case. But here too unilateral action may be decisive. When Earl Spencer, brother of Princess Diana, divorced his first wife he surprised her by issuing proceedings in South Africa where they were then living. In England, where they had been domiciled, she might have got a better deal. She ended up suing her lawyers.

The lesson for couples? How you live may determine the length and happiness of your marriage. Where you live is likely to determine how it ends.


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