For couples seeking to divorce, COVID-19 is creating extra challenges. But a collaborative, strategic approach by asset recovery specialists and legal teams can smooth the way, says Hannah Davie.
The coronavirus situation is proving stressful for different people in different ways. But for couples already experiencing relationship difficulties, the strain may have brought them to breaking point.
Around the world, divorce is on the increase. In China, Bloomberg has reported that record numbers of couples are filing for divorce in cities like Xian and Dazhou, while in Italy the Corriere della Sera has reported a 30% increase in divorce filings since the start of lockdown.
It’s the same story in the UK, with one legal advice firm recording a 42% increase in divorce inquiries year-on-year.
Impact of Covid-19 on high-value assets
Divorce can be emotionally fraught at the best of times, but in the current situation, it’s proving even more unsettling and challenging than usual.
Some spouses are concerned about the impact of the economic downturn on the value of assets. Others fear that efforts by their spouse to protect assets during the pandemic – perhaps by moving them to a different jurisdiction, looking at other forms of investment or creating new complex trust arrangements – will make it more difficult to locate assets or enforce recovery once a financial settlement is reached.
Asset tracing across jurisdictions
Our experience tells us that one partner, whether they are the one initiating divorce proceedings or not, often has little detailed knowledge of the assets on which they may be able to make a claim.
They may say things like 'we often go to a holiday house in Dubai' or 'he/she talks about a company in Bermuda'. But they won’t know whether the holiday house is owned by their partner or a corporate structure and, if the latter, what the corporate structure is and where it is actually located.
Early-stage discussion can yield long-term benefits
In circumstances like this, where you are acting for high net worth individuals with extensive assets across multiple jurisdictions, we would always recommend contacting our insolvency and asset recovery team at an early stage, even if only for a friendly initial discussion.
There are several reasons why this can be beneficial. It can give your client the opportunity to take early-stage advice on agreeing a financial settlement compared to entering into litigation to fight for a higher financial award.
It can also offer much-needed reassurance and clarity to your client about the assets that are likely to be available, the potential costs of enforcement and how these might be funded if a settlement is not reached.
In some cases, a client can feel extremely vulnerable, with no access to funds and no means of paying for enforcement action, should this prove necessary. This can deter them from pursuing litigation or, once a settlement has been reached, enforcing it.
A flexible approach to fees and innovative funding solutions can also give your client peace of mind, knowing that, if their spouse does prove obstructive, they can still be get professional help to obtain the settlement to which they are legally entitled.
Experience in offshore jurisdictions
Where a client lacks information about their spouse’s assets, or suspects that assets have been hidden or misappropriated, research by forensic investigators will be needed to trace and identify assets and advise on their recoverability.
As the largest insolvency and asset recovery team in the UK, we have an extensive footprint across multiple offshore jurisdictions. Once we’ve tracked down assets, we can offer valuation services and help you formulate a strategy for settlement or litigation.
We can then work with you to devise bespoke enforcement and recovery procedures, if necessary, putting a funding solution in place so your client does not have to bear the costs of enforcement action upfront.
Our presence in markets around the world means that, when required, we can use this local knowledge to help identify and secure assets, unravel complex corporate structures and formulate the best enforcement strategy for each individual asset.
Collaborative, strategic approach
Divorces can be messy, emotionally charged and sometimes acrimonious. By working collaboratively and strategically with legal teams, we aim to achieve the best possible outcome for clients and allow them to make a fresh start with a firm financial footing.