Divorce and finances for international families in the time of Covid-19
I was invited to speak to the Financial Times on the subject of global divorce and the impact Covid-19 is having on international families going through a divorce or separation.
The Financial Times article was published online on 12th October and can be accessed here. The full article produced for the Financial times is below.
The Family Court in England and Wales is coming apart at the seams and fallout from Covid-19 has compounded the issue, international clients need to be prepared for delays in this jurisdiction. Court hearings are being adjourned (sometimes with just a few hours’ notice), the courts are under resourced, there are significant delays to response times and processing matters, the court computer system is struggling and at times unable to accept e-bundles. Experts are also finding it hard to commit to values which are needed to understand the parties’ asset base during the divorce process, and this becomes more complex when there are assets in multiple jurisdictions. All this has led to increased costs to clients due to delays.
Add a dramatic loss in balance sheet values through the impact of Covid-19, a negative FX change and the emotion of divorce and that is a cocktail which will inevitably impact on at least one party’s willingness or ability to settle. It may also be in one party’s interest to delay and then take advantage of the financial pressure the delay may bring on their spouse. The traditional litigation route through the court will add months and months to the time it will take to get all aspects of the divorce resolved. Whilst the online portal seems to be improving timings, as capacity increases, response times will be slower.
The use of Alternative Dispute Resolution (ADR) processes (mediation, private FDRs, the collaborative model and arbitration) if both sides can agree to the process can help. Indeed, Judges are now positively encouraging non-court based processes to address the backlog.
However, even where agreement is reached over money and children, you will still need the Family Court to process your divorce and approve and seal your financial order which may lead to delays even when settlement is reached quickly outside of the court process.
For individuals living abroad, the move from face to face hearings to online has meant they can remain in their county for preliminary and some final hearings which has eased the practical issues of travel for international clients. Although this can give rise to jurisdictional and practical difficulties (see below).
The economic impact of Covid-19 has been seismic for those with high-value asset portfolios. From its impact on asset values (ISAs, Stocks, Shares, FX fluctuations), property values, businesses and pensions (particularly where funds are invested heavily in commercial property and/or overseas investments) the fluctuations have for many been significant and constantly changing.
With varied types of assets potentially in multiple jurisdictions there are risks in respect of the significant uncertainties created by the almost daily changes we are seeing. Whilst for many the volatility of the markets may have negatively impacted their worth, for others their asset base may have increased in value.
Recession and lower asset bases may encourage one party to seek a divorce by speculating on a future recovery but the impact will be varied in different jurisdictions and where foreign assets exist it will be essential to gain local knowledge and take specific advice. We are also seeing a greater involvement of the wider family seeking to protect what might be viewed as family assets. The added voice of a dominant parent or sibling can quickly unravel progress, particularly where they may be applying the experience they may have of the court system in their jurisdiction which is often significantly different to the application of the law in England and Wales.
Changes in income, perhaps when needing to relocate back to the UK, FX changes, deferred or unpaid bonuses are creating issues over existing maintenance commitments in cases which may have relatively recently been resolved. Where genuine changes in income positions do occur, it can be hard to convince the receiving party that their lifestyle needs to suddenly change. A party seeking a reduction in maintenance payments can feel powerless as they have no agency in what is happening. Often clients will want to achieve certainty on divorce in respect of their financial obligations and achieve a clean break, which for some is the holy grail, but this may not be possible in this climate due to the affordability or uncertainty. This leaves open the prospect of on-going maintenance claims to be varied either upwards or downwards.
Clients need to think carefully about entering into a binding financial agreement if their future financial position is uncertain, and they should think about risk being shared to avoid unfair outcomes if assets values were to quickly fluctuate. The pandemic is making it difficult to quantify asset bases with experts heavily caveating their reports given the uncertainties which can change from country to country. For some, the pandemic provides the opportunity to reduce their future financial obligations post-divorce or speculate on markets and currency rates. The shadow support in high net worth cases of a financial adviser is vital to have in the lawyer’s toolbox. The financially weaker party and the one who does not hold the purse strings may have some hard decisions to make when considering the longer-term impact of a deal offered to them. The costs of enforcement in foreign jurisdictions or in securing an order could also add additional layers of costs as it will require multi-jurisdictional advice.
Covid-19 is having a huge impact on the practice of family law across the world. Like England and Wales, many court buildings closed during local lockdowns and court proceedings were adjourned, except for urgent and essential hearings (injunctions, child abduction and other child welfare matters). With the growing backlog of applications and cases accumulating, there will be a long wait for many hearings to be listed. Certain other jurisdictions like the response in England and Wales are very keen to promote the use of Alternative Dispute Resolution (ADR), such as Hong Kong and Australia, however this is not always the case.
For high net worth clients with international assets, currently divorcing or contemplating divorce in the ongoing pandemic this is causing delays with lockdowns across the world creating difficulties in travel, accessing financial information, contacting experts and getting property and business valuations undertaken.
Notwithstanding difficulties with other jurisdictions, there are other practical issues with clients giving evidence in other jurisdictions. Nationals of other countries may be prevented from properly participating in hearings due to time differences with England and Wales. This may require court days to be cut considerably short – which could extend any time estimate of hearings, thereby increasing cost and the pressure on an already crumbling court system. Alternatively, overseas clients may be forced to get up very early or stay up very late for hearings, which may impact their ability to properly engage in proceedings, therefore this opens the question as to whether they have received a ‘fair trial’.
The key for international clients is to seek early advice from specialist family lawyers in each jurisdiction in which they may be able to divorce to ascertain where they should issue and to act quickly. Whilst international cases are often complex, with good advice and a solution-focused approach, it is possible to reach bespoke agreements that take a holistic and nuanced approach and structure settlements in a tax efficient manner.
Families with international connections and homes in multiple jurisdictions have had to manage contact arrangements with the backdrop of the constantly shifting sands of lockdowns, travel restrictions, travel corridors and quarantines. Many families have worked constructively to agree how to balance the wish to spend time in other jurisdictions against the practical issues that may arise. This has resulted in agreements about contact and handovers between jurisdictions requiring carefully thought out provisions to manage arrangements if Governments were to change the rules mid contact.
In the UK, like most family practitioners, we have seen a rise in contact disputes between parents during the last few months, where concerns over Covid-19 are a regular feature.
Early into lockdown, the UK Government issued guidance and policy regarding social distancing in the hope of limiting the transmission of the virus. This included that, ‘where parents do not live in the same household, children under 18 can be moved between their parents’ homes’. There has since been further guidance from the President of the Family Division and Head of Family Justice The Rt. Hon. Sir Andrew McFarlane. This was clearly intended to assist parents/legal advisors of separated families to make the right decisions in the best interests of children and to avoid the crisis being exploited by some parents to prevent or frustrate contact with the other parent.
For children whose parents already live in different jurisdictions the impact of lockdowns and travel restrictions will have been significant, with forced and prolonged separation from the other parent. Parents continue to be worried about agreeing contact arrangements involving international travel if lockdowns are suddenly imposed causing a forced separation from the other parent in another jurisdiction. A key focus has also been trying to ensure the children do not have to quarantine on their return from international travel, which would impact their ability to spend time with both parents or their ability to return to school.
If parents are unable to agree on child arrangements, and ADR is not an option, then the matter will have to be determined by a Judge or Arbitrator. Currently, the time it takes to get a court listing is a lottery. Under the law of England and Wales, this country will have jurisdiction for children matters if the child(ren) are habitually resident here. However, if an order is made against a parent living in another jurisdiction, this can raise issues of enforcement, which will be subject to the domestic law of that country. Enforcement may be particularly problematic in Non-EU or Hague Convention countries.
Covid-19 has also prompted many to re-evaluate their lives and their living arrangements. For some international families it has created a desire to relocate to be closer to family and friends. If separated parents cannot agree in which jurisdiction the children should live, then it will likely require litigation to resolve the matter. International relocation cases are emotionally charged for all involved because if parties cannot agree arrangements then the Judge has to decide if a family should live in different jurisdictions or force one unhappy parent to remain in a country they do not want to live.
Jurisdictions in which children are living apart from their parents need to bring in concessions, even during lockdowns, to allow the non-resident parent to travel and stay to facilitate the contact and exempt the children of parents who live in different jurisdictions from quarantines for the wellbeing of all involved.
If you are an international family living in separate jurisdictions struggling to agree arrangements for your children or you simply want to be able to travel with them and cannot agree the arrangements then seeking early specialist family law advice is likely to help you to reach a sensible and workable solution.
Kate Elliott is head of our award-winning team of specialist family lawyers in Horsham. To speak with Kate, or a member of the Horsham team, about your specific requirements surrounding international divorce and separation please contact us.