Media playback is unsupported on your device Media caption Lawyer Simon Bruce: "Pre-nups are like a form of fire insurance - far better taken out before the event"

The UK Supreme Court has ruled that a pre-nuptial agreement is binding in the case of a German paper company heiress.

Katrin Radmacher's ex-husband Nicolas Granatino went to the Supreme Court after appeal judges slashed his divorce settlement from more than £5m to £1m.

The Supreme Court said it agreed that in the right case such agreements can have decisive or compelling weight.

The case was seen by lawyers as a test of whether pre-nup agreements were applicable in law in England and Wales.

The justices dismissed Mr Granatino's appeal by a majority of eight to one.

They said that following their ruling, which was published on the Supreme Court's website, "it will be natural to infer that parties entering into agreements will intend that effect be given to them".

'Upheld fairness'

Lord Phillips, president of the Supreme Court, said the courts would still have the discretion to waive any pre-nup or post-nup agreement, especially when it was unfair to any children of the marriage.

Analysis Pre-nuptial agreements allow people to ringfence part of their wealth at the outset of a marriage. They are enforceable in many countries but they have never been binding in England and Wales. This landmark ruling means that if the parties enter into a "pre-nup" freely, are fully informed of all the relevant financial and other information, and the implications of the agreement, then the courts will uphold the pre-nup. In effect, they are now binding unless they are unfair. Pre-nups are not just for the rich. People entering second marriages, who want to protect their wealth for their children should the marriage fail, will find it much easier to do so. The ruling has been hailed as a judgement for a modern society, but there are some who believe it will significantly damage the financially weaker party in divorce. If that party, normally the wife, is held to the terms of a pre-nup they may be deprived of a considerable chunk of the couple's wealth.

Ms Radmacher, who was present at the Supreme Court for the ruling, said afterwards: "I am really pleased with the ruling but saddened at the four-year process that brought us to this point.

"I am delighted that Britain has upheld fairness. It is important to me that no-one else should have to go through this."

Nicholas Mostyn QC, representing Mr Granatino, had told the Supreme Court the contract was impermissible because it amounted to a court legislating over pre-nuptial agreements which were not recognised in English law.

Mr Granatino, a French investment banker who became an Oxford University researcher, and his German former wife signed their pre-nup in 1998.

They spent most of their life together in Chelsea, west London, until their divorce in 2007.

Ms Radmacher's former husband had agreed not to make any claims on her fortune if they split up, but was awarded £5.85m by a High Court judge in 2008.

She challenged that decision and judges at the Court of Appeal agreed that the couple's pre-nuptial contract should have been taken into account.

The Appeal Court had agreed that Ms Radmacher, thought to be worth £100m, should be protected by the terms of the German marriage contract. Mr Granatino was fighting to get that ruling overturned.

Media playback is unsupported on your device Media caption Lord Phillips: "The court should give effect to such an agreement if it is entered into freely"

They slashed his lump sum payment to about £1m. Mr Granatino also received a £2.5m fund for a house, which would return to Ms Radmacher when the younger of their two daughters, aged 10 and seven, reaches 22.

Mr Granatino said being forced to accept the smaller settlement would leave him in financial ruin, and he asked the Supreme Court to reverse the decision.

In a later statement, the mother-of-two said she believed a pre-nuptial agreement was a "natural part of the marriage process".

She said: "For Nicolas and I, in our homelands - France and Germany - these agreements are entirely normal and routine.

"We made a promise to each other that, if anything went wrong between us, both of us would walk away without making financial claims on each other. The promise made to me was broken.

"I know some people think of pre-nuptial agreements as being unromantic, but for us it was meant to be a way of proving you are marrying only for love."

Her former husband, who made no public comment after the judgement was handed down, hugged his lawyers before leaving court.

Before the Court of Appeal judgement was handed down, it was understood pre-nuptial agreements were not recognised in English law.

The Law Commission is due to report in 2012 on whether a change in the law should be made to ensure pre-nuptial agreements are fully enforceable.