The EU Succession Regulation (Regulation (EU) No.650/2012), also known as Brussels IV, marks a major change in cross-border succession law. The Regulation’s effects will be felt worldwide – not just within the EU.
Cross-border conflicts
For many mobile families, there has long been a conflict between the principles of free movement within the EU, and the realities of the expensive and complicated succession issues to which these principles can give rise.
The historic conflict stems from the entirely different succession laws that apply across the EU (and, in fact, throughout the world). These differences do not simply boil down to the perennial clash between testamentary freedom (broadly applied in common-law jurisdictions) and forced heirship (found in many civil law and Nordic jurisdictions); they are more involved. Examples include the multiple variations of forced heirship within civil-law jurisdictions and the lack of a common EU-wide succession law language.
As such, it is inevitable that conflicts arise. And this has increasingly been the case as families and their assets have become more mobile. When more than one jurisdiction is involved, which system takes precedence? Often we are faced with the thorny question of renvoi: does a reference to the law of a particular jurisdiction mean its domestic laws only or does it also include its private international laws (PIL), which may, in fact, pass the question on to another state entirely? Can the laws of different jurisdictions apply to different assets?
In one fell swoop, the Succession Regulation is meant to fix the problem. But it does so only partially, across the participating states (all EU member states other than Denmark, Ireland and the UK).
The Succession Regulation’s solution
The Succession Regulation has many nuances but, for the purposes of this article, we can generalise them under two headings:
Jurisdiction and applicable law
The main purpose of the Succession Regulation is to ensure that succession to a given estate is treated coherently. Ideally, the courts of a single jurisdiction will apply a single law to the entire estate. Generally speaking, the courts and governing law will track each other and will be those of:
- the jurisdiction of habitual residence;
- unless there is a jurisdiction to which the deceased was more closely connected;
- unless the deceased elected for the law of their nationality to apply.
Provided the law that governs succession falls within one of these categories, it does not need to be that of an EU member state. This means that assets (including real estate) held in a participating state could pass in accordance with the law of another jurisdiction entirely.
In many cross-EU situations, renvoi will be disapplied and so only the domestic succession laws of the relevant jurisdiction will be applied. In theory, this will reduce the possibility of conflicts. But, of course, matters are never so straightforward.
European Certificate of Succession
The second major change is that the parties interested in an estate will be able, though not obliged, to apply to the courts in the relevant jurisdiction for a European Certificate of Succession (ECS). In cross-EU cases, an ECS may replace the usual national post-death certificates or instruments. It is envisaged the ECS will set out the details of the deceased, any applicable marital regime, the relevant succession law, and the heirs and legatees, so it can then be used in each participating state in order to transfer and dispose of the estate assets. Essentially, there should be no need for separate post-death procedures in each jurisdiction in which assets are held.
What still needs resolving?
So far, so good. However, a few areas need further consideration, including:
What does ‘habitual residence’ mean?
Unless a nationality election to the contrary is made, the law and jurisdiction that govern succession will usually correspond to the country of habitual residence. The meaning of ‘habitual residence’ is therefore key to the Succession Regulation, although, in similar fashion to other EU regulations, it is not defined in the regulation itself.
‘Habitual residence’ has an autonomous meaning developed through EU case law (most notably cross-border divorces). It is not always determined by a simple calculation of the amount of time spent in a jurisdiction. Other factors will come into play, as set out in the Borras Report of 1998: ‘the place where the person had established, on a fixed basis, his permanent or habitual centre of interests, with all the relevant facts being taken into account for the purpose of determining such residence’.
Given the lack of definition, determining habitual residence may become a complex question of fact.
The UK, Irish and Danish question
The UK, Ireland and Denmark are not parties to the Succession Regulation and so the effect of the Succession Regulation in these three states is uncertain.
Clearly residents and nationals of each of these states with assets within a participating state will be affected: for example, under the Succession Regulation, Adam, a French resident and British national, can ensure that English law applies to his Luxembourg bank account.
And, equally clearly, residents and nationals of other participating states with assets in the UK, Ireland and Denmark will not be able to take advantage of the Succession Regulation. Carl, a German resident and national, with a flat in London, might want German law to apply, but the English courts are not obliged to comply.
Things become more complicated when we consider the qualified disapplication of renvoi. Where habitual residence (and therefore the applicable law) is that of a ‘third state’, renvoi will still be allowed provided the reference will be to a ‘member state’ or to another ‘third state’ that would apply its own domestic law.
So what is a ‘member state’, what is a ‘third state’ and where do the UK, Ireland and Denmark fit in? It is unfortunate the Succession Regulation does not include a definition of these terms (unlike the Maintenance Regulation and Rome I, both of which specify that ‘“member state” shall mean member states to which this regulation applies’). Even in the absence of such a definition, it is difficult to see how the UK, Ireland or Denmark could qualify as member states for the purposes of the Succession Regulation. The Succession Regulation imposes obligations and requirements on ‘member states’. Without their participation, how can these apply to the UK, Ireland and Denmark?
Assuming this approach is correct, consider Elizabeth: as an English resident and British national, she might want English law to apply to her Paris flat. However, English PIL rules would apply French law (as the law of situs) to succession. Unless Elizabeth has made a specific election referring to her nationality, France will presumably accept the renvoi and apply French law.
Application of the ECS
For many people with assets throughout the EU, the ECS should make the post-death process considerably more certain, efficient and cheaper. However, people with links to the UK, Ireland and Denmark are unlikely to benefit from this.
Take England, for example: despite the current move to amend the English and Welsh Non-Contentious Probate Rules, it is not envisaged an ECS will ever replace the need for a separate grant of representation in England. For a start, the information required for a grant of representation does not correspond with the details provided in an ECS. Perhaps even more importantly, the usual English procedure secures the payment of any inheritance taxes due before property can be transferred: this will not be the case with the ECS. There does remain an open question, however, of whether an ECS will provide sufficient information to secure an English grant, without the need for further (potentially costly) evidence of the relevant foreign law.
Testamentary freedom across the EU
Over the years, different jurisdictions have developed different methods of protecting family members and dependants from being disinherited. Across much of the EU, this is enshrined in the principle of testamentary freedom. In the UK, the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act) allows certain categories of disinherited heirs to claim against the estate of an English or Welsh domiciliary.
Without any further changes (which were, at one point, envisaged) to the 1975 Act, it is easily imaginable that a British, non-English or Welsh domiciliary with assets throughout the EU could simply disinherit all family and dependants. Neither forced heirship nor the 1975 Act will provide protection.
Implications of the ‘public-policy exception’
The above scenario is an example of where the ‘public-policy exception’ may become relevant, especially if the testator also happens to be a dual national of Britain and another EU country.
The public-policy exception allows participating states to deviate from the governing law and enforcement/recognition provisions contained in the Succession Regulation when they are ‘manifestly incompatible’ with national public policy. As substantive EU law currently stands, the public-policy exception must be interpreted in a restrictive way. Where the applicable law deviates entirely from domestic succession laws, it is conceivable that the public-policy exception will be raised.
All change in 2015
While the Succession Regulation will only apply to deaths after 17 August 2015, transitional provisions allow a choice-of-law clause to be included in wills and other testamentary documents drawn up now. These choices should be carefully considered, together with any tax-planning opportunities and the effect of a marriage contract. Now is the time to start reviewing wills and estate-planning measures, and consider what impact the Succession Regulation is going to have.