Alain Cornec & Allison Bull
Whilst the House of Lords is going to examine the already famous Granatino v. Radmacher case concerning the impact of a German pre-nup in an English divorce, a new step has been recently taken by a French court about the consequences of an English pre-nup in a French divorce.
Behind similar words, the concepts are different. In France, marital agreements are legally valid and binding but concern the arm’s length division of assets and enrichment, without setting any “equitable element” to try and pre-empt the divorce court right to “tip the scale”, whilst in England, they are essentially linked to divorce and avoiding equitable distribution. Under French law, one cannot exclude the right to a “compensatory payment” on the occasion of divorce, contrary to German law where it can be waived (as in Granatino). So, the enforcement of an English prenup in France was not certain.
The practical example of the case of Ian and Laura illustrates the problems at hand.
After a few years of romantic involvement, Ian, a retired English businessman, wanted to marry his French girlfriend, Laura. She lived and had a clerical job on the Cote d’Azur. He hoped she could adapt to northern England. He also wanted « a parachute if things did not work out ». He had a few millions, earned in his career, and she had virtually nothing. He was many years older than she, and he had health problems, which could require costly treatment. Both had been previously married and had children.
Jeremy Poznanski, Q.C., Alison Bull at Mills and Reeve (Manchester) and Alain Cornec from Villard Cornec (Paris) advised him in 2005 on the setting up of an English prenuptial agreement. Alain had a strong feeling that things might not work out at all. Ian, a definite optimist, moved forward regardless.
The contract provided for English law to apply, as it was essential the assets in England be protected as efficiently as possible. In case of break down of the marriage, each spouse would keep his or her assets, she would get £50,000 (indexed) for each year of marriage (until the filing of a divorce petition) and this amount was to cover any financial claim or remedy of any sort. At the time of marriage, he also bought her a flat in her name on the Cote d’Azur, then worth about £300,000.
The divorce case
Things did not work out well. She preferred to live in the sun. After three years, Ian wanted out. The same legal team at Mills & Reeve and Villard advised Ian.
Under European rules, the divorce petition could be filed in England, where Ian had resided all his life, and where most of the assets were. France also had jurisdiction as Laura effectively lived there. Had French divorce law applied, the separation of assets could not have been set aside, but the limitation of the “equitable” element at £50,000 per annum would not have bound the judge. Effectively, by French standards, the amount provided in the prenup was very generous. But one of the key reasons of acting in France was that French courts have recognised and enforced foreign pre and post nuptial agreements for a long time.
Ian filed for divorce in France: the prenuptial was more likely to be recognised there, though divorce proceedings could be substantially longer than in England, as status is not .
At the initial “conciliation” hearing, Ian offered to pay Laura the full amount if she granted divorce by consent, which could have been done there and then, all issues being solved immediately. Laura refused and asked for maintenance to which “she was entitled under French public policy”. Her chances of getting a larger “equitable” amount than the prenup was small, but she could try getting maintenance over it. The Family Judge initially granted Laura £4,000 monthly maintenance for the duration of the case and £3,000 as an advance towards her legal costs. Whether the maintenance pending suit and the advance on costs would be offset against the capital agreed under the prenuptial agreement would be decided later at trial, which took place a year later.
The amount of £50,000 per annum was not disputed. It was far more anyway than she would have obtained from the French court in the absence of a prenup, especially added to the gift of a flat, then worth about 450.000€.
The decision of the Court of Grasse came down earlier this year and upheld all the terms of the English prenup:
– Laura would get what had been agreed in the prenuptial
– the temporary maintenance and the costs would be offset against the total amount due
– the rate of exchange £/€ is that of the decision.
Laura accepted the Judgement, which is now final. The likely reason? maintenance bears income tax in France, whilst capital received on divorce is tax free.