Probate: What to do when someone dies
If there is a word that captures the post-Brexit world, it is uncertainty. No-one likes the u-word. However, as the big day approaches and a Brexit becomes a real possibility, there is at least one area in the succession field that would become clearer if we leave the EU: whether the UK is a member state or a third state under the EU Succession Regulation (ESR).
The ESR and the UK’s uncertain status
The ESR is an ambitious European project with the objective of harmonising the succession of the populations within its borders. It came into force on 17 August last year and twenty five of the twenty eight member states are fully signed up. Three (the UK, the Republic of Ireland and Denmark) have exercised their special status under the EU treaties not to be bound by it. The UK and Ireland can still opt in so are in a ‘wait and see’ position. There is no carve-out in the ESR for member states that are not bound by it. Consequently, there is uncertainty, when the ESR refers to a member state as having legal control over any aspect of the succession, whether the UK, Ireland and Denmark possess this special ‘Member State’ status, or if they are just plain old ‘third states’.
Why does the UK’s uncertain status matter?
If the UK is an ESR ‘Member State’, it will have an enhanced status and individuals with UK connections could have extra options. Prior to the ESR, determining which succession law was applicable between ESR member states involved a range of different private international law (PIL) approaches at a state level, known collectively as ‘renvoi’. One of the most significant changes introduced by the ESR is the abolishing of renvoi between the 25 signed up member states and the replacement of this with the unified set of rules in the ESR. If the UK is an ESR Member State, the other 25 member states must apply the new ESR rules in interactions with the UK on succession matters rather than renvoi, whereas the UK, not being bound by the ESR, need not follow the ESR. However, if the UK is a ‘third state’ for the ESR, the UK will not hold any special status vis-a-vis the rest of the EU states and the 25 member states can continue to apply their old renvoi rules for interactions with the UK on succession matters. It is not popular in all quarters to allow the UK special ESR Member State status on a ‘pick n mix’ basis; the argument goes that it is unfair that we should benefit from this harmonisation where it is convenient, but avoid it when inconvenient. It has been argued on the other side that, as a matter of EU policy, the ESR should be recognised and enforced whether or not individual states are bound by the ESR.
Why has this uncertainty arisen?
Drafters of the ESR were hopeful of the UK and Ireland joining in, so I believe drafted the ESR to minimise the need for amendment at the point of these UK and Irish opt-ins.
Example 1: Anthony is British and lives in England. He is domiciled in the UK and most closely connected to England. He owns a holiday cottage in South France. He has not made any wills. He wants to know how the ESR applies if he does nothing.
England will apply its PIL rules without any reference to the ESR because it is not bound by it. English PIL specifies the holiday cottage to be ‘foreign immovable property’ which means a renvoi to the law of location i.e. French succession law. French legal commentators at present indicate that England is a ‘third state’ under the ESR. Accordingly, the French accept the renvoi meaning French forced heirship rules apply to the succession of the cottage.
However, if the beneficiaries of Anthony’s estate have a problem with French forced heirship rules, they might advance the argument in France that the UK is an ESR Member State and that no renvoi from the UK should be accepted. If they were successful in this, the French would have to cede to the ESR rules which replace renvoi for France and which specify that:
(i) only one succession law can apply to the whole succession; and
(ii) the default succession law to apply is that of habitual residence.
Accordingly, English succession law would apply to the whole succession, including the French cottage. In practice, this would probably involve the French court taking advice from an English law expert to apply internal English succession law (i.e. without its PIL) to the French real estate.
As a footnote, rather than leave his estate subject to this uncertainty, under the ESR, Anthony should elect under the ESR for the succession law of his nationality (British (English)) to apply to his worldwide estate. This choice of law is open to all nationalities (i.e. including third state nationals).
Example 2: Brigitte is a French national who is habitually resident in London but still French domiciled (as understood in English law). She owns real estate in London and in France. She has not made any wills and wants to know how the ESR applies if she does nothing.
If the UK is a third state for the ESR, English PIL specifies a separation of succession law between England and France based upon the location of the real estate. As in example 1 above, France would probably accept the renvoi to French law as regards the French real estate and French forced heirship rules would apply to the French real estate.
However, again as above, beneficiaries of her estate might prefer to argue that the UK is an ESR Member State, so France cannot accept the renvoi from English law. Instead, because Brigitte died habitually resident in an ESR Member State and had not made a nationality succession law election, France must follow the internal succession law of England without its PIL. One unexpected consequence of this, from the perspective of a beneficiary seeking to avoid French forced heirship, is the novel possibility of a claim in the French court under the Inheritance (Provision for Family and Dependants) Act 1975. Such a claim would be prohibited in an English court due to the scope of the 1975 Act being limited to the estates of English and Welsh domiciled persons. Legal commentators suggest that this is possible because the domicile restriction is part of English PIL and thus must be ignored when applying English law without its PIL.
Rather than permit this uncertainty, Brigitte could make an election under the ESR for French law to apply to her worldwide estate in accordance with her nationality. To ensure consistency, with the UK not being bound by the ESR, she would then need to match her English Will to French forced heirship provisions. The downside of this planning is that French forced heirship provisions may not match her intentions.
If we Brexit, whether we qualify as a special ESR Member State will be history. Regardless of whether we are great, under the ESR we will just be a boring old third State.
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