German Court Rules on EU Succession Regulation26 Apr 2023 | Samantha Tayler
Succession laws vary from country to country which historically made the administration of cross-border estates potentially complex. Since 17 August 2015, the EU Succession Regulation has given individuals in most EU Member States an element of choice over which country’s rules are to govern the succession of their estate.
Though this gives an element of certainty to beneficiaries and those administering estates, legal problems can still arise, as a recent German case highlights. The probate team at Osbornes Law has extensive experience in advising clients in estates involving cross-border assets in Europe and internationally.
What is the EU Succession Regulation?
Also known as ‘Brussels IV’, the Regulation applies to 25 EU member states, it doesn’t apply to Denmark, Ireland or the UK. It aims to reduce the uncertainty of who will inherit your estate where you have connections in more than one country, each having its own law on the succession of estates.
The Regulation allows individuals to elect, in their Will, that they would like the succession laws of their country of nationality to govern the succession of their estate as a whole, rather than the law of the country in which they are habitually resident in when they die.
UK Nationals electing UK law to apply
While the UK opted out of the Regulation and is no longer in the EU, this does not prevent a UK national from electing UK law to apply to their estate. The UK national should choose the law of the jurisdiction (England & Wales, Scotland or Northern Ireland) that they are most closely connected with. On death, EU Member States must then apply that jurisdiction’s law to estate assets in those countries.
As England & Wales have ‘testamentary freedom’, allowing testators to leave their estate to whomever they wish, choosing the law of England & Wales to govern the succession of assets is often favoured by clients who have assets in other countries where a ‘forced heirship’ regime exists. However, a recent judgment in Germany has held that English law over the ‘compulsory portion’ (enforced under German law), is not applicable, despite the testator being a UK national who elected UK law to govern the succession of his estate as a whole.
Jan-Hendrik of WF Frank & Partners has provided a helpful summary of the Federal Court of Justice’s decision in this case:
In its judgment of June 29, 2022 (Case No. IV ZR 110/21), the Federal Court of Justice ruled that the application of English inheritance law on the basis of a choice of law in a Will violates the German public policy if this deprives the testator’s children of their entitlement to a compulsory portion irrespective of need and there is a sufficient domestic connection. The BGH thus confirms the previous decision of the Cologne Higher Regional Court (judgment of April 22, 2021 – 24 U 77/20, ZEV 2021, 698).
In the facts underlying the decision, the testator, who was a British citizen from England who had lived in Germany for over 50 years, had chosen English law in his will for the legal succession as a whole. The plaintiff, who was adopted by the testator and excluded from the succession by the will, requested information on the existence of the estate in accordance with § 2314 of the German Civil Code (BG), invoking his (German) right to a compulsory portion.
The BGH confirmed that the election of English law pursuant to Art. 22 (1), 83 (4) EuErbVO is generally permissible and that the testator effectively exercised the election right. Then, it analysed whether the application of English law is incompatible with the (German) public policy and thus inapplicable as far as the mandatory share is concerned:
“Contrary to the view of the revision, the application of English law is, at least in the case at issue here, obviously incompatible with the German ordre public (Article 35 EuErbVO). This is because English law is in such serious contradiction with the distribution of the estate constitutionally guaranteed under German law that its application in the case here is unacceptable. This has the consequence that it does not apply here.” (paragraph 11)
In this context, the BGH first referred to the guarantee of the right to inherit enshrined in Art. 14 (1) sentence 1 and Art. 6 (1) of the German Constitution (Grundgesetz, GG) pursuant, which, according to a prior decision of the Federal Constitutional Court, in principle grants children a minimum share in the estate that cannot be withdrawn and is not dependent on need. The children’s right to a compulsory portion protected the family-law bond established by descent beyond death and in this respect restricted the freedom to make a will.
“As an institutional guarantee, the right to a compulsory portion is part of the existence of German ordre public. In its landmark decision of April 19, 2005 (BVerfGE 112, 332 et seq.), the Federal Constitutional Court clarified that the right of the testator’s children to a compulsory portion is subject to the guarantee of the right to inherit under Article 14.1 sentence 1 in conjunction with Article 6.1 of the Basic Law. Article 6 (1) of the Basic Law, the right of the testator’s children to a compulsory portion has the character of a fundamental right in the sense of a minimum economic share in the testator’s estate which is in principle irrevocable and independent of need. This follows from family solidarity and the family-protecting function of the right to a compulsory portion derived from this (see BVerfGE loc. cit. [juris para. 64 ff.]). Article 6.1 of the Basic Law protects the relationship between the testator and his or her children as a lifelong community within which parents and children are not only entitled but also obliged to assume responsibility for one another both materially and personally.” (paragraph 14)
According to the BGH, a corresponding guarantee does not exist in English law. The relevant provisions of the Inheritance Act 1975 do not contain a claim to a compulsory portion comparable to German law. It merely provided for financial compensation in the sense of a claim to maintenance by descendants, but this was at the discretion of the court and depended on numerous circumstances, such as the neediness of the child. In addition, the prerequisite for such a claim to compensation is that the decedent had his last “domicile”, which is not to be equated with the German concept of residence, in England or Wales. As a result, under English law, there was neither a claim to a compulsory portion independent of need nor a comparable claim to compensation in the specific case, which was incompatible with the fundamental ideas of German compulsory portion law and thus with domestic order public.
What does this mean?
This development serves as an important reminder to those with cross-border estates to seek legal advice on your circumstances, including which country’s succession laws would best achieve your wishes and ensuring your Will is drafted correctly to include any necessary EU Regulation election, with the aim of reducing potential problems for your beneficiaries on your death.
For further advice on making a will with international assets or if you are administrating an international estate, contact our specialist lawyers for further advice. You can call us or fill in the form below.
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Appreciated the professionalism of my solicitor, Samantha Tayler, in particular her clear explanation of legal terms and situations, her attention to great details which reassured me and put my mind at rest, her patience in helping me to make sure that I was satisfied to all aspects of my will before I signed the final draft. Since I have assets in Malta, she also clarified for me the situation regarding the European Succession Law .
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