Alex Brereton and Eri Horrocks examine why NDAs included in divorce agreements are becoming increasingly popular in the FT Adviser

Alex and Eri’s article was published in the FT Adviser, 13 August 2024, and can be found here.

Keeping relationships confidential – the rise of marital non-disclosure agreements

Non-disclosure agreements (NDAs) have been a feature of life for those in the public eye for many years, and they continue to be used by the rich and famous to protect sensitive information that they would much prefer to keep private. When this information is leaked in breach on an NDA, the outcome is often explosive and public knowledge of the existence of an NDA can lead to accusations of gagging, and the abuse of an uneven power dynamic. However, for every such leak, there are thousands of NDAs that continue to function quietly and effectively, keeping their signatories’ secrets hidden from view.

Whilst the very public downfall of figures such as Harvey Weinstein goes to show the limitation of NDAs, they have also served to increase the public’s awareness of them. With the ascendancy of social media, we all now have a public presence of some form or another, and are increasingly conscious of the permanent damage that a single post on Facebook or X can do to people’s lives. It is no surprise then, that increasingly people of all backgrounds are becoming pro-active in seeking to protect their privacy in whatever ways that they can. This is as true in the context of marriage and divorce as it is in any other.

What matters are people trying to keep confidential?

NDAs have become an ever more common feature in pre-nuptial agreements and financial settlements on divorce. They range from the relatively simple (keeping personal financial information private and confidential), to the wide ranging and deeply specific, and in some cases can become the central feature of negotiation, with significant sums of money being committed in the other direction to secure their agreement. In all cases, their content will depend on the nature of the information people are seeking to protect. For example, this may be:

• Details of a private nature relating to the couple and their married life – for many of us this might be relatively uninteresting to others, but for some (particularly those with a media presence of some kind) this may include details about arguments, addictions, affairs, sexual proclivities or other behaviours or habits that might cause embarrassment if made public, even if just to family and friends.
• Information about the other’s dealings with third parties – this may include allegations of criminal behaviour or civil disputes, as well as their professional/ social relationships.
• Financial information – people are often concerned that details of their private finances are not made public, but this may also include commercially sensitive information about their businesses or employers that their spouse has become privy to during the marriage (perhaps not legitimately so) and which could have serious professional consequences if it were made public. In these cases, it is often mutually beneficial for the person who is being asked to sign the NDA to agree to do so, so as not to strangle the goose that lays the golden egg. It is usually in everyone’s interests to ensure that sources of wealth are not prejudiced.

In addition to the specific details which are sought to be protected, what will also matter is the motivations and personalities of the parties involved. In particular, the public narrative of why a couple are getting divorced can be a hotly contested issue, for example where large families and a wide circle of friends (or a public following) may be interested in the latest gossip. When relationships break down, each party may have very different views about why this has taken place (and indeed about the other party generally), and while emotions are still raw this can cause obvious problems when people have such easy access to a wide network via social media. As a result, NDAs may become more significant points of negotiation where one or both parties wish to control the narrative following a divorce.

When and how are matrimonial NDAs entered into

Divorce

Upon divorce, the terms by which a couple’s wealth is divided should ideally be set out in a binding Court Order. This can be achieved by reaching a negotiated agreement (perhaps using some method of Non-Court Dispute Resolution – e.g. mediation), or it can be imposed by a judge following contested Court proceedings.

Although, within these Court proceedings, there is an inherent duty of confidentiality that applies to all parties, this relates only to information that is disclosed within the proceedings. Accordingly, whether or not Court proceedings are issued, in order to obtain wide ranging and lasting protection against the public disclosure of all relevant confidential information, parties can seek that their financial Order contains an NDA clause. This normally takes the form of a solemn promise made to the Court (called an “undertaking”) not to publish or otherwise disclose to third parties certain specific information or types of information, which will be clearly defined in the Order. Breaching an undertaking can result in very serious consequences; including imprisonment, a fine or the seizure of assets.

Of course, such an Order is usually only made at the conclusion of negotiations or Court proceedings. To protect parties in the lead up to this, when emotions are often at their most raw and the scope for indiscretion is high, one party may seek that the other enters into a stand-alone NDA. This would take the form of a contractual agreement between the parties, and may come with certain financial or other benefits to the party being asked to sign up to it. Whilst all types of NDA are generally drafted to apply equally to both parties, it is often very obviously there to protect one of them more than the other. Where this is true, it is common for there to be an element of horse trading to secure its agreement.Although not strictly an “NDA”, parties (or one party in particular) may also agree to request that the Court (if in proceedings) anonymises any judgments which it chooses to be reported on, and sets clear restrictions for any press involvement. This is an evolving area, but in recent years there has been an increasing shift towards greater transparency. Where parties agree between themselves that proceedings should be heard in private and for any reported judgments to be anonymised, this may be a factor that their judge takes into account when making these decisions.

Nuptial agreements

Pre-nups, and indeed post-nups, are having a renaissance. Though still not strictly binding in England & Wales, the Court will follow them where they have been entered into properly (i.e. with legal advice and on the basis of full disclosure, inter alia), and where the provision made for the financially weaker party is fair and enables them to meet their needs. Much like NDAs, as knowledge of nuptial agreements has grown in the public consciousness, so has their popularity, and they are no longer the exclusive preserve of the super rich.

It is possible within pre-nups (and post-nups) to regulate arrangements both during and after a marriage. As such, they are a natural home for NDAs that seek to prohibit the disclosure or publication of confidential information from the moment they are entered into. In some cases, the NDA element is one of the key reasons that one party is seeking the agreement of a pre-nuptial agreement (and again, this may trigger an element of horse trading that benefits the financially weaker party). The existence of the nuptial agreement itself may also include within the definition of the confidential information that must not be disclosed or published.

The benefits and the drawbacks

NDAs can be incredibly useful devices for helping to maintain the privacy and confidentiality of all manner of perceived sins. However, the agreement of an NDA comes at a financial cost (in terms of legal fees) and it may also alert the person being asked to sign one to the fact that they have more bargaining power than they might otherwise have thought.

For the person being asked to sign the NDA, the request can go down like a lead balloon, particularly when the issue they are being asked to keep secret maty be a key reason for the relationship breaking down. A good lawyer can help by carving out specific people that the person being asked to sign the NDA can still talk to about sensitive matters (such as their own professional advisors or therapists), to ensure they are not being prevented from properly accessing a support network.

Where concerns around the publication of confidential information are a central issue for our clients, we regularly work with PR advisors to advise on how best to manage the risk from a non-legal standpoint. This might involve developing a strategy to get ahead of an issue by preparing a press-release and/or engaging with journalists to quickly take control of the narrative in the event there is a future breach of confidentiality, as well as instructing defamation lawyers and crisis management professionals to secure the “take down” of any such publications as quickly as possible once they are out, and to obtain injunctions against future public disclosures.

If there is a breach on an NDA, there are various methods of enforcement available, including for contempt of Court where an undertaking has not been followed. However, depending on the method of enforcement, it is possible that any related Court proceedings will be held in public and can be fully reported on. For some, they may think the cat is out of the bag and that it is worth pursuing that enforcement mechanism despite the further attention that may be brought onto the very issue that they were trying to keep discreet. For others, it will not be a proportionate or advisable step to take.

If this article seeks to demonstrate one thing, it is that NDAs come in many shapes and sizes, and proper thought should be given at the outset to what is being sought to be protected, why this is necessary and how this can best be achieved.