Why are prenuptial agreements binding on the continent and not here?
In the case of Radmacher v Granatino the court here nearly held the parties to a prenuptial agreement. In Germany where the agreement was made the couple would have been bound by the agreement and no further investigation would have been undertaken. The court here said that for the court to uphold an agreement it would have to be fair. Why is there such a difference here to the position on the continent?
Jurisdictions on the continent are based upon the concept of a Matrimonial Property Regime which couples opt into when they marry. A Matrimonial Property Regime (MPR) defines how the capital assets of a marriage will be divided when it comes to an end either on death or divorce.
In France there are a number from which couples can choose, the two extremes being separation of property and community of property. In the former case each spouse keeps what they own. If therefore the family home is in the husband’s sole name he keeps it and there is no adjustment for need or otherwise. If the couple choose community of property then everything is divided equally. There is scope during a marriage to change the regime but a decision is made at the time of the marriage. The decision on the MPR will also bind creditors so that if there is separation of property a creditor of one spouse cannot sue the other but can if the couple have chosen community of property.
In France maintenance for a spouse is treated separately but is restricted to a sum sufficient to allow a spouse to obtain work and adjust. The usual maximum would be for 8 years but maintenance is wherever possible capitalised. This is due to the tax regime whereby capitalised maintenance attracts a nominal tax charge but maintenance paid periodically is taxable income in the hands of the payee.
Jurisdictions on the continent are based upon the concept of a matrimonial property regime which couples opt into when they marry. At least on the face of it we do not in this jurisdiction have such a concept and we cleave tightly to our cherished system whereby our courts retain the discretion to come to a just and fair conclusion at the end of a marriage even though the cost of running such a system both for the clients and the state is eye watering.
The continental jurisdictions also run a system of applicable law. So that the French courts can come to the conclusion that on a divorce in their jurisdiction they will apply the matrimonial law, for them the MPR, that applies in the relevant jurisdiction. So when a French court decides that the law of England and Wales applies to the divorce and look in our direction for the appropriate MPR what do they see? We would say of course that we have no such thing and the court has the power to do what is right. That however is not what the French see. They take the view that we have a MPR that provides for separation of property and therefore take the view that each spouse simply keeps the assets they own.
How do they come to this conclusion? At the time of marriage no decision is taken as to how property should be divided. There is no opt in to community of property and therefore the default is they each keep what they have. Further a creditor cannot sue either spouse for a debt so there cannot be community of property.
From their perspective the conclusion they draw makes perfect sense. We know of course that no decision is taken at the time of the marriage because the appropriate division will be decided at the end based on the circumstances then. This, however, is an entirely foreign (excuse the pun) concept to a jurisdiction based on MPRs.
With all of this on board the reason for the different status of pre-nuptial agreements here and on the continent becomes significantly clearer. Couples on the continent must choose at the beginning of a marriage how their property will be divided at the end of a marriage. All a pre-nuptial agreement does is set out the couples’ own personal MPR. Here however we are trying to anticipate what a fair result might be in 5, 10 or 20 years’ time. Not a simple exercise but one that has to be undertaken if the court here is to be persuaded that a prenuptial agreement should be upheld.
Do we want to have binding prenuptial agreements? If we do then moving to a system where we have a Matrimonial Property Regime would help.
Do we really not have something close to a Matrimonial Property Regime already? Very simply our system could be boiled down to the following in a marriage of any length:
- Exclude external assets
- Divide equally the assets accrued during the marriage
- Make adjustments according to need
The Germans have a matrimonial property regime Zugegewinnausgleich which provides for the equal division of accrued gain. If we bolted on to that system a needs safety net would we not have a MPR which would for the most part achieve the outcomes we would expect now?
An MPR for England and Wales and binding prenuptial agreements anyone?