Brussels IV - Regulation (EU) No 650/2012 (‘the Regulation’) applies to all deaths after 17 August 2015, and will be binding on all 27 EU member states, except for Denmark, the UK and Ireland which has somewhat undermined the overall purpose of the regulation.
Its objective is to provide a single uniform system for the recognition of inheritance, planning and administration law and the introduction of the European Certificate of Succession
The Regulation applies a single national law of succession to a person's moveable and immoveable property upon death and applies to both testate and intestate succession. The applicable law under the Regulation is that of the country of the deceased's habitual residence at the time of death, unless:
- The deceased was manifestly more closely associated with another state; or
- The deceased elected in their Will for their national law to apply, regardless of whether the state of their nationality is a Regulation State or not.
Notwithstanding the provisions of this Regulation with regard to the formal validity of wills the Member States which are Contracting Parties to the Hague Convention of 5 October 1961 on the Conflicts of Laws Relating to the Form of Testamentary Dispositions should be able to continue to apply the provisions of that Convention instead of the Regulation.
Along with the UK and Denmark, Ireland opted out of the new Regulations, as according to the Department of Justice and Equality, opting in would have interfered to an unacceptable extent with the manner in which estates are administered in this jurisdiction.
On this basis practitioners from countries who have not adopted the Regulation, including Ireland may be minded to dismiss the application of same to Irish law. The Regulation however can indirectly affect an Irish estate if a deceased person had any connection to any of the member states in which the Regulation has effect.
Thus the Regulation may still have relevance for Irish clients where they die habitually resident in a participating member state, leave property in a participating member state or if a valid election for the law of the individual’s nationality has been made. In such cases there may be a conflict of laws with regard to the law of the domicile of the individual and the law of the state in which they are habitually resident.
If we look at an example, Derek an Irish citizen who is habitually resident in Ireland, owns property in France and would like to utilize the Regulation to avoid stringent French heirship rules. If Derek simply relies on his habitual residence in an effort to ensure Irish law applies under the Regulation the analysis is not straight forward. The Regulation will seek to apply the law of habitual residence, that being Irish law which remains subject to the application of renvoi as described above. Under Irish law the ‘lex situs’ would be France and French succession law would be deemed to apply. Under the new Regulation renvoi is disapplied between member states but will still apply when habitual residence is in a third state and its law provides for the reference to be made to the law of a member state. The key question is Ireland a third state or a member state for the purposes of the Regulation. If Ireland is considered a third state under the Regulation France would accept the renvoi to it under Irish law and French succession law would apply however if Ireland is considered a member state, despite not signing up to the Regulation, renvoi would be disapplied and Irish law would apply.
That is why the option for the law of the Nationality particularly in the case of a highly mobile individuals is of importance. This is because testators will be able to elect for the law of their own nationality – i.e. Irish law – to apply in these countries, which are bound by the new regulations. While Irish people with properties in the UK and Denmark won’t be able to apply the rule, it may be less of an issue, given the similarity of UK inheritance rules.
The Regulation is at an early stages of implementation and there are differing views and some uncertainty as to how it will be interpreted. On this basis the option as set out above to include a choice of law clause in a Will to ensure the law of nationality applies regardless of habitual residence offers some certainty in this regard For example, an Irish person with property in France would include a choice of law clause in their will so that Irish succession law would apply to the French property. Renvoi is specifically disapplied when a choice of law is made based on nationality and so this offers the greatest degree of certainty.
This may also assist to simplify succession planning abroad as the testator may have been bound to allocate their estate in a particular fashion due to a member state’s succession rules which can now be simplified by directing that Irish law applies to your entire estate.
However, before making any moves it may be important to get tax advice as, if people invoke the nationality rule, they may then inadvertently expose themselves to additional tax liabilities. The tax consequences of international estates are not covered by the Succession Regulation and are not harmonized at all excluding the few bilateral treaties which are already in place to avoid double taxation. Download our free guide to making a Will