The European UnionSuccessionRegulation(EU) No 650/2012 (“the EU Succession Regulation”)[1]

The history of the EU Succession Regulationis a long one but not as long as that of the EU itself.

European Union

Originally there were six members of European Economic Community (“EEC”) which expanded and later became the European Community (“EC”).

Since, the accession of Croatia onJuly 11, 2013, there are now 28 Member States (“MS”) of the European Union (“EU”) in an area of Freedom, Security and Justice with rights of free movement of people, capital, goods and services – the Single Market – with a population of over 500 million.

EU institutions.

The European Commission is the civil service of the EU that proposes legislation. The Council of the European Union represents the individual member states.

The European Union Parliament has members directly elected by citizens in individual constituencies.

Some legislation requires unanimity from the Council of Ministers with no input from the European Parliament, whilst other legislation under what is now known as the ordinary legislative procedurerequires a majority from the Council of Ministers and a majority from the European Union Parliament.

European Union governments have for some time recognised that judicial co-operation is important. Back in 1968, the original six Member States agreed on common rules on jurisdiction and enforcement of judgments in civil and commercial matters now known as Brussels I, but this always excluded succession issues. In 1993, the Maastricht Treaty identified judicial co-operation in civil matters as an area of common interest for EU Member States. TheTreaty of Amsterdam made judicial co-operation in civil matters a European Community policy linked to the free circulation of people.

The Lisbon Treaty came into force on December 1, 2009 and now sets out the basis for European Union law making.A working knowledge of the structure of the consolidated versions of the EU Treaties is helpful when trying to understand the European Union law making process. The Rome Treaty Establishing the European Community and the Maastricht Treaty on the European Union, have now been replaced by the Treaty on the European Union (“TEU”) and the Treaty on the Functioning of the European Union (“TFEU”).

Title V of Part Three of TFEU deals with what is now known as the Area of Freedom, Security and Justice. Chapter 3 of Title V of Part Three of TFEU deals with judicial co-operation in civil matters, including succession and the Succession Regulation. It is under this chapter that succession matters have been addressed.

IWhat was the problem?

Different European Union member states had completely different private international law (“PIL”) rules for succession. For example, some used“domicile” but with a different definition from the usual common law ones. The use of nationality did not avoid confusion. The PIL rules of the majority of European Union member states heldthat succession law was governed by the law of an individual’s nationality and that the entire estate both movable and immovable was governed by that law. Whether “law” meant the internal law of that state or includedthat state’s own PIL rules, i.e. whether renvoi was accepted, and whether only directly but also indirectly, varied from state to state.

Until the Succession Regulation, in the European Union,there had been no agreement as to which law applied – the applicable law. Similarly, a court decision, inheritance certificate or grant of probate in one state was not recognised or enforced in another. Resealing of a grant of probate was not possible. The differences involved were often irreconcilable and certainly added expense and time in the administration of estates with cross border elements in Europe.

There are terminology problems around the world and particularly across the Atlantic.

PIL as known in Europeare usually known as Conflicts Rules or conflicts of laws in the Americas

Applicable Law is often known in the Americas as the choice of law.

In the EU, “choice of law” is often used for professio juris or the ability for an individual to make a choice as to the succession law that is to apply.

IIThe European Union and the Single Market

The harmonisation of PILfor succession was first declared a priority in 1998. The Dörner and Lagarde Report was published in 2002.A Green Paper on Wills and Succession was published in 2005.

A draft Succession Regulationwas published in October 2009.

The Regulation had to be agreed by both the European Union Parliament and the Council of the European Union and was subject to qualified majority votingunder the ordinary legislative procedure.

The most detailed analysis and critique of the initial draft Succession Regulation was probably provided by the Max Planck Institute of Hamburg published in Rabels Zeitschrift 74 (2010) issue 3 and available on the European Union Parliament website[2].

The Max Planck Institute proposals did not suggest any changes in relation to the definition of habitual residence but did suggest some limits to clawback and various other additional suggestions including:

  • choice of jurisdiction
  • further elements as to choice of applicable law
  • provisions for harmonisation as to formal validity of Wills

The Report is a useful summary of many issues and repays study.

Negotiations at the Council of the European Union level were confidential to a degree. An interim document was published on 6 June 2011[3]. A final version (18475/11 ADD 1 JUSTCIV 356 CODEC 2397 - “JUSTCIV 356”)[4]was published on 15 December 2011, subject to further discussions and agreement on the issues of administration and clawback.

Political agreement was finally reached in March 2012 and the final Succession Regulation (EU) No 650/2012 entered into force on August17, 2012.However, most of the Succession Regulation did not become fully effective until August 17, 2015.

IIIOpt ins

Although approval of the Succession Regulation was subject to qualified majority voting, the United Kingdom and Ireland (and Denmark under a separate arrangement) have individual continuing opt in choices in relation to matters within Title V Area of Freedom, Security and Justice under Protocol 21 annexed to TEU and to TFEU. Title V Regulations do not apply to the UK (or to Ireland) unless within 3 months of the proposal being made, the UK (or Ireland) decides to opt in under Art.3 of Protocol 21. Under the Irish constitution, such decision has to be ratified by the Irish Parliament. The UK and Irelandseparately decided not to optin to the Succession Regulation.

However, each of the UK and Ireland may, under Art.4 of Protocol 21, still opt in at a later stage. Thus the UK took full part in the negotiations on the detail of Succession Regulation, but not having opted in,could not take part in the qualified majority voting.

Due to the provisions in relation to clawback and other matters, the UK Government decidednot to opt in.

Denmark is also not bound by Title V matters by virtue of Protocol 22. However, Denmark has no ability to opt in, unless it agrees to the revocation of Protocol 22 and to be bound by all Title V matters as a whole. In 2015, by referendum Denmark decided to retain its Protocol 22 opt out.

However, the Succession Regulation will still apply to assets situated in the EUMember Statesthat are participating to which the SuccessionRegulation applies (all EU Member States other than Denmark, Ireland and the United Kingdom – “the SR Zone”), to the succession of persons dying habitually resident there or to nationals of such states who make a valid professio juris of suchstates’ law.It is important to understand that theSuccession Regulation will govern the PILfor succession in the SR Zone, not only between participating MS but also between both participating MS and non-participating MS and also participating MS and third States outside the EU, such as a US state or a Canadian province or territory.

The Succession Regulation may also apply when the PIL of a non participating MS or of a third Statedirects the applicable law to be one within the SR Zone and does not accept any renvoi. The provisions governing the applicable law, professio juris and the other provisions of the Succession Regulation will thus be vital for all practitioners to understand in any event.

IVThe Need for Regulation

The Commissionin the European Judicial Networkwebsite states that theSuccession Regulation“should considerably simplify the rules on successions with an international dimension in the European Union. The aim is to make life easier for citizens by laying down common rules enabling the competent authority and law applicable to the body of assets making up a succession, wherever they may be, to be easily identified. In addition to providing more effective guarantees for the rights of heirs, legatees and other interested parties, the proposed Regulation will take some of the stress out of succession planning by enabling people to choose the law that will govern the transmission of all their assets. The European Commission is also proposing the creation of a European Certificate of Succession enabling heirs or the administrators of a succession to prove their capacity easily throughout the EU.”[5]

The Succession Regulation

The Succession Regulationincludes some nine and a half initial pages with 83 recitals. As explained at point 10 in the EUR-Lex Joint Practical Guide for drafting legislation[6], “the purpose of the recitals is to set out concise reasons for the chief provisions of the enacting terms, without reproducing or paraphrasing them. They shall not contain normative provisions or political exhortations.” However,some of the recitals in the Succession Regulation are somewhat opaque and do not always add to clarity or explain all of the enacting terms, which are the Articles.

The Succession Regulation in the same manner as other EU Regulations is divided into chapters dealing with separate topics of PIL.

Chapter I (Arts.1 to 3) covers Scope and Definitions.

Chapter II (Arts.4 to 19) deals with Jurisdiction, which is given to the state of the last habitual residence.

Chapter III (Arts.20 to 38) relates to ApplicableLaw which is to be that of the state of the last habitual residence, but with the ability for the testator specifically to choose the law of nationality in its place, theprofessio juris. Renvoi is partially abolished. The Chapter also deals with questions as to capacity and validity of Wills and Succession Agreements (“Dispositions of Property upon Death”)

Chapter IV (Arts.39 to 58) deals with Recognition, Enforceability and Enforcement

Chapter V (Arts.59 to 61) affects Authentic Instruments and Court Settlements

Chapter VI (Arts.62 to 73) concerns the European Certificate of Succession

Chapter VII (Arts.74 to 84) deals with General and Final Provisions.

The English version was originally translated from the French version, and inevitably there were some translation and transposition issues, but the Succession Regulation has rectified many, but not all of these linguistic problems.

The term “beneficiary” is now used to include both “heirs” (or residuary beneficiaries) and “legatees” but the terms are not necessarily clearly distinguished, since under some laws legatees merely have a claim against heirs or administrators whilst in others they may have a right in rem to an asset.[7]

V Scope, Exclusions and Definitions

The relationship between Arts.1,2, 3 and 23 needs to be understood.

Article 1 defines the scope of the Succession Regulation. If the Succession Regulation does not apply, none of the other articles apply. Thus none of the Succession Regulation applies to property passing by survivorship, since that is property passing otherwise than by succession.

It is here that linguistic issues are particularly acute. Art.1.1 in the English version states that, “This Regulation shall apply to succession to the estates of deceased persons.”

The French and German versions however do not refer to‘an estate’, but state, “Le présent règlement s’applique aux successions à cause de mort” and “Diese Verordnung ist auf die Rechtsnachfolge von Todes wegen anzuwenden“.

It is uncertain as to how to resolve this linguistic diversity in favour of a single meaning, but it is clear that a broad definition of "Succession" is to be inferred.

The Succession Regulation is not to apply to revenue, customs or administrative matters. Art.1.2 sets out further exclusions to which the Succession Regulation will not apply.

Of particular note is Art.1.2 (g) which excludes, “property rights, interests and assets created or transferred otherwise by succession, for instance by way of gifts, joint ownership with a right of survivorship, pension plans, insurance contracts and arrangements of a similar nature, without prejudice to point (i) of Art.23.2”

The scope of the applicable law under Art.23, on the other hand, does not limit other portions of the Succession Regulation. Even though a matter may not be governed by the applicable law under Art.23, it may still be a matter governed by the Succession Regulation and therefore subject to issues of Jurisdiction, Recognition, Enforceability and Enforcement under the law of the state of the Jurisdiction as opposed to that of the state of the applicable law.

MemberStates and ThirdStates

The Treaty on the Functioning of the European Union indicates that a third country is one that is not a Member State[8], whilst the expression Member State includes all Member States that are parties to the EU Treaties.

As set out in Recitals 82 and 83, Denmark, Ireland and the United Kingdom are Member States that are not bound by or subject to the application of the Succession Regulation. In those Recitals, they are referred to as Member States, however, there is no specific definition of ‘Member State’ or ‘third State’ in the Regulation.

The final line of the Regulation: "This Regulation shall be binding in its entirety and directly applicable on the Member States in accordance with the Treaties" can certainly be interpreted as including those three states as Member States.Others argue that reference in the final sentence of Recital 82 to "the United Kingdom and Ireland", rather than to "those Member States" is an indication that they are not to be regarded as such for the purposes of the Succession Regulation.

By virtue of Protocols 21 and 22 to the EU Treaties, the three Member States will not be bound by or subject to the application of the Regulation, but other Member States do not have the benefit of equivalent protocols to those of Protocols 21 or 22 and therefore the Regulation will bind all of those Member States.

If it had been wished to exclude the three states from the definition of Member State, it would have been perfectly feasible to do so.

The original form of the draft Regulation as proposed by the Commission in COM (2009) 154, included a provision at Art.1.2, which stated that “In this Regulation ‘Member State’ means all the Member States with the exception of Denmark [the United Kingdom and Ireland].” This provision has not survived the legislative process and does not appear in the Regulation.

In many EU Regulations, such a definition is included, restricting the definition of a Member State to those that are bound by the specific Regulation. In the Brussels I Regulation, for example, Art. 1.3 [now amended in Brussels I bis Regulation] defined “the term ‘Member State’ as meaning Member States with the exception of Denmark.” Similarly in the Rome I Regulation, Art.1.4 states that “In this Regulation, the term ‘Member State’ shall mean Member States to which this Regulation applies. However, in Art.3(4) and Art.7 the term shall mean all the Member States”, and the Maintenance Obligations Regulation (EC) No 4/2009

of 18 December 2008 specifically defines in Art.1.2 that “In this Regulation, the term ‘MemberState’ shallmean Member States to which this Regulation applies”.

The most similar equivalent example to the Succession Regulation is perhaps that of the Insolvency Regulation(EU) No 1346/2000 which applies to all Member States, other than Denmark. In that Regulation there is also no definition excluding Denmark from the definition of Member State.The external evaluation of the Insolvency RegulationJUST/2011/JCIV/PR/0049/A4 refers in passing to Denmark as being a third State without any authority for such a reference. The EUCJ decision in Seagon v Deko MartyC-339/07 related to issues involving Germany and Belgium. The Swedish Supreme Court decision in Siv Ing Benum AS v Kinovox-Benum AB[9] to issues involving Sweden and Norway and the application of the Nordic 1933 Treaty, but these do not directly address the issue. It would seem that the Swedish Supreme Court was indicating that Denmark may not be a third State.

It may therefore be argued that even though Denmark, Ireland and the United Kingdom are not bound by or subject to provisions of the Succession Regulation, the definition of Member State in the Succession Regulation does still include Denmark, Ireland and the United Kingdom, and that therefore the definition of a third State also excludes Denmark, Ireland and the United Kingdom.

There are divided opinions between experts as to whether each of Denmark, Ireland and the United Kingdom are within the definition of a Member State in the Succession Regulation.

Many opinions from the EU Institutions and national governments support the view that it was intended that non-participating Member States should not be regarded as within the definition of "Member State" in the Succession Regulation. However, any decision on the question will be subject to review by the Court of Justice of the EU ("CJEU") and may depend upon the political climate at that time. In the meantime, practitioners should be aware that the courts of most Member States are likely to regard the United Kingdom as a third State for the purposes of the Succession Regulation.