Brussels IV – the draft Succession Regulation
The proposal for a Regulation of the European Parliament and of
the Council on jurisdiction, applicable law, recognition and
enforcement of decisions and authentic instruments in matters of
succession and the creation of a European Certificate of
1Succession - COM(2009)154 final
The Treaty of Lisbon being likely to enter into force on 1 December 2009, we
must all now become accustomed to the new consolidated Treaty on
European Union (“TEU”) and the Treaty on the Functioning of the European
Union (“TFEU”) and their protocols and annexes. Under Article 3 of Protocol
21, the United Kingdom and Irish governments each have to make a decision
before 14 January 2010 as to whether they wish to opt in to Brussels IV. The
negotiations between member states have begun. These may well continue
for up to 2 years. Simultaneously, the European Parliament will be
considering the draft and introducing its own amendments. The Regulation
will not become effective until a further year after the draft has been agreed
and finalised between the Parliament and the Commission. Even if the UK
has not opted in now, it may still take an active part in the negotiations, on the
basis that it may decide under Article 4 of Protocol 21 to accept Brussels IV
after it has finally been adopted in 2011 or 2012.
Even if the UK does not opt in whatsoever, Brussels IV will still apply to assets
within the remainder of the EU (“Brussels IV Zone”) being the EU other than
the United Kingdom, Ireland (if it decides to take the same course as the UK)
and Denmark. Brussels IV will also apply when the private international law
(“PIL”) of a non Brussels IV state, including non-EU states, directs the
applicable law to one within the Brussels IV Zone. Choice of law and the other
provisions of Brussels IV will be important for all practitioners to understand in
any event.
1 http://ec.europa.eu/civiljustice/news/docs/succession_proposal_for_regulation_en.pdf
First Thoughts on the draft Regulation
The English version has been reasonably transposed from the French version,
but there are a few translation and transposition issues. For example “Renvoi” has been translated as “Referral” in Article 26. It would be preferable to
continue to use the word “Renvoi”. Article 19.2(l) “sharing the inheritance”
might be better translated as “Schemes of division”. Reference to “Authentic Instruments” in Article 38.2 should be to “Authentic Documents (or Certified Copies)”. It is to be hoped that a number of improvements and amendments
will be inserted during the negotiation process.
Wills
Although Brussels IV has previously been described both in the Dörner and
23Lagarde Report and in the Green Paper as dealing with Succession and
Wills, the reference to Wills has now been removed. There are now no articles
changing the existing PIL of member states in relation to the formal validity
and creation of Wills. It would seem that we may await another Regulation
(Brussels IV bis?) on this and the topic of Will Registers. Generally, reference
is now to “forms of disposition of property upon death” (disposition à cause de mort) as opposed to testamentary disposition (disposition testamentaire). Presumably this change is to avoid classification problems as to whether a
particular disposition, such as the French Donation entre époux, is a testamentary one or not.
The removal of the formerly proposed article 17 dealing with the PIL for formal
validity of Wills has left an unsatisfactory position. We appear to have the
peculiar effect that a Will will generally be formally valid under the old
individual and conflicting rules. Thus the form of a Will may be valid in for
example the UK and France, but not valid in Malta. However, since Article 26
abolishes Renvoi, a choice of law to be effective under Article 17.3 must be in
a “form of disposition of property upon death” made in accordance with the
internal law of the state whose law is chosen.
2
http://europa.eu.int/comm/justice_home/doc_centre/civil/studies/doc/testaments_successions
_fr.pdf 3 http://europa.eu.int/comm/justice_home/doc_centre/civil/doc/com_2005_065_en.pdf
The position regarding revocation of Wills is equally unfortunate. Article 19.2(k) has the effect that the law governing revocation is that of the applicable law at death. Whether a Will has been revoked or affected by marriage, the birth of a first child or destruction would not be known until the applicable law is decided at death.
The rule relating to the modification or revocation of a choice of law, under Article 17.4 is equally opaque. It would appear that the relevant applicable law is that at death rather than of the determined law. This appears entirely circular, since it is to be the applicable law that governs these issues, and the validity or otherwise of the choice of law needs to be decided, before it can be decided as to what is the relevant applicable law.
All of these provisions are far from ideal and it is to be hoped, will be amended during the negotiations. It would perhaps be more sensible if Articles 17.3 and 17.4 were amended so that the determined law (including its PIL, i.e. not excluding renvoi) should govern the existence, validity,
modification or revocation of a determination of applicable law. Alternatively, Article 26 which abolishes Renvoi could be amended so as not to apply to the
validity of the creation, modification or revocation of a form of disposition upon death and thus existing PIL rules could continue to apply.
Capacity Article 19.states that the applicable law will govern by 19.2(c) “the capacity to
inherit” and by 19.2(d) “the particular causes of the incapacity to dispose or
receive”. However, Article 1.3(b) makes it clear that notwithstanding these provisions, the question of “the legal capacity of natural persons” is excluded from the scope of the Regulation. The logical interpretation is that references in Article 19 are to issues of capacity other than the legal capacity of natural persons. This does tie in with the limits of the 2000 Hague Convention on the International Protection of Adults.
Habitual Residence Some commentators find the proposed connecting factor of habitual
residence as unsatisfactory since it is a term that is to have a uniform
meaning throughout the European Union and subject to interpretation by the
Court of Justice of the European Union, and yet it is not currently clearly
defined and therefore may in practice have a different interpretation by the
courts in different member states.
This may well be a matter of particular concern to those member states
currently using the connecting factor of nationality.
For the United Kingdom however, where we are familiar with the connecting
factor of domicile, this should be of less concern. The term “habitual
residence” is currently used in other EU Regulations and in various Hague
Conventions. The definition has been considered by the High Court in
4matrimonial proceedings in the case of Marinos and set out a number of
guidelines to be used in difficult circumstances:
? EU habitual residence is defined more by the centre of a
person’s interests than by a particular duration of residence;
? although a person may be resident in more than one state
at any particular time there can only be one EU habitual
residence at any time;
? in the same manner as a change in domicile, EU habitual
residence can be lost and gained within one day. The existing definitions of domicile within the United Kingdom are different in
Scotland and in England & Wales and have much uncertainty attached. The
1985 proposals of the Law Commission of England & Wales for changes to
the law of domicile were not implemented, whilst the Scottish Law
Commission proposals have been partially implemented. The definitions in the
United Kingdom are different to those in other jurisdictions such as the United
States, Australia, New Zealand or India. Reform of the existing law of
domicile is urgently needed in any event.
4 Marinos v Marinos [2007] EWHC 2047
To the extent that individual circumstances might create any uncertainty as to
a person’s habitual residence, clients can of course exercise their option to choose the applicable law to be that of their nationality. It is unfortunate that
Article 17.1 only gives a choice of nationality and does not permit a choice of
the habitual residence at the time of choice. This would perhaps have
resolved other issues, but appears to be politically unacceptable.
Article 28.1 deals with the position of the United Kingdom and Spain which
are states with several territorial units each having its own rules of succession.
Whether a UK citizen could choose any of the laws of England & Wales,
Scotland or Northern Ireland without any further connection, is currently
unclear.
Within the United Kingdom, Article 28.2 makes it clear that the United
Kingdom would not be obliged to apply Brussels IV between the individual
jurisdictions within the United Kingdom. In view of the unsatisfactory and
unresolved existing conflicts within the United Kingdom it would seem
unfortunate if Brussels IV were to apply between the United Kingdom and
other member states but not within the United Kingdom which would then
have continuing mismatches of connecting factors, renvoi and between
unitarian and schismatic systems.
European Certificate of Succession (“ECS”)
After a great deal of promotion and publicity regarding the ECS, these would
now seem to be optional documents that may prove of some value, but have
little direct effect. However, thought will need to be given to the interaction
between the effects provisions of Article 42.3 and 42.4 and the creation
provisions of Article 36.2 stating that “The use of the ECS shall not be
obligatory. The certificate shall not be a substitute for internal procedures.”
There is room for conflict here.
Personal Representatives
The differences between States that have separate administration and those
that do not, do generally seem to have been resolved as far as they can be by
Article 21. However, this will still leave a number of issues. Article 19(g) needs
to be extended to include the obligations and protections of executors and
administrators. English internal law may need to be amended to impose a
duty on personal representatives to administer the whole of the succession
with the European Union and in return the protection given by section 27 of
the Trustee Act 1925 needs to be similarly extended.
If the UK and Ireland choose not to opt in, one wonders whether Article 21
would continue to be retained in the Regulation.
Gifts and Inheritance Contracts
The major problem as envisaged is in relation to clawback.
Recital (9) reminds practitioners who may not have yet been aware that the
Rome I Regulation on contractual obligations effective from 17 December
2009 applies to the question of the validity of a gift. The Rome I Regulation
does contain choice of law provisions and restrictions on such choice and
limitations due to public policy. .
Under Article 18 of Brussels IV, the validity of inheritance contracts which are
valid either under the law of the testator’s habitual residence on the date they are created, or by virtue of a prior valid choice of law, cannot later become
invalid, by a change of habitual residence or amendment of the choice of law.
The words “the law which, under this Regulation, would have been applicable to the succession of that person in the event of their death on the day on
which the agreement was concluded” leave some uncertainties.
Article 18.3 seems to imply that a choice of law can be made by the parties in
the inheritance contract, but limited to that of the nationality of the relevant
testator.
However, it is uncertain as to whether any separate choice of law must be made on a day prior to the date of the inheritance contract. Is the deemed death to be necessarily after or before the time of executing the contract? It would be clearer to state that “the law which, under this Regulation, would
have been applicable to the succession of that person in the event of their death immediately after the agreement was concluded”.
In contrast to inheritance contracts, gifts can become subjected to different clawback rules by virtue of a change of residence. Article 19(j) is the culprit. The applicable law governs “any obligation to restore or account for gifts and the taking of them into account when determining the shares of heirs”.
Some have argued that the issue of clawback is a unique problem for the United Kingdom. However, in theory, clawback already exists in the United Kingdom both under insolvency legislation and under the law of England & Wales and Northern Ireland under the 1975 Inheritance (Provision for Family & Dependents) Act and the 1979 N.I. Order with six year time limits. Equally, the trust industry, appears to cope (although with grumbles) with the existing clawback powers of the English divorce courts.
In practice, the issue is one that 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 5 years before death and is a monetary claim rather than a claim to the asset itself. In Austria the period is 2 years. In Germany, the time limit is one of ten years, with a tapering provision of 10% per year. In France, there are no time limits and the value of the asset is that as at the date of death, even though the claim is now a monetary claim.
One proposal was that the gift should be governed by the law of the habitual residence as at the date of the gift. As already stated, this solution has been partially incorporated in Article 18.1 in relation to the validity of succession agreements.
It is inevitable that other Member States will need to find a solution to this issue. One could suggest that public policy in individual Member States should be able to limit claims to the period applicable in their own internal law, thus limiting such claims in England and Wales to 6 years before death.
Alternatively or 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. Article 2(c) has a very broad definition of inheritance contracts.
Alternately, if a gift is made and an obligation included for the donor to execute a Will including a choice of English law and not to revoke such provision, is such a contractual obligation a matter for Rome I or Brussels IV?
The recent dispute between Dr Gibbs 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 to charity or elsewhere, might be a sensible provision reducing the likelihood of later litigation.
Public Policy
The other lurking issue is whether Muslim and other religious inheritance laws will be enforced if some States regard them as being discriminatory and thus in breach of Article 21 of the Charter of Fundamental Rights of the European Union to the extent that the Charter is directly enforceable under the Lisbon Treaty (subject to the United Kingdom, Polish and Czech opt outs under Protocol 30). Recital 34 touches on this point. Will this also mean that same sex and mixed sex couples may claim to be discriminated against in Member States that do not recognise same sex marriage or non-marital registered relationships?
Trusts and Usufructs Article 1.2(i) excludes “the constitution, functioning and dissolving of trusts”
from the scope of BIV.
The preliminary comment on Article 1 makes it clear that a ”usufruct cannot
be introduced in a State which does not recognise it.”
Notwithstanding the attempt to limit the importation of foreign concepts such
as trusts or usufructs, the flow of such structures is bound to have an effect.
The administration of a succession under the law of England & Wales will
introduce a trust like structure into other states. Whilst the administration
continues, a “trust” will exist. The EU legal laboratory is going to become an
even more interesting place to practice.
Use Brussels IV Now! There are transitional provisions in Article 50 giving effect to choices of law
and inheritance contracts made before Brussels IV is fully effective.
Although, it will still be a few years before Brussels IV becomes effective,
practitioners would be wise to consider suitable choices of law in Wills and
inheritance contracts now since they are likely to become valid even though
made before Brussels IV is effective.
The course of the Brussels IV negotiations in the Commission and in the EU
Parliament will be interesting to follow.
Richard Frimston
Solicitor and Notary Public
Russell-Cooke LLP, London
richard.frimston@russell-cooke.co.uk