09 May 2021

Succession

'The EU succession regulation: achievements, ambiguities, and challenges for the future' by Maksymilian Pazdan and Maciej Zachariasiewicz in (2021) 17 Journal of Private International Law comments 

The quest for uniformity in the private international law relating to succession has a long history. It is only with the adoption of the EU Succession Regulation that a major success was achieved in this field. Although the Regulation should receive a largely positive appraisal, it also suffers from certain drawbacks that will require a careful approach by courts and other authorities as to the practical application of the Regulation. The authors address selected difficulties that arise under its provisions and make suggestions for future review and reform. The article starts with the central notion of habitual residence and discusses the possibility of having a dual habitual residence. It then moves to discuss choice of law and recommends to broaden further party autonomy in the area of succession law. Some more specific issues are also addressed, including legacies by vindication, the relationship between the law applicable to succession, the role of the legis rei sitae and the law applicable to the registries of property, estates without a claimant, the special rules imposing restrictions concerning or affecting succession in respect of certain assets, as well as the exclusion of trusts. Some proposals for clarifications are made in that regard.

The authors argue

The objective of the present article is to discuss some of the provisions and solutions adopted in the EU Succession Regulation. It does not intend to be a comprehensive commentary on the Regulation. Rather, it takes the Regulation’s state of play and purports to address some of the difficult issues, as identified in the scholarly discussions or already experienced in the legal practice. The article focuses on issues of applicable law, dealing with other questions (jurisdiction, certificates of succession) to a lesser extent. The authors hope that the effort made herein can contribute to any eventual, future improvements to the Regulation. By 2025 the Commission is obliged to submit a review report on the application of the Regulation, which could also be accompanied by a proposal for amendments (in accordance with Article 82 of the Regulation). A secondary goal of the present article is to attempt to depict the work of the Polish doctrine dealing with the EU Succession Regulation. Although the Regulation has spurred great interest among Polish scholars and led to intensive debates relating thereto, these works are – for obvious linguistic reasons ‒ generally unknown to the wider European audience. The article considers interpretations of the Regulation in Poland alongside the debate in European academia. ... 

The central connecting factor used in the Regulation is the habitual residence of the deceased at the time of death. It determines both the general jurisdiction of the courts in succession matters (Article 4), as well as the law applicable to the succession as a whole (Article 21). This should be welcomed even if – as we will see shortly – it poses various difficulties of its own. The habitual residence has already been adopted in the 1989 Hague Succession Convention,11 as well as in several EU private international law regulations. Reactions of the governments and other stakeholders when the habitual residence was proposed in the Green Paper were generally positive. It was thus a natural choice for the EU legislator to opt for that connecting factor also in the context of succession matters. 

Habitual residence is an autonomous concept under the Regulation. It should be understood without reference to national laws and given a European meaning. It is a factual, if not casuistic, and somewhat vague concept so that the habitual residence is determined in each case by factual circumstances that connect the deceased with a legal system of a given state and its territory. As noted in Recital 23 of the Regulation: “an overall assessment of the circumstances of the life of the deceased during the years preceding his death and at the time of his death” is necessary. The Court of Justice already had the opportunity to make clear in a judgment in case C-80/19 E.E. that all the circumstances must be taken into account in making such determination. The Advocate General opined that a joint examination of the facts relating to the stability of the deceased’s situation must be carried out especially in complex situations. 

The above means that the habitual residence is determined on a case-by-case basis by the national courts, in light of the totality of factual elements present in the proceedings. As a practical matter, the evidence available to the court will be of the essence here. The role of the Court of Justice of the European Union is on the other hand limited. While the Court is competent to set the detailed criteria that would precisely define the concept of habitual residence (and its active involvement is certainly welcomed), it is ultimately up to the national courts to establish a practice that will provide a truly uniform understanding of the notion. For these reasons, habitual residence might be more difficult to ascertain than the nationality. It introduces greater uncertainty. 

The experience under other EU regulations that use habitual residence as a connecting factor will certainly be helpful. This includes, in particular, the case law of the CJEU under the Brussels IIa Regulation. One should nevertheless keep in mind that the concept is functional in the sense that its understanding under a given set of conflict-of-laws rules depends on the role it plays. Although cross-references and uniformity in interpretation standards are helpful, the habitual residence of the deceased for succession law purposes should, in our view, not necessarily be understood in the same manner as, say, the habitual residence of the seller to determine the law applicable to the sales contract under the Rome I Regulation. One must note, however, that many authors argue for the uniform interpretation of the concept of “habitual residence” under all EU instruments dealing with private international law. 

Habitual residence is defined as the place where the centre of a person’s vital interests (centre of a person’s life) is located. Under the Succession Regulation, this refers to the place where the deceased had the centre of his or her life. Recital 23 of the Regulation underlines that in determining this place, “the duration and regularity of the deceased’s presence in the State concerned and the conditions and reasons for that presence” are particularly important. The reasons thereto include both personal as well as professional motives for a stay in a given country. The whereabouts of the family home are thought to be particularly relevant in that regard, but the location of the business, employment, and other social relationships are also of some weight. Still, it is submitted that in the context of the Succession Regulation, family connections are somewhat more important than professional relationships, given the goals of the succession law in general (to pass the property to the relatives and other people close to the deceased). The weight of the family relations is different under the conflict-of-law rules relating e.g. to contractual obligations, where the habitual residence of a natural person acting in the course of his or her business activity is expressly defined as his or her principal place of business. Thus, for example in a case where a person established his or her family home and most personal and social relationships in country X, while driving every day to work in country Y, it should normally be assumed that he or she had his or her habitual residence in country X. However, if that person’s sole connection to country X was that he or she rented an apartment to sleep overnight, but had no family or social life there (and his or her social relationships were rather related to the work carried out in state Y), it would probably have to be concluded that he or she had their habitual residence in country Y (with reservation to other factors that could point to different conclusions). The suggestion that the habitual residence is “where one comes to rest, where one sleeps” – although often helpful ‒ should thus not be taken as an absolute rule. 

In difficult instances, when a person has significant connections with more than one state (e.g. living alternately in more than one state), the nationality of the deceased, as well as the location of the assets, might also be of relevance. However, as rightly noted by AG Campos S├ínchez-Bordona in his Opinion in case C-80/19 EE, these factors have only subsidiary nature. While the facts in that case do not seem to be of the type where subsidiary factors should play a pivotal role in determining the deceased’s habitual residence, such cases might certainly occur. One example could be that of an elderly person who spends half of the year in a warmer climate zone (and has already built a social life there) and the other half in his or her home jurisdiction. A similar difficult case arises when a wealthy individual spends parts of the year in different countries, where he or she possesses homes, and important social and family connections, thus being significantly connected with each of these countries. In such cases, the nationality and the location of the deceased’s assets could constitute a decisive consideration. 

These subsidiary factors do not play such a substantial role in situations when the deceased acquires consecutive habitual residences at different points in time during his or her life. An example here is of a person who upon retirement transfers the centre of life to a different country. If the stay there is stable and affects a person’s social connections to the extent that one may conclude that he or she has settled there, one would normally have to conclude that this constitutes the acquisition of the new habitual residence. On the other hand, a temporary departure for another country, e.g. as a student participating in an exchange or international programme, or as a posted worker, does not normally imply a change in the habitual residence. 

A feature – and possibly a downside ‒ of the habitual residence is that it is a less stable connecting factor than that of nationality. It changes more easily with people moving from state to state. Nevertheless, as underlined in Recital 23 to the Regulation, it “should reveal a close and stable connection.” A temporary stay in another country (such as to study or being posted overseas for work), even if lasting relatively long, does not give rise to a change in habitual residence in the sense of a true change to the centre of a person’s life. Therefore, the habitual residence is not as vulnerable to changes and manipulation (e.g. by avoiding forced heirship rules of the country, where the deceased family lives) as some think. 

It might be noted that in States which had previously used nationality as the connecting factor determining the governing law, some sentiment is sometimes expressed given the need to drop their traditional approach in favour of habitual residence. The sentiment may be felt particularly in countries from which there has been a substantial amount of emigration, such as Poland, which may no longer apply their own law to the succession of their citizens who left the country. This also includes European citizens who emigrated to the non-EU Member States. In the case of Poland, that would include a large Polish community living in the United Kingdom and the United States. Given that the EU Succession Regulation grants subsidiary jurisdiction to the courts of a Member State where the assets of the estate are located (Article 10), a court in a Member State could be seised to decide with respect to the succession of a deceased habitually resident in a non-Member State. Nevertheless, under the universally applicable rule expressed in Article 21, such court would have to apply the law of a non-member state in question as governing the succession. 

While such a sentiment, particularly among politicians and other policymakers, might be understood, this should not be taken as criticism. It is our view that in a world where mobility of the people became easy (even if rendered more difficult by the recent outbreak of COVID-19 pandemic), nationality lost much of its relevance from the perspective of private international law. Habitual residence better reflects the modern social and economic reality, especially within the EU, where it promotes integration. Volatile and uncertain as it is, habitual residence provides a much closer and genuine connection of the deceased with a given legal system. The principle of proximity thus mandates that the issues relating to succession are subjected to the law of the state where the deceased had his or her habitual residence.