The European Union Succession Regulation (EU) No 650/2012
Until now, different states have had completely different private international law rules (“PIL”) for succession.
The Succession Regulation (“SR”) has attempted to harmonise PIL for succession throughout the EU without significantly affecting the internal succession laws of Member States. Regulation (EU) No 650/2012 – entered into force on 17 August 2012, although most of it will not apply until 17 August 2015.
Because of clawback and other matters, the UK and Irish Governments exercised their right not to opt in.
The SR will still apply to assets situated in most EU Member States (“the SR Zone” – all EU Member States other than Denmark, Ireland and the United Kingdom) and to the succession of persons dying habitually resident there. The SR will govern the PIL for succession in the SR Zone, not only between States within it, but also between them and States outside it.
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Thus, the provisions of the SR, including those governing choice of law, are vital for all practitioners to understand.
Choice of Law
Art.22 of the SR provides that a person may choose the law of their nationality as the law to govern their succession as a whole.
Applicable Law and Renvoi
According to Art 21.1 of the SR, the law applicable to the succession is the habitual residence at the time of death and is to apply to the whole of the succession. This applies whether or not the applicable law is the law of a SR Zone state.
Art.34 abolishes renvoi unless the applicable law is that of a non-SR Zone State. If so, the PIL of that third state is included, in so far as it makes a renvoi back to the law of a SR Zone State or to the law of another third State which would apply its own law.
No renvoi is to apply to an Art.22 choice of law and some other limited matters.
UK Nationals resident in the SR Zone
The estates of British citizens living in France, Spain, Italy or Portugal will be subject to the jurisdiction of the courts of that state. The local law will be applied to the worldwide assets and any non-SR Zone assets not so passing, may be brought into account.
Thus immovables in England & Wales will, under UK PIL, pass subject to Anglo-Welsh law, but will be brought back into account in the administration in France, Spain or other SR Zone state. This will be a significant change in France and Germany which currently do not bring foreign immovables back into account..
Local clawback rules will apply to lifetime gifts whether made within or outwith the SR Zone.
A choice of national law by a UK citizen living in Spain would be of the relevant internal law of part of the UK. The ability to choose the law of England & Wales or of Scotland will be novel in France and Spain, but less so in Italy, where a form of choice of law already exists.
UK Nationals resident in the UK with assets in the SR Zone
The SR Zone immovable assets of British citizens living in the United Kingdom will be subject to the jurisdiction of the courts of the SR Zone state. Whilst the law of the habitual residence applies, this includes PIL and renvoi back into the SR Zone. The local law will be applied to the local immovables only. This will not represent a significant change in France, but will in Spain or Portugal, where currently the renvoi has generally not been accepted.
A choice of national law by a UK citizen for his Spanish immovables would be of the relevant internal law of part of the UK. This will be vital for most existing UK citizens with immovables in Spain or Portugal.
US Nationals resident in the UK or US with assets in the SR Zone
The SR Zone immovable assets of US citizens living in the United Kingdom or the United States of America (or any other schismatic jurisdiction) will be subject to the jurisdiction of the courts of the SR Zone state. Whilst the law of the habitual residence applies, this includes PIL and renvoi back to the SR Zone. The local law will be applied to the local immovables only. In the same manner as for UK nationals, this will not represent a significant change in France, but will in Spain or Portugal, where currently the renvoi has not been accepted.
A choice of national law by a US citizen for his French immovables would be of the relevant internal law of part of the USA. If the US citizen is domiciled in the USA, this would be the law of the relevant US State. If not, then it will be of the US State with which he is most closely connected. The definition of “domicile” in the USA is somewhat different and In some circumstances, it may be difficult to establish with which part of the USA is the US citizen most closely connected.
SR Zone Nationals resident in the UK with assets in the SR Zone
The estate of a French domiciliary habitually resident in London, would be subject to the PIL of the UK so that French internal succession law would apply to his movables and French immovables.
If he has French situs assets the French courts would have jurisdiction in relation to his worldwide estate, if he is a French national or was habitually resident there within the previous five years..
The only choice of law available to the resident is that of his nationality. If his only nationality is French and if French law is not attractive to the testator, he may be tempted to take on British nationality to permit a choice of the internal succession law of England & Wales.
Whatever is stated in the SR, it may be that the French courts may regard such an assumption of British nationality as a fraud on the law and in breach of French public policy, until a judgment of the European Court decides otherwise.
Former SR Zone residents in the UK or USA or elsewhere with assets in that SR Zone
The worldwide estates of SR Zone and Non SR Zone nationals with assets situated in a SR Zone State in which they were habitually resident within the previous 5 years, will be subject to the jurisdiction of those courts. If public policy or clawback issues might be relevant, such individuals may wish to consider moving assets out of such a SR Zone State.
Conclusion: Use the Choice of Law Provisions Now
It would be wrong to consider that the SR has no relevance to practice before it becomes fully effective in 2015. All practitioners would be wise to consider suitable choices of law now.
If clients have any EU cross border issue, a valid choice of law will become effective in 2015 even though made now.
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