Select Committee on European Union Fortieth Report


SUCCESSION AND WILLS (7027/05)

Letter from Rt Hon Baroness Ashton of Upholland, Parliamentary Under Secretary of State, Department for Constitutional Affairs to the Chairman

  I refer to your letter of 13 October 2005.[177] I am grateful to you and your Committee for your comments on the Green Paper.

  I am pleased to enclose a copy of the Government's reply to the European Commission's Green Paper on succession and wills. The response was agreed with the Scottish Executive. It was delivered to the Commission on 30 August. This was later than I had hoped but my officials kept the Commission informed of the progress of the preparation of the reply.

  I also enclose a translation purchased by my Department of the Commission's Working Paper Annex to the Green Paper (not printed) referred to in the response in case it is of assistance to you or the other members of the Committee. The original Commission text is in French.

  I understand that the Commission is now considering the responses to the Green Paper, many of which are available on the Commission's website, and that there is to be a public hearing on the Green Paper on 30 November.

  In your letter you said that the Committee would be pleased to see the outcome of the consultation that my Department carried out with stakeholders and looked forward to seeing a summary of the result. We received 11 responses. I have been able to obtain agreement from most of the consultees to make their replies available to you. These include the principal professional organisations involved in this area. My officials are still seeking permissions from the remainder and, if this is forthcoming, I will arrange for the relevant replies to be forwarded to you or your Clerk. Where a permission cannot be obtained in the next two weeks a summary will be prepared and sent instead.

  Finally, you may be interested to know that on 12 September the European Parliament's JURI Committee is to consider a motion to seek a resolution of the Parliament calling on the Commission to submit a legislative proposal to deal with succession and wills in accordance with certain detailed recommendations (Provisional 2005/2148(INI)). Several of these recommendations seem prematurely prescriptive of the solution to be adopted and are inconsistent with the line taken in the UK response. Several amendments have been tabled and we will be watching developments with interest.

4 September 2006

Annex A

RESPONSE OF THE GOVERNMENT OF THE UNITED KINGDOM

  1.  The Government of the United Kingdom welcomes the opportunity to respond to the Green Paper on Succession and Wills (the Green Paper)[178] published by the European Commission on 1 March 2005. The Government thanks the Commission for publishing the helpful Staff Working Paper Annex to the Green Paper (the Annex).[179]

  2.  The United Kingdom consists of three jurisdictions. The law of England and Wales and the law of Northern Ireland on matters relating to succession and wills are broadly similar. Scots succession law has many similar features but is somewhat different. The principal differences between Scots law and the laws of England, Wales and Northern Ireland, in this area are described in Appendix A. The Government is accordingly familiar with the practical issues arising in relation to cross-jurisdiction succession and wills.

  3.  The Green Paper is extremely wide ranging and asks a large number of questions. Many of these raise difficult and controversial issues, particularly for a common law jurisdiction. The Government has been greatly assisted in formulating its views by the comments and advice of several academics and legal practitioners. The Government's replies are summarised in this document and set out in full in Appendix B. A short summary of the private international law of England and Wales in relation to succession is set out at Appendix C.

  4.  For brevity, references in this response to "the law of succession" include the law relating to wills.

HARMONISATION OF LAWS

  5.  The UK Government agrees with the Commission that the diversity of the laws of succession in operation across Member States makes full harmonisation of these laws inconceivable. The Government considers that such harmonisation would be a fundamental interference in the domestic affairs of Member States, which could have unpredictable social and cultural outcomes. It would be undesirable and unnecessary.

  6.  It is the UK Government's view that the diversity of legal traditions in Member States must be fully respected. This is essential because the differences in the approaches taken by Member States to the transfer of property on death are fundamental. Some Member States, such as the UK, favour freedom of testamentary disposition, whilst others provide for reserved heirship. Some allow property to pass direct to the heirs, but the UK and others operate a court based system, which, on the death of the deceased, gives ownership of the deceased's property to a third party. This third party is entrusted with the administration of the estate of the deceased and its distribution to his or her beneficiaries. Some, including the UK, define the estate as the property of the deceased at the date of death, others include gifts made by the deceased during his or her life. This diversity is entirely legitimate. It reflects the differing approaches adopted by different societies within the European Union to questions about the nature of ownership and about family obligations. It limits the extent to which any harmonisation proposed in a European instrument could be acceptable. However, although the UK Government would, in principle, be able to support measures of limited harmonisation that would bring real benefits to citizens, it considers that there is very little scope for creating them in the field of succession.

  7.  The UK Government strongly believes that any European legislation on cross-border succession cases must not adversely affect the working of important aspects of the domestic succession laws of the UK. Therefore, any European instrument must not:

    —  limit the operation of the principle of freedom of testamentary disposition or affect the operation of the rules of intestacy;

    —  change the court based system of probate and the associated office of executor;

    —  interfere with the use of trusts, joint tenancies or life policies; or

    —  adversely affect the working of the national land registration or tax law systems.

  8.  The UK Government notes that differences between Member States are not limited to matters of substantive succession law. There are also fundamental differences between their private international laws in relation to succession. Of particular significance in this respect to the UK are three matters:

    —  the principle of scission (that is the rule that the law of the country where the immovable property is situated is the law applicable to the succession for the immovable property);

    —  the distinction between matters of succession (determining who gets what) and matters of the administration and distribution of the estate (determining what is the net estate and the procedures and formalities for collecting in and then distributing the net estate to those entitled under the law of the succession); and,

    —  the basic principle that the law of succession applies only to property comprised in the deceased's estate at death, with property effectively given away by the deceased in his or her lifetime not being part of the estate. Any proposal to change these rules would require strong justification. The UK Government is not aware that such justification exists.

  9.  The potential effect of European legislation on the different national systems of property ownership and transfer must therefore be carefully considered as part of the assessment of any proposals. The effect of any proposed European instrument in the field of succession must be proportionate to the degree of change required to implement it. The principle of subsidiarity must be fully applied.

  10.  Subject to these significant concerns, the UK Government supports, in principle, the concept of attempting to develop proposals to improve the administration of the estates of deceased persons with a cross-border element, in so far as the diversity of laws and practice creates real problems in the field of succession.

  11.  In general terms, the UK Government would approach such proposals from the standpoint that European measures in the civil law field should be based on mutual recognition and enforcement of judgments, judicial co-operation and the harmonisation of conflict of laws rules. However, any proposals must be restricted to cases with a cross-border element. They must also be demonstrably necessary for the proper functioning of the internal market to ensure that they fall within the competence of the European Union.

IMPACT ASSESSMENT

  12.  The UK Government is strongly of the view that the first stage in the development of any proposals should be a thorough analysis of problems with current law and practice. Any proposals for action at European level must flow from this analysis and be justified by clear evidence that the measures proposed offer proportionate solutions to real problems, which could not adequately be addressed at national level. The Green Paper and the Annex do not contain such evidence. The assertion that European action is essential because there appear to be around 50,000 transnational succession cases each year among Member States is not an adequate evidence base to justify legislation. The Commission must identify the real problems that exist and demonstrate their scale. It must develop persuasive impact assessments to justify proposed change. The UK Government does not accept the Commission's view that there is an established need for reform.

LANGUAGE

  13.  Finally, the UK Government stresses the importance of an accurate understanding of technical legal language and concepts used in different Member States. For example, words such as "domicile", "deed" and "heirs" appear to have a different meaning in the English language version of the Green Paper than normally applies in the United Kingdom. Similarly, as already mentioned at paragraph 8, "estate" may mean different things in different countries and is not synonymous with "patrimony". It will be very important to ensure that linguistic and conceptual accuracy is maintained during the development of any proposals.

REPLIES TO THE QUESTIONS IN THE GREEN PAPER

  14.  Turning now to the topics addressed in each Part of the Green Paper, the UK Government has the following general observations.

CONFLICT OF LAWS

  15.  The UK Government considers that the assertion in Part 2 of the Green Paper that the universal nature of future rules should not be in dispute is premature. In view of the practical importance of the United Kingdom's strong relationships with the Commonwealth and the USA, the UK Government will give careful consideration to the impact of any proposals arising from the Green Paper on dealings with non-EU countries.

  16.  On the question of the proper scope of the law applicable to the succession the UK Government considers that the applicable law should not extend to matters of the administration and distribution of the estate, or to the definition of the property comprised in the estate. This will prevent disruption of well functioning national administrative systems, such as the probate and land registries. It will also avoid interference with the operation of national property law by incompatible rules of another Member State as to reserved heirship or freedom of testamentary disposition. It would be totally unacceptable to the Government of the UK if the law applicable to the succession undermined perfectly valid lifetime gifts, including trusts, or interfered with the operation of testamentary trusts. In the UK Government's view no further choice of law rules are necessary in relation to trusts.

  17.  In relation to the determination of the applicable law, the UK Government agrees that there are advantages and disadvantages to each of the likely connecting factors, but is not convinced that one solution is yet demonstrably superior to the others. Nor has the UK Government a finally concluded view on permitting a testator to be able to choose an applicable law. An unlimited choice would present some obvious difficulties but a limited choice might provide greater certainty for testators.

JURSIDICTION

  18.  Turning to issues relating to jurisdiction, the UK Government considers that a single exclusive jurisdiction would have considerable disadvantages and would be undesirable. For example, it might require a foreign court to exercise a discretion under English law. The foreign court could find this impossible due to its lack of familiarity with the common law concepts involved (for example, proprietary estoppel or the operation of the court's discretion under the Inheritance (Provision for Family and Dependants) Act 1975).

  19.  The UK Government also considers that the courts of the territory in which immovable property is situated should have jurisdiction over that property. This supports the proper and efficient administration of the transfer of property, which is correctly a matter of domestic law. The Government is unaware that the present systems in operation in the UK create any significant problems for nationals of other Member States or that UK nationals, properly advised, have to make disproportionately burdensome arrangements in relation to property in other Member States in relation to succession.

  20.  Subject to these considerations, the UK Government is open to discussion about the precise rules that would govern the primary choice of jurisdiction and the transfer of jurisdiction in whole or in part in an individual case.

  21.  The UK Government notes the proposals in Part 3 of the Green Paper that non judicial authorities of one Member State might have jurisdiction instead of the court designated under the choice of court rule. The Government considers that this possibility is fraught with difficulties and very unlikely to be acceptable.

  22.  The UK Government considers new rules of jurisdiction are unnecessary in relation to testamentary trusts, because they, like lifetime trusts, are within Regulation 44/2001.

RECOGNITION AND ENFORCEMENT

  23.  Part 4 of the Green Paper addresses issues of mutual recognition and enforcement on the assumption that harmonised choice of law and choice of court rules have been established. This assumption is unnecessary and premature.

  24.  As a general rule, the UK Government supports mutual recognition and enforcement measures as effective and efficient ways to make procedures in cross-border cases simpler, cheaper and more certain. However, it acknowledges that the differences in legal systems across Member States in matters of succession appear to create significant obstacles even to the creation of such measures. These obstacles would be particularly acute in relation to the suggestion that judgments from one Member State should automatically form the basis for an amendment of land registers in another. These obstacles would require very careful consideration.

  25.  For similar reasons, the UK Government has strong reservations about the proposals in Part 4 that the same status should be given to succession related deeds as to judgments. This proposal appears to be based on mutual recognition of notarised documents. This would present problems in jurisdictions that do not have a notarial tradition. Essentially the same problems arise in relation to the proposals for the automatic recognition of executors.

EVIDENCE OF STATUS AS HEIR

  26.  The UK Government has no overriding conceptual objection to the creation of a European Certificate of Inheritance. However, the certificate proposed would have to be compatible with systems of administration and distribution of estates that are fundamentally different. A certificate designating an heir (in the civil law sense) would not be effective to entitle that person to possession of property in UK jurisdictions where a grant of representation, or equivalent, in favour of an executor is required so that the executor can administer and distribute the estate. Unless a means can be found to overcome the differences, the certificate would have to perform different functions in different systems. This might make it confusing and cumbersome.

REGISTRATION OF WILLS

  27.  The UK Government does not have any overriding objection in principle to the possible creation of a scheme for registering wills in all Member States, including the possibility of a central European register. However, the Government considers that any registry of wills should be voluntary and that it should not preclude informal and deathbed wills, both of which are regularly made in UK jurisdictions. Any proposals for the creation of such registries would have to be carefully evaluated.

LEGISLATIVE APPROACH

  28.  In response to the Commission's request for suggestions as to how the project might be carried forward, the UK Government strongly believes that the Commission would be unwise to attempt to carry forward an immense single project covering the whole of the subject matter of the Green Paper in a single stage. The Government strongly recommends that the Commission should divide the work both by subject and chronologically into separate and manageable areas. Priority should be given to those parts that are likely to be achievable and to bring demonstrable benefits to citizens.

  29.  In carrying out this exercise the Commission should take into account the successes and failures of the previous attempts to create international conventions in this field. Whilst not ruling out the possibility of commencing work in another area, the UK Government strongly recommends that serious consideration be given to the exploration of the need for, and the possibility of achieving, an instrument harmonising choice of law rules in matters of succession (excluding administration and distribution of estates). If progress can be made in this area, it may well be possible to build on that achievement in other areas covered by the Green Paper. The suggested European Certificate of Inheritance might also provide a starting point provided that it applied to both heirs (in the civil law sense) and executors (in the common law sense). There are, however, significant practical problems in identifying and creating an effective and cost-efficient procedure of this kind. All proposals must however be developed in accordance with Better Regulation principles.

August 2006






177   Correspondence with Ministers, 45th Report of Session 2004-05, HL Paper 243. p483. Back

178   COM(2005) 65. Back

179   SEC (2005) 270. Back


 
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