The Panama Papers, non-disclosure and divorce article banner image

The controversial disclosure of the Panama Papers has implicated some of the world’s leading political figures and rocked governments across the globe. The anonymous leak of 11.5m documents from Mossack Fonseca, the world’s fourth largest offshore law firm, has again brought the use of offshore tax regimes by the rich and famous into the public eye.

Whilst the use of offshore legal structures in itself is perfectly legal, there has been a significant erosion of trust between the public and those politicians who have been named. Remarkably, Prime Minister David Cameron and other prominent MPs have gone to the unprecedented lengths of publicly disclosing their tax returns in an effort to demonstrate their trustworthiness.

Politicians like Cameron, Vladimir Putin and the Icelandic Prime Minister Sigmundur David Gunnlaugsson have made the headlines. However, the Panama Papers also have significant implications for those named parties who are going through or have previously been divorced. They includes Russian oligarch Dmitri Rybolovlev, whose divorce from his wife Elena was dubbed “the most expensive in history”. Rybolovlev allegedly used Mossack Fonseca to set up an offshore company which he could use to shield assets from his wife, although he has denied this.

Whilst the primary motivation for many users of sophisticated offshore tax regimes is to minimise their tax liability, for others it is to prevent their spouse from finding out the true extent of their personal wealth – thus minimising their liability in financial proceedings in the divorce courts. This is an important distinction. Making use of offshore legal structures to minimise tax is legal, but hiding wealth from the matrimonial courts is not.

It is not uncommon in divorce proceedings for there to be accusations of dishonest or incomplete financial disclosure. However, the reality is that even if this has taken place it can be very difficult to prove – particularly where the assets in question do not appear on a tax return. This includes assets such as ISAs and – very topically – funds which are held in offshore tax regimes.

The recent decision in Sharland has opened up the possibility in England and Wales of financial orders being subsequently revisited where it later transpires that there was a material non-disclosure of a party’s true financial position. Whilst the bar for proving material non-disclosure appears to be high, this ruling has increased the pressure on divorcing spouses to ensure that they uphold their obligation of full and frank disclosure. Those who fail to do so face the risk of a court retrospectively ordering that they should make significant additional payments to their former spouse.

The Panama Papers are likely to result in two immediate outcomes as far as divorce settlements are concerned. The first is that named parties who are going through or have previously been divorced will be very vulnerable if it transpires that they have not fully disclosed their financial position. As a result of the Panama Papers we may well see a number of high-value non-disclosure cases in the matrimonial courts over the coming years.

The second potential outcome is that the Panama Papers will act as motivation for suspicious spouses and former spouses to continue looking for evidence of hidden assets. Unfortunately, proving financial non-disclosure remains very difficult. In the majority of cases the party making the allegations simply has insufficient resources to demonstrate to the courts that there really was an undisclosed pot of gold at the end of the rainbow.


Dan is a trainee solicitor at Stephens Scown and his first seat is in the family team, based in the Exeter office. If you would like to contact Dan, then please call 01392 210700 or email