Overseas Assets Are Part of the Financial Settlement
Financial consequences of divorce may extend beyond the borders of England and Wales, where property, investments, trusts and pensions may be located in several jurisdictions. Assets held abroad do not fall outside the consideration of the English courts. Section 25 of the Matrimonial Causes Act 1973 requires the court to have regard to all of the parties’ financial resources, including assets held offshore or in which either party has an interest, irrespective of where those assets are located.
Not every financial dispute following divorce needs to be contested in court proceedings. Where the parties are able to reach an agreement about their finances, they should seek to secure that agreement in a consent order, making the agreed arrangement legally binding. This may be particularly valuable in cases with offshore assets, as litigation concerning overseas property, foreign companies or trusts can be expensive and complicated. Where parties cannot agree, the court must determine the appropriate division of assets, with the central objective being fairness.
Decision on Financial Settlements
Financial remedy proceedings consist of two stages: computation and distribution. First, the court must establish what exists, who owns or controls it, what it is worth and what nature of interest each party has in it. Secondly, it must determine how the available assets should be divided between parties to achieve a fair outcome in each party’s best interest.
The sharing principle is the starting point of the computation process, particularly where assets have been accumulated during a long marriage through the party’s joint endeavours. But there is no rigid rule that matrimonial assets must always be divided equally. Nor do “70/30” or “80/20” rules exist. The court’s objective is fairness based on specific circumstances of each case, where various factors are taken into account, such as the income, earning capacity, property, financial resources of each party, financial needs, obligations, responsibilities, the standard of living during marriage, age of the parties and length of the marriage, contributions made by each party, and the welfare of any minor children. The governing principle is not equality for its own sake, but fairness in the circumstances of the particular case.
Matrimonial and Non-Matrimonial Assets
In the same way, the court may consider the source of the asset, the manner in which it has been treated during marriage and the party’s respective needs. Non-matrimonial property may become matrimonialised where it is integrated into the party’s shared financial life, for instance, by transferring it into joint ownership or using it for a common purpose. International wealth may remain separate, but geographical separation alone is insufficient to determine its legal character.
Disclosure of Overseas Assets
There is a legal duty to provide honest and full disclosure of all assets, including everything owned in every location. Offshore assets would not exempt from this requirement just because they are under another jurisdiction. Where there is a concern that relevant offshore assets have not been disclosed, various investigative and procedural measures may be considered, leading to serious consequences. These may involve potential contempt of court charges, financial penalties, settlement agreement set aside, requirement to restart the entire divorce process, or even potential risk of going to prison.
Valuing and Dividing Assets
Identifying an offshore asset is only the beginning. Its value must be established reliably, taking into account relevant factors, such as currency movements, local market conditions, taxation, transfer restrictions and the practical ability to sell the asset. The appointment of an appropriate independent valuer may be necessary. Although most professional valuers take their obligation seriously, the parties may nevertheless question whether an expert appointed in another jurisdiction is sufficiently independent. The involvement of a local lawyer may help ensure that the valuation process is conducted appropriately. The court must consider not simply what the asset is worth, but what financial value it can realistically contribute to the settlement.
Not every matrimonial asset may or should be physically divided. For instance, furniture would be neither practical nor fair to be divided in half. If one parent remains in the family home with children, it may be reasonable for the ordinary household furniture to remain there. Where there are duplicated items, it may be appropriate for a party establishing a new home to retain those items where practical. The general approach by courts would be to consider the value and practical utility of the assets as part of the overall settlement.
Special Considerations
Prenuptial and postnuptial agreements can be particularly valuable where substantial international or inherited wealth is involved. They can record the party’s intentions concerning pre-marital assets, inheritances, businesses and other property. The existence of these agreements does not, however, completely remove the court’s statutory jurisdiction. The court retains the power to determine the appropriate financial outcome having regard to the statutory framework and the circumstances of the case. Such agreement is best regarded as an important part of the court’s assessment rather than an absolute guarantee of a particular outcome.
Foreign pensions present particular difficulties because pension rights cannot necessarily be divided or transferred in the same way as ordinary capital. In England, pension provision may be addressed through pension sharing, pension attachment or an offsetting. Pension sharing can create a pension credit for the receiving party, while offsetting allows one party to retain pension rights in exchange for a greater share of other assets. Pension attachment operates differently, with benefits directed to the former party when they become payable. The position is more complicated where the pension is governed by foreign law. An English pension sharing order cannot simply be assumed to be capable of implementation by a foreign pension provider. Early advice in the relevant jurisdiction may therefore be essential to establish whether an English order will be recognised, whether a local order is available, or whether offsetting or another solution is more appropriate.
Where an overseas divorce has already occurred, Part III of the Matrimonial and Family Proceedings Act 1984 in appropriate cases may provide a route to financial relief in England, subject to its jurisdiction and procedural requirements.
What Can and Can Not English Courts do
In summary, English courts take overseas property and financial interests into account when assessing the party’s overall resources, require full disclosure of assets and financial interests held abroad, consider whether non-matrimonial wealth has become matrimonialised, take offshore assets into account when determining the appropriate overall division, require appropriate valuation evidence concerning foreign assets, and make financial orders whose overall effect reflects the value of overseas assets.
The existence of English jurisdiction does not mean that an English order will automatically operate in another country as though it were a local order. Therefore, the court may face limitation, where an overseas asset cannot be transferred, the foreign jurisdiction does not recognise or enforce relevant English order, local registration or court procedure are required, overseas pension provider cannot implement an English pension sharing order, foreign law imposes restrictions of the sale or transfer of property, or the ownership structure is governed by a foreign legal regime requiring local proceedings.
For international families, the most important principles are therefore transparency, careful valuation, early advice and realistic attention to enforcement. The border may limit the court’s reach, but it does not place foreign wealth beyond the financial consequences of divorce.