On 31 January 2024, the UK Supreme Court handed down the much-awaited, judgment in the case of Potanin v Potanina .
The case centred on whether Natalia Potanina should be allowed to bring a $6 billion claim for financial relief against her former husband, the sanctioned Russian billionaire Vladimir Potanin, in the English courts, despite having already litigated widely in Russia.
Mr Potanin was successfully represented by a team from Payne Hicks Beach comprising Baroness Shackleton of Belgravia, Nick Manners, Camellia Buckmaster and Marina Fitzalan-Howard, who said the ‘landmark victory’ will have a ‘long-lasting impact’ on family law.
Mr Potanin’s appeal was far from unanimous, and was allowed by a majority of 3:2 . In a powerful opening paragraph to the lead judgment, Lord Leggatt began: ‘Rule one for any judge dealing with a case is that, before you make an order requested by one party, you must give the other party a chance to object… What is always unfair is to make a final order, only capable of correction on appeal, after hearing only from the party who wants you to make the order without allowing the other party to say why the order should not be made.’
The Matrimonial and Financial Proceedings Act 1984 Part III
This was a comment on the somewhat unusual, judge-made procedure that has evolved in the discrete area of financial remedies law that is Part III of the Matrimonial and Financial Proceedings Act 1984. This is the provision in UK law that allows spouses who have been divorced outside England and Wales to bring a claim for financial relief here, provided they can show ‘substantial ground for the making of an application for such an order’, specifically their connections with the jurisdiction.
There is often good reason to seek a financial arrangement in England and Wales. Some jurisdictions, the UAE for example, usually leave assets on divorce to the party in whose name they are owned; there is no sharing principle or concept of matrimonialisation of property during a marriage.
In practice, this often means very wealthy couples who have already had one round of divorce and financial applications settled in their national courts, coming to London seeking a more generous award. It is, in part, the reason why London earned its moniker as, ‘the divorce capital of the world’.
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Mr Potanin, undoubtedly one of the world’s richest people (with wealth estimated at $20 billion), had already been ordered to pay his ex-wife between $41.5 million and $84 million by the courts in Russia. But she reportedly wanted $5 billion and came to London to look for it.
Had this been a purely English case with English parties, Mrs P would have had a decent shout at significantly more. This was after all, a long marriage with three children, and the English starting point of equality would have indicated an award in billions rather than millions.
Should permission for Potanin v Potanina been granted?
If one looks at the background to Mrs Potanina’s application, one might wonder at the procedure which has been in place for well over a decade – established as it was by the combination of the Supreme Court decision in Agbaje v Agbaje and the Court of Appeal decision in Traversa v Freddi .
To bring a Part III claim, the applying spouse first needs the court’s permission. The bar for permission is set low. Mrs Potanina, in accordance with normal practice, applied without giving any notice to Mr Potanin. In January 2019, Mr Justice Cohen, despite saying he would ideally have liked to have heard from both sides, nonetheless granted the permission, applying the law as it then stood.
The procedure then available to Mr Potanin was to apply to set aside the permission, but to succeed there had to be a compelling reason; what came to be known as ‘a knockout blow’.
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In October 2019, on the husband’s application, Cohen J did set aside his own grant of permission to bring the claim once he was fully appraised of the facts – Mr Potanin’s team said he had been misled. The Court of Appeal, however, determined that in line with the well-established practice, he should not have done so, there was, they said, no knockout point. That led to the appeal hearing in the Supreme Court and the strong opening paragraph in Lord Leggatt’s lead opinion.
As the case amply demonstrates, if Cohen J, had been apprised of the full picture, he would not have granted permission in the first place. Yet the law only permitted him a necessarily one-sided view presented by Mrs Potanina’s team, as Lord Leggatt was at pains to point out: ‘… I would feel bound to say that, in the eloquent words of Mr Bumble, “the law is an ass”.’ (Paragraph 30).
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‘The knockout blow’
So, gone are the days of permission being granted unless the respondent can deliver a knockout blow. The court must now treat the word ‘substantial’ in section 13 as meaning ‘solid’, having a ‘real prospect of success’. As both majority and minority judgments made clear, this will inevitably lead to an increase in the number of contested Part III permission hearings - and longer ones.
What then of Mrs Potanina’s claim for more dollars? Well, on it goes. The Supreme Court returned the cases to the Court of Appeal for more arguments to determine the two further technical grounds of her appeal. The battle continues but then so does the Ukraine war and the sanctions that bite on the assets that might be available.
Whether London retains its ‘divorce capital of the world’ title remains to be seen (whether or not it ever merited the title is another matter). What can be said with some certainty, and with the greatest of respect to Lords Briggs and Stephens, is that the overall impact of greater scrutiny at the permission stage may well weed out less meritorious claims, but it will not stop foreign spouses from fighting for more cherries.
