The escape clause under the Succession Regulation and other international issues
Maria Grazia Antoci Lawyer in Florence, Italy UNIT 1
Summary and the notion of habitual residence - Part I Succession Regulation (SR): questions to be addressed
What is an escape clause?
Is there any autonomous field of application of such clause under the Succession Regulation? Summary
Definition of habitual residence under the SR Scope of Escape Clause under the SR Scope of Escape clause under other instruments Comparison Conclusions Habitual residence (SR)
To better understand the scope of escape clause we need to: recall the notion of habitual residence; compare the field of application of the habitual residence with the scope of the “escape clause”. Article 21.1 introduces the connecting factor of the Habitual Residence as general rule. “Unless otherwise provided for in this Regulation, the law applicable to the succession as a whole shall be the law of the State in which the deceased had his habitual residence at the time of death.” Habitual residence (SR)
The provision of an uniform connecting factor in the Succession Regulation is a significant development in the process of harmonisation at European level. The adoption of a connecting factor which was close to the centre of interests of the deceased, thus satisfying the need for proximity, does facilitate the mobility of persons within the European area. The aim was to choose a criterion that was as free as possible from the substantive law of each State (unlike “domicile”) and that had an international origin. Habitual residence (SR)
It responds to the need for integration and non-discrimination between individuals established in a Member State, whatever their nationality is. It is flexible. It ensures proximity. It must be "effective" and "sufficiently stable" (that is not temporary or occasional). It should reveal a "close" and "stable" link with the State concerned. It should be defined taking into account the "specific objectives" of each Regulation. European Court of Justice
(Decision of 15 September 1994 Case C- 452/93) The habitual residence is described as "the place where the person concerned has established, with the intention of stability, the permanent centre of his interests", that is, his own centre of life. It is also stated that, in determining the place of habitual residence, account must be taken of all the factual circumstances which contribute to its assessment. European Court of Justice (Decision 2 April 2009, Case C-523/07)
According to the case law of the European Court of Justice, the concept of habitual residence developed in relation to a given field of European law cannot be directly transposed into the framework of another field of European law. Therefore, the concept of habitual residence for the purposes of each European Regulation must be interpreted independently, taking into account the specific objectives pursued by the Regulation in question. Definition of habitual residence (SR)
The Succession Regulation (as many other international instruments) lacks a definition of habitual residence.
Recitals 23 and 24 of the Succession Regulation have been included to provide some guidance on the definition of the habitual residence of the deceased at the time of death. Recital 23 spelling out certain factual elements to be taken into account. Recital 24 listing certain complex cases. UNIT 2
The notion of habitual residence - Part II Recital (23) (SR)
In view of the increasing mobility of citizens and in order to ensure the proper administration of justice within the Union and to ensure that a genuine connecting factor exists between the succession and the Member State in which jurisdiction is exercised, this Regulation should provide that the general connecting factor for the purposes of determining both jurisdiction and the applicable law should be the habitual residence of the deceased at the time of death. Recital (23) (SR)
In order to determine the habitual residence, the authority dealing with the succession should make 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, taking account of all relevant factual elements, in particular the duration and regularity of the deceased’s presence in the State concerned and the conditions and reasons for that presence. The habitual residence thus determined should reveal a close and stable connection with the State concerned taking into account the specific aims of this Regulation. Complex cases
It is not always easy to establish which country is the country of the last HR of the deceased.
For example: the deceased may have been temporarily posted for professional reasons to another country or may have lived in several countries without settling permanently in any of them. Recital (24) SR: complex cases
In certain cases, determining the deceased’s habitual residence may prove complex. Such a case may arise, in particular, where the deceased for professional or economic reasons had gone to live abroad to work there, sometimes for a long time, but had maintained a close and stable connection with his State of origin. In such a case, the deceased could, depending on the circumstances of the case, be considered still to have his habitual residence in his State of origin in which the centre of interests of his family and his social life was located. Recital (24) (SR): complex cases
Other complex cases may arise where the deceased lived in several States alternately or travelled from one State to another without settling permanently in any of them. If the deceased was a national of one of those States or had all his main assets in one of those States, his nationality or the location of those assets could be a special factor in the overall assessment of all the factual circumstances. First example: complex cases (Recital 24)
The transfer for work to a country, even for a long period, could be not decisive for the purposes of establishing the habitual residence of the deceased where he had maintained a close and stable connection with the country of origin.
The location of the centre of interests of the deceased’s family and the location of his social life determines such close and stable connection prevailing on the duration of the stay for professional/financial reasons. Second example: complex cases (Recital 24)
In the second example the determination of the habitual residence can be complex in cases in which the working activity is carried out alternately in more than one State without settling in any of them permanently.
In this case, the elements of nationality or location of the deceased’s main assets are taken into account in the assessment of the habitual residence. Case: Bram
1. Bram from the Netherlands was posted to Germany for a 5-year project. 2. He died while living in Germany. 3. His wife has continued to live in the Netherlands. 4. No children. 5. Family house in the Netherlands. 6. Bank acount in the Netherlands. 7. Bank account and rented house in Germany. What is the law applicable to Bram’s succession under SR?
The authority dealing with the succession concludes that Bram had his habitual residence in the Netherlands because Bram’s family and friends and his main home were in the Netherlands. Although Bram’s job was in Germany, he intended to go back to the Netherlands on completion of his project in Germany.
Dutch law will apply to Bram’s succession UNIT 3
Scope of the escape clause under the Succession Regulation – Part I One habitual residence only The Succession Regulation assumes that:
each person has only one habitual residence and that the habitual residence can be always identified even in complex cases.
Therefore, there is no space for any subsidiary rule to apply if the habitual residence is complex to assess as HR should always be established. How relevant is the intention of the deceased to assess the HR?
It is argued if the intention of the person concerned is relevant or not to establish the habitual residence in a given State.
According to the established opinion of the European Court of Justice expressed in case law related to other European Regulations the intention is relevant provided that it has been objectively expressed in the relations with third persons. (Decision of 22 December 2010, Case C-497/2010, Mercredi, among the others) Intention of the deceased
The various elements, both objective and subjective, may have different connotations and impacts for the purposes of various European Regulations. In succession matters the intention of the deceased can be ascertained only after death and therefore, it should be externalised in factual elements in order to be taken into account. The intention might play a limited role in the definition of the habitual residence under the Succession Regulation. This is, at least, the opinion of some scholars as we are going to see later on. Length of the stay (SR)
The length of stay in a country is significant but may not be decisive.
A certain degree of stability is required, but Regulation (EU) No 650/2012 does not require a defined minimum period, unlike the 1989 Hague Convention, which provides for a minimum period of 5 years.
It follows that the transfer of the habitual residence could have taken place shortly before the death as long as the centre of the deceased's life has really been transferred to the new country. Length of the stay (SR)
However, the subsidiary jurisdiction provided by Article 10.1(b) might indicate that it may be difficult to change habitual residence in less than 5 years.
The length of the stay may play a role in the application of the escape clause. Escape clause Art. 21.2 (SR)
Art. 21.2 provide that where “by way of exception, it is clear from all the circumstances of the case that, at the time of death, the deceased was manifestly more closely connected with a State other than the State whose law would be applicable under paragraph 1, the law applicable to the succession shall be the law of that other State”. An exception clause was not included in the 2009 EU proposal for a Regulation on successions and it was introduced into the Regulation with the aim of allowing a sort of "corrective" measure to the criterion of habitual residence to be used in cases where its application would lead to unsatisfactory results. Purpose of escape clauses
In general the purpose of escape clauses is to introduce certain flexibility when the abstract rule of the norm of conflict would lead to unjust or inappropriate results related to the location of the considered legal case.
The escape clause is commonly interpreted by scholars as a tool to overcome the rigidity inherent in the general conflict rule, such as nationality or the place where the damage occurred. The application of the strict conflict of law rule is mitigated with different and more flexible solutions less related to formal criteria.
Its finality is to contribute to the conflicts justice, as part of it ensuring equity in the determination of legal proximity. Dual nature of the escape clause
The exception clause has a dual nature:
on the one side, it leads to the non-application of the connecting factor which should have been applied under the general rule and
on the other side, it allows to bring the conflict rule more into line with the characteristics of the specific case in question. Recital (25) (SR)
Recital (25) gives an example of application of the escape clause mentioning the case in which the deceased had moved to the State of his habitual residence fairly recently before his death and all the circumstances of the case indicate that he was manifestly more closely connected with another State. The same recital clarifies that manifestly closest connection should not be resorted to as a subsidiary connecting factor whenever the determination of the habitual residence of the deceased at the time of death proves complex. Does the escape clause have an autonomous field of application under the SR?
The scope of the escape clause under the succession regulation is uncertain since the notion of "habitual residence", by its inner nature, presupposes that all the circumstances of the case have been taken into account which indicate a "close and stable link” with the State concerned" (see recital 23). How can “all the circumstances of the case” lead to assess the habitual residence in a certain country and, at the same time, “all the circumstances of the case” show that the deceased had maintained "manifestly closer links" with a State other than that of his habitual residence? UNIT 4
Scope of the escape clause under the Succession Regulation – Part II Examples of escape clause
The example given by recital 25 (twenty five) could be easily addressed as a complex case. In fact, if all the circumstances of the case indicate that he was manifestly more closely connected with another State probably the deceased was still habitually resident in that State. Case: Valérie
Valérie and Jean from France moved to a retirement home in the Canary Island (Spain). They opened a bank account in Spain and they set to have their pension delivered to their Spanish bank account. They did not sold their family home in France. Their children live in France. After a few months of living in the retirement home in Spain, Valérie dies. What is the law applicable to Valérie’s succession under SR? The authority dealing with the succession assesses that, although Valérie’s last habitual residence was in Spain, Valérie was clearly still more closely connected with France The authority takes into account that Valérie had lived most of her long life in France that her children and grandchildren live in France that her family house is in France
French law might therefore apply to Valérie’s succession under art 21.2 SR Are we sure that Valérie’s HR was in Spain? Interpretation of the escape clause (art.21.2 of Succession Regulation)
Some scholars have attempted to find an autonomous scope for the exception clause under the SR, arguing that it applies in cases where all the objective/factual elements indicate that the transfer of habitual residence to a given State has taken place but the subjective element (the intention of the deceased) shows a closer link with the State of former habitual residence. Interpretation of the escape clause (art.21.2) This interpretation has the merit to provide an autonomous scope to the escape clause under the Succession Regulation enhancing the role played by the intention as in the concept of "domicile" in Common Law countries. In fact, the notion of domicile is more stable than that of habitual residence and gives the intentional element a decisive role.
The above interpretation implies a tighter definition of habitual residence under the Succession Regulation based on objective elements only. Escape clause and jurisdiction
The possibility of invoking the exception clause increases the discretion of the interpreter and adversely affects the predictability of the law applicable to the succession.
The exception clause does not shift jurisdiction, which remains rooted in the State of habitual residence. • the authorities of the State of habitual residence are unlikely to waive the application of the lex fori in favour of a foreign law. • The State which have subsidiary jurisdiction under Articles 10 and 11 may invoke the escape clause if it is possible to apply the lex fori under this exception clause. UNIT 5
Escape clause provided by other international instruments – Part I Regulation (EC) No. 864/2007 on the law applicable to non-contractual obligations (Rome II)
Article 4 General rule 1.Unless otherwise provided for in this Regulation, the law applicable to a non- contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur. 3. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question. Recital (14) Rome II The requirement of legal certainty and the need to do justice in individual cases are essential elements of an area of justice. This Regulation provides for the connecting factors which are the most appropriate to achieve these objectives. Therefore, this Regulation provides for a general rule but also for specific rules and, in certain provisions, for an ‘escape clause’ which allows a departure from these rules where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with another country. This set of rules thus creates a flexible framework of conflict-of-law rules. Equally, it enables the court seized to treat individual cases in an appropriate manner. Recital (18) Rome II
The general rule in this Regulation should be the lex loci damni provided for in Article 4(1). Article 4(2) should be seen as an exception to this general principle, creating a special connection where the parties have their habitual residence in the same country. Article 4(3) should be understood as an ‘escape clause’ from Article 4(1) and (2), where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with another country. Article 4 Rome II
Paragraph 1 takes into account one element of fact only (that is the place where the damage occurred).
Paragraph 3, provides a correction of the strict general criterion: if it is clear from the "set of circumstances of the case" that the tort is "manifestly more closely connected" with a country other than that referred to in paragraph 1 (one), that law shall apply. Conclusions
The escape clause provided in article 4 of Rome II plays its proper role to mitigate the strict application of the general connecting factor making sure that the principle of proximity is respected.
The same argument cannot be used for the Succession Regulation. Hague Convention (HC) 1 August 1989 on the law applicable to successions
Article 3 Paragraph (1) : “succession is governed by the law of the State in which the deceased at the time of his death was habitually resident, if he was then a national of that State”. Paragraph (2) : “succession is also governed by the law of the State in which the deceased at the time of his death was habitually resident if he had been resident there for a period of no less than five years immediately preceding his death. However, in exceptional circumstances, if at the time of his death he was manifestly more closely connected with the State of which he was then a national, the law of that State applies”. Paragraph (3) : “in other cases succession is governed by the law of the State of which at the time of his death the deceased was a national, unless at that time the deceased was more closely connected with another State, in which case the law of the latter State applies”. UNIT 6
Escape clause provided by other international instruments – Part II Article 3 HC 1989
Paragraph 2 and 3 deal with 2 independent escape clauses (also called “unless” clause or exception clauses). In paragraph 2 the general rule is the residence for five years and the exception invokes the law of the nationality if it is the closer connection, but in paragraph 3 the general rule is nationality and the reference in the 'unless' clause is to any law provided it is more closely connected with the deceased. In paragraph 3, therefore, the closer connection is used as an independent connecting factor. Explanatory Report of the HC The Explanatory Report of the Hague Convention specifies that “Article 3 as a whole, provides a scale of laws and Article 3(3) was seen as an ultimate reference for the marginal case. When Article 3(3) is invoked, Articles 3(1) and 3(2) have failed to supply an answer to the question in hand. Three connecting factors in Article 3: a single connecting factor for each of the sequence of situations described: the law of the nationality; the law of the habitual residence; the law of the place of closer connection. Notion of HR under the HC (Explanatory Report)
“Domicile” is predominantly a question of the intent of the de cuius “Habitual residence” is determined by a more equal weighting of a range of elements. HR is the place of belonging of the de cuius, the centre of his living; the place with which he is most closely associated. A person can have only one habitual residence, because it is the centre of his living. For the purpose of determining this place, his family and personal ties are particularly important elements. Notion of HR under the HC(Explanatory Report)
Intention appears to play a muted role as an element in habitual residence than it traditionally has done in “domicile”. Habitual residence is “a regular physical presence, enduring for some time, and a clearly stronger association than 'ordinary' or 'simple' residence”. However, the manifest hopes and plans of the de cuius are also elements that may be legitimately considered by the person who would have to know which State is the habitual residence. Notion of HR under the HC (Explanatory Report)
The habitual residence considered in paragraph 2 is mainly linked to the length of the stay and the escape clause gives the option to correct the rigid criterion related to the duration of the permanence in a State. It should be also noted that the escape clause provided in paragraph 2 operates only in favour of the deceased’s State of Nationality. Therefore, if the State to which the deceased was mainly linked was not his State of nationality, the law of the State in which he had resided for more than 5 years shall apply. Scope of escape clause under Convention
The way in which the above escape clause operates makes sense as the scheme followed is to set a “fixed criterion” as general rule and the escape clause plays a corrective function to enhance the other elements including the intention of the deceased and pursue proximity. We do no find the same scheme of application in art. 21 of the Succession Regulation where the general criterion is flexible enough to solve all complex cases. Scope of escape clause under Convention
The explanatory report clarifies, in relation to Paragraph 3, that “where the deceased dies a national of a State, but is resident in another State at his death without having an habitual residence there or without that ordinary residence having endured for five years prior to his death, the law of the nationality applies. However, if it can be shown from the evidence that the deceased at his death was 'more closely connected' with any other State, the law of that State is the applicable law. We will first take instances of when the nationality law would apply, and then show how that result may be changed by the 'unless' clause. Scope of escape clause under Convention The escape clause provided by paragraph 3 also introduces a flexible connecting factor to correct the strictness of the nationality as connecting factor and to ensure the application of the proper law. The above mentioned escape clauses operate to ensure proximity where the application of a specific and fixed connecting factor (5 years residence for paragraph 2, and nationality for paragraph 3) might lead to unsatisfactory results. They both have an autonomous field of application. UNIT 7
Escape clause provided by other international instruments – Part III Comparison with the escape clause of Article 21.2 Succession Regulation
The general connecting factor of the habitual residence outlined in Art 21.1 is not a rigid and fixed criterion (such as the 5-year duration of residence) but it is flexible as it is the result of the evaluation of a plurality of elements and it is able to guarantee the closest connection without referring to any escape clause. In the notion of habitual residence under the Hague Convention the intention plays a muted role and factual elements are more relevant, such as the regular physical presence, enduring for at least 5 years. Intention of the deceased
The intention of the deceased might, therefore, play a more relevant role in the application of the escape clause. The relevance of the intentional element in the application of the escape clause provided by paragraph 2 of article 3 of the Hague Convention might have inspired those Scholars, mentioned before, who have attempted to find an autonomous scope for the exception clause in the Succession Regulation by enhancing the role played by the intention of the deceased in the application of the escape clause under art. 21.2 of the Succession Regulation. Intention of the deceased
This interpretation seems not to be confirmed by the wording of article 21.2 of the Succession Regulation which indicates that “all the circumstances of the case”, including therefore factual (objective) elements, should indicate a manifestly closer connection and not just one, that is the intentional element. A part from the wording of article 21.2 it is difficult to imagine how the subjective element can create closer links of the deceased with a given State without those links being expressed in factual elements acting as indicators of habitual residence. REGULATION (EU) 2016/1104 implementing enhanced cooperation in the area of jurisdiction, applicable law and the recognition and enforcement of decisions in matters of the property consequences of registered partnership Article 26
Art. 26 of the European Regulation number 1104 of 2016 states a fixed connecting factor to determine the applicable law to property consequences of registered partnerships that is the law of the “State under whose law the registered partnership was created”. Article 26
Paragraph 2 of article 26 says that “by way of exception and upon application by either partner, the judicial authority having jurisdiction to rule on matters of the property consequences of a registered partnership may decide that the law of a State other than the State whose law is applicable pursuant to paragraph 1 shall govern the property consequences of the registered partnership if the law of that other State attaches property consequences to the institution of the registered partnership and if the applicant demonstrates that: • (a) the partners had their last common habitual residence in that other State for a significantly long period of time; and • (b) both partners had relied on the law of that other State in arranging or planning their property relations. Article 26
There are four conditions for the escape clause to operate: the request of at least one of the partners; an objective element given by last habitual residence in common for a long period; a subjective element given by the expectations of the partners who have relied on the application of the law of a specific State to plan their property relations; the fourth condition is that the law attaches property consequences to the institution of the registered partnership. Conclusions
Also in the escape clause provided by Regulation (EU) 2016/11 the corrective mechanism of a rigid connecting factor operates helping to apply the proper law. COUNCIL REGULATION (EU) 2016/1103 of 24 June 2016 implementing enhanced cooperation in the area of jurisdiction, applicable law and the recognition and enforcement of decisions in matters of matrimonial property regimes Article 26
Article 26 of this Regulation introduces harmonised conflict of law rules to determine the law applicable to all the spouses' property on the basis of a scale of connecting factors: the common habitual residence of the spouses shortly after marriage the law of the spouses' common nationality at the time of their marriage the law of the State with which the spouses have the closest links. (If neither of these criteria apply, or failing a first common habitual residence in cases where the spouses have dual common nationalities at the time of the conclusion of the marriage.) Article 26: escape clause
The third paragraph of article 26 provides an escape clause applicable in exceptional cases by the judicial authority and at the request of at least one of the spouses. Instead of the law of the first common habitual residence after the conclusion of the marriage the judge may apply the law of the State to which the spouses have moved and which has been the State of their habitual residence for a long duration and if the spouses have relied on the application of such a law in planning their properties relations. Conclusions Many other international instruments do provide escape clauses which we cannot all analyse in this context. All the examples of escape clauses given above seem to have a proper field of application. Only the escape clause stated by the Succession Regulation seems not to have any autonomous scope compared to the flexible connecting factor of the HR. We can only wait for the European Court of Justice to rule on it and let’s hope that the European Legislator will finally amend art. 21.2 of the European Regulation number 650 of 2012. Thank you for your attention