Russian law applied ‘warts and all’ by Court of Appeal in high profile matrimonial dispute

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Summary: On 1 May 2013, the Court of Appeal delivered a landmark decision which gives guidance on the way in which the English Courts will attempt to recognise and give effect to ideas of joint matrimonial property regimes arising under civil law jurisdictions.

In a case concerning rights arising under the Russian joint matrimonial property regime, the Court of Appeal found that such rights would be recognised and given effect to by the English Courts – but only to the extent recognised by Russian law and subject to the restrictions imposed by the Russian regime. English law could not be used to supplement those rights: Russian law applied ‘warts and all’.

Background

Mr and Mrs Slutsker, who were both of Russian domicile, and who were married in Russia, wished to purchase a property in London. On advice, the property was bought in the name of an investment company, Haron Investments Limited, and ultimately held by that company as nominee for the trustees of a Cayman Islands discretionary trust. The original beneficiaries of the trust included Mr and Mrs Slutsker and their minor children.

Following the breakdown of the couple’s marriage, the trustees executed a discretionary power to exclude Mr Slutsker as a beneficiary under the trust. As a result, Mr Slutsker issued proceedings in England claiming that, under the Russian matrimonial property regime, he was entitled to a 50% equitable share in the property.

The Court of Appeal upheld the First Instance decision of Mr Justice Underhill, confirming that Russian law (as the lex domicilii matrimonii) was applicable in these particular circumstances. Moreover, since Russian law was applicable, all of the restrictions and formalities inherent in the Russian joint matrimonial regime would also be imported in order to determine Mr Slutsker’s rights. Accordingly, Mr Slutsker would need to show (i) that he had not given the consent required by the Russian matrimonial regime to the transfer of the property and (ii) that his claim had been brought within the requisite limitation period under the regime. On both counts, Mr Slutsker’s claim failed. 

Moreover, the equitable interest claimed by Mr Slutsker was not one recognised by Russian property law; Mr Slutsker could not succeed on a claim that relied on a hybrid application of both Russian and English law in order to establish his interest.

Why is this case important?

This case provides a landmark decision in the arena of Private International law. However, it also provides important practical guidance for those spouses whose matrimonial domicile imposes a system of community property.

The case illustrates that holding matrimonial property (whether moveable or immoveable) in the UK will not necessarily put that property out of the reach of the relevant civil law matrimonial property regime. Equally, holding matrimonial property through investment structures of a type not recognised by the relevant civil jurisdiction may do so, provided that the relevant consent has been provided.

The case also has an impact for third parties who have dealings with those individuals whose property is subject to a civil law joint property regime. For example, where a charity receives a donation from Spouse A, that charity will want assurance that the donation (a disposal of matrimonial property) will not be challenged by Spouse B.

BLP Comment

Rupert Ticehurst, the partner at BLP acting for the successful trustee commented on the judgment as follows: “This is a significant case for the English conflict of law rules. However it is also going to be an important decision for any number of property disputes that may arise between spouses who have married, not just under Russian law, but under any civil law system which imposes a community property regime.”

Please click the link to read about this case in the Lawyer.

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