As we move from the previous part to the next part of this complex legal match, Xabier has decided to challenge the appropriateness of England retaining jurisdiction and is advocating in favour of the Spanish proceedings taking precedence for his divorce. But what is the reasoning behind Xabier's decision? What are the disadvantages for him if the divorce takes place in England? In this chapter, we'll delve into the financial implications that influence Xabier's strategic decision.
When more than one country is competent to hear a divorce case, it is obvious that the key question for most people will not be which country grants the divorce (i.e., the irrevocable dissolution of the marriage) but which country decides the financial outcome of the case. As Bill Clinton famously said, "it's the economy, stupid". Money rules the world.
But, in England, both proceedings go hand in hand. That is, if England is competent for the divorce, it is also competent for the finances – and that encompasses both maintenance between the spouses and what in Spain would be characterised as the dissolution of the matrimonial property regime. There is, however, an added layer of complexity, because England never applies foreign law to family matters. Therefore, if Xabier's challenge to the jurisdiction fails, he will succumb to the dangers of English family law.
Understanding the English legal system on divorce and finances
The key to all this is that in England there are no matrimonial property regimes, which are otherwise ubiquitous in the European continent and all other civil law systems – there is no separation of assets, no community of assets, nothing of the sort. The assets of the spouses are not categorised in separate and joint property, as they are in Europe. In short, marriage in England has no effect whatsoever on the spouses' assets (past, current or future); it makes no difference to the ownership of those assets, nor to the ability of each spouse to administer and dispose of those assets. But that does not mean that, if the spouses divorce, they have no financial claims against each other and each of them will walk away with what is theirs. On the contrary, the English court has an almost unfettered freedom to redistribute the assets of the parties as it sees fit and fair, regardless of the source or ownership of the assets. One cannot but admire the great trust that the English legal system has in its judicial system, so much so that it vests them with enormous powers with the confidence that those powers will be exercised in an appropriate manner. But, from Xabier's point of view, this is a great risk from an asset-protection perspective.
When assessing how to distribute the parties' assets, all the circumstances of the case are relevant, and this includes the source of each asset (i.e., if it was acquired before or during the marriage, or if it was acquired purchased for a price or received by way of inheritance or gift), but this categorisation is not as rigid as it is in Europe, because the use a couple makes of a certain asset can result in its "matrimonialisation"… a controversial concept recently backed up by the Court of Appeal. The weight that a judge gives to each factor of the case is a matter for the judge, but their primary obligation is that the outcome of the case must be fair. Needless to say, fairness is an elastic and subjective concept, so much so that five different judges will surely reach different conclusions for the same case. However, this is perfectly admissible as it falls within the boundaries of judicial discretion, which makes the outcome of a case hard to predict, and hard to appeal.
Another consequence of these wide-ranging discretionary powers is that judges have a wide array of orders that can be made to redistribute assets between the parties. They can order not only the payment of maintenance or lump sums, but the transfer of assets, the sale of assets and how the net proceeds must be split, and the sharing of pension pots.
In addition to the above factors, which are set out in the statute, English judges follow the case law. This has resulted in various additional fundamental principles.
The impact of Whitev White
The landmark case of White v White transformed the landscape of English family law by advocating for equality between breadwinners and homemakers. Before this case, homemakers often received settlements based solely on their financial needs, while the breadwinner retained the remaining assets. The House of Lords analysed how this stemmed from the erroneous (and discriminatory) assumption that a spouse who has contributed to the family life through remunerated work has made a greater contribution than a spouse who has taken care of the family, the household and the children.
White's fundamental principle is that the starting point for any judge must be an equal division of the assets. There might be certain factors that point towards an unequal division being the fairer solution. That is permitted, provided that the outcome is fair and meets the financial needs of both parties.
For example, let us assume that the family has assets totalling ten million pounds, and that all of them were amassed during the marriage – regardless of who generated them or who is the legal owner, those assets will be considered matrimonial. The obvious outcome would be an equal split, as each party should be able to meet their financial needs with five million; there would be no reason for an unequal split. But let us assume that from those ten million pounds, Xabier inherited two; in that case, the obvious outcome would be for Xabier to keep six million (so that he can keep his inherited assets) and for Sara to keep four (which would, arguably, still be enough to meet her financial needs). However, in a scenario where, from the ten million pounds, Xabier inherited nine, it would be almost impossible to argue that he should keep them all – the court will prioritise Sara's needs over the "non-matrimonial" nature of Xabier's inherited assets.
How will all of these impact Xabier if the divorce is ultimately dealt with in England?
Firstly, because there is no such thing as a matrimonial property regime of separation of assets and because the English courts do not apply foreign law, the marriage contract that Xabier and Sara signed back in Spain before their marriage will not be binding for the English judge; it will be simply one more of the myriad of factors to be considered, but it won't be the main one, necessarily. The higher the standard of living enjoyed during the marriage and the larger the pot of assets amassed during the marriage, the more generous the judge is likely to be with Sara, despite what the marriage contract says.
Secondly, Xabier would have, in England, a legal obligation to disclose all his assets and income throughout the proceedings, and to file any document that he is required to disclose – and it is a long list. The other side could ask questions and request further information and documents. Non-compliance with this obligation can have serious consequences for Xabier, including fines, assets being seized, and even imprisonment. This obligation is not replicated under Spanish law, where the onus is on the applicant.
Xabier's solicitor, as an officer of the court, also has a legal obligation not to lie or mislead the court; for example, if Xabier discloses to his solicitor that he has a bank account in Switzerland with one million pounds, but he refuses to authorise the solicitor to disclose this to the other side, a conflict of interest will arise, and the solicitor will be obliged to stop acting for Xabier.
It would have been advisable for Xabier to sign a post-nuptial agreement when he first moved to England. This document would have confirmed the principles of the Spanish marriage contract while adapting them to the English legal system. When they meet certain criteria, nuptial agreements are generally followed and upheld. The reality is, unfortunately, that most foreign couples that move to England with a marriage contract from their country of origin wrongly assume that the contract will be valid in England and give no consideration to this matter until it is too late. It is another example of sophisticated clients who are used to seeking legal and tax advice about many other business and personal matters, but who leave their marriage to one side, often for the worse.
Xabier has filed a challenge to the jurisdiction of the English courts with the aim of avoiding all this – it is the best (and, at this stage, the only) way to try to protect his wealth from the reach of the English courts. If this challenge fails, Sara will end up receiving, in all likelihood, between 35% and 50% of the total assets accumulated during the marriage, depending on the weight the English court decides to give to the marriage contract.
Looking ahead: living arrangements and other concerns around children
In our next chapter, we will explore the considerations around Xabier's son, Iker, and the implications of his potential return to Spain amidst the ongoing divorce proceedings.
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