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Lawyers representing
international clients who plan to marry and who want the protection of a
prenuptial agreement should always consider the international ramifications of
any proposed agreement. While conventional domestic prenuptial agreements raise
grave malpractice concerns for family lawyers, the concerns become a hazardous
minefield when the issues are multi-jurisdictional.
In many ways the world
is rapidly shrinking and globalizing. “The World is Flat” is not only the
catchy title of a bestselling book, but it also highlights the fact that
international borders matter far less to most aspects of life than was the case
a couple of decades ago. In sharp contrast, however, divorce laws remain local
and parochial. Not only do divorce requirements and procedures vary from
country to country, but so do the substantive laws concerning the division of
assets and spousal and child support. Moreover, the laws about prenuptial
agreements and marriage contracts vary considerably around the world and – just
as important – the attitudes of courts to such contracts diverge considerably,
significantly and in many different ways from country to country. Outside
of the European Union there is generally no international law that governs the
application of local law to international personal relationships.
Certainly it would be
foolish to assume that a "prenup" that is currently valid in the
place of the marriage or the place of current residency will be equally valid
in other places which might have divorce jurisdiction in the future.
International People
International issues
concerning prenuptial agreements are obviously of critical importance for
people of different countries of origin or for people from a country other than
the place where they currently reside. But there are far more clients who may
require international support concerning prenuptial agreement matters. Many
clients have significant contacts with numerous countries or believe that they
may in the future. Take the example of an international symphony conductor who
may have ongoing appointments with many orchestras and festivals around the
world, teaching positions with universities and conservatories in other parts
of the world, and personal connections and assets in yet more parts of the
world. What if his fiancée is an international business consultant? Or an
international movie star? In such circumstances, where does the lawyer start?
And where does the process end?
We recently
represented an American business executive living in country A in Europe who
was planning to marry a woman in the same city who was from country B. We knew
that residency in country A created red flags as to the future enforceability
of the proposed prenuptial agreement there. We elicited the fact that the
parties might temporarily relocate to States C, D or E in the United States or
to countries F or G in Europe. We further ascertained that they could potentially
move to any of a host of countries in the future but that countries H, I and J
were more likely than the others. Accordingly, we drafted a prenuptial
agreement and certain other documents in close collaboration with attorneys in
jurisdictions A, B, C, D, E, F, G, H, I and J.
While such precautions
are time-consuming and expensive, it would often be “penny wise and pound
foolish” (as the old British saying goes) to skimp on the prenup and leave it
all to courts to resolve if and when things go wrong.
The need for extreme
care and self-preservation in such circumstances hardly needs emphasizing.
Potential
Jurisdictions
Lawyers representing
international clients are now more frequently recognizing that a prenuptial
agreement must often be drafted with a view to its potential
enforceability in an array of potential jurisdictions. These might include any
of the following:
· The state
of current residence of the husband.
· The state
of current residence of the wife.
· The state
of domicile of either of them.
· The state
of the nationality of each of them.
· The
states to which they might relocate together in the future.
· The
states to which just one of them might relocate.
Selection of the
Governing Law
A critical element of
any international prenuptial agreement is the choice of the jurisdiction under
whose law the agreement will be drafted. Obviously lawyers should not be wedded
to their own jurisdiction as the “home” of the agreement. It must also be recognized
that silence as to the choice of law is in many respects equivalent to the
express selection of that jurisdiction.
The decision as to the
best choice of law provision cannot be made without being adequately informed
as to the applicable laws and practices of the various competing jurisdictions
and as to the potential effect of the foreign law in any of the potential
jurisdictions. The decision should also be made upon the advice of counsel who
has substantial experience in such matters, who is independent in thinking, and
who has consulted or will consult with appropriate local counsel in other
relevant jurisdictions. It is likewise important to be aware that choice of law
clauses may or may not be valid in other jurisdictions.
A choice of law clause
should usually be drafted broadly. In one case a court in Oregon applied the
law chosen by the prenuptial agreement -- California law -- only as to the
construction of the agreement, but did not apply California property law
because the choice of law clause was limited to construction issues. In
re Marriage of Proctor, 203 Or. App. 499, 125 P.3d 801 (2005), opinion
adhered to as modified on reconsideration, 204 Or. App. 250, 129 P.3d 186
(2006). Choice of law clauses should provide for both the application of both
substantive and procedural law of the foreign jurisdiction to be effective.
Basic Principles
The following are some
basic principles that the author has developed from handling many
such agreements throughout the world over a number of years:
1. This is a very
highly specialized area. There is much more risk for the family law
practitioner who agrees to handle an international agreement than is the case
with a conventional prenuptial agreement. These matters are tricky and they
require great care. Do not handle international prenuptial agreements unless
you have experience or are collaborating with an international family lawyer
who handles international prenuptial agreements regularly.
2. Ensure that only
one lawyer is in charge of the entire process, is the chief coordinator among
the various lawyers in different jurisdictions that work on the prenuptial
project and is the primary (or sometimes the sole) liaison with the client. If
one lawyer is not clearly in charge there may well be great confusion, lawyers
will be tempted to jostle for a larger role than might be appropriate, the
client will receive conflicting advice and important issues might never be
addressed.
3. Do not take on the
process of drafting an international prenuptial agreement unless you are
prepared to work with foreign counsel, to understand foreign law, to become
familiar with different legal concepts that may apply to your client's
circumstances and to work in an environment in which there are no clear-cut
rules or procedures in which you may often feel compelled to consult your
malpractice policy.
4. Make it clear to
the client that you are admitted to practice only in Jurisdiction A (or perhaps
A and B); that while you may have a little familiarity with Jurisdiction C, you
are not admitted to practice there; that anything that you might say about the
law of that jurisdiction is strictly subject to the client's confirmation with
local counsel; that you have no familiarity with the laws of Jurisdictions D,
E, and F; and that you will endeavor to find out what you can about the laws in
those jurisdictions but you will need to rely on local counsel and that it is
local counsel's advice upon whom the client will ultimately be relying. Back
this up with a letter to the client and notes to your file.
5. Obtain clear
authority from the client to engage the services of local family lawyers in
other jurisdictions for the purposes of advising as to the laws and procedures
of their own jurisdictions.
6. Be clear on client
confidentiality when you hire a foreign lawyer. The rules vary considerably.
7. Obtain funding to
cover all of the anticipated legal charges. It is critical to know that you may
be responsible for the legal fees of lawyers you ask for help in foreign
jurisdictions. See the International Bar Association's International Code
of Ethics, Rule 19, which provides, in part, that, “Lawyers who engage a
foreign colleague to advise on a case or to cooperate in handling it, are
responsible for the payment of the latter's charges except express agreement to
the contrary.” Find out what fees each lawyer charges and how the lawyer
expects to be paid. In some countries, fees are fixed by local law. You should
establish a workable billing schedule. Foreign lawyers may not be accustomed to
including a description of work performed in connection with billing. Some
foreign attorneys may expect to be paid in advance. Others may demand payment
periodically and refuse to continue until they are paid. Request an estimate of
the total hours and costs of doing the work. Be clear who will be involved in
the work and the fees charged by each participant.
8. When reviewing
foreign law, be careful to understand the terms that the foreign local lawyers
use. For example, foreign terms might be translated into English as “marital
property”, “custody”, “ownership” and “commingled” but the terms
might well have completely or even subtly different meanings in the foreign
jurisdiction which could seriously impact the way that a contract is
interpreted. Become familiar not only with the law as it is written in the
foreign jurisdiction but the law as it is actually applied and as it might
apply to your particular client if the prenuptial agreement were brought before
the courts in that jurisdiction. In this regard, it is critical to determine
how much discretion is afforded to a judge in the foreign jurisdiction to
rewrite specific provisions or to take any action other than strictly applying
the law concerning prenuptial agreements.
9. Check out the
conflict of laws issues. Be alert to the fact that a contract executed in one
jurisdiction might in any particular jurisdiction be governed by another
jurisdiction's law. You may even need to consider renvoi rules (perhaps for the
first time since cramming in law school for a Conflicts exam) insofar as
another court that applies its own law to a prenuptial agreement might include
its laws on the conflict of laws, which might require the court to apply the
laws of another jurisdiction.
10. Inform the client
that you do not know where the client and his or her spouse might reside in the
future, where their children, if any, might be located and where either or both
of them may in the future have assets or do business. All of these factors may
have an enormously significant bearing on the enforceability of their
prenuptial agreement.
11. Some jurisdictions
still do not enforce prenuptial agreements. Other jurisdictions have rules that
make it easy for a court to invalidate a prenuptial agreement. In some such
situations, it is also good practice to consider whether the parties should
sign so-called “mirror agreements” that contain essentially the same terms as
the primary agreement but are executed in accordance with the local law and are
to come into effect only if the primary agreement is not recognized by a local
court. It is sometimes good practice to have the parties execute a simple
regime selection document at the time of their marriage in a civil law country
such as France or Italy while at the same time having a far more complete
agreement entered into in a common law jurisdiction such as New York or
California that cross-references the civil law selection. If there
is to be more than one agreement it is important to decide how to prioritize
between them and to avoid unnecessary confusion by having multiple agreements
that cover the same topic.
12. It may well be
prudent to insist that there be compliance with both the procedural and
substantive requirements of the toughest potential jurisdiction, or even that
each and every hurdle to overcome for enforceability in any of a list of
jurisdictions should be fully complied with. This may mean that
counsel should ensure compliance with all of the execution requirements of
every potential jurisdiction.
13. One must be alert
to the fact that the way that the courts of a particular country apply foreign
law may vary considerably. Thus, in a totally different context, the author
worked on a custody case in Japan in which a Japanese court ruled that the
provisions of California law requiring that both parents be permitted to be
substantially involved in the lives of their children meant that a (good)
foreign father could visit his child once a month for a few hours under
supervision!
14. One must also be
alert to varying rules in other jurisdictions as to validity of execution;
requirements for independent representation; disclosure of assets; fairness;
and unconscionability. One example is that of disclosure. It may suffice in one
jurisdiction to attach an appendix that lists in summary form a party's assets
and liabilities. However, in California it is the practice for the attorneys
for each party to deliver a “disclosure packet” to the other party containing
the last three years' personal tax returns as a well as a schedule of assets
and liabilities and if the party owns a business to also deliver three years of
business tax returns and a profit and loss statement.
15. Make it clear to
the client that you are not an oracle and that you cannot predict the future.
Therefore you do not know what the law will be in any particular jurisdiction,
even including your own, in the future and how it might be applied by the
courts in any such jurisdiction. Consequently, you are unable to guarantee that
the prenuptial agreement will be enforceable at the time in the future when a
court in your own jurisdiction or in a foreign jurisdiction might look at it.
Conclusion
International
prenuptial agreements are traps for the unwary or unknowing. They are extremely
important to clients but must be handled with great care by family law counsel.
