International Prenuptial Agreement – What is it?
A prenup is a marriage agreement that discusses the division of assets in advance of a divorce. While each state has its own laws about prenups (many states refer to these agreements as "marital agreements") the courts will generally uphold international prenups (also known as "international matrimonial agreements" or "international premarital agreements"). There are two primary things that give international prenups their name.
International contracts with no local affiliation: First, the contract may be called "international" if the parties involved have no real local ties to speak of. For example, if they meet on holiday in Paradise Island, the agreement they enter into may be called "international." This is because, ultimately, it will be a generic contract of sorts, without a true home base.
Different local laws that may govern the prenup: Second, the contract may be called "international" if the parties involved are subject to a variety of local laws . These local laws may govern the prenuptial agreement. In these cases, it makes sense for the parties to simply agree on a law up front that will govern the relationship, rather than having to worry about which local law is applicable at the time a divorce arises.
International premarital agreements (IBAs) give couples the option to predetermine how to manage assets and responsibilities related to property prior to a marriage. Further, the IBAs can also transform into spousal agreements during the marriage that detail how to equitably liquidate marital property in the event of divorce. The agreements are typically enforced so long as they:
While international prenups are like domestic prenups in that they discuss the division of assets, international pre-nups have fewer restrictions about asset division. With fewer restrictions, international prenups can cover a wider array of topics that domestic prenups cannot. Further, as is the case with most contract laws, there may be other unexpected differences.
International Prenuptial Agreements – The Major Advantages
Navigating the complexities of an international lifestyle can be daunting, particularly when it comes to marriage and divorce. For expatriates and couples from different nations, such challenges often extend to financial and legal matters. An international prenuptial agreement can provide a much-needed solution, acting as an insurance policy against the unpredictability of international law. One of the paramount advantages of entering into an international prenuptial agreement is the opportunity for financial protection. For instance, couples with separate assets in multiple countries may stipulate in their agreement how those assets should be divided in the event of divorce. This is especially important for expatriates, who may have acquired substantial property during their time abroad. In the absence of a prenuptial agreement, the division of such assets would be subject to the laws of the country in which they are located, potentially resulting in costly and time-consuming court proceedings. In addition to financial security, an international prenuptial agreement can provide legal clarity. Most importantly, it allows couples to choose the governing law that will apply in the event of divorce. For example, if a couple holds assets in two distinct countries, an international prenuptial agreement can establish which country’s laws will apply in dividing the assets. This can save married couples from the headache of determining which jurisdiction’s laws will be upheld in an international divorce. International prenuptial agreements also offer a level of comfort for individuals with children from previous relationships. Such individuals may be concerned that a new partner’s assets will be mixed with their own, potentially affecting the inheritance of the children. An international prenuptial agreement can address these concerns by clearly defining which assets belong to the new spouse, thus ensuring the protection of the children’s inheritance rights. On a broader level, having an international prenuptial agreement can make the process of marriage registration simpler and more predictable. Oftentimes, different countries have their own requirements when it comes to marriage registration, potentially causing complications for couples. A legally sound prenuptial agreement can help avoid unnecessary delays in the registration process. Ultimately, an international prenuptial agreement serves as a tool for conflict resolution, offering a framework for how spousal, financial, and child-related matters should be handled in the event of a divorce. Without an agreement, the resolution process may be lengthy, expensive, and stressful as spouses may need to navigate multiple sets of laws and jurisdictions. In an era of increased globalization, the importance of international prenuptial agreements cannot be underestimated.
Various Countries, Various Laws: Legal Requirements
U.S. prenuptial agreements are generally governed by state law, and the requirements vary from state to state. Most states will enforce an agreement that meets the requirements of the law of the state in which it is signed or the law of the state where the marriage takes place. including in the District of Columbia, Maryland, New Jersey, Massachusetts, New York and Pennsylvania. In some states, the law is not as clearly defined as to which specific law would apply to an agreement signed by two parties in an international or interstate context. For example, Florida has a conflict of law rule providing that an agreement shall be effective according to the law of the jurisdiction where executed or the law of the jurisdiction having the most significant relationship to the parties and transactions. Florida’s clearest example is a law providing that an agreement by a couple residing, OR planned to live, OR from an authorized marriage license jurisdiction will be valid.
The Uniform Premarital Agreement Act has been adopted in 25 states and the District of Columbia. This act sets out basic rules for the enforcement of prenuptial agreements, resulting in greater predictability for their results. It also expressly addresses the issues surrounding prenuptial agreements and international law.
The U.K. recognizes "pre-marital" contracts, which have been used often between parties entering into intended marriages in the U.K., but are not valid unless they are enforced in a subsequent divorce court proceeding. The primary focus in the U.K. seems to be the eventual silence of pre-marital contracts, unless there is active enforcement in a single common law jurisdiction during the pendency of a divorce proceeding. If a compliant pre-marital contract is covered by the laws of more than one common law jurisdiction, there may be problems in enforcing it, unless it is properly performed in all of those jurisdictions. A contract could also be unenforceable if it is deemed to potentially be void as promoting divorce, since either party could try to escape its provisions by filing for divorce in a different country or common law jurisdiction. This is not unlike the similar thoughts about the enforceability of pre-nuptial agreements in the U.S., although the latter would tend to look at the laws in just one common law jurisdiction, whereas the U.K. would look at the law of several common law jurisdictions, where appropriate, both for its enforcement, and for jurisdiction to hear the parties’ divorce case.
During the EU member period for the U.K., the U.K. also participated in an attempt to harmonize international law for several countries. The Rome III regulation was to be used by a broad range of EU member states, including the U.K. and France. Rome III has not been very successful to this point, although it was a dramatic attempt to organize family law and marital law for EU member states in a global context. Its stated purpose was to replace national rules with a common law across Europe for the jurisdiction for the dissolution of a marriage. Up until now, member countries have used their own internal rules. After Great Britain exited the EU process of Rome III, France decided to opt out the process. Thus, the first major EU attempt to commingle legal concepts and processes for marital law within Europe has not been effective.
Most EU member states have already adopted their own set of laws with respect to any potential prenuptial agreement between citizens of those countries. This could lead to potential conflicts between the EU country and non-EU countries that could complicate the creation of a valid prenuptial agreement. Typically, these issues surround the grouping of common law and civil law jurisdictions.
Prenuptial Agreement – How to Enforce it
The enforceability of international prenuptial agreements is dependent on a number of factors. The most significant of these factors include the jurisdictional authority of a particular court and whether the agreement complies with local law. To elaborate further, if couple A (who are both citizens of Country B) are married in Country C and then move to Country D, any divorce proceedings brought before a court in Country D, would be subject to the laws of Country D. However, whether Country D will recognize the prenuptial agreement between Couple A, is dependent upon (among other things) the laws of Country D. If the courts of Country D do not recognize foreign prenuptial agreements, couple A would not be able to rely on the agreement should they get divorced in Country D.
In this sense, the application of local law can mean either the validation or invalidation of a particular prenuptial agreement. While some jurisdictions will uphold foreign prenuptial agreements, in certain scenarios the agreement itself may be deemed to contravene local public policy and thus be set aside. For example, in England, the Matrimonial Causes Act 1973 provides that a post-nuptial agreement shall be binding on the parties subject to the following conditions; (1) that it was executed voluntarily; and (2) that the provisions provided for in the agreement are fair. Where the agreement fails to meet the foregoing conditions the court may set it aside. As such, when adjudicating upon a divorce in which a jurisdiction attempts to enforce an agreement made by a couple outside of the jurisdiction, it is more than likely that the local court will not recognize the foreign agreement but apply the jurisdiction’s own public policy (i.e. fair and just outcome).
Worldwide Prenuptial Agreement – Drafting a Success
Within the context of a recognized international prenuptial, the same elements that would be required in respect of a domestic prenuptial would apply, including the following:
Disclosure
Full disclosure of assets and liabilities is made between the parties. It may be required that there be exchange of property statement forms in prescribed format. It is neither appropriate to retain lawyers who are partners in the same firm, nor to draft the agreement without the involvement of lawyers.
Independent Legal Advice
Both parties will receive independent legal advice from their own separate solicitors on the meaning and implications of the agreement. Both parties would acknowledge in writing within the agreement that they have had independent legal advice.
Time For Review of Draft
Both parties are to have sufficient time to receive legal advice , ask questions of their solicitors and make an informed decision prior to signing the agreement.
Notarization
The parties would acknowledge that the agreement has been entered into of their own free wills, and that in the absence of unconscionability, the agreement would be ultimately enforceable.
Governing Law
The law that governs the agreement varies depending on the residency and domicile of the parties. The governing law clause should address which law applies to the agreement. In situations where one party is a resident of another province or country, jurisdiction to enforce the agreement may be based upon the domicile of except in circumstances where the parties were married or either of them were habitually resident within the jurisdiction when an application under the agreement is made.
Common Problems with International Prenuptial Agreements and How to Solve Them
Drafting and enforcing an international prenuptial agreement comes with its own set of challenges, which all parties would be well-advised to understand ahead of time. One of the primary challenges is determining which country’s laws apply. When spouses hail from different countries, the court of one might accept a prenuptial agreement drafted in accordance with the law of the other and vice versa, but there are no guarantees. Another common challenge is recognizing the potential differences in the power of a court, depending on where the divorce takes place. In some countries, courts can nullify or void prenuptial agreements without cause, so no matter how valid an agreement may otherwise be, it may not be enforceable. The laws of different countries vary significantly, and individuals interested in creating international prenuptial agreements would do well to understand and plan for these discrepancies. Only then should parties invest the time and expense necessary to create an enforceable international prenuptial agreement.
Real Life Scenarios, Various Case Studies
To illustrate the global role of international prenuptial agreements, we can look at two illustrative case studies: international couples and United States residents. First, an American and a Brit who marry in Antigua, with no nuptial agreement, could be stuck in limbo. The net worth of the American is in the U.S. and the net worth of the Brit is held in England. Which country has jurisdiction and authority for the division of assets? In most cases, it’s the United States because that is where the Antiguan divorce could be filed. In the unusual situation where the Brit relocates to the U.S., gets to know a good divorce attorney and obtains competent advice; it would be the U.K. that has jurisdiction and the Antiguan divorce would not be recognized. Why? Because the American citizen moved to the U.K. and obtained what is known as habitual residence. In such a scenario, it would make sense that the Commonwealth would decide the division of its property- residing Brit with U.K. income and capital gains tax advantages.
In a second scenario, the American graduates from law school and is hired by a large firm with an international law practice. On a international travel-based assignment in England, the American meets a lovely Englishwoman and decides to enter into a nuptial agreement that protects his law school merit-based awards and awards of stock options, capital gains and bonuses. The marriage, after eight years, turns into irreconcilable differences and he files for divorce in London. The nuptial agreement is valid and enforceable in London and in the State of Florida. That does not mean, however, that the entire property award will be upheld in the State of New Jersey in this example. The laws of equitable distribution and the laws of marital versus non-marital property are entirely different. The challenge for the American is that in England, equitable distribution focuses on the length of the marriage, the "needs basis" as it relates to the difference in the two spouses’ incomes, and the needs of the children under the age of 18. The American will likely be ordered by the court to pay in the neighborhood of 20 to 30 percent of his net worth to his wife as an equitable distribution award. The lesson here is that it is critical to have an experienced attorney as part of the team, because the US attorney will be able to advise that the nuptial agreement will be enforceable in the U.K.; however, an offer should be made to resolve this matter without a trial because it is likely that the equitable distribution award in the U.K. will far exceed the amount that would be awarded in the United States for a long duration marriage.
Trends for the International Prenuptial Agreement
Given the unique nature of international prenuptial agreements, they have been the subject of extensive legal reform and scholarly debate. As international couples become more common, the need for carefully drafted international prenuptial agreements will ensure that they are a topic of both legislative standards setting and professional discussion. Throughout the European Union, draft legislation is being considered to develop a common prenuptial regime for all EU member states. Such reform would aim to create a harmonized system across state borders. Drafted to be consistent with the 2007 Hague Convention on the Law Applicable to Matrimonial Property Regimes , these proposed laws would be better suited than common law to international couples. Likewise, as globalization increases the diversity of cultures, lifestyles and values, there will hopefully be a trend toward uniform prenuptial agreements that are reflective of a broader societal understanding. In the coming years we will likely see more active participation by legislators and jurisprudence in international prenuptial agreements. Such reform will interest not only international couples, but also legal professionals and scholars.
