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Authorisation of Payments in International Commercial Surrogacy – A New Approach?

Ruth Cabeza, barrister, of Field Court Chambers considers two important judgments recently made by Mrs Justice Theis concerning payments under international commercial surrogacy agreements.













Ruth Cabeza, barrister, Field Court Chambers

Across every aspect of our lives governments, here and abroad, individually and collectively, seek to regulate the commercial applications which come with each new scientific discovery.  Each government does so within the context of the social and moral values of the peoples it governs.  The court's function in this country is to implement the intention of Parliament. However, as the pace of change with regard to social mores and scientific discoveries increases exponentially, it can be hard for the legislature to keep pace, particularly in the context of an increasingly internationally mobile population.  Perhaps one of the most acute examples of the tension created by this dynamic is the legal status of the child born as a result of an international commercial surrogacy arrangement.  This article will explore the impact of a change in approach to the interpretation of s.54(8) of Human Fertilisation and Embryology Act 2008 (HFEA 2008) as seen in two recent cases.

The statutory framework
The Surrogacy Arrangements Act 1985 (SAA) outlawed commercial surrogacy in this country.  The Human Fertilisation and Embryology Act 1990 (HFEA 1990) provided a framework to establish the identity of the legal parents of a child born as a result of assisted reproduction.  Those Acts were updated by the HFEA 2008. As we can see from the recent judgment of Jackson J in M v F and H [2013] EWHC 1901 (Fam), 'assisted reproduction' in this context is not limited to that which is provided by a licensed fertility clinic.  It also includes conceptions brought about by individuals acting in the privacy of their homes (or hotel rooms) in which the mother is inseminated by means otherwise than sexual intercourse. 

Parental status
Within the context of a surrogacy arrangement, the effect of the HFEA 2008 is that the surrogate mother is the child's legal mother.  If the surrogacy arrangement was brought about using the sperm of a male commissioning parent, then, if the birth mother is unmarried or her husband/civil partner did not consent to the mother's artificial insemination, the child's father will be the commissioning father.  However, if the surrogate mother has a husband or civil partner who consented to her artificial insemination, the child's other parent will be the surrogate mother's husband or civil partner and not the biological father.  The fact that the child may have no biological connection with either of its legal parents does not alter the legal position.  Nor does the fact that the assisted reproduction took place in a country other than England or Wales.  Notwithstanding that in the country of the child's birth,  the people treated as parents under English law, are not recognised under the law of that country as the parents, and the commissioning couple are named on the birth certificates, for all purposes under English law the surrogate mother and her husband/civil partner will remain the child's only legal parents, and the commissioning couple do not have any legal relationship to the child.  Such a child is a legal orphan, and potentially as a consequence, a stateless one too.

Parental orders
The most straightforward means by which commissioning parents can obtain legal recognition of their status as parents of their child is by the grant of a parental order under s.54 HFEA 2008.  Its effect is similar to an adoption order in that it transfers full parental status to the applicants and extinguishes it in every other person.  Following the making of a parental order, the child is registered in the English register of births and deaths, the commissioning parents are named as its parents and an English birth certificate is generated.  However, that is where the similarities end as the legal process by which a parental order is obtained is very different from that which is followed in an adoption application, and the criteria for eligibility to apply for a parental order are much narrower.

Unlike adoptions, parental orders can only ever be granted if there is a biological connection with at least one of the commissioning parents.  Further, unlike adoption, if the surrogate mother or her husband/civil partner oppose the making of a parental order, the application cannot succeed.  The only basis upon which an order can be made without the consent of the surrogate mother and her husband/civil partner, is if they cannot be found or lack the capacity to give their consent.  The ideal of surrogacy as a selfless act of generosity, in which a woman who can carry a child, does so altruistically for a couple who cannot, is encapsulated by the requirement that the woman who gives birth (and her husband or civil partner if they consented to the surrogacy arrangement)  must 'have freely, and with full understanding of what is involved, agreed unconditionally to the making of the order.' 

Payments and section 54(8) HFEA
It is within the context of the freely given consent required by s.54(6) that the issue of payments in s.54(8) has historically been understood.  This subsection reads:

(8) The court must be satisfied that no money or other benefit (other than for expenses reasonably incurred) has been given or received by either of the applicants for or in consideration of--

(a) the making of the order,
(b) any agreement required by subsection (6),
(c) the handing over of the child to the applicants, or
(d) the making of arrangements with a view to the making of the order,

unless authorised by the court.

The first reported case to consider this provision appears to have been  Re C; Application By Mr And Mrs X Under S 30 Of The Human Fertilisation And Embryology Act 1990 [2002] EWHC 157 (Fam) [2002] 1 FLR 909.  This was a domestic surrogacy arrangement in which the commissioning parents had been misled by the surrogate to believe that the surrogacy arrangement would cause her to suffer loss of earnings.  In fact it turned out that she had not been in employment in any event.  Accordingly, parts of the payments made to the surrogate by the commissioning couple were not reimbursement of her of reasonably incurred expenses caused by the pregnancy, and so they fell within the ambit of what was then s.30 (7) HFEA 1990 (which in all material parts is identical to s.54(8) HFEA 2008).  Wall J had to consider whether or not that provision was intended by Parliament to allow the court to give retrospective authorisation to payments which would otherwise preclude the making of the parental order.  Having regard to adoption cases, in which similar issues had arisen, he determined that the court had the power to give retrospective authorisation to such payments.  He further considered that when doing so it should have regard to all the circumstances of the case, with the welfare of the child as first but not paramount consideration, including the degree of taint of the transaction.

Commercial surrogacy agreements
The first time that this provision was considered within the context of an international commercial surrogacy arrangement was in Re X and Y (Foreign Surrogacy) [2008] EWHC 3030 (Fam) [2009] 1 FLR 733.  In that case Hedley J points out that the HFEA 1990 provided no statutory guidance for the application of the court's discretion to give its authorisation to payments pursuant to s30(7).  He therefore had to extrapolate  the criteria from the framework of the statute as a whole, the Children Act 1989, the Adoption and Children Act 2002, and earlier cases in which the court had authorised payments in an adoption.  At paragraph 21, Hedley J concluded that when considering the public policy issues:

the court pose itself three questions:

(i)was the sum paid disproportionate to reasonable expenses?

(ii)were the applicants acting in good faith and without 'moral taint' in their dealings with the surrogate mother?

(iii)were the applicants party to any attempt to defraud the authorities?

With the coming into effect of the HFEA 2008 on 1st April 2010 parental orders became available to all couples in a committed relationship, be they married, civil partners or heterosexual/same sex relationships of an enduring nature.  At the same time, some jurisdictions were enthusiastically embracing the concept of commercial surrogacy, which is now a big business in some countries.  One click on Google will open the door to countless advertisements for commercial surrogacy agencies based overseas.  It is therefore unsurprising that since the case of Re X and Y (Foreign Surrogacy) there has been a steady flow of applications for parental orders made against the background of an overseas commercial surrogacy arrangement.  Inevitably the court has had to consider whether or not to give its retrospective authorisation for payments to surrogate mothers which have exceeded the reasonable expenses of the surrogate in connection with the arrangement. 

The whole point about commercial surrogacy is that it is a 'for-profit' enterprise.  In addition to the reimbursement of her reasonable expenses associated with the pregnancy, the surrogate will receive a payment which is designed to recompense her for the pain, inconvenience and risks associated with carrying a child.  Equally, the agency which invests in finding and assessing potential surrogates and marketing itself to commissioning couples, as well as linking both surrogate and commissioning parents to legal and medical resources necessary for the arrangement, undertakes its role in the process with an expectation of commercial profit.  The fertility clinic will charge for its services as will the egg donor or sperm donor.  The surrogacy contract will often provide for the commissioning parents to meet the cost of insurance for the surrogate and her costs associated with her obtaining independent legal advice and counselling.  Some of these payments would arise in a 'not for profit' surrogacy arrangement in England.  Other expenses are unique to the overseas commercial surrogacy market.

The first major change of approach came in the case of Re L (Commercial Surrogacy) [2010] EWHC 3146 (Fam) [2011] 1 FLR 1423.  This was the first case to be considered in the High Court following the coming into effect of the HFEA 2008 and the regulations made under that Act.  One significant effect of these regulations was that they imported the provisions of s.1 Adoption and Children Act 2002 into the court's determination of orders under s.54 HFEA 2008.  This changed the priorities when balancing the welfare of the child against the public policy considerations for determining whether or not the court should give retrospective authorisation to relevant payments, with the welfare of the child being elevated to the court's paramount, rather than first consideration.  However, notwithstanding this change of approach, Hedley J went on to say at paragraph 12:

I think it important to emphasise that, notwithstanding the paramountcy of welfare, the court should continue carefully to scrutinise applications for authorisation under s 54(8) with a view to policing the public policy matters identified in Re S [[2009] EWHC 2977 (Fam)]and that it should be known that that will be so.

Payments to parties other than the surrogate mother
Re P-M
No case since has departed from this view and the court continues to require applicants to be absolutely transparent with regard to all the details of their surrogacy arrangement.  This is because it is not simply a question of 'how much?'  It is, and has always been, a question of 'how much and in what context?'

Until the case of Re P-M [2013] EWHC 2328 (Fam) which was heard on June 6th 2013, s.54(8) had been understood to relate exclusively to payments made to the surrogate mother.  However in Re P-M Theis J clarified that the ambit of s.54(8) was not so limited, stating at paragraph 15:

Hitherto the focus of section 54(8) has rightly been on the monies that have been paid to the surrogate mother, and whether the payments that were made to the surrogate were "other than for expenses reasonably incurred" and so required to be authorised by the court. However it seems to me and this is supported by CAFCASS Legal that in fact the position in relation to the court is that it is necessary to look at the wider payments as well. The section makes reference, not to payments paid to the surrogate, but payments made by the applicants. So the court's scrutiny should include, and can include, payments that are made to an organisation (for example, CSP, in this case) who are effectively doing this on a commercial basis and there is an element of profit.

In this case the surrogate had not been paid a fee to compensate her for the discomforts and inconvenience caused by the pregnancy.  However, the court noted that US$48,000 has been paid to the surrogate agency.  Over half this sum appeared to have been disbursed to meet medical treatment costs, some insurance and some possibly some legal costs, but the sum of US$21,000 appeared to the court  to have been retained by the agency, and was characterised by the court as the agency's  'profit element'.  In this case, the court took the view that the profit element paid to the agency was a sum which required authorisation under s.54(8).  When considering how to exercise her powers under s.54(8) Theis J said this:

However, it should be recorded that where the welfare considerations demand that an order should be made, the court will only in the clearest case of abuse of public policy consider not making an order; and the fact that an agency has made a profit where the surrogate has acted in an altruistic basis is a factor to take into account. But, in essence, provided it complies with the relevant legal framework in the jurisdiction in which it is entered into (which obviously on the evidence in this case CSP did) then it is a matter for the court to consider and look at. But the level of profit is unlikely, in circumstances such as here where it is in compliance with the legal framework in the country that it is entered into be a reason for refusing to make an order, save in the most exceptional case. The reality is there is a legal commercial framework which is driven by supply and demand.

Re C
On 19th July 2013 the court had cause to give further thought to the ambit of s.54(8) in the matter of Re C [2013] EWHC 2408 (Fam).  In the light of Re P-M, the applicants in Re C accepted that payments made to an agency were capable of falling within the ambit of s.54(8), since by facilitating the contract for the surrogacy arrangement the surrogacy agency was clearly involved in 'the making of arrangements with a view to the making of the order', an activity captured by s.54(8)(d).  However, it was submitted, and the court accepted, that only that part of the payment to the agency which exceeded its reasonable business expenses would be captured.  The difficulty of course is that without access to the minutiae of the agency's accounts, the court could not be invited by the applicants to identify which part of the agency fee related to its running costs and which to its legitimate profit.  Accordingly, Theis J took the cautious option and authorised the whole amount, which in that case amounted to US$15,000.  However, having widened the ambit of payments to which s.54(8) applied, the applicants invited the court to clarify whether and to what extent other payments to third parties might also be captured by s.54(8).  In particular the court was invited to consider whether medical treatment and/or payments to an egg donor would need the court's approval.

Although it was implicitly accepted in Re P-M that medical treatment costs are a reasonable expense, this was explicitly confirmed in Re C at paragraph 15, not least of all because it has always been accepted in domestic cases that medical expenses are a reasonable expense.  However, egg donor compensation often forms part of the medical expenses.  In this country, as a matter of public policy, it is not permissible to pay an egg donor more than £750 as compensation for their reasonable expense in connection with egg donation.  In the case of Re C, the egg donor had received a payment of US$6,000.  In some case the sums paid to egg donors are even higher, and it was therefore an important issue to clarify.  The court accepted the submission on behalf of the applicants that payments made by them to the egg donor were not payments which required authorisation under s.54(8), because those payments were not made in connection with an activity identified in that subsection.  However, while these payments are not captured directly by s.54(8), they will be part of the of the overall context of the case, and as such may well form a part of the balancing act with regard to public policy.  Therefore transparency with regard to the issue of egg donation is likely to continue to be a requirement of the court.

Lessons from the recent cases
What can we learn from these recent cases?  The lesson for the practitioner is that applications for parental orders with regard to children born as a result of overseas commercial surrogacy arrangements, need to be prepared with great attention to detail.  The court will not be willing to simply 'rubber stamp' these applications.  It will continue to scrutinise with care the full circumstances which are relied upon to justify the court exercising its discretion to give retrospective authorisation to payments.  Of course the court will continue to place the child's welfare at the heart of its determination and the child's welfare remains paramount.  However, the delicate task of balancing the child's welfare against public policy must and will be undertaken, on a case by case basis.  In each case the applicants will need to provide evidence, in the form of witness statements, supported by comprehensive documentary evidence.  Where necessary, expert reports on the law of the country in which the surrogacy arrangement took place are likely to be required, and this may now relate to the way in which the agency has operated.  Only by providing the court with full and frank disclosure can the applicants expect the court to undertake the task of assessing whether or not they have acted with good faith, have complied with the legal requirements in all relevant jurisdictions, and have not made payments which have or would have been likely to have undermined the surrogate's free will or caused her to be exploited in any way.  With regard to the information relating to payments, it is suggested that good practice would require the applicants to disclose with absolute transparency all payments made to the surrogate, the agency, for medical costs and, where relevant, the egg donor.  They all form part of the overall context within which each payment falls to be considered, so that the court can tell whether and to what extent payments made other than for reasonable expenses are proportionate payments.

The good news is that when balancing the child's welfare against public policy, the court is likely to give retrospective authorisation to fees paid in a commercial surrogacy arrangement entered into lawfully in a foreign jurisdiction provided a case is properly prepared; there is jurisdiction to make the order pursuant to the requirements of s.54 (1) - (7); and the information disclosed does not establish that there has been 'the clearest case of abuse of public policy';  .  That being the case, if the welfare of the child requires it, the court will almost inevitably go on to make a parental order as this is the most effective means by which that child can become fully and lawfully rooted within their family for the rest of their lives.

Ruth Cabeza was counsel in the matter of Re C [2013] EWHC 2408 (Fam) (instructed by Louisa Ghevaert of Porter Dodson LLP)

22 August 2013