In the last two decades a new legal world has unfolded before us, in which married couples immigrate from France to establish a home in Israel. What financial relationship regime applies to those couples wishing to divorce in Israel?
Adv. Yonatan Kanir and Adv. Debbora Abitbol || 22.6.20
Meet Jacques and Sol
In 1999 they married in France and signed a financial agreement establishing a separation of property regime in accordance with French law by which each spouse retains ownership, management and free use of the property belonging to him at the time of signing the financial agreement and property which shall be received during the marriage. (1)
The couple had 3 children, with Sol not working most years of marriage, in accordance with her husband's demand and their agreement that she would invest most of her time raising their joint children, while Jacques did well in his businesses and amassed a large fortune in France which was registered in his name.
About 7 years ago, the couple immigrated to Israel, with Sol being completely economically dependent on her husband's livelihood and raising their children in an exemplary fashion. Apart from a property in France that was registered in Jacques's name only, two properties were purchased in Israel – a residence which was registered in the names of the parties in equal shares and an investment apartment which Jacques purchased with own money and which was registered in Sol's name only.
After 20 years of marriage, the parties decided to divorce and legal proceedings began between them.
Does the financial agreement which was signed in France apply to the parties who wish to divorce in Israel?
Most lawyers in Israel adopt an erroneous strategy aimed at persuading the court to "forego" enforcement of the financial agreement signed in France and apply Israeli law. This is a mistake.
Under Israeli law, the law applying to the financial relationship between spouses shall be the law of their place of residence at the time of the marriage (2), for spouses who married after 1992 and signed a financial agreement in France, French law shall apply (3).
Therefore, in the case of Sol and Jacques, a couple who married in France, signed a financial agreement in France, immigrated to Israel and want to divorce in Israel – French law shall apply.
What is the position regarding the residence registered in the name of both parties in Israel under French law?
In Israel, the law is that registration of the title to property in the joint names of spouses attests to their intention to divide the rights in the property between them in equal shares (4) The separation of property regime in France differentiates between the registration and the property (5). In other words, if at the time of the division of the property it can be proved that despite the joint registration, the property was purchased by one of the spouses only, then upon severance of the joint ownership that spouse can demand pecuniary compensation.
Is Jacques entitled to 100% of the funds he used to purchase the residence? An affirmative answer to this question would actually leave Sol homeless, which is not what the French legislator intended. French law recognizes the great significance of a home and provides that participation in the acquisition of the home does not have to be by way of income from an occupation and a spouse's earnings but may by participation in running the household and raising children over the years.
The breadwinner who wants to claim that he is the only one who financed the house because his wife did not go out to work to support the family, shall not be able to demand the return of the financing money.
And what about reimbursement for the investment apartment?
Under Israeli law, Jacques' ability to demand the registration of the apartment in his name is almost non-existent (6).
French law is more complex in these matters. Where purchase of the property was financed wholly or mainly by one of the spouses, and is registered in the name of the other, the question which arises relates to the nature of the financing – was it a gift or a loan between the spouses? If it was a gift made during the marriage, then there is a presumption that it was given voluntarily and it cannot be revoked (7). In order for the spouse to be able to demand reimbursement of the financing money, it would have to be classified as a loan, and he bears the burden of proof in this regard (8).
The equalization compensation mechanism
Sol gave up any possibility of a professional career in order to devote herself to housekeeping and her children, while during the 20 years of their marriage, her husband devoted his entire time to his enterprises and professional development.
Under French law, a party whose personal standard of living is expected to decline due to the termination of marriage shall have the right to claim equalization compensation which shall be calculated according to criteria such as the gap between the couple's income, the duration of marriage, their age and state of health, training and professional status, the spouse's estimated and projected capital, etc. (9).
How is the equalization compensation mechanism applied in the Israeli courts? At the time of writing these lines the courts in Israel recognize the complexity of the question of equalization compensation, but have not yet given an explicit ruling on the matter and channel it into settlements.
The bottom line – what's the right action to take?
The case of the imaginary couple Jacques and Sol is but one example of the countless couples we have met, each of their cases having its own complexities. It is important to remember, that if the couple signed a financial agreement in France – French law shall continue to apply to them, including in Israel. Therefore, after purchasing a property in Israel, an agreement should be made which is in line with the laws of the State of Israel before friction is created in the marriage.
Currently, in order to contend with such cases, the courts in Israel order an expert in French law to submit an accurate and up-to-date opinion regarding the rights of the spouses in order to bring about an equitable division. Until the day comes when these issues shall be regulated and a "simple" procedure can be followed for dividing property between spouses who were married in France, including in Israel, there is no choice but to consult with a law firm specializing in family matters in Israel and a law firm specializing in financial relationships under French law.
(1) Articles 1387 – 1399, 1536 – 1548, 115 and 220 of the French Civil Code which prescribe the rules of the financial relationship regime between spouses – hereinafter: "the French law" or "the French rule".
(2) Section 15 of the Financial Relationships between Spouses Law, 5733-1973), and it also corresponds with the provisions of The Hague Convention on property regimes.
(3) Article 7 of The Hague Convention.
(4) CA 66/88 Tamar Decker v. Felix Decker, IsrSC (1) 122 (1989).
(5) Article 1543 of the French Civil Code.
(6) CA 384/88 Ariela Zisserman v. Dov Zisserman, IsrSC 43(3) 205.
(7) Article 1096 of the French Civil Code.
(8) The spouse who financed the property may obtain a debt settlement during the liquidation of the property regime, provided that he proves that he financed the purchase or part of it (Supreme Court, 23rd January, 2007 No. 05-14.311).
(9) Article 270-271 of the French Civil Code.