Legal Eye: beware the cross-border minefield of prenuptial agreements
Beware the cross-border minefield of prenuptial agreements
Prenuptial agreements are becoming an increasingly popular way for families to manage their assets in the event of a divorce. However, it is crucial to note that different jurisdictions handle such contracts differently.
Prenuptial agreements need to be drafted with care to ensure that they are enforceable and in line with prevailing law in the jurisdiction in which the assets and/or the parties to the agreement are located.
As an example, in one prominent English case the wife was a German heiress who owned assets all over the world. The husband was French, and they had married and lived in London. England, where prenuptial agreements were not enforceable before the determination of this case, was deemed to be the correct forum to adjudicate the division of assets. This particular agreement was finalised in Germany and had a German choice of law clause. In Germany, as in most of Europe, prenuptial agreements are normally strictly enforced. The Supreme Court in England eventually found that it was fair to hold both parties to the agreement because it had been freely entered into. The court determined that the German prenuptial agreement was enforceable and consequently the husband was given only limited access to his ex-wife's family wealth.
The fact that there is a difference in the treatment of a prenuptial agreement between jurisdictions often leads to a forum dispute. In a recent case in Hong Kong's Court of Appeal, a husband sought to keep his wife's application for a divorce in Hong Kong, largely because they had German agreements that restricted the wife's rights. Whether the agreements will be enforceable in this case remains to be seen because it comes before the Court of Final Appeal later this year.
As well as the differing extents to which agreements are enforced in different jurisdictions worldwide, there are unique conditions attached. For example:
The Law Commission in England has in the past few weeks announced a recommendation for prenuptial agreements, stating that they should be binding, subject to safeguards ensuring that they cannot be used to impose hardship on either party, or escape parental responsibility.
In Hong Kong and Singapore, prenuptial agreements are not enforceable. However, such an agreement will be taken into account as a factor of varying importance when looking at a case. In Singapore, a prenuptial agreement involving an expatriate couple was upheld because the agreement would be enforceable in their home country - and the court was clear that this was the reason for its decision. More recently, a further decision of the Court of Appeal held that if the applicant could establish that the parties' intention had been that the agreement should "exhaustively govern the division of marital assets on divorce, whenever that might actually happen", then the agreement would be admissible, which it was not in this case.
In Australia, Canada and New Zealand, prenuptial agreements are generally binding. In Canada they are binding so as long as there has been independent legal advice and full disclosure. The courts can intervene if the provision for division of property is unfair. In Australia, prenuptial agreements are binding pursuant to certain conditions set out in Australia's Family Law Act. In New Zealand, they are binding unless a court considers that letting the contract stand would cause "serious injustice".
In China, prenuptial agreements are enforceable under the Marriage Law, which enables specific arrangements for ownership of property to be made before entering into a marriage. It is important, as with other jurisdictions, to ensure that the formalities are correct and that the agreement is fair.
In Indonesia, an agreement made by mutual consent, in writing and legally approved by the registrar of marriage, will be enforceable unless it is "contrary to the restrictions set by the law, religion or morality".
In the United Arab Emirates, there are no specific laws regarding prenuptial agreements. Such an agreement would be viewed as a civil contract between two parties, not specifically relating to marriage and divorce. Properly executed post-nuptial agreements can be enforced, unless they are in conflict with public order, morals or Sharia law.
Many other countries do not have any specific laws in respect to prenuptial agreements, such as Vietnam. However, there is provision under the Law on Marriage and Family whereby the couple may enter into a Property Division Agreement to divide their mutual property, which must be executed in writing by both parties, witnessed, and full details given regarding the property and the reasons for division.
- Most countries in Europe, as well as the US and Russia, strictly enforce prenuptial agreements.
Generally speaking, it is important to take great care with prenuptial agreements because if they have not been properly executed or thought out, they can be a rich source of litigation - contrary to the idea that reaching an agreement will minimise the risk of protracted court battles.
In recent years, this has proved to be the case in Australia. It has to be clear that both parties have entered into the agreement with full knowledge and understanding it will be enforceable on divorce. Hence, both parties should get independent legal advice and there should be no hint of duress or misunderstanding.
The facts surrounding the drafting of such an agreement, such as the time before the wedding, will be material. Full disclosure and proper provision for the weaker party and the children are also requirements in most jurisdictions.
Before embarking on a prenuptial agreement, bear in mind the varying conditions in different jurisdictions and make sure you have all the information about formalities and requirements ready.
A watertight prenuptial agreement suited for a global couple needs thorough legal attention so as to avoid the pitfalls and loopholes out there. Sharon Ser is head of matrimonial practice in Asia, and Sindy Wong, an associate, at international law firm Withers