London reasserts role as divorce capital

The Court of Appeal’s recent decision in Potanina v Potanin was keenly awaited by those in the divorce law community who advise international HNWs, as the latest test of England's reputation for being a fair and generous forum.

And it didn’t disappoint. In a unanimous ruling, Mrs Potanina successfully obtained permission to pursue her financial claims here against her former oligarch husband under Part III of the Matrimonial and Family Proceedings Act 1984 (Part III claim), a judgment that reinforces London’s standing as ‘divorce capital of the world’. 

This may have surprised some given the couple spent most of their married life in Russia, where they divorced after a long marriage, and given the hard fought procedural battle that had already taken this case all the way to the UK Supreme Court. 

However, the Court of Appeal had little difficulty in concluding that Mrs Potanina has solid grounds to bring her application based on her sufficient connections to this country and the 'limited' view of the assets that was taken in Russia. 

The Russian court had awarded Mrs Potanina a settlement representing under 1% of the family wealth, despite a blizzard of litigation and Mr Potanin being one of the wealthiest men in the world with accumulated assets estimated at $20 billion. Unfortunately for Mrs Potanina, the Russian courts failed to take into consideration assets held beneficially via trusts and companies. 

The Court of Appeal observed she had only received a fraction of what she might have received in this country and even went so far as to note that it could be argued the size of her award in Russia meant her reasonable needs could not be met. 

This reaffirmed England’s wider view of “resources” and our appeal as one of the most generous divorce jurisdictions in the world.

The purpose of Part III claims is to alleviate the injustice in cases where no, or no adequate financial provision is made by the foreign court. The Supreme Court in the leading Part III case of Agbaje (2010) emphasised that the claim is not designed to provide a second bite of the cherry. Critics will argue that Ms Potanin’s award of over $40m can hardly be classified as a failure to make proper provision and that the Court of Appeal’s decision is very much permitting that second bite.  They will add this case opens the door to increased “divorce tourism” and encourages those with tenuous links to England to try their luck here in the hope of securing a more generous award.

However, looking at the circumstances of the case, it seems the issue of fairness has prevailed. The Court of Appeal relied on the High Court judge’s own conclusion that the Russian settlement, is “paltry” by English standards and would lead to Mrs Potanina suffering hardship. The assets within the companies and the trust structures were built up during the marriage and are therefore considered matrimonial, against which the wife would have a sharing claim under English law. Mrs Potanina received less than 1% of the wealth after a 30-year marriage – an outcome considered manifestly unfair. Fairness, in the context of English family law, is a relative concept. 

In every Part III claim, there is a tension between fairness, respecting the outcome of foreign proceedings and the need to avoid England becoming a jurisdiction for opportunistic claims. The Court of Appeal has given a strong signal that England will not shy away from intervening where there is a stark injustice brought about by a foreign order. That may not be universally welcomed - for every international case that attracts headlines, there are many domestic litigants facing unacceptable delays in resolving their own disputes. The Court of Appeal acknowledges that this case had already taken up substantial resources. Yet they chose not to close the door and have underscored London’s position as a venue of choice for high-value, complex international divorce litigation.

Looking ahead, this litigation is far from over. The High Court will now grapple with the substantive issue – what should Mrs Potatina receive? Given the billions at stake and the history of the litigation, there is no doubt that Mr Potatin will appeal to the Supreme Court.

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