International aspects to a nuptial agreement
When one or both parties to a marriage has a connection with another country in addition to England and Wales, there are international considerations and implications to take into account when considering a nuptial agreement. This could be because of where they live, their domicile or nationality, or where their assets are based.
Where should my nuptial agreement be drawn up?
For international couples, many of whom divide their time between two or more countries, this question requires careful thought. It is commonplace for an agreement to be drawn up in one country and then reflected in another country by entering into a mirror agreement in the other country to ensure that the agreement would be upheld in accordance with that country's laws.
In practice, however, this can be fraught with difficulty because it can be difficult to translate legal principles from one country to the next.
The most logical country in which to "root" the nuptial agreement is the country in which the couple intend to spend the early years of their marriage, and to review this as necessary if the couple later relocate.
The benefits of an English agreement
That said, there are enormous merits in drafting a nuptial agreement in accordance with English law. Although not completely binding, a nuptial agreement that is properly constituted carries the twin benefits of both it being extremely likely to be upheld, and providing certainty to both parties. This can mean certainty for the financially stronger spouse that their wealth will not be shared on divorce, and confidence for the financially weaker party that their needs on divorce will be met.
To be properly constituted, the agreement must be entered into freely and without duress; (in case of a pre-nup) signed at least 28 days before the wedding; with full financial disclosure of each party's assets, with each party having the opportunity to take legal advice; and be fair. That is not the same in all countries.
Will my English nuptial agreement be upheld abroad?
It is important for couples to consider how their English nuptial agreement will fare in another country, if there is a possibility that another country may have power to hear any future divorce. The other country may have such power at the same time as England and Wales or have sole jurisdiction, because, at the time of divorce, the couple no longer meet the jurisdictional requirements to divorce in England.
Couples should take advice at an early stage from lawyers in the other country(ies) which may be relevant in the future to ascertain the view that the local foreign court would take of an English nuptial agreement.
The best advice to the party seeking to uphold the agreement is not to leave England or let England lose power to oversee a divorce, without reviewing the agreement in the light of the advice from the other country and, if necessary, entering a nuptial agreement in that other country.
I am moving to England – will my foreign nuptial agreement be upheld by the English court?
It is often a surprise to couples divorcing in England that their nuptial agreement may not be binding on the English family court, particularly if their agreement would have been binding in another country. Whereas other countries can apply English law, in England, the court will only apply English law, which means that whether or not a foreign nuptial agreement will be upheld depends on the circumstances of the case and, importantly, whether the terms of the foreign agreement are fair from an English legal perspective.
Therefore, where an agreement provides that e.g. Spanish law will govern the couple's nuptial agreement, the English court will not be constrained by a nuptial agreement and will apply English law. Within English law, a nuptial agreement is most likely to be upheld if it is fair and meets the other criteria that the English court looks to when weighing up the relevance of a nuptial agreement to the outcome of a case (for example, that is entered into freely, and with full and frank disclosure of the other's financial position). If, in the eyes of an English family court judge, the agreement would lead to unfairness or leave one party in a predicament of real need, it is not likely to be upheld, or might be upheld only in part.
However, the very fact of its existence may carry evidential weight. For instance, if one party agrees not to share the other's assets on divorce in a nuptial agreement, the English judge may abide by that principle whilst varying the agreement to ensure that the financially weaker party's reasonable financial needs for housing and income are met. This could be by the provision of capital being paid on trust, to revert to the payer at some point in the future. This achieves the twin goals of meeting the financially weaker party's needs for a period of time, but also ensuring that the principles of an agreement which might have been intended to protect family wealth from claims on divorce are, ultimately, upheld.
How are nuptial agreements treated in other countries?
It is important that specialist advice be taken in any relevant countries. To give some brief pointers:
In Australia, pre-nuptial and post-nuptial agreements are referred to under the umbrella of "financial agreements", and binding financial agreements can be made before a marriage, during a marriage, or after a divorce order. These agreements are binding on the parties and exclude the jurisdiction of the Family Court with regard to matters covered by them, provided that they comply with the following requirements:
- The agreement must be in writing
- The agreement must be signed by all parties
- Each party must be provided with independent legal advice about the effect of the agreement on his or her rights, and the advantages and disadvantages of making that agreement
- The parties must have been provided with a statement of advice from the legal practitioner who advised each party
- Each spouse must receive a copy of the statement given to the other (but this does not mean a copy of the advice given to the other).
The court can set aside agreements obtained by fraud or the unconscionable conduct of one of the parties. It can also set aside agreements which were entered into to defraud creditors, or which are invalid or unenforceable as a matter of general law. In terms of the content of the agreement, it can set aside agreements which have become impracticable, or where there has been a material change in circumstances since the making of the agreements, where that change relates to the care, welfare and development of a child of the marriage, and as a result of the change, the child will suffer hardship if the agreement is not set aside.
If some of the mandatory criteria have not been met, but it would be unjust and inequitable not to uphold an agreement which has been signed, then the court can make an order declaring the agreement to be binding.
The court will not be concerned with the contents of the agreement, but the circumstances in which it was made. The court will not invalidate an agreement because the parties have entered into a bad bargain. Failure to make full and frank disclosure can be unconscionable conduct, for which agreements can be set aside.
In France, there is no concept of a pre-nuptial or post-nuptial agreement, but there is a long tradition that French law will recognise the freedom of the spouses to create a marriage contract. The aim of such agreements is for the parties to specify the matrimonial arrangements between the parties, and they can include clauses to cover what will happen when the marriage ends, by reason of death or divorce.
In France, couples have a choice between a number of Matrimonial Property Regimes. For international couples, French lawyers often recommend the "separation of property" regime, which means that each party holds his or her own assets, as before the marriage.
There is broad freedom in Germany to enter into marriage contracts, the equivalent of both pre- and post- nuptial agreements. Such agreements have to be concluded in a public notary's office, with both parties present, but the parties do not have to be represented by lawyers before or during the signing of the agreement, and full disclosure of the parties' assets is not required.
The notary is an independent, impartial consultant for the parties, who must:
- Explore the parties' intent
- Clarify the facts in the case
- Instruct the parties on the legal consequences of the agreement
- Reflect the parties statements clearly and unambiguously in the transcript
- Read the entire transcript to the parties.
In Germany, couples can choose between matrimonial property regimes. If they do not choose one, the default is "community of accrued gains". The marriage contract can also cover any other aspects of arrangements during marriage, including the consequences of divorce.
The German courts can set aside agreements in certain circumstances, or can set aside certain clauses while leaving the remainder of the agreement in force. They will set aside contracts which "undermine the proper application of law", including where there are significantly unequal bargaining positions, or the agreement leads to an obviously unilateral and unjustified burden for one party.
In Switzerland, pre-nups and post- nups are binding provided that they are entered by notarial deed. The notary has a duty to ascertain that the contract is entered out of the parties' free will and reflects their wishes, and must ensure that the parties have an understanding of the meaning of the contract. If the notary does not fulfil this duty, the contract will remain valid but the parties will be able to sue the notary for damages.
Full disclosure of assets is not necessary, but the courts can set aside pre-nups and post-nups in the same way as other contracts—the marriage contract may be invalid by reason of fundamental mistake, fraudulent misrepresentation or duress.
Common provisions in Swiss pre-nups include variations from the standard property regimes ("Community of Property" and "Participation in Acquisitions"), such as separating business assets so that they do not form part of the matrimonial property, and excluding one party's participation in an asset in which the other party has made significant investments.
Most US states recognise pre-nuptial agreements as valid contracts in the same way as any other contracts. This is usually subject to compliance with requirements including:
- The contract must be in writing
- vThe contract must be signed by both parties. In some states it must be signed as a deed eg. New York
- There must be no fraud, duress, or inequitable conduct.
In some states (e.g. South Carolina), the agreement must be ratified by the family court in that state.
In most states, the agreements can be challenged, especially with regard to maintenance provisions, if they are "unconscionable" at the time of entry or at the time of a final divorce. Failure to make fair and reasonable disclosure of property or financial obligations may be a factor making the agreement unconscionable.
In view of the different approaches to nuptial agreements around the world, the best advice is to take specialist advice at an early stage when either drawing up a nuptial agreement, or before moving to another country. That way, couples can have the most confidence that their wishes as regards wealth protection will be respected on divorce.
Nuptial agreements and wealth protection
A nuptial agreement can be a useful tool for wealthy individuals and families who seek to preserve wealth for future generations.