Threats to the EU succession regulation
The Brussels IV Regulation
The European succession regulation EU560/2012, also known as Brussels IV (the regulation), came into effect on 17 April 2015 and applies to all EU states apart from Denmark and Ireland who opted out of the regulation. This provides that the UK, Denmark and Ireland (together with all non-EU countries) are considered third-party states.
The regulation was introduced to simplify and harmonise succession law by ensuring that only one country’s law applied to cross-border estates where assets are situated in the EU. The overarching general principle is that the law of the state where the deceased was habitually resident at their death will apply to the deceased’s estate as a whole.
The general principle can be overridden where a clear and positive statement has been made in the deceased’s Will electing the law of his or her nationality instead. For example, a person who was habitually resident in Germany but has retained their British citizenship can elect for UK succession law to apply to their German estate.
The threat from France and Germany
We have established that where the deceased dies owning assets in another EU jurisdiction, the general principle is that the law of their habitual residence applies to their estate unless they elect for the law of their nationality in their Will (and their nationality is different from their habitual residence).
France and Germany have sought to undermine the principles of the regulation by implementing and enforcing changes to their succession laws.
The French resistance to the regulation came with the amendment to the French Civil Code in August 2021, which introduced the following succession legislation:
If the deceased individual or at least one of his or her children is a national of any EU member state or habitually resident in any EU member state; and
The applicable law does not include forced heirship rights; then
A child (of the deceased) who has received less than their compulsory share is entitled to make it up from property located in France.
Take, for example, a scenario where the deceased died in the UK but had a child who lives in France. The deceased owned a holiday home in the south of France. The deceased left a Will prepared in the UK and electing to apply UK law to their French assets which left their estate to their surviving spouse absolutely. The child will not receive their compulsory share and will be able to claim that share under French succession laws, contrary to the deceased’s wishes.
The German threat to the principles of the regulation can be seen in the judgment of the case of IV ZR 110/21 in the German Federal Court of Justice on 29 June 2022. The court ruled that an election of the law of England and Wales made in the deceased’s Will was ineffective because it provided that English succession law was not compatible with the principles of German succession law.
The case concerned a Briton living in Germany who had elected the law of England and Wales to apply to his Will (and succession of his whole estate). The deceased had an adopted son, who was a German national, with whom he had a turbulent relationship. The deceased died and excluded his adopted son from his Will.
This is fine under the freedom of testamentary disposition adopted in England and Wales, although the adopted child could make a claim against the estate if they were financially dependent on the deceased. However, under German succession law, the adopted son is entitled to a compulsory share of the estate. The son sought to apply German law to his father’s estate and claim that he should receive his compulsory share of the estate.
The German court found that German law was based on the ‘indissoluble’ relationship between parent and child and the compulsory share should be maintained. The German court analysed the mechanism which enabled children to make a claim against an estate for financial provision under the Inheritance (Provision for Family and Dependents) Act 1975 (1975 Act). They found that a 1975 Act claim was not sufficient to guarantee that the child receives their compulsory share (which of course it is not, as it was not designed for this purpose).
What does this mean?
There is scope under Article 35 of the regulation for any member state to refuse the elected law of another jurisdiction if the application of that law is ‘manifestly incompatible’ with their public policy. This indicates that the scope for refusal should only apply in exceptional circumstances.
The amendment to the French Civil Code and the recent German ruling no doubt go beyond this, and clash with the regulation and its general principle. This potentially creates a conflict between different succession laws and throws a spanner in the works for any cross-border estate planning. It remains to be seen how the EU judicial system deals with this conflict between the French and German succession laws and the regulation. It is certainly something to keep an eye on in the next couple of years.
The next steps
For anyone with assets in either France or Germany, it is advisable to speak to a lawyer and review your current circumstances. We have legal and tax experts here who will be pleased to assist.