by: Jeremy D. Morley

NEW YORK FAMILY LAW MONTHLY, March 2004

If you represent globetrotting clients, be careful! Your married "international" clients who may one day be divorced may face great financial dangers -- or alternatively enjoy significant financial opportunities -- as they travel to and live in different countries.

International People: Local Laws

Although the world is shrinking and more people are residing internationally and enjoying international relationships, divorce laws generally remain local and parochial. Family laws around the world are interwoven with local culture, religion and history, and change at a much slower pace than society in general. Moreover, while the model of a family unit with a single local permanent residency is becoming increasingly outmoded, divorce laws generally remain wedded to the idea that married couples belong to one certain place that will resolve the legal aspects of their relationship.

If you represent international people as they consider divorce, it is critical to consider the various laws that may affect them. Whether a client benefits or suffers from the laws of another country may well depend in part on your ability to spot the issue, secure appropriate advice from international or local counsel and create a strategy that allows the client to take full advantage of the situation.

There is no global consensus on how best to divide the assets of divorcing couples and there are sharp differences between the divorce laws and practices of different  countries.

Scenario No. 1: The Netherlands

Let's assume that you represent a husband who married a Dutch woman and subsequently lived with her in The Netherlands for several years. There was no prenuptial agreement. Now they are separated. The wife remains in The Netherlands while your client has moved to New York. Prior to his marriage, he owned an extremely valuable business, as well as a substantial stock portfolio that derived from an inheritance. His wife had no significant assets at the time of the marriage, or subsequently. Upon marriage, the husband had his adult son run the business, and his broker run his stock portfolio; both have flourished.

When the client appears in your office for a pre-divorce consultation, you discuss the details of New York law. He has lived in New York for a couple of years now, so you provide him with the extremely reassuring advice that, under New York law, both the business and the stock portfolio are separate property and will not be equitably distributed in the event of a divorce. You discuss the fact that New York law will require him to pay some periodic and limited maintenance payments.

Some time later, your shocked and furious client informs you that his wife has instituted suit for divorce in The Netherlands, and has asserted that, in her country, the basic legal matrimonial property regime is that of universal community of property, which covers everything that the husband owns. Belatedly, you seek an opinion on Dutch law and, to your surprise and horror, discover that the wife is right. Under Netherlands Civil Code, Title 7, Article 1:94, all assets and debts of individuals who marry, whether these were acquired before or after the marriage, fall within the community. Accordingly, your client faces the devastating loss of as much as one-half of all his assets, including everything that he brought into the marriage.

In an effort to avoid disaster, you immediately institute suit for divorce on your client's behalf in New York. But you are confronted with two enormous hurdles. First, since there is a prior action for divorce already pending in The Netherlands, the wife may well succeed in a motion to dismiss the New York action on the ground of a prior action pending. Second, while a New York court has jurisdiction over the "rem" (the marriage itself), it may not have "in personam" jurisdiction over the wife If  since she may well not be "present" in New York.

If you had understood the laws of The Netherlands from the outset, what might you have done differently? Most importantly, you would have alerted your client to the dangers of facing suit in that country. Armed with advance knowledge, he might have followed a different path. You and he could have created a strategy to maximize the chances of having a divorce suit in New York, such that the state would have not only in rem but also in personam jurisdiction over the wife. For example, your client might have commenced suit immediately in New York. Or he might have sought to persuade his wife to move with him to New York for a trial reconciliation, for at least sufficient time to cause her to become subject to in personam jurisdiction in New York. Or you might have recommended that your client do whatever he could to have his wife execute a post-nuptial agreement. Alternatively, you might have suggested that the parties consider moving to a third jurisdiction.

In my international family law practice, I am often asked to identify the "best" place to which a client might consider moving. For example, executives with multinational oil companies may be offered a transfer to several different countries. We coordinate consultations with counsel in each jurisdiction to elicit the divorce laws and procedures in each location so that a client can make an intelligent choice.

Scenario No. 2: Great Britain

Mary, an American, and Michael, a UK native, are married and live in England. They are both teachers. Mary decides to become a doctor. Michael's continuing income as a teacher supports them both while Mary pursues her medical studies. After she completes her medical qualifications, they move to New York, so that Mary can take up a position as an intern at a New York hospital.

Mary and Michael then decide to divorce. There are no children. Their incomes are both modest, as are their tangible assets. If Michael starts a divorce action in New York, he may reap a huge windfall  and Mary may well rue the day that she ever stepped foot in this state. New York courts treat professional licenses acquired during marriage as marital assets that must be valued and "equitably" divided. Michael's expert will project a vast earning potential for the rest of Mary's career and will establish that Mary's medical qualification is a multi-million dollar asset of the marriage and Michael will doubtless ask for half of the present value of that asset. Of course, Mary will hire her own expert, who will provide a much lower valuation and will assert that "equitable" should mean much less than equal, but she must expect to end up on the receiving end of an order from the New York court that will compel her to make hefty payments to Michael for many years to come.

If Mary consults with you in anticipation of a possible divorce, you should ascertain how the English courts would resolve this matter. You will discover that in England, while the law has changed dramatically in recent years in favor of the spouse who has less assets in his or her own name, the courts do not consider a degree or professional qualification as property to be equitably divided. In an English court, the case would be somewhat routine. There would be a division of the couple's tangible assets, but Michael would receive no payment from Mary for having helped her to qualify as a doctor.

Since New York is a dangerous place for Mary to be divorced in, she should do whatever she can to get out of here as quickly as possible. She might well choose to return to live in England with Michael and to delay any decision to separate from him until that has been accomplished. This might seem to be cynical forum shopping and indeed it is! But, whoever counsels Mary to do this will have performed an invaluable service to her.

On the other hand, if you represent Michael, you would counsel him to file suit in New York as soon as he is able to do so. It would be of the utmost importance that before he leaves New York to return to England, he has a full and complete understanding of exactly what the move back to the UK might cost him.

Procedural Differences 

Not only do different countries' laws differ as they appear on the statute books, but the practices and procedures can differ in ways that dramatically affect the result. It is important to understand how this may affect your clients. Certainly there are vast differences between the procedures in New York, where I practice, and England, where I formerly resided and taught law. There are even greater differences in my wife's home country of Japan.

For example, in England, a divorce decree is generally issued first, while economic matters are handled later. This is in sharp contrast to the practice in New York, where the divorce must generally await the resolution of the financial disputes. This can create an important reason for choosing one jurisdiction or another in the event that one party wants to quickly remarry.

In Japan, while the general legal principles are reasonably clear, the weaknesses of the family court system often render the substance of the law effectively meaningless. Family courts in Japan have little or no enforcement powers, and it is essential that this be taken into account when advising clients who might become embroiled in the Japanese legal system. And, of course, the differences encountered in the numerous other countries your clients might have ties to can run the gamut.

Choice of Law Rules

It is also critical to note that it is often necessary to consider the private international law rules of foreign jurisdictions. In an American court, the "choice-of-law corollary" to the domicile rule means that, once a court has jurisdiction to grant a divorce (based on "domicile," which is primarily satisfied by a designated period of in-state residency), it will apply its own substantive laws to resolve the applicable issues, without having to resort to conflict of laws rules. Accordingly, American divorce lawyers are generally able to ignore conflicts laws.

However, this rule does not apply in most other countries. Returning to our Netherlands example, the law that the Dutch court will apply in divorce cases will vary in designated ways according to the habitual residence and nationality of the parties. Accordingly, it would be essential for your client's legal team to investigate the possibility of asking a Dutch court to apply New York law to the economic consequences of a divorce.

Many other countries have specific code or statutory provisions concerning the choice of law. For example, in Japan, the "Horei" Law provides that where the national law of the spouses is the same, the effects of the marriage shall be governed by that national law; that otherwise, the law of the spouses' joint habitual residence shall govern. Failing this, the law of the place with which the spouses are most closely connected shall govern; but if either party is a Japanese citizen habitually resident in Japan, then Japanese law must apply.

What to Do

If you are counseling parties in these kinds of situations - and they will doubtless become increasingly common - you must become fully familiar with the laws and the procedures in all of the potential jurisdictions. Since you are not an expert in the laws of foreign jurisdictions, you should secure opinions from international counsel.

However, it is not sufficient to simply ask a foreign lawyer for a recitation of the foreign laws. You will be speaking a different language, even when your foreign counterpart uses English words. Not only are the terms different, but so is the entire context. It is important to fully comprehend the practical and realistic effect of the foreign laws.

In sum, you should be prepared to provide extremely practical advice to your international clients -- and sometimes it is essential to do so with great expedition.


Further Examples of Foreign Divorce Laws

Austria: The law requires that "guilt" be established before alimony is paid. In addition, alimony can be withdrawn or reduced if a person is found guilty of "immoral behavior," which includes inviting someone to live with him or her. Austrian women have lost alimony after the courts found that they had "defamed" their husbands by speaking against them in public.

Japan: A ward office divorce can be obtained very quickly, without the need to institute a court proceeding, but the divorces are of questionable validity in other jurisdictions.

Korea: Adultery is a serious crime, and the law is enforced both civilly and criminally. In divorce cases, the "innocent" spouse may receive substantial monetary compensation from the party who is guilty of adultery. In addition, the criminal court may impose serious penalties, including imprisonment, for adultery.

The Philippines: Divorce is prohibited. However, Article 36 of the Family Code provides that a marriage can be voided if one of the contracting parties is psychologically incapacitated to perform the essential marital obligations, even if this incapacity surfaces only after the marriage is contracted. A divorce decree obtained in another country, on the initiative of a Philippine citizen, is not recognized or considered valid in the Philippines. On the other hand, the Family Code provides that an alien spouse may procure a divorce outside the Philippines, which will be recognized in the Philippines.

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Jeremy D. Morley, a member of Morley and Trager, New York, and of this publication's Editorial Board, may be reached at 212-372-3425 and through his Web site, www.international-divorce.com.

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