The Succession Regulation and the connecting factor

On 17 August 2015 the Succession Regulation (Regulation (EU) No. 650/12) will be wholly applicable. As this date approaches, lawyers are still struggling to clear up myriad unresolved issues regarding the new European succession system.

Italian conflict-of-law rules will undergo a big change, as the connecting factor which determines the law applicable to succession will shift. As a result, the Succession Regulation shall have a great impact on non-nationals who have settled in Italy (in most cases after they retire) giving them the opportunity to plan their succession choosing the law of their nationality, a choice which was not available before.

In this brief article I will address “The connecting factory“.

Under the Succession Regulation the habitual residence of the deceased at the time of death will be the connecting factor. It will be the default rule to determine the law applicable to the entire succession. In other words, the law applicable shall govern all questions related to the succession from the start of the succession to the transfer of ownership of the assets forming part of the estate to the beneficiaries, including the administration of the estate.

Under article 21.1 of the Succession Regulation, the law of the state in which the deceased was habitually resident at the time of death might also be the law of a ‘third state’ (so called erga omnes or universal application). If the law determined under article 21.1 is the law of a state bound by the Succession Regulation, the existence of a uniform connecting factor shall avoid any conflict of laws.

On the other hand, when the law of habitual residence is the law of a third state the PIL of that state should be considered. If those rules provide for renvoi either to the law of a member state or to the law of a third state which would apply its own law to the succession, such renvoi should be accepted.

Therefore the meaning of ‘member state’ and ‘third state’ under the Succession Regulation must be established.

In this respect, Recital No. 82 of the Succession Regulation indicates that the UK and Ireland are member states, despite these states ‘not taking part in the adoption of this Regulation and are not bound by it or subject to its application’.

The Succession Regulation should be workable and systematically coherent. Therefore, it seems correct to agree with those scholars who have underlined how the inclusion of Denmark, UK and Ireland among the ‘member states’ for the purposes of the Succession Regulation would lead to lack of consistency. Until this problem of interpretation is sorted out, we shall surely face some practical problems. A possible way to reduce uncertainty is to advise clients to make a choice of law when possible and suitable. As we shall better see in next posts, renvoi is excluded if the deceased had made a choice of law in favour of the law of a third state.