Freezing Assets in Divorce: Is the Battle Worth It?
In the complex landscape of divorce proceedings, the question of freezing assets often emerges as spouses vie for fairness and justice. While family lawyers usually strive for amicable resolutions, disputes over wealth can lead to lengthy litigation, particularly for ultra-high-net-worth individuals (UHNWs).
Understanding Asset Freezes in Divorce
When one partner suspects the other of hiding assets, courts may impose a freeze on matrimonial holdings. According to Lucy James, a partner at Trowers & Hamlins, this tactic is increasingly vital as UHNW wealth becomes more global. She explains that while UK courts may lack jurisdiction worldwide, they can still order freezing of assets in multiple jurisdictions, especially if unusual transactions are detected.
Notable Cases of Asset Freezing
A significant example of this phenomenon is the case of Akhmedova v. Akhmedov. This highly publicized divorce involved Russian billionaire Farkhad Akhmedov and his ex-wife, Tatiana Akhmedova. They initiated divorce proceedings in London in 2013, culminating in a court order for Akhmedov to pay over £453 million. However, initially, he only transferred £5 million.
Akhmedov reportedly attempted to shield his wealth by moving assets, including a superyacht valued at £340 million and an art collection. The UK courts moved to freeze his global assets, although complications arose when attempting to seize superyachts registered in Dubai. The couple eventually settled out of court in 2021, but not before their son faced legal consequences for his role in concealing assets.
Legal Principles Behind Freezing Orders
- Freezing orders can encompass various asset classes.
- Lawyers stress the importance of clear communication regarding financial actions during divorce proceedings.
- Panic or misunderstanding often leads to unwarranted asset freezes.
Nikki Corrie, a family lawyer at Vardags, emphasizes that asset freezes often arise when one side attempts to manipulate shared resources. For instance, one party may move their share of a joint company or mismanage insurance claims, prompting the other spouse to seek court intervention.
Risks Associated with Freezing Orders
Luke Scarratt from Payne Hicks Beach cautions that applying for freezing orders can carry risks. The applicant could be liable for damages that arise from the freezing of assets or business interests. Therefore, it is crucial to meticulously assess the situation before proceeding with such a request.
The Importance of Transparency
To avoid an asset freeze, transparency is paramount. Legal experts advocate for providing full disclosures to the court about financial decisions. According to Scarratt, clear explanations reduce anxieties and help maintain stability during proceedings.
Family law partners like Catherine Costley and Lidia Cantele agree on this point, indicating that many asset freezes stem from miscommunication or impulsive decisions. They acknowledge, however, that freezing orders can be essential in specific circumstances, especially in international cases where assets might be at risk of being moved offshore.
Challenges with International Asset Freezes
Emma Williams from Harbottle & Lewis outlines the difficulties associated with freezing international assets. Not only does this process require cooperation from foreign banks and legal entities, but it is also complicated by varying legal frameworks around the world. Despite these challenges, freezing assets remains a viable option under certain conditions.
Ultimately, while the freezing of assets during divorce is rare, it serves as a critical legal tool. The emphasis on transparency and clarity in communication can help mitigate disputes and promote fair outcomes.
