Oligarchs, Divorce Tourism And Dystophia 

Published on 02 February, 2024 | Izzy Walsh


For some years now, London has been regarded as the divorce capital of the world. That is a label which has been earned due to a succession of high value cases which have notably been regarded as more generous to financially weaker spouses than might have been the case in other jurisdictions.  

Within the last few decades, there has been a rise in the number of international marriages and a consequent increase in divorces featuring arguments and assets spanning the borders of many different countries. In a practice widely referred to as ‘forum shopping’, financially weaker spouses in some cases like this have instigated proceedings in jurisdictions which they believe will grant them settlements more favourable to them.

In some of those cases, proceedings here have actually followed divorces concluded in other countries. English courts can still determine financial settlements in such matters if they determine that there was no, or inadequate, financial provision made during the overseas’ divorce process. A spouse such as Mrs Potanina could, in principle, bring a subsequent application for financial relief here. The other spouse, very likely believing that the matter was done and dusted in the overseas jurisdiction, may well thereafter have been subjected to protracted, complicated and extremely expensive litigation in the courts here.

Such proceedings can be brought because of a law which came into force 40 years ago this year, namely Part III of the Matrimonial and Family Proceedings Act 1984 (“Part III”) (https://www.legislation.gov.uk/ukpga/1984/42/part/III). This provides the Court the power to make a wide range of financial orders, but importantly, it does require that certain conditions should be met in order for the Court to take up these sorts of cases.

Those criteria include the connections of the individuals involved to England and Wales, including any property which they may own here, and the nature of any financial settlement which was made in a foreign divorce.

These proceedings can be incredibly complex, something made apparent by the case of Potanin v Potanina recently decided by the Supreme Court in a majority decision thanks to which the Russian billionaire husband has prevailed (https://www.supremecourt.uk/cases/uksc-2021-0130.html).

During the course of Vladimir Potanin’s 30-year marriage to his wife, Natalia, he amassed enormous wealth. He has been described as Russia’s richest man, with a fortune which the Supreme Court said was estimated to be in the order of $20 billion.

When the couple divorced in 2014, a Russian court awarded Mrs Potanina a substantial, albeit disputed, sum. Mr Potanin claimed that the settlement was $84 million, while his ex-wife maintained that it was just under half of that total.

Following the Russian divorce, Mrs Potanina purchased a property in London, and moved here soon after. She began proceedings in 2019 in the Courts of England & Wales under Part III, claiming, the Supreme Court judgment explained, “an amount of money measured in billions of dollars”.

Part III proceedings involve a two-stage process, the first of which requires the applicant to apply, ex parte, for permission to bring the financial application. If permission is granted, they may then proceed with their substantive application.

In this case, Mrs Potanina was granted permission (on an ex parte basis) to bring her application. Mr Potanin, however, objected, insisting that his wife’s demands should not be entertained for a number of reasons. He applied for her permission to be set aside and was successful.

Mrs Potanina then appealed to the Court of Appeal against the setting aside of permission and was herself successful. The Court of Appeal took the law to be that the power to set aside may only be exercised where there is some “compelling reason”, demonstrable by a “knock-out blow”, to do so, and in practice only where the court has been misled.  That ruling established what had come to be seen as the law in this area. If the knock-out blow could not be established, then the litigation would continue.

Last week, Lord Leggatt described this Catch-22 scenario as a “dystopian situation”, as had arisen in the case of Vladimir Potanin and his ex-wife, Natalia.

In a judgment which included some unusually robust language, Lord Leggatt, the Supreme Court judge who delivered the majority ruling, described how the use of the legislation by an increasing number of foreign individuals had led to “mischief”.

“Rule one for any judge dealing with a case”, he said, “is that, before you make an order requested by one party, you must give the other party a chance to object”.

“This fundamental principle of procedural fairness”, Lord Leggatt continued, “may seem so obvious and elementary that it goes without saying”.

He further explained that “on this appeal, we are asked to review a practice which has developed…that violates this principle”.

This perfectly sums up the challenges faced by parties (and their representatives) in dealing with these cases in recent years.

This latest ruling will provide the opportunity to contest the more egregious attempts to exploit Part III in order to ‘top up’ already healthy settlements made in foreign courts.

To be clear, the Part III jurisdiction has a very valuable role in protecting those people who are subject to cynical attempts to leave them inadequately provided for upon divorce obtained overseas. Preventing the law itself being used in a wholly cynical manner is all the more important, and something which many people would regard as a very positive outcome.

The Supreme Court’s decision does not, however, mean an end just yet to the Potanin proceedings.

Lord Leggatt and two of his five colleagues – Lord Lloyd-Jones and Lady Rose – have entrusted the Court of Appeal with resolving part of the issue which will determine whether the former Mrs Potanina’s financial claims succeed or not.

The guidance which the Supreme Court ruling provides, however, could be made even clearer. Lord Briggs, one of the two judges who disagreed with the majority decision, has asked the Family Procedure Rule Committee – the body which determines the protocols which govern how family courts operate – to consider whether part III of the Matrimonial and Family Proceedings Act 1984 is still fit for purpose or should be reformed.

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