Foreign Trusts and Divorce

The English Courts have some of the widest powers on divorce when it comes to making orders in respect of trust assets.    In some circumstances the English Court will make financial orders against a party to force the trustees to make a distribution from the trust (otherwise the party may risk imprisonment if the trustees don’t assist).  In other cases the English Court will even go as far as varying the terms of the trust to benefit a former spouse.

Where an order is made against an English trust adminstering English assets the powers of an English Court are almost limitless.  However, the English courts willingness  to make orders against foreign trusts is increasingly facing resistance from foreign courts.

In the past, offshore jurisdictions such as Jersey have been prepared to recognise English orders as a matter of courtesy but recently there has been a backlash against English judges who attempt to vary the terms of a trust that is subject to foreign law.   Some offshore jurisdictions (such as Bermuda, Isle of Man, Cayman Islands) have legislation which says that only local courts can vary trusts which are subject to the local law.  Whereas the Bahamas will not enforce a foreign divorce order in any circumstances.

Foreign trustees need to consider carefully whether to intervene in English divorce proceedings as a foreign court is more likely to uphold the English order if the trustees are a party to the proceedings.  However, if the trust contains UK assets then the position of the foreign court may be irrelevant as the English Court can enforce their order directly against those assets.

If your spouse is a beneficiary of a trust, you cannot assume that an English Court order will be sufficient.  Where the trust is governed by foreign law and contains only foreign assets, an attack on the trust via the English Court may be extremely expensive in terms of legal costs and ultimately fruitless.   In those cases, enquiries should first be made of the trustees and an application to the foreign court may be the better route.

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