Are Overseas Prenuptial Agreements Binding?

In Australia, the Family Law Act 1975 upholds the legal enforceability of Binding Financial Agreements (BFAs) or “prenups”, when a relationship breaks down. There are strict statutory requirements for creating prenups in Australia, raising the question of whether overseas prenups are legally enforceable in Australian courts. Many prenups will state that they are valid in all jurisdictions worldwide, but Australian law does not recognise prenups made outside this country unless they meet strict requirements. This article looks at the jurisdictional issues and enforceability of overseas prenups in Australia.

Legally valid Binding Financial Agreements

In Australia, two (or more) individuals can make an agreement that specifies the division of assets if the relationship ends. The parties can enter into such an agreement at any time including before, during or after a relationship. This financial agreement records the parties’ intentions as to how some or all their property will be dealt with if they separate. It can also cover other obligations such as spousal maintenance. The parties can tailor the agreement to suit their financial circumstances and priorities. For instance, some parties enter into a prenup because they want to ensure that the assets that they bring into the relationship are excluded from any property division. This can be more important for couples who have children from a previous relationship and wish to preserve the inheritance of their heirs.

A prenup is legally recognised under the Family Law Act in Part VIIIA (for marriages) and Division 4 of Part VIIIAB (for de facto relationships) as long as it abides by certain formalities and requirements:

• both parties to the BFA must sign the agreement
• before signing, both parties must receive independent legal advice about the advantages and disadvantages of the agreement
• legal representatives for each party must provide written statements confirming that independent advice was given to the parties
• if the agreement claims to finalise future spousal maintenance claims, it must specify who will receive the maintenance and the actual amount of maintenance as a lump sum or periodic payment
• the agreement cannot be made under duress, undue influence or fraud.

The requirements illustrate the importance of fairness and transparency in family law matters. The Federal Circuit and Family Court of Australia (or the Family Court of Western Australia) has the authority to set aside any prenup that does not abide by these restrictions.

Recognition of overseas prenuptial agreements in Australia

In certain circumstances, an overseas prenuptial agreement may be binding and enforceable if it meets the substantive procedural requirements outlined in the Family Law Act.

Overseas prenuptial agreements can usually be sorted into one of two categories:

1. Agreements that were created and executed in a way that complies with Australian legal requirements for a prenup. Unless there is a public policy concern, an Australia court is likely to find such agreements binding.
2. Agreements that fail to satisfy legal requirements for an Australian prenup (perhaps because one party did not receive independent legal advice or one of the parties was under duress to sign the agreement). Australian courts are unlikely to enforce such an agreement in its entirely, if at all. However, the Court may use the terms of the agreement as evidence of the parties’ original intentions.

A foreign prenup will not be enforced if it contravenes public policy, even if it was otherwise made according to the legal requirements for an Australian prenup. For instance, public policy prioritises equitable division of assets and the welfare of children in family law matters. Therefore, a prenup that significantly disadvantages one party or fails to provide for children may be seen as contrary to public policy. For instance, an overseas prenuptial agreement that allocates a disproportionate share of the assets to one party without reasonable grounds may be deemed unenforceable, regardless of its legal validity in other jurisdictions.

Specific jurisdiction clauses

Prenuptial agreements made overseas often have “choice of jurisdiction” clauses, with words to the effect that any legal dispute will be heard in a specific jurisdiction under the applicable law. An Australian Court is not bound by these clauses when determining the validity of a prenuptial agreement. Instead, the Court will apply Australian law to assess whether the agreement is enforceable within its own jurisdiction.

Mirror agreements

In cases where a couple move to Australia with an overseas prenup in place, it is often best to have an Australian solicitor draft a supplementary contract or “mirror agreement” to increase the likelihood of enforceability of the prenup. These mirror agreements ensure that the prenup’s terms are binding in Australia and do not contravene public policy. Alternatively, the parties might have an Australian solicitor review the overseas prenuptial agreement before signing to ensure its compliance with Australian standards. The solicitor can identify potential issues with the terms and suggest any necessary modifications.

Ultimately, the enforceability of an overseas prenuptial agreement depends on whether it abides by the legal standards established by Australian family law, and whether there are any concerns about fairness, undue influence or public policy considerations. For any advice on binding financial agreements, or any other family law matter, please contact the team at Go To Court on 1300 636 846.