How are overseas assets treated in financial remedy proceedings?
In financial remedy proceedings, which are often part of divorce or separation cases in England and Wales, overseas assets are treated similarly to domestic assets but can add complexity due to jurisdictional issues. Here’s how they are generally handled:
1. Full Disclosure Required
Both parties are required to provide full and frank disclosure of all their assets, regardless of where they are located, including those held overseas. This includes properties, bank accounts, investments, businesses, and pensions in other countries.
2. Valuation
Overseas assets must be valued. This may involve hiring foreign valuers or experts to assess the worth of the assets in the relevant jurisdiction, which may be affected by local market conditions or exchange rates.
3. Consideration of All Assets
The court treats overseas assets as part of the overall matrimonial "pot" and considers them along with domestic assets when making a financial settlement. The court’s objective is to achieve a fair division of assets, considering factors such as the needs of both parties, contributions, and the welfare of any children.
4. Enforcement Issues
One of the key challenges with overseas assets is enforcement. The court in England and Wales has the authority to make orders in relation to foreign assets but cannot directly enforce them abroad. Instead, enforcement relies on international agreements or cooperation from foreign courts. The ease of enforcement will depend on the country where the assets are located and whether there are reciprocal enforcement agreements in place.
5. Foreign Jurisdictions
If assets are located in countries with less robust legal systems or where recognition of UK court orders is difficult, this may complicate the process. Legal advice from professionals familiar with the laws in those countries is often necessary.
6. Asset Freezing Orders
If there’s a risk that one party might hide or dissipate overseas assets, the court may issue a freezing injunction (or a worldwide freezing order) to prevent any transactions involving the overseas assets until the proceedings are resolved.
7. Tax Implications
The tax treatment of foreign assets can vary by country, and this needs to be factored into the financial remedy proceedings. A tax expert may be required to advise on any potential tax liabilities that may arise from the transfer or sale of overseas assets. The failure to consider tax implications on foreign assets was recently considered in XY v XX [2024] EWFC 387.
8. Offshore Trusts
If overseas assets are held in complex structures such as offshore trusts, it can be difficult to determine whether the assets are part of the marital estate. In such cases, the court may "pierce the veil" of the trust structure to determine whether the trust assets should be included in the financial settlement.
9. Pre-nuptial/Post-nuptial Agreements
If there is a valid prenuptial or postnuptial agreement that specifies how overseas assets should be treated in the event of divorce, the court will take this into account, although such agreements are not always binding in the UK.
In summary, overseas assets are treated as part of the overall financial settlement, but the process can be more complicated due to valuation, jurisdictional, enforcement, and tax issues. Professional advice is often required to navigate these complexities.
This document does not constitute legal advice, and is not a substitute for advice from a qualified professional.
Zubair Mughal is a specialist family law barrister, qualified to accept instructions under the direct access scheme. For further information on instructing Zubair for your family law matter, contact him today to arrange a free initial consultation.
