The Differences Between the Proposal and the Hague Convention on Matrimonial Property Law

The Differences between the Draft regulation on Matrimonial Property Law and the Hague Convention on Matrimonial Property Law 1978,

With a focus on the Rules concerning Applicable Law and the Effects on Third Parties

Prof. Dr. B.E. Reinhartz, University of Amsterdam

Introduction

In this statement I will cover the following subjects:

a.Some differences between the Draft Regulation on matrimonial property law and the Hague Convention on matrimonial property regimes 1978;

b.The effects of the application of foreign law on third parties;

c.Effects of changes of the applicable law during the marriage, also in respect to third parties.

Some differences between the Draft Regulation on matrimonial property law and the Hague Convention on matrimonial property regimes 1978

There are several differences between those two sets of rules. I will only mention a few:

The European Commission proposed two regulations, one on matrimonial property regimes and a second on registered partnerships, whereas the Hague Convention 1978 only covers matrimonial property regimes as we understand them: regimes that exist as a result of a marriage. In the European Context it is made clear that this can be any marriage, mixed sex or same sex.
The European draft regulations, and I will focus mainly on the draft regulation on matrimonial property regimes, contain rules on jurisdiction, applicable law and recognition and enforcement, whereas the Hague Convention only covers the aspects of applicable law. But it does not cover – for example – the question which judge may give a decision on the validity of a marriage contract or an ante nuptial agreement. Also the question about the recognition of such a contract, whether it is drawn up in an authentic instrument (for example a notarial document) or not, is not solved under the Hague Convention. These aspects do fall within the scope of the draft regulation.
Both the rules on applicable matrimonial property law contain the possibility of a choice of the applicable law by the spouses. If they have not made such a choice, then the applicable law is determined by a list of laws in a certain order. In the Hague Convention this is quite complicated because of the amendment of the clear rules of article 4 by the exceptions in article 5, which forms a compromise between different insights in the prevailing connecting factor for the applicable law. In some countries this is the nationality; in others the law of habitual residence.

In article 7,section 2 however; the Hague Convention states several cases in which automatic changes of the applicable law occur. These changes only apply to the assets that the spouses will acquire after the change has taken place. In daily practice this makes life quite complicated because often the spouses are not aware of the changes. Eventually a notary or a divorce lawyer has to determine which set of rules is applicable to the old TV and which set of rules applies to the newer sofa, which was acquired after the automatic change. It is clear that many scholars were against this rule in the Convention. It is a good thing that this is not copied into the draft regulation. But, as we see, it seems that the draft regulation uses this “compartment system” in another context. I will come to that later.

The effects of the application of foreign law on third parties

Basic rule: spouses may hold their foreign regime against third parties

In the draft regulation we find article 35 on the effect of the application of the regulation on third parties. Article 35 of the draft regulation resembles article 9 of the Hague Convention, except for section 4 of article 9 of the Convention, where member states are given the possibility to specify by declaration the scope of the second and third paragraph of this article.

These articles state that in general third parties must respect a foreign matrimonial property regime. When can this be relevant? The application of foreign law may influence the rules about the right to dispose of goods of the spouses. Third parties have to take this into account: are they dealing with the spouse who may sell and transfer a certain item of the possessions of the spouses? Or should they have dealt with the other spouse? Or: if one of the spouses has debts, which assets of the spouses may be used by a creditor to execute in order to get his claim settled?

What if the spouse for example sells a painting that is hanging in the house where both spouses live. In some legal systems the other spouse must give his consent to this kind of contracts. Does this matter fall within the scope of the draft regulation or not? At this moment the Netherlands have excluded this matter from the scope of the Hague Convention. It is important that it is decided how this will work under the future regulation.

In section 2 of both article 9 of the Hague Convention and article 35 of the draft regulation, we find a provision on the protection of third parties who had a good reason to rely on the fact that the acting spouse would not have a foreign matrimonial property regime. In the Netherlands we have a national legal provision that gives the right to third parties to act as if there was no foreign regime applicable (and therefore the national default regime would be applicable of the member state in question) in the same way as they may – in strictly national cases – rely on the fact that the default regime of Dutch law is applicable, even if there was a marriage contract which contained a different regime. Whether third parties are protected or not, depends on a registration in a national register for matrimonial property regimes.

This provision of the Hague Convention works quite well in the Netherlands. It must be said that in my country the notaries who take care of the registration of foreign matrimonial property regimes, do not have to register which exact law is applicable, only that a foreign law is applicable. Sometimes it may not be easy to establish, what law is applicable and the notaries were fearing that they would be held accountable if they made any mistakes in determining the correct foreign law. By this vague information in the register third parties are warned that they have inquire further into the law that is actually applicable.

This matter does not influence the way in which assets are transferred to a third party. This is a not matter of matrimonial property law and therefore is not governed by the Convention or the regulation. These questions are solved according to the lex rei sitae.

Effects of changes of the applicable law during the marriage, also in respect to third parties

The position of third parties is also at stake when the spouses change the law that is applicable to their matrimonial property regime during marriage; article 6 of the Hague Convention and article 18 of the draft regulation contain provisions for this case. In article 6 of the Convention it says in short, that the choice for another law during marriage affects all of the current and future assets of the spouses. In the Explanatory Report of Von Overbeck which accompanies the Convention, we find that in practice usually legally trained professionals will be involved in this change of applicable law (also because of the formal requirements for this choice). This professional, for example a notary, will advise the couple on the necessary steps which they will have to take. For example when they change from German to Dutch law, all or practically all of their assets will become common property under Dutch law. So generally not much action will be necessary as this will happen automatically. If the change occurs in the other direction, from common property to separate property, the legal advisor has to tell the spouses that they will have to divide their common property in order to make a correct start into the new regime.As far as I am aware, in practice this generally works quite well.

Under the draft regulation – as far as I understand it – the Commission has chosen another approach: article 18, section 2, states that in general the newly chosen law will only be applicable to the assets (and debts) that the spouses acquire after the change has occurred. Only if the spouses choose to make this change of applicable law retrospective, then it will have a retrospective effect. But this may not affect the validity of previous transactions entered into under the law applicable before, orthe rights of third parties deriving from the law previously applicable, as section 3 of article 18 specifies.

I ask myself, what is the reason for this provision? Is it perhaps because of the “retrospective effect”, just as we see it in some literature about article 6 of the Hague Convention? As we learn from the Rapport Von Overbeck, the idea behind article 6 of the Convention is not to be interpreted as retrospective effect as we may encounter it in for example national contract law. If a certain contract is flawed, it may be invalid, and that effect indeed has retrospective force. This means that the contract is treated as if it had never been concluded. But this is not what is meant in article 6 of the Hague Convention. There it only means that all the assets are governed by the new law from the moment of the choice on. All the transactions for example that the spouses undertook in the period before that, are governed by the “old” law.

Therefore section 3 of article 18 of the draft regulation should, as I see it, not contain provisions about any “retrospective effects”, because that term is very similar to the contract issues I just mentioned. This is not what we want. In my opinion it would be better to copy the wording of article 6 of the Hague Convention so that the spouses have the possibility to make a choice for a new law for all of their existing and future property. I think that it would be the best to have the effect for all of their assets as a basic rule and – if necessary – give them the possibility to – in effect – split their assets in an “old law”-part and a “new law”-part if the Commission wants to have this option.

We must remember that it also influences the position of third parties which law/laws is/are applicable. This is because for example the applicable law also includes the rules on the protection of third parties who may have acquired goods from the spouses during the marriage. For example: is the ability of a spouse to dispose of a certain good to be established according to the old regime or according to the new regime? Which goods can creditors execute in order to get their claims paid? What if a certain item was acquired after the change but it possibly substituted another item that was already acquired under the old regime? Which rules of substitution are to be used? The old or the new ones? It would be nice if the legal professionals would get answers to those questions before the draft regulation enters into force.

I would like to end my statement with another argument against having retroactive effects to a choice of law in the draft regulation. In my view this possibility goes right against the basic idea that all the assets of the spouses should be governed by one law, so it might be advised to skip this possibility all together. This would make life a lot easier for lawyers and notaries who will have to apply the rules in the future, and it will add to legal certainty for the European citizens. It is not only a political question we have to solve, which of the possible solutions should be given to the spouses who want to choose a different law during marriage. Usually they have good reasons for the change, for example because they want to have the same law applicable for matters of matrimonial property law and their succession. I think that is important that we give them a solid legal framework to achieve those goals.