The long-running legal battle between Mr Potanin and his ex-wife Mrs Potanina has received understandable legal and mainstream media attention. Most recently, a Court of Appeal decision permitted Mrs Potanina to pursue her claim under Part III of the Matrimonial Causes Act for financial relief further to an overseas divorce. This case is undoubtedly sensational due to Mr Potanin’s wealth and, by extension, the value of the litigation, estimated by some to be $30bn. It is also a case that has put a renewed spotlight on the willingness and ability of the courts in England and Wales to permit Part III claims.
Will the floodgates open?
For some time, London has been labelled the ‘divorce capital of the world’, with applicants under Part III earning a reputation as ‘divorce tourists’. This must stem in part from the breadth of reporting on such cases. It must, however, also reflect the fact that, unlike some other jurisdictions, there is a statutory framework for such claims to be pursued, and case law which makes clear how and when they are to be permitted. For potential applicant spouses, most often female, there is arguably a presumption that this is the jurisdiction of choice.
There has been concern among family lawyers that the decision in this case would open the floodgates to a raft of litigation, with ex-spouses who can show a tenuous link to this jurisdiction being permitted to bring claims. However, when the decisions of the High Court, Court of Appeal and Supreme Court are considered collectively, this may not be the case after all.
How can applicants adapt?
The law as applied here is well established. The issue that went before the Supreme Court centred not around the validity of Mrs Potanina’s claim, but instead where it should be presumed the burden lies in respect of orders made. The decision of the Supreme Court was that it was for Mrs Potanina to satisfy the court of her claim, even after being granted leave to apply, and it was not for Mr Potanin to deliver a ‘knock-out blow’ to overturn that ex parte decision.
This will impact on advice given to prospective applicants, both in terms of how comprehensive and transparent they should be at the outset and the need for more detailed ‘front-loaded’ submissions to accompany the application.
At the most recent hearing, the Court of Appeal was satisfied that Mrs Potanina had a sufficiently strong connection to this jurisdiction that her claim should be permitted. This was based on facts as they were in the original ex parte application, which were not then disputed by Mr Potanin. The legal threshold remains a high one and is most commonly based on habitual residence or domicile. In Mrs Potanina’s case, she was found to be habitually resident in England for at least a year before her application, having obtained an investor visa, cutting almost all ties to Russia and purchasing a property in London.
This would seem to be the least controversial aspect of this case, but does perhaps set down a road map for potential future applicants who could pre-emptively reorganise their own lives to establish jurisdiction here.
Difficulties the couple still face
In addition to her connection to England and Wales, Mrs Potanina was also found to have a substantial ground for her application. It was noted specifically that the award Mrs Potanina received in Russia was a ‘tiny fraction’ of that which she might have received under English law, being perhaps only 1% of Mr Potanin’s wealth. This was because a significant proportion of Mr Potanin’s property and business assets was held legally by other companies or individuals, but beneficially remained under his control, and those assets were not considered as ‘matrimonial’ by the Russian courts.
The matter will now be listed in the High Court to determine the extent of the award that Mrs Potanina should receive. That will not be a simple exercise. Mr Potanin has had several years to consider the structuring of his assets
and so the court may find it difficult to unravel what should be considered as matrimonial or otherwise. Further, if the court here needs to enforce any order for disclosure, for example, in Russia, this would in all likelihood prove problematic. Even if an award is made, Mrs Potanina will then have to consider how it can be enforced. Previous cases have demonstrated how difficult this could prove to be.
A lifeline for others
While Mrs Potanina still faces an uphill battle, this decision does reinforce the ability of the courts here to look behind the strict legal ownership of assets. This may serve as an invaluable lifeline for ex-spouses who divorce in a jurisdiction that does not have this wide-ranging approach, particularly if those assets form most of the matrimonial pot. It will need to be case-specific, and, like for Mrs Potanina, enforcement will be a key consideration, but this could open up Part III to those not strictly in the ultra-high-net-worth category.
Caution and confidence for advisers
It may be too early to decide whether this case cements London’s reputation as ‘the divorce capital of the world’. That decision may be better made once the High Court has assessed the extent of Mrs Potanina’s award, and once she has in fact enforced that decision. Until that point, future applicants and their advisers should remain cautious. Encouragingly, there is however no doubt that this case will allow family lawyers to advise international clients on possible Part III claims more confidently.
Sean Hilton is a partner at Stevens & Bolton, Guildford
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