The European marriage contract - a different animal to the pre-nup?

13 December 2010

I have read with interest the commentary on a highly contested divorce currently proceeding in New York, the divorce of Olivier Sarkozy (the half brother of Nicolas Sarkozy) and his wife Charlotte. According to the press reports (even reported in the English press - eg see Telegraph of 5 December) Mrs Sarkozy is trying to overturn the terms of a French 'pre-nup' the parties had entered into when they married in the 1990's. Olivier apparently had been 'summoned' by his future father in law to sign the contract to protect Charlotte's family trusts. Since then Olivier's career and financial position had gone from strength to strength and, by the time of the parties' separation, the terms of the agreement no longer suited Charlotte and to the contrary were very much in her husband's interests .

While it is not clear from the press reports, it sounds as though the agreement that the parties had signed was a typical French (indeed European) marriage contract, providing for a 'separation de biens' a separation of assets thereby ensuring that everything they each built up by way of income or capital or inherited would remain theirs in the future including upon divorce.

Such a contract can be a very different beast to the extensive pre-nuptial agreement that English lawyers consider will be on the increase as a result of the recent Supreme Court decision of Radmacher v Granatino. In that case Katrin Radmacher, a wealthy German heiress, had entered into a detailed agreement providing that her husband would not receive anything on divorce, which is not typical of the simple separation of assets marriage contract that we often see in France or other continental countries. Such contracts are entered into for lots of reasons, eg to protect each spouse against future creditors as, unlike in the UK, spouses on in many European countries can be responsible for their partner's debts (here we are only liable if it is a joint debt) . Many countries such as France have 'property regimes' and if they want to avoid being subject to the 'community of property' regime (which is the default position if parties don't enter into a contract) they need to elect a different property regime, such as a separation of assets.

The Supreme court in Radmacher on 20th October 2010 gave the green light to the enforceability of prenuptial agreements (unless the terms would lead to unfairness) but, in making their ruling, they were clearly considering the wider more complicated pre-nup where the terms of divorce are specifically mentioned. The court did not address (some may say surprisingly) what the court should do if they are faced with the more typical short European marriage contract which just deals with the property regime and does not go into any more detail (eg that no claims can be made in the event of divorce). In the case of F V F (in which we acted for the wife in the original hearing) the husband sought to rely on the simple foreign separation of assets contract in his appeal against the decision of the District Judge, referring to the Court of Appeal’s 2009 judgment in Radmacher (like the Supreme Court, the Court of Appeal had agreed that the terms of the pre-nup should be enforced). However we are yet to see how a spouse will use the Supreme Court judgment to support his or her contention that the marriage contract should prevent financial provision being made for their spouse. How the English court will respond post the Supreme Court‘s decision remains to be seen but, if fairness is to be achieved, the differences between the short marriage contract and the extensive pre-nuptial agreements which English lawyers are now regularly drafting need to be appreciated. And, when negotiating such agreements, lawyers need to be alive to the fact that a couple's financial circumstances could well change in the future (like Charlotte and Olivier Sarkozy) and need to think carefully as to whether, if they do, the agreement the lawyer has fought hard to negotiate will still be in their client's interests? My earlier blog ‘Clean break for wives with children – are they achievable?’ discusses this and other practical difficulties of negotiating a full pre-nuptial agreement.

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