Frank Arndt has a particular interest in the outcome. He is the head of Stowe Family Law’s busy International Department, which specialises in cross-border divorce and expat cases. Frank has been discussing the events in Malta with Lorraine Schembri Orland, one of Malta’s top family lawyers (and a member of the International Academy of Matrimonial Lawyers, to boot). Their conversation, copied below, raises some interesting points about the way forward in Malta, not least of which is the speed with which prospective divorce legislation is proceeding.

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Frank Arndt: Were many people in Malta surprised by the result of the divorce referendum?

Lorraine Schembri Orland: Polls leading up to the referendum showed that the “Yes” vote would win. However the voter turnout was at 73%, which is far inferior to the voter turnout in a general election. Many stayed at home because of issues of “conscience”.

FA: How have people responded to the result of the divorce referendum? Have you had many calls from prospective clients who are seeking to get divorced?

LSO: Yes. Clients have expressed interest both before, and obviously after the referendum result. The first reading has passed through Parliament but many  MPs are stating they will not respect the results of the consultative referendum and will vote according to their conscience.

FA: Previously, what were the options for unhappily married couples in Malta? Did they stay together? Was it considered socially acceptable to separate? Could Malta-based couples divorce overseas?

LSO: Maltese Law previously gave couples a choice between personal separation – amicable by contract, or judicial – and annulments, both civil and Church. A foreign divorce judgment would only have legal effect in Malta if one of the spouses was a national or domiciled in the country where the divorce was pronounced, so it was not easy for two Maltese to divorce abroad unless one of them changed their domicile. Married couples would not stay together and personal separations have been on the increase for several years.

FA: Why, in your opinion, has the Irish Family Law Act been used as a starting point?

LSO: Well, I think it was the perception that Ireland is a Catholic country, like Malta. For example, Irish law was used as a model in domestic violence legislation. It seems strange to me that we do not look to countries with a civil law tradition based on the Code Napoléon.

A bit of background will explain matters. This Bill was a single Member’s Bill, introduced by the MP who holds the one vote in the Prime Minister’s Party that can topple the Government. So it was introduced against a political backdrop. There was no prior consultation, contrary to previous family law reforms, which were introduced amidst widely conducted information campaigns.

We are now faced with an important law, which will go to the core of family law in Malta, passed in a rush without consultation or contribution on substantive issues by the legal profession, constituted bodies and the public in general. It is also incomplete as the Bill stopped short of pension issues.

FA: On what grounds will a court in Malta grant a divorce?

LSO: The Bill provides that divorce will be a “no fault divorce” and the parties must have been “living apart” for four out of the last five years. Also there must be proof that a reconciliation is not possible.

FA: How many people in Malta are likely to be affected if and when the Divorce Bill becomes law?

LSO: No statistics are available. However if divorce requires a five-year de facto separation period, it may well cover all of those who are already in the process of separating.

FA: That’s a potentially lengthy separation period. Does the Divorce Bill make it possible for people to apply to the court for interim maintenance or final settlements during that period? If not, how is the vulnerable party to be supported and protected?

LSO: I would suggest we wait until the Bill is enacted, when I will be in a better position to answer these questions. I don’t think that a divorce settlement will depart from a separation settlement, for the time being. On the contrary: we are used to inserting a clause in a separation agreement, which states that the agreement cannot be varied in the eventuality of a divorce .

FA: Have any requirements been put into place to ensure that in Malta, divorcing couples are aware of alternative methods of dispute resolution, such as mediation and collaborative divorce?

LSO: Mediation in separation proceedings is compulsory in Malta. Mediation is also compulsory in proceedings concerning child custody and maintenance, so we do have a mediation culture already.

FA: Do prenuptial agreements, signed in Malta or elsewhere, have any legal standing in Malta? If so, do you expect prenuptial agreements and postnuptial agreements to become increasingly popular?

LSO: Prenups and postnups are valid in Malta if drawn up by a Notary Public. A postnuptial deed will require prior court authorisation. The agreements are limited to a choice of regime and maintenance. Contracts published abroad will have to satisfy private international law rules for validity and recognition.

FA: England has a reputation as “the divorce capital of the world”, because there is a perception that wives receive relatively generous financial settlements here. Do you think that Malta will become an attractive option for certain types of people who are looking to get divorced?

LSO: Maltese courts traditionally favour custody to the wife and maintenance for her as the carer of the children. However if a wife works, she would generally not receive maintenance. Her maintenance rights would be suspended until such time as she would be without employment.

As to financial settlements, a couple living in Malta would be subject to the rules of the community of acquests. If one spouse has substantial personal property derived from inheritance or gifts, the other party would not be entitled to a share of that property, independent of the number of years of the marriage. Malta is participating in the enhanced cooperation procedure within the EU and it will impact on the Maltese courts’ mindset. A spouse may also request the right to live in the matrimonial home, but this is not automatically granted.

FA: What is the likely impact on Malta’s expat community? Do you expect to see many expat clients?

LSO: I already have a number of foreign clients. Malta’s accession to the EU already left this sort of impact on our legal scene. Until now, divorcing in Malta was not an option for foreigners living in Malta but yes, I expect it to become an option especially in view of EU jurisdictional rules. I also expect to see a surge in Maltese divorces and consequent downturn in civil annulments.

FA: What financial orders or ancillary relief orders can a Maltese court make? For example, what about maintenance pending suit orders, property adjustment orders, pension sharing orders and financial compensation orders?

LSO: Maintenance orders pending suit are requested in every case, so these are not new. The courts will dissolve the property regime on a judgment being pronounced.

As to pension sharing orders, these are consequential on maintenance orders, but the big issue now is how pensions will be regulated in Malta upon divorce. The Bill has not reproduced the Irish provisions on pensions, but we have asked for specific provisions as such a matter cannot be left unregulated.

As to financial compensation, again this depends on the division of property. Maintenance can be converted to a lump sum payment or capital transfer upon separation, so I expect that this will be the case on divorce.

FA: Who pays for divorce costs? Can one party be held liable for another party’s costs?

LSO: The party at fault bears costs in the Maltese courts. However divorce will be “no fault”, so I would expect that each party will bear his or her costs.

FA: What does the future hold? Do you think that divorce is likely to become even easier in Malta, as time goes by? Will it lose its social stigma? What are your predictions?

LSO: I think that several years would have to pass before the grounds for divorce were touched.  Couples are also cohabiting, and many people who have separated have declared they will not remarry. Going through a contentious separation makes people wary of making the same mistake! In this respect, I think Malta will reflect the mix found in neighbouring societies.

Importance is still given to the traditional marriage as the basis of a stable society. The lesson that has been learned is that people should only marry if they have a mature understanding of what marriage is all about  and wish to commit to one another.

FA: Thank you, Lorraine.

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Frank Arndt heads the International Law Department at Stowe Family Law. He is a qualified lawyer in two European countries, a qualified judge in Germany and a registered European lawyer with the Law Society in England.

An expert in cross-border family law, Frank regularly advises on cases involving families and assets scattered across continents.

Lorraine Schembri Orland runs her own boutique firm, FSO Legal in Valletta, Malta. A specialist in matrimonial and family law before the courts of civil and criminal competence, her expertise includes cases with a significant international element, from child abduction, divorce and annulment, to succession and estate law.

The first female member of Malta’s Chamber of Advocates, and a recognised practitioner before the Maltese Tribunal on the nullity of Catholic Marriage, Lorraine speaks English, Italian and French.

Will London Become the Divorce Capital of the World?

By Catherine Boyle

In an era where divorce tourism is becoming increasingly common, with the globe-trotting super-wealthy trying to split up wherever will give them the best deal, London has the potential to become the divorce capital of the world.

Some divorcing couples battle over who keeps the wok they got as a wedding gift.

In cases where multimillionaires divorce, multiple properties, hefty offshore assets, and substantial trust funds can make the fighting even more prolonged and bitter.

One such case, the divorce between Elena Golubovich and Ilva Golubovich, both in their twenties and from wealthy Russian families, saw the former spouses pay out legal costs of more than 2 million pounds ($3.22 million). Mrs Golubovich tried to get the divorce heard in London, where the couple had lived, while Mr Golubovich, a financier, rushed through a divorce in Russia.

British courts are historically seen as more favorable to the less wealthy partner in the marriage than other jurisdictions. In China, for example, there is no legal obligation to pay child support.

The McFarlane case, where wife Julia McFarlane was awarded 250,000 pounds annually and about 3 million pounds in capital for her contribution to her husband’s career as a wife and mother of their three children, is one of the best-known recent settlements.

The judge ruled that Mrs McFarlane was entitled to a large slice of her husband’s earnings because she had given up a promising career as a lawyer when they married.

The British legal system is also attractive to some people because both partners are legally required to make full disclosure of their assets, while in some countries, including Spain, the onus is on the spouses to prove how much their soon-to-be former husband or wife is worth.

The international super-rich can get divorced in London even if they are not British-born or wed, because under a British regulation known as Part 3 jurisdiction, they can get divorced here if they have substantial links to the UK, such as owning a property.

“It’s obviously very international here, and London has lots of international couples,” Frank Arndt, head of the international department at Stowe Family Law, told CNBC.com. “You do need some substantial presence in the UK.”

The decision over how much child support or alimony should be paid can continue in the UK even if one party has got a decree absolute issued elsewhere, as in the case of the Goluboviches.

In a recent case involving a divorcing Nigerian couple, Agbaje v Agbaje, the wife was able to get a higher settlement under British law because the couple owned a home in the country and their children had been educated there.

“Even if you start proceedings somewhere else, one partner can come back to the UK. That’s a very nasty tool against the wealthier partner,” Arndt said. “A lot of them will try to get as far away as possible.”

Wealthier partners may have good reason to stay clear of London.

In 2006, Melissa Miller walked away from a childless marriage of less than three years with 5 million pounds of her fund manager ex-husband’s 17.5 million pound fortune.

“Every husband saw that with fear,” said Arndt.

And former Beatle Paul McCartney paid out 24.3 million pounds to former wife Heather Mills in 2008, after six years of marriage.

This settlement is dwarfed by the rumored 100 million pounds paid out by Russian tycoon Boris Berezovsky when he divorced his second wife Galina. This figure has never been confirmed.

While pre-nuptial agreements, or pre-nups, are not formally recognised under British law, they are increasingly common and can be binding.

In the case of German paper heiress Katrin Radmacher, appeal judges in the UK ruled last year that her ex-husband Nicolas Granatino was only entitled to 1 million pounds of her fortune, as stated in their pre-nup.

Arndt said that he would advise all high net worth individuals to sign pre-nups as they are being formally recognised more often.

[Will London Become the Divorce Capital of the World?]

© 2011 CNBC.com

When the second wife of Russian oligarch Boris Berezovsky was granted a “quickie divorce” at the High Court last week, Frank was contacted by a number of journalists for expert comment and analysis. His comments, about the Berezovsky case and also about the UK’s much vaunted reputation as the “divorce capital of the world”, have since appeared as far afield as Russia and Australia!

Divorce tourists face judicial rethink

Frank Arndt, head of international practice at Stowe Family Law, said: “There is a perception that wives can achieve a fairer settlement in England and importantly there are obligations here for full and frank disclosure of assets belonging to one party, which there may not be in some countries. Often husbands see divorce as a business deal and look at which jurisdiction is best.” Continue reading»

Boris Berezovsky’s wife granted “quickie divorce”

Frank Arndt, a lawyer at Stowe Family Law, which specialises in big money divorces, said: ”The Berezovskys were married for 18 years, have two teenage children and, although estimates of the couple’s fortune vary, it is indeed likely that any settlement eventually awarded to Mrs Berezovsky will dwarf the £48 million awarded to Beverley Charman in 2008.” Continue reading»

London seals reputation as divorce capital as oligarch faces £100 million payout to ex-wife

[Frank] Arndt said Berezovsky may use what is known in the legal profession as the “stellar or genius” argument used by Charman, in which he said his wife had made no financial contribution to the fortune he had built up in the insurance market during their marriage. His case resulted in a discount from the 50:50 position: a high court judge ruled Charman should have 63.5% of the couple’s wealth rather than half because of his special contribution to building it up and because the assets he was keeping were riskier than those which went to his wife.” Continue reading»

SPOUSES WHO GO FORUM SHOPPING FOR DIVORCE

By Liz Parry

If you think your marriage may be on the rocks, think twice about moving to another country, says Frank Arndt

It is well known that two of the most stressful things in life are getting divorced, and moving house.

When the move is to a different country to start a new life in the sun with your partner, though, it seems reasonable to think that at least it is only the stress of moving you are going to face, and divorce is unlikely to be on the cards in the near future. But is this so? According to Frank Arndt, who was in Malaga last week for a meeting of Spanish and British lawyers, all may not be as it seems.

Frank, who works for the Stowe Family Law firm in the UK, specialises in transnational family litigation. Because laws and procedures vary so much from one country to another, some of the more wily would-be litigants, including those who are intent on getting divorced, are going “forum shopping” – filing the case in the jurisdiction most likely to find in their favour and getting a head start on the unsuspecting party. By way of illustration he describes the case of a wealthy man who lured his wife and children to live in South Africa and then divorced her and returned to the UK leaving her stranded thousands of miles away, with children who could not be moved.

Other women have had similar experiences after planning a family move to Spain, where unlike in England, the divorce courts do not insist on “full and frank disclosure” of all the couple’s assets. By the time the second partner in the case gets wind of the impending divorce, it is usually too late: the case will be heard in the jurisdiction where it is first filed. According to Frank, this situation has led in the past to scenes worthy of being filmed. One wife who had moved with her husband to France found out that he was intending to file for divorce in Paris, and immediately flew back to the UK. She rushed to file her own petition in London, but her husband got there first, by ten minutes, and the case was heard in France.

“Cases like these are not isolated,” says Frank. “It is a real problem, and in my opinion both parties should be on an equal footing”. This and other similar issues were being thrashed out by lawyers last week in Malaga, where because of the exceptionally large foreign resident population, there is a high incidence of transnational litigation.

Custody

The problem of being unexpectedly confronted with a divorce case in which the unaware party will probably be financially disadvantaged is obviously compounded when there is child custody to be taken into account. Frank describes European family law as “like a dog’s dinner” and tells the sad story of a case he recently undertook on a pro bono basis to help a woman, Carly Jones, who had returned from Germany to the UK for cancer treatment and was having to fight the German courts for her right to her children. Frank represented Carly in Germany, obtaining an order that they should travel to the UK to see their mother. The German social services refused to comply, and then appealed against a decision to enforce the ruling, and tragically, Carly died just before the appeal was due to be heard.

SUR in English asked Frank if the notorious slowness of the law in Spain was a factor to be taken into account, but he thinks that family law in Spain does not share this reputation. Delays in court procedures cause stress everywhere though, he says, and in Germany a proposal has been put forward to compensate people financially if their cases are held up.

Frank has some advice for those who are involved, or who suspect they are going to be involved, in a family law case. “Get legal advice fast”, he says, “and get the right advice, from a lawyer who will consult with lawyers in the other country, not just go with their own national procedures”.

You can find the latest digital edition of Sur in English here.

Had the case been heard in England, Mrs Agbaje would have received at least half of the couple’s assets. As it was a Nigerian court left her virtually penniless, with her former husband retaining assets worth £616,000. The case has been in and out of our courts for years now, with Mrs Agbaje seeking a fairer settlement here in England.

Today the Supreme Court ruled in her favour – and I was delighted. So when journalists contacted me for comment, I didn’t exactly mince my words (below). UPDATE: Mrs Agbaje’s peerless Queen’s Counsel, Nigel Dyer QC, tells me that the Supreme Court ruled 5-0 in her favour.

I don’t necessarily share the same opinions about matrimonial jurisprudence as Frank Arndt, Head of our International Law department, who was quoted in The Lawyer. We hail from differing backgrounds: mine is rooted in the common law with discretion as its key, whereas German family law is strict and codified. And the difference in our approach actually works well in the office, where we can advise clients from differing perspectives.

Incidentally, I have never been keen on the description of London as the “world’s divorce capital”. Even though Stowe Family Law is opening a new London office, I feel obliged to point out that good settlements aren’t curtailed by the M25!

Nigeria divorce judgment attracts attention

By Jane Croft

Law Courts Correspondent

The Supreme Court reinforced London’s reputation as “divorce capital of the world” after it found in favour of a Nigerian woman who took her case to the UK courts after disputing the divorce settlement she was awarded by a Nigerian court .

Family lawyers said the keenly watched judgment could open the floodgates for wealthy spouses in “big money” divorce cases who are unhappy with divorce awards made by overseas courts to seek a bigger payout in the UK.

London has been dubbed ”divorce capital of the world” because recent changes in the law meant wives are now favoured in big money break-ups.

The Supreme Court ruled that Sikirat Agbaje had not received an adequate financial settlement from her barrister husband when the couple divorced in Lagos in 2003 after 38 years of marriage. Continue reading»

If you do, and you are also considering divorce, I recommend that you take notice of a recent legal precedent that means Her Majesty’s Revenue and Customs can now close tax loopholes retrospectively and claw back unpaid taxes from trusts which have benefited.

We often see cases at Stowe Family Law in which husbands (more than wives, in our experience) have invested in elaborate tax avoidance schemes. These arrangements have been mostly disclosed during proceedings, but they become a Trojan horse when the Inland Revenue declares they might lead to a huge tax liability in the future.

The case I mention above concerns a self-employed IT consultant called Robert Huitson who set up a tax avoidance scheme in 2001 which took advantage of the Double Taxation Treaty between the United Kingdom and Isle of Man.

The Finance Act 2008 made Mr Huitson’s arrangement illegal and HMRC handed him a bill for £100,000 in unpaid tax. He claimed he couldn’t pay the bill as he had spent all of his income during the period on his lifestyle.

He was not alone. By the time the Finance Act 2008 came into force there were around 2,500 taxpayers exploiting similar arrangements, and the amount of income tax at stake was £100 million.

Mr Huitson tried to challenge his tax bill on the basis that changes outlined in the Finance Act 2008 regarding double taxation relief were applied with “retrospective effect”. This meant that the loophole was not only closed in the future, but also in the past. Mr Huitson’s legal team argued that the Human Rights Act made it illegal to pass laws that could be retrospectively enforced.

The judge however decided that the Financial Act 2008 stuck a fair balance between Mr Huitson and those using a similar scheme on one hand, and ordinary taxpayers on the other. He added that previous attempts to close the loophole had also been backdated, and that Mr Huitson should have anticipated that the same thing would happen to him.

Despite the fact that HMRC could make many people homeless or bankrupt through big tax bills, the judge discouraged HMRC from being lenient with those who owed money. He asked HMRC to consider whether such leniency was fair to everyday tax payers and those involved in the scheme who have set money aside for possible taxation.

So what you might ask does this mean for tax payers and couples considering divorce, or currently going through a divorce?

It is clear that HMRC will readily challenge this sort of arrangement and those using a similar scheme are wise to make sure they have liquid funds available so that any future demands can be met, including claims for interest and penalties.

The lesson for those considering divorce is very similar; if you or your spouse employ an elaborate tax avoidance scheme or invest in illiquid assets that might decline in value, and choose to spend all of your income on your lifestyle then you do so at your own risk. You need to ensure that any court order provides for this possibility, so that if you are subsequently caught post-divorce you do not bear the risk alone.

If you are unaware of your spouse’s financial investments and you only find out when you actually receive their financial disclosure during the divorce it might be to too late to claim you had nothing to do with them.

This reminds me of the 2008 case of S v S (EWHC 1925) in which the husband had been convicted of tax evasion and fraud and imprisoned. A criminal confiscation order of £900,000 had been made against him and the court decided that his wife’s claim for financial support should not be prioritised over the order. In reaching his conclusion the judge rejected her claim that the assets were “untainted” by his activity as the family had become heavily reliant on tax evasion to fund their lifestyle.

Divorce courts are more than prepared to insist money be added back into the matrimonial pot, regardless of whether an investment has been successful or not – but you do need  a compelling reason for them to do so.

However, it is best not to wait until you have no other choice but to accept that outcome, as the taxman will be first in line for payment if any unpaid tax, penalties or interest is at stake.

Getting involved in the financial planning of your family and your future is the only sure way of protecting both.

Frank Arndt heads the International Law Department at Stowe Family Law. He is a qualified lawyer in two European countries, a qualified judge in Germany and a registered European lawyer with the Law Society in England. An expert in cross-border family law, he regularly advises on cases involving families and assets scattered across continents.

Image credit: alancleaver_2000

Tomorrow, the leaders of the world’s 20 largest economies meet in London to discuss the state of the global economy.

High on their agenda will be the issue of offshore tax havens. On the face of it, this is an issue for accountants, not family lawyers. Offshore accounts are favoured by the wealthy as a way of avoiding higher tax levels and, in some cases, masking outright tax evasion.

My previous post on divorce and tax havens described several governments’ purchase of data stolen from LGT Group, a bank owned by the Royal Family of Liechtenstein.

It is difficult to give any reliable figure on how much money is held in tax havens such as this one, but estimates of the value of assets held offshore range from US$1.7 trillion to US$11.5 trillion. A recent report by the United States Senate estimated that American tax authorities could be losing some US$100 billion in annual tax revenues due to offshore tax abuses.

However, there is also an important aspect of family law that should be considered. The secrecy afforded to offshore accounts means that if a marriage does end, it can extremely difficult to quantify the assets to be divided.

The collapse of financial institutions which hid their financial liabilities behind a myriad web of offshore bank accounts, trusts and companies, has propelled these issues up the political agenda.

The G-20 Agenda

Against this background Jose Angel Gurria, the current Secretary General of the Organisation for Economic Cooperation and Development (OECD), announced in February that improved tax cooperation is key to restoring financial confidence.

The secrecy previously afforded to those who used tax havens was protected by the national laws of the haven country: for example, a policy of preventing foreign angencies from accessing bank account information. Those countries are now being pressured to fall into line with the larger economies and adopt the OECD’s standards for information sharing.

If you are a spouse who has hidden money in one of these jurisdictions, beware!

Last November at their summit in Washington, G-20 leaders signalled their determination to combat cross-border tax evasion. Since then, more than 20 bilateral tax information exchange agreements have been signed between different partners.

Here is a brief summary of the tax havens that have been identified, and the progress that has been made:

Austria, Luxembourg and Switzerland have announced that they will adapt their tax laws to reflect the internationally agreed standard of exchange of information developed by the OECD.

Singapore and Hong Kong intend to remove domestic hurdles to the exchange of information. On 25 February, China announced that it would work with Hong Kong to negotiate agreements implementing the OECD standard for effective exchange of information.

Andorra and Liechtenstein have stated that they will move in the same direction. Andorra has announced its willingness to enter into tax information exchange agreements. It intends to eliminate strict bank secrecy for tax purposes by November 2009.

Liechtenstein, which has already signed a tax information exchange agreement with the United States, has announced its acceptance of the OECD standards and its willingness to negotiate agreements that provide for effective exchange of information in all tax matters.

Jersey and the United Kingdom signed an agreement on 10 March 2009, which covers the exchange of information for tax purposes. It is the 11^th such agreement entered into by Jersey.

Belgium, which already signalled a move towards the international standard last year, with its bilateral tax treaty with America, said it would be adopting the same approach in tax treaties with other countries.

The Cayman Islands has announced that it will sign tax information exchange agreements with seven Nordic economies on 1 April 2009.

As for Russia and Eastern Europe: in 2008 the OECD launched a Eurasia Competitiveness Programme. This covers two regions: Central Asia (Afghanistan, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan and Uzbekistan) and the South Caucasus and Ukraine (Armenia, Azerbaijan, Georgia and Ukraine, with Moldova as an observer).This programme aims to progress national investment agendas and to encourage specific reforms and delivery of reforms.  The wider agenda is to move the countries towards joining the OECD Declaration on International Investment, and converging to OECD and EC standards.

Since Russia’s official request for OECD membership in 1996, co-operation between the OECD and the Russian Federation has increased. The Russian Federation participates in 18 OECD Committees and various Working Groups. Russian Ministers regularly participate in Ministerial Council Meetings. The Russian Federation also participates in meetings of the OECD Global Forums and regional activities with non-members in Europe. Currently, Russia is the only non-member for which the OECD Council has created a Liaison Committee. This Committee monitors and reviews the implementation of the annual work programmes. It also serves as the platform for discussion of progress in economic reform process in the Russian Federation, the OECD-Russia co-operation and other issues of mutual interest. The Committee meets every 18 months.

The next stage:

It is yet to be seen how successful the OECD’s work will be in opening up these traditionally secretive jurisdictions, or how performance will be measured.

Clearly some countries will have to modify their legislation and renegotiate their existing tax agreements, all of which will take some time.

Thirty-five jurisdictions have made commitments to transparency and effective exchange of information and are considered co-operative jurisdictions by the OECD’s Committee on Fiscal Affairs.

The following jurisdictions, which have not yet made commitments to transparency and effective exchange of information, have been identified by the OECD’s Committee on Fiscal Affairs before the G20 summit as uncooperative tax havens.

• Andorra
• The Principality of Liechtenstein
• The Principality of Monaco

This week’s meeting could be a watershed moment in the reform of secretive offshore financial institutions. What remains to be seen is if spouses will be afforded the same level of detail as the tax authorities are demanding.

In the meantime it is up to the less wealthy spouse to work with professionals who can do the digging for them. Stowe Family Law’s International Family Law Department works closely with our two forensic accountants, who work to ensure that our clients are not caught out by offshore scheming.

Frank Arndt heads the International Law Department at Stowe Family Law. He is a qualified lawyer in two European countries, a qualified judge in Germany and a registered European lawyer with the Law Society in England. An expert in cross-border family law, he regularly advises on cases involving families and assets scattered across continents.

Treasure Island image credit: Aaron Escobar.

Our firm’s commitment to working pro bono (free of charge) in complicated cases where funding is not possible, is well known. This was recently applied in a transnational case, where a young mother had struggled to obtain good legal advice and representation to secure her children whom she was forced to leave behind in Germany when she returned to England for cancer treatment.

So I am proud to record the involvement of Frank Arndt, and our firm in this tragic transnational children case.

Frank is a German Rechtsanwalt and Partner in our firm. A fluent English, Dutch and German speaker he heads Stowe Family Law’s International department and is one of the very few family lawyers practising in England who has higher rights of audience in the Federal Court in Germany. In this case he represented a terminally ill young mother Carly Jones in a child custody case in Germany after she had seen literally scores of lawyers, first in Germany and then on her return to the UK all of whom proved unable to help her. Twenty-five year old Carly found Frank’s contact details through Reunite, a UK charity specialising in international children’s law issues, of which Mr Arndt is a member.

We agreed to act for her pro bono and Frank Arndt provided advice on the complicated childcare issues, representing Carly in the German courts, following which he successfully obtained an order that both children should travel to England to see their mother. German social services however refused to comply with the order and appealed.

After being fined €10,000 for not complying with the judge’s order, they still refused to comply with the decision. Sadly, Carly lost her fight with cancer days before the appeal hearing was scheduled to take place in court and only weeks after she had celebrated her 25th birthday.

The children’s maternal grandmother, Jean Jones, has now launched a campaign, Justice For Carly, to bring the children back to the UK – Carly’s dying wish.

The wider tragedy is that Carly’s plight is the tip of an iceberg, with the spread of transnational families across the globe. When such a relationship breaks down, the whole family could find itself unwittingly caught up in a nightmare struggle involving unfamiliar legal systems, laws, language – and outcome.

Stowe Family Law’s head of international family law, Frank Arndt, features in today’s Times Law ‘Water Cooler.’ His comments on proposals to reform EU divorce law highlight a pertinent issue for many of our clients – what to do when you divorce across borders.

From The Times:

Forum-shopping for the best European country for a divorce may become even more complex – with proposals just announced by the UK to harmonise the law affecting the 170,000 couples involved in cross-border EU divorces each year. New draft regulations would allow couples to choose the member state where they want to divorce, if they have other defined links with it, such as place of marriage, usual domicile, nationality or they were last resident there.

The proposal provides for both spouses to be informed of their rights to stop the choice of forum creating a disadvantage for the weaker member of a couple. The commission’s draft has run into opposition from Sweden; it needs unanimous approval to become EU law. At least nine countries (France, Italy, Spain, Romania, Austria, Hungary, Greece, Slovenia and Luxembourg) have agreed to use what is called “enhanced co-operation” on the issue, enabling them to go ahead on their own.

Frank Arndt, head of international family work at Stowe Family Law, said: “This is a split, not a harmonisation. Current EU law in this area is a dog’s dinner of contradictions, absurdities and injustices. The country in which divorce proceedings are filed is of huge significance . . . and can have a dramatic bearing on the eventual settlement.”

To read the full ‘Water Cooler’, click here.

Frank Arndt heads the International Law Department at Stowe Family Law. He is a qualified lawyer in two European countries, a qualified judge in Germany and a registered European lawyer with the Law Society in England. An expert in cross-border family law, he regularly advises on cases involving families and assets scattered across continents.

Over the past decade, efforts to conceal assets and avoid tax have become more sophisticated. This is why our team here at Stowe Family Law LLP includes two forensic accountants, who work to ensure that our clients are not caught out by offshore scheming.

Elsewhere, the proliferation of such schemes has led to drastic action. Earlier this year the German government took its pursuit of tax dodgers to a new level, when it paid for stolen data with which to hunt the evaders down. German spies paid around £3.2 million for around 1,400 names.

The move sparked a new discussion about fruit of the poisonous tree. This is a legal metaphor, drawn from a Biblical passage, used to describe evidence gathered with the aid of illegally-obtained information.

Not to be outdone, last week the American Internal Revenue Service won backing from a federal court to track down customers suspected of evading US taxes, by accessing accounts held with the Swiss bank UBS.

The UK government is also thought to have paid for similar information about suspected tax dodgers. Their source is believed to be the same as the Germans’. The Sunday Times reported in February that HM Revenue & Customs had paid £100,000 for details of 100 overseas accounts.

This data was stolen in 2002 from the LGT Group, a bank owned by Liechtenstein’s royal family. The theft has triggered probes in 14 countries. It has led to the resignation of the chief executive of German postal giant Deutsche Post AG, after it was alleged that his name was on the list of tax evaders.

Such cases are keenly watched by international lawyers who, like myself, are only too familiar with spouses who attempt to conceal their true financial worth with off-shore bank accounts and other asset protection schemes.

However, the recent chain of events has placed the secret banking systems of Liechtenstein and Switzerland under unprecedented scrutiny. For spouses who try to hide their assets, this is bad news.

British courts have long battled with those who shift their assets around foreign bank accounts, particularly when such actions are used to reduce individuals’ “financial worth” during divorce proceedings. When Mr Justice Coleridge had to decide in the 2004 case of J v V  (1 FLR 1042), which involved a number of sophisticated offshore structures, he said of them: “They neither impress, intimidate, nor fool any-one and the Courts have lived with them for years.”

He went on to note that those engaged in such “ducking and weaving…cannot expect much sympathy when it comes to the question of paying the costs of the enquiry.”

Indeed, it would appear that courts around the world are taking a tougher line. The judge in the American case surprised many legal observers when he ordered UBS to supply details of American taxpayers with accounts in Switzerland. It has been estimated that collectively, these accounts contain around $20 billion in assets – and unpaid taxes amounting to some $300 million.

Switzerland is now under pressure from the EC to bring its taxation arrangements into line with arrangements elsewhere in Europe. Such changes would mean that Swiss banks had to disclose information about account-holders. Unsurprisingly, Switzerland wishes to preserve the status quo. Its stance is shared by Luxembourg, and the Swiss Finance Minister and the Luxembourgian Prime Minister met in May to discuss the situation. The Swiss minister emphasised that although his country supports the European Union in its reform projects in the financial sector, there is no legal obligation for Switzerland to enter into talks with Europe on a revision of the agreement on the taxation of savings income before 2013.

While Swiss law still prohibits banks from disclosing confidential information – which, it argues, includes the names of account holders – without client approval, it is clear that the law is moving to tackle this long-standing problem. In doing so, it will deal a major blow to those who seek to deny their partners fair divorce settlements by stashing away their assets in offshore havens.

Unscrupulous spouses: you have been warned!