Grant Howell, partner, collaborative lawyer and family law arbitrator at Charles Russell, discusses the attractions of arbitration for HNW couples who are divorcing.
On 22 February 2012, family arbitration was introduced into England and Wales for the first time. The scheme, run by the Institute of Family Law Arbitrators, covers financial and property disputes arising on the breakdown of family relationships including divorce. By the end of 2012, there are likely to be over 100 trained family arbitrators.
On the launch of the scheme, the attractiveness of arbitration to high profile or wealthy couples was stressed in the national media. This is not surprising, for reasons which will be explored in detail in this article. In contrast to the judge in a court process, the arbitrator needs to be paid a fee. However, this will not be a disincentive to the wealthy bearing in mind the other advantages of the process.
Speedy, private resolutions
Facing the need to resolve financial matters arising on divorce, the wealthy share the objectives of others who find themselves in this situation. They would prefer matters to be resolved efficiently and speedily. However, given their profile and their wealth, they are particularly concerned to preserve their privacy.
If they find themselves embroiled in the court process, efforts can be made to retain their anonymity. However, they cannot expect special treatment by the court if hearings are required. Back in 2009, on the relaxation of the law relating to the media reporting divorce proceedings, Earl Spencer and his wife asked the court to prevent the reporting of their case in court. They both argued that the revealing of details of their private lives could not be said to be legitimately in the public interest. However, the judge rejected their application stressing that it was, in his words "potentially very dangerous to privilege those who attract the attention of the media over and above another group who do not." A higher public profile, therefore, does not bring with it a greater right to privacy.
Avoiding a torturous process
The wealthy typically incur very substantial professional charges not only for managing their wealth but doing so as discretely as possible. Going through the court process not only leads to the risk of media intrusion but also requires full and frank disclosure in a prescribed form going into great detail as to the financial position. Also, a contested case in the courts can take as long as two years to resolve. Hearings will be involved requiring attendance at court even though there is no guarantee that the hearing will actually take place on that day due to the pressure on the court lists. The same judge will not necessarily be involved throughout. Even when the final hearing takes place, this will not necessarily be the end of the story. Appeals may drag out the process even longer. It is not surprising, then, that an alternative means of resolving matters will be strongly attractive.
Until the introduction of arbitration, though, the wealthy had no alternative to the court process where it was not possible to settle every aspect of the matter by agreement. That, however, has now changed and arbitration brings many advantages. This is no "one size fits all" process: it can be tailored to cover only those aspects of the matter which are truly in dispute. The same arbitrator will deal with the matter from beginning to end. If it is agreed, or the arbitrator decides, there will not necessarily need to be the extent of the financial detail required by the court - matters will be resolved far more speedily, and even the most complicated of cases should be capable of being resolved within a few months.
Of particular significance though is the fact that the arbitration process is completely confidential. The media will be unaware of the process of the arbitration or the outcome. The running of the gauntlet of the media on arrival or departure at court will simply not arise. The risk of matters being prolonged by use of the appeal process will also be virtually removed. It is a condition upon entering into arbitration that the court will be invited to make a financial order by consent in the terms of an arbitration award.
For these reasons, the wealthy and the high profile will appreciate the advantages of arbitration. Indeed, they are already availing themselves of the option. It is not that the arrival of arbitration makes divorce easier for the wealthy or that it is likely to increase how often they divorce. Divorce rates have arisen inexorably over the years and give every indication of continuing to do so for a multiplicity of reasons. But arbitration provides the means of resolving matters efficiently, speedily and discretely which can only be to the benefit of those unfortunate enough to find themselves in this situation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.