Choice of Law Clause in Wills
The EU Succession Regulation (650/2012) came into force in August 2015, with the intention of simplifying and clarifying succession procedures and applicable laws, for Europeans living in different countries than that of their origin, and owners of property in multiple cities.
Currently the applicable law to a succession, in accordance with this Regulation, is that of an individual’s “habitual residence”, of which there is no definition. The interpretation of “habitual residence”, three years on, remains a subject of debate, especially in situations whereby an individual officially lives in one country, but holds assets and spends a frequent amount of time in another country, or in a situation where an equal amount of time is spent in several countries, throughout the year.
The law applicable to a person’s succession is significant, because each country has its own succession laws. Italy, France, and Switzerland, for instance, have forced heirship laws, whereby a proportion of the Estate must be left to the spouse/children. A will in conflict with this can be successfully contested by the legitimate heirs (whereas countries such as England have complete freedom of testamentary disposition). Accordingly, an English national in Italy cannot leave any living spouse or child out of their will – unless a “Choice of Law” clause is written in.
This clause allows for the testator to choose the law of their nationality to apply to their succession (as opposed to the laws of their “habitual residence”). Taking the above example, the English national living in Italy, can insert a clause in their will choosing English law to apply to their will and succession, thereby removing the risk that any relatives contest their will, on the basis of local forced heirship laws.
There are transitional provisions in the Regulation which apply to wills written before the Regulation came into force. These provide that there could be an implied choice of a person’s national law in a will written before 2015, for example if the will strictly follows the format required by that national law.
There are still several potential issues; for example, a country is not obliged to apply foreign law, and its courts will not if it is contrary to public order. French courts will not apply another country’s laws to one of its citizen’s succession, if the heirs are put in the situation of economic need as a result.
Another unclear position is whether the United Kingdom accepts the choice of law clause. While other EU countries ratified this Regulation, the United Kingdom did not, and it was long debated whether the U.K. was to be considered a “Third Party State”. This has been somewhat clarified with “Brexit” in 2016, and the United Kingdom can now safely be considered a Third Party State, like the United States.
There has not been near enough case law, during these first three years, to establish the success of the Regulation, what the clear views of the European courts may be, nor enough to remove any ambiguities present in the Regulation itself.
Whilst lawyers eagerly await any case law regarding the subject, we advise all our clients, who either live in Italy, or who have property in this country, not only to write a will, but to insert a clause which clearly chooses the law of the country that they wish to apply on their succession.