Commission staff working document accompanying the Proposal for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and authentic instruments in matters of successions and on the introduction of a European Certificate of Inheritance Impact Assessment {COM(2009) 154 final) {SEC(2009) 411} - Hoofdinhoud

EN

Brussels, 14.10.2009

SEC(2009) 410 final

COMMISSION STAFF WORKING DOCUMENT

Accompanying the

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on jurisdiction, applicable law, recognition and enforcement of decisions and authentic instruments in matters of successions and on the introduction of a European Certificate of Inheritance

Impact Assessment

{COM(2009) 154 final)

{SEC(2009) 411}

Table of Contents

• 1. 

  Introduction 5

• 2. 

  Procedural Issues and Consultation of Interested Parties 5

2.1. Legal basis, political mandate and existing instruments 5

2.2. Organisation and timing 6

2.3. Consultation and expertise 6

• 3. 

  Problem Definition 8

3.1. The causes of the current problems (the drivers) 8

3.1.1. Divergences in national substantive rules on successions 9

3.1.2. Problem 1 - Problems relating to the determination of which country and body is competent to handle the case 10

3.1.3. Problem 2 – Conflicting laws applicable to the same succession in different Member States 11

3.1.4. Problem 3 - Insufficient (limited) freedom of choice of law for the testator 13

3.1.5. Problem 4 - Restricted recognition* and enforcement* of judgments, non-contentious decisions and notarial deeds* 13

3.1.6. Problem 5 - Restricted recognition of the status as an heir or as an administrator/executor 14

3.1.7. Problem 6 – Difficulties identifying wills abroad 14

3.2. Negative consequences faced by Union citizens (the problem) 15

3.2.1. An intended or expected heir may fail to inherit, or an unintended or unexpected person may inherit 15

3.2.2. Shares of the inheritance may be different to what was intended or expected 16

3.2.3. Heirs may face long delays in obtaining their inheritance 17

3.2.4. International aspects lead to significant increase in costs 17

3.2.5. Planning of international succession is difficult 18

3.3. Scope of the problem 18

• 4. 

  Need for Action at EU Level 19

4.1. How would the problem evolve, all things being equal? 20

4.2. Legal framework in place 20

4.3. Does the EU have the power to act? 21

• 5. 

  Objectives 22

• 6. 

  Description of Policy Options 23

6.1. Definition of policy options 23

6.2. Description of policy options 25

6.2.1. Policy options A addressing problems caused by national legislative differences concerning successions with transnational elements 25

6.2.2. Policy options B addressing problems of identifying wills abroad 27

6.3. Discarded policy options 28

6.4. Alternative elements which could have formed part of policy options A 28

• 7. 

  Analysis of the Impacts of the Policy Options 31

7.1. Impact of the Policy Options addressing problems caused by national legislative differences concerning successions with transnational elements (Policy Options A) 31

7.2. Impact of the policy options that that address problems of identifying wills abroad (Policy options B) 38

• 8. 

  Comparing the Options 41

8.1. Comparison of policy options and justification of choosing the preferred option 41

• 9. 

  The Preferred Option 44

9.1. The preferred option and its effects 44

9.2. The preferred option’s achievement of the objectives 44

9.3. Economic impacts 46

9.3.1. Financial costs and benefits 46

9.3.2. Impact on the legal profession 46

9.3.3. Impact on taxation 47

9.4. Potential draw-backs/risks and sensitive elements 47

9.5. Fundamental Rights, EU added value and proportionality 48

9.5.1. Fundamental rights 48

9.5.2. Proportionality 48

9.5.3. European added value 48

• 10. 

  Monitoring and Evaluation 49

ANNEX 1 - Glossary 50

ANNEX 2 - The magnitude of international successions and wills 53

ANNEX 3 – Financial costs and benefits of the preferred policy option 69

ANNEX 4 – Economic effect on fees for legal professionals 71

ANNEX 5 – Impact of the preferred option on inheritance tax 73

Lead DG: Justice, Freedom and Security

More and more European citizens take advantage of the Internal market, live in another Member State and have family members or own property (houses, bank accounts) in more than one Member State. Upon their death, their potential heirs often face great difficulty, long delays and high legal costs in trying to obtain their inheritance. Worse, many rightful heirs, particularly the most vulnerable, do not receive all of their inheritance. The process is protracted, expensive and stressful.

The causes of this problem are complex. Succession law varies considerably between the Member States. National legal systems are often in conflict with one another, which results in multiple legal proceedings taking place in more than one Member State for the same succession. Judgments, the powers of administrators or executors of wills, and status as an heir in one Member State are often not recognised in others. In addition, unless the testator registers his will, or at least informs his potential heirs, notary or legal practitioner that he has made a will, there is no obvious means for potential heirs to find out whether the testator made a will before his or her death.

This is a cross-border problem which affects a large and growing proportion of citizens in the European Union. Member States and stakeholders have therefore urged action at EU level to address it.

1.Legal basis, political mandate and existing instruments

At its meeting of 15 and 16 October 1999 in Tampere (Finland), the European Council called for the development of a genuine European Area of Justice in which individuals and businesses should not be prevented or discouraged from exercising their rights by the incompatibility or complexity of legal and administrative systems in the Member States.

Although much progress has been made towards the creation of a genuine European Area of Civil Justice*¹, successions have not, so far, been covered in this progress. In particular, they are excluded from the most important legal instrument in the field of civil judicial cooperation, the Regulation on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (so-called "Brussels I" Regulation)².

The adoption of a European instrument relating to successions was already among the priorities of the Vienna Action Plan adopted by the Council and the Commission in 1998³. The Programme of measures for implementation of the principle of mutual recognition of decisions in civil and commercial matters⁴ adopted by the Council and the Commission at the end of 2000 provides for an instrument to be drafted on succession. Finally, the Hague Programme adopted by the European Council of 4-5 November 2004 called on the Commission to present a Green Paper on succession covering a range of issues – applicable law, jurisdiction and recognition and administrative measures (certificates of inheritance, registration of wills).⁵

2.Organisation and timing

The Commission's Work Programme for 2008⁶ included the adoption of a proposal for a regulation on successions and wills⁷ as a priority initiative. A road map was prepared for this strategic initiative.

The Commission commissioned an external study (hereinafter "the external study") to support the preparation of the Impact Assessment.⁸ The problems, objectives and policy options assessed were based on the outcome of the consultations and the expertise brought together by the Commission to prepare the present initiative (see point 2.3 hereafter) as well as contributions from the contractor.

This report also incorporates comments submitted during two meetings of the inter-service steering group on September 9 and December 9 2008 at which representatives of the Directorates-Generals Enterprise and Industry, Internal Market and Services and Taxation and Customs Union, as well as the Secretariat General and the Legal Service of the Commission participated.

This Impact Assessment was reviewed by the Impact Assessment Board (IAB). The recommendations for improvements have been accommodated in this revised version of the report. In particular, the following changes were made: (i) additional explanations on the reasons why other alternative elements have been discarded; (ii) clarification on the cross-linkages with the taxation of successions; (iii) reference to methodology on the evaluation of the instruments including indicators.

3.Consultation and expertise

To better understand the status quo, the Commission commissionned a "Study on Conflict of Law of Succession in the European Union", prepared by the Deutsches Notarinstitut (German Notary Institute) in November 2002⁹.

Since this study confirmed the existence of practical problems in devolution of estates and drafting of wills in cross-border successions, the Commission decided to launch an in-depth reflection and debate with all relevant stakeholders on the architecture of a future Community initiative. It therefore presented a Green Paper on Succession and wills (COM(2005)65 final) on March 1, 2005,¹⁰ launching a public debate on successions with an international dimension.

The Commission received approximately 60 written contributions from Member States, non-governmental organisations, academia, bars and law societies. All contributions, including the opinions by the European Parliament, the Economic and Social Committee and the Committee of Regions have been published on the JLS website¹¹.

Following a call for proposal, the Commission set up an expert group (PRM III/IV) composed of experts acting independently of the Member States, including several notaries, and representing the different legal traditions of the EU to assist the Commission in its work on a future legislative proposal on successions. Seven meetings of the Expert Group took place between 2006 and 2008, and a public hearing on the question of the applicable law on succession was held on 16 November 2006. In addition, the Commission consulted national experts on a preliminary draft proposal for a regulation on successions upon death between June and November 2008.

The following figure outlines the current problems and factors influencing these problems prepared on the basis of available information from desk research and stakeholder consultations. The different elements are developed further in the following sections.

Figure 1 - Outline of problems and factors influencing them

1.The causes of the current problems (the drivers)

The outcome of international successions in the EU often does not meet the expectations and objectives of those who die. In addition the rights of (potential) heirs, persons formally or otherwise related to the deceased, private and public creditors, etc. are not being fulfilled.

This initiative aims to address the problems and factors behind this situation. The starting point for outlining the problems currently faced by citizens are the national substantive* rules on successions which diverge widely between the Member States. Some of the most significant problems in the area of successions are caused by those divergences in national substantive rules, the most important of which will be briefly outlined in the following section. While their harmonisation remains outside the competence of the European Community, it is nevertheless important to have an understanding of these differences and what this entails for citizens.

1.Divergences in national substantive rules on successions

Some of the main differences between substantive rules which have given rise to difficulties for the citizens are as follows:

• 1. 

  If a person dies intestate*, i.e. without a will, the inheritance is divided according to substantive* succession rules. The shares that the family members inherit vary widely, depending on which national law is applied to the succession. In particular the division of the inheritance between a spouse and children is handled very differently. For example, while English law in practice leads to the spouse receiving the majority if not all of the inheritance, French law in some cases grants the spouse merely a quarter of the inheritance, with the remaining three quarters inherited by the children of the deceased.

• 2. 

  All Member States recognize testaments. Some Member States furthermore provide for more elaborate instruments to plan successions, namely joint and reciprocal wills* as well as succession agreements*.¹² A joint and reciprocal will, unlike a testament that can be revoked or modified at any point in time, cannot be unilaterally changed and can bind the surviving spouse even after the death of the partner. Similarly, a succession agreement, which can be concluded between a testator and any third party, can limit a testator's right to modify his or her last will after the conclusion of the agreement. As many Member States, especially the Romance legal orders, place particular emphasis on the free will of the testator, reciprocal wills or succession agreements may not be recognized.

• 3. 

  All Member States except for the UK (specifically, England and Wales) grant a compulsory share of the inheritance to close family members, regardless of any testamentary dispositions by the deceased. This share, the "statutory reserve", can amount to between 25 and 100% of the inheritance, depending on the applicable law and the number of remaining family members, and also varies widely between the Member States.

• 4. 

  The procedural rules governing succession are very different between Member States. While in some Member States all possessions of the deceased become the property of his or her heirs automatically upon death, in other Member States the estate is managed by an administrator and transferred to the heirs after their shares have been established and any inheritance tax has been paid.

• 5. 

  The rights of unmarried or same-sex partners, as compared to those of spouses, vary widely between the Member States. While England, the Netherlands, Spain and Germany treat a registered same-sex partner like a spouse in most respects, other Member States that do not provide for same-sex marriage or registered partnerships as a consequence do not have any rules granting a share of the inheritance to the registered partner. Even in some Member States that have a registered partnership, the inheritance rights of a registered partner are non-existent or very limited in scope. For example, the surviving partner of a French PACS is entitled by law only to a habitation right as regards a home shared with the deceased partner.

Given these differences, it is evident that the results of a succession vary widely, depending on which national law is applied. As mentioned above, these results can also diverge from the expectations of the deceased and the heirs.

To address these issues, the Member States have set up their own rules to define the competence of their authorities and the applicable law in international succession cases. However, as these rules also vary widely from Member State to Member State and have not always been adapted to the mobile life style of European citizens taking advantage of the Internal market, they create further problems for those citizens, in particular due to the lack of predictability of the applicable law (problem 2). Consequently, citizens suffer from a very low level of legal certainty.

2.Problem 1 - Problems relating to the determination of which country and body is competent to handle the case

Difficulties for citizens to predict which country has competence to handle the international jurisdiction and positive and negative conflicts of jurisdiction. Citizens have difficulties predicting which Member State's authorities are competent to handle an international succession. The authorities of two ore more Member States may accept to handle the same succession (positive conflict of jurisdiction*) or, on the other hand, none of them might accept to handle it (negative conflict of jurisdiction*).

This situation mainly occurs due to the fact that the Member States have adopted widely varying criteria for determining the competence of their courts in an international succession. Many take the last habitual residence of the deceased as connecting factor, others the nationality of the testator.¹³ But other connecting factors exist: in cases of contentious litigation (e.g. because of a dispute among potential heirs), the habitual residence of the parties, the location of the property or the nationality of the parties may be used. Some Member States even allow a choice of jurisdiction by the parties in case of a dispute between (potential) heirs.

Beside different connecting factors, there are other rules on international procedure which differ among Member States, thus increasing the risk of positive or negative conflicts of jurisdiction: e.g. the power of courts/judges to declare themselves incompetent (i.e. not having jurisdiction) on their own motion or on request of the parties, including the UK mechanism of forum non conveniens* or the rules on lispendence*.

These different rules lead to a situation where the competent bodies of different countries may accept to decide on the same succession and even on the same question, which may lead to contradictory decisions, even more since each of the courts may then apply a different law (see 3.1.3). This diversity also favours the phenomenon of forum shopping* : parties involved in an international succession case may try to bring their claims before the courts of a certain Member State, because they will apply substantive succession law which is particularly favourable for them.

Difficulties for citizens to predict which body or court will handle the case. Even once citizens have identified the Member State the authorities of which have competence to handle the succession, they often do not know which body is competent in this Member State. In many Member States, the majority of successions are settled outside the courts, sometimes with the support of public bodies or certain legal professions (mainly notaries); courts are involved only in complex or contentious successions. In other Member States, the courts always have to be involved. Furthermore, in some countries, only one court is competent, whereas in other countries the plaintiff has an option to choose between several courts. This makes it difficult for citizens to predict what body or court will actually handle their case.

3.Problem 2 – Conflicting laws applicable to the same succession in different Member States

It must be borne in mind that, in matters of private law, a court is not obliged to apply the law of its own country; it may also apply the rules of law of another country.¹⁴ For this reason, Member States have adopted their own rules to decide which law of which country should be applied to which case, called conflict of laws rules*.

At present, the Member States have different conflict of laws rules in matters of successions. Since the authorities of several Member States may be competent to deal with a given succession (see point 3.1.2), these authorities might come to different results as regards the question “what belongs to whom”, which is not only a major factor of legal uncertainty, but has serious consequences on the estate planning and the mutual recognition of judgments between Member States.

The main existing discrepancies between the conflict of laws rules of the Member States are the following.

Different connecting factors in the conflict of laws rules. The connecting factors used in the conflict of laws rules of the Member States to determine the law applicable to succession are quite different. In particular, there is a striking difference between Member States which apply the law of the last habitual residence of the deceased and others who follow the principle of nationality.¹⁵

Example: a French citizen whose last habitual residence was in Germany dies, leaving movable property (e.g. bank accounts, shares) in both countries. The authorities of both Germany and France would have competence to handle the case (cf. point 3.1.2). Applying their own national conflict of laws rules, the German authorities would apply French succession law to identify the heirs, whereas the French authorities would apply the German rules. As a further consequence, conflicting judgments will be given by French and German courts with regard to the succession of the same deceased person, and recognition will be denied to the French judgment in Germany as being in contradiction to the German judgment, and vice versa.

Distinction between unitary systems and systems of separate conflict rules for movable and immovable property. Seventeen Member States have unitary systems where all succession property (i.e. both movable and immovable property) wherever it is located, is subject to a single law (e.g. the Austrian succession law determines the heirs of both the bank account in Luxembourg and the house in Granada). Ten Member States have systems where movable and immovable goods can be subject to different laws if they are located in different countries. According to this system, immovable property is governed by the law of the country where it is located, whereas movables are subject to the general connecting factor (mainly nationality or last habitual residence). The application of the law of the country in which the immovable property is located makes it easier to transfer ownership of the property, but makes it more difficult to organise succession of the entire estate and to draft wills.¹⁶

Example: An Italian citizen dies in England, leaving a house there. English courts will apply English succession law (law of the place of location). Italian courts would apply Italian succession law to the whole estate including the house in England.

Difference in the treatment of the administration* and the distribution* of the estate. Further difficulties arise from the fact that the administration of the estate is part of succession law in civil law countries, governed by the law applicable to the succession, whereas it is part of the national procedural law in common law countries.

Different scope of application of the conflict of laws rules relating to successions in the Member State. The fact that the delimitation between succession law on the one hand and other laws (family law, property law, company law) is drawn in a different way in the Member States also makes it difficult to know which law is applicable, and can lead to contradictory decisions.

Examples: The law of the last country of residence (Member State A) provides that the surviving spouse automatically becomes life tenant of all property owned by her husband, including the holiday residence in Member State B, whereas the law of Member State B stipulates that such a life tenancy can only be arranged by a written contract. As a consequence, the spouse will have difficulties enforcing her rights in Member State B.

4.Problem 3 - Insufficient (limited) freedom of choice of law for the testator

When a citizen taking advantage of the Internal market is aware of the differences in substantive succession law and in the conflict of laws rules in the Member States and is also aware of the resulting problems, he/she may wish to get around this by drawing up a will and choosing a single law applicable to his/her entire estate irrespective of the location of the property. However, most Member States do not yet allow the future deceased to choose the law applicable to his/her succession¹⁷. Those Member States which give a choice also introduce limitations, varying from one country to the other, as regards in particular the laws which may be chosen (in general, law of habitual residence or of nationality, in one Member State the law of the matrimonial property regime)¹⁸, the property for which such choice is allowed (movable or immovable property) and the form of the choice.

Due to these limitations, in practice, no Member States allows citizens to choose a single law governing the whole succession. This may cause particular problems for those citizens that take advantage of their freedom of movement in the EU. When such persons make a will and then change their country of residence, they are often unaware that this change may mean that their will no longer has the expected effects, since it may become subject to a different law. But even when these citizens are aware of this fact, they have no possibility to avoid these consequences by choosing the law of their former habitual residence as governing their succession. The only alternative is to draw up a will which satisfies the requirements of all Member States concerned, which is nearly impossible in practice.

5.Problem 4 - Restricted recognition* and enforcement* of judgments, non-contentious decisions and notarial deeds*

A judgment given by a court in one country is not automatically recognised and enforced in another country the courts of which may render a conflicting judgment on the same question. Although the mutual recognition of judgments within the EU is a cornerstone of the objective to create a genuine European area of civil justice, succession matters are expressly excluded from the scope of the instruments adopted so far, in particular the Brussels I Regulation. This question is therefore regulated either by bilateral conventions or by the national procedural laws of the Member States. As a consequence, there are still grounds for non-recognition of judgments and non-contentious decisions given in another Member State. In certain Member States, notaries or other authorities prepare deeds to determine the order of succession and to provide for the administration of the estate. There is currently a lack of provision for the recognition and enforcement of such deeds.

6.Problem 5 - Restricted recognition of the status as an heir or as an administrator/executor

Lack of automatic recognition of certificates on the status as an heir. Currently there are various types of evidence to prove the status as an heir in the Member States. Documents concerning one's status of an heir executed in one Member State are at present normally not automatically recognised in other Member States. This gives rise to duplication of procedures to prove one's status as an heir in the country where the property is situated and additional costs and time delays; often heirs are required to initiate new proceedings to obtain a document attesting their status as heir, when in fact such a document has already been issued in another Member State. For example, Luxembourg banks are often faced with the question of the legal value of a German Erbschein or a French acte de notoriété; in case of non-recognition, the heirs are required to initiate new proceedings before a Luxembourg court to obtain a second proof of their status.

Lack of automatic recognition of the status as administrator/executor with the power to dispose of the estate. The designation of an administrator of the succession or of the executor of a will is either optional or compulsory, depending on the law of the Member State in question. In a few Member States (United Kingdom and Ireland) it is compulsory to appoint an administrator or executor to handle matters of succession. In the majority of Member States this is merely an option and it is upon the moment of the death of a person that the heirs become owners of the deceased's property. The problems faced by citizens are twofold: (i) citizens of those Member States where heirs become owners of the property upon the death of a person see their rights to administer the property refused in those Member States which require the intervention of an administrator or executor; (ii) administrators appointed under the rules of one Member State see their rights refused in a Member State where the property is located.

7.Problem 6 – Difficulties identifying wills abroad

Even in cases which are purely internal to one Member State, it is not always easy for heirs to know whether the deceased had established a testament, especially in those Member States which authorize handwritten wills with no requirements as regards registration. This question is even more problematic for citizens looking for a will abroad: in ideal cases, the testator warns his relatives or notary that he/she drafted a will in another country. If this is not the case, the heirs and the professionals involved have to investigate if the testator has a will in one of the countries with which he was connected. This situation causes extra work for the legal professionals and triggers severe time delays, uncertainty as to whether wills exist that may change the completion of the succession of the deceased, whether other heirs will step forward, etc. The procedures become extended and complex which in turn results in greater costs.

2.Negative consequences faced by Union citizens (the problem)¹⁹

As outlined above in section 3.1, there is a risk that the outcome of successions with an international element does not match the legitimate expectations of the deceased and the heirs. In particular, the divergent rules may result in the following issues that will be addressed in more detail in the following sections:

• - 

  a person who was not expected or intended to inherit the estate may do so; conversely, a person who was intended or expected to inherit may fail to do so;

• - 

  the shares of the estate can deviate in size from what was intended or expected;

• - 

  heirs face long delays in obtaining their inheritance;

• - 

  heirs face significantly higher costs; and

• - 

  EU citizens face difficulties in attempting to plan their succession.

We have been unable to collect hard data as regards the extent of these problems; however, each of these problems, the importance of which was confirmed by the stakeholders interviewed for the preparation of the external study, is illustrated by a concrete example in the following section. Further details on all examples by practitioners cited in this section may be found in Annex 8 of the external report.

1.An intended or expected heir may fail to inherit, or an unintended or unexpected person may inherit

Under the present rules, there is a high risk that an intended or expected heir may fail to inherit or that an unintended or unexpected person may inherit. The practical result can be unfair, e.g. when it leads to discrimination among siblings.

Example: A Spanish father living in Spain owns two houses of equal value, one located in London, the other in Spain. He made a will, leaving the first house to his son, the second to his daughter. Upon his death, the two houses are treated separately, the succession of the first being subject to English law, the succession of the second to Spanish law. Under Spanish law, which provides for an equal statutory reserve for all children of the deceased, the son could claim a share in the house in Spain. Since English law does not provide for such statutory reserve, the daughter would not be allowed to do the same for the house in London. As a consequence, brother and sister could be treated in an unfair manner although their father had wanted to treat them equally.

In addition, sometimes the problem of failing to inherit despite legitimate expectations is faced by children because the ability of minors to own property varies from Member State to Member State.

Registered partners in particular suffer from not seeing their legitimate expectations achieved in situations in which they do not receive a share of the estate because their partnership is not recognized by the national law applicable to the succession. Accordingly, that law will not provide for rights of inheritance for the registered partner.

Similar cases were cited in particular by English, German and Dutch practitioners.

A particular issue arises in relation to the English substantive law of succession, which, as mentioned above, does not provide a statutory share to close family members of the deceased. In case of an Englishman who has made important gifts during his lifetime (gift intra vivos*), the change of applicable law following the move to another Member State can lead to unexpected results.

Example: An Englishman has invested most of his wealth in a collection of modern art paintings, which he gives away to a museum. Shortly thereafter, he moves to France, where he eventually marries a French woman, and the couple have two children who are also French citizens. When the father passes away years later, the children under the applicable French law of succession are entitled to a statutory share of the inheritance, which in this example would amount to ⅔ of the estate. For the purposes of calculating the value of that share, the value of the estate of the deceased including all gifts made during his lifetime is calculated. Assuming that the value of the collection of paintings amounts to ½ of the estate's total value, the statutory share cannot be satisfied by the remaining assets in the estate. In this case, the children can bring a so-called "claim for reduction" against the museum, forcing it to pay the remaining 1/6 of the estate to complete the statutory share of the children.

2.Shares of the inheritance may be different to what was intended or expected

The share of the inheritance can be smaller or larger than was originally expected.

Example: A Lithuanian couple has drawn up a joint and reciprocal will, naming the surviving spouse as the heir to the entire estate and the couple's three children as the heirs of that surviving spouse. If that couple e.g. owns a vacation home in France, the French courts will refuse to recognize the surviving spouse as the heir as they do not accept joint and reciprocal wills. Accordingly, French rules will apply. The surviving spouse receives – at his or her choice – either ¼ of the estate or the usufruct of the entire estate. The rest of the estate goes to the children.

Problems can also arise due to the fact that the protection of the surviving spouse can be governed either by family law or by succession law, or by a combination of the two. Since almost all conflict of laws rules differentiate between family law and succession law, it may be that different national substantive rules apply to questions of family law and questions of succession law. Depending on the combination, this can lead either to an unintended decrease (the spouse is protected neither by succession nor by family law) or increase (the spouse is protected by both succession and family law) in the spouse's share of the estate. Examples of such cases were cited by Swedish, Dutch and Spanish practitioners.

3.Heirs may face long delays in obtaining their inheritance

When the deceased owned property in another Member State, heirs are faced with two main problems. First, they have to prove to the authorities in the second Member State that they are the rightful heirs, which may be difficult in particular if a joint and reciprocal will not recognized by the second Member State. Secondly, they have to find out about and follow the correct procedures to transfer ownership of the property from the deceased to themselves, e.g. effecting the necessary changes in the land register. An English practitioner cited the example of a client who had to wait two years to settle her inheritance. The non-recognition of decisions and other acts also frequently leads to long delays, as reported by several practitioners. Similarly, the failure to recognize the authority of an administrator/executor causes delays. One practitioner cited the example of a Spanish bank which did not recognise the powers of a Swedish administrator/executor; it took three years before it was possible to access the account.

The legal uncertainty can also lead to an increased risk of dispute amongst the potential heirs. In the case of contentious procedures, practitioners estimate that it may take up to 10 years or more to settle the inheritance, depending on the efficacy of the relevant national legal system.

4.International aspects lead to significant increase in costs

Successions with international aspects also tend to be much more costly, in particular due to the legal uncertainty faced by the heirs. As the national rules on jurisdiction and the applicable law diverge, it can be difficult to establish which Member State's authorities are competent to handle the succession and which national law applies. Depending on the national competence rules, the authorities in several Member States might consider themselves to be competent (positive conflict of jurisdiction) or, conversely, no Member State's authorities may find themselves competent (negative conflict of jurisdiction). Furthermore, some Member States' conflict of laws rules provide for the application of different national laws depending on the location of the estate ("scission"* of the estate).

Accordingly, in cross-border cases, legal professionals estimate that costs are twice or three times as high as in national cases due to the necessity to seek advice from lawyers, notaries and tax advisers in more than one country. Costs also increase compared to national successions due to additional court costs, witnesses, expert opinions, etc. An English practitioner estimates that, while the costs of a purely national succession might amount to 2% of the estate, a transnational succession would cost the heirs approximately 5% of the estate.²⁰ A German practitioner cited an example involving property in Spain which cost the heirs € 10,000 more than it would have absent the international element.

These problems are especially difficult for persons with limited financial means, since the legal procedures need to be financed in advance of acquiring the estate, which, as seen above, may take many years. An English legal practitioner estimated that the legal fees for a complicated succession may start at 20,000 Euros. Such an upfront investment can be difficult to finance and can deter potential heirs from even pursuing their rights to the inheritance.

5.Planning of international succession is difficult

As explained in section 3.1.4, the divergent national substantive and conflict of laws rules pose a challenge for a Union citizen attempting to plan his or her succession in advance, if that succession contains an international element. As most national legal systems currently do not offer any possibility of choosing the law applicable to the succession, the applicable law often cannot be determined in advance. Furthermore, legal professionals in England and Germany cited examples of succession plans that had been voided by a later change in habitual residence of the citizen.

3.Scope of the problem

According to the external study, around 4.5 million people die each year in the EU. For successions without an international dimension, it is assumed that the value of the average estate is about € 137,000. Accordingly, the total value of the estates per annum would amount to € 646 bn.

This study currently estimates that about 1 in 10 (that is, about 450,000) successions in the EU have an international dimension. This international dimension, as outlined above, can arise for example due to the existence of movable or immovable property of the deceased in another Member State, due to the deceased's having a nationality other than that of the Member State in which he or she was resident or simply due to the fact that the potential heir lives in another Member State than the last habitual residence of the deceased.

The likelihood of an international element to the succession rises with the value of the estate. A wealthy person is more likely to have e.g. an account or a second home in another Member State. It is therefore estimated that the average value of estates with an international dimension would amount to around double the value of an average estate (i.e. € 274,000), totalling approximately € 123.3 bn euro per annum.

These estates are liable to problems. Even if resolved in a reasonable manner, the costs of legal fees according to estimates by practitioners might amount to between 2% (€ 2.466 bn) and 5% of the total value of international successions (€ 6.165 bn). An average of 3% (€ 3.699 bn) of the value of estates can be considered realistic. Moreover, the costs of delays, which may be measured in terms of years rather than months, might be of the same order of magnitude. Addressing the problems giving rise to the need for legal advice beyond the flat rate norm for a ‘straightforward’ national will and the associated delays could thus generate benefits to EU citizens in the order of € 4 bn per annum.

The heirs are not only faced with legal uncertainty, increased costs and time delays. Depending on the financial situation of a potential heir and the value of the expected shares, the succession may prove to be altogether too costly for the heir. Practitioners cited examples of heirs who were forced to renounce rights to a succession because their enforcement in a foreign Member State would have been too expensive. The complications arising out of such an international connection add to the distress already experienced by many heirs in dealing with the succession of a loved one.

The magnitude of the problem is very likely going to increase in the future, as the number of EU citizens taking advantage of the internal market and the mobility it affords is on the rise continuously. As is evidenced by Eurostat data, while the number of foreign residents stagnates in a few Member States, it increases continuously in others:²¹

Figure 2 – Residents from other Member States in selected EU countries

Further arguments explaining why the magnitude of the problem is likely to increase over the next years are set out in Annex 2.

The problems outlined above are due to the cross-border nature of succession. National law alone can therefore not solve the problems, and action at Community level is needed. In the absence of such action, there are a number of factors that might lead to an increase in the scale of the problem.

• 1. 

  How would the problem evolve, all things being equal?

Given the increased numbers of international marriages, the growing numbers of complex extended and same sex family relations and the rising propensity of estates to include immovable and movable property located in more than one Member State, the costs to EU citizens would probably increase beyond the estimated 4 bn euro per annum without policy changes. Indeed, in view of these developments, a doubling of costs within a period of ten years is not unlikely, particularly as there has been a marked recent increase in foreign property ownership within the EU that is unlikely to level off. Furthermore it has been reported that the incidence of wills being contested has increased, partly because the value of individual successions has increased, leading to greater costs and delays for heirs.

However, other developments also need to be taken into account with regard to the evolution of the problem. It is by no means certain that there will be an increase in the value of estates in successions; indeed there are several tendencies that could reduce it. Firstly, people are living longer and staying active until a much later age. There is evidence that the ‘baby boom’ generation who have enjoyed high incomes and accumulated wealth may choose to consume it during their retirement years and give less priority to leaving a legacy to their heirs. Secondly, the elderly often incur high health care costs in the years shortly before their death that may, depending of course on the insurance and social security arrangements applying, diminish their wealth. Thirdly, individuals may choose, for tax, altruism or other reasons to give away (parts of) their wealth during their lifetime.

Taking into account these trends and the forecasts as regards the scope of the problem (section 3.3 and Annex 2), in balance it can be expected that problems will get worse at least in the short term; it is reasonable to estimate that the costs of international successions will double within a period of ten years.

2.Legal framework in place

As already mentioned, successions are excluded from all instruments adopted so far at EU level in matters of civil judicial cooperation. The problems outlined above are also unlikely to be eliminated by a concerted action of the Member States, e.g. by means of an international convention. Although there have been three Hague Conventions on questions of succession alone, only the first one of 1961, which harmonises the conflict of laws rules relating to the form of testamentary dispositions, has been widely ratified by the Member States²². Another convention, dealing with the problem of the administration of the succession, of 1973, was ratified only by a few Member States,²³ and a convention on the law applicable to the successions of 1989 has never entered into force due to an insufficient number of ratifications by the contracting States²⁴.

However, national and international action has begun with a view to alleviating the problem of identifying wills in other countries. In 1972, the members of the Council of Europe signed the Basel Convention on the establishment of a scheme of registration of wills.²⁵ In the past few years, those Member States that previously did not have a register of wills have begun to create such registers. 22 Member States presently have registers of wills at a national or regional level, and two (Bulgaria and Latvia) are in the process of establishing registers.²⁶ In order to facilitate the exchange of information on the existence of wills, a system for connecting registers of wills has been developed by the European Network of Registers of Wills Association (ENRWA). ENRWA was started by the Slovenian, French and Belgian notary associations in 2005 and is open to all states able to respect the Basel Convention principles and certain other requirements. The following Member States have joined the network to date: Romania, the Netherlands, Portugal, Italy, Bulgaria and Latvia. Moreover, the following additional countries have expressed their intentions to join the ENRWA: Austria, Greece, Luxembourg, Hungary, Poland, the Czech Republic and Slovakia. They will likely become members during the first semester of 2009. The notary associations of Estonia, Germany and Spain are also considering joining the ENRWA but, due to national particularities, are still in the process of investigating the modalities.

Two other key factors influence the success of this trend: the first is the extent to which wills are actually registered. The second factor is whether information from these registers can be obtained efficiently, quickly and at low cost. Ideally, every will would be registered and the registers would be interlinked, allowing a quick search via e.g. a search form. At the moment, the ENRWA requires its members to nominate a contact point in their respective state to deal with inquiries regarding wills. Beyond this contact person system, no connection between the registers exists at this point in time.

3.Does the EU have the power to act?

Treaty base. Since the entry into force of the Amsterdam Treaty, the competence of the European Community to act in the area of conflict of laws rules is governed by Article 61(c) of the EC Treaty. Under Article 67 EC, as amended by the Treaty of Nice, the Regulation is to be adopted in accordance with the co-decision procedure of Article 251 EC. Article 65(b) furthermore provides: “Measures in the field of judicial cooperation in civil matters having cross-border implications, to be taken in accordance with Article 67 and in so far as necessary for the proper functioning of the internal market, shall include: … promoting the compatibility of the rules applicable in the Member States concerning the conflict of laws and of jurisdiction”.

As outlined above, it is evident that the differences in the conflict of laws and jurisdiction rules create significant obstacles to the free movement of persons and the freedom of establishment. They also impede the full enjoyment of the citizens' right to private property, which according to the established case law of the European Court of Justice (ECJ) forms an integral part of the fundamental rights safeguarded by the Court.²⁷ Accordingly, there is a need for action at Community level.

Title IV of the EC Treaty, which is the basis for the matters covered by this proposal, does not apply to Denmark by reason of the Protocol applicable to it. Nor does it apply to Ireland and the United Kingdom, unless those countries exercise their right to opt into this initiative as provided by the Protocol annexed to the Treaty.

Necessity test (subsidiarity). The solution to the problems outlined above cannot be adequately attained by the Member States alone, which cannot lay down uniform Community rules, and can therefore, by reason of its effects throughout the Community, be better achieved by action at Community level.

As outlined above in Section 4.2, it is also unlikely that a concerted action by the Member States would make Community action unnecessary, as evidenced by the failed Hague Conventions. Accordingly, Community action is required.

The Community can take measures in accordance with the subsidiarity principle set out in Article 5 of the Treaty. The measures respect the proportionality principle set out in that Article, by increasing certainty in the law without requiring harmonisation of the substantive rules of domestic law. They therefore go no further than necessary. Purely national successions are not affected by this initiative.

Point 6 of the Protocol on the application of the principles of subsidiarity and proportionality provides that “Other things being equal, directives should be preferred to regulations..”. For this proposal, however, the Regulation would seem to be preferable as its provisions lay down uniform rules on the applicable law that are detailed, precise and unconditional and require no measures for their transposal into domestic law. If the Member States enjoyed some room for manoeuvre in transposing, the uncertainty as to the law which the aim is to abolish would be restored (see Section 6.3). Regulations have, in the vast majority of cases, been the preferred instrument for mutual recognition in civil law.

The overall objective of the Proposal is to contribute to the creation of a genuine European area of civil justice in the field of successions upon death.

The general, specific and operational objectives are summarised in the following table:

1.Definition of policy options

The policy options have been split into the following two different sets, in order to take account of the different options to be considered (see table below):

• - 

  Policy options A: Options that address problems caused by national legislative differences concerning devolution of succession with transnational elements (nine different options have been identified); and,

• - 

  Policy options B: Options that address problems of identifying wills abroad (six different options have been identified).

The preferred option can combine options from both of these sets.

2.Description of policy options

1.Policy options A addressing problems caused by national legislative differences concerning successions with transnational elements

Policy Option A.1 - Status quo. Under this policy option there would be no common EU legislative action.

Policy Option A.2 - Harmonisation of jurisdiction rules and introduction of rules on automatic recognition and enforcement of judgments, other decisions and authentic acts/deeds. This option would imply EU legislative action in terms of a Regulation establishing harmonised rules on jurisdiction and recognition and enforcement of judgments, other decisions and authentic acts/deeds. The Regulation would establish one unique head of jurisdiction, i.e. the court of the deceased's last habitual residence, which would have competence for the whole succession (movable and immovable property).²⁸ Like the Brussels I Regulation, this Regulation would also include rules on lis-pendence* and other procedural rules.²⁹ Following the example of the Brussels I Regulation, the instrument would introduce rules on recognition and enforcement. The general rule would be automatic recognition of judgments and other decisions given in one Member State in matters of successions in all other Member States. The partial or total refusal would be allowed in exceptional cases only³⁰. As regards enforcement, the general rule would be that a judgment given in one Member State and enforceable in that Member State would be enforced in another Member State when, on the application of any interested party, it has been declared enforceable there (see Article 38 Brussels I Regulation).

Policy Option A.3 - Harmonisation of conflict of laws rules on successions upon death. This option consists of adopting harmonised conflict of laws rules to ensure that the whole succession (movable and immovable property) is governed by a single law, the law of the deceased's last habitual residence. The testator would also be allowed to choose instead the law of his or her nationality. These rules could also lead to the application of the law of a third state. The applicable law would not only govern the determination of the heirs and their respective shares, but also any obligation to restore or account for gifts made during lifetime, the statutory share, administration and distribution of the estate. In practice, this would mean that an administrator nominated in one Member State would also be allowed to act in other Member States.

Policy Option A.4 - Harmonisation of conflict of laws rules and introduction of a Certificate of Inheritance and Executor / Administrator in transnational successions. Under this option, in addition to the establishment of harmonized conflict of laws rules (see Policy Option A.3 above for description), a European Certificate of Inheritance and/or of Administrator/Executor would be introduced. This certificate, which would be based on a harmonised form included with the legislative measure, would serve as proof of heirship and/or of the power of administration in all Member States, allowing the heir or administrator to manage and eventually distribute the estate. The Regulation would also specify the conditions under which third parties can rely upon the content of the certificate.

Policy Option A.5: Harmonisation of conflict of law rules and jurisdiction rules. This option consists of a combination of Policy Option A.3 with a more limited version of Policy Option A.2, namely, an establishment of one single head of jurisdiction at the last habitual residence of the deceased, which would have competence for the entire succession.

Policy Option A.6: Harmonisation of conflict of law rules and jurisdiction rules, and introduction of rules on automatic recognition and enforcement of judgments, other decisions and authentic acts/deeds. This option, which is slightly wider in scope than Policy Option A.5, entails a combination of Policy Options A.2 and A.3 described above.

Policy Option A.7: Harmonisation of conflict of law rules and jurisdiction rules, and introduction of rules on automatic recognition and enforcement of judgments, other decisions and authentic acts/deeds, and introduction of a Certificate of Inheritance and Executor / Administrator in transnational successions. This option represents a further increase in scope, combining Policy Options A.2 and A.4 described above.

Policy Option A.8: Establishment of a database / knowledge management system on conflict of law, jurisdiction rules and competent bodies. This non-legislative option would entail the creation and maintenance of a database providing information on the various national rules governing applicable law and jurisdiction, as well as on the relevant competent authorities in the Member States. Such a database would be accessible via the Internet and could be linked to from the European Judicial Network's website³¹ or the e-Justice portal³².

Policy Option A.9: EU-wide information campaign on succession (legislation and existing/forthcoming instruments). This option, which is also non-legislative in nature, could consist of a combined EU and national initiative to inform EU citizens of the various national rules governing successions. It could either be run as an independent initiative or as part of a larger EU information campaign.

2.Policy options B addressing problems of identifying wills abroad

Policy Option B.1 - Status quo. The Community could refrain from taking any action to facilitate identifying wills abroad.

Policy Option B.2 - Commission Recommendation on the establishment of interconnected national registers of wills and organisation of information campaigns. This option would entail the adoption of a Recommendation encouraging the Member States to establish national registers for wills where such a register does not yet exist, and to provide for a connection between the individual national registers for ease of obtaining information on the existence of a will in another Member State. This connection could be provided via the European Network of Registers of Wills Association (ENRWA) described above in Section 4.2. Concurrently, the Recommendation would encourage the Member States to run a publicity campaign informing the public about the existence of the registers and the benefits of registering wills would be conducted.

Policy option B.3 - Compulsory establishment of interconnected national registers of wills. Under this option, the EU would adopt a directive requiring all Member States to establish national registers of wills and connect to the other registers, e.g. via the ENRWA system. The Community could furthermore provide funding to assist transnational cooperation.

Policy option B.4 - Establishment of a central EU Register of Wills. The EU could create a central EU register by means of adopting a regulation. EU citizens would then be able to register their wills using a standard form available in all 23 official languages, e.g. via the Internet. An administrative office would have to be set up to manage the database and provide help to users. Information on the existence of a will would only be given upon proof of death of the person in question.

Policy Option B.5 - Creation of a webpage on existing registers of wills and national rules. This is a non legislative action. The webpage would provide contact information for the existing registers of wills as well as information on national rules governing succession. It could be included in the e-Justice portal.

Policy Option B.6 - National information campaigns on wills (legislation and existing/forthcoming instruments). This is another non legislative action which could either be adopted on its own merits to inform citizens about the current legal situation or in combination with other options.

3.Discarded policy options

Another option is the ratification of the 1989 Hague Convention on the Law Applicable to Succession to the Estates of Deceased Persons,³³ eventually in combination with other measures. However, this option was discarded since experts and stakeholders agree on the shortcomings of this Convention with regard to the harmonisation of the law applicable to an international succession. These shortcomings have led to the fact that, almost 20 years after its signature, the Convention has yet not entered into force. It results from the consultations that Member States do not intend to ratify it. In addition, the flaws of this convention cannot be remedied by combining these rules with other measures, such as harmonisation of jurisdiction rules or rules on recognition and enforcement since Member States would not accept to tackle the latter without having harmonised rules on applicable law. Therefore this option has also been discarded.

With regard to the policy options which imply EU legislative action, theoretically either a Regulation or a Directive is possible. For this proposal, however, the Regulation would seem preferable since its provisions lay down uniform rules on the applicable law that are detailed, precise and unconditional and require no measures for their transposition into domestic law (see Section 4.3). If the Member States enjoyed some room for manoeuvre in transposing, the uncertainty as to the applicable law which the aim is to abolish would be restored and the defined objectives would not be met. The same solution is suggested with regard to the establishment of a European Register of wills if policy option B.4 on a European central register will be followed, because such Register should be based on the same rules in all Member States. By contrast, for the compulsory establishment of interconnected national registers of wills (policy option B.3), a directive would be the preferable legal instrument since Member States would be required to establish a national register.

4.Alternative elements which could have formed part of policy options A

As concerns the definition of policy options A, theoretically it would also be possible to assess other options. Most of these options would have consisted of isolating different elements of option A (e.g. an instrument proposing harmonisation of jurisdiction rules only or the introduction of a European certificate as to successions only). The reasons why these options alone do not solve the problems faced by citizens and have, as a consequence, been discarded are outlined in the external study.

The definition of the options overall involves a large number of rather specific elements. Details of such specific elements may be extremely important for the effects of legislation (compare e.g. the word ‘should’ to ‘may’). It was however decided to assess only "full" policy options that already combine selected elements, in particular as several good sources of information on the ‘preferred’ alternative elements are available, i.e. the 2002 Study, the Green Paper responses and the work of the Expert Group. The individual relative advantages of alternative elements are not assessed since this would not only provide an artificial picture of the potential impacts, but worse; it would not provide a correct picture of the results of adopting various individual elements. Furthermore, in view of the vast number of theoretical possibilities to combine different elements, it is not practically feasible to assess all potential combinations of alternative elements.

To illustrate these challenges, take the example of "habitual residence" as the unique connecting factor for conflict of laws rules, which can be combined into at least 480 ‘realistic’ proposals.³⁴ Furthermore, five of the total nine identified policy options include conflict of laws rules, i.e. these elements can also be combined with the alternative elements of the other options (jurisdiction and recognition, European Inheritance Certificate, etc.).

Hence, given that some of these alternative elements are very sensitive from a political point of view, the reasons for which they have been preferred to others, which have been discarded, need to be explained.³⁵

The use of habitual residence as a unique connecting factor rather than nationality. Habitual residence, favoured by the majority of stakeholders, corresponds to the practical needs of the large majority of successions: in general, it is the place where most of the assets, the heirs and the creditors are located. Should there be closer links to the country of nationality, the proposed Regulation provides for an exception. It could be argued that nationality would provide more legal certainty as it is easily ascertainable and that the use of habitual residence would allow for abuse of the system (citizens could change habitual residence in order to avoid the reserved portion). Hence, not only is the risk of abuse very limited (there is only one Member State in which there is no protection in the form of reserved portion), but there are several other reasons why nationality has been discarded: further rules would be needed in the more and more frequent cases of deceased having two or more nationalities; it is inappropriate if the deceased has settled in a Member State of which he is not a national and has lived there for many years; it is not in line with the principles of the Internal market which aims at abolishing discriminations among citizens living in a same Member State. For all these reasons the trend in national legislation also tends towards replacing nationality by habitual residence.³⁶

Introducing a unitary system rather than a system of separate conflict rules for movable and immovable property. Although ten Member States have a system where movable and immovable property can be subject to different laws if they are located in different countries, this solution would perpetuate a situation where citizens would need to take into account the often conflicting rules of different substantive national laws on successions. The general and specific policy objectives would not be met. This view is shared by the legal professionals consulted who unanimously reject a split system.³⁷

Providing for a (limited) choice of law for the testator. The protection of compulsory inheritance right for the benefits of close family members (in particular children) could be a reason for refusing any choice of law to the testator. However, this risk of abuse is very limited given that such compulsory rights are known by all Member States except one, which therefore have legislation to prevent the deceased from circumventing those compulsory inheritance rights.³⁸ To the opposite, in the consultations some stakeholders wish a larger choice for the testator (including, for example, the law of the matrimonial property regime). However, this solution is not compatible with the solutions in place in the Member States where choice of law, if any, is very limited. A large choice would also increase the risk that the protection of compulsory inheritance rights is undermined. As a consequence, only a limited choice of law can realise the overall objectives of the present initiative.

Inclusion of the administration of a succession into the scope of the future Regulation. In the consultations some Member States question any solution which would modify the regimes governing the administration of a succession, either because they fear the instrument might affect their regime of transfer of the estate's assets or because they want to safeguard their inheritance tax collection schemes. Yet, the instrument will not govern property rights which are outside the scope of Community competences. In addition, the Commission proposal contains a specific rule to preserve national mandatory rules relating to the nomination of an administrator and tax collections schemes. As a consequence, the limitation of the scope goes far beyond the legitimate requests of Member State and would prevent the present initiative to fulfil its objectives in respect of citizens who need to proof their status as an heir or as an administrator/executor in another Member State.

1.Impact of the Policy Options addressing problems caused by national legislative differences concerning successions with transnational elements (Policy Options A)³⁹

Policy Option A.1 - Status quo. (i) Objectives to achieve: This option would not meet the objectives outlined above. Member States may make changes to their national legal systems on their own initiative, but it is unlikely that these will be made in view to streamline the country’s rules with other EU Member States’ rules to facilitate international succession. On the contrary, the situation would worsen in view of the trends of EU citizens’ increasing international connections; negative effects are likely to become aggravated for citizens. More serious problems could in the long term reduce citizens’ trust in the EU internal market and European citizenship. (ii) Fundamental Rights: Maintaining the status quo would mean that the fundamental right to property according to Article 17 of the European Charter of Fundamental Rights and Article 1 of Protocol 1 to the European Convention on Human Rights, which includes the right of heirs of property inherited from a deceased person on the basis of a will or intestate succession, is not fully operative with regard to property situated in another Member State. Even if the right of the heir to the estate has been acknowledged by the courts of the Member State in which the heir is habitually resident, this judgment may not help to enforce his right to property in another Member State. Furthermore the fundamental rights in Articles 20 and 21 (equality before the law, non-discrimination) would not be fully respected if the status quo was maintained, because heirs living in the Member State where certain property of the deceased person is situated may have advantages compared to heirs living abroad. In particular, discrimination on the basis of nationality of the different heirs is possible as jurisdiction in succession matters is still, in the domestic law of many Member States, dependent on the nationality of the deceased or the heir. With regard to Article 24 on the rights of the child, the negative consequences of the status quo in cross-border successions (time delays, cost increases) are aggravated if minors are amongst the heirs, since they are unable to protect their legal interests themselves, but need to be represented by a guardian who has to be paid in addition to the lawyers. (iii) Social effects: The problems experienced by the economically disadvantaged and by children are likely to remain and even become more severe as costs are likely to rise in view of increasing international connections. With regard to the present problems experienced by citizens who have concluded a civil/registered partnership in one Member State, the situation may improve as their status and rights may be recognised in more countries than at present. (iv) Financial cost: The option itself would not imply any financial costs to the EU or other public authorities. (v) Economic effects: Legal professionals will be able to charge more for increasingly complicated cases due to links to two or more countries. Time delays and costs, including reduction of the value of assets, will become worse.

Policy Option A.2 - Harmonisation of jurisdiction rules and introduction of rules on automatic recognition and enforcement of judgments, other decisions and authentic acts/deeds. (i) Objectives to achieve: Overall, this option would only lead to limited positive effects. Even though it is likely to reduce the number of problems, it is unlikely that Member States will accept that the State of the deceased's last habitual residence has exclusive jurisdiction as regards their own nationals and over the estate located in their territory without harmonisation of the applicable law. As a consequence, several jurisdictions would still be competent to handle the case at the same time, with varying outcomes, which would also have negative effects with regard to the recognition of judgments. (ii) Fundamental Rights: By reducing slightly the number of problems, thus creating a positive economic impact, this option would promote fundamental rights to a greater extent than the status quo. (iii) Social effects: There would be minor improvements compared to the present situation for economically disadvantaged persons and children as costs for legal advice and assistance could slightly decrease. (iv) Financial costs: Costs for administrative work to produce the necessary legislation at EU level and legislative changes at national level. Effective enforcement would require some minor expenditure on awareness rising. (v) Economic effects: This option would imply some limited cost savings, estimated to a maximum of 5% of the costs currently pertaining due to the problems addressed. It would in particular lead to cost savings in those cases where only one Member State has jurisdiction. Costs would decrease for heirs as it would not be necessary to prove that they are indeed heirs by bringing proceedings in another Member State. Furthermore, the option would also lead to cost reductions in Member States requiring exequatur* of foreign decisions; such proceedings would no longer be necessary. Overall, the option would, however, not achieve the objectives.

Policy Option A.3 - Harmonisation of conflict of law rules. (i) Objectives: The policy option would have some limited positive impacts with regard to achieving the objectives. Several jurisdictions could still handle the case (i.e. the problem of parallel proceedings would remain), but they would all apply the same conflict of law rules and, as a result, (normally) the same substantive succession law and the introduction of choice of law would help citizens to better organise their succession. However, due to varying interpretation of the concept of habitual residence, different laws may still be applied by the courts of different Member States in the short term (which will be reduced in the long term through case law/rulings by the ECJ).⁴⁰ Furthermore, different law may still be applied to a succession due to different requirements to pleading and proof of foreign law. Finally, the same law may also be applied slightly different in different countries due to difficulties in applying foreign law. In certain cases the policy option may help. In particular, it may prevent the phenomenon of forum shopping (at present heirs may try to get the succession handled by a certain jurisdiction depending on what law the court will apply, i.e. depending on what law has the best outcome for them). But since there are no rules on recognition and enforcement, heirs may have to go through the same procedures in another Member State. Problems due to lack of recognition of the powers of administrator's/ executors would remain, slowing down the administration and distribution of the estate. (ii) Fundamental Rights: With increased legal certainty and a lower risk that the outcome of the succession differs among Member States, the enforcement of the rights of citizens in other Member States is improved. Due to the introduction of a choice of law, a child may in some rare cases lose a reserved portion; this is not likely to happen very often in practice, depending on the extent to which the testator is allowed to choose the law applicable to his/her succession. (iii) Social effects: The positive impact mainly consists of the increase in legal certainty and the resulting economic consequences. It may in many cases help to avoid litigation between family members, such litigation being a particular strain for vulnerable parties and children. The positive economic effect of this option for those citizens who have entered into civil partnerships there will be greater certainty with regard to the outcome in terms of whether the rights of civil partners (as heirs) are recognised or not⁴¹. (iv) Financial costs: Financial costs for administration would be very low for the introduction of new rules. The introduction of the unitary succession system and of habitual residence as dominant connecting factor as well as the admission of limited choice would tend to decrease costs for applying foreign law, to a differing extent in different Member States. (v) Economic effects: Cost savings would amount to maximum 10% due to decreased legal uncertainty. There would be cost reductions for citizens in terms of reduced legal fees, in particular in those cases when the deceased made a choice of law. Moreover, costs would also be reduced as legal professionals would not need to look into other countries’ conflict of law rules. However, there would still be costs due to non-recognition. With regard to increased costs for citizens, in those countries where citizens have to prove foreign law (e.g. in the United Kingdom) costs would be higher than at present when laws of other countries, in particular third countries, are applied (for example, if the deceased had his/her habitual residence in China, Chinese law would be applied, which the citizen would need to ‘prove’ unless a choice of law of the nationality of the deceased had been made).

Policy Option A.4 - Harmonisation of conflict of law rules and introduction of a Certificate of Inheritance and Executor / Administrator in transnational successions. (i) Objectives to achieve: Although this option would not fully achieve the objectives, it would have some advantages compared to the current situation. In addition to the positive impact of option A.3, the key benefits of this option are that it would reduce current problems in terms of time delays and costs by speeding up the administration and devolution of the estate if the executor/administrator is allowed to act in the entire EU, and the heirs obtain a certificate proving in all Member States that they are, indeed, the rightful heirs. However, if there is no harmonisation of jurisdiction rules there will still be parallel proceedings. As a result, certificates may be issued in different countries. (ii) Fundamental rights and (iii) Social effects: Slightly improved compared to option A.3 due to positive economic effects.⁴² (iv) Financial costs: In addition of those of option A.3, those Member States that currently do not have a certificate would need to introduce it. There would be a small administrative cost for issuing the certificate in those Member States. This may however, be offset by a court fee. (v) Economic effects: Cost savings would amount to maximum 15% due to decreased legal uncertainty.

Policy Option A.5 - Harmonisation of conflict of law rules and jurisdiction rules. (i) Objectives to achieve: The same jurisdiction rules would be applied across all Member States, which would create some increased legal certainty with regard to which country will handle the case and the outcome thereof, in particular as conflict of law rules would also be harmonised. Moreover, if jurisdiction rules are harmonised, there will be less conflicting proceedings. However, as recognition and enforcement is still based on bilateral agreements or on national law, proceedings may still take place in different Member States. Furthermore, normally harmonisation of jurisdiction rules is only a means to facilitate the national recognition and enforcement of decisions between Member States; none of the existing Conventions or Regulations harmonise jurisdiction rules without also harmonising recognition and enforcement of decisions. (ii) Fundamental rights and (iii) Social effects: Similar to options A.3., A.4 and A.5. (iv) Financial costs: Administrative costs more or less similar to the added costs of options A.2 plus A.3. (v) Economic effects: As for policy option A.4 cost reductions can be expected to be maximum 15%.

Policy Option A.6 - Harmonisation of conflict of law rules and jurisdiction rules, and introduction of rules on automatic recognition and enforcement of judgments, other decisions and authentic acts/deeds (A.2 plus A.3). (i) Objectives to achieve: This option is more advantageous than the previous options as it combines the three main legal elements used to handle international successions at present (jurisdiction rules, conflict of law rules and rules on recognition and enforcement). Harmonised jurisdiction rules that provide exclusive jurisdiction to a Member State in combination with rules on recognition and enforcement would significantly reduce the scope for parallel and conflicting proceedings or lack of proceedings. Even if an exclusive jurisdiction of only one Member State would not be introduced, the harmonised jurisdiction rules would lead to very few possibilities for parallel proceedings. Predictability of the outcome of the international succession would be greatly improved in those cases where a choice of law was made by the deceased. The choice is likely to be recognised in other Member States due to the rules on automatic recognition and enforcement. This option would therefore be beneficial for heirs (and deceased/testators) in that the succession could be finalised faster, in particular in those cases where the deceased had made a choice of law, as proceedings may be quicker. With regard to the disadvantages of the option, due to the lack of a certificate of administrator/executor it is not certain that an administrator/executor could exercise his/her powers in other Member States under this option. (ii) Fundamental rights and (iii) Social effects: Slightly improved compared to option A.6. (iv) Financial costs: Administrative costs more or less similar to option 1.5. (v) Economic effects: The option would lead to cost reductions of maximum 20% and would be a great improvement to the current situation in terms of achieving the objectives.

Policy Option A.7 - Harmonisation of conflict of law rules and jurisdiction rules, and introduction of rules on automatic recognition and enforcement of judgments, other decisions and authentic acts/deeds, and introduction of a Certificate of Inheritance and Executor / Administrator in transnational successions (A.2 plus A.4). On the basis of the assessment of the policy options, option A.7 is the preferred one as it would address most of the current problems and lead to the greatest cost reduction (maximum 30%). It is the most ambitious policy option and, correspondingly, goes furthest in terms of the challenges it is designed to address. The following table presents its impact in a more detailed manner than for the other options:

Policy Option A.8: Establishment of a database / knowledge management system on conflict of law, jurisdiction rules and competent bodies. (i) Objectives to achieve: If citizens are more aware that another country may have jurisdiction over (parts of) their succession and that another country’s law may be applied with different outcomes than expected, they would be (slightly) better prepared and may e.g. seek legal advice. However, the database would need to be regularly updated and translated, and not all citizens have access to Internet-based systems (in particular older generations). Benefits would be very limited; it is unlikely that they would outweigh the costs for establishing and running the system. In particular, the option would not solve any of the current problems due to legal differences; at its best it would only make citizens more aware of the consequences resulting from them. (ii) Fundamental rights: Insignificant impacts due to very limited positive effect on legal certainty. (iii) Social effects: Economically disadvantaged citizens may be able to access information which they would otherwise not have been able to obtain (due to high costs for legal advice). However, not all these citizens are likely to have access to Internet-based systems. In addition, due to the technical complexity of this subject matter, it is likely that not all citizens are able to understand the full impact of the different legal rules. (iv) Financial costs: Administrative costs for creating and regularly updating the knowledge management system. Little or no income from users. (v) Economic effects: Very limited positive impact due to reduction of costs for legal advice for those citizens involved in relatively simple cases.

Policy Option A.9: EU wide information campaign on succession (legislation and existing / forth-coming instruments). (i) Objectives to achieve: As with policy option A.8, national information campaigns could at its best make citizens better aware that the outcome of their succession may be different than expected if they have property in another Member State. The campaign would not allow citizens to check the outcome of their specific case (which the database/knowledge management system would), but it may reach a wider audience than the database/knowledge management system. Also similar to option A.8, it would not solve any of the current problems due to legal differences; it would only make citizens more aware of the consequences resulting from them. Benefits would be very limited; it is unlikely that they would outweigh the costs for establishing the and running the campaigns.(ii) Fundamental rights and (iii) Social effects: Similar to option A.8. (iv) Financial costs: 5,000,000 € minimum, depending on the duration and the media chosen. (v) Economic effects: Similar to option A.8.

2.Impact of the policy options that that address problems of identifying wills abroad (Policy options B)

Policy Option B.1 - Status quo. (i) Objectives to achieve: Due to the ongoing trend of establishing registers of wills and interconnecting these, it is likely that wills could be identified abroad more easily in the future than at present, which will have a small positive impact on the occurrence of parallel and conflicting proceedings or lack of proceedings. However, the positive impact will be very limited. First, even though most countries are currently establishing registers of wills, most benefits will not be experienced until the long term (since wills registered now may not be executed until in many years time). Second, as not all wills are registered, even the possibility to check whether a will is registered in another country will not lead to legal certainty concerning whether a will exists or not. Finally, stakeholder consultations have pointed to current problems with regard to searching for wills in other countries; this is on the basis of names at present and there are problems e.g. with regard to names written in another alphabet and what name to search for (maiden name, name as married etc.). This may improve in the short term, but all related problems are unlikely to be possible to solve until the long term. (ii) Fundamental rights: If wills are identified to a higher degree, the right to property is promoted. This policy options includes exchanges information concerning the existence of wills may lead to issues with regard to the protection of personal data (Article 8 of the Charter). The European Network of Registers of Wills Association (ENRWA) is a notary-based system set up in 2005 which according to stakeholders is a secure repository of personal data. Also with regard to the individual registers of wills, and exchanges of data outside of the ENRWA system, according to the individual registers, personal data is protected. (iii) Social effects: In practice, disadvantaged citizens who do not seek advice from notaries might be unaware of the possibility to register wills. (iv) Financial costs: There would be no financial costs to the EU of this option. The costs for establishing and maintaining registers of wills would continue to be borne at national or local level, or even at organisational level (notary organisations). Citizens would bear some of the costs, as the current systems are based on a fee for registering wills as well as searching for wills. The initial costs for setting up a register of wills vary greatly between Member States⁴⁶. As far as interconnection costs are concerned, the Belgian register of wills indicated that the costs of the creation of interconnection with the French register amounted to 95,000 euro. (v) Economic effects: The positive economic effects relative to the problems addressed will be extremely limited. The economic effects will mainly be experienced by individual citizens (time delays may be decreased, fees to legal professionals to identify wills abroad may be decreased, but in particular it would be less likely that the inheritance be given to the ‘wrong’ heirs) and legal professionals (easier searches for wills abroad). For the general economy, it is not particularly relevant who the individual heir is; what is relevant is if undue time delays with regard to the succession can be avoided (as wills would be identifable faster than at present).

Policy option B.2 – Commission Recommendation on the establishment of interconnected national registers of wills. (i) Objectives to achieve: Similar to the status quo, if more Member States establish registers of wills which are interconnected, it is likely that wills can be identified abroad to a higher extent in the future than at present, which will have a small positive impact on the occurrence of parallel and conflicting proceedings or lack of proceedings, as well as allowing citizens to know they may inherit. A Commission Recommendation may speed up the process of Member States establishing registers of wills that are compatible and may be interconnected. It may also lead to that some Member States that otherwise would not have established a register will do so. Therefore, this option scores higher than status quo. However, even though registration of wills would be encouraged, this would still not be compulsory. This means that although registers would be available in a higher proportion of EU Member States, a confirmation that no will has been registered would not mean that no will exists. (ii) Fundamental rights and (iii) Social impacts: Similar to option B.1. European wide information campaigns could make a larger group of citizens aware of the benefits of registering wills. (iv) Financial costs: Similar to option B.1 plus costs for administrative work to produce Recommendation. (v) Economic effects: This option would lead to maximum 1-2% reduction of costs due to current problems.

Policy option B.3 - Compulsory establishment of interconnected national registers of wills and organisation of information campaigns. (i) Objectives to achieve: Compared to the two previous options, under this option Member States would be obliged not only to create registers of wills, but to ensure that they are compatible with registers of wills in other countries and could be interconnected. If more wills are identified, the risk of parallel and conflicting proceedings is reduced. However, citizens would still not be obliged to register their wills, which reduces the positive effects of the option. (ii) Fundamental rights and (iii) Social impacts: Similar to option B.1. On the other hand, if a will has been registered, reduced legal fees to legal professionals related to identifying a will may mean that economically disadvantaged groups may have improved possibilities to access their (potential) inheritance. (iv) Financial costs: Similar to option B.1 plus costs for administrative work to produce a Directive. (v) Economic effects: Similar to policy option B.2, this option would also lead to maximum 1-2% reduction of costs due to current problems.

Policy option B.4: Establishment of a central EU Register of Wills. (i) Objectives to achieve: If more wills are identified, the risk of parallel and conflicting proceedings is reduced. However, positive impacts would not be much greater than the previous option B.3; both options would merely mean that it is possible to register wills across the EU. In the short term (and with great likelihood also in the long term), the register would need to co-exist with national registers. Indeed, according to stakeholders consulted, registering and identifying wills is at present primarily a national problem, even though the proportion of wills that concern cross-border successions is likely to increase. (ii) Fundamental rights and (iii) Social impacts: Similar to option B.4. (iv) Financial costs: The establishment of a central register, which would co-exist with national registers, would amount to 120 million €. It can be assumed that the costs would be reimbursed by those registering and requesting information. (v) Economic effects: Similar to policy option B.2, this option would also lead to maximum 1-2% reduction of costs due to current problems.

Policy Option B.5 - Creation of a webpage on existing registers of wills and national rules. (i) Objectives to achieve: The option may lead to some positive impacts in that slightly more citizens may become aware that registers of wills exist, and it could facilitate the work of legal professionals. It would, however, not solve any problems. Indirectly, it could potentially promote the establishment of registers in those countries that currently do not have any (as it would become obvious which countries have and which ones do not have registers), but positive impacts on reducing current problems can be expected to be insignificant. The option may at the best be used as an information tool by legal practitioners and may have some minor positive impacts on the awareness of citizens. (ii) Fundamental rights and (iii) Social impact: Those citizens who are currently most likely to make wills (older citizens) may not have access to Internet. (iv) Financial costs: Costs for information campaigns at national level. (v) Economic effects: Insignificant.

Policy Option B.6 - National information campaigns on wills (legislation and existing / forth-coming instruments). (i) Objectives to achieve: This policy option would only lead to minor positive impacts as some citizens that would otherwise not have made and registered a will are likely to draw up and register a will, which would lead to a minor reduction of parallel and conflicting proceedings (or lack of proceedings). It would, however, not solve any problems. Furthermore, not all countries have registers of wills at present, which means that in some countries there would be no positive impacts at all. (ii) Fundamental rights and (iii) Social impact: Minor positive effects on some citizens that would otherwise not have made a registered will. (iv) Financial costs: Costs for information campaigns at national level. (v) Economic effects: Insignificant.

1.Comparison of policy options and justification of choosing the preferred option

Table 8.1 provides a comparison of the ‘ratings’ of the nine policy options A (policy options that address problems caused by national (legislative) differences concerning devolution of international successions) elaborated in section 6.2.1.

Table 8.2 compares the ratings of the six policy options B (policy options that address problems of identifying wills abroad), elaborated in section 6.2.2.

The policy options are categorised according to their potential to meet the objectives defined above in section 5, with ten checkmarks (√√√√√√√√√√) indicating that an option fully meets all objectives.

As regards policy options A, on the basis of the assessments of the policy options, the preferred option is Policy Option A.7 as it would address current problems as effectively as possible and lead to the greatest cost reductions (maximum 30%).

As regards policy options B, on the basis of the assessments of the policy options, the preferred option is Policy Option B.2 (Commission Recommendation) even though it does not receive the highest rating. In comparison, option B.4 (EU central register of wills), which received the highest ranking, would be significantly more costly without providing substantially higher benefits. It takes account of the fact that the identification of wills is to a certain extent a national problem and is likely to remain such even in the long term (despite the trend towards citizens having increasing cross-border links). This preference is also in line with the rating made by the stakeholders.

This section describes the preferred option and the expected impacts of the preferred policy option, which is a combination of policy options A.7 and B.2.

1.The preferred option and its effects

The preferred option is, in brief:

As outlined above, this option would involve EU action in the form of:

• - 

  The adoption of a Regulation on the harmonisation of conflict of law rules and jurisdiction rules, the introduction of rules on automatic recognition and the enforcement of judgments, other decisions and authentic acts/deeds, the introduction of a Certificate of Heir and Executor / Administrator in transnational successions; and,

• - 

  The issuing of a Recommendation on the establishment of interconnected national registers of wills and organisation of information campaigns.

The preferred option consists of the following elements:

• - 

  The harmonisation of jurisdiction rules;

• - 

  The harmonisation of applicable law rules, including the introduction of a limited choice of law for the testator;

• - 

  Establishing rules on recognition and enforcement of judgments, other decisions and authentic acts/deeds;

• - 

  The creation of a European Certificate of heir and administrator/executor; and,

• - 

  The adoption of a Commission Recommendation on the establishment of interconnected registers of wills and the organisation of information campaigns.

Further details of the preferred option's elements are outlined in the external study.

2.The preferred option’s achievement of the objectives

As indicated in the assessment of the individual policy options, this option addresses the problems as identified above better than any of the other options :

• - 

  Risk of parallel proceedings and application of different substantive laws to the same international succession;

• - 

  Insufficient (limited) choice of law for the testator;

• - 

  Non-recognition of:
• - 

  Judgments, other decisions and authentic acts/deeds on international successions;

• - 

  powers of administrators/executors; and,

• - 

  heirship.
• - 

  Inaccessibility of information on the existence of wills abroad.

Harmonised jurisdiction rules that provide exclusive jurisdiction to a Member State, in combination with harmonised conflict of law rules and rules on recognition and enforcement and a common certificate of inheritance, would eliminate the potential for conflicts of jurisdiction.

The introduction of unified conflict of law rules would allow for a faster finalisation of the succession, as the competent authorities would no longer have to deal with different and potentially contradictory national conflict of law rules to identify the substantive law governing the question of who inherits. The introduction of rules on a limited choice of law for the testator would allow citizens to better plan and organise their succession in advance.

Problems with regard to the recognition of powers of executors/administrators and decisions would be reduced. As these powers would be recognised abroad, legal fees and time delays would be reduced. Problems in relation to recognition or enforcement of judgments/decisions concerning the determination of the heirs are also likely to be resolved. This, in combination with the recognition of powers of administrators/executors, means that implementation and administration would be optimized (with regard to the procedures as well as their outcome).

Furthermore, the Commission Recommendation may speed up Member States' creation of registers of wills that are compatible and interoperable, which would facilitate the identification of wills in other Member States. The information campaigns could lead a higher number of citizens to draw up wills and register them than at present. As a consequence, more wills would be registered and subsequently identified than at present. This will have a certain positive impact in terms of speeding up the succession proceedings, and thereby lead to less delay and decreased legal costs. However, the positive impact of the register may be limited because there would be no obligation to register wills.⁴⁷

Overall, the preferred option would increase the likelihood that the rights of the testator, potential heirs and persons formally or otherwise related to the deceased, private and public creditors etc. would be fulfilled in an effective and efficient way. The option would also increase the likelihood that the objectives of the future deceased/testator are met.

The preferred policy option respects the fundamental rights of the Charter of Fundamental Rights of the European Union.

3.Economic impacts

In sum, the preferred option could lead to cost reductions of up to an estimated 32% of the costs of € 4 bn caused by the current problems, i.e. € 1.3 billion.⁴⁸

1.Financial costs and benefits

The process of adoption and implementation of the preferred option would create financial costs both at the EU level and on the national level, mainly costs for administrative work to produce the necessary legislation at EU and at national level, the costs for establishing and running a register of wills and for information campaigns. For a detailed analysis of these costs and corresponding benefits of the preferred option, see the external study.

2.Impact on the legal profession

On the one hand, the preferred option, through its harmonisation of the applicable law, would result in a reduction of fees for legal professionals who would charge less for complicated cases. On the other hand, if the value of legacies and the number of international cases increase as projected, the overall volume of successions work would probably also increase. As indicated above, there is also evidence of a rising number of contested cases. In addition, the new rules will improve predictability for citizens. It is likely that more of them will wish to organise their succession in advance, therefore using the services of legal professionals. Within the legal practice, as with every other professional service, there are always market changes, and the magnitude of those associated with the preferred option is likely to be small and gradual.⁴⁹

3.Impact on taxation

The preferred option would be tax neutral in so far as it would not entail any changes to the Member States' national legislation on inheritance taxation, which are expressly excluded from the scope of the proposed Regulation. This is because the rules determining which Member State is competent to collect inheritance taxes on a given succession are totally independent from those rules determining the civil law governing this succession: the first will continue to result from national taxation law, including bilateral conventions on double taxation, whereas the latter will be harmonised by the future Regulation.

Example: Under the future Regulation, a Dutch couple living in Spain and owing a house there, would be allowed to choose Dutch law as the law applicable to the civil aspects of their successions. However, since the future Regulation will not impact on the rules on inheritance taxes, the surviving spouse will, in principle, still be subject to Spanish inheritance taxes.

Hence, the preferred option would potentially have implications on the amount of inheritance tax revenues collected by a given Member State. For movable property (e.g. a bank account), if, under the law applicable under national rules, the heir is the son of the deceased living in Member State A, whereas, under the law applicable under the future Regulation, the heir is a charity located in Member State B, Member State A will not longer be able to collect inheritance taxes. These effects would accordingly be marginal and indirect (also see Annex 5).

As a consequence, the proposed Regulation does not contribute to reducing the complexities of tax systems applicable to successions with transnational elements. In particular, it does not prevent citizens who take full advantage of the Internal market of being subject to double taxation or⁵⁰ to taxation rules which do not fit their legitimate expectations. Indeed, it is clearly impossible, for legal and political reasons, to modify the existing regime in the frame of the present Regulation.

4.Potential draw-backs/risks and sensitive elements

Potential risks and politically sensitive elements include:

• - 

  The use of habitual residence as a unique connecting factor rather than nationality.

• - 

  The extent to which citizens take advantage of the possibility to make a choice of law and register wills.

• - 

  The inclusion of the administration of the succession in the scope of the instrument.

• - 

  The treatment of compulsory inheritance rights.

• - 

  The political feasibility of adopting a system of exclusive jurisdiction.

• - 

  To what extent registers of wills are established and interconnected.

The extent to which citizens take advantage of the possibility to make a choice of law and register wills will impact the benefits and level of costs reductions. The more citizens choose the applicable law, make a will and register this, the greater the benefits will be. At present the tradition of drawing up wills vary between Member States; whereas it is common in some countries (e.g. United Kingdom), in others it is far from standard practice. The proportion of citizens who take the possibility to make a choice of law (in a will) may therefore vary between Member States. It is likely that the proportion would increase in the long term.

Adopting a system of exclusive jurisdiction may be problematic for some of the Member States that currently have a split system based partly on the location of immovable property.⁵¹ However, their concerns relate mostly to their respective systems of land and other property registers, whose accuracy needs to be safeguarded. The preferred measure would not affect these systems; to acquire ownership of the property in question, the heir would still have to comply with any registry requirements of the Member State in which the property is situated.

Finally, as concerns the establishment of interconnected national registers of wills and related information campaigns, the Recommendation would not impose any legal obligations on Member States. The positive impacts on citizens are therefore not certain.

5.Fundamental Rights, EU added value and proportionality

1.Fundamental rights

See the description in the table above in Section 7 (Policy Option A.7).

2.Proportionality

Measures taken have to be proportionate to the size and extent of the problems addressed. The preferred option respects the proportionality principle. It concerns only cases with cross-border elements. It would not harmonise substantive laws, but merely aim to achieve a situation where parallel proceedings are avoided and different substantive laws are not applied to the same international succession. As outlined above, benefits and savings largely outweigh its costs and disadvantages. Accordingly, the preferred option would ensure the harmonious co-existence of different national substantive laws.

3.European added value

The preferred option has the potential to promote trust in the internal market and facilitate mobility of EU citizens. The problems addressed by the preferred option are in part a consequence of the internal market. At the same time, if they are not solved, the trust in the EU internal market and the EU area of freedom, security and justice without internal borders may be damaged. Because of EU citizens’ increasing cross-border links, higher numbers of citizens are likely to be affected by problems in the future. Cross-border successions are both more costly and time-consuming for citizens than national successions. Some transnational successions are never finalised due to complications. By ensuring a smoother devolution of international successions, the preferred option would facilitate the life of the modern and mobile EU citizen.

In order to monitor the effective implementation of the Regulation as well as the success of the Recommendation on the creation of interconnected registers of wills and the information campaigns, regular evaluation and reporting by the Commission will take place. To fulfil these tasks, the Commission will prepare regular evaluation reports on the application of the Regulation, based on consultations of Member States and stakeholders. Regular expert meetings will also take place to discuss implementation problems and exchange best practices between Member States in the framework of the European Judicial Network. The Commission will also monitor the creation and the utilisation of the wills registers and the use of certificates of inheritance to track the success of the measures in facilitating the life of the Union citizens. The external study contains many useful suggestions on potential monitoring and evaluation instruments and concrete indicators that will be taken into consideration by the Commission.

ANNEX 1 - Glossary

ANNEX 2 - The magnitude of international successions and wills

To assess the general current situation, especially the scale of successions with cross-border elements and scale of legal activity dealing with successions, estimates have been made of the following (as far as possible):

• - 

  The number of successions and wills in the EU;

• - 

  The number of cross-border successions within the EU involving (a) a deceased who lived in a Member State different from his/her its state of origin or (b) a succession involving properties (e.g. bank accounts or immovable property) distributed in more than one Member State;

• - 

  The number of successions in which the competent authority (e.g. court, administrator or notary) applies laws of other EU Member States.

• - 

  The number of successions in which the competent authority (e.g. court, administrator or notary) applies laws of third countries.

• - 

  The value/amount of all these successions in the EU (in euro);

• - 

  The number of cases where foreign law is not applied on the basis of ‘ordre public’ concerning (a) other EU Member States; and, (b) third countries.

• - 

  The number of legal professionals involved by Member States and the turnover which cross-border successions represent for these professionals (by group of professionals).

The estimates are based on statistical data, results from relevant surveys and information obtained from national authorities, professional bodies and individual legal professionals. While efforts have been made to substantiate the estimates with data from as many countries as possible in order to maximise its robustness and soundness, useful data were received only from a limited number of Member States. Estimates have been made on available information. It is clearly outlined what data have informed what estimations.

• 1. 

  Estimated number of successions and wills in the EU

Exact data on the overall number of successions were not given by the stakeholders contacted. However, it was estimated by survey respondents that this number comes very close to the number of all deceased adults in the given Member State. In case of death, a succession procedure is launched if the deceased owned or is assumed to have owned property, which applies to almost all adults.

According to Eurostat figures, the total number of persons deceased in 2006⁵² was 4,744,852 persons in the EU27 (see Table 2.2 for individual country figures). The number of successions launched in the EU can be estimated to correspond to the number of deceased persons who were aged 18 or more at the point of their death (the age of majority is 18 in the Member States of the European Union⁵³), which was 4,703,286 in 2006 (99.1% of all deceased).

The succession procedure of the deceased covered by Eurostat statistics is not necessary launched in the EU, as the main connecting factor of the deceased might have connected him/her to a third country. Accordingly, successions of deceased EU nationals who resided in third countries (and thus not appearing in the mortality statistics) might be launched in the EU.

An estimated 29 million citizens (corresponding to 6% of the EU population in 2006) are currently living outside the borders of the EU. This indicator, however, strongly overestimates the number of deaths abroad where a succession would nevertheless be launched in the EU. Many of these citizens work or live abroad only temporarily and may return to their country of origin at a later stage.

Source: Eurostat (population figures), Member State authorities (data or estimates on the number of nationals living outside the EU)

The estimations of the number of wills in the EU27 are based on information supplied by national registers of wills (registers of wills in 9 Member States have sent data or estimates), on survey data from the UK and Germany⁵⁴ concerning the proportion of adult population who draw up a will (36% and 25.8%, respectively) and Eurostat data on the number of adult population (18+).

Available data show large differences across Member States concerning the share of adult population who has drawn up a will. The figures range from approximately 36% in the UK (survey data) to as few as around 1.1% in Hungary (estimates based on the number of wills registered⁵⁵), their average being around 24%. Based on this figure and on Eurostat numbers on the number of adults (396,125,456 on January 1, 2006), around 97 million wills are estimated to exist in the EU today.

Figures and estimates are provided by country in Table 2.

Figures in bold indicate data obtained from national registers of wills, Eurostat or surveys. Figures not in bold are derived figures. Figures in italics are GHK estimates based on available data (averages) or qualitative information.

• * 

  Reference year 2007 or 2008; ** 2007 survey results

While the estimates show that around 76% of the EU population had not drawn up a will, available information suggests that the ratio of intestate deceases is actually much lower than that. This is explained by the fact that the propensity of citizens to draw up a will strongly increases with their age. The ratio of deceased citizens who had a will is therefore much higher (in 2006, 85.1% of all deceased in the EU27 were at least 60 years old, and 79.6% were at least 65 years old at the time of death).

The German survey showed that 48.1% of citizens above 60 had drawn up a will (as compared to the average for the total adult population; 25.8%). The respective figure in the UK study was 70% of 65+ year olds in England and Wales (as compared to 36% for the adult population). These numbers have been used as a proxy indicator for the proportion of deaths that are not intestate. Also, estimates made by the Spanish register of wills showed that around 70-75% of all successions in Spain are based on a will, while somewhat surprisingly, the estimates put the proportion of adult population in Spain who have a will to as few as 8% only (this is, however, swiftly increasing as the number of new wills registered per annum is high: it exceeded 600,000 in 2007).

The weighted average of the three above figures (with estimated number of successions per annum, i.e. the number of deceased individuals aged 18+ years as weights) is 60.4%, which has been used as an estimation for the proportion of successions within the EU27 that are not intestate⁵⁶. The corresponding number of wills that are executed per annum is around 2.8 million (2,839,385), and the number of intestate successions is around 1.9 million (1,863,901). An additional 42,000 minors die per annum, for whom it has been assumed that no succession procedure is launched.

• 2. 

  Estimated number of cross-border successions within the EU

Legal professionals estimated the proportion of cross-border successions to be between 1% and 25% of all successions-related cases, 12.5% on average. Extrapolating this result to all successions within the EU27 would arrive at a number of about 588,000 cases (587,911) per year.

This figure may, however, be overestimating the actual numbers, as the legal professionals asked were likely to have some international contacts and clientele, and since rich, big countries with a higher propensity to invest abroad were over-represented in the sample. Other approaches were therefore necessary to validate or refine these results.

Successions with cross-border elements may mostly occur because the deceased:

• - 

  Held a foreign nationality, or

• - 

  Held property abroad.

Successions of foreign nationals, foreign wills

Statistical data on the citizenship of deceased residents of EU Member States are not available. However, the proportion of foreign nationals amongst the deceased can be estimated by using, as a proxy indicator, the proportion of foreign population above 60 years; the age group accounting for most (85.1%) of deceases in the EU27 (the national statistics forwarded to Eurostat include individuals who reside permanently in the given Member State, irrespective of their nationality).

The proportion of population with foreign citizenship has been increasing in the EU over the last decades. In 2007, around 28.9 million of the EU Member State inhabitants (5.8% of the total population) were non-nationals. The majority of them were citizens of another Member State (3.8%), but around 10.2 million (2.1%) held citizenship of a third country⁵⁷.

This population with foreign citizenship is still relative young. Amongst above-60-year-olds their proportion is only 2.7% (based on Eurostat data available for 14 Member States). It can therefore be assumed that the number of successions concerning foreign citizens deceased in EU Member States, which are thus likely to involve cross-border elements, is about 125,000 (124,816), 2.7% of all deceased adults.

As regards future developments, a significant upward trend is expected. The proportion of foreign nationals is around 6.5% for the below-60-year-old cohort. A share of these foreign nationals may move back to their country of citizenship at a later age, but the number of foreign nationals deceasing in the EU is in any case expected to rise in the next decades.

Data on the number of ‘foreign wills’ are only available from three Member States and show marked differences. The figures from Italy and Spain suggest that foreign nationals do not tend to draw up wills and register them in the Member States they reside in. Only 0.11% of registered wills were drawn up by foreign nationals. However, the register of wills in Cyprus reported that over 50% of all wills registered are those of foreign nationals. The weighted average of the figures is 0.46%, whilst the weighted average of foreign wills within new wills registered per annum is 0.33%. Extrapolating this to the EU27, a (very) broad estimate of about 246,000 foreign wills registered is obtained, and about 7,100 new foreign wills per annum. Also, registers of wills reported an increase in the number of foreign wills.

The proportion of wills that involve a cross-border element is likely to be higher than the proportion of cross-border successions in general since the population drawing up wills is on average more wealthy than the part of the population who do not make wills, and these citizens’ successions are therefore more likely to involve international elements. Using the average of estimates made by legal professionals concerning the proportion of cross-border successions of all successions (12.5%), of the 97 million wills drawn up, around 12 million (12,088,000) wills can be estimated to involve a cross-border element. These wills may not have had an international element when they were drawn up, but only first after they were made (as the testator moved, opened an account and/or acquired property abroad).

Foreign property

Foreign property includes figures on portfolio investments and housing that were obtained from national statistic offices and central banks. While it was not possible to take full stock of financial assets and other property that EU citizens have abroad, it was clear that the trend is significantly increasing.

For example, the Swedish Tax Authority reported that the number of immovable property abroad declared in tax statements increased in just two years (from 2004 to 2006) from 2,344 to 3,624 (by 54,6%), while its value increased from 1.64 bn SEK (177 million euro) to 2.99 bn SEK (327 million euro), i.e. by 82.3%. The actual figures are expected to be even higher, as this information is supplied to the Swedish Tax Authority by residents on a voluntary basis only.

Based on the above it can be estimated that though successions involving cross-border elements is likely to be somewhat less than the on average 12.5% indicated by legal practitioners (it can be estimated that in 2006 around 9-10% of all successions, corresponding to around 450,000 successions, involved cross-border elements), the trend is clearly increasing. This follows from two main reasons:

• - 

  The proportion of inhabitants with foreign citizenship was relatively low amongst the elderly (2.7% in the age group above 60 in 14 Member States in 2007 for which data was available), but their proportion is much higher in the younger generations (6.5% for below-60-year-olds), and inhabitants with foreign citizenship are more likely to trigger successions with a cross-border dimension. The proportion of non-nationals is continuing to grow in the future as a result of continued immigration from third countries and the increasing significance of relocations within the EU, e.g. because of job prospects or cross-border marriages and partnerships.

• - 

  The proportion of EU citizens who own property abroad is increasing rapidly. This involves mostly financial assets (such as shares, bonds, bank accounts) and real estates. With increased liberalisation of the movement of capital in the internal market and with third countries and increased wealth (in the EU and globally), the share of EU citizens who have such foreign assets and the number of third-country nationals who have assets in the EU will continue to rise.

The assumption that the number of cross-border successions would increase is also supported by legal professionals; all professionals who commented on this reported that this was the case (be it a slight or significant increase).

Certain Member States and regions are already, and will be in the future, more affected by cross-border successions than others. These are in particular those countries where the population has a higher proportion of foreign nationals and has a higher level of income (which usually correlates with an increased level of investments abroad).

On the basis of the proportion of non-nationals in the various EU Member States and level of income (GDP/capita in Purchasing Power Standard (PPS)), ratings have been made for the EU27 in order to get an indication of what countries are likely to be more affected by international successions than others. It must, however, be emphasised that this rating does not take into account the extent to which citizens actually have movable and immovable property abroad as such data were not available by country.

Source: Eurostat *x – bottom tertile; xx – centre tertile; xxx – top tertile **Sum of Score 1 and 2

In addition, some countries are particularly frequented by foreign investors (for relocation, second homes or financial investment targets) such as France, Spain, Portugal, Cyprus or Greece. As concerns the difficulties linked to domestic property of non-nationals, these countries are especially affected. Also, in certain border regions where cross-border contacts are strong (such as e.g. between Belgium and France, Austria and Hungary), holding some property in the neighbouring country is more frequent.

• 3. 

  Estimated number of successions in which the competent authority applies foreign law (including the law of third countries)

Legal practitioners from the Member States referred to the number of such cases to be very small, but could not quantify it.

• 4. 

  Estimated proportion of cases where the law of third countries is not applied due to the application of the “ordre public exception”

Interviewees from the Czech Republic and United Kingdom (Scotland) reported that the exception was generally not used in succession-related cases. In Germany several judgments have been published by appellate courts in which the application of Islamic succession law has been prohibited as it has been considered as violating the German ‘ordre public’ as far as the intestate shares of heirs were dependent on religion or gender.

• 5. 

  Approximate amount of successions in the EU in euro

Estimates as regards the value of successions have been made based on accessible studies, statistics and surveys, as well as estimations made by legal professionals. Information obtained, however, greatly varies across countries and even across figures for one single country, as reflected in Table 2.7.

In the United Kingdom⁵⁹, only 40,300 successions out of ca. 571,300 deaths in total (7%) surpassed in value the nil-band threshold of £240,000 (approximately 345,500 euro) in the budgetary year 2003-2004, with a total value of £23,110 million. In 291,000 cases, the value of the estate was below £5,000. Based on these figures, the average value of successions can be set at around £75-80,000 (108-115,000 euro). An estimation made by a legal professional was £50,000 (72,000 euro) – which may in fact be close to the median of successions.

According to the socio-economic panel survey of 2002 by the German research institute DIW, the average value of successions in Germany was ca. 102,000 euro in 1990 and 129,700 in 1996. Extrapolating trends, the average value of successions may in 2007 reach 242,000 euro (corresponding to a total value of ca. 200 bn euro). The research company Empirica has estimated the average value of successions to be around 180,000 in 2005.

Calculating with an average of the more recent survey results (176,667), this is about 5.5 times the gross national income per capita of the countries concerned (Germany and the UK, 30,000 and 33,800, respectively in 2007, according to Eurostat data). As the gross national income was 24,800 euro for the EU27, one can estimate the average value of successions to be around 137,000 euro, ca. 646 billion euro in total, 5.9% of the EU27 GDP.

This proportion will, however, continue to rise in the future – to a lesser extent because of demographic reasons (the more populous post-war cohorts will reach the age 65-70 in the next ten years; Eurostat demographic projections forecast a 5% increase in deaths for 2018 in the EU27, as compared to 2008, from 4,969,000 to 5,235,000), but mainly because of the increase in net wealth accumulated by the population.

Statistics by the German Central Bank (Deutsche Bundesbank) show a 20.6% increase in net wealth per capita from 1993 to 2003 (net of inflation), an increase that may be even more steep in other Member States. Financial assets have had the lion’s share in the increase (although the credit crisis will have had some impact on this).

Source: Deutsche Bundesbank

However, the increase of net wealth was not equally distributed across generations. The eldest generations who are usually the testators in current-time successions only had a small share in this wealth accumulation. Their estates are not as large as those of the following generations will be.

Estimates in Table 2.8 already show that the value of estates significantly increased over time. In Germany, according to a study by Empirica from 2005, average real household wealth (i.e. discounting or inflation) has almost doubled in the last 25 years, and the ratio of households with a property rose by 10 percentage points (by ca. 20 percentage points for above-50-year-olds). Whilst the average net wealth for households with an over-69-year-old head was 119,803 euro in 2003, the corresponding figure for the 59-69 year age group was already 173,165, which is 44.5% higher. This wealth gap does also exist and can be even wider in other Member States.

One can thus expect that the average value of successions will rise significantly in real terms in the next ten years, maybe by around 45% (from 137,000 to some 199,000 euro), whilst their total value – accounting for the overall increase in the number of deceases – may rise by perhaps 50% (from 646 billion to some 969 billion euro per annum, at 2007 prices).

Generally, the studies and legal practitioners consulted to date have indicated that the average value of cross-border successions have a higher value than purely ‘national’ successions. One legal practitioner estimated its value to be around twice as high as national successions.

The bulk of successions involve a very small estate of some thousand euro only, which are unlikely to include property abroad (although other cross-border elements, e.g. the heirs being non-nationals, are possible). As for the UK, successions below £5,000 (7,197 euro) accounted for 50.9% of all cases in 2003/2004. In Austria, according to information from the Federal Ministry of Finance, two thirds of successions concerned an estate of less than 7,300 euro. In Germany, the value of 28% of all estates was below 13,000 euro. Excluding the bottom half of successions that are probably not cross-border, an estimation of around twice the average value for the remaining half of successions can be used for calculations (i.e. 274,000 euro). Calculating with only 450,000 cross-border cases (around 9.5% of all), this would sum up to 123.3 billion euro.

These estates are liable to problems. Even if resolved in a reasonable manner the costs of legal fees might amount to from 2% (2.466 bn euro) to as much as 5% of the total value of international successions (6.165 bn euro), according to legal professionals interviewed. An average of 3% (3.699 bn euro) of the value of estates can be considered realistic.

In the past decades, successions involving property abroad was a characteristic only concerning the affluent testator, whereas today financial investments and even property purchases abroad are not restricted any more to the wealthiest citizens. The gap in the value of the average cross-border and purely national successions has probably started to narrow a bit, and will continue to narrow as cross-border property will be much more frequent. Despite this narrowing, the aggregated value of cross-border successions will rise by more than the previously estimated 50% (because of the increased proportion of cross-border successions).

• 6. 

  Approximate number of legal professionals involved and the turnover which cross-border successions represent for these professionals

The number of notaries public has been obtained from six Member States only. The number of inhabitants per notary is, however, in a relatively narrow range (10,762 on average). If this proportion was applicable to the 21 Member States where this institution exists⁶¹, the total number of notaries would be somewhere around 38,000.

• * 

  Population in 2009

** EU27 minus the UK, Ireland, Cyprus, Sweden, Denmark and Finland

Information on the numbers of other legal professionals involved (lawyers, judges etc.) have not been obtained. The same is valid with regard to the income of international successions for these groups of professionals; information has not been obtained.

As for the six Member States where notaries public are not employed, solicitors (or ‘advocates’ or ‘lawyers’) are engaged in settling successions⁶². Based on data obtained through desk-based research on the number of solicitors, it can be estimated that there are about 190,000 solicitors or equivalent in the six Members States concerned, about 130,000 of them being active. Most of them (existing data from England and Wales show that about 80%) work in private practices. That would correspond to about 100,000. The rest are in-door lawyers. Many of the solicitors in private practices would occasionally deal with successions, though estimates have not been received.

Source: Law Societies, Bar Associations * GHK calculation **UK, Ireland, Cyprus, Sweden, Denmark and Finland

ANNEX 3 – Financial costs and benefits of the preferred policy option

The preferred policy option would lead to the following financial costs:

• - 

  At EU level: Costs for administrative work to produce the necessary legislation at EU level. This is estimated to be the equivalent of one Commission official during one year.

• - 

  At national level: Training of legal professionals (e.g. lawyers, judges, notaries, solicitors) and judicial cooperation. It is reasonable to assume that these costs would be less than 0.5% of the legal costs associated with problematic international successions. These costs would be ‘one off’ as the Regulation and related practice would rapidly become the norm and legal professionals regularly need to absorb and learn the consequences of new law.⁶³

Specific elements of the preferred option may also incur initial costs:

• - 

  Jurisdiction rules. Financial costs for the Member States would also arise in making the necessary changes of national legislation with regard to the harmonised jurisdiction rules, e.g. legislation indicating what court/authority would handle the case, and enforcement. These costs would need to be borne by the Member States. It is reasonable to assume that the costs for the legislation would be very small as it would be technical in character, non-contentious and necessary.

• - 

  Applicable law. Financial costs to the administration for the introduction of the new rules would be low, i.e. comparable to those for the introduction of the Rome I and II Regulations.

• - 

  Certificate. The Member States that currently do not have a certificate would need new legislation to identify what body should issue the certificate and to institute procedure. There would also be a small administrative cost in issuing the certificate. It is reasonable to estimate the costs of a certificate at around € 60 assuming that identity checks similar to those required for obtaining a passport (or marriage certificate) are required, but that there would be no special technical requirements for the certificate itself. This would most likely be offset by a fee.

• - 

  Establishment of interconnected national registers of wills.
• - 

  For those countries that currently do not have registers of wills, the option would result in establishment costs for creating registers of wills and running them. Such costs will only be relevant for a few countries; first, registers of wills already exist in several Member States⁶⁴, and second, the establishment of a register of wills would be voluntary.

• - 

  Registers of wills in some Member States would be encouraged to move from a paper-based system to an electronic system in order to ensure the effective and efficient functioning of the interconnected system.⁶⁵

• - 

  Other changes to existing registers (including electronic registers) may also be necessary in order to allow for interconnection.

• - 

  Total annual costs for running a register of wills currently range from € 2,700 for Hungary to € 3.5 million for France.⁶⁶
• - 

  Information campaigns would be organised at a national level to inform citizens about the existence of registers of wills and the rules on wills. Overall, costs for the information campaign are estimated to be € 50,000,000 across the EU (estimates are based on 10 euro per death per annum), borne at the national level. Some of these costs would be recouped from testators who register wills and through fees paid for searches for wills (this assumes that fees will be charged for both, as the current registers do).

There would also be impacts on the level of financial costs as a consequence of the use of habitual residence instead of nationality as the connecting factor in combination with the possibility for the testator to make a limited choice of law.

In many EU Member States, nationality is currently used as a connecting factor. In these countries, the use of habitual residence will lead to additional costs in relation to the application of the law of third countries. However, on the other hand, the use of habitual residence will also result in substantial costs savings in those countries that currently have nationality as connecting factor. For example, there are many Turkish nationals who have their habitual residence in Germany. With nationality as connecting factor, Turkish succession law would at present be applied. With the new rules, German law would be applied. Both these costs and savings would, however, not be certain due to the introduction of a limited choice of law, which would mean that the law of the nationality would still be applied if the testator chose it.

Furthermore, the introduction of a unitary succession system at EU level would result in cost savings in those Member States which presently adhere to the split system (where immovable property is governed by the law at its location), because the court would apply only one succession law.

In sum, the introduction of the unitary succession system and of habitual residence as dominant connecting factor as well as the admission of a limited choice of law would tend to decrease costs; however, savings would vary between Member States.

ANNEX 4 – Economic effect on fees for legal professionals

The potentially affected legal professionals are:

• - 

  Those assisting testators in making wills. Two elements of the preferred option are likely to increase the proportion of wills drawn up. The first is the possibility to make a limited choice of law, which would need to be indicated in a will. The introduction of a limited choice of law would naturally have the greatest impact in those countries that currently do not allow a choice of law (Austria, Cyprus, France, Greece, Ireland, Latvia, Lithuania, Luxemburg, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Czech Republic)⁶⁷. The second element that may lead to a minor increase in the proportion of wills is the national information campaigns relating to registering wills. These two elements are likely to have the effect of increasing the business and income for legal professionals assisting testators making wills.

• - 

  Those charging for certificates of inheritance. Where heirs previously used to need several certificates, but under the preferred option would only need one European certificate, the legal professionals issuing certificates could loose some business and revenue. In those countries which currently do not issue certificates, the introduction of a European certificate would however lead to new business opportunities. These effects would concern cross-border successions only as the proposed legislation would not contain obligations to issue a European certificate for purely national successions. However, for public notaries, overall revenues would not necessarily be reduced. In many countries, the fees they would charge would be fixed (or proportional to the estate). The market of public notaries is not necessarily a competitive one.

• - 

  Those charging for searching for wills. By implementing the preferred option, it is expected that the system of identifying wills would become more efficient. While the fees charged to clients for these activities may decrease, this might be associated with a substantial time and cost reductions for the professionals involved. This could increase the margins on such work as currently this often involves considerable resource intensive work.

• - 

  Legal professionals involved in difficult cases. By far the most significant effects (most of the potential 1.3 billion euro savings in legal costs) would be on legal professionals involved in difficult cases. This includes fees to legal professionals acting on behalf of the various parties (be it in- or out-of-court procedures), the costs of courts and court officials (that may be paid for by the ‘public purse’), and the costs of ‘parallel’ proceedings. Here, there is a clear potential for fee reductions for clients, and thus revenue foregone for legal professionals. However, these effects are likely to be twofold. First, a reduction in the volume of work, second, an increase in the ‘quality’ of the work which could be associated with improved financial returns and efficiency. The effects should not therefore be seen as a disbenefit.

Aggregating the above effects, the maximum revenue foregone for legal professionals would be in the order of around 1.3 billion euro per annum, corresponding to the annual average employment of 10,800 FTE. However, this would be offset by potential increases in work to assist those making wills and in improvements in the quality of work due to reductions in legal uncertainty and complexities in identifying wills and the bona fide of heirs.

It has been estimated in the external study that the tax revenue in 2005 for the EU27 from inheritance tax was around 31.0 billion euro (this compares with the estimated total value of estates of 646 billion euro in 2005, 5.9% of the EU27 GDP). Inheritance tax was estimated to be 0.28% of EU27 GDP in the same year. Table 5.1 in Annex 5 indicates the total tax from inheritance and gifts for eight EU countries. These figures have been used to extrapolate to the EU27.

ANNEX 5 – Impact of the preferred option on inheritance tax

Source: OECD *Inheritance tax abolished in 2004 **Extrapolated figure for the EU27

Rates of inheritance tax vary markedly between Member States. Marginal rates range from nil to 80%. The latter maximum occurs in Belgium Wallonie and Brussels, for heirs not closely related with the testator, for inheritance above €250,000. The variation in effective tax rates is also considerable. Table 2 indicates the effective tax rates in EU countries for four examples (estates worth either 100,000 or 500,000 euro left to either spouse and/or children (assuming two heirs) or heirs apart from close relatives). The smaller examples of 100,000 euro reflect estimated average (median) size of estates in the EU average.

Seven EU countries do not have inheritance tax. Tax rate for heirs apart from close relatives are almost always higher. There are wide variations in effective tax rates for each of the four examples. For the example of spouses and children inheriting 50,000 euro each, effective tax rates range from 0 to 11.3%. For the example of spouses and children inheriting 250,000 euro each, effective tax rates range from 0 to 15.1%. For the example of heirs apart from close relatives inheriting 50,000 euro each, effective tax rates range from 0 to 46.3%. Finally, for the example of heirs apart from close relatives inheriting 250,000 euro each, effective tax rates range from 0 to 71.3%.

• * 

  Heirs who are not close relatives (i.e. heirs except spouses, children, descendents of children, parents, siblings, nephews/nieces, in-laws)

Note on table: For the purpose of this report, the figures have been derived by aggregating the different tax rates applicable to different bands⁶⁸, accounting for basic tax exemptions and nil-bands but not accounting for special tax deduction possibilities as for example in Belgium, or tax savings from e.g. family trust arrangements. The latter can be very significant in certain cases. Also, holdings in companies or immovable property may be subject to reduced tax rates (e.g. Greece).

There are few potential effects of the preferred option on inheritance tax paid.

Citizens may choose law on the basis of nationality or move habitual residence which would enable them to bequest their estates to heirs other than close family members. The effective tax rate to be paid by these ‘other’ categories of heirs (not spouses, descendents, parents) is usually higher. Thus inheritance tax receipts might increase. However, such an effect could only accrue to those ‘choosing’ England and Wales law. The scale of this effect is anticipated to be very low.

A large proportion of typical estates are made up of immovable assets. Inheritance tax (transfer duty) paid on immovables will continue to paid in the country in which they are located. The preferred option will only have very minor effects on this tax.

As a result of these effects it is unlikely that there would be large changes in inheritance tax paid in the EU. There might, however, be some, small changes on certain national budgets, either increases or decreases.

ANNEX 6 – Potential monitoring and evaluation indicators

1Legal terms marked by "*" are explained in the glossary contained in Annex 1.

2Regulation (EC) No 44/2001 of 22 December 2000, OJ C 12, 15.1.2001.

3OJ C 19, 23.1.1999.

4OJ C 12, 15.1.2001.

5See Presidency conclusions, Brussels European Council, 4 and 5 November 2004.

6http://ec.europa.eu/atwork/programmes/docs/clwp2008_en.pdf.

7Although the Commission proposal for a Regulation will be entitled "successions upon death" instead of "successions and wills", the question of wills will be addressed in this proposal. From a legal perspective it is obvious that wills are part of succession law.

8EPEC, Impact Assessment Study on Community Instruments on Successions and Wills, under framework contract No DG BUDG No BUDG06/PO/01/Lot no.2, ABAC 101908, available at the following website: […].

9http://ec.europa.eu/justice_home/doc_centre/civil/studies/doc_civil_studies_en.htm.

10Available at: http://europa.eu/scadplus/leg/en/lvb/l16017.htm.

11Available at: http://ec.europa.eu/justice_home/news/consulting_public/successions/ news_contributions_successions_en.htm.

12Joint and reciprocal wills are accepted in, e.g., Denmark, Sweden, the UK, Germany, Austria and Lithuania (in the last three states, between spouses only). Succession agreements exist only in Austria, Germany, Denmark and the UK. Some other Member States provide for alternative solutions, e.g. a contractual promise of a gift between spouses in case of death (France, Belgium, Portugal, the Netherlands and Luxemburg).

13Nationality as a connecting factor is used in the laws of Austria, Germany, Spain, Greece, Hungary, Italy, Poland, Portugal, Romania (for movable property), Slovenia, Sweden and the Czech Republic. Habitual residence is used in Belgium (movables), Bulgaria (movables), Cyprus (movables), Denmark, Estonia, Finland, France (movables), Luxembourg (movables), Ireland, Lithuania, the Netherlands and the UK (England and Wales; Scotland: for movables only).

14For example, for the succession of a national of Member State A living in Member State B, the courts of Member State B might conclude that the succession is governed by the substantive laws of Member State A. The application of a foreign law may be problematic itself. However, this problem is not specific to successions.

15For a list of which Member State uses which connecting factor, please see n. Error: Reference source not found above. Even if two Member States apply the same rules to determine the applicable law, they can nevertheless come to a different result because of their respective solutions on renvoi (situation in which the conflict of laws rules of Member State A call for the application of the law of country B. The conflict of laws rules of Member State B, however, provide for the application of the law of Member State A or of a third State).

16In addition, the distinction between movable property and immovable property is not the same in all Member States, which can lead to the application of different laws for a given property even among those Member States which have the split system, when it is qualified as being movable in one Member State and as being immovable in another Member State.

17No choice of law admitted in Austria, Cyprus, France, Greece, Ireland, Latvia, Lithuania, Luxembourg, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Czech Republic. Information is unavailable for Hungary, Malta and Northern Ireland.

18Although Belgium grants a limited choice, this choice is not valid if the result is to deprive one of the heirs of his/her rights to a reserved portion to which he/she would be entitled according to the succession law normally applicable.

19While this report focuses on EU citizens, the benefits of any measures taken would extend to any foreign resident in a Member State.

20For more information, see Annex 8 of the external study.

21Source: Eurostat statistic "Population par citoyenneté".

22Hague Convention of 5 October 1961 on the Conflict of Laws Relating to the From of Testamentary Dispositions, in force in the following Member States: Austria, Belgium, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Poland, Portugal, Slovenia, Spain, Sweden, UK.

23Hague Convention of 2 October 1973 Concerning the International Administration of the Estates of Deceased Persons; in force in the following Member States: Czech Republic, Italy, Luxembourg, Netherlands, Portugal, Slovakia, UK.

24Hague Convention of 1 August 1989 on the Law Applicable to Succession to the Estates of Deceased Persons; this Convention has never entered into force.

25Available at: http://conventions.coe.int/Treaty/en/Treaties/Html/077.htm.

26No information available for Malta.

27ECJ, Judgment of 3 December 1998, Case C-368/96 – Generics (UK), ECR 1998 I-07967; Judgment of 28 April 1998, Case C-200/96 – Metronome Musik, ECR 1998 I-01953.

28The courts of the Member State in which immovable property is located might also be granted jurisdiction, not to rule on succession as such, but with regard to property rights which are often linked.

29E.g. a rule allowing the competent court to send the case before a more closely connected court.

30Article 34 Brussels I Regulation and Article 22 of Council Regulation (EC) No 2201/2003 of 27 November 2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility ("Brussels II bis") contain four grounds for refusing to recognise foreign judgments: (i) if such a judgment is manifestly contrary to the public policy of the Member State of recognition; (ii) in case of violation of the rights of the defending party; (iii) if it is irreconcilable with a judgment given in a dispute between the same parties in the Member State in which recognition is sought; (iv) if it is irreconcilable with an earlier judgment given in another State, provided that this earlier judgment fulfils the conditions necessary for its recognition in the Member State addressed.

31http://ec.europa.eu/civiljustice/.

32http://www.ejustice.eu.com/.

33Available at: http://www.hcch.net/index_en.php?act=conventions.text&cid=62.

34Alternatives that could have been considered include, amongst others, the possibility to choose nationality instead of habitual residence as the unique connecting factor; to introduce a hierarchy of connecting factors in the order habitual residence, nationality, or the other way around. All of these alternative elements can furthermore be combined with a (limited) choice of law, which would change the impacts of the alternative elements. The testator could e.g. be enabled to choose the applicable law on the basis of habitual residence or nationality; or, additionally, of the matrimonial property regime. This choice of law could in turn be restricted to prevent decrease of the statutory reserve. To examine all these options would have meant analysing more than 400 possible combinations. Please also see the external study for more detail on the discarded policy options.

35Section 7.7 further develops the advantages and drawbacks of the preferred alternative elements.

36Habitual residence is used by the Hague Convention and at least 12 Member States: Belgium (movables), Bulgaria (movables), Cyprus (movables), Denmark, Estonia, Finland, France (movables), Luxembourg (movables), Ireland, Lithuania, the Netherlands and the UK (England and Wales; Scotland: for movables only).

37See Annex 17 of the external study "Legal professionals' views on alternative elements of the policy options.

38Accordingly, if the future deceased gives away a large part of the estate as a gift to a third party, this gift could potentially be subject to a claim for reduction in very exceptional circumstances. Nevertheless, one Member State (United Kingdom for England and Wales), whose law does not know such claims for reduction, has expressed concerns as regards the effects of an EU instrument on the validity of lifetime gifts made by the deceased.

39The external study contains a more detailed analysis of the impact of each policy option.

40A reference for a preliminary ruling is already pending before the ECJ: ECJ, Case C-523/07 – Applicant A – Reference for a preliminary ruling from the Korkein hallinto-oikeus (Finland) lodged on 23 November 2007.

41Except if the "ordre public" clause is applied.

42See the external study for more detail.

43Maximum of 10 checkmarks indicates that the option fully meets the objective(s).

44ECJ, Case C-523/07 – Applicant A – Reference for a preliminary ruling from the Korkein hallinto-oikeus (Finland) lodged on 23 November 2007.

45The proposal's impact on the rights of the children of such couples are mentioned under "Fundamental Rights".

46See Annex 3 for more detailed figures as regards the costs for running a register in the different Member States who have done so.

47Accordingly, a confirmation from a register that no will has been registered would not mean that no will existed. There may also be problems searching for wills of citizens in other countries due to, for example, name changes or names in another alphabet.

48The establishment of interconnected national registers of wills and the related information campaigns would contribute up to 2% of these costs reductions. The remainder of the costs savings would be a result of clearer rules on jurisdiction; the identical applicable law regardless of jurisdiction; the outcome of the devolution of the succession not only being identical, but also recognised across the EU; and of heirs being able to prove their rights.

49See also Annex 4 for more information.

50This section does not come back on the draw-backs and risks of those alternative elements which have already been developed in section 6.4.

51In their responses to the Green Paper, six Member States (FR, LU, IT, PL, UK and SK) indicated that a single forum in matters of succession should not be appointed. Four Member States (NL, ES, SE, LV) were in favour of the establishment of a single forum.

522005 for the UK and 2004 for Italy.

53With the exception of Scotland, where the age of maturity is 16, but this has been disregarded in the analysis.

54UK: a 2007 study by the National Consumer Council, interviewing 2,673 adults in England and Wales; Germany: a survey of 1,424 adults made by TNS Infratest in August 2007, commissioned by the Deutsches Forum für Erbrecht e.V.

55It should be noted that the proportion of wills not registered may be in fact much higher in Hungary than the 66% (arithmetic average of UK, IT, ES), thus the proportion of adult population with a will.

56Data were received from Italy (58,000 wills ’published’ per annum) and the United Kingdom (22,303 successions in 2007 where a will was available) which are not consistent with the estimations made, however, these data were also found to be in conflict with the proportion of adults who had drawn up a will and therefore they were disregarded.

57I.e. - in case of multiple citizenship – that they did not hold citizenship of the Member State they resided in nor of another EU Member State.

58Member States for which age breakdown was available, representing 53.4% of the total population of the EU27.

59‘Inland Revenue - Inheritance Tax’, a report by the National Audit Office, 2004.

60„Vermögensbildung in Deutschland: Immobilienerbschaften“, Empirica Forschung und Beratung, 2005.

61EU-27 minus the UK, Ireland, Cyprus, Sweden, Denmark and Finland

62When brought to court, successions would then also involve barristers / practicing advocates of course.

63Professional services companies tend to invest circa 2% of turnover in training per annum. There would be a case for EU funding of some training on the consequences of the Regulation. However, the implications would be clear and the appropriate legal professionals would need to be informed as much as trained. Much of the costs of any training should be met by the legal professionals themselves.

64Registers of wills have been established in nineteen Member States (Austria, Belgium, Czech Republic, Cyprus, Denmark, Estonia, France, Greece, Hungary, Italy, Lithuania, Luxembourg, the Netherlands, Portugal, Slovakia, Slovenia, Spain, Sweden and Romania), however, not all of these are ‘official’ (e.g. the register in Sweden is independent). Decentralised registers of wills are in place in three Member States (Germany, Poland, United Kingdom - England and Wales; probate register); registers may not cover the entire country. Two Member States (Bulgaria and Latvia) are in the process of creating a register of wills. In two Member States (Ireland and Finland) no register of wills has been established and is not in the process of being established. No information on the existence of a register of wills has been identified for Malta.

65Information on whether the registers are electronic or paper-based has been identified for thirteen Member States. The majority of them (Austria, Belgium, Czech Republic, Estonia, France, Hungary, Italy, Lithuania, Luxembourg and the Netherlands) currently have an electronic register of wills. Cyprus, Portugal, Spain, Sweden and Romania have paper-based registers.

66Belgium: € 236,000, Estonia: € 15,600, Lithuania: € 193,000 and Italy: € 50,000. Annual budgets for maintenance of registers of wills have been provided by three Member States: Italy (€ 50,000), Belgium (€ 60,000) and France (€ 280,000).

67Information is unavailable for Hungary, Malta and Northern Ireland.

68Source of raw data http://www.globalpropertyguide.com

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