Brexit’s inconsistent cross-jurisdictional prenups

We all know that more and more families cross jurisdictional borders today than ever before. But how legal systems view family law and the financial consequences of divorce differs enormously from country to country – and individuals or couples who move to a foreign city are often shocked to discover, usually too late, that local courts won’t respect or uphold marriage agreements or prenups they took for granted in their home land.

Picture this classic scenario we see over and over at Graf & Partner: the son of a wealthy German father, let’s say a family business patriarch, falls in love at the boarding school gates in London (the world’s favourite place to educate its wealthiest and most privileged children). He then marries in haste, completely unaware of the financial disaster awaiting him if the relationship turns sour and he has to face a divorce in an English court. It’s only much later, when the relationship has broken down, that he finds to his horror his soon-to-be ex has filed for divorce in the British capital, and therefore just how differently the divorce will now run, compared to in his home country.

Back in Germany, the children of our wealthy dad would not even have needed a prenup to protect pre-existing assets from claims by their spouse, as they would have automatic protections in statute; in German marital law any assets that pre-date a marriage are automatically protected from spousal claims by section 1363 German Civil Code. Furthermore, even post marriage, any lifetime gift and any inheritance from family members received from family members are also automatically exempt and ringfenced in case of divorce, section 1376 German Civil Code. Thus the default position in German law is that all family wealth is automatically protected from claims by a spouse.

Prenups, or “marriage agreements” as they are known, are in fact only needed to protect wealth gained during the course of a marriage – and where they are used, they are seen as binding contracts. The biggest shock for our wealthy German spouse is that the English court are not bound to uphold what is to him a binding contract, and will at best see his prenup as merely having “decisive weight”.

London is known as the divorce capital of the world precisely because its courts are famous for awarding large amounts to the “poorer” spouse. The English legal principles of “equal split” and “clean break”, often trumping any prenup agreements, have been known to bring wealthy foreign spouses (well, not just foreign spouses – ask Mick Jagger!) to tears. No wonder dependent spouses the world over rush to find grounds to establish the London courts as the forum to decide on the split of family assets.

Indeed even the leading English judgment on prenups, Radmacher v Granatino in 2010, is a case in point. Ms Radmacher was a German spouse, Granatino her French husband and both had signed a German prenup before a German Notary three months prior to marrying in London. This case stands for the first time the English Supreme Court recognised a prenup as having “decisive weight” in a UK divorce (previously judges had tended not to uphold them, on public policy grounds because they contemplate break-up even before a marriage takes place). But even so, the position after Radmacher falls way short of the status of a “binding contract” that the German, and many other continental courts, confer on prenups.

Foreign spouses need to understand the hard truth that a move to London can effectively undermine the strength of any marriage contract they have signed in their home country. Their new domicile in the capital effectively opens them up to divorce proceedings being issued in a jurisdiction that at best sees their marriage contract as having merely “decisive weight” in any financial settlement.

Brexit has only made matters worse. Where once the philosophical aim at least was to “harmonise” laws across Europe, now of course we are in a period of differentiation! Indeed the UK’s Retained EU Law (Revocation and Reform) Bill got its second reading in the House of Commons only this month. But where are the initiatives to bring a global approach to family law and divorce? Given the continuing rate of globalisation, and the large and rising number of relationships and families that cross borders, surely it’s time to call time on these inconsistences?

Bernhard Schmeilzl is the founder of English-German / German-English specialist law firm Graf and Partners.