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  1. Law
August 23, 2019

The £15bn divorce, legals costs and the state of UK family law

By Spear's

There is the potential for significant legal costs to be incurred on both sides of the Potanin/Potania divorce – and there is certain to be media interest, writes Hannah Minty

Family court cases involving significant wealth always attract significant interest. But the case of Russian oligarch Vladimir Potanin and his now-former wife, Natalia Potanina has raised the stakes even further: Ms Potanina is said to have applied to the High Court in London to determine her financial claims after moving to the UK in 2016.

It has been reported that the assets involved amount to an eye-watering, headline-grabbing £15 billion. If accurate, this would far exceed the assets in any previously reported divorce settlement in the English courts, eclipsing the case of Tatiana Akhmedova, the former wife of Russian billionaire Farkhad Akhmedov, who was awarded £453 million of assets totalling over £1 billion in 2016.

Mr Potanin and Ms Potanina are already divorced. Divorce proceedings took place in Russia in 2014 and her financial claims were litigated there, resulting in a financial award reported to be worth ‘only’ £5.5 million. Importantly, Mr Potanin (ranked number 58 on the most recent Forbes Billionaires list) is, according to that publication, worth in excess of $18 billion.  If that’s anywhere close to correct, then a financial award at this level after a 30+ year marriage would be far below anything the English court would have ordered had the financial proceedings taken place here.

It may come as a surprise to many that it is possible for Ms Potanina to ask the English courts to make a further financial award in her favour. Such claims are permitted under Part III of the Matrimonial and Family Proceedings Act 1984 (colloquially called ‘Part III’ claims), which exists to alleviate the adverse consequences of inadequate financial provision in cases of foreign divorce, where there is a substantial connection with England and Wales.

If Ms Potanina establishes jurisdiction to proceed with her application in England and Wales then she will benefit from the principle under English law that marriage is deemed to be a partnership of equals, even where the wealth is generated by only one of the parties. Ms Potanina could try to argue that she is entitled to claim up to 50 per cent of the wealth generated by Mr Potanin during their lengthy marriage.

For his part, Mr Potanin could seek to justify a departure from equality if he can establish that there are assets which either pre-date the marriage or represent post-separation accrual. He could also try to argue that he has made a ‘special contribution’ in generating wealth at this level, although this argument has been successful in only a few cases.

Ultimately, much will depend upon the court’s assessment of the assets available for distribution. It is reported that Mr Potanin was able to persuade the courts in Russia that he had few assets, but Ms Potanina has disputed this, suggesting that much is hidden. Importantly in this regard, the circumstances in which the family courts can pierce the corporate veil and make orders in relation to assets held by a company are limited.

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That said, the disclosure process in England is robust and Mr Potanin’s assertions as to the level of his assets would be subject to considerable scrutiny and forensic assessment. The English court will not necessarily be bound by any finding made by the courts in Russia on this issue.

Even if Ms Potanina is successful in her application and goes on to secure an award, she may still find herself embroiled in further litigation for years to come in an effort to enforce any judgment she obtains.

If the case proceeds in England, it has been suggested that Ms Potanina will seek an award worth £5.8 billion but much remains unclear at this early stage

What is certain, however, is that there is the potential for significant legal costs to be incurred on both sides, if Ms Potanina’s application results in contested proceedings, and the media interest in this sensational story will be considerable.

Against this background, family lawyers are increasingly seeing many couples opt to arbitrate or settle proceedings out of court to minimise costs, and to keep their personal and financial affairs private and beyond scrutiny – both public and state – where possible.

Hannah Minty is a family lawyer at Russell-Cooke

Read more

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Divorce 101: Why the breadwinner-homemaker ideals need to go

Want privacy in divorce? Make your financial claims less newsworthy

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