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The most expensive divorce in history may soon become the most expensive divorce reduction in history.
Earlier this month, a Swiss appeals court slashed nearly $4 billion from the award that Russian billionaire Dmitry Rybolovlev was ordered to pay his ex-wife, Elena Rybolovleva, in their divorce. The court ruled that the judgment of 4 billion Swiss francs (around $4.4 billion) awarded last year to Rybolovleva should instead be capped at 564 million Swiss francs, or around $600 million.
Rybolovelva's attorneys are appealing. But if it's upheld, the divorce would clearly be the largest award reduction in history.
Among the issues in the divorce were trusts that Rybolovlev had set up for his children and heirs. Elena said the trusts should be part of the settlement and were created to improperly shield assets from the divorce.
An attorney for Rybolovleva didn't respond to emails or calls. In earlier statements to Swiss media, her attorney, Marc Bonnant, said he would appeal the ruling to the Federal Supreme Court of Switzerland.
As for Rybolovlev's attorney, Tetiana Bersheda, based in Geneva, the ruling is vindication after a multiyear battle. Here is a Q-and-A with Bersheda about how she won such a massive reduction and what it could mean for trusts and divorces for the world's rich.
Q: Elena's attorneys say they will appeal and this decision will be reversed. Comment?
Bersheda: We are very confident that the judgment of the Cour de Justice of Geneva will be upheld. The judges ruled correctly on the facts of the case and applied both Swiss law and the conflict of law rules in this case, and their judgment should be duly confirmed.
Q: Does this ruling or any other aspect of the divorce have any implications for U.S. divorce law or divorces in other countries in Europe? Do you think it could offer a template (i.e., use of properly structured trusts) for spouses in a divorce?
Bersheda: Matrimonial law differs from one jurisdiction to another so the judgment may not be directly relevant for U.S. domestic divorce procedures or those in other countries.
However, beyond the realm of family law alone, the judgment certainly does have huge significance for all those who have assets located in Switzerland. That is because it confirms that Swiss judges are willing to comply with The Hague Convention of 1985 on recognition of foreign trusts (ratified by Switzerland in 2007) in relation to the status of those foreign trusts. It effectively gives full recognition to those trusts as structures protected under the law and confirms the familiarity of the Swiss judiciary system with the concept of a trust governed by a foreign law.
Q: How long could this case continue if it's appealed to the Swiss Supreme Court and when could we have a final ruling? This year? 2016 or later?
Bersheda: The appeal process could take between six and 12 months, or potentially even longer. However, it should be concluded by the end of 2016 at the latest.
Q: Elena's attorneys say the trusts were created to prevent her from receiving her share of wealth. How would you describe their purpose?
Bersheda: That argument was clearly shown to be baseless, contradictory with the facts and deeply flawed.
The trusts were established in 2005, long before Mr. Rybolovlev's now ex-wife initiated divorce proceedings in late 2008. Mr. Rybolovlev had no inkling that she would ever wish to do that. When, years later, he learned from third parties during the Christmas holidays of 2008 that his ex-wife had filed for divorce two days before Christmas to take him by surprise and freeze all the assets, he still tried to prevent the divorce in order to keep his family together.
So, on the contrary, rather than setting up the trusts with a divorce in mind, Mr. Rybolovlev established them to benefit his family and secure its future. The purpose was asset protection and succession planning. During that period around 2005, many leading Russian businessmen were creating foreign trusts to protect their assets from potential risks of corporate raiding in Russia—it was a common practice amongst the top cadre of entrepreneurs to which Mr. Rybolovlev belonged.
As far as succession planning was concerned, Mr. Rybolovlev believed that his assets had become so significant that it would have been indecent for them to be enjoyed by one generation. Therefore, it was critical to create a structure of which the beneficiaries would be not only the couple's two children, but also their future heirs.
By complete contrast, Mrs. Rybolovleva felt that she was entitled to multibillion corporate and other assets, even at the expense of her own children and future grandchildren.
Perhaps the saddest thing for the family is that this entire process could have been over long, long ago had she accepted the repeated settlement offers, which were generous and exceeded the amount awarded by the Cour of Justice de Geneva. Somehow she felt that only a multibillion settlement of her divorce would correspond to what she deserved or needed.
So, the award made by the court has now shown how fair and generous the settlement offers were: In applying Swiss law to the dispute the judges have now awarded Mrs. Rybolovleva a lesser amount than what Mr. Rybolovlev repeatedly offered her, offers he made for the sake of peace in the family and for the well being of the couple's children.
Q: This may be among the biggest (if not the biggest) reduction in a divorce award in history. How does it feel to have won such a legal and financial victory?
Bersheda: After seven long years of sometimes bitter legal dispute, it is a satisfying result for the entire team of lawyers who have worked together on the case in more than 10 jurisdictions where Mrs. Rybolovleva was attacking her ex-husband and the family trusts.
Above all, we are happy for Mr. Rybolovlev and his family. This has been a grueling and testing process for him and his children and he has conducted himself with great dignity throughout. On a personal note, my hope is that the judgment will now allow them to turn the page on this chapter and move forward with their lives.
From a legal standpoint, our team and I are happy that we finally have a victory for the application of law and the law is now being correctly applied in this case. The first judgment handed down in May 2014 was clearly erroneous—it did not consistently apply Swiss matrimonial law and ignored the provisions of The Hague Trust Convention in force in Switzerland.
The significantly reduced settlement was the result of those earlier errors being corrected and constitutes a victory of the law.
Q: Do you think the trust paid reasonable market prices for the assets it purchased? The $88 million price for the condo at 15 Central Park West, the Trump house in Palm Beach, etc.?
Bersheda: We are confident that the trust sought the appropriate professional advice before making any investment decisions and that it has made good investments, acquired at competitive valuations.