The long-awaited draft Brussels IV RegulatIon on Succession (BIV) finally arrived on 14 October 2009. The UK and Irish governments have to make a decision before 14 January 2010 as to whether they will opt in. The negotiations between member states began in November and may well continue for up to two years. Simultaneously, the European Parliament will be considering the draft and introducing its own amendments. BIV will not become effective until a further year after the draft has been agreed and finalised between the Parliament and the Commission.
Although it will still be a few years before BIV becomes effective, practitioners would be wise to consider suitable choices of law in wills and inheritance contracts now, since they are likely to be valid even though made before BIV is effective.
There are a considerable number of detailed issues arising from the drafting of BIV and much CO2 will be produced in dealing with them. In the space permitted here, I will flag two issues.
Some commentators find the connecting factor of habitual residence unsatisfactory. It is a term that has a uniform meaning (subject to the ECJ) throughout the EU, but is not yet clearly defined and therefore may have different interpretations in member states.
For those of us familiar with domicile, this should be of less concern. Domicile is defined differently in Scotland to how it is defined in England & Wales, and has much uncertainty attached to it. For many clients it is very difficult to establish their actual domicile, whilst their habitual residence is fairly obvious. Any change would be an improvement. Habitual Residence is an existing connecting factor for many existing Regulations and Conventions.
The other major problem that is envisaged is in relation to clawback of gifts. Under Article 19(j), gifts can become subjected to different clawback rules by virtue of a change of residence.
Some have argued that the issue of clawback is a unique problem for the United Kingdom. However, clawback already exists under insolvency legislation and under the 1975 I (PFD) Act and the 1979 N.I. Order with six-year time limits. The divorce courts have no difficulty in forcing clawback.
In practice, a solution to this issue will need to be found, since it affects most EU Member States, many of which have different rules for gifts to heirs and to non-heirs. In the Netherlands, clawback is limited for gifts to non-heirs made within the five years before death and is a monetary claim rather than a claim to the asset itself. In France, there are no time limits and the value of the asset is that as at the date of death.
Public policy in individual Member States might be able to limit claims to the period applicable in their own internal law, thus limiting such claims in England & Wales to six years before death.
In addition, the concept of inheritance contracts might be introduced into UK internal law. In the same way that the pressure for recognition of pre-nuptial contracts is growing in England & Wales, there is no reason why families should not also be able to plan their succession issues and, subject to suitable safeguards, contract out of 1975 Act rights.
The recent dispute between Dr Gill and the RSPCA in relation to her mother’s farm in Northallerton highlights the fact that obtaining consent from spouses and children to significant gifts might be a sensible provision, reducing the likelihood of later litigation. In the desert that is the existing Private International Law mess in the EU and also in the UK, a camel, however ugly, could still be extremely helpful.