The seismic events of 2022 have presented the divorce industry with unprecedented challenges, and 2023 seems set to deliver more of the same. The ongoing crisis in Ukraine continues to weigh heavily on the global economy via inflationary impact, ultimately sowing uncertainty across asset classes when it comes to assessing true values for parties seeking to divide portfolios in a fair and logical manner.

Perennial allegations that one party is deliberately undervaluing their assets in divorce proceedings are exacerbated in such circumstances and, in the current climate, obtaining accurate valuations for either party’s interest is made even harder as a result of the uncertainty that abounds in domestic and international markets. Further, ongoing volatility and inflationary/recessionary pressures are providing significant challenges to this computation exercise for individuals and experts alike, as snapshots of asset values are not only fleeting in their relevance but also, in many cases, undeniably depressed.

As such, we are encountering figures on asset schedules that are much lower than one party might have anticipated (or hoped for).

Therefore, parties’ expectations are having to be adjusted in response to this economic uncertainty, with the lack of clarity also affecting anticipations for future standards of living, thus making settlement discussions significantly more sensitive.

This is further complicated by the ongoing and very real cost of living crisis. Post-pandemic inflationary pressures have sent shockwaves through everyday life for millions of families, forcing a brutal re-evaluation of affordability as a result.  From a divorce industry perspective, both recipients and payers of ongoing maintenance have had to rethink costs, and we have seen an increase in parties’ income needs, as well as a surge in applications to vary maintenance orders which are no longer viable or fit for purpose.

While recent events are not without precedent, an unforeseen nuance to divorce proceedings this year has been the ripple effect of the Russian-Ukrainian conflict, which has presented serious challenges around access to justice. Many Russian citizens have close ties to England, with some of England’s highest profile divorces featuring HNW Russian individuals who have chosen the divorce capital of the world as centre stage for their split. A significant number of law firms have now closed their doors to all Russian corporate and individual clients due to regulatory concerns arising from the ever-growing and ever-changing sanctions list. This has resulted in many wealthy Russians – despite their having no explicit connections to the Russian government – being inadvertently affected and limited in their ability to obtain legal advice.

At the same time, individuals with Russian-held interests (whether Russian citizens themselves or not) are also being affected by the ongoing conflict and sanctions. Russian-based assets are being increasingly targeted by sanctions, with a consequential depressive effect on their market value . In some cases, such assets come close to having no value at all as Russia is progressively more ostracized from international trade while the conflict persists.

As such, assessing the value of Russian interests is now an almost impossible task and – even if it were possible to ascribe value with any certainty – there remains the challenge of limited economic recovery prospects and an inability to access the assets themselves.

On the plus side, however, one post-Covid positive to note is the evolution of a more technology-friendly court system. The continued use of electronic court documents and the ability to conduct hearings remotely (or in a hybrid manner) is more expedient and cost-efficient for individuals and for the courts themselves. It is hoped that this will eventually go some way to assisting with the backlogs with which the courts are still coping post-pandemic.

Looking ahead to 2023, it is likely that we will see a continuation of many of the issues that 2022 has presented. As an industry, we will also keep a close eye on the ongoing debate surrounding transparency. The President’s report, Confidence and Confidentiality: Transparency in the Family Courts, published on 28 October 2021 concluded that “the time has come for accredited media representatives and legal bloggers to be able, not only to attend and observe Family Court hearings, but also to report publicly on what they see and hear.” Notwithstanding the opposition of many family lawyers to this change, many members of the judiciary are openly supportive of such measures, and so we must begin to prepare our clients for the very real likelihood of their private matters becoming public.

Alex and Stacey’s article was originally published in Legal Futures, here.