London has become known as the ‘divorce capital of the world’, proving that where you file your divorce can be of extreme importance. File in the wrong jurisdiction, like Afghanistan, and your divorce can be deemed a nullity. But file in the right jurisdiction, and you could get a windfall.
Russian tycoon Vladimir Potanin, is currently making a legal challenge in the UK Supreme Court next week over a $6b marital settlement sought by his ex-wife, Natalia Potanina, which helped to make London’s reputation as the “divorce capital” of the world.
The couple married in 1983 in Russia. During the 1990s, Potanin had a reputed $20bn fortune, including shares in companies or other business entities that were not registered in his name – though Potanin was their beneficial owner, according to information contained in a 2021 Court of Appeal ruling.
Potanina was initially awarded roughly $41.5mn in 2014 by Russia’s courts but has claimed she is entitled to a far larger share of her husband’s fortune.
Potanina, who is Russian but who also has had a home in England since 2014, is now seeking half of the assets beneficially owned by her former husband. The case has prompted what one recent Court of Appeal ruling described as a “blizzard of litigation”.
In 2019, Potanina turned to the High Court in London, citing Part III of the Matrimonial and Family Proceedings Act 1984, legislation that gives the English courts the power to make financial orders if a marriage has been annulled outside the UK.
Potanina alleged in proceedings at the High Court that she had “made exhaustive efforts to obtain justice in Russia” but that the sum awarded in Moscow “does not even begin to meet my reasonable needs”. Her attempt to bring a claim in England was initially blocked by the High Court in 2019 on the grounds that the couple had little connection with Britain.
In the 2019 ruling, Mr Justice Jonathan Cohen said that if her claim went ahead, “there is effectively no limit to divorce tourism”. However, the Court of Appeal reversed the decision in 2021 paving the way for Potanina to bring the action in England.
Potanin is seeking to overturn that Court of Appeal ruling at the Supreme Court in a two-day hearing this month. If he loses the appeal, the battle is expected to move to the family courts.
Florida Divorce Jurisdiction
International divorces often bring up the issue of jurisdiction. Who sues whom, how do you sue for divorce, and in what country are problems in an international divorce case. The answers are more difficult than people think as I have written before.
A British divorce might give more money because British courts can disregard prenuptial agreements, and the cost of living is high in London. However, in Florida, the outcome could be different still.
Rules about children and hiding assets is a problem in every divorce, especially in international cases. The problem of discovery of hidden wealth is even bigger in an international divorce because multiple countries, and multiple rules on discovery, can be involved. The problems in an international divorce are more complicated because hiding assets from a spouse is much easier in some countries than in others.
Florida, at one extreme, requires complete disclosure of assets and liabilities. In fact, in Florida certain financial disclosure is mandatory. At the other extreme, there are countries which require very little disclosure from people going through divorce.
Choosing possible countries to file your divorce in can be construed as “forum shopping”. The European Union introduced a reform which tried to prevent “forum shopping”, with a rule that the first court to be approached decides the divorce. But the stakes are high: ending up in the wrong legal system, or with the wrong approach, may mean not just poverty but misery.
Residency for divorce is a very important jurisdictional requirement in every case. Generally, the non-filing party need not be a resident in the state in order for the court to divorce the parties under the divisible divorce doctrine. The court’s personal jurisdiction over the non-filing spouse is necessary only if the court enters personal orders regarding the spouse.
The durational domicile or residency requirement goes to the heart of the court’s ability to divorce the parties, because the residency of a party to a divorce creates a relationship with the state to justify its exercise of power over the marriage.
Rudie Can’t Fail
Potanin’s appeal of the order granting permission for Potanina to bring her claim in England, could become one of the biggest settlement cases recorded in the country. Potanin, who was hit with sanctions by the British government in 2022 because of his support for the Kremlin after Russian president Vladimir Putin ordered the full-scale invasion of Ukraine, is due to begin on October 31st.
London’s reputation as the “divorce capital of the world” was earned because of a perception that courts there were awarding large financial settlements to financially weaker spouses.
The ruling on appeal is expected to have significant ramifications for other cases, particularly in relation to whether ex-partners can turn to the English courts to obtain a more favorable payouts.
The Financial Times article is here.