Clawback Law in the Context of Succession 2019051097, 2019051098, 9781509932320, 9781509932337, 9781509932344

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CLAWBACK LAW IN THE CONTEXT OF SUCCESSION This book offers a global solution for determining the law applicable to a claim to clawback an inter vivos gift from a third party within the context of a succession. The book aims to identify an appropriate and applicable legal framework which supports legal certainty for cross-border estate planning and protects the legitimate expectations of the relevant parties. This is an area of private international law that has yet to be handled satisfactorily – as can be seen by the inadequate treatment of clawback from third parties in the 1989 Hague Convention on the Law Applicable to Succession to the Estates of Deceased Persons, and the 2012 EU Succession Regulation. Volume 26 in the series Studies in Private International Law

Studies in Private International Law Recent titles in the series The Hague Child Abduction Convention: A Critical Analysis Rhona Schuz Interregional Recognition and Enforcement of Civil and Commercial Judgments: Lessons for China from the US and EU Law Jie Huang The Recovery of Maintenance in the EU and Worldwide Paul Beaumont, Burkhard Hess, Lara Walker and Stefanie Spancken Australian Private International Law for the 21st Century: Facing Outwards Edited by Andrew Dickinson, Thomas John and Mary Keyes Maintenance and Child Support in Private International Law Lara Walker The Choice of Law Contract Maria Hook The Nature and Enforcement of Choice of Court Agreements: A Comparative Study Mukarrum Ahmed Cross-Border Litigation in Europe Edited by Paul Beaumont, Mihail Danov, Katarina Trimmings and Burcu Yuksel Forum (Non) Conveniens in England: Past, Present, and Future Ardavan Arzandeh Commercial Issues in Private International Law: A Common Law Perspective Edited by Vivienne Bath, Andrew Dickinson, Michael Douglas and Mary Keyes Jurisdiction and Cross-Border Collective Redress: A European Private International Law Perspective Alexia Pato Rethinking Judicial Jurisdiction in Private International Law Milana Karayanidi Economic Sanctions in EU Private International Law Tamás Szabados Clawback Law in the Context of Succession Jayne Holliday

Clawback Law in the Context of Succession Jayne Holliday

HART PUBLISHING Bloomsbury Publishing Plc Kemp House, Chawley Park, Cumnor Hill, Oxford, OX2 9PH, UK 1385 Broadway, New York, NY 10018, USA HART PUBLISHING, the Hart/Stag logo, BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published in Great Britain 2020 Copyright © Jayne Holliday, 2020 Jayne Holliday has asserted her right under the Copyright, Designs and Patents Act 1988 to be identified as Author of this work. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/doc/ open-government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998–2020. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication data Names: Holliday, Jayne, author. Title: Clawback law in the context of succession / Jayne Holliday. Description: Oxford ; New York : Hart, 2020.  |  Series: Studies in private international law  |  Based on author's thesis (doctoral - University of Aberdeen, 2018).  |  Includes bibliographical references and index. Identifiers: LCCN 2019051097 (print)  |  LCCN 2019051098 (ebook)  |  ISBN 9781509932320 (hardback)  |  ISBN 9781509932337 (Epub) Subjects: LCSH: Conflict of laws—Inheritance and succession.  |  Conflict of laws—Gifts.  |  Revocation. Classification: LCC K7230 .H65 2020 (print)  |  LCC K7230 (ebook)  |  DDC 346.05/2—dc23 LC record available at https://lccn.loc.gov/2019051097 LC ebook record available at https://lccn.loc.gov/2019051098 ISBN: 

HB: 978-1-50993-232-0 ePDF: 978-1-50993-234-4 ePub: 978-1-50993-233-7

Typeset by Compuscript Ltd, Shannon To find out more about our authors and books visit www.hartpublishing.co.uk. Here you will find extracts, author information, details of forthcoming events and the option to sign up for our newsletters.

SERIES EDITOR’S PREFACE As series editor, I declared a conflict of interest when receiving this manuscript. I supervised Jayne’s PhD at the University of Aberdeen, we are now a couple, and we work together teaching private international law at the University of Stirling. Happily, the Publishing Editor for Hart, Sinead Moloney, made the decision to publish this book in the series after getting a very strong academic report on the quality and suitability of the manuscript for the series. The anonymous academic reviewer said the following: ‘The author carries out an original and detailed analysis of the subject-matter distinguishing the notion of clawback from the notion of collation, the different policies found behind these two concepts, the interests involved, distinguishing the civil law from the common law approach and, importantly, the reasons that led her to focus on the clawback from third parties, which is central to her thesis. This line of attack remains constant in her study and constitutes one of the main strengths as it might be a fundamental point to convince civil law countries about the need to face the harmonisation of conflict of law rules by means of a PIL Convention to determine the applicable law. The contribution rests upon a careful comparative analysis that makes it possible to suggest her proposal on the applicable law to the claim for the clawback of inter vivos gifts from third parties. Thus the rich comparative approach is certainly a value that should be underlined as it gives a complete view of the different national interests and legal traditions. Regarding that question, the author emphasises that there is a wide variety of conceptions within the EU and it is this existing legal diversity that allows the author to hold the effectiveness of her thesis. The work provides guidelines to characterise the multiple sides that the clawback of inter vivos gifts encompasses. The study on characterisation establishes the basis on which Dr Holliday assesses the connecting factor to propose a set of conflict of laws rules. After that, the author is already prepared to suggest an innovative and useful draft convention that will certainly be taken into account if the subject-matter is dealt with at the Hague Conference on PIL. The subject-matter of the thesis has barely been studied from this original point of view. It should be added that the publication of the thesis could be convenient to debate on the opportunity of taking again a new perspective on this question in the EU Regulation on Succession. Besides, I believe that the proposed study could be useful not just for academics but for practitioners too, since it provides information on different legal systems and contributes to organise a succession in advance considering the donations made by the deceased.’

vi  Series Editor’s Preface To conclude, Jayne Holliday has clearly explained a story of misunderstandings that could be sorted out with the publication of her thesis, which I strongly recommend.

Jayne’s work highlights that even in countries within the civil law tradition there is considerable diversity in how they treat clawback claims from third parties in the context of succession. She makes a convincing case for a sui generis characterisation of the issue and carefully advocates a specific set of bespoke conflict of laws rules, which should be adopted globally, but if not will provide excellent guidance for regional and national private international law reform. Paul Beaumont, University of Stirling

ACKNOWLEDGEMENTS Thanks to the College of Arts and Social Sciences at the University of Aberdeen for the scholarship awarded to pursue the PhD on which this book is based, as well as to the Robert Nicol Trust, the Centre for Private International Law and the University of Aberdeen’s Principal’s Excellence Fund, whose financial support enabled me to present my research at conferences both within and outside of the UK. The book builds on research conducted by Professor Roddy Paisley in preparation for the UK’s decision whether to opt into the EU Succession Regulation and utilises personal notes taken by Professor Beaumont during the drafting of the EU Succession Regulation in his role as a UK negotiator. The book also includes information gathered during a study which was carried out as part of my work as a research assistant in the University of Aberdeen. I am indebted to the academics and notaries in each EU Member State who took the time to complete the questionnaire, and to Professor Paul Beaumont and Dr Jonathan Fitchen for their permission to use the unpublished material that first appeared in my PhD thesis. This data was checked and supplemented where possible. Grateful thanks are extended to my academic colleagues throughout the European Union and beyond, who were so generous with their time when answering my queries regarding the substantive law of their countries. Thanks are also due to my supervisor Professor Paul Beaumont, for his intellectual guidance, support, patience and encouragement without which this book would not have been completed. I would also like to add a special thanks to Joanne Choulerton for her invaluable copy editing and to Sinead Moloney and everyone else at Hart for supporting this book. Last but not least, I would like to express my heartfelt gratitude to all my family for their love and encouragement throughout the course of my studies. Jayne Holliday University of Stirling July 2019

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CONTENTS Series Editor’s Preface����������������������������������������������������������������������������������������������������v Acknowledgements����������������������������������������������������������������������������������������������������� vii Table of Cases������������������������������������������������������������������������������������������������������������ xiii Table of Legislation��������������������������������������������������������������������������������������������������� xvii 1. Introduction�������������������������������������������������������������������������������������������������������������1 I. Background and Context�������������������������������������������������������������������������������1 A. The Succession Regime in Private International Law������������������������2 B. Distinguishing ‘Clawback from Heirs’ from ‘Clawback from Non-heirs’��������������������������������������������������������������������������������������4 C. Terminology������������������������������������������������������������������������������������������14 D. How is the Legitimate Portion Calculated? And how does a Claim for Clawback Arise in a Civil Law Context?����������������������21 E. Conclusion��������������������������������������������������������������������������������������������22 II. Aim and Purpose������������������������������������������������������������������������������������������23 III. Methodology�������������������������������������������������������������������������������������������������25 A. Comparative Approach�����������������������������������������������������������������������25 B. Pragmatism�������������������������������������������������������������������������������������������28 IV. Structure and Scope�������������������������������������������������������������������������������������30 V. Conclusion����������������������������������������������������������������������������������������������������33 2. Legislative Drafting������������������������������������������������������������������������������������������������35 I. Legal Diversity and the Need for High-Quality Comparative Research���������������������������������������������������������������������������������������������������������40 II. The Principles of Legal Certainty and Legitimate Expectations������������43 III. Legal Certainty under the Succession Regulation������������������������������������45 A. The Donor���������������������������������������������������������������������������������������������45 B. The Donee���������������������������������������������������������������������������������������������46 C. The Legitimate Heir or Dependant����������������������������������������������������46 IV. Conclusion����������������������������������������������������������������������������������������������������48 3. Clawback: A Comparative Analysis��������������������������������������������������������������������49 I. Introduction��������������������������������������������������������������������������������������������������49 A. Existing Analysis����������������������������������������������������������������������������������50 II. Empirical and Analytical Research������������������������������������������������������������52

x  Contents III. Findings from the Participating EU Member States������������������������������54 A. Detailed Summary of Findings��������������������������������������������������������57 IV. Countries not Participating in the EU Succession Regulation Analysed for this Book������������������������������������������������������������������������������63 A. Australia����������������������������������������������������������������������������������������������63 B. Denmark����������������������������������������������������������������������������������������������64 C. Ireland��������������������������������������������������������������������������������������������������64 D. South Africa����������������������������������������������������������������������������������������66 E. United Kingdom���������������������������������������������������������������������������������66 F. Findings from the Non-EU Succession Regulation Countries Examined for this Book���������������������������������������������������������������������68 V. Overall Observations on the Rules Pertaining to Clawback�����������������69 A. Category I��������������������������������������������������������������������������������������������70 B. Category II������������������������������������������������������������������������������������������70 C. Category III�����������������������������������������������������������������������������������������70 D. Category IV�����������������������������������������������������������������������������������������71 E. Category V������������������������������������������������������������������������������������������71 F. Category VI�����������������������������������������������������������������������������������������71 VI. Shari’a Law���������������������������������������������������������������������������������������������������71 VII. Conclusion���������������������������������������������������������������������������������������������������72 4. Characterisation�����������������������������������������������������������������������������������������������������75 I. Introduction������������������������������������������������������������������������������������������������75 A. What is Characterisation?�����������������������������������������������������������������75 B. So, Why is Characterisation of the Legal Problem Important?����76 C. Characterisation in Cross-border Cases�����������������������������������������77 II. The 1989 Hague Convention���������������������������������������������������������������������80 A. Analysis of the Proceedings of the Sixteenth Session��������������������81 B. Analysis of the Waters Report����������������������������������������������������������83 C. Conclusion������������������������������������������������������������������������������������������86 III. The EU Succession Regulation�����������������������������������������������������������������87 A. The Problem with ‘Off-the-Shelf ’ Characterisation����������������������87 B. Preparation for the EU Succession Regulation Negotiations�������89 C. The Clawback Negotiations – A Timeline��������������������������������������91 IV. Preparation for Determining the Applicable Law��������������������������������105 A. Legitimate Expectations������������������������������������������������������������������106 B. Fundamental Rights and Substantive Interests����������������������������109 C. Comity and the Process of Characterisation��������������������������������111 D. The Character of a Clawback Claim against a Third Party���������111 E. The Nature of the Claim for Financial Provision under Section 1(1)(e) of the 1975 Act�������������������������������������������������������119 F. The Character of the Gift�����������������������������������������������������������������124 V. Conclusion�������������������������������������������������������������������������������������������������126

Contents  xi 5. The Applicable Law����������������������������������������������������������������������������������������������128 I. Introduction������������������������������������������������������������������������������������������������128 A. The Legal Problem�����������������������������������������������������������������������������128 II. A Sui Generis Approach�����������������������������������������������������������������������������131 III. What is the Most Appropriate Connecting Factor?�������������������������������132 A. Habitual Residence����������������������������������������������������������������������������133 B. Nationality�������������������������������������������������������������������������������������������144 C. Domicile����������������������������������������������������������������������������������������������148 D. Scission������������������������������������������������������������������������������������������������149 E. Conclusion������������������������������������������������������������������������������������������151 IV. Recommendations for a New Private International Law Solution������151 A. Objective Applicable Law������������������������������������������������������������������151 B. Subjective Applicable Law�����������������������������������������������������������������154 C. Escape Clause�������������������������������������������������������������������������������������155 D. Overriding Mandatory Rules and Public Policy����������������������������157 E. Modal Law�������������������������������������������������������������������������������������������158 F. Conclusion������������������������������������������������������������������������������������������162 V. Conclusion��������������������������������������������������������������������������������������������������162 6. Conclusion������������������������������������������������������������������������������������������������������������164 Annex I: Correspondence with the Senior Representative of the UK������������������169 Annex II: Draft Convention on the Law Applicable to Clawback (by the author)������������������������������������������������������������������������������������������������������171 Annex III: List of National Reporters on the Law on Clawback���������������������������173 Annex IV: Member States of the European Union: Laws on Clawback���������������175 Bibliography���������������������������������������������������������������������������������������������������������������226 Index��������������������������������������������������������������������������������������������������������������������������235

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TABLE OF CASES Court of Justice of the European Union Case C-523/07 A [2009] ECR I-02805�����������������������������������������������������134, 139, 142 Case C-120/79 Cavel v Cavel (No 2) [1980] ECR 731 [3].�������������������������������������121 Case C-43/75 Defrenne v Sabena (No 2) [1976] ECR I-00455��������������������������������43 Case C-497/10 PPU Mercredi v Chaffe [2010] ECR I-14309�������������������������� 141–42 Case C-369/90 Micheletti v Delegación del Gobierno en Cantabria [1992] ECR I-04239����������������������������������������������������������������������������������������������146 Case C-111/17 PPU OL v PQ ECLI:EU:C:2017:436�����������������������������������������������141 Case C-154/04 R (Alliance for Natural Health and Others) v Secretary of State for Health [2005] ECR I-06485��������������������������������������������������������������110 Case C-90/97 Swaddling v Adjudication Officer [1999] ECR I-01075 �������� 140, 142 Case C-220/95 van den Boogaard v Laumen [1997] ECR I-01147�����������������������120 European Court of Human Rights Brauer v Germany App No 3545/04, CE:ECHR:2009:0528JUD000354504�������� 47, 109 Camp and Bourimi v the Netherlands App No 28369/95, CE:ECHR:2000:1003JUD002836995����������������������������������������������������������� 47, 109 Fabris v France App No 16574/08, CE:ECHR:2013:0207JUD001657408����� 47, 109 Inze v Austria App No 8695/79, CE:ECHR:1987:1028JUD000869579��������� 47, 109 Marckx v Belgium App No 6833/74, CE:ECHR:1979: 0613JUD000683374��������������������������������������������������������������������������������������� 47, 109 Mazurek v France App No 34406/97, CE:ECHR:2000: 0201JUD003440697��������������������������������������������������������������������������������������� 47, 109 Mitzinger v Germany App No 29762/10, CE:ECHR:2018: 0125JUD002976210��������������������������������������������������������������������������������������� 47, 109 Puncernau v Andorra App No 69498/01, CE:ECHR:2004: 0713JUD006949801��������������������������������������������������������������������������������������� 47, 109 Zaiet v Romania App No 44958/05, CE:ECHR:2015: 0324JUD004495805��������������������������������������������������������������������������������������� 47, 109 UK Ames v Jones 2016 WL 04772447, [2016] EW Misc B67������������������������������������������30 B v H (Habitual Residence; Wardship) [2002] 1 FLR 388���������������������������������������140

xiv  Table of Cases Brown v Brown (1744) Mor 4604 �����������������������������������������������������������������������������148 Cameron (Deceased), Re [1999] Ch 386�����������������������������������������������������������������������5 D v D 2002 SC 33������������������������������������������������������������������������������������������������ 134, 139 DW & Director-General, Department of Child Safety [2006] Fam 93 (CA)����������������������������������������������������������������������������������������������139 Gorjat v Gorjat [2010] EWHC 1537 (Ch)�������������������������������������������30, 114, 125–26 Harding v Wealands [2006] UKHL 32����������������������������������������������������������������� 76–77 Hardy v Shaw [1976] Ch 82��������������������������������������������������������������������������������������������5 Hatfield v Minet (1878) 8 Ch D 136������������������������������������������������������������������������������5 Ikimi v Ikimi [2001] EWCA Civ 873; [2002] Fam 72 (CA)��������������������������� 134, 136 Ilott v Mitson [2017] UKSC 17������������������������������������������������������������������������������������30 Lambton v Lambton [2013] EWHC 3566 (Ch)�������������������������������������19–20, 30, 38, 76, 112, 125 MacMillan Inc v Bishopgate Investment Trust plc [1995] EWCA Civ 55 ���������������78 Marinos v Marinos [2007] EWHC 2047 (Fam) ��������������������������������������������� 134, 141 Mark v Mark [2005] 3 WLR 111�������������������������������������������������������������������������������134 Moore v Moore [2007] EWCA Civ 361�������������������������������������������������������������� 120–21 Musa v Holliday [2012] EWCA Civ 1268���������������������������������������������������������� 30, 121 Nessa v Chief Adjudication Officer [1999] 1 WLR 1937�������������������������133, 136, 140 Price v Price [1951] P 413 (CA).��������������������������������������������������������������������������������120 Pouey v Hordern [1900] 1 Ch 494�������������������������������������������������������������������������������30 R v Barnet LBC ex parte Shah [1983] 2 AC 309�������������������������������������������������������136 Race v Race [2002] EWHC 1868 (Ch); [2002] WTLR 1193��������������������������������������5 Re Coventry [1980] Ch 461����������������������������������������������������������������������������������������120 Re Dennis [1981] 2 All ER 140�����������������������������������������������������������������������������������120 Re F (Child Abduction) [1992] 1 FLR 546����������������������������������������������������������������139 Re F (Child Abduction) [1995] 1 FLR 548 ���������������������������������������������������������������140 Re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562������� 133–34, 136, 139 Re Korvine’s Trust [1921] 1 Ch 343 ����������������������������������������������������������������������������14 Re S (Habitual Residence) [2010] 1 FLR 1146 ���������������������������������������������������������140 Siew Chai v Tan Sri Khoo Kay Peng [2014] EWHC 1519 (Fam).��������������������������149 Taylor v Taylor (1875) LR 20 Eq 155�����������������������������������������������������������������������������5 V v B (Abduction) [1991] 1 FLR 266 ������������������������������������������������������������������������140 Vogelius v Vogelius (2005–06) 8 ITELR 619 ������������������������������������������������������������112 W and B v H (Child Abduction: Surrogacy) [2002] 1 FLR 1008������������������� 134, 139 Watson v Jamieson 1998 SLT 180���������������������������������������������������������������������� 134, 144 Other Jurisdictions France Decision No 2012-274 QPC of 28 September 2012��������������������������������������������������12

Table of Cases  xv Portugal Supreme Court decision dated 4 September 2002 available in Portuguese at: http://www.dgsi.pt/jstj.nsf/954f0ce6ad9dd8b980256b5f003fa814/ 26280c8fb3f9dfd880256ba50037b654?OpenDocument (accessed 3 August 2016)�������������������������������������������������������������������������������������216 Lisbon Appeal Court decision dated 02/08/2007 in proc. 10633/06-2 available in Portuguese at: http://www.dgsi.pt/Jtrl.nsf/e6e1f17fa82712ff 80257583004e3ddc/5d0991ce64e5ec4a802572de00361c82? OpenDocument (accessed 3 August 2016)��������������������������������������������������������216

xvi

TABLE OF LEGISLATION EU Legislation Primary Legislation Consolidated Version of the Treaty on European Union [2008] OJ C115/13 (TEU)��������������������������������������������������������������������������������������������������25 Treaty on the Functioning of the European Union [2008] OJ C 115/47 (TFEU)������������������������������������������������������������������������������������ 1, 10, 25 Charter of Fundamental Rights of the European Union [2000] OJ C 364/01������������������������������������������������������������������������������������������������������������110 Secondary Legislation Council Regulation (EC) 650/2012 of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession [2012] OJ L 201/107ff (Succession Regulation)����������� vii, 3–6, 8, 10–12, 14, 20, 23–29, 31–33, 35–39, 42–48, 50–51, 53, 55–57, 63–69, 72, 77, 80–81, 85–107, 110, 114, 128–30, 132–33, 135, 140, 142–49, 152–57, 159, 161–62, 165–66, 169, 177, 185, 190, 194, 199, 202, 212, 219, 221 Council Regulation (EC) No 4/2009 of 18 December 2008 on jurisdiction, applicable law, recognition and enforcement of decisions and cooperation in matters relating to maintenance obligations [2009] OJ L 7/1 (Maintenance Regulation)������������������������������106, 119, 121, 136 Council Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I)������������������������ 8, 32, 106, 125, 134, 136, 150 Council Regulation (EC) No 864/2007 of the European Parliament and of the Council of 11 July 2007 on the law applicable to non-contractual obligations (Rome II)������������������ 77, 104, 114, 134, 136, 157 Council Regulation (EC) 2201/2003 of 27 November 2003 on jurisdiction, recognition and enforcement of judgments in matrimonial matters and matters of parental responsibility, repealing Regulation (EC) No 1347/2000 [2003] OJ L 338/1 (Brussels IIa)���������������������������������������������������������������������������������134, 136, 141, 145

xviii  Table of Legislation Conventions of the Hague Conference on Private International Law Hague Convention of 23 November 2007 on the International Recovery of Child Support and Other Forms of Family Maintenance (Maintenance Convention)����������������������������������������������������������������������������������111 Protocol of 23 November 2007 on the Law Applicable to Maintenance Obligations�������������������������������������������������������������������������������������������������������������106 Hague Convention of 1989 on the Law Applicable to Succession to the Estates of Deceased Persons (1989 Convention)��������2–3, 6, 27, 31, 80–86, 147, 149, 155, 157, 165 Hague Convention of 25 October 1980 on the Civil Aspects of Child Abduction (1980 Abduction Convention)������������������������� 29, 134, 136, 138–40, 144 Hague Convention of 1961 on the Conflicts of Laws Relating to the Form of Testamentary Dispositions (1961 Convention)��������������������� 2–3 Statute on the Hague Conference on Private International Law (entry into force 15 July 1955)���������������������������������������������������������������������������������2 Hague Convention of 1930 on Certain Questions Relating to The Conflict of Nationality laws��������������������������������������������������������������������������146 Human Rights Conventions United Nations International Convention on the Elimination of all forms of Racial Discrimination, 21 December 1965������������������������������109 United Nations Convention on the Rights of Persons with Disabilities, adopted on 13 December 2006.���������������������������������������������������������������������������109 International Covenant on Civil and Political Rights, New York, 16 December 1966 (ICCPR)��������������������������������������������������������������������������������110 Council of Europe, European Convention on Human Rights, Rome, 4 November 1950 (ECHR) ��������������������������������������������������������������������� 29, 47, 110 UK Legislation Civil Partnership Act 2004�����������������������������������������������������������������������������������������120 Family Law (Scotland) Act 1985���������������������������������������������������������������������������������67 Inheritance (Provision for Family and Dependants) Act 1975��������� 5, 7, 14, 27, 30, 32, 37–38, 47, 50, 66, 90, 113, 115–17, 119–22, 124, 148, 187 Inheritance (Provision for Family and Dependants) (Northern Ireland) Order 1979���������������������������������������������������������������������������������������������������������������68

Table of Legislation  xix Law Reform (Succession) Act 1995������������������������������������������������������������������� 86, 112 Matrimonial Causes Act 1973�����������������������������������������������������������������������������������120 Marriage (Same Sex Couples) Act 2013�������������������������������������������������������������������120 Succession (Scotland) Act 1964���������������������������������������������������������������������������� 27, 67 The Wills Act 1837������������������������������������������������������������������������������������������������������116 Legislation of Member States of the European Union Austria Austrian Civil Code – Allgemeines Bürgerliches Gesetzbuch (ABGB)���������������175 Auβerstreitgesetz (AussStrG)�������������������������������������������������������������������������������������176 Belgium Belgian Civil Code: http://www.droitbelge.be/codes.asp#civ�������������������21, 177–80 Belgian Code of Civil Procedure (BCCP)����������������������������������������������������������������179 Bulgaria Bulgarian Inheritance Act, available in English, see: http://www.bulgariainheritance-law.bg/law.html��������������������������������������������������������������������������������181 Croatia Croatian Inheritance Act, available in Croatian at: http://www.zakon.hr/ z/87/Zakon-o-nasljeđivanju���������������������������������������������������������������������������������183 Cyprus Wills and Succession Law: http://www.cylaw.org/nomoi/arith/ CAP195.pdf����������������������������������������������������������������������������������������������������� 185–86 Limitation of Actionable Rights Law 2012���������������������������������������������������������������186 Fraudulent Transfers Avoidance Law (Cap 62) [περί Δολίων Μεταβιβάσεων (Ακύρωση) Νόμος] ����������������������������������������������������������������������������������������������186 Czech Republic Civil Code���������������������������������������������������������������������������������������������������������������������187 Denmark Inheritance Act: https://www.retsinformation.dk/Forms/ R0710.aspx?id=2664#K2����������������������������������������������������������������������������������������64

xx  Table of Legislation Estonia Law of Succession Act: https://www.riigiteataja.ee/akt/129062014010 and in English here: https://www.riigiteataja.ee/en/eli/ee/Riigikogu/ act/520012015004/consolide������������������������������������������������������������������������ 188–90 Family Law Act: https://www.riigiteataja.ee/en/eli/513032015005/consolide����188 Finland The Inheritance Code is available here: �������������������������������������������������������������������191 in Finnish: http://www.finlex.fi/fi/laki/ajantasa/1965/19650040 (updated)��������190 in Swedish: http://www.finlex.fi/sv/laki/ajantasa/1965/19650040 (updated)������190 in English: http://www.finlex.fi/fi/laki/kaannokset/1965/en19650040.pdf (amendments up to 1228/2001 included)����������������������������������������������������������190 France French Civil Code:���������������������������������������������������������������� 5, 11–13, 15, 40, 158, 193 https://www.legifrance.gouv.fr/affichCode.do?cidTexte= LEGITEXT000006070721&dateTexte=20151014���������������������������������������������192 and in English here: https://www.legifrance.gouv.fr/Traductions/ en-English/Legifrance-translations��������������������������������������������������������������������192 Germany Bürgerliches Gesetzbuch – BGB (Civil Code) see: http://www.gesetze-iminternet.de/bgb/BJNR001950896.html (accessed 9 August 2016).�����������������194 For an official version in English see: http://www.gesetze-im-internet.de/ englisch_bgb/index.html (accessed 9 August 2016).����������������������������������������194 Greece Greek Civil Code�������������������������������������������������������������������������������������������������� 196–98 Hungary Hungarian Civil Code:����������������������������������������������������������������������������������������� 200–01 http://net.jogtar.hu/jr/gen/hjegy_doc.cgi?docid=A1300005.TV (accessed 2 August 2016).������������������������������������������������������������������������������������199 For an English translation of the Hungarian Civil Code available online see: https://tdziegler.files.wordpress.com/2014/06/civil_code.pdf������������������������199 Ireland Succession Act 1965����������������������������������������������������������������������������������������������� 64–65

Table of Legislation  xxi Italy Italian Civil Code: http://www.diritto.it/codici/1-codice-civile�������������185, 202–03 Latvia Latvian Civil Code (English translation): http://unpan1.un.org/intradoc/ groups/public/documents/UNTC/UNPAN018388.pdf (accessed 27 March 2017)�����������������������������������������������������������������������57, 204–05 Lithuania Lithuanian Civil Code, available at: http://www3.lrs.lt/pls/inter3/ dokpaieska.showdoc_l?p_id=245495 (accessed 9 August 2016)������������� 205–06 Luxembourg Civil Code of Luxembourg: http://www.legilux.public.lu/leg/ textescoordonnes/codes/code_civil/CodeCivil_PageAccueil.pdf (accessed 19 December 2016)������������������������������������������������������������������������������207 Malta The Maltese Civil Code is available in English at: http://www.justiceservices. gov.mt/DownloadDocument.aspx?app=lom&itemid=8580&l=1 (accessed 3 August 2016)�������������������������������������������������������������������������������������208 Netherlands Civil Code in Dutch (accessed 3 August 2016)������������������������������������������������������������� Unofficial English Translation: http://www.dutchcivillaw.com/ civilcodegeneral.htm, (accessed 3 August 2016) ����������������������������������������������209 Poland Polish Civil Code: https://supertrans2014.files.wordpress.com/2014/06/ the-civil-code.pdf (accessed 3 August 2016).��������������������������������������������� 212–14 Portugal Portuguese Civil Code: ������������������������������������������������������������������������������������� 132, 216 http://www.pgdlisboa.pt/leis/lei_mostra_articulado.php?ficha=2001&artigo_ id=&nid=775&pagina=21&tabela=leis&nversao=&so_miolo= (accessed 3 August 2016)�������������������������������������������������������������������������������������215

xxii  Table of Legislation Romania Romanian Civil Code������������������������������������������������������������������������������������������ 216–17 Civil Procedure Code��������������������������������������������������������������������������������������������������217 Slovakia Slovakian Civil Code https://www.slov-lex.sk/pravne-predpisy/SK/ ZZ/1964/40/20150401#predpis.cast-siedma (accessed 11 August 2016)������218 Slovenia Slovenian Inheritance Act: http://www.pisrs.si/Pis.web/ pregledPredpisa?id=ZAKO317 (accessed 4 August 2016)����������������������� 49, 219 Spain Spanish Civil Code��������������������������������������������������������������������������������������������� 221, 223 Aragon Civil Code�������������������������������������������������������������������������������������������������������224 Compilation of Navarre����������������������������������������������������������������������������������������������223 Sweden Swedish Inheritance Code������������������������������������������������������������������������������������������224 National Insurance Act�����������������������������������������������������������������������������������������������224 Additional Jurisdictions Australia Administration and Probate Act 1958 (Vic)��������������������������������������������������������������63 Family Provision Act 1969 (ACT)�������������������������������������������������������������������������������63 Family Provision Act 1970 (NT)���������������������������������������������������������������������������������63 Family Provision Act 1972 (WA)��������������������������������������������������������������������������������63 Inheritance (Family Provision) Act 1972 (SA)����������������������������������������������������������63 Succession Act 1981 (Qld)�������������������������������������������������������������������������������������������63 Succession Act 2006 (NSW)����������������������������������������������������������������������������������������63 Testator’s Family Maintenance Act 1912 (Tas)����������������������������������������������������������63 South Africa Maintenance of Surviving Spouses Act No 27 of 1990���������������������������������������������66

1 Introduction I.  Background and Context The private international law of succession is inherently complicated.1 The reason for the complexity is in part due to the historical and cultural diversity among substantive laws, which has led to differing legal traditions characterising succession law in different ways. Some legal traditions see it as having characteristics associated with property law, whereas other legal traditions see it as inherently connected to family law.2 The fact that family law draws heavily from cultural, religious and social values and the reality that these values differ widely between countries and play a major part in the development of legal policy, contribute to the legal diversity in this area of law.3 Without the unification of private international law rules, legal diversity in succession law can not only cause practical difficulties for international testators to predict which law is applicable to deal with their succession or aspects of their succession, but can also cause problems for those dealing with an estate when faced with conflicting rules governing aspects of the succession.4 From a practical perspective, with the number of people choosing to relocate to other countries ever increasing5 and the consequent number of people owning and investing in property in multiple countries rising accordingly, the possibility

1 Walter Pintens, ‘Need and Opportunity of Convergence in European Succession Laws’ in M Anderson and E Arroyo i Amayuelas (eds), The Law of Succession: Testamentary Freedom (Europa Law Publishing, 2011) 6 and 28; ‘persons are therefore faced with considerable difficulties in asserting their rights with regard to an international succession’ SEC(2009) 410 of 14 October 2009 1.2: http://www.europarl.europa.eu/meetdocs/2009_2014/documents/com/com_com(2009)0154_/com_ com(2009)0154_en.pdf (accessed 7 June 2019). 2 Anderson and Amayuelas, ibid, v. 3 ibid. 4 Summary of the Impact Assessment SEC(2009) 411 final 2.1 of 14 October 2009, http://register. consilium.europa.eu/doc/srv?l=EN&f=ST%2014722%202009%20ADD%202 (accessed 7 June 2019). 5 Free movement of people within the EU is a fundamental principle of the EU see the Treaty on the Functioning of the European Union; M Benton and M Petrovic, ‘How free is free movement? Dynamics and drivers of mobility within the European Union’ (2013) Migration Policy Institute Europe. Figures for free movement of EU nationals suggest that it is likely that intra EU mobility will continue to grow but that the financial crash in 2007 changed the direction of flow from east to west to south to north. There are approximately 1.22 million UK citizens currently living elsewhere in the EU: see Oliver Hawkins, Migration Statistics, House of Commons Library, 2 December 2016. The impact of Brexit on movement is as yet unknown.

2  Introduction of complex and, by connection, costly, cross-border succession cases is a cause for concern.6 Finding ways to encourage and create legal certainty in cross-border estate planning, before the problems emerge, would go some way to addressing the legitimate expectations of the relevant parties.

A.  The Succession Regime in Private International Law The progressive unification of private international law – the approach taken by the Hague Conference on Private International Law – allows for the preservation of cultural and historical diversity within the substantive law.7 When the intention is to create a treaty which is acceptable from a global perspective, starting from a position of respect for cultural differences seems sensible. In order to determine the most appropriate private international law rule that will be acceptable to different legal traditions, it is necessary for those involved with the unification of private international law, whether at a regional level such as for the European Union or at the international level at the Hague Conference, to question the real nature of the issue so that they are able to put forward solutions that are both practical and fair. Knowledge of the private international law rules of relevant countries is by itself not always sufficient to answer these questions. Countries can be slow to amend their private international law rules or the rules can be vague on the point to be addressed, providing the drafter with nothing clear to work with. When attempting to find a truly international solution to determining the applicable law to an issue it requires a deep understanding of the substantive laws in each country in order to create private international law rules which are both pragmatic and fair to the relevant parties. The Hague Conference has in the past attempted to unify private international law, in the area of succession, with varying degrees of success. The 1961 Convention on the Conflicts of Laws Relating to the Form of Testamentary Dispositions is

6 The increase in movement of people and the impact on succession laws was put forward as a reason for the development of the 1989 Hague Convention, see Donovan WM Waters, Explanatory Report to the Convention on the law applicable to succession to the estates of deceased persons (1988) 19 available at: https://www.hcch.net/en/publications-and-studies/details4/?pid=2959&dtid=3 (accessed 14 June 2019). Paul Beaumont and Peter McEleavy, Anton’s Private International Law, 3rd edn (W Green/SULI, 2011) para 24.01; SEC(2009) 410 of 14 October 2009, 1.2: http://www.europarl.europa. eu/meetdocs/2009_2014/documents/com/com_com(2009)0154_/com_com(2009)0154_en.pdf (accessed 7 June 2019); SEC(2009) 411 final of 14 October 2009, 2.2: http://register.consilium.europa. eu/doc/srv?l=EN&f=ST%2014722%202009%20ADD%202 (accessed 7 June 2019). Note that the figures within the Impact Assessment document are estimates due to lack of relevant statistics. It was estimated that the total value of cross-border estates within the EU in 2009 was €123.3 billion with the legal fees amounting on average to 3% of this figure; M Benton and M Petrovic ‘How free is free movement? Dynamics and drivers of mobility within the European Union’ (2013) Migration Policy Institute Europe, Table 1. In 2011 the number of mobile EU nationals within the EU was 12,805,000. 7 Art 1 of the Statute of the Hague Conference on Private International Law (entry into force 15 July 1955) see: https://www.hcch.net/en/instruments/conventions/full-text/?cid=29 (accessed 7 June 2019).

Background and Context  3 regarded as a success,8 whereas the 1989 Hague Convention on the Applicable Law to the Succession to the Estate of Deceased Persons, whilst being considered a success by those negotiating it, has yet to be ratified by a single country – if we ignore the Netherlands ratifying it in 2008 but then denouncing their ratification in 2015 to coincide with the EU Succession Regulation coming into force.9 In light of the failure of the 1989 Convention, which was attempting to unify the applicable law to the whole of the succession, the aim of this book is to produce a bespoke and achievable framework for a problematic but much smaller area of law. At a regional level, the European Union’s recent and ambitious Succession Regulation – a regulation that was strongly influenced by the rules within the 1989 Hague Convention – does bring some coherence for intra-EU succession, but it is biased towards civil law and is not sympathetic to different legal traditions. The consequence is that it still contains fundamental weaknesses which were transferred from the Convention, particularly in relation to its choice of connecting factor to determine the applicable law, which is the law of the deceased’s habitual residence at the time of death.10 These weaknesses have remained despite the intention that, All the legal systems of the Member States have mechanisms intended to guarantee support for the relatives of the deceased, including primarily the mechanisms concerning the reserved portion of an estate. However, testators who are nationals of Member States in which inter vivos gifts are considered irrevocable may confirm the validity of such acts by opting for their national law as that applying to their successions.

8 For the 1961 Convention on the Conflicts of Laws relating to the form of Testamentary Dispositions see: https://www.hcch.net/en/instruments/conventions/full-text/?cid=40 (accessed 7 June 2019) which has 42 Contracting States: https://www.hcch.net/en/instruments/conventions/statustable/?cid=40 (accessed 7 June 2019). Anderson and Amayuelas (n 1 above) 6. 9 For the status table of the 1989 Convention and the subsequent withdrawal by the Netherlands see https://www.hcch.net/en/instruments/conventions/status-table/?cid=62 (accessed 7 June 2019), https://www.hcch.net/en/instruments/conventions/status-table/notifications/?csid=49&disp=type (accessed 7 June 2019). 10 J Holliday ‘Reconciling the European Union Succession Regulation with the Private International Law of the UK’ in J-S Bergé, S Francq and M Gardeñes Santiago (eds), Boundaries of European Private International Law (Bruylant, 2015) 298–309; P Beaumont and J Holliday, ‘Some Aspects of Scots Private International Law of Succession Taking Account of the Impact of the EU Succession Regulation’, Centre for Private International Law, University of Aberdeen, Working Paper Series, 2015/6, available at: https://www.abdn.ac.uk/law/research/working-papers-455.php (accessed 7 June 2019). A comparative analysis of clawback in all EU Member States was not conducted in preparation for the drafting of the EU Succession Regulation. The initial preparation for the EU Succession Regulation did briefly compare the laws of the Member States who were members of the EU at that time, with regards to the issue of clawback but the information they received was not sufficiently detailed in that it did not distinguish between rules relating to heirs and those relating to non-heirs. The UK Government asked Professor Roderick Paisley from the University of Aberdeen to provide a comparative report on the topic. This report considered Austria, Belgium, Bulgaria, Cyprus, France, Germany, Greece, Italy, Malta, Netherlands, Poland, Portugal, Spain and South Africa, and therefore due to the remit did not consider the laws of the Eastern European Member States that had joined the EU in 2004 and 2007: see R Paisley in Ministry of Justice, European Commission Proposal on Succession and Wills, Consultation Paper, CP41/09 (October 2009): https://www.biicl.org/files/4682_ec-succession-wills%5B1%5D.pdf.

4  Introduction A key objective of the Regulation is to ensure that these mechanisms are respected (­emphasis added).11

The intended solution to the known weakness was that the testator would be given the ability to choose the law of his nationality to govern his succession. The problem with this is that it still lacks legal certainty for the donee, as the testator may change his nationality or his will.12 The point of private international law which requires sensitive handling in order to respect legal and cultural diversity, and which is the focus of this book, is the applicable law for an heir (or dependant) to claim for the clawback/reduction of an inter vivos gift from a third party in a cross-border succession context. The retroactive nature of applying the law of the habitual residence of the donor at the time of death to claims to reduce inter vivos gifts to third parties puts at risk valid property transfers to third parties where, at the time the gift was made, the law of the donor’s habitual residence allowed the gift without any risk of clawback, creating legal uncertainty for all relevant parties.13

B.  Distinguishing ‘Clawback from Heirs’ from ‘Clawback from Non-heirs’ In the context of succession law, the term ‘clawback’ is a term used by academics and practitioners when writing about the reduction of inter vivos gifts and is generally treated as if there were no distinction between the reduction of gifts that are made to heirs and the reduction of gifts that are made to non-heirs, even though substantive law treats the two as distinctly separate issues.14 This book will work on the premise that claims to claw back a gift from heirs and claims to claw back a gift from non-heirs are inherently different and require the application of very different private international law applicable law rules. The reason for this is that the underlying functions behind the two claims are fundamentally different.15 The purpose behind reducing a gift or advance made by the 11 EU Commission, 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 succession and the creation of a European Certificate of Succession, COM(2009) 154 final, 6: http://www.europarl.europa.eu/meetdocs/2009_2014/documents/com/com_com(2009)0154_/com_ com(2009)0154_en.pdf (accessed 7 June 2019). 12 Holliday, Boundaries of European Private International Law (n 10 above). M Pfeiffer, ‘Legal certainty and predictability in international succession law’ (2016) 12 Journal of Private International Law 566–86. 13 EU Commission Succession Proposal (n 11 above) 6. 14 The rules for the reduction of gifts that were made to forced heirs are found within the rules on collation. The rules for the reduction of gifts that were made to third parties are separate to collation. 15 ‘… “Clawback” is more than this rule of collation or hotchpotch [sic] as regards a presumed advance. In the various legal systems in which it exists, the aim of “clawback” is to protect against the defrauding or prejudice by means of lifetime gifts (whether to a forced heir or otherwise) of those beneficiaries who are entitled to forced heirship provisions.’ Paisley (n 10 above) 18.

Background and Context  5 donor to an heir is to create equality between the heirs.16 The effect of reducing an advance even if made with the intention to defraud the other legitimate heirs or simply as a requirement to satisfy the legitimate portion is to create equality between the heirs. This is an accepted succession issue (although there are still issues with the current applicable law rule in that the lex successionis lacks legal certainty for heirs).17 Conversely, the reduction of a gift that has been given to a third party donee is for the purpose of satisfying the legitimate portion in some civil law traditions or, in some common law traditions, for obtaining maintenance where there has been evidence of evading a duty to maintain a dependant after death. Under common law traditions, the claimant may be a non-heir, such as a cohabitant, who is asking the court to reduce a gift given to a third party donee, who is also a non-heir.18 In this case the claim is arguably one of maintenance not succession.19 Clawback from a third party in these cases is not a clear succession issue. The common law tradition does not include the value of the inter vivos gift when calculating the value of the estate and therefore considers a claim for clawback as a threat to its property laws on title. This would suggest that the applicable law for the claim to claw back gifts from third parties cannot be solely characterised as succession law, and needs to be reassessed. When the French refer to the ‘rapport des libéralités’, they are referring to collation. They are referring to the return of an inter vivos gift by a beneficiary to the estate prior to receiving their share in the distribution of the estate; ‘for a fair ­share-out amongst children’.20 The element that is pertinent to protecting the legitimate portion by ensuring that the ‘available portion has not been exceeded by lifetime gifts to persons other than the children’ is known as the ‘réduction des libéralités’.21 However, it appears that the ‘person’ in this case although not an heir entitled to the legitimate portion, may still be an heir to the estate rather than a clearly defined third-party non-family member, thus blurring the boundaries of what is meant by a third party.22 16 Justinian, n 28 below, Book 37, 6. Taylor v Taylor (1875) LR 20 Eq 155, Hatfield v Minet (1878) 8 Ch D 136, Hardy v Shaw [1976] Ch 82, Race v Race [2002] EWHC 1868 (Ch); [2002] WTLR 1193, Cameron (Deceased), Re [1999] Ch 386. 17 Reduction of gifts for the purpose of collation was accepted by negotiators within the 1989 Convention and the EU Succession Regulation. 18 Sections 1(e) and 10 of the Inheritance (Provision for Family and Dependants) Act 1975 known hereafter as the 1975 Act. 19 See J Holliday, ‘Characterisation within Private International Law: Maintenance or Succession?’ in P Beaumont, B Hess, L Walker and S Spancken (eds), The Recovery of Maintenance in the EU and Worldwide (Hart Publishing, 2014) 443–58 for an analysis of the characterisation of the claim to claw back an inter vivos gift under the 1975 Act. 20 Louis Garb and John Wood, International Succession, 4th edn (Oxford University Press, 2015) 282. 21 Art 920 French Civil Code. The Laws of Scotland: Stair Memorial Encyclopaedia, Vol 25 (Butterworths/Law Society of Scotland) 609. Garb and Wood, n 20 above. 22 Art 924(1) French Civil Code clearly states that both heirs to the estate who are not forced heirs and non-heirs are required to return gifts that exceed the disposable portion to the estate. – ‘Lorsque la libéralité excède la quotité disponible, le gratifié, successible ou non successible, doit indemniser les héritiers réservataires à concurrence de la portion excessive de la libéralité, quel que soit cet excédent.’ (emphasis added), with thanks to Aude Fiorini, Senior Lecturer at the University of Dundee for her explanation of the French Civil Code.

6  Introduction There is also evidence of a common (mis)understanding amongst academics and practitioners that ‘collation’, ‘hotchpot’ and ‘clawback’ are the same thing.23 As Professor Roderick Paisley rightly pointed out in his comparative exercise on clawback, they are not the same thing at all.24 Hotchpot is the principle that: requires that a child ‘advanced’, that is provided for materially by a parent, is not thereby preferred to his or her siblings but must account for the advance on the parent’s intestacy when the value of the advance will be deducted from the advanced child’s share of the estate.25

The author will, for the purpose of this book restrict the scope of the term ‘­clawback’ to the reduction of inter vivos gifts to third-party non-heirs, as the underlying function, purpose, timing of the claim and associated substantive law differ substantially from those relating to a claim for the reduction of the inter vivos gifts to children or collateral heirs.26

(i)  A Civil Law versus Common Law Approach to Clawback A claim to claw back an inter vivos gift from a third party is a tool used in certain civil law countries to restore property to the estate of the deceased in order to satisfy the legitimate portion or in some cases a creditor of the estate. Historically the function behind the legitimate portion was to ensure certain heirs inherited the family property.27 The concept appears in Justinian and places the idea of family above property.28 Life expectancy at that time was short, and children had a greater chance of survival at a time when there was no state support if they were entitled to a share of the family wealth. However, with the increase in life expectancy in modern times and the fact that the ‘children’ may be mature adults with accrued wealth of their own, it is questionable as to whether this type of assumed need for maintenance is, in general, necessary.29 The legitimate portion is a restriction on testamentary freedom designed to protect the succession rights of close family

23 See Chapter 3 of this book for further discussion on this point. Jean-Francois Gerkens, ‘Legal Certainty v Legal Precision, some thoughts on Comparative Law’, Paper presented at Tilburg Institute of Comparative and Transnational Law, March 2009, 121–29, 128 highlights the problem of imprecision in the use of legal terminology when English is the chosen language in the private international law context. 24 Paisley (n 10 above) 18. 25 Stair Memorial Encyclopaedia (n 21 above) 611. 26 Art 7(3) 1989 Hague Convention and Art 23(i) EU Succession Regulation both contain noncontentious applicable law rules for claims for the reduction of gifts made to heirs. The reduction of gifts to non-heirs, although not directly addressed, falls within the scope of the Convention and Regulation when the claim forms part of the succession law applicable under those instruments: P Lagarde, ‘Applicable Law’ in U Bergquist, D Damascelli, R Frimston, P Lagarde, F Odersky, B  ­Reinhartz (eds), EU Regulation on Succession and Wills: Commentary (Sellier European Law Publishers, 2015) 139, 142. 27 Pintens (n 1 above) 12. 28 The Digest of Justinian Volume 3, Book 27, 6 Hotchpot. 29 Pintens (n 1 above) 12.

Background and Context  7 members, allowing certain heirs30 a legal right to a share of the estate. The value of these shares differs from State to State. The underlying rationale for clawback from third parties in this context is to protect the legitimate portion, supported by the view that the property of the deceased belongs to the family and that core family members have a right to inherit.31 The reduction of an inter vivos gift or advance that was made to a legitimate heir creates fairness between the heirs and in essence amounts to reduction of the inter vivos gift for the purpose of collation. The claim is triggered by a legitimate heir to the succession of the donor, to reduce an inter vivos gift given to another collateral heir. As will be seen in Chapter three, an aspect that overlaps with the common law approach is that clawback from a third party is used as an anti-avoidance strategy to prevent disinheritance. This is particularly evident in some legal regimes where the limitation period restricts the operation of clawback to gifts made in the year or two before the death of the deceased. However, evasion of obligations is not a necessary component for clawback in a civil law system. At the time of the claim, the legitimate heir may be facing the fact that there is no inheritance, or that they are entitled to receive a greater sum in law, if the claim is successful. In the common law tradition stemming from English statutory developments, the ability to claw back an inter vivos gift differs from the varying approaches found within the civil law tradition. In this common law tradition, it is for the purpose of providing reasonable financial provision or maintenance to an heir or dependant where there is evidence that the deceased intentionally gifted the property in order to avoid their responsibilities.32 In contrast to the position within the civil law tradition, this approach is discretionary, and needs based. The claimant need not be an heir or even a member of the family but has to have been dependent on the deceased in the two years prior to the death of the deceased. In the English law scheme the claim has to be made during the administration of the estate, within the first six months after the death of the deceased and only applies to gifts made in the six years prior to the death of the donor.33 Under the 1975 Act, the donee can be an heir or a non-heir who received an inter vivos gift from

30 The heirs entitled to the legitimate portion are known as legitimate heirs, reserved heirs or forced heirs. The ‘right’ to inherit is a right that is protected by a State. It is not a fundamental human right. 31 Pintens (n 1 above) 12. 32 Section 10 Inheritance (Provision for Family and Dependants) Act 1975: http://www.legislation. gov.uk/ukpga/1975/63 (accessed 7 June 2019). This approach is also seen for example within the laws of Australia, Ireland and South Africa. For further analysis of this point see Holliday (n 19 above). D Hayton in Appendix B, a joint response to the Law Society and STEP, notes that ‘… English and Welsh law believes that children should be able to stand independently on their own two feet once they have been fully reared and educated by their parents, so that the parents have no legal obligations to their grown-up children unless the children have physical or mental problems, while the civilian philosophy is that parents must ensure that their children inherit most of their property.’ in J Harris, ‘The proposed EU Regulation on succession and wills: prospects and challenges’ (2008) 22 Trust Law International 181, 196. 33 Section 10(2) Inheritance (Provision for Family and Dependants) Act 1975.

8  Introduction the deceased, although for the purpose of the book the analysis will focus on gifts made to third parties. The underlying differences between the concepts of clawing back an inter vivos gift from a third party who is not an heir and the reduction of the inter vivos gift or advance to an heir, to create equality or fairness between heirs, appears clear and they should be treated differently. The ability to distinguish between the two in such a clean way allows for the development of an applicable law rule just for the claims made against third parties. Yet, both within private international law and in legal analysis, distinguishing between the two is rare. This may be due to the superficial similarity in that it is possible to reduce an inter vivos gift for both purposes and the claims are both triggered by a succession (it should be noted that the claim to reduce the inter vivos gift to an heir occurs before a claim to reduce an inter vivos gift to a third party will be considered). However, the consequences of applying the lex successionis are far graver for the donee and claimant in a cross-border situation where the gift was made to a third party than where a gift was made to an heir in advance of their final inheritance. The crucial distinction between collation and clawback concerns the donee; the distinction being from whom the gift can be taken and the underlying intention behind the reduction. If it is an issue of collation, then if the law permits gifts to be reduced, then the gifts that may be reduced are restricted to eligible inter vivos gifts or advances that were made to collateral heirs. If it is an issue of clawback, the inter vivos gifts that may be reduced are gifts that were made by the donor to third parties during his or her lifetime who are not heirs or family members, such as gifts that were made to friends of the donor or to institutions such as charities. The author’s concern over the blurring of the distinction between the reduction of gifts to heirs and non-heirs arose during her reading of the responses to the questionnaire which formed the basis of the comparative substantive law analysis within this book, from analysis of the international and regional private international law on succession and the academic literature on succession, combined with the close analysis of the documents used during the drafting of the Succession Regulation. As previously stated, from a private international law perspective, the applicable law rule for the reduction of the gift for the purpose of collation is not as contentious.34 Whereas reduction of an inter vivos gift to a third party, from a private international law perspective, is highly contentious due to the retroactive nature of using the lex successionis for the applicable law rule, which may overturn 34 Within the EU it is suggested that where the gift was made to an heir at a point where the lex successionis was unknown and it was a valid gift under the applicable law under Rome I it is debatable whether the heir would be required to return the gift: see E Castellanos Ruiz in A-L Caravaca, A Davi, H-P Mansel (eds), The EU Succession Regulation A Commentary (Cambridge University Press, 2016) 366. This view is also taken by A Metallionos in H Pamboukis (ed), EU Succession Regulation, A Commentary (Nomiki Bibliothiki, CH Beck and Nomos, 2017) 277. A criticism of this approach is that it relies on an interpretation of the law rather than there being certainty, and also favours the donee over the claimant.

Background and Context  9 what was believed to be an irrevocable gift at the time the gift was made, and the fact that in some countries claimants need not be heirs; they may be a creditor of a legitimate heir. The reduction of an advance versus the reduction of a gift made to a third party needs to be treated differently if we are to achieve a global applicable law solution. Paisley identified the difficulties of applying the civil law construct of clawback within the UK systems, which was summed up as follows: • The potential to increase the time and costs of conveying both moveable and immovable property. Such additional expense may reflect the costs of taking out an appropriate insurance-based title indemnity policy. • The potential to make it impossible for the vast majority of UK solicitors to give complete advice in relation to the risks attendant upon the conveyance of property. • The potential to undermine the integrity of the various UK Registers of title to land. • The potential to undermine charitable giving in the UK. • The potential to undermine the use of inter vivos trusts as a mechanism for estate planning in the UK. • The potential to undermine use of insurance or pension policies taken out in the name of the deceased, where the premiums are paid for by the deceased during his life and written for the benefit of a surviving relative of the deceased as a means of testamentary provision. • The potential to undermine the title to both immoveable and moveable property situated in the UK. This could arise in a case where the property had previously been acquired as a result of a lifetime gift where the donor later died and the law of a Member State recognising clawback applies to the succession. This could apply not only to rights of property, but also to rights of security, such as mortgage created over the property. • The potential to give rise to liability on the part of the State to indemnify family heirs where a title to property has been conferred on a third party by registration so as to deprive that heir of title to that property. • The potential to encourage the evasion of clawback provisions and the consequent legal uncertainty as to whether such evasion is lawful. • Potential difficulties about determining the valuation of any sums subject to clawback.35

Conversely, without a truly global private international law solution to this problem, heirs within a civil law tradition who are entitled to utilise clawback in order to satisfy the legitimate portion are unable to gain satisfaction.

(ii)  Not the Whole Picture As the rules surrounding clawback of an inter vivos gift from a third party within the context of a cross-border succession are so visibly contentious and are a clear

35 Paisley (n 10 above), 15. Quoted at: https://www.biicl.org/files/4682_ec-succession-wills%5B1 %5D.pdf.

10  Introduction example of a conflict of laws, it does not seem too far-fetched to suggest that ­everyone around the EU Succession Regulation negotiating table should have been aware that this would require a lot of work to reach a workable solution that would be agreeable by all. Unfortunately, it appears that not everyone approached the table with that aim. Although speculative, it is suggested that the political noise (which is discussed later on in this chapter) surrounding the issue of clawback from a third party during the Succession Regulation negotiations was unfortunate, as it contributed to drowning out common sense in relation to achieving a solution that would be agreeable to all sides. With hindsight, it is also clear that the guidance given to the drafters of the EU Succession Regulation, to the UK House of Lords and to the UK politicians responsible for giving their support to the project, did not place enough emphasis on the relatively non-contentious aspect of the reduction of gifts for the purpose of collation, nor that clawback from third parties in a cross-border context was not often litigated, but instead chose to focus solely on the headline-grabbing element of reducing a gift given to a third party, fuelled by the concerns of UK charities who were understandably worried about the effect on their receipt of inter vivos gifts. The evidence put forward to the UK government prior to the start of the Succession Regulation negotiations contributed directly to the UK’s decision not to opt into the Regulation prior to the negotiations, leaving the UK negotiators in the less than advantageous position of attempting to negotiate a compromise when there was no guarantee that they would ultimately opt in.36 The following example of clawback was put forward during the gathering of evidence for the UK House of Lords EU Select Committee by Professor Matthews on 9 March 2010. ‘An extreme example of clawback’ A British national domiciled in, and entirely connected with, England gives away a significant proportion of his property. Forty years later he dies, having moved to France, having become domiciled, bought property, married and raised a family there. The forced inheritance claims and clawback will apply to the gifts made when he was domiciled in England as far as French law is concerned. They are liable to be returned to the estate to meet these claims.37

For the UK, a country which upholds the legal tradition where donation is protected, and where inter vivos gifts do not form part of the deceased’s estate, 36 See Holliday (n 10 above), where the author observes that a failure by the UK to opt in when negotiations have been conducted is a failure by all Member States to reach a compromise and to take cultural diversity into consideration, a point which is required under Art 3(3) of the Treaty on the Functioning of the European Union. 37 The House of Lords European Union Committee on the proposed EU Succession ­Regulation, 6th  Report of Session 2009–10: https://publications.parliament.uk/pa/ld200910/ldselect/­ ldeucom/ 75/7502.htm, p 25 (accessed 7 June 2019). It should be noted that no distinction is made in this example between clawback from a third party and clawback from an heir. It is also inaccurate, as the laws had changed by this point (2006) and the claim had been changed to a monetary claim for the sum that exceeds the disposable portion and not for the return of the property itself.

Background and Context  11 the possibility that a gift could be clawed back at an indeterminate point in the future which would threaten the legitimate expectations of the donee was sufficient to set off alarm bells everywhere.38 However, contrary to this inflammatory representation of clawback to the Select Committee, on conducting the research for this book, it became clear that in countries where clawback from third parties is used, the law in this area is much more nuanced than portrayed in this example. Taking the French Civil Code as an example, the first thing that needs to be mentioned is that it underwent great change in 2006 (a point which was not mentioned during the Succession Regulation negotiations by the French negotiators)39 in relation to the inter vivos gift for both collation and clawback, in that the claim became a monetary claim rather than a claim for the actual property. Under the French Civil Code at the time of the negotiations, it is noted that: • An inter vivos gift for the purpose of succession in French Law only applies to a transfer of property that is registered as such by a notary who records the transfer for the purpose of succession.40 It is recorded as an ordinary contract and remains valid unless nullified.41 • It is possible for the donor to exclude a gift for the purpose of collation.42 • It is possible for the heirs to exclude a particular inter vivos gift for the purpose of collation through contractual agreement.43 38 See Paisley’s study for a list of potential negative effects in relation to the UK and clawback (n 10 above), which amongst other things included: increased conveyancing costs; increased risk of negligence by practitioners; undermining the UK Registers of titles to land which contain insufficient information (for example in order to fulfil the requirements of clawback there would be a need to know who potentially had a right in the property); undermining charitable giving; undermining inter vivos trusts; undermining the use of insurance policies taken out in the name of the deceased; undermining title to immoveable and moveable property; raising potential liability on the State to indemnify forced heirs; giving rise to an industry supporting the evasion of clawback; and difficulties providing valuations to be clawed back. 39 During a meeting between the author and Professor Paul Beaumont in May 2016, Professor ­Beaumont noted that ‘this fact (the changes to the French legislation and that it was only for a monetary claim) was not mentioned by the French Representative during the negotiations of the EU Succession Regulation.’ This conversation is recorded in the author’s private notes. 40 Art 931 French Civil Code. The requirement that the inter vivos gift is recorded by the notary restricts the scope of what is regarded as an inter vivos gift. This is contrary to the understanding of ‘inter vivos gift’ within the UK, which refers to any gift made by the deceased during his lifetime. In 2007 it was reported that 586,500 inter vivos gifts had been transferred to children by French households with a total value of €33 Billion: C Péres, ‘Intestate Succession in France’ in K Reid, MJ de Waal, R  Zimmermann (eds), Comparative Succession Law, Intestate Succession (Oxford University Press, 2015) 34. If we consider that a percentage of these gifts will have included property that was in a different Member State then it would suggest that the current rules relating to estate planning and collation are needed. 41 Art 931 French Civil Code. 42 Art 919 French Civil Code. The donor is able to gift a percentage of his estate from his free estate. Only gifts that exceed the freely disposable part of the estate can be clawed back for the purpose of satisfying the reserved share. 43 Art 919 French Civil Code. The ability under French law for the heirs to agree through contract that a gift will not be clawed back, which allows the donee to have certainty of ownership, does not take into account the possibility that there could be a future heir that has yet to be born. It is not unknown

12  Introduction • Inter vivos gifts that were made by the donor and do not exceed the legitimate portion because the sum total of the gifts falls entirely within the disposable share of the estate are not considered for the purpose of satisfying the legitimate portion. • The scope of who constitutes a legitimate heir is narrow in that it is restricted to descendants, with only the spouse being regarded as a legitimate heir where there are no children.44 • There is debate as to whether the legitimate portion is regarded as a matter of public policy.45 • The claim for the reduction of the inter vivos gift to an heir is not automatic and can only be claimed by a legitimate heir.46 • A person entitled to a legitimate portion can waive their rights.47 • Testamentary bequests will be used to fulfil the legitimate portion before inter vivos gifts/advances to heirs are considered.48 • Inter vivos gifts or advances are regarded as forming part of a person’s legitimate portion or reserved share. If the gift to an heir is valued at more than the person’s legal share then the excess can be reduced in order to create equality between the heirs.49 It is a monetary claim. • If there is a successful claim, the gifts will be reduced in chronological order starting from the date of the death of the deceased.50 • The costs of food, housing and education for descendants do not constitute gifts for the purpose of collation.51 • Gifts to certain institutions are also excluded from reduction.52 for there to be large age gaps between children of one biological parent. French law does not discriminate between legitimate children and illegitimate children for the purpose of the reserved share. 44 Garb and Wood (n 20 above) 280. 45 See M Grimaldi, ‘Some brief thoughts on public policy and the hereditary reserve’, Defrénois, 2012 755, available at Henri Capitant Law Review, No 7, 31 December 2014: http://www.henricapitant.org/ revue/en/n7. 46 Art 921 French Civil Code, see: https://www.legifrance.gouv.fr/affichCode.do?idSectionTA=LE GISCTA000006165578&cidTexte=LEGITEXT000006070721&dateTexte=20170324 (accessed 7 June 2019). 47 Art 929 French Civil Code – they may waive their rights to the whole inheritance or to the reduction of a particular gift. 48 Art 923 French Civil Code. 49 Art 924 French Civil Code. Art 924 is discussed within Decision No 2012-274 QPC of 28 ­September 2012 for the purpose of collation, see: https://www.legifrance.gouv.fr/affichTexteArticle. do;jsessionid=859F6825B38B44D54C0DC28D04C3B8B9.tpdila13v_2?cidTexte=JORFTEXT0000 26426322&idArticle=JORFARTI000026426323&dateTexte=20120929&categorieLien=cid#JORFA RTI000026426323 (accessed 25 March 2017). 50 Art 923 French Civil Code. 51 Art 852 French Civil Code. 52 This is interesting from the perspective of the EU Succession Regulation negotiations. The UK was concerned about the effect of clawback on gifts made to charities. The fact that some countries that permit clawback from third parties exclude gifts made to charities was not mentioned during the negotiations.

Background and Context  13 • The ability to claim for the return of an inter vivos gift or for the value to be returned is therefore available for the purpose of collation (rapport des libéralités). And the rule that allows for the reduction of an inter vivos gift made to a third party? This is arguably less extreme than at first purported. • It is possible to make a monetary claim against persons who are not children who have received inter vivos gifts that exceed the legitimate portion (reduction des libéralités).53 Only the excess is subject to reduction.54 Therefore, the reality of a claim to claw back or reduce an inter vivos gift to a third-party non-family member for the purpose of satisfying the legitimate portion is that it occurs: • only in cases where the estate is not able to meet the requirements for fulfilling the legitimate portion through the reduction of testamentary bequests or through the reduction of advances for the purpose of collation between the reserved heirs, • and then only if the heirs are aware of a transfer of an inter vivos gift to a third party and wish to make the claim. They do not need to make a claim. • and then only if the inter vivos gifts exceeded the disposable portion of the estate, • and if the claimant was not excluded from making the claim by the testator, • and even then, as is the case in the majority of countries that use clawback, it is not possible to claw back the actual property from the donee.55 The claimants can only make a monetary claim and then only for the amount that exceeds the disposable portion.56 53 Garb and Wood (n 20 above) 282. For literature on the reduction of gifts under French law see, for example, Péres (n 40 above) 49 and R Hyland, Gifts. A Study in Comparative Law (Oxford University Press, 2010) 84. In order to obtain clarity on whether French law allowed for clawback, the author contacted Cécile Peres, Professor in Private Law at the University of Paris II Panthéon-Assas and author of the chapter on French law in Garb and Wood. She very kindly clarified that: ‘Les règles relatives à la réserve héréditaire et à la réduction des libéralités excessives sont prévues par les articles 912 et suivants du Code civil. Toutes les donations entre vifs sont prises en compte pour le calcul de la réserve héréditaire (art. 913 du code civil): peu importe leur date, peu importe aussi qu’elles aient été consenties à un tiers, étranger à la famille, ou à un membre de la famille. On ne distingue pas suivant le bénéficiaire de la donation.’ Which translates as ‘The rules relating to the hereditary reserve and to the reduction of excessive gifts are laid down in articles 912 and following of the Civil Code. All inter vivos gifts are taken into account for the calculation of the hereditary reserve (article 913 of the Civil Code) whatever their date; it also does not matter whether they were granted to a third party, a stranger to the family, or a member of the family. There is no distinction between the recipients of the donation.’ Email received 31 March 2017. This should be read in light of the fact that the inter vivos gift for the purpose of succession is limited to those that are recorded by a notary. The recording of the gift creates awareness between the parties that the gift could be at risk of clawback. 54 Art 919 French Civil Code. 55 Within the EU only Greece and Romania ask for the actual property to be returned under their rules on clawback – see Chapter 3 of this book. 56 Art 919 French Civil Code.

14  Introduction If we contrast this experience with the position under the law of England and Wales, the 1975 Act states that the dependant, if in need of financial provision due to having been maintained by the deceased in the two years prior to the latter’s death, is able to demonstrate that the gift was made to avoid providing for them, then any gift can be reduced.57 The reduction is for the actual property and not just in kind. The aim is to provide the dependant with reasonable financial provision. However, there is no case-law within England and Wales on this point.58

C. Terminology In addition to the apparent confusion between the terms clawback and collation, a factor that became clear during the analysis of the substantive law and the legislation in Chapters three and four is that there does not appear to be a common understanding of the key elements integral to the concept of clawback.

(i)  There is No Clear Definition of the Term ‘Heir’ Across the EU, the term ‘heir’ can be understood narrowly to mean the statutory heir, sometimes referred to as the blood relatives, or broadly, to include anyone who benefits from the estate of the deceased.59 The term ‘beneficiary’ can also be understood narrowly to mean the people who are named within the will, or broadly, to also include those who benefited from receiving an inter vivos gift, which could include a third party who is not an heir in the narrow sense of the word. This difference in the scope of what is meant by ‘heir’ is important if we are to understand who we are actually dealing with, which in turn can affect how we understand the law. If inter vivos gifts can only be ‘clawed back’ from blood relatives, for example, solely from the descendants in order to create equality between the heirs, then it is more accurate to say that this is restoration of the gift to the estate for the purpose of collation. At the other end of the spectrum, if clawback of inter vivos gifts is permitted from non-heirs who are not blood relatives, ie third

57 Section 10 Inheritance (Provision for Family and Dependants) Act 1975. 58 When discussing clawback, Professors E Crawford and J Carruthers in their evidence to the House of Lords EU Committee (n 37 above) p 65, noted that an English case Re Korvine’s Trust [1921] 1Ch 343 regarded a deathbed transfer in English law as an issue of property law rather than succession law, and go on to state that they can see that there is a conflict between the two ‘innocents’ – the donee and the beneficiary – but say that they regard clawback as a substantive issue that should be dealt with under the lex causae (lex successionis). Crawford and Carruthers also note that there are no cases of clawback from third parties in cross-border cases in Scots law but they recognise that there is a conflict between succession law and property law. 59 The need for a clear definition of the term ‘heir’ was requested by the Netherlands during the negotiations of the Succession Regulation proposed by the Council of the European Union, October 2010 JUSTCIV167, p 3.

Background and Context  15 parties, then this is more accurately defined more narrowly as clawback for the purpose of either satisfying the legitimate portion or for maintaining dependants as per the legal systems of England and Wales and Northern Ireland. Clawback from a third party does not mean in all cases that the heir is otherwise going to inherit nothing, but that if the gift is clawed back they will inherit more. It is not needs based when used to satisfy a legitimate portion. This is an important distinction, as many countries would appear to regard the term collation and clawback as interchangeable, whereas they are in fact separate concepts and have different objectives.

(ii)  There is No Clear Definition of the Term ‘Inter Vivos Gift’ Another point where there appears to be a difference in understanding is what is meant by an inter vivos gift. Some countries interpret the term literally.60 In the UK the term inter vivos gift is interpreted literally, but crucially under the lex fori they are not considered part of succession law. In other countries, the term inter vivos gift is interpreted narrowly and refers specifically to gifts made by the deceased during his lifetime that were formally registered as an inter vivos gift by a notary and are not otherwise excluded in law. The inter vivos gifts that are included for the purpose of calculating the fictive estate may be restricted to those gifts that were recorded for the purpose of succession that the donor had given to his legitimate heirs. Inter vivos gifts that may be excluded are gifts that support the child’s day-to-day needs or gifts to charities or government bodies. In non-excluded cases which are recorded, the notary will prepare an appropriate contract to denote the transfer of the property from the donor to the donee. In these contracts, there may be a clause that permits selling of the property by the donee without the risk of clawback if the heirs entitled to the legitimate portion consent. If the donee sells the property it is also noted in the sale that the property is at risk of clawback. If the heirs are willing to contract the gift out of the fictive estate, then their consent excludes this gift from being clawed back in order to satisfy the legitimate portion at a point in time where the value of the succession is unknown.61 An obvious problem with this approach in contract law is that it is not 60 England and Wales regard any gift that was made by the deceased during their lifetime as an ‘inter vivos gift’. These gifts do not form part of the estate, as only the property that is owned at the time of death is considered for that purpose. In the alternative, France regards inter vivos gifts for the purpose of succession as only those that were noted by the deceased as being such with a notary or that the heirs account for. 61 The changes in the French Civil Code in 2006 increased the certainty of ownership for the donee and lessened the scope of the legitimate portion by removing ascendants from the list of those entitled to the legitimate portion thus bringing into question whether the legitimate portion can still be considered a public policy issue due to the way the donor is now able to circumvent the legitimate portion. ‘la renonciation anticipée à l’action en réduction est une technique pleine d’utilité pour la pratique notariale qui y trouvera le moyen de donner efficacité définitive aux dispositions à titre gratuit du défunt.’ Claude Bremmer, ‘Le Nouveau Visage de la Réserve Héréditaire’: http://www.henricapitant.org/revue/ fr/n7 (accessed 4 August 2019).

16  Introduction possible for heirs to contract out of something where there may be a party to the contract that they are unaware of. For example, a parent may have had a second family that the first family was unaware of where the children also have rights to the legitimate portion. Due to the anti-discrimination laws, children that were born outside of wedlock are still entitled to a share of the legitimate portion of the estate of the deceased parent. In another example, the legitimate heirs known at the time of the contract to exclude the gift would not have taken into consideration that a parent may have a new family late in life and have one set of adult children and a younger set of children from a second or third relationship. Austria only allows children to claw back gifts that were given by the donor during the lifetime of the child, which on the face of it seems fair, yet if a substantial gift was given one year before the death of the deceased and the child is just a few months old and has an older sibling it seems odd that one child is advantaged depending on the date of birth. It is possible in some cases for the donor to exclude the gift from falling within the scope of the fictive hereditary estate on the basis that it falls within the free share of his estate, thus excluding it from the risk of clawback. This would suggest that in some cases the clawback for the purpose of collation or from the third party can be limited by the donor, and therefore the functions of both concepts of collation and clawback are weakened in these cases in favour of testamentary freedom and clarity for the donee as to the irrevocable nature of the transfer of property.62 There are other more difficult areas in terms of defining the inter vivos gift which are beyond the scope of this book, such as whether matrimonial gifts fall within the scope of ‘inter vivos’ gifts for the purpose of succession law.

(iii)  There is No Clear Definition of the Term ‘Clawback’ As explained above, the term clawback is a rather abused term. It means different things depending on whether it is being referred to within a procedural or substantive law context. a)  Procedural law In the context of succession law, the generic use of the term clawback is used to describe the procedure used to reduce a gift. In this way a gift given to either a legitimate heir or a third party by the deceased can be said to be ‘clawed back’. Greater clarity could be achieved by restricting the use of the term clawback to the procedure that applies to gifts made to a third party and maintaining the use of the term ‘reduction’ of the gift for the purpose of collation when referring to gifts made to legitimate heirs. This would be in line with the underlying function

62 Ibid.

Background and Context  17 of the substantive law. This would also be in line with the terminology used by Lagarde.63 b)  Substantive law The term clawback at the substantive level is more nuanced than is generally understood and is open to misunderstanding. There is a substantive difference between the restoring of property to the estate that has been given to a legitimate heir by the deceased and the restoring of property to the estate that has been given to a third party by the deceased, yet the term clawback is commonly used to describe both forms. It is argued that the substantive differences between the donees and the nature of the gifts and differences in function and procedure highlight the need to treat these two issues separately. Figure 1  Substantive Law – Collation v Clawback

In the diagram above the inter vivos gifts made by the deceased to legitimate heirs may, depending on their nature, be regarded as: • irrevocable (for example if they are gifts for the purpose of maintenance or education); • advances, and therefore open to collation. A claim may be brought by the heirs to reduce the gift that was given to an heir, in order to create equality between the heirs. • advances, but exempt from collation.64 63 Lagarde (n 26 above) 141, restricts his use of the term clawback to the reduction of gifts to third parties. When referring to gifts made to legitimate heirs he restricts his terminology to reduction. 64 An advance may be exempt from collation if the donor expressly states that the gift is to be exempt or is to fall within the disposable portion of the estate, or if the heirs agree that it is exempt. The gift can also become irrevocable if not challenged by the legitimate heirs and the prescription period elapses.

18  Introduction The inter vivos gifts made by the deceased to a third party who is not an heir may, depending on their nature, be regarded as: • irrevocable and excluded from clawback.65 • within the reach of clawback if the applicable succession law takes into account inter vivos gifts for the purpose of calculating the fictive estate and if the value of those gifts exceeds the disposable portion of the estate and the legitimate portion has not been satisfied and the heirs wish to make a claim.66 The reduction of a gift to a third party is to enable the legitimate heirs to receive part or all of the protected reserved share of the estate. The difference between the functions of reducing the gift for collation purposes and reducing the gift made to a third party are subtle but important. • not being subject to reduction for the purpose of collation, as the donee is not an heir. • subject to reduction by way of clawback even though the claimant is not an heir but rather a creditor of the heir. • subject to reduction by way of clawback where the claimant is not an heir but rather a dependant, in countries where clawback from third parties is used to provide dependants with maintenance where a donor has tried to avoid leaving reasonable financial provision for that dependant. Professor Paisley in his guidance to the Ministry of Justice in 2009, when defining clawback, stated that clawback goes beyond the rule of collation or hotchpot (where the aim is to divide the estate fairly prior to the division of the estate) to one where the concern is to protect the legitimate heirs against ‘defrauding or prejudice by way of lifetime gifts’ made to either the legitimate heirs or a third party by the deceased.67 This interpretation of substantive clawback sees the aim of clawback as being separate to that of collation. However, for the purpose of creating a private international law rule, it would be better not to distinguish between the point where collation stops and where clawback starts, but rather between to whom the gifts have been given. When dealing with gifts made to the legitimate heirs the scope of the underlying purpose behind clawback of the inter vivos gift made to a legitimate heir is not sufficiently different from reduction of the inter vivos gift for the purpose of collation, to be considered separately. Reducing a gift

65 This may be because the donee and the heirs have agreed to exclude the gift from clawback (although the ability to make a contractual agreement to exclude a gift from clawback has potential weaknesses, such as new legitimate heirs appearing that no one knew about, eg children from second relationships). It may also be because the succession law does not allow for clawback from third parties. 66 In the past the question as to whether succession law uses clawback was set around the issue of forced heirship. However, on closer scrutiny the issue centres not on forced heirship per se but on whether the succession law considers inter vivos gifts as part of the fictive estate. Not all countries that have forced heirship extend the estate to include inter vivos gifts. In other cases, they may also restrict the reduction of the gifts only to gifts made to the legitimate heirs. 67 Paisley (n 10 above) 18.

Background and Context  19 made to a legitimate heir in order to create fairness between the legitimate heirs, ie for the purpose of collation, implies that the gift in some way prejudiced the remaining heirs. What is taking place when gifts were made to one legitimate heir to prevent other legitimate heirs from inheriting or a legitimate heir does not seek a viable claim (see the Lambton case discussed below (Example 3)) can be more accurately stated as procedural clawback for the purpose of the substantive issue of collation. Reducing a gift made to the legitimate heir for the purpose of clawback, as understood by Professor Paisley, creates the same outcome. The outcome when reducing a gift made to the legitimate heirs does not change whether we do it under collation or clawback but it is argued that greater clarity in law can be achieved if we distinguish between donees who are heirs and donees who are not heirs. The reduction of inter vivos gifts made to the original third-party donee can only ever be for the purpose of satisfying the legitimate portion or to help meet the needs of dependants. It can never be for collation, as the third party is not an heir. The reduction of the inter vivos gift or advance made to a legitimate heir is a succession issue. The reduction of an inter vivos gift to a third-party non-heir for the purpose of satisfying the legitimate portion, as will be demonstrated, has no clear legal character. In addition, there is a further category of third party, which as mentioned is beyond the scope of this book, namely third parties who acquire the property from the original donee in good faith. This blurring of the use and the meaning of the term ‘clawback’ leads to misunderstanding amongst academics and practitioners, which has contributed to the acceptance of an applicable law rule that is more appropriate for the concept of collation than the concept of clawback from a third party. Examples which highlight the need for a clear definition of the term clawback are: 1) In December 2009, a leading practitioner, when advising the UK Select Committee on the European Union, uses the term ‘clawback’ to refer to the reduction of gifts for the purpose of collation and the reduction of gifts to third parties for satisfying the legitimate portion. Restricting the use of the word ‘clawback’ in the context of succession to the reduction of gifts to third parties and raising the profile of collation will greatly improve communication in this context, as collation is not contentious. My Lord, claw back, I think is a tricky topic and I think one needs to distinguish between rearrangements between heirs and rearrangements not between heirs, so that in general terms in the European Union rearrangements between heirs often have no time limit, whereas rearrangements between people who are not heirs usually have a time limit. … I think the tricky question is claw back between non-heirs and certainly I know that charities in this country are very worried about it …68 68 Richard Frimston’s response to Q81 in House of Lords EU Select Committee (n 37 above) pp 35–36.

20  Introduction 2) In an academic commentary published in 2016 on the EU Succession ­Regulation, by clarifying the term ‘clawback’ to equate to the common law provision of ‘hotchpot or advancement’, Castellanos Ruiz implies that the meaning of clawback is the reduction of gifts made to heirs, and does not refer to third-party donees at all; According to article 23.2(i) ESR the lex successionis is only applied in order to identify gifts which are subject to ‘clawback’, that is to say, gifts made by the deceased which must be reintegrated into the estate in order to determine the shares due to the beneficiaries under the inheritance. As stated in recital 14, it must be the lex successionis ‘which determines whether gifts or other forms of dispositions inter vivos giving rise to a right in rem prior to death should be restored or accounted for the purposes of determining the shares of the beneficiaries in accordance with the law applicable to the succession’. Provision is made for this ‘clawback’ obligation both in civil law systems and in common law countries. In the latter it is referred to as hotchpot or advancement.69

In common law hotchpot or advancement refers to restoring or accounting for gifts for the purpose of collation. Hotchpot is not the same as clawback. 3) A case before the UK Court of Justice Chancery Division in 2013, refers to a claim which speaks of the ‘clawback issue’ in very general terms: … in order to calculate the value of Lord Lambton’s estate (for the purposes of calculating each Defendant’s share of the estate) assets which Lord Lambton owned but gave away during his lifetime have to be added back to what was left at death in order to calculate a fictitious patrimony of Lord Lambton (the ‘clawback’ issue)70





The accounting of inter vivos gifts in order to determine the value of the fictive estate is for the purpose of calculating the legitimate portion. Only after the legitimate portion has been calculated will there be evidence to show whether the inter vivos gifts exceeded the legitimate portion, with the initial satisfaction for the forced heirs coming from the bequests in the will before collation is considered, and clawback from a third party being the option of last resort. In this case the forced heirs who had been excluded from their father’s will settled out of court when the sole named heir in the will sold moveable bequests he had been left that were within the UK to satisfy the claim. Although the deceased had transferred all of his immoveable property during his lifetime to his eldest son and into trusts, he had left four valuable paintings in his will to his eldest son, worth approximately £12 million. The case uses the term clawback and does mention the issue of gifts given to ‘others’ but the settlement after the English court case is a separate issue to the Italian case and would appear to be one of reduction for the purpose

69 Castellanos 70 Lambton

Ruiz (n 34 above) 365–66. v Lambton [2013] EWHC 3566 (Ch).

Background and Context  21 of collation, as the settlement out of court was the result of the son, who was also the executor, selling one of the paintings and dividing the proceeds between the sisters. Also the case did not result in the reduction of inter vivos gifts made to the son by the father but rather the redistribution of bequests to the son.

D.  How is the Legitimate Portion Calculated? And how does a Claim for Clawback Arise in a Civil Law Context? (i)  An Example under Belgian Law In order to calculate the value of the estate of the deceased so that the legitimate portion can be established, the value of the assets at the time of death is added to the value of the gifts made by the deceased during his or her lifetime, creating a fictive estate.71 The debts of the deceased are then subtracted from this figure. The legitimate portion rules are then applied, which vary depending on who the legitimate heir is and how many heirs exist in each tier.72 If the deceased had no spouse but had one child, the child as a legitimate heir, under Belgian law is entitled to a legitimate portion of one half of the estate.73 The remaining half of the estate is considered to be the disposable part of the estate that the deceased is able to bequeath or gift without challenge. If there are insufficient funds in the estate to give the child the share of the estate that they are entitled to then any bequests that the deceased made in his will can be reduced to satisfy the legitimate portion. If there are insufficient bequests and the gifts made during the lifetime of the deceased exceed the half share that the deceased was entitled to dispose of freely, then the child is able to claim for the gifts to be reduced/clawed back in chronological order from the date of death of the deceased until the legitimate portion is satisfied.74 Gifts made to legitimate heirs (ie, for the purpose of collation) are taken into account for reduction before considering gifts made to third parties. If the deceased left assets worth €1,000,000 and had gifted property to third parties during his lifetime worth €200,000, the estate for the purpose of working out the legitimate portion is valued at €1,200,000. If the deceased left one child, 71 Paisley (n 10 above), 19. 72 Under Art 913 of the Belgian Civil Code, if the deceased leaves one child they are entitled to 50% of the estate. If the deceased left three or more children, this is capped at 75% of the estate. The disposable part of the estate therefore also varies depending on the numbers and classification of the forced heirs to the estate. The Belgian Civil Code is available at http://www.droitbelge.be/codes.asp#civ (accessed 8 June 2019). See also Belgian Succession Law Report conducted by Patrick Wautelet: https://ec.europa. eu/civiljustice/news/docs/study_bxl1_belgium.pdf (accessed 25th July 2019). 73 Art 913, Belgian Civil Code. 74 For examples of different scenarios under Belgian law see Gerd D Goyvaerts, Belgium, International Estate Planning Guide, 2017: https://www.ibanet.org/internationalestateplanningguides.aspx (accessed 10 June 2019).

22  Introduction the  child is entitled to a legitimate portion of €600,000 which can be satisfied from the assets in the estate. If the deceased had left three children and the value of the inter vivos gifts to third parties had instead amounted to €1,000,000, the total value of the estate for the purpose of satisfying the legitimate portion would be €2,000,000 and the children would be entitled to a three-quarters share, meaning that the legitimate portion would be made up of the €1,000,000 of the assets at the time of death and the children would have the right to claim for the inter vivos gifts to the third party(ies) which had exceeded the disposable portion, to be clawed back in chronological order from the date of death of the deceased until the legitimate portion was satisfied. Contrary to the situation regarding gifts/advances made to heirs, in general it is not possible for the donor to exclude a gift from clawback from third parties to satisfy the legitimate portion.75 It is also not necessary for the heir who is entitled to claim the legitimate portion to be in a state of need at the time of the claim or to be a current dependant of the deceased.76 The claim by the legitimate heir simply allows them to obtain what is theirs in law. The property that is ‘clawed back’ into the estate from a third party is then shared between the legitimate heirs. The sharing of the reduced gift is so that the legitimate heir receives what is due to them in law. The sharing of the property is not to create equality in the face of the deceased favouring one child above the others.

E. Conclusion Different legal traditions have developed differing approaches for protecting heirs and dependants from disinheritance. Some countries have opted to protect heirs by ring-fencing a percentage of the estate for a specific group of heirs, the value of which includes inter vivos gifts, and provides the heir with tools to obtain their share. Others offer discretionary solutions which can be used by dependants to obtain financial provision but with the caveats that the deceased had to be maintaining them for a certain period prior to death and (an additional very difficult element, which probably explains the lack of case-law) that the dependant has to prove that the donor gifted the property with the intention of evading their duty to maintain. Some countries do not permit any clawback of inter vivos gifts made to third parties, either to protect the legitimate portion or to provide maintenance. Some countries value family above property. Other countries place emphasis on testamentary freedom and the need to protect title in relation to transfers of property. 75 It is possible for the donor to exclude gifts/advances made to heirs from being reduced. The donor is able to state that the gift is to fall within the disposable portion. It is also possible in some countries for the heirs to create a contract with the donee (either an heir or third party) that they will not make a claim for the reduction of the gift. 76 Pintens (n 1 above) 12.

Aim and Purpose  23 The clear conflict of laws surrounding this issue makes it a strong topic to assess from a traditional private international law perspective.

II.  Aim and Purpose This book therefore aims to identify the appropriate applicable law rule that will be suitable at an international level for the claim for the clawback of property from third parties who are not family members, whether it be for the purpose of satisfying the legitimate portion or for reasonable financial provision.77 It does not seek a solution that will only work at a regional level. From this point on, ‘clawback’ for the purpose of collation – ie, to reduce the advancements from heirs – although pertinent to the issue of characterisation, falls outside the scope of this book. The current private international law approach to the applicable law to the claim for clawback of inter vivos gifts made to third parties who are not family members does have the potential to affect estate planning, the security of title for the third party, as well as giving inadequate protection for legitimate heirs. The applicable law rule in the EU Succession Regulation, the law of the habitual residence of the deceased at the time of death, will also affect non-EU nationals78 who are habitually resident in a participating Member State or have immoveable property in a participating Member State. Within the EU, the rule also has the potential to affect the third-party donee who received an inter vivos gift unaware of the possibility that the gift may be at risk of a claim for clawback at an unknown time in the future, whereby they could be required to return the actual property or to pay the estate the value of the property or part of the value of the property. Outside the EU there appears to be little or no harmonisation of the applicable law rules on clawback and the national private international law rules on the point may often be uncertain. This is an area of law that has not been adequately addressed and is a topic in need of further analysis if the Hague Conference on Private International Law wishes to take its attempts at determining the applicable law for succession any further.79

77 The definition of what constitutes a ‘third party’ is restricted to those parties who are not a member of the family because, during the assessment of the laws of succession within the contracting Member States to the Succession Regulation, it became clear that the use of the term third party can mean anyone who is not a legitimate heir, which can therefore include close family members. Reduction of inter vivos gifts and bequests to family members is not contentious within private international law. 78 For the purpose of the EU Succession Regulation, Denmark and Ireland are considered as third States even though they are EU Member States, because they are not bound by the Regulation. See Beaumont and Holliday (n 10 above). 79 The lack of academic comment on clawback from third parties or available guidance on this topic, combined with the lack of translations available of civil codes means that any practitioner or affected party requiring information on this point is at a disadvantage. The substantive rules tend to focus on who is able to make the claim rather than from who can be claimed from, with the ability to reduce the gift to a non-family member more often implied rather than explicit.

24  Introduction With this in mind, the intention will be to identify a pragmatic and fair private international law solution, suitable to be used at an international level within a future Hague Convention or at a regional level in the EU Succession Regulation, by splitting the two issues of the rules for reduction of gifts to heirs for the purpose of collation, and the rules for clawback from third parties. In order to achieve this the characteristics of clawback from third parties for the purpose of maintaining a dependant of the deceased, where it can be demonstrated that the inter vivos gift was transferred in order to avoid providing the dependant with reasonable financial provision, which was not adequately considered for the purposes of the Convention or the Regulation, will also be considered. A truly ‘international’ private international law solution cannot be achieved if an issue is only viewed through a single lens. By taking common law approaches into account and by considering the differing ways the claim is characterised, the aim is to find a solution that would protect the legitimate expectations of all relevant parties and meet the aims of simplicity, flexibility and legal certainty in estate planning.80 As the EU Succession Regulation is in force and has the potential to affect many people, it will also be recommended that when the opportunity arises in the future to fine-tune the EU Succession Regulation it would be helpful to amend the flawed rules relating to the law applicable to clawback that survived the initial negotiation process, clearly separating the non-contentious rule for collation from a new provision for clawback from third parties. The European Commission’s wish that cross-border estate planning should invoke ‘serenity’ should not be considered to be a pipe-dream, but maybe as something to aim for, however unlikely in reality.81 By adopting a pragmatic approach, a theory used by the majority of British private international law scholars,82 the needs of affected parties will be considered, with recommendations being made to promote fairness and certainty in cross-border succession planning and in the process protecting the legitimate expectations of the donee and the donor’s intentions, or the expectations of a donee receiving a gift where there was no awareness that the gift could be clawed back at an indeterminate date in the future. It will also consider the legitimate expectations of the claimant who may be an heir or dependant.83 By using the evidence from the preparation and drafting of the EU Succession Regulation, this book will argue that a lack of understanding as to the extent of the diversity within the substantive law on clawback in the succession laws of the Member States contributed towards the difficulties faced by the UK during the

80 The relevant parties are the donor, donee and claimant. 81 Vice President Jacques Barrot, the member of the Commission for Justice, Liberty and Security, quoted in Europa Press Release, ‘The Commission proposes to simplify the settlement of international successions and to make the rules governing them more predictable.’ (2009) Brussels. 82 Beaumont and McEleavy, Anton (n 6 above) paras 2.87–2.99. 83 Consideration will also be given to the effect for parties from other major non-EU countries such as, Australia, South Africa and USA.

Methodology  25 negotiation stage.84 The objection to the lex successionis applying to clawback from a third party was seen solely as a common law problem; whereas in reality many of the EU Member States who joined post 2004 did not provide for it either. This fact has only been established as a result of the research conducted for this book. This lack of understanding contributed to some of the longer established Member States of the EU adopting a political stance during the final stages of the negotiations that failed to respect diversity in legal cultures. As it currently stands the general applicable law rule within the Regulation for the clawback of an inter vivos gift to a third party is inherently weak, and these weaknesses need to be addressed in order to meet the core aims: that of being able to plan an estate in advance with certainty; and for the rights of heirs and legatees to be guaranteed.85 By restricting the scope of the analysis to this one small but highly contentious point, the aim of the book will be to identify the most appropriate global and regional solution.

III. Methodology A.  Comparative Approach As part of a comparative project on the evidentiary effects of authentic instruments in the Member States of the EU in the context of succession, which the author worked on, a comprehensive questionnaire was compiled and sent out to academics and anonymous notaries in 25 Member States participating in the EU Succession Regulation.86 This questionnaire contained several questions on the 84 Recital 82 to the EU Succession Regulation: ‘In accordance with Arts 1 and 2 of Protocol No 21 on the position of the United Kingdom and Ireland in respect of the area of freedom, security and justice, annexed to the Treaty on European Union and to the Treaty on the Functioning of the European Union, those Member States are not taking part in the adoption of this Regulation and are not bound by it or subject to its application. This is, however, without prejudice to the possibility for the United Kingdom and Ireland of notifying their intention of accepting this Regulation after its adoption in accordance with Article 4 of the said Protocol.’ The UK and Ireland had made a decision not to opt into the Regulation from the outset under the UK and Ireland Protocol but remained part of the negotiating team with an option to ‘opt in’ at the end of the discussions. For Protocol 21 of the TFEU, see: http://eur-lex.europa.eu/legal-content/en/ ALL/?uri=CELEX%3A12012E%2FTXT (accessed on 8 June 2019). The decision that the UK was not opting into the EU Succession Regulation at the negotiation stage can be found at: https://www.publications.parliament.uk/pa/ld200910/ldselect/ldeucom/75/7503.htm (accessed 8 June 2019). See further, for the UK status in relation to the Regulation, Beaumont and Holliday (n 10 above) where at fn 18 it is recorded: ‘Scottish Government Consultation on Technical Issues of Succession (Scottish Government 2014): http://www.gov.scot/Resource/0045/00457666.pdf accessed 18 December 2015: “In 2012 the EU Regulation (No 650/2012) on Succession was adopted … The UK, as agreed with Scottish Ministers, will not be party to this Regulation when it comes into force in 2015.” 5.1’. 85 The aims of the Regulation are inferred from Recital 7 to the Succession Regulation. 86 For the co-authored study see the European Parliament Policy Department for Citizens’ Rights and Constitutional Affairs, P Beaumont, J Fitchen and J Holliday, ‘The evidentiary effects of authentic acts in the Member States of the European Union, in the context of successions.’ (2016)

26  Introduction issue of clawback. The data that was gathered on this point was not published in the final report on authentic instruments but is used in this book with the permission of my co-researchers and the national reporters.87 Where the responses to the questionnaire did not provide full answers to the questions, or in some cases where there was confusion between the concept of clawback and reduction of the gift for the purpose of collation, the relevant law in each country was referred to in order to fill in the gaps where it was possible to access the relevant information in either English or French. Where this was not sufficient, requests were made by email to specialists on succession law within the countries where the law was not clear, in order to obtain clarity. The author is very grateful to everyone who offered their help. It should be noted that the number of Civil Codes in EU Member States that are now available in English has increased since the work conducted by Professor Paisley in 2009 and this is to be commended for its consequences for ease of understanding within the EU. The questions relevant for this book that were asked within the questionnaire that was sent out to academics and notaries in every participating Member State were: 1. Clawback – please explain whether or not it is possible for a person entitled under a domestic legitimate portion/réserve héréditaire rule to bring a claim in connection with a life-time gift made by the deceased that has diminished the value of the estate (and hence the reserved amount that is owed to the claimant). 2. How is a ‘clawback claim’ commenced and how long is the limitation/ prescription period for such a claim? With hindsight, these questions contained a weakness that only became apparent on receipt of the responses. When designing the questionnaire, the questions were divided into questions relating to collation and separate questions relating to clawback. From the responses, it was evident that ‘clawback’ was being used to mean the reduction of the gift or advance for the purpose of collation, with several

The report is available online at: http://www.europarl.europa.eu/RegData/etudes/STUD/2016/556935/ IPOL_STU(2016)556935_EN.pdf (accessed 10 June 2019). The questionnaires were sent to National Reporters in mid-July 2015. The EU Succession Regulation entered into force on 17 August 2015. The reports were completed towards the end of 2015. The list of the National Reporters is available in Annex III of this book. I would like to take this opportunity to again thank the National Reporters for their responses to the questionnaire. The author is also grateful to the Council of the Notariats of the ­European Union (CNEU) which sent the questionnaire to its Members and delegates on the CNEU working group on succession. The CNEU circulated the questionnaire on a pro bono basis to its members and delegates in its working group on succession in August 2015. I am grateful to the 15 anonymous notaries who took the time to complete the questionnaire. 87 The author obtained permission to use the data within the national reports and is grateful for the support and encouragement she has received from the National Reporters. The author supports the view put forward by Professor Ralf Michaels that comparative law and private international law are inherently connected (see Chapter 4, fn 17 of this book) For further explanation on the relationship between comparative law and private international law see Chapter 4.

Methodology  27 reporters choosing not to report on the reduction of the gift made to a third party and filling in that section as if reporting on collation. In order to build on the work of Professor Paisley of the University of Aberdeen in his research on clawback, which was commissioned by the UK government for its Consultation Paper on the European Commission proposal on succession and wills, additional questions that were asked as part of that study were also considered. If the answers to these additional questions were not offered within the responses to the questionnaire then the author undertook to find the answers within the relevant laws where there were translations available in either English or French. Due to the comprehensive comparative research undertaken for the report on Authentic Instruments it was possible to expand Professor Paisley’s study from 13 EU Member States to 25 EU Member States.88 It is believed that this exercise provides a valuable comparative analysis of the substantive law of clawback from third parties that will be useful to practitioners, academics and legislators alike. The additional questions from Professor Paisley’s research that were considered were: 1.

Does the value of the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? 2. Is there a limit to the size of a compensation claim in respect of a gift made during the lifetime of the deceased? The substantive laws in relation to clawback from third parties in five other countries were also considered for the purpose of comparison to the countries within the EU that are bound by the EU Succession Regulation. These countries are Australia, Denmark, Ireland, South Africa, and the UK. Australia was chosen as a common law country whose citizens are known to live and work within the EU and therefore could be affected by the EU Succession Regulation. As the UK, Denmark and Ireland are considered to be ‘third countries’ for the purpose of the Succession Regulation, and with the outcome of the EU referendum within the UK meaning that the UK is now withdrawing from the EU, the author has opted to place the UK, Denmark and Ireland within the latter group of countries as opposed to being placed within the list of EU Member States albeit in a non-participating category. South Africa was chosen as an example of a country with a mixed legal tradition of common law and civil law. Desk-based research was utilised to prepare this book. The book considers documents that are in the public domain. The primary documents to be considered are the 1989 Hague Convention on the Law Applicable to Succession to the Estates of Deceased Persons, the EU Succession Regulation, the Inheritance (Provision for Family and Dependants) Act 1975, the Succession (Scotland) Act 1964 and 88 The countries that were considered within Professor Paisley’s research (n 10 above) were Austria, Belgium, Bulgaria, Cyprus, France, Germany, Greece, Italy, Malta, Netherlands, Poland, Portugal, Spain and South Africa.

28  Introduction relevant civil codes. The book takes into account the preliminary or background documents relating to the 1989 Convention, EU Succession Regulation and any subsequent official documents, any relevant case-law and secondary sources. The book considers all relevant documents produced prior to 31 March 2019.

B. Pragmatism This book takes a pragmatic approach which suits the final aim to produce an applicable law framework which would be of interest to the Hague Conference and the EU. Pragmatism, a concept founded by the German scholar Ernst Rabel, drawn from a comparative law methodology, gained momentum in the late ­twentieth century as a reaction against the ‘artificial theoretical barriers’ that Rabel viewed as an obstruction to conflicts law.89 It is characterised as ‘antitheoretical, favouring practicality and simplicity of solutions for specific legal problems and valuing the importance of justice.’90 The character of this approach is therefore suited to the needs of the book to find practical solutions to issues arising in the private international law of succession and to provide justice in relation to protecting the legitimate expectations of the relevant parties.91 The use of pragmatism in private international law scholarship is evident within the UK, the EU and the Hague Conference on Private International Law.92 Indeed the pragmatic approach to the working methods within the Hague Conference on Private International Law, which promotes the unification of

89 Beaumont and McEleavy, Anton (n 6 above) paras 2.88–2.90. E Rabel, ‘An Interim account on Comparative Conflicts Law’ (1948) 46 Michigan Law Review 625, 635. 90 Beaumont and McEleavy, Anton (ibid) paras 2.91–2.99. 91 The author considered the application of the economics theory, which advocates economic selfinterest through the use of party autonomy and the ability to circumvent mandatory rules, but rejected this approach due to the nature of succession and the UK’s expectation that an individual has a minimum duty of care to his dependants, which the individual should not be able to circumvent. For a brief summary of the economic model with private parties as relevant actors, see Beaumont and McEleavy, Anton (n 6 above) paras 2.102–2.104. 92 Pragmatism is evident within British scholarship in Anton by Beaumont and McEleavy (ibid) paras 2.87–2.99, supported by Professor Trevor Hartley in his review of Anton: T Hartley, ‘Review: Private International Law by AE Anton’ (2012) 8 Journal of Private International Law 407. The European Group for Private International Law also takes a pragmatic approach, see: http://www.gedip-egpil.eu/ (accessed 10 June 2019). One of the leading English books on private international law says: ‘There is no sacred principle that pervades all decisions, but when the circumstances indicate that the internal law of a foreign country will provide a solution more just, more convenient and more in accord with the expectations of the parties than the internal law of England, the English judge does not hesitate to give effect to the foreign rules. What particular foreign law shall be chosen depends on different considerations in each legal category. Neither justice nor convenience is promoted by rigid adherence to any one principle … Private international law is no more an exact science than is any other part of the law of England; it is not scientifically founded on the reasoning of jurists, but it is beaten out on the anvil of experience.’ Paul Torremans (ed), Cheshire, North and Fawcett: Private International Law, 15th edn (Oxford University Press, 2017) 37.

Methodology  29 private international law, has proven to be extremely successful in areas such as the 1980 Hague Convention on the Civil Aspects of Child Abduction. However, it should be noted that even within the Hague Conference, reconciling private international law within common law and civil law countries has not been without its difficulties, although there are signs of improvement.93 The pragmatic approach endeavours to consider the whole of the legislative process in order to achieve the proper administration of justice.94 It pays attention to how the rules are constructed and how they will work in practice.95 This aspect is crucial to attaining successful and just legislation. An issue during the drafting of the EU Succession Regulation was that concerns surrounding substantive succession law were ultimately sidestepped by the majority, leaving the legitimate expectations and property rights of individuals potentially unprotected. The creation of fair and just legislation is achieved through the evaluation of the interests of the individual. Whether the tool that is chosen to achieve this is the harmonisation of substantive private international law96 or the preference of substantive justice over conflicts justice,97 the intended outcome should remain at the heart of the drafting process. As part of the evaluation of the interests of the individual, this book briefly takes into consideration fundamental human rights, in particular rights in relation to property.98 Strictly speaking, the evaluation of human rights with respect to substantive succession law leans towards a theoretical approach rather than the pragmatic. However, Dr Lara Walker in her development of the scope of the pragmatic approach,99 considered that as human rights law forms part of the principles of law of the UK and the EU and plays a strong role in the interests of the individual, in order to take a pragmatic

93 Beaumont and McEleavy, Anton (n 6 above) 2.99. Hans Van Loon, ‘The Hague Conference on Private International Law: Current Problems and Perspectives’, p 33: https://www.ehu.eus/ documents/10067636/10678077/2002-Hans-Van-Loon.pdf/fc4a27f4-a808-f680-2096-77a413bf6033 (accessed 4 August 2019). Submission of Dr Alex Mills, ‘Review of the Balance of Competences: Civil Judicial Cooperation’ (Ministry of Justice, United Kingdom, 2013): https://www.gov.uk/government/ uploads/system/uploads/attachment_data/file/279300/dr-mills-evidence.pdf (accessed 4 August 2019). The Judgments Project shows evidence of current successful working practice between the common law and civil law jurisdictions see: https://www.hcch.net/en/projects/legislative-projects/ judgments (accessed 10 June 2019). 94 G Kegel, ‘Fundamental Approaches’ in International Encyclopaedia of Comparative Law. Volume III, Private International Law (Martinus Nijhoff, 1986) 12–16. 95 Ibid. This book will demonstrate that one of the reasons for the UK making the decision not to opt into the Succession Regulation was not the use of pragmatism by the UK negotiators being inappropriate, but rather a failure within the legislative drafting process that did not sufficiently promote inclusivity between the legal systems as required by EU Law, resulting in the premature acceptance by a majority of negotiators to agree to weak solutions in complex areas of law and therefore failing in the primary aim of pragmatism – to create legislation which offers proper justice for the individual. 96 Kegel (n 94 above) 14. 97 Ibid 15. 98 Art 1, First Protocol, European Convention on Human Rights 99 Lara Walker, Maintenance and Child Support in Private International (Hart Publishing, 2015) 7.

30  Introduction approach it is necessary to take fundamental human rights into consideration.100 Issues concerning the fundamental interests of the individual should be dealt with pragmatically at the drafting stage in order to protect the legitimate expectations of the individual. The book seeks to follow the school of pragmatism in order to offer practical solutions to support the simplification of international cross-border estate planning and intra-EU cross-border estate planning whilst promoting international cooperation and comity and protecting the property rights and the legitimate expectations of individuals. Emphasis on an understanding of how the substantive law works in practice is regarded by the author as essential to the creation of sound private international law.

IV.  Structure and Scope Within the UK there is no case-law regarding a cross-border claim to claw back an inter vivos gift from a third party.101 This does not mean that revising the private international law is unnecessary. The revision is necessary because the current applicable law rule for clawback from a third party is perceived as an issue that is so contentious that countries will refrain from signing up to private international 100 Ibid. 101 Lawrence Collins (gen ed), Dicey, Morris and Collins on the Conflict of Laws, 15th edn (Sweet and Maxwell, 2012) at para 27-015, asserts that under the private international law of England and Wales, ‘Where a person has made a gift or settled assets on trust shortly before death, the lex successionis may provide that such assets should be considered as part of the deceased’s estate for the purposes of calculating the compulsory share of a spouse or child. If, however, the gift or settlement on trust is valid and unimpeachable according to its governing law, then the assets no longer form part of the deceased’s estate and it follows that the lex successionis should not be applied in respect of those assets. See Pouey v Hordern [1900] 1 Ch. 494, 494; Underhill and Hayton, Law Relating to Trusts and Trustees (18th edn 2010), p. 1369. See also Gorjat v Gorjat [2010] EWHC 1537 (Ch.), where the deceased had instructed a bank to transfer certain Swiss bank accounts held in his own name into new accounts held in the joint names of himself and his second wife. When he died intestate some months later, the children from his first marriage challenged the validity of those transfers. The court characterised the issue as one relating to the validity of an inter vivos transfer, and not as a matter of succession see 152 below. Contrast ­European Commission’s Proposal for a Regulation on succession: COM(2009) 154, paras 27–136 et seq.’. The recent Lambton v Lambton case [2013] EWHC 3566 (Ch), although it speaks of ‘clawback’ was resolved as an issue of collation in that bequests left to the favoured heir, the son (moveables (valuable paintings) within the UK) were sold and the funds distributed equally between the siblings. The inter vivos gifts that were given to the son by the father were not reduced. The case was settled out of court, see text accompanying n 70 above. Cases in England and Wales involving the Inheritance (Provision for Family and Dependants) Act 1975 are primarily claims for reasonable financial provision, which, if the claim is successful, is taken from the estate at death. The estate of the deceased within the UK does not include the value of the inter vivos gifts. The English courts have upheld the concept of testamentary freedom and are firm in needing to see clear evidence of the claimant being maintained by the deceased: see Ames v Jones [2016] EW Misc B67 (CC), 2016 WL 04772447 and Ilott v Mitson [2017] UKSC 17, The additional issues surrounding the 1975 Act relate to problems identifying the domicile of the deceased (Musa v Holliday [2012] EWCA 1268) and the fact that there is no guidance as to the factors that need to be taken into account when trying to work out if an adult child is deserving of maintenance (Lady Hale Ilott v Mitson [49]–[66]).

Structure and Scope  31 law legislation because of it. The way the claim is characterised in different countries means that merely ‘tweaking’ a succession rule doesn’t solve the perceived ­problems.102 A more refined solution is required. Chapter two will begin by setting out elements that support good legislative drafting by considering the principles of legal certainty and legitimate expectations of the relevant parties. In this book the relevant parties are the donor of the inter vivos gift, the donee of the inter vivos gift (referred to as the third party in this book) and the claimant. In some countries, it is possible for the legitimate heirs to claim not only against the donee but also against a buyer of the gifted property from the donee, or from an heir of the donee, or from someone that the original donee donated it to, in order to satisfy the legitimate portion. However, clawback from such buyers/donees and heirs is beyond the scope of this book due to the change in the nature of the transaction between the donee and such parties. It is also possible for the claimant in a civil law tradition to be a creditor and not an heir. The issue of insolvency will also not fall within the scope of the book. This chapter will argue that failure to conduct appropriate comparative substantive legal research resulted in a lack of understanding as to the extent of the legal and cultural diversity, which in turn led to the acceptance of private international law rules which are not fit for purpose. Chapter three endeavours to support the argument in Chapter two by describing the substantive laws in relation to clawback from third parties in the civil law countries that are participating in the EU Succession Regulation and from five common law/mixed legal systems. The findings will be compared with the aim of identifying the extent to which clawback from third parties to protect the legitimate portion is regulated within these countries. The book will then focus on two key areas within private international law: characterisation of the claim (Chapter three) followed by what is the most appropriate connecting factor for the new applicable law framework (Chapter four). Chapter four considers the nature of the claim for clawback from third parties as the precursor to identifying an appropriate applicable law solution. The applicable law rules relevant to the claim to claw back a gift from a third party within the 1989 Hague Convention and the EU Succession Regulation will be assessed. It will be argued that characterising the claim for clawback from third parties as succession results from a partial understanding of the substantive law picture. Yes, the vast majority of the countries at one point in the history of the EU regarded ‘clawback’ as a succession issue (ie prior to the expansion in 2004) but when explored more fully it would also appear that this categorisation arises because the term ‘clawback’ is commonly used as a generic term for the reduction of gifts which encompasses the non-contentious reduction of inter vivos gifts for the purpose of collation. These points need to be distinguished. When this is taken into account, a third of Member States do not allow for the reduction of gifts that were given to

102 Holliday,

Boundaries of European Private International Law (n 10 above) 298–309.

32  Introduction third parties. Neither the Hague Convention nor the EU Regulation sufficiently acknowledged the countries that do not use clawback from third parties, leaving the parties themselves, presumably along with the associated legal costs, to work out any legal uncertainty.103 The chapter will also consider the character of clawback of inter vivos gifts to third parties for the purpose of maintaining a dependant of the deceased within the UK, to assess whether this type of claim falls within the law of maintenance rather than succession. The law of England and Wales permits clawback from a third party for the purpose of obtaining maintenance from the estate of the deceased where the deceased has not provided for the dependant as a result of making inter vivos gifts intended to defeat a legitimate financial provision.104 It is necessary for the purpose of this book to consider the various approaches to claims for clawback from third parties that protect not only heirs but dependants (who may not be heirs) of the deceased in order to obtain a balanced picture of what the revised law needs to achieve. Based on the evidence presented in Chapter four it will be argued in Chapter  five that a claim to claw back an inter vivos gift from a third party requires a sui generis approach to determining the applicable law. Chapter five will consider the issues relevant to ‘international’ private international law; the issue of party autonomy; the law applicable in the absence of acceptable party autonomy; whether the revision requires a manifestly closer connection exception to the objective applicable law rule when the parties have not agreed or are not allowed to agree the applicable law; overriding mandatory rules and public policy; and options for modal law in order to support estate planning and legal certainty for the parties. The issues that fall outside of the scope of the book are: • Insolvent estates.

103 In the UK, the inter vivos gift does not form part of the estate and therefore does not fall within the law of succession. A valid gift within the UK would be governed by Rome I. The EU Succession Regulation came into force in July 2015. So far there have been no cases on clawback before the CJEU. 104 Section 10, Inheritance (Provision for Family and Dependants) Act 1975, ‘Dispositions intended to defeat applications for financial provision. (1) Where an application is made to the court for an order under section 2 of this Act, the applicant may, in the proceedings on that application, apply to the court for an order under subsection (2) below. (2) Where on an application under subsection (1) above the court is satisfied – (a) that, less than six years before the date of the death of the deceased, the deceased with the intention of defeating an application for financial provision under this Act made a disposition, and (b) that full valuable consideration for that disposition was not given by the person to whom or for the benefit of whom the disposition was made (in this section referred to as “the donee”) or by any other person, and (c) that the exercise of the powers conferred by this section would facilitate the making of financial provision for the applicant under this Act, then, subject to the provisions of this section and of sections 12 and 13 of this Act, the court may order the donee (whether or not at the date of the order he holds any interest in the property disposed of to him or for his benefit by the deceased) to provide, for the purpose of the making of that financial provision, such sum of money or other property as may be specified in the order.’

Conclusion  33 • The ability of creditors of the heirs to claim for the clawback of the inter vivos gift. • Clawback from a third-party buyer or heir who is not the original third party non-heir donee. • Gifts given to trusts. • Donations mortis causa. • Matrimonial property. • Domestic property law.

V. Conclusion Legal certainty is a necessary requirement in cross-border estate planning.105 The number of people who are relocating within Europe and globally is increasing, with more people owning property in different countries.106 At present, the private international law rule concerning the general applicable law to a claim to claw back an inter vivos gift from a third party does not give legal certainty to the donor or donee at the point at which the property is transferred.107 Nor does it give certainty to the claimant. The current rule is also not suitable for use within a global private international law context, as it fails to acknowledge the diverse nature of the claim within different legal traditions. The suggestion that the solution to this problem is that the reader ought to infer from the Succession Regulation that the donee’s property rights are protected in countries which do not use clawback of gifts from third parties is unsatisfactory, as it lacks clarity and favours the legitimate expectations of the donee to the detriment of the claimant – the very parties the Succession Regulation was trying to protect. The flawed applicable law rule for claims in relation to third parties was sufficient to stop the UK opting into the Succession Regulation.108 The rule may not have  led to litigation prior to harmonisation of the rules in the Succession Regulation but the lack of certainty is a real problem for those wanting to draft private international law on the applicable law to succession. By analysing the nature of the claim and taking into account the legitimate expectations of the parties, a sui generis approach to determining an applicable law framework for a

105 Lagarde (n 26 above) Art 23 para 43. Metallionos (n 34 above) 277. Holliday, Boundaries of ­European Private International Law (n 10 above); Pfeiffer (n 12 above). 106 For international migration figures, see the OECD: http://www.oecd.org/migration/internationalmigration-outlook-1999124x.htm (accessed 10 June 2019). 107 Pfeiffer (n 12 above). 108 Letter from the Hon. Mr Justice David Hayton: https://www.publications.parliament.uk/pa/ ld200910/ldselect/ldeucom/75/75we05.htm (accessed 10 June 2019).

34  Introduction future Convention will be recommended. The aim will be to put forward possible solutions that will improve legal certainty, protect the legitimate expectations of the parties involved and be practical to use. This is in line with the pragmatic approach taken by the Hague Conference on Private International Law. To the author’s knowledge there is no one else working on this issue from this perspective and therefore the recommendations for the applicable law framework and the modal law rules to support the overall aims, as found within this book, are regarded as new knowledge and of value to future development of the law in this area.

2 Legislative Drafting ‘Building Bridges’1

Expertise in the technical aspects of private international law, such as being able to recognise and address problems caused by characterisation issues, is fundamental to the crafting of high-quality legislation. Without this knowledge, the negotiation process is at best hampered by the need for prolonged explanation on each point and at worst, generates misunderstanding. The misguided pursuit of what is perceived to be legal certainty by those without an understanding of private international law and the underlying comparative substantive issues can result in agreements that are flawed from the outset.2 Unfortunately, and to the detriment of good legislative drafting, at least within the EU, there has been a trend for Member States not to send experts in private international law to the negotiating table, a trend that needs to be reversed.3 A lack of adequate preparatory research by the EU Commission prior to the Succession Regulation negotiations, combined with a lack of technical expertise amongst the negotiators, was evident during the drafting of the Succession ­Regulation.4 The lack of comparative legal knowledge in relation to clawback in the

1 Van Loon, ‘The Hague Conference on Private International Law: Current prpoblems and perspec­tives’: https://www.ehu.eus/documents/10067636/10678077/2002-Hans-Van-Loon.pdf/fc4a27f4a808-f680-2096-77a413bf6033 p 33, noted ‘the reserved share (the légitime), which is known in the law of succession of the civil law countries and not in the common law’, highlighting the stark difference between the legal cultures and that to build bridges between the systems requires patience and imagination. 2 Wim Voermans, ‘Concern about the quality of Legislative Drafting’ (2009) 2 Erasmus law Review (accessed here: http://www.erasmuslawreview.nl/tijdschrift/ELR/2009/1/ELR_2210-2671_2009_002_ 001_004.pdf, 4 August 2019). Van Calster notes that ‘(especially within EU private international law) legal certainty takes precedence over suitability’ in Geert Van Calster, European Private International Law (Hart Publishing, 2013) 1. 3 ‘Cross-Border Litigation in Europe’ Jean Monnet Workshop Report No 1, 4 October 2012: http:// www.abdn.ac.uk/law/research/events-150.php (accessed 10 June 2019). Katarina Trimmings, Child Abduction within the European Union (Hart Publishing, 2013) 23. 4 The preparatory research commissioned by the EU Commission, which was conducted by people from Germany and France, did not differentiate between the reduction of gifts for the purpose of collation and the reduction of gifts to third parties for the purpose of satisfying the legitimate portion, and focused on the reduction of gifts for the purpose of collation, which was described as ‘clawback’. See Étude de droit comparé sur les règles de conflits de juridictions et de conflits de lois relatives aux testaments et successions dans les Etats membres de l’Union Européenne by the Institut Notarial Allemand

36  Legislative Drafting differing Member States or even within a negotiator’s home state was significant, and ultimately contributed to the acceptance of an ineffective connecting factor for a claim to claw back an inter vivos gift from a third party, even by Member States who should have been aware that their domestic law did not provide for clawback from third parties. Xanthaki notes that the way to measure the quality of legislation is to look at whether it is effective, whether it has clarity, precision and is unambiguous.5 The difficulty with drafting private international law is that a rule that may appear to be acceptable from one country’s perspective is not acceptable from another’s. Having said that, the rule that was permitted to apply to these claims to claw back the inter vivos gift from third parties within the Succession Regulation should not have been acceptable from anyone’s perspective, as it is really only suited to collation and to domestic legislation where all parties would be aware that clawback was part of the legal culture. The ability to understand how legal issues are characterised within the differing legal traditions is necessary for shaping appropriate, fair and inclusive private international law legislative rules. Drafters should be prepared to think outside of the box and question accepted practice if something does not work. Trying to tweak existing collation rules or to tag on a hastily prepared additional applicable law rule for clawback from third parties – to satisfy the legal needs of countries which do not use clawback from third parties for the purpose of succession – is not best practice. Without this knowledge and willingness to be proactive to find a solution that is inclusive of the legal cultures the legislation is destined to be used in, it is all too possible for an issue to be swept under the carpet, or, as was the case during the Succession Regulation negotiations, misunderstood as being a political rather than a legal problem, and risks alienation.6 An unexpected but quite revealing finding during the research for this book was the negative impact that politicians can have on legal negotiations. In an email to the author dated 6 May 2014 the UK’s Secretary of State for Justice at the in co-operation with Professors Heinrich Dörner and Paul Lagarde, available at: http://ec.europa.eu/ civiljustice/publications/docs/testaments_successions_fr.pdf (accessed 10 June 2019). The difficulty with this is that the reduction of the gift or advance for collation is not contentious and is accepted as a succession issue, whereas the clawback from a third party is not. Another crucial flaw by the Commission was that the preparatory research was not updated to include the substantive laws of the Member States that joined the EU after the project’s completion. If it had updated the research and distinguished the issues it would have been clear that there was a conflict in characterisation of the clawback from third parties which needed to be addressed and that it was not solely a common law problem. 5 Helen Xanthaki, Drafting Legislation: Art and Technology of Rules for Regulation (Hart Publishing, 2014) 211. 6 This was a problem during the Succession Regulation negotiations. Although all parties were aware that ‘clawback from third parties’ was a major issue for the UK, the Presidency did not put the topic on the agenda to be discussed until the Succession Regulation was almost completed and the political clock was ticking to finalise it, leaving insufficient time for thorough analysis, explanation or constructive discussion. J Holliday, ‘Reconciling the European Union Succession Regulation with the Private International Law of the UK’ in J-S Bergé, S Francq and M Gardeñes Santiago (eds), Boundaries of European Private International Law (Bruylant, 2015) 298–309.

Legislative Drafting  37 time of the negotiations acknowledged that during the negotiation period of the Succession Regulation:7 I told Viviane Reding that I would be very pleased if we could reach some Europeanwide Regulation, but I probably did indicate … that I thought it very unlikely that the British would be persuaded to import the concept of clawback into our Law.

This statement is understood by the author to have been made prior to the negotiations relating to clawback having taken place, as it was prior to the request by the Secretary of State for Justice for the negotiations to be extended in order to discuss the issue of clawback, the very topic that the EU believed to be an impossible hurdle to a UK opt-in. Although speculative, it is possible that this remark by a cabinet minister negatively influenced the perceived position of the UK among other Member States during the negotiations, a conversation that the UK negotiators were unaware of, which resulted in certain Member States being particularly obstructive on this issue. During the negotiations, the UK negotiators felt that the Member States and the Commission had concluded that the UK ‘lacked the necessary political commitment ever to become a party to the (Succession) Regulation.’ This ‘feeling’ on the part of the negotiators was indicated in a talk given by Oliver Parker, Legal Adviser in the Ministry of Justice 1993–2014 and negotiator for the UK on the Succession Regulation.8 From analysing the private notes and records of the UK negotiating team it is clear that the rule relating to the reduction of gifts for the purpose of collation was not an issue. The reduction of gifts to third parties was an issue for the UK, Cyprus and Ireland, with only Slovakia supporting the need for amendment to the rule.9 If we ignore the fact that the law of England and Wales does use a form of clawback from third parties under the 1975 Act, albeit not for the purpose of protecting a legitimate portion, a potential defence to the position put forward by the UK Secretary of State is that it may have been influenced by the evidence given to the House of Lords EU Select Committee on whether the UK should opt into the Succession Regulation. The evidence that was presented did not sufficiently underline that the reduction of inter vivos gifts for the purpose of collation was not a particular problem to the UK, in fact the UK negotiators expressed this clearly

7 For the full transcript of the emails between the author and The Right Honourable Kenneth Clarke, QC, MP see Annex I. 8 The possibility that Member States and the Commission had concluded that the UK ‘lacked the necessary political commitment ever to become a party to the (Succession) Regulation.’ was noted by Oliver Parker in his ‘Talk on the experience of a government private international lawyer given at the Centre for Private International Law, University of Aberdeen (30 April 2014)’: http://www.abdn.ac.uk/ law/content-images/piltalk.docx (accessed 10 June 2019). 9 The research for the book has shown that clawback from third parties was an issue for many more countries sitting at the negotiating table but they were not vocal and it was left to the UK, Cyprus and Ireland to fight their corner. A legal compromise may have been attainable on this point. Slovakia (as a country that does not have clawback from third parties within its succession law) was the only other country to openly support the need for a change to the rule. The support by Slovakia was noted in unedited notes made during the drafting of the Succession Regulation by Professor Beaumont.

38  Legislative Drafting during the Succession Regulation negotiations,10 and that it was only the reduction of the inter vivos gift to a third party to protect the legitimate portion that was problematic.11 If certain factors had been highlighted – namely: that there was a lack of case-law on this point and therefore in reality the threat to property law was extremely low; that there was a possibility, as is the case in some legal systems, that gifts to charities could be exempt from clawback apart from in cases of avoidance (which would have appeased the English charities lobby as they are not exempt from clawback under the 1975 Act); that the most common claim is a monetary claim, not a claim for the property itself; and that the scope of what was meant by ‘inter vivos gift’ could be restricted to gifts that were recorded as being relevant for the purpose of succession rather than the UK’s broad interpretation to mean all gifts – it may have made the negotiators’ position easier. Unfortunately, these terms were not defined for the purpose of drafting the Succession Regulation. During the development of the Succession Regulation, the lack of willingness to address the question of how the claim should be characterised within private international law proved to be critical for a UK opt-in.12 Conflict over whether clawback was a succession issue or not was the main point of contention.13 With the necessary level of knowledge, all parties to the negotiations should have been able to immediately identify that these issues would require careful consideration in order to find suitable and inclusive solutions that would allow Member States from all legal traditions to be comfortable with the Regulation.14 Unfortunately a majority approach was taken to the decision which fundamentally ignored

10 Proposal from Cyprus and the United Kingdom, The Council of the European Union JUSTCIV 60 CODEC 268 (7 April 2010) 3: ‘The proposed exclusion of clawback claims from the Regulation is not intended to alter the position under the Regulation in relation to any obligation which may fall on heirs or legatees to restore or account for lifetime gifts made to them by a deceased testator and the taking of them into account when determining their shares. This kind of adjustment of the shares of heirs and legatees to reflect what they may have received from the testator during the latter’s lifetime is widely recognized in the laws of the Member States. Under the law of England and Wales it is known as hotchpot and under Scots law as collation. Equivalent arrangements exist under the law of Cyprus. It is designed to ensure an equalization of benefits which the heirs may have received as a result of advances made by the testator in his lifetime. It does not affect the interests of third parties.’ It is also clear that the UK courts support the concept of equity between siblings and request that bequests are distributed equally to take that into account (Lambton v Lambton [2013] EWHC 3566 (Ch).) (See Chapter 1, fn 70). 11 See Professor Matthews, House of Lords EU Committee (Chapter 1, fn 37) Q 28 (pp 22–23). Clawback was raised as a ‘redline’ issue for the UK in the Supplementary letter from Lord Grenfell, Chairman of the European Union Committee, to Bridget Prentice MP, Parliamentary Under Secretary of State, Ministry of Justice of 25 October 2007 in HL European Union Committee, see: https://publica​ tions.parliament.uk/pa/ld200708/ldselect/ldeucom/12/7101005.htm (accessed 10 June 2019). 12 There were two issues that proved to be especially difficult to characterise, administration of estates and the issue of clawback, both of which are not characterised as succession by the UK. 13 Paul Beaumont and Peter McEleavy, Anton’s Private International Law, 3rd edn (W Green/SULI, 2011) 1063. 14 Holliday, Boundaries of European Private International Law (n 6 above). Commission of the ­European Communities, Green Paper: Succession and Wills, COM (2005) 65 final 1 March 2005.

Legislative Drafting  39 the countries in the EU which do not provide for claims to claw back gifts from third parties.15 When drafting private international law, the aim of the Hague Conference on Private International Law and the EU is to create legal certainty for individuals through the creation of harmonised and unified rules.16 This aim is threatened by what are understandable, if not necessarily justifiable, economic constraints in relation to providing the drafters with the necessary legal knowledge and understanding through the production of thorough and high-quality comparative legal research prior to the negotiations. The requirement to provide high-quality comparative research of the substantive law is recognised and understood by the institutions that initiate new legislation as a necessary component of creating truly pragmatic private international law solutions; solutions that seek to solve real issues through ‘reasonable, fair and liberal systems … applied in the spirit of supranational co-operation and comity’.17 However, if we also consider that in addition to starting a negotiation process with insufficient comparative legal knowledge and understanding, we also add the rather unattractive human traits, of being satisfied by the mediocre or the familiar, or staying silent when faced with something that is not clear rather than admit a lack of understanding, then it should come as no surprise when there are flaws in the final draft. Left unchecked, these factors will erode the reputation of private international law as a whole, as private international law conventions are left unratified and for example, the Court of Justice of the European Union is consciously (mis)used as a tool to address any gaps in the law left by the negotiators. Private international law relating to succession is inherently complex. Any attempt to draft legislation in this area without providing the drafters with the necessary comparative knowledge and understanding is nothing short of remiss. The fact that there was inadequate comparative research conducted in preparation for the EU Succession Regulation, in particular in relation to the choice of law 15 Analysis of the substantive laws of the EU Member States identified indicates that there are nine States that do not use clawback from a third party. This information was not available at the time of the negotiations and not helped by the silence by the new Member States to put forward that their position on this differed from the ‘Old’ EU Member States. 16 The aim of the Hague Conference on Private International Law (HCCH) is to work towards ‘progressive unification of private international law rules’, Art 1, Statute of the Hague Conference on Private International Law: https://www.hcch.net/en/about (accessed 10 June 2019), and the Permanent Bureau asserts on the Conference website under the heading ‘REINFORCING LEGAL CERTAINTY AND SECURITY’, that: ‘The ultimate goal of the Organisation (HCCH) is to work for a world in which, despite the differences between legal systems, persons – individuals as well as companies – can enjoy a high degree of legal security.’ TMC Asser, a founder member of The Hague Conference on Private International Law was described as having ‘a reputation for pragmatism, a skill that allowed him to broker compromises and break stalemates in international negotiations.’ Geert de Baerer and Alex Mills, ‘TMC Asser and Public and Private International Law: The Life and Legacy of “a Practical Legal Statesman”’ (2011) 42 Yearbook of Private International Law 3–36. 17 European Group for Private International Law (Group européen de droit international privé (GEDIP)) found at: http://www.gedip-egpil.eu/present_eng.html (accessed 4 August 2019).

40  Legislative Drafting applicable to the substantive issue of clawback, is in part what this book seeks to redress.

I.  Legal Diversity and the Need for High-Quality Comparative Research Comparative research of the substantive law and of the private international law is needed when drafting international or regional private international law to enable the drafters to have a clear understanding of the legal problems that may arise when creating a private international law solution that will work across all countries. The civil law traditions and common law traditions still currently handle succession rights quite differently. A fundamental difference at the substantive level within the EU is seen in the succession rights of the spouse and issue. These differ dramatically depending on whether the legal tradition is based on a familycentric approach to succession or favours testamentary freedom.18 Having said that, there is evidence to show that these differences are lessening as a result of sociological changes within the EU; with the family-centric approach becoming more amenable to supporting the spouse, and with the testamentary freedom approach bringing in checks to prevent those that were being maintained by the deceased from being left in poverty.19 Historically, the Member States whose legal tradition was based on the ­Napoleonic Code initially placed the blood relative at the heart of their succession laws. This placed the spouse (who was not a blood relative) in a weak position.20 This situation is now visibly changing as the concept of family within these Member States changes from being the ‘blood relative’ to one of a ‘community of life, to which the spouse belonged by nature’,21 although it should be noted that the spouse is still not as protected in these Member States as they would be under the current Nordic and many common law systems.22 France has moved from a position where historically the spouse was not considered an heir, to where the spouse has an option of a life interest of the whole inheritance or a portion of the property, dependent on whether there are issue.23 Of note is that 18 W Pintens, ‘Need and Opportunity of Convergence in European Succession Laws’ in M Anderson and E Arroyo i Amayuelas (eds), The Law of Succession: Testamentary Freedom (Europa Law Publishing, 2011) 8–17. 19 An example of protection against a loss of maintenance in a country that favours testamentary freedom can be found in the law of England and Wales, the Inheritance (Provision for Families and Dependants) Act 1975 (see J Holliday, ‘Characterisation within Private International Law: Maintenance or Succession?’ in P Beaumont, B Hess, L Walker and S Spancken (eds), The Recovery of Maintenance in the EU and Worldwide (Hart Publishing, 2014) 443). 20 Pintens (n 18 above) 8–17. 21 Ibid. 22 Ibid. 23 Art 757 French Civil Code. Pintens (n 18 above) 9.

Legal Diversity and the Need for High-Quality Comparative Research  41 none of the systems that utilise the protected heirship regime allow a cohabitant as a legitimate heir.24 In contrast, in England and Wales and Northern Ireland the scope of claimant is broad, in that the requirement is that they were a dependant of the deceased and they do not need to be an heir. This extends the protection to supporting the needs of cohabitants and others. The Germanic legal tradition currently works on the principle of splitting the estate between the spouse and issue based on clear statutory portions. The Nordic legal tradition also divides the estate of the deceased equally between the spouse and the issue, if any, and favours the spouse above other family members if there are no issue. The common law tradition as found within England and Wales and Northern Ireland, depending on the size of the estate and notwithstanding testamentary freedom, favours the spouse over the issue. However, historically English Law also favoured a ‘blood heir’ approach to succession, flickers of which can still be seen in contemporary succession cases that involve heritable property such as farms.25 Scotland, as a mixed legal system, has a system of forced heirship. Ireland, albeit a common law system, also has a system of forced heirship. The influence of each legal tradition on the substantive law in a particular country is of particular importance when it comes to the issue of clawback from third parties.26 This book will demonstrate that the relationship between the legal tradition and the provision for clawback from third parties is complex. From the comparative analysis, it was possible to identify six different approaches. A brief summary from the following Chapter three notes that there are: • Countries that have a legitimate portion rule, consider inter vivos gifts to be part of the fictive estate and allow for clawback from third parties to satisfy the legitimate portion (eg Belgium, France, Germany, Italy, Poland and Spain). In addition, there are countries like the Netherlands where the clawback claim is discretionary, to take into account fairness to the donee. • Countries that have a legitimate portion rule but do not consider inter vivos gifts to be part of the estate and do not provide for clawback from third parties (eg Estonia, Finland, Scotland, Slovakia and Sweden). • Countries that have a legitimate portion rule, do not consider inter vivos gifts to be part of the estate, but do have a discretionary rule for clawback from third parties, with the requirement that there has to have been an evasion of responsibility by the donor to maintain the dependant (Cyprus). • Countries that have a legitimate portion rule, do not consider inter vivos gifts to be part of the estate, but do have clawback from third parties. The rule is there to protect the evasion of forced heirship. The gift has to have been made 24 See Annex IV and Chapter 3 at IIIG for a detailed summary of who is considered an heir for the purpose of the legitimate portion. 25 Pintens (n 18 above) 9. 26 This point will be discussed in Chapter 3: Clawback: A Comparative Analysis.

42  Legislative Drafting with the purpose of disinheriting the spouse or children. The gift has to have substantially diminished the estate (Ireland). • Countries that have testamentary freedom and therefore do not have a legitimate portion rule but do have a discretionary rule for clawback from a third party if there has been an evasion of the duty to maintain a dependant (England and Wales and Northern Ireland). • Countries that do not have a legitimate portion rule, do not consider inter vivos gifts to be part of the estate and do not have a discretionary rule for clawback from a third party if there has been an evasion of the duty to maintain a dependant. (Australia and South Africa). Those who value this cultural and historical diversity advocate harmonisation of private international law as a method of preserving the legal traditions and expectations of the heirs,27 whereas others recognise that succession law is not static, in that it adapts as societies embrace laws from neighbouring states and that values within the society change.28 The common move towards strengthening the position of the spouse over the rights of the children, would suggest that the substantive succession law within the EU is moving towards harmonisation. These things cannot be rushed and the speed that governs the ability for a society to accept change is slow. People need a chance to prepare; especially, it is argued, in relation to succession law. In the contemporary social/legal context it makes sense that the EU restricts harmonisation to private international law. However, the lack of appropriate highquality comparative legal research which would have identified the countries that only allow claims for the reduction of gifts for the purpose of collation and not for clawback from third parties, combined with the subsequent lack of understanding of the needs of the common law tradition which allows claims by dependants for gifts given to third parties where there is evidence of evasion, means that the Succession Regulation was clearly not neutral and favoured the Franco/ Germanic civil law traditions, which were the legal traditions of the countries where the people responsible for the initial preparatory research for the Succession Regulation came from.29 This is not in itself a criticism. All the countries that do not provide for clawback from third parties were present during the negotiation process, and (excluding Slovakia who fought alongside the UK, Ireland and Cyprus on this point) did not join the debate, leaving it to become a ‘common law/ civil law’ fight when it was actually anything but. 27 Pintens (n 18 above) 6. 28 Ibid, 7–8. 29 The questionnaire created for the preparatory research of the Succession Regulation did not ask a direct question on the issue of reduction of gifts. The question that was most connected to the issue of reducing a gift was a question concerning whether an inter vivos gift was taken into account when valuing the reserved share. Geert Van Calster asked: ‘Will gifts made by the testator or contracts on marital property be taken into account when calculating the amount of the forced share?’ Van Calster, European Private International Law (n 2 above).

The Principles of Legal Certainty and Legitimate Expectations  43

II.  The Principles of Legal Certainty and Legitimate Expectations The principle of legal certainty30 is broad and includes the principles of legitimate expectations, the principle of non-retroactivity and the principle of res judicata. The principle of legal certainty is a necessary factor for the rule of law.31 Within EU law these factors are protected and legislation that falls short of these requirements is regarded as unlawful.32 As previously stated, the general applicable law rule within the Succession Regulation, when applied to the claim for clawback, breaches the requirements for legal certainty. The rule has the rather unsettling effect that the law that governed the inter vivos gift at the time it took place can be overturned and the lex successionis applies retrospectively. Also, gifts that were given by the deceased prior to the Regulation coming into force become relevant for satisfying the legitimate portion.33 The retroactive nature of the applicable law rule is unacceptable on many levels, with the main objection being that it does not afford legal certainty for either the donor or the donee and is therefore contrary to the aims of the Regulation as identified in its Recital 7. The choice of law rule, if used, is also problematic. As Magdelena Pfeiffer points out, legal certainty can only be achieved in relation to clawback under the current Regulation where: … an informed and active testator can secure predictable clawback rules for all involved by choosing his lex patriae as the law applicable to his succession prior to making the gift, informing the donee and the heirs of his choice of law, and not revoking it before his death.34

As it is more common for people not to make a will than to make one (indeed in some countries making a will is regarded with a degree of superstition that it will jinx the person making it)35 it is suggested that the Succession Regulation is 30 Case 43/75 Defrenne v Sabena (No 2) [1976] ECR 455. 31 Gustav Radbruch and Lon Fuller, The Morality of Law, 2nd edn (Yale University Press, 1969). For a brief history of the principle of legal certainty from ancient Greece to the modern era, see Jérémie Van Meerbeeck, ‘The principle of legal certainty in the case-law of the European Court of Justice: from certainty to trust’ (2016) 41 European Law Review 275–88, argues for the need for a multidisciplinary approach to the law making, such as the need for ‘linguistic and communication sciences’ and ‘Sociological research’. Jean-Francois Gerkens, ‘Legal Certainty v Legal Precision, some thoughts on Comparative Law’, Paper presented at Tilburg Institute of Comparative and Transnational Law, March 2009, 121–29, 128 highlights the problems that arise as a result of writing in a language that is not your own when making private international law. 32 Takis Tridimas, The General Principles of EU Law, 2nd edn (Oxford University Press, 2006) Ch 6. 33 M Pfeiffer, ‘Legal certainty and predictability in international succession law’ (2016) 12 Journal of Private International Law 566–86, 584. Art 83 Succession Regulation. 34 Pfeiffer (ibid), 584. 35 Private conversation with Dr Fernando Pedro Meinero, expert in succession law and private ­international law at the Journal of Private International Law Conference in Rio, Brazil (August 2017), about the reason why there is such a low number of people writing wills in Brazil.

44  Legislative Drafting rather optimistic on this point. The key word in this quote is ‘informed’: not an easy thing to be when even the European Commission’s guidance to consumers of the Succession Regulation fails to warn citizens of the retroactive nature of the Succession Regulation on inter vivos gifts other than a reference to the fact that it applies to the restoration of gifts to protect reserved shares.36 It is far more pragmatic to ask the donor to agree to a law to apply to claims relating to the inter vivos gift than to expect him to make a will that will be stable throughout his life. When trying to encourage people to make wills we have to accept that many people will not do so.37 The stability of the law relating to the inter vivos gift being dependent on the donor making a will that includes the choice of the law of his or her nationality to govern his or her succession and informing all the parties is unreasonable. Even when viewed from the alternative perspective that the donor and donee were familiar with clawback and understood that the gift could be reduced to satisfy the legitimate portion if the will were revoked and the new succession law does not use clawback, it leaves a donee in the position of making decisions in relation to the gift that could be ultimately irrelevant if the will is revoked. The fact that the law in relation to the clawback of an inter vivos gift from a third  party can change at an indeterminate point in the future depending on whether (i) someone chooses not to make a will and changes their habitual residence to a Member State that uses clawback or not, as the case may be, or (ii) only at the end of their life makes a will choosing the law of their nationality which uses clawback when for most of their lives they have been habitually resident in countries that do not, thus suddenly bringing inter vivos gifts into the scope of being reduced to satisfy the legitimate portion, is nonsensical. Prior to the finalisation of the Succession Regulation there were suggestions that the solution to the legal uncertainty for the donee would be to have a special conflict of laws rule in the Succession Regulation to apply to the inter vivos gifts of the deceased.38 Again this solution does not differentiate between inter vivos gifts that can be reduced or taken into account for the purpose of collation and inter vivos gifts that can be reduced for the purpose of clawback from a third party. This idea was rejected during the negotiation process, as it 36 Cross-Border Successions, A Citizen’s Guide (2018) 15 http://op.europa.eu/en/publication-detail/ publication/61afb4c0-a71b-11e7-837e-01aa75ed71a1 (accessed 22 December 2019). 37 See the text to n 35 above for one reason, another is procrastination and another may be that the testator assumes that the intestate rules are good and that there is no need to make a will. 38 Holliday, Boundaries of European Private International Law (n 6 above); Pfeiffer (n 33 above), 584; Max Planck Institute for Comparative and International Private Law, ‘Comments on the European Commission’s Proposal for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession’, p 86: http://www.europarl.europa.eu/document/activities/cont/201005/20100526ATT75035/20100526ATT 75035EN.pdf (accessed 10 June 2019); Working Party suggestion by UK on clawback, Council of the European Union, Proposal from Cyprus and the United Kingdom, 7 April 2010, JUSTCIV 60, 3. For further details of UK Working Party suggestions see Chapter 4 on Characterisation.

Legal Certainty under the Succession Regulation  45 was felt by certain countries that it would leave the ‘door wide open for evasion’.39 This response is reasonable when trying to protect the opportunity to reduce the gift for collation, but highlights the difficulty in treating the two issues the same way. Unfortunately the door remains wide open to evasion for protecting the legitimate portion, as a person can evade the legitimate portion by either moving to, and becoming habitually resident in, one of the many Member States that do not use clawback or one where the scope of the legitimate portion is much more restrictive than the law of his nationality, or even more easily by buying immoveable property in a country outside the scope of the Regulation which still uses scission and applies the lex situs rules on succession to that property. Neither the general applicable law rule relating to clawback of inter vivos gifts from third parties within the EU Succession Regulation nor the ability by the testator to choose the law of his nationality provides legal certainty for any of the parties involved, as the donor may make a will after the transfer of the gift choosing the law to govern the succession (which may be that of a nationality the person did not possess at the time the gift was made) which would leave the donee unaware of the new applicable law rule.

III.  Legal Certainty under the Succession Regulation A.  The Donor An aim of the Succession Regulation found within Recital 7 is that ‘… citizens must be able to organise their succession in advance’ and that ‘The rights of heirs and legatees, of other persons close to the deceased and of creditors of the succession must be effectively guaranteed.’ In order for the donor to do estate planning it must be possible to know which succession law will apply to the estate. The only way to know this with any certainty is to make a will choosing the law of nationality prior to the transfer of the gift and then not to revoke it. In relation to the donor being able to gift property, if the law applicable to succession uses clawback to protect the legitimate portion, then the donor has to be aware of (a) whether the gift will fall within the free share and can therefore be excluded from clawback or (b) whether it is a gift that might be clawed back if there is insufficient in the estate to satisfy the legitimate portion, in order to be able to indicate the risk level to the donee. All of these factors are speculative. If the donor is making a gift to a third party long before the anticipated time of death it may be extremely unpredictable to the donor what may happen in the future that might lead to a change of outcome.

39 Kurt Lechner, ‘EU Regulation 650/2012 on successions and the creation of a European Certificate of Succession’ in ‘Cross-border activities in the EU – Making life easier for citizens’ European Parliament (Workshop for the JURI Committee 2015): http://www.europarl.europa.eu/RegData/etudes/ STUD/2015/510003/IPOL_STU(2015)510003_EN.pdf (accessed 4 August 2019).

46  Legislative Drafting The retroactive nature of the law applicable to clawback is a stumbling block to certainty. A solution needs to be found which protects the legitimate expectations of the donor to be able to gift the property but which may include the ability to reduce the gift if necessary for the purpose of protecting the heirs and/or dependants of the donor, but only in a way that properly respects the property rights and legitimate expectations of the donee.

B.  The Donee Under the rules within the Succession Regulation the donee is the most vulnerable party.40 The donee’s legal position is completely uncertain. If the donee receives the gift in a country where clawback is unknown why would they consider clawback a risk? The donee is completely at the mercy of the donor’s testamentary intentions or the law of the country where the donor dies habitually resident. To be in a position where the law at the time of the transaction can be replaced by an unknown law at an indeterminate time in the future is the epitome of legal uncertainty. The donee’s peaceful ownership of the gift is at the mercy of the donor leaving an estate that is sufficient to cover the legitimate portion, if relevant, or the donor providing properly for any dependants at the time of the donor’s death and also at the mercy of the legitimate heirs/dependants, who might not bring a claim as the claim is not automatic. However, the donee is unable to peacefully enjoy the property or sell it without the risk that at an unknown date in the future a legitimate heir/dependant may make a monetary claim against him/her. In the alternative, if the donee receives the gift believing that it may be clawed back in the future but then, years later, the donor dies habitually resident in a Member State that does not recognise clawback then for all those years they may have treated the property differently than if they had owned it peacefully in the first place. The applicable law rule relating to clawback in the Succession Regulation does not allow the donee to make an informed decision when it comes to accepting the gift. The donee needs to be aware of the law and this law needs to be stable.

C.  The Legitimate Heir or Dependant Whether the legitimate heir has a legitimate expectation is questionable. They cannot be certain which succession law will ultimately apply to the deceased’s estate and therefore, as the rules relating to legitimate heirs vary greatly between the countries that do protect the legitimate portion, until the law applicable to

40 The donee for the purpose of the book is a third party who is not an heir or a dependant of the donor.

Legal Certainty under the Succession Regulation  47 the succession is confirmed they cannot be certain that they are a legitimate heir. Once they have confirmed their position as legitimate heir they then have to wait to find out what is in the estate. The deceased may have left nothing, gifted nothing, and may be in debt so the legitimate heirs may be entitled to nothing. Of relevance to the issue of legitimate expectations in the context of succession law is that testamentary freedom and the right to inherit do not fall within the scope of the European Convention on Human Rights and Fundamental Freedoms.41 The case-law before the ECtHR has mostly been concerned with discrimination against certain parties which has prevented their ability to inherit due to being illegitimate42 or adopted.43 Whether a dependant has legitimate expectations is also questionable. If a donor has deliberately attempted to evade their responsibility to maintain that person, it is unlikely that the donor will have made them aware of the transfer. Under section 1 of the Inheritance (Provision for Family and Dependants) Act 1975 the connecting factor for the claim is that the domicile of the deceased must be England and Wales. This connecting factor comes with its own problems in that the cases that come before the court are ones where the deceased’s domicile is being questioned. You can have a situation, for example, where a cohabitant is in need and there is property within the UK, but because the deceased was domiciled abroad the cohabitant is unable to raise a claim.44 This is also unfair and the connecting factor needs to be reassessed on this point. It should be noted that this rule has been treated slightly differently in Commonwealth countries in that some have allowed a claim to be made if there is property in the jurisdiction where the claim is being made.45

41 http://www.echr.coe.int/Documents/Convention_ENG.pdf (accessed 10 June 2019). The case law that has come before the European Court of Human Rights is based on questions relating to Art 8, the right to respect for family life, see Zaiet v Romania App no 44958/05 (24 March 2015), and to Art 14, the prohibition of discrimination, see Marckx v Belgium App no 6833/74 (13 June 1979), Inze v Austria App no 8595/79 (28 October 1987), Art 14 in conjunction with Art 1 of Protocol 1 (right to peaceful enjoyment of ones possessions) in Mazurek v France App no 34406/97 (1 February 2000), Art 14 in conjunction with Art 8 in Camp and Bourimi v Netherlands App no 28369/95 (3 October 2000), Art 14 in conjunction with Art 8 in Pia and Puncernau v Andorra App no 69498/01 (13 July 2004), Art 14 in conjunction with Art 8 in Brauer v Germany App no 3545/04 (2009), Art 14 in conjunction with Art 1 of Protocol 1 in Fabris v France App no 16574/08 (7 February 2013), Art 14 in conjunction with Art 8 in Mitzinger v Germany App no 29762/10 (9 February 2017). Zoltán Csehi in Anderson and Amayuelas, The Law of Succession: Testamentary Freedom (Europa Law Publishing, 2011) 272 identifies Germany, Spain, Portugal, Slovenia, Croatia, Slovakia and the Czech Republic as having constitutions that regard succession as a right. However, in this context it should be noted that the Czech Republic and Slovakia do not recognise clawback from a third party to satisfy the legitimate portion. 42 Mazurek v France (n 41 above). 43 Pia and Puncernau v Andorra (n 41 above). 44 For analysis of case law from England and Wales relating to the domicile of the deceased for the purpose of the 75 Act see Holliday (n 19 above). 45 Dicey, Morris and Collins on the Conflict of Laws, 15th edn (Sweet and Maxwell, 2012) Rule 155, 27-055: ‘In other Commonwealth jurisdictions it has been held that the court can make an order out of immovables within the jurisdiction, no matter where the testator was domiciled at the date of his death, but not out of immovables situated outside the jurisdiction.’

48  Legislative Drafting

IV. Conclusion Reaching an appropriate and pragmatic private international law solution is the essence of legal diplomacy. At its best, it provides solutions to real problems faced by real people, based on the awareness of the comparative law, jurisprudence and context.46 High-quality comparative research of the substantive law is a necessary component for creating effective private international law solutions. Crafting pragmatic private international law solutions needs appropriate investment by the relevant institutional parties/governments in terms of providing high-quality preparatory comparative research for the negotiators to work with. A willingness to challenge what has been done in the past is also helpful, as it reduces the chance of errors being imported from older legislation. At the EU level, ignoring the legal cultures of the Member States that joined after the primary preparation for the Succession Regulation had been conducted – and, even where additional research was contracted by the European Parliament, still not taking the opportunity to contact these new States – undermined the quality of the private international law produced, with the affected individual or company being regarded as acceptable collateral damage.

46 Mico Augustin, ‘The Drafter’s Role in the Drafting Process’ (2013) 15 European Journal of Law Reform 177–205, 205.

3 Clawback: A Comparative Analysis I. Introduction As explained in Chapter one, in many civil law countries when a person dies, the estate that is taken into consideration for the purpose of the succession does not only include the property that the deceased held at the time of death but also any property that they may have gifted during their lifetime, or a limited period of their lifetime, or more narrowly it will include only those inter vivos gifts that were registered as forming part of the succession.1 The value of this fictive estate is then calculated and the appropriate percentage is reserved for those entitled to a domestic legitimate portion.2 If there is insufficient property within the estate to cover the reserved share, (starting first with bequests, then considering reduction of advances to heirs before finally looking to the clawback of property from third parties), those entitled to the legitimate portion are able to make a claim to claw back the property that was gifted by the deceased to third parties during his or her lifetime from the donee if the value of the gifts exceeded the disposable portion. The gift does not need to have been given away with the intention to defeat the reserved share for it to be clawed back. It is sufficient that it diminished the value of the estate and the gifts exceed the disposable portion. Clawback in this context is a device to protect an heir from disinheritance and in most cases, cannot be avoided by a testator if it is applicable to their succession, unless the behaviour of the person entitled to the legitimate portion has been such that they can be lawfully excluded.3 Clawback of the inter vivos gift from a third party is a device that is primarily found within some civil law traditions where the legal tradition favours the family over testamentary freedom. In contrast, inter vivos gifts do not fall within the law of succession in the common law traditions. However, clawback

1 ‘… the disposable portion of the estate … is calculated not only by reference to the estate owned by the deceased on death but, in addition, by adding, the lifetime gifts made by him.’ R Paisley in Ministry of Justice, European Commission Proposal on Succession and Wills, Consultation Paper, CP41/09, 18. See https://www.biicl.org/files/4682_ec-succession-wills%5B1%5D.pdf. 2 Paisley, ibid, 15. 3 Legitimate reasons for disinheritance can be that the heir demonstrated immoral behaviour towards the deceased or his immediate family. For an example of this justification, see Art 42 of the Slovenian Inheritance Act (accessed 10 June 2019) at: http://www.pisrs.si/Pis.web/pregledPredpisa?id=ZAKO317.

50  Clawback: A Comparative Analysis from a third party is possible within some common law traditions in limited circumstances if there is evidence that the deceased intended to avoid providing reasonable financial provision for a dependant. The dependant does not have to be an heir. The dependant may be a friend or a cohabitant. This clash between legal traditions has not been resolved within private international law and therefore the following comparative analysis of the law relating to clawback, combined with the characterisation of the inter vivos gift in the subsequent chapter, should reveal the way forward for law reform, in order to create legal certainty whilst protecting the legitimate expectations of all parties: the donor, the donee and the claimant.4

A.  Existing Analysis The research conducted in preparation for the drafting of the Succession Regulation did not, within the questionnaire, directly address claims to reduce an inter  vivos gift. The study did, however, gather/glean information in relation to inter vivos gifts from the answers to the questions about the reserved share, and noted them in a summary. The responses predominantly reported whether an inter vivos gift would be taken into account when valuing the estate.5 It did not differentiate between the ability to clawback an inter vivos gift under the 1975 Act and ‘clawback’ within the recorded civil law systems, and therefore the information is not easily comparable.6 It also did not specify from whom the gift could be taken and therefore did not differentiate between the reduction of a gift for the purpose of collation and the reduction of a gift to third parties. It should also be highlighted that the report for the ‘UK’ was limited to an account of the law of England and Wales and did not give an account of the law of Scotland – which uses a system of forced heirship but does not have clawback for the purpose either of succession or for meeting the financial needs of a dependant – or Northern Ireland, which follows the English and Welsh system, and therefore gave a limited picture of the UK’s legal position.7 The comparative analysis of the national laws of certain Member States within the EU relating to clawback, conducted by Professor Paisley for the purpose of advising the UK Government prior to their negotiations for the EU Succession 4 For the purpose of the book a claimant may be an heir or a dependant in order to achieve a private international law solution that is truly international. 5 The summary of La Reserve Legale from the research: Étude de droit comparé sur les règles de conflits de juridictions et de conflits de lois relatives aux testaments et successions dans les Etats membres de l’Union Européenne by the Institut Notarial Allemand in co-operation with Professors Heinrich Dörner and Paul Lagarde, available at: http://ec.europa.eu/civiljustice/publications/docs/testaments_ successions_fr.pdf (accessed 10 June 2019), notes that the legitimate portion and the ability to reduce the inter vivos gift has the character of obligation and is in certain countries for certain claimants, regarded as a claim for maintenance. 6 Ibid. 7 Ibid.

Introduction  51 Regulation, revealed that the rules relating to clawback varied greatly.8 In some Member States it was possible to claw back the actual property from the donee, or even from a third party if the donee had gifted the property, bequeathed the property or sold the property. In other cases, clawback was restricted to a claim for value from the donee, rather than the actual gift. The timescales within which claims can be made were also variable, ranging from up to one year after the death of the deceased, to 30 years after the death of the deceased. All of these factors are contrary to security of title.9 The comparative work undertaken for the purpose of this book updates the research conducted by Professor Paisley by expanding on the number of countries to be considered in order to get the most accurate picture of the current situation in relation to the national laws on clawback. As far as the author is aware, this work is new, as existing research in relation to international succession law focuses on the reduction of gifts to heirs rather than to third parties.10 The work done by Aaron Schwabach in 2011, which does take into account the issue of clawback from third parties and in particular donations to charities, is descriptive and focuses on raising awareness of the fact that the rule within the EU Succession Regulation poses a threat to charitable giving.11 It does not look to resolve the issue within private international law. The decision to protect clawback within the Succession Regulation was requested by certain Member States, in particular Poland, who were concerned by the ease with which it was possible for someone to change their habitual residence within the EU, which could in turn mean that family members in the home Member State would lose their inheritance rights.12 The solution to this perceived problem put forward within the Succession Regulation was to allow the testator to choose the law of his nationality to apply to his or her succession. The problem with this is that it only protects the parties if: the testator is proactive in making a will; the will remains valid; the lex successionis is known by the donor at the time the gift is made; and the donor is vigilant in informing the donee as to the risks of clawback and is also vigilant in informing the heirs as to the transfer of property. Without these requirements being in place the applicable law rules within the Succession Regulation do not protect the legitimate expectations of the parties, especially the donee. 8 Paisley (n 1 above). 9 Ibid. 10 In Louis Garb and John Wood, International Succession, 4th edn (Oxford University Press, 2015) the questionnaire asks for information about inter vivos gifts only in relation to heirs. Question ‘8 (a) Are gifts (to an heir) prior to death set off against the heir’s inheritance? (b) If so to what limit?’. The questions relating to obligations to return gifts within the 1989 Convention were directed towards heirs. 11 Aaron Schwabach, ‘Of Charities and Clawbacks: The European Union proposal on Successions and Wills as a Threat to Charitable Giving’ (2011) 7 Columbia Journal of European Law 447–76. 12 This is indicated in the view held by David Hayton in his written evidence to the House of Lords EU Committee on the proposed EU Succession Regulation, that the EU Succession Regulation was influenced by the ‘traditional nationalist stance of its newest members’. 6th Report of Session 2009–10.

52  Clawback: A Comparative Analysis In reality, there is some evidence to show that the use of non-needs-based c­ lawback from third parties within the EU is diminishing, as Member States are moving away from family-centric succession towards testamentary freedom, whether by restricting the scope of who is entitled to the legitimate portion or restricting clawback from third parties or the reduction of inter vivos gifts for the purpose of collation.13 The original basis for the reserved share, to protect the family property and to provide financial support for vulnerable parties, is lessening as people live longer and their heirs are more likely to be financially independent. Indeed, France, which had what would seem at first glance to be a strict policy on the rules surrounding the reserved share for those entitled to the legitimate portion and clawback, reformed its substantive law in 2006 to allow future heirs to ‘waive the right to claim the recovery of gifts’.14 There is also a general trend towards moving away from entitlement to the clawback of the actual property towards a monetary claim. In certain Member States the ‘person with a right to a compulsory portion is no longer an heir but is considered a creditor with a monetary claim.’15 This factor, which alters the character of the claim within these Member States, was not mentioned during the negotiations. A monetary claim on the estate of the deceased would not be considered a succession issue within the UK but would fall within the administration of estates and would be governed by the lex fori. This does not mean to say that the issue of clawback should be brushed under the carpet just because it is likely that as a protective measure for inheritance it is in decline in some civil law countries. It is argued that while it is still practised, and exists within national succession laws, a method should be found that protects both the legitimate expectation for clawback by a person entitled to a legitimate portion or maintenance as well as the legitimate property rights of the donee who accepted an inter vivos gift unaware of the possibility of clawback.

II.  Empirical and Analytical Research The primary objective of the study for the European Parliament on authentic instruments involving the help of the national reporters was to obtain as complete

13 Walter Pintens, ‘Need and Opportunity of Convergence in European Succession Laws’ in M Anderson and E Arroyo i Amayuelas (eds), The Law of Succession: Testamentary Freedom (Europa Law Publishing, 2011). Marius J de Waal, ‘A Comparative Overview’ in Kenneth GC Reid, Marius J de Waal and Reinhard Zimmerman (eds), Exploring the Law of Succession Studies National, Historical and Comparative (­Edinburgh University Press, 2007) 16. Since 2009, of the 12 EU Member States that Paisley (n 1 above) stated had clawback provisions within their national laws, three countries no longer allow clawback of inter vivos gifts (Germany, Malta, and the Netherlands). 14 de Waal, ibid, 16 and 18. 15 Ibid, 16. ‘The person with a right to a compulsory portion is not an heir but a creditor with a monetary claim within Austria, Catalonia, France, Hungary, Netherlands, Poland’. See the following chapter for the expansion of this point.

Empirical and Analytical Research  53 a picture as possible of the way clawback operates within the EU. Building on the questions that were considered by Professor Paisley, additional questions relating to clawback were added and formed part of the questionnaire that was submitted to researchers and notaries in every participating Member State of the EU Succession Regulation.16 The analytical work that was returned was checked by the author against the law in each country for accuracy. Where no information was returned the author undertook to source the information, via online access to the official Civil Codes where they are available in English. Where they are unavailable in English the author has relied on native speakers in the Member State concerned who specialised in private international law/succession law. Secondary sources were also used to fill any knowledge gaps. In addition to the 25 participating EU Member States, additional third countries were also considered, Australia, Denmark, Ireland, South Africa and the UK, in order to see whether and if so how the claim for clawback is treated within differing legal traditions, to build a more comprehensive comparative assessment of the reality behind this cross-border conflict of laws.17 The questionnaire was designed in English and national reporters were chosen for their knowledge of the law of succession combined with their ability to speak and write fluently in English.18 The initial information that was gathered concerning the EU Succession Regulation participating States represents the law of each country as at September 2015. It has been updated where possible. The information that was considered relevant for the purpose of this book was: 1. Where can the rules relating to the legitimate portion and clawback from third parties be found? 2. Who is entitled to a legitimate portion? 3. What share of the estate are they entitled to? 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? 5. How is a ‘clawback from a third party claim’ commenced? 6. How long is the limitation period for such a claim? 7. How long is the prescription period for such a claim? 8. Does the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? 16 For details of questions put forward by Paisley (see n 1 above). See also for information about the European Parliament study conducted by the Centre for Private International Law, University of Aberdeen: http://www.abdn.ac.uk/law/research/the-evidentiary-effects-of-authenticacts-in-the-member-states-of-the-european-union-in-the-context-of-successions-507.php (accessed 10 June 2019). 17 For the purpose of the Succession Regulation, the UK, Ireland and Denmark are considered as third States. 18 For the list of national reporters, see Annex III. The study is available online at: http://www. europarl.europa.eu/RegData/etudes/STUD/2016/556935/IPOL_STU(2016)556935_EN.pdf (accessed 10 June 2019).

54  Clawback: A Comparative Analysis 9. Is there a limit to the size of a compensation claim in respect of a gift made during the lifetime of the deceased? Questions 1–7 were inserted into the questionnaire that was submitted as part of the research project on authentic instruments.19 For the purpose of this book the questions were amended to take into account the need for precision on the point of the need for information on the issue of clawback from third parties. Questions 8 and 9 were also considered by the author in order to build on the work by P ­ rofessor Paisley and were added with practitioners in mind. However, the answers and information available for both Questions 8 and 9 proved to be extremely vague. In relation to Question 9 the value of the inter vivos gift is difficult to define other than that inter vivos gifts are considered as a whole, and it is only if the value of all the gifts exceeds the disposable portion that any individual gift will be considered for the purpose of clawback. The disposable portion is dependent on the value of the estate as a whole and therefore countries avoid expressing a minimum or maximum value for the gift. This was recognised within the research by Professor Paisley, who noted that none of the countries he had been asked to assess provided rules for the size of the gift.20 Therefore, this question was ultimately removed for the purpose of creating the country reports. These questions were also applied to the laws within the additional countries chosen for their common law or mixed legal traditions.

III.  Findings from the Participating EU Member States21 The ability to clawback an inter vivos gift from a third party, in order to satisfy the legitimate portion is not just a civil law versus common law issue. It is more nuanced than that. Some EU Member States have retained the classic Roman law system which allows for forced heirship, but does not provide for clawback of inter vivos gifts in order to satisfy the legitimate portion.22 Others have developed their law to go beyond the traditional Roman law concept of legitim and consider the legitimate portion claim to fall within the law of obligations.23 This has the notable effect that the party entitled to the legitimate portion is not considered to be an heir for this purpose.24 Others have been influenced by both the civil law and 19 It was apparent on receiving the responses from the national reporters that the questionnaire needed to have been more specific as to clawback from third parties. The author has taken this into account when compiling the country profiles and focuses on information for clawback to third parties rather than rules relating to the reduction of gifts made to heirs. 20 Paisley (n 1 above) 15 and 27–28. 21 For a comprehensive description of the law on clawback in the participating EU Member States see Annex IV. 22 For example, Slovakia. 23 For example, Germany. 24 A Röthel, ‘The Law of Testamentary Freedom in Germany’ in M Anderson and E Arroyi i ­Amayuelas (eds), The Law of Succession: Testamentary Freedom (Europa Law Publishing, 2011) 163.

Findings from the Participating EU Member States  55 common law traditions and therefore have a system of forced heirship but instead of having clawback to fulfil the legitimate portion, they operate an anti-evasion, needs-based system.25 What has become clear from conducting this research is that although the concept of clawback from third parties does run contrary to the common law approach to donation, there are many Member States that have legal systems with a civil law tradition that do not provide for clawback from third parties. In this respect, these Member States should have been conscious that the applicable law rule within the Succession Regulation on this point was not compatible with their own approach to succession. Yet, out of all the Member States that fall within a civil law tradition and yet do not provide for clawback from third parties, only Slovakia was vocal in its support of trying to find a solution that would satisfy both its needs and the needs of the common law systems, during the negotiations. In reality, there is no common regime for clawback. No two Member States have the same clawback rules. The only aspect of the clawback regimes that is common to all Member States is that the claim is not automatic. Yes, it has to be initiated by those entitled to the legitimate portion, but who falls within the scope of being a legitimate heir varies considerably from State to State and indeed, in some cases a claim can also be raised by a creditor. What is clear from the comparison of the substantive laws is that the ‘extreme’ form of clawback referred to by common law academics and practitioners to explain the issue of clawback to the UK Government is not that common within the EU. During the drafting of the Succession Regulation the EU consisted of 27 Member States.26 The UK and Ireland did not opt into the Regulation but were active participants in the negotiation process.27 Denmark did not opt in and was not involved in the negotiation process.28 Croatia, however, did not join the EU until 2013 and therefore did not take part in the negotiations but had to accept the Regulation as it stood when it came into force.29 Therefore, the following comparison of the substantive rules will consider the substantive law in every Member State that is participating in the EU Succession Regulation, rather than

25 For example, Cyprus. 26 Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, ­Slovakia, Slovenia, Spain and Sweden. (Please note that Denmark, Ireland and the UK will be discussed later in this chapter). 27 PRES/2011/491: http://europa.eu/rapid/press-release_PRES-11-491_en.htm?locale=en (accessed 10 June 2019). 28 Ibid. 29 In relation to clawback from third parties, England and Wales and Northern Ireland allow for the clawback of gifts from third parties if there is proof of evasion in order to satisfy a duty to maintain a dependant (it applies to gifts given in the 6 years prior to the death of the deceased). Ireland has a similar rule but is even more restrictive, as it only applies to gifts given in the three years prior to the death of the deceased and Denmark does not provide for clawback from third parties. Scotland has a system of forced heirship but does not provide for clawback even when there is clear evasion, Paisley (n 1 above), 22.

56  Clawback: A Comparative Analysis from a civil law/common law perspective, in order to bring the understanding up to date. The perception by some civil law academics that contributed to a widelyread analysis of the Commission’s Proposal for a Succession Regulation was that ­clawback was used in almost all Member States.30 However, this is only accurate if ‘clawback’ is understood to mean the reduction of inter vivos gifts to a collateral heir. The ability to reduce an inter vivos gift/advance made by the deceased to a collateral heir is, indeed, possible in 23 out of 25 Member States, with only Cyprus and the Czech Republic as participating Member States not permitting the reduction of gifts for the purpose of collation.31 However, if we look at the issue that was actually contentious during the negotiations, that of clawback of an inter vivos gift from a third party donee to satisfy the legitimate portion, then the actual number of Member States that provided for this goes down to 16, with a common view being held that the Member States regard it as rarely used. This means that one-third of the participating Member States do not have substantive rules that provide for clawback of an inter vivos gift from a third party. The explanation for the perception that almost all Member States had a ­clawback rule is in part due to the reliance on the German Notaries’ preparatory report which was conducted in 2002.32 This report was in effect out of date almost as soon as it was published due to the number of Eastern European countries that joined the EU in 2004 and 2007.33 However, the author’s main criticism is that the start of the negotiation process for the Succession Regulation took place after the majority of the new Member States had joined and yet the original research was  not revised to cover the laws of these countries (even though further research  was commissioned in 2010) and unfortunately the outdated report continued to be used as guidance.34 The following findings present a more accurate picture concerning clawback from third parties. 30 Max Planck Institute for Comparative and International Private Law, ‘Comments on the European Commission’s Proposal for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession’: http://www.europarl.europa.eu/document/activities/cont/201005/20100526ATT75035/20100526ATT 75035EN.pdf, p 86. 31 Cyprus adopted the English approach to clawback if there was clear evidence of evasion. The underlying nature to this kind of claim differs from that of reduction to satisfy the legitimate portion. The Czech Republic does not permit the reduction of gifts for the purpose of collation or to satisfy the legitimate portion. 32 Note 5 above. 33 https://europa.eu/european-union/about-eu/countries/member-countries_en. (accessed 10 June 2019). The following countries joined between the preparatory report and the start of the negotiations: Bulgaria 2007, Cyprus 2004, Czech Republic 2004, Estonia 2004, Hungary 2004, Latvia 2004, Lithuania 2004, Malta 2004, Poland 2004, Romania 2007, Slovakia 2004, Slovenia 2004. Out of these 12 countries only Bulgaria, Poland and Slovenia had clawback from third parties as part of their succession rules. Cyprus appears to have adopted its clawback rules after the Succession Regulation came into being. The lack of attention to the laws of these new EU countries is negligent. 34 A question that needs to be asked is why did the countries who do not use clawback from third parties to satisfy the legitimate portion not speak up during the negotiation process and leave it to be regarded as a Cyprus, UK and Irish issue?

Findings from the Participating EU Member States  57

A.  Detailed Summary of Findings (i)  Which Participating Member States Provide for Clawback of an Inter Vivos Gift from a Third Party?35 For the purpose of satisfying the legitimate portion, Austria, Belgium, Bulgaria, Croatia,36 France, Germany, Greece, Italy, Latvia,37 Luxembourg, Netherlands, Poland, Portugal, Romania, Slovenia and Spain38 have substantive laws that allow legitimate heirs to claw back an inter vivos gift from a third party to satisfy the legitimate portion. For the purpose of protecting against evasion, Cyprus also provides for clawback from a third party but not from a legitimate heir. Although recently revised, the succession laws in Cyprus are based on the English common law system and require evidence of evasion.

(ii)  Which Participating Member States do not Provide for Clawback of an Inter Vivos Gift from a Third Party? Czech Republic, Estonia, Finland, Hungary, Lithuania, Malta, Slovakia and Sweden.

(iii)  Which Class of Heir/Party May Claim in Participating Member States? The following section highlights the differences in the level of classes of heirs/ parties permitted to claim for clawback of an inter vivos gift from a third party for the purpose of satisfying their legitimate portion if their class is reached during the succession in the participating Member States.39 a) Great-grandparent Greece. 35 For the purpose of the analysis, clawback for the purpose of satisfying the legitimate portion and clawback for the purpose of maintaining a dependant will both be considered. 36 Croatia was not part of the Succession Regulation negotiations, as it joined the EU in 2013. 37 The wording within the Latvian Civil Code reads ambiguously as to whether clawback does apply to third parties. The author has followed the National Reporter’s thoughts on this point when deciding where to place Latvia. 38 Within Spain, Navarre has forced heirship in name only. It is a requirement that forced heirs are named within the will. However, there is no economic or material benefit to being a forced heir under the law of Navarre (Art 274): see Sergio Cámara Lapuente, ‘Freedom of testation, Legal Inheritance Rights and Public Order under Spanish Law’ in Anderson and Amayuelas (n 24 above) 274. 39 The most common first class of forced heir is the child of the deceased, along with the spouse of the deceased if living. If there are neither children nor a spouse, then many Member States allow the

58  Clawback: A Comparative Analysis Figure 2  Map of the European Union showing which countries allow for clawback of a gift from a third party in order to satisfy the legitimate portion

b) Grandparent Croatia. c) Parent Belgium, Croatia, Cyprus, Germany, Greece, Latvia, Poland, Portugal, Romania, Slovenia and Spain. d) Sibling Croatia, Greece. e) Spouse40 Austria, Belgium, Cyprus, France, Germany, Greece, Italy, Latvia, Poland, ­Portugal, Romania, Slovenia and Spain. parents of the deceased to become a forced heir. Greece has the widest class of potential forced heirs in that if there are no children or spouse then parents, siblings, grandparents or great-grandparents of the deceased may be regarded as a forced heir. 40 The rules relating to forced heirship for the spouse should be understood in the context of the support they are entitled to under the matrimonial property law regimes in some countries: see ­Csongor Nagy, ‘Love and Money: Problems of Characterisation in Matrimonial Property and

Findings from the Participating EU Member States  59 f)  Issue (Children/Grandchildren in lieu of living Children) Austria, Belgium, Bulgaria, Cyprus, France, Germany, Greece, Italy, Latvia, Luxembourg, Netherlands, Poland, Portugal, Romania, Slovenia and Spain. g) Cohabitant None. h)  Unrelated Dependant None. i) Creditor41 Romania.

(iv)  Is the Legitimate Portion the Same in All Member States? The percentage of the estate that is available to the forced heir is dependent on their relationship with the deceased, and whether there is more than one heir in the same tier. The most common figure is that the reserved share constitutes 50 per cent of the estate. In some Member States, such as Luxembourg, the reserved share may be 75 per cent of the estate if there are three or more descendants.

(v)  Is the Claim a Monetary Claim or a Claim for the Reduction of the Property Itself? Within the EU the claim is primarily a monetary claim for the sum that has exceeded the disposable portion. The claim within the EU is regarded as a claim for restitution and therefore the obligation is to pay compensation for the unjustified enrichment that has occurred. No Member State within the EU demands the return of the property itself, if the monetary claim can be satisfied. The forced heir becomes a creditor to the estate when a claim for clawback is made.

(vi)  Who Can the Claim be Brought Against? The claim is brought against the third-party donee. If the donee has transferred the property to someone else, this does not prevent a claim being made to claw back the gift from that person if the claim is permitted. In Belgium, it is possible for the ­ aintenance Matters in the European Union’ in P Beaumont, B Hess, L Walker and S Spancken (eds), M The Recovery of Maintenance in the EU and Worldwide (Hart Publishing, 2014) 411, 413–19. 41 A creditor does not fall within the category of heirs but in Romania a creditor is a class of person who is able to bring a claim to claw back an inter vivos gift from a third party.

60  Clawback: A Comparative Analysis claim to be brought against the donee even if they have transferred the property to another party.42 In some cases, the claim will be against the current possessor. The most extreme position is found in Belgium where a claim can be made against a third-party donee or indeed the person who has received the property from the original donee and the property must be returned to the estate mortgage-free. This arrangement must cause problems for mortgage lenders.

(vii)  Is there a Common Definition of the Term ‘Inter Vivos Gift’ for the Purpose of Clawback? There did not appear to be a common understanding of the term inter vivos gift in that the Member States had different rules as to whether gifts with a moral purpose could be excluded.43 Indeed some countries allow for gifts to charities to be excluded from clawback altogether or to be excluded if the charity can prove that they have used/spent the gift.44 A gift will only be at risk of clawback if the total value of all inter vivos gifts exceeds the disposable portion. It is also possible in Austria and Belgium for the testator to exclude a gift from clawback. If the value of the inter vivos gifts falls within the disposable portion it will not be clawed back. France and Luxembourg have the rule that for a gift to be regarded as an inter vivos gift for the purpose of succession it is to be recorded as such with a notary, making this an extremely narrow definition of inter vivos gift.

(viii)  Is there a Common Limitation Period? The first and most common approach, rather than defining the limitation period in terms of years, takes a reverse chronological approach to reducing the gift, beginning with claiming against the gift that had been given by the deceased most closely to the time of death first and working backwards in time until the legitimate portion is satisfied.45 The downside to this approach is that there is no finite limitation period and any gift made by the deceased during his lifetime could be clawed back if it is not an excluded gift. To the common law practitioner, reverse chronological order looks like ‘open season on donees’ but it is also clear that some States now restrict the number of years prior to the death of the deceased that are relevant for clawback from third parties. The second approach is to have restricted limitation periods. Croatia has a limitation period of one year before the death of the deceased. A slightly different 42 See Annex IV. 43 For example, Greece does not allow clawback of gifts that were given for the purpose of maintenance – see Annex IV. Also, Austria, Croatia and France (only applies to certain institutions), do not allow clawback of gifts to charities – see Annex IV. Please see section I.C in Chapter 1 on ‘Terminology’ for a fuller understanding of what is understood by the term ‘inter vivos’ gift. 44 Ibid. 45 Belgium, Bulgaria, France, Poland, Portugal, Romania and Spain reduce gifts in reverse chronological order.

Findings from the Participating EU Member States  61 approach is seen in Cyprus, with its common law influence, which restricts the limitation period to gifts made in the year immediately prior to the death, but requires evidence of evasion.46 Slovenia also makes a point of it being one year prior to death for gifts made to third parties. Austria limits clawback from third parties to those given in the two years prior to the death of the deceased, Germany and Greece to 10 years, with Germany operating a taper period. In this situation gifts that fall outside of the limitation period are not taken into account for the purpose of calculating the fictive estate. What is clear is that the limitation period within some States is far shorter when the claim is against a third party than when it is against a collateral heir. The most extreme example in relation to limitation periods is found within the Italian rules on clawback from third parties. In this case a claim against immoveable property could be noted in advance of the death of the deceased and lasts for a period of 20 years but the 20 years can be renewed unilaterally by the claimant, which must be rather unsettling for the donee.47 Spain is also an interesting case, as the limitation period varies depending on the region.48 The first approach would appear to be one which protects the family property as a whole, in contrast to the second approach where there is a short limitation period of one year prior to the death, which leans more towards clawback being regarded as an anti-avoidance tool.

(ix)  Is there a Common Prescription Period? There is no common prescription period within the EU, ie the length of time after the death of the donor within which a claim can be raised by a legitimate heir to claw back an inter vivos gift from a third party. Some States provide for different prescription periods depending on whether it is a monetary claim or a claim for the property itself.49 In the Netherlands the prescription period can, rather uniquely, be limited by the donee to a maximum of five years after the death of the donor.50 France allows for a variety of prescription periods depending on whether the legitimate heir was aware of the gift, in that the prescription period is described as five years after the death of the donor, or only two years after the death if the heir is aware of the gift, with the claim being time barred after 10 years. The widest scope was found within Belgium where the prescription period is 30 years. Austria and Germany will also allow for 30 years if the claimant was unaware of the gift; otherwise the prescription period is three years. 46 See Annex IV, Cyprus. 47 See Annex IV, Italy. 48 See Annex IV, Spain. 49 See Annex IV, Bulgaria where the prescription period is 5 years for a monetary claim and 1 year for the property itself. 50 See Annex IV, the Netherlands. This system relies on the donee being aware that the gift he or she has received is at risk of being clawed back.

62  Clawback: A Comparative Analysis Other than that, the prescription periods were short and ranged from one year in Bulgaria, to two years in Greece and Portugal, to three years in Croatia and Romania, to 10 years in Italy.51 The general prescription rules apply in Luxembourg. Spain’s prescription periods are variable.52

(x)  Is there a Common Date at which the Gift is Valued for the Purpose of Calculating the Legitimate Portion? Whether the compensation claim made by the heirs assesses the value of the gift at the date the gift was made or at the date of death was not easy to find. The summary below is based on the countries where this information was obtained. It was also a point where there was no clear common approach. Some countries valued the property at: • the date at which it had been given to the donee.53 • the time of the death of the deceased but in the imagined condition that it was in when it was gifted.54 A variation of this approach is found within Poland where the gift is valued at the time it was given but according to the prices at the time the right to the claim is established. How this works in practice is anyone’s guess.55 • the date of the opening of the succession.56 Germany’s rules are complex and do not fit into the above.57 They divide their gifts as to whether they were a consumable, or not. If a consumable, then the gift is valued at the time the gift is given. If not a consumable, then the value of the gift is determined at the time of death unless it was of a lower value at the time it was given, in which case it will be valued at the time it was given. Germany also taper the value of the gift during the 10 years prior to the death of the deceased.

(xi)  Does the Inter Vivos Gift Have to be Above a Minimum Value? In relation to whether there is a restriction on the size of a compensation claim in respect of a gift made during the lifetime of the deceased, there was very little information available to answer this question. If there are insufficient funds available to satisfy the legitimate portion then it is possible to make a monetary claim 51 See Annex IV, Netherlands. 52 Annex IV, Spain. 53 See Annex IV, Austria, Luxembourg, Netherlands. 54 See Annex IV, Belgium, Croatia, France. 55 This approach does not appear to take into account potential loss in value of the property due to external reasons. For example, a house that was gifted in 2015 at the height of a housing boom may three years later be worth £30,000 less than that due to a property market crash. 56 See Annex IV, Portugal, Slovenia. 57 See Annex IV, Germany.

Countries not Participating in the EU Succession Regulation  63 against multiple donees until the legitimate portion is satisfied. Depending on the size of the gifts this may require a claim against more than one donee. Defining what was meant by an ‘inter vivos gift that could be at risk of ­clawback’ also proved to be difficult. In the literal sense, it can be regarded as meaning any gift made by the donor during his or her lifetime. However, in many countries the definition was less broad in scope. In Austria gifts to charities and gifts made out of the income of the donor are excluded from the value of the estate and are therefore not at risk. Croatia and Slovenia also exclude gifts made to charities from clawback. In some Member States, an inter vivos gift is restricted to those that are recorded as such by a notary.58 The knowledge that gifts made to charities were accepted as gifts that could be excluded from clawback would have been helpful during the Succession Regulation negotiations to reach a compromise on this point.

IV.  Countries not Participating in the EU Succession Regulation Analysed for this Book A. Australia There are no forced heirship regimes within the laws of the different legal units within Australia and no provision for clawback.59 There is family provision legislation that allows for different classes of applicant (family and dependants) to make a claim against the estate of the deceased if they have been left with insufficient provision.60 It should be noted that the ability for an applicant to apply for financial provision from the estate of the deceased varies in each jurisdiction.61 The scope of who is able to make a claim is narrower than that found within the English and Welsh provision in that the dependant must be a close family member or cohabiting partner rather than including also a non-family member who was being maintained by the deceased. However, in contrast to the system within England and Wales the provision for maintenance is provided for out of the estate and their laws do not contain the anti-evasion rules to clawback a gift made to a third party that was made with the intent to avoid providing reasonable financial provision.

58 See France and Luxembourg. 59 John de Groot in Garb and Wood (n 10 above) 27. 60 Ibid, 27. See for example within Queensland s 40 of the Succession Act 1981 (the definition of dependant is construed narrowly in that it may be a child, a parent of the deceased, a spouse or a parent of a child of the deceased if the child is below the age of 18). See s 57 NSW Succession Act 2006. 61 de Groot in Garb and Wood (n 10 above) 27, ‘Family Provision Act (ACT) s.7; Succession Act 2006 (NSW) s.57; Family Provision Act (NT) s.7; Succession Act 1981 (Qld) ss.40–41; Inheritance (Family Provision) Act 1972 (SA) s.6; Testator’s Family Maintenance Act 1912 (Tas) s.3A; Administration and Probate Act 1958 (Vic) s.90; Family Provision Act 1972 (WA) s.7’.

64  Clawback: A Comparative Analysis In relation to the way inter vivos gifts are handled, several legal units use the doctrine of hotchpot (collation) which has been excluded in other jurisdictions.62 Victoria takes all gifts into account when considering the value of the estate, however they are considered an advance and therefore of relevance to collation.63 Australian succession laws support the concept of freedom to gift property that is owned by the donor during his or her lifetime.

B. Denmark Denmark is not a participating EU Member State and therefore for the purpose of the Succession Regulation it is considered a third country. However, the rules relating to the compulsory minimum share are found within the Inheritance Act.64 The succession laws within Denmark are trending towards testamentary freedom. In 2008 the compulsory share was reduced to 25 per cent of the estate.65 The spouse and issue are entitled to the compulsory share.66 If the deceased does not leave a spouse then the children of the deceased are entitled to 25 per cent of the estate. If the spouse is living, then the spouse and the children share the 25 per cent of the estate with 12.5 per cent going to the spouse. The remaining 75 per cent can be distributed in accordance with the will.67 It is not possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate.68 Denmark does not include the value of inter vivos gifts when calculating the estate and does not allow for the reduction of gifts for the purpose of collation or as against a third party.69

C. Ireland Section 121 of the Succession Act 1965 contains a provision for clawback from the donee, including third parties, if the gifts were made in the three years prior to the 62 de Groot in Garb and Wood (n 10 above) 29, ‘Australian Capital Territory, the Northern Territory, South Australia and Victoria’ have retained the doctrine of hotchpot. Hotchpot is excluded from the remaining legal units. The rules on hotchpot in the legal units that do apply it can be found within their legislation on Administration and Probate (Administration and Probate Act 1929 (ACT) s49BA http:// www6.austlii.edu.au/cgi-bin/viewdoc/au/legis/act/consol_act/aapa1929259/s49ba.html (accessed 11 June 2019), Administration and Probate Act (NT) 68 (3)(4): http://www6.austlii.edu.au/cgi-bin/ viewdoc/au/legis/nt/consol_act/aapa259/s68.html, Administration and Probate Act 1919 (SA) s72(k): http://www8.austlii.edu.au/cgi-bin/viewdoc/au/legis/sa/consol_act/aapa1919259/s72k.html, (accessed 11 June 2019). 63 de Groot in Garb and Wood (n 10 above) 29. 64 Garb and Wood (n 10 above) 244. Inheritance Act: https://www.retsinformation.dk/Forms/R0710. aspx?id=2664#K2 (accessed 11 June 2019). 65 Ibid. 66 Ibid. 67 Ibid. 68 Ibid. 69 Ibid.

Countries not Participating in the EU Succession Regulation  65 death of the deceased, for the purpose of disinheriting the spouse or the ­children.70 The rule is not completely comparable to the English and Welsh approach, as the Irish rule is there to protect against the evasion of the legitimate portion for, or intestate share of, the spouse (if the gift would defeat or substantially diminish the amount the spouse is entitled to) rather than the evasion of a discretionary needsbased assessment for dependants. However, it is similar, in relation to children, to the English system because the clawback does not take place to prevent defeating or substantially diminishing the legal rights of the deceased’s children but to prevent ‘leaving any of his children insufficiently provided for’ (though it can be used to prevent defeating or substantially diminishing a child’s intestate share). Curiously, when the above analysis is taken into account, in the briefing note provided to the European Parliament in 2010, ‘Legal consequences of the decision by Ireland not to take part in the adoption of an EU Regulation on Succession’, Binchy noted that the Succession Act 1965 does not address private international law matters on this point, that there are no Irish court decisions on the issue of clawback, but that, as Irish law is similar to the law of England and Wales, they would take account of the view held by the UK that ‘the current position under the law … is that clawback claims based on a foreign law of succession are simply not recognised or enforced here, even if in principle the estate of an individual in this country is governed by that law because he died when domiciled abroad’ Ministry of Justice, European Commission proposal on succession and wills – A public consultation (CP41/09, 21 October 2009), para. 15.71

He then goes on to state that: It is not quite so clear that Irish private international law is so definitively opposed to recognising clawback provisions. They are designed to give practical assistance to the forced share provisions and, has been mentioned, form part of the Irish domestic law of succession. It would be hard to stigmatise them as being contrary to public policy. In the absence of caselaw, the question remains an open one.72 70 See: http://www.irishstatutebook.ie/eli/1965/act/27/section/121/enacted/en/html#sec121 (accessed 11 June 2019). ‘121.(1) This section applies to a disposition of property (other than a testamentary disposition or a disposition to a purchaser) under which the beneficial ownership of the property vests in possession in the donee within three years before the death of the person who made it or on his death or later. (2) If the court is satisfied that a disposition to which this section applies was made for the purpose of defeating or substantially diminishing the share of the disponer’s spouse, whether as a legal right or on intestacy, or the intestate share of any of his children, or of leaving any of his children insufficiently provided for, then, whether the disponer died testate or intestate, the court may order that the disposition shall, in whole or in part, be deemed, for the purposes of Parts VI and IX, to be a devise or bequest made by him by will and to form part of his estate, and to have had no other effect. (3) To the extent to which the court so orders, the disposition shall be deemed never to have had effect as such and the donee of the property, or any person representing or deriving title under him, shall be a debtor of the estate for such amount as the court may direct accordingly.’ 71 William Binchy, ‘Legal consequences of the decision by Ireland not to take part in the adoption of an EU Regulation on Succession’ (March 2010) for the Directorate-General for Internal Policies, Citizens’ Rights and Constitutional Affairs, 7: http://www.europarl.europa.eu/cmsdata/61703/att_2010032 9ATT71513-6707412546773655737.pdf. 72 Ibid, 7.

66  Clawback: A Comparative Analysis The reason Ireland ultimately chose not to opt into the Succession Regulation was that it would have interfered to an unacceptable extent with the way in which estates were administered in Ireland. Certainly, the problems relating to administration of estates were as difficult to resolve as clawback for both Ireland and the UK, but the pragmatic approach put forward by Professor Binchy regarding clawback and public policy would suggest that a private international law applicable law rule on this point might be acceptable to Ireland.

D.  South Africa There are no forced heirship rules in South Africa.73 Inter vivos gifts are considered for the purpose of collation. Minor children have a common law claim of maintenance from the estate of the deceased and a surviving spouse can apply for maintenance from the estate under the Maintenance of Surviving Spouses Act  No  27 of 1990.74 Unlike the English and Welsh system, the Act does not provide for the clawback of gifts made to third parties for the purpose of satisfying the maintenance claim whether there has been avoidance of the duty to maintain or otherwise.

E.  United Kingdom The UK is divided into three legal units: England and Wales, Scotland, and Northern Ireland.

(i)  England and Wales The succession laws of England and Wales do not have rules that protect heirs through the use of a legitimate portion but they do permit clawback for retrieving inter vivos gifts from third parties that were made to defeat applications for financial provision for dependants. Under Section 10 of the Inheritance (Provision for Family and Dependants) Act 1975 a court is able to order a donee who received the gift within six years prior to the date of the death of the deceased to pay a sum of money or transfer property in order to meet the necessary financial provision for the maintenance of the dependant if it can be demonstrated to the court that the deceased intended to evade his/her duties under the 1975 Act. This issue is discussed in detail in Chapter four.

73 JR Flax (updated by D Hutchison) in Garb and Wood (n 10 above) 760. 74 See: https://www.gov.za/sites/default/files/gcis_document/201503/act-27-1990_0.pdf (accessed 11 June 2019). See also Flax (updated by Hutchison) ibid.

Countries not Participating in the EU Succession Regulation  67

(ii) Scotland75 Scotland has a mixed legal system. Under the rules of intestacy, legal rights and prior rights of certain heirs provide some level of protection from disinheritance.76 However, there is no clawback rule under the law of succession and no other antiavoidance legislation. In the context of divorce, section 18 of the Family Law (Scotland) Act 1985 allows a court to set aside a transaction that has had the effect of defeating in whole or in part certain pecuniary claims of the spouse or children if it occurred within five years of the claim. It seems amiss that a dependant is not able to make a claim for maintenance on the death of the deceased and not to have their claim protected against behaviour whose purpose is to evade the duty to maintain. There are some that claim that aliment jure representationis from the deceased’s estate by the deceased’s spouse or child is possible but rare.77 In 2007, within the discussion paper on Succession,78 the Scottish Law Commission asked whether it should consider having an anti-evasion rule ­ for clawback within its succession rules. However, it was not taken up as it was regarded as causing unnecessary complexity. The response in 2009 was 1.20 One topic which we included in the discussion paper is that of anti-avoidance, or ‘clawback’. We asked whether there should be new legislative provisions designed to protect close relatives against the possibility that the deceased might give away, or sell at undervalue, assets during his or her lifetime in circumstances where this reduces the estate at death and hence the value of the relatives’ claims. There was almost unanimous opposition to this idea. As many respondents pointed out, any anti-avoidance scheme would create numerous practical difficulties and would be likely to be complex. And, from a principled perspective, it would disrupt or frustrate otherwise legitimate and intentional acts on the part of the deceased before death. In addition, those who were well advised would be able to take steps to organise their affairs in the light of whatever anti-avoidance measures may be in place, but those who were not in that position, which generally would be people with more modest estates, would be liable to be unduly and unjustifiably affected. In view of all of these factors, we have decided to make no recommendation in this regard.79

In June 2015, the Scottish Government held a consultation on the law of succession taking account of the Scottish Law Commission’s Report in 2009 and considered the issue of disinheritance. The only reference to inter vivos gifts was in relation to collation, where recommendation 24 from the Scottish Law 75 For an account of Scots Private International Law of Succession see P Beaumont and J Holliday, ‘Some Aspects of Scots Private International Law of Succession Taking Account of the Impact of the EU  Succession Regulation’ Centre for Private International Law, University of Aberdeen, Working Paper Series, 2015/6, available at: https://www.abdn.ac.uk/law/research/working-papers-455.php. 76 Part II of the Succession (Scotland) Act 1964. 77 Frankie McCarthy, Succession Law (Dundee University Press, 2013) 5. 78 Scottish Law Commission, Discussion Paper on Succession (2007) (DP No 136) available at https://www.scotlawcom.gov.uk/files/1012/7885/3181/dp136.pdf (accessed 11 June 2019). 79 Scottish Law Commission, Report on Succession (April 2009) (DP No 215) available at: https:// www.scotlawcom.gov.uk/files/7112/7989/7451/rep215.pdf, 5 (accessed 11 June 2019).

68  Clawback: A Comparative Analysis Commission’s 2009 Report called for advances not to be taken into account for the purpose of claiming the legal share.80 This seems rather unfair but is beyond the scope of this book.

(iii)  Northern Ireland Northern Ireland has rules similar to those of England and Wales in that the general principle is that the testator has testamentary freedom and that there are no forced heirship rules. Under the Inheritance (Provision for Family and Dependants) (Northern Ireland) Order 1979, certain categories of people are able to make a claim against the estate of the deceased for reasonable financial provision.81 Where a gift has been made in order to defeat the financial provision, clawback of that gift is permitted but only if ‘intent’ to do so can be proved. It is necessary to prove that the gift or below-value transfer of property was made: ‘with the intention of defeating an application for financial provision under this Order’. Under Article 12 of the Inheritance (Provision for Family and Dependants) (Northern Ireland) Order 1979, a court is able to order a donee who received the gift within six years prior to the date of the death of the deceased to pay a sum of money or other property in order to meet the necessary financial provision for the maintenance of the dependant. This follows the approach taken by England and Wales.

F.  Findings from the Non-EU Succession Regulation Countries Examined for this Book The laws of Australia, South Africa and the UK (excluding Scotland) do not have forced heirship rules and follow a tradition which favours testamentary freedom. Although the laws of these countries do allow for a dependant to make a claim from the estate of the deceased for maintenance, interestingly, only the laws of England and Wales and Northern Ireland protect this claim by allowing for the clawback of an inter vivos gift from a third party in cases where the donor has clearly gifted the property in order to evade his/her duty to maintain the dependant after death. Denmark and Scotland both have forced heirship; however, neither has provisions for clawback from third parties. Ireland, on the other hand, does have 80 Scottish Government Consultation on the Law of Succession, Chapter 3, recommendation 24, available at: http://www.gov.scot/Publications/2015/06/7518/4 (accessed 11 June 2019). The Scottish Government issued its response to this consultation in 2018, see: https://www2.gov.scot/ Resource/0054/00542136.pdf (accessed 11 June 2019). The Scottish Government noted, at p 4, that: ‘In short, apart from dependent children, the Survey Monkey indicated there was significant support for testamentary freedom and the ability to disinherit others, including spouses/civil partners.’ However, the Government proposed no changes to the law on testate succession including that relating to legal rights and collation. 81 See: https://www.legislation.gov.uk/nisi/1979/924 (accessed 11 June 2019). See Art 3 for the broad categories of people who can apply for financial provision.

Overall Observations on the Rules Pertaining to Clawback  69 forced heirship and anti-evasion rules that are to protect the legitimate portion of the spouse and to ensure that children are not insufficiently provided for. Elements that can be drawn from the above would suggest that: • Due to the rarity of the provision of clawback from third parties to protect against evasion of duty to maintain a dependant, the ability to limit the period prior to the death of the deceased in respect of which gifts will be at risk of clawback is important for legal certainty. • The laws of Australia, South Africa, England and Wales and Northern Ireland allow for dependants to make a claim for maintenance from the estate of the deceased. Unlike the laws of England and Wales, the laws of Australia and South Africa do not allow for clawback from a third party for the purpose of providing the maintenance. Within the UK, there is a problem in defining what constitutes ‘need’ in an adult child, but this is a substantive issue and not relevant to the book. In any event, as it is needs based, the claimant will be aware that they need to submit a claim and therefore it is not necessary for the prescription period to be extensive and one year should be more than adequate. • In England and Wales and Northern Ireland, the donor and donee do not have legitimate expectations respectively to transfer property freely and to have protected ownership if there is an awareness that the transfer was done in order to evade the donor’s duty to maintain the dependant. • In Ireland the position is very complicated because the spouse’s and child’s claims arise from different reasoning. The spouse’s legitimate portion is protected from intentional efforts by the other spouse to defeat it through the making of inter vivos gifts up to three years before the other spouse’s death whereas a child’s claim to claw back a gift made by their parent within three years before their death does not require evasion but simply has to demonstrate that they have been ‘insufficiently provided for’ with no statutory guidance as to what constitutes sufficient provision and whether it is needs based.

V.  Overall Observations on the Rules Pertaining to Clawback Combining the above findings drawn from the laws of the EU Member States that are party to the Succession Regulation and from the laws of the other countries examined for this book, it is crystal clear that not all countries have rules pertaining to clawback from third parties and of those that do, there are very few whose frameworks are the same. However, whilst it is not possible to identify a common framework to these rules on clawback, if we take the common thread as simply being whether the countries have rules to ‘clawback inter vivos gifts from third parties for the purpose of satisfying the legitimate portion or maintaining a dependant of the deceased’ it is possible to identify six sub-categories.

70  Clawback: A Comparative Analysis

A.  Category I The first, and most common, framework for clawback from third parties is where the country has a legitimate portion rule and considers inter vivos gifts to be part of the fictive estate and allows for clawback from third parties to satisfy the legitimate portion. The countries that fall within this category are Austria, Belgium, Bulgaria, Croatia, France, Germany, Greece, Italy, Latvia, Luxembourg, Poland, Portugal, Romania, Slovenia and Spain. However, the rules within this category vary greatly. To demonstrate the two ends of the spectrum, Belgium adopts an extreme form of clawback in that the prescription period is 30 years from death and, as it reduces the gifts in reverse chronological order of receipt, the limitation period could potentially be over decades, albeit tempered by the fact that an inter vivos gift is one that is recorded by a notary (see Annex IV). In contrast, the Netherlands has a very restrained form of clawback in that the emphasis is on protecting the donee, as the donee is able to set the prescription period and if a clawback claim does arise the demand for compensation has to be reasonable depending on the financial position of the donee (see Annex IV). A more restrained form of clawback, where the gifts that are considered for the purpose of clawback are ones which were given in the few years before the death of the deceased, appears to be the direction that the rules on clawback from third parties are taking. This approach would seem to support clawback from third parties as moving towards an anti-evasion rule as opposed to a means of protection of the legitimate portion.

B.  Category II Secondly, there are countries that have legitimate portion rules but, unlike the first category, do not consider inter vivos gifts to be part of the estate and do not provide for clawback from third parties. Examples of the second category are the Czech Republic, Denmark, Estonia, Finland, Hungary, Lithuania, Malta, Scotland, Slovakia and Sweden. (See Annex IV for all except Scotland. For Scotland see Section IV.E and F above).

C.  Category III Thirdly, there are countries that, like the second category, have legitimate portion rules and do not consider inter vivos gifts to be part of the estate but, unlike the second category, they have a discretionary rule for clawback from third parties with the requirement that there has to have been an evasion of responsibility by the donor to maintain the dependant. The only example in the countries analysed for this book is Cyprus (see Annex IV, Cyprus).

Shari’a Law  71

D.  Category IV Fourthly, there are countries that have a legitimate portion rule, do not consider inter vivos gifts to be part of the estate, but do have rules to clawback gifts made to third parties. The rule is partially to prevent the evasion of forced heirship for spouses, as the gift has to have been made with the purpose of substantially diminishing the spouse’s legitimate portion. The rule is partially to ensure that children are sufficiently provided for, whilst not giving judges any guidance as to what constitutes sufficient provision. The only example of this in the countries analysed for this book is Ireland (see Section IV.C above).

E.  Category V Fifthly, there are countries that do not have a legitimate portion rule and do not consider inter vivos gifts to be part of the estate but do have a discretionary rule for clawback from a third party if there has been an evasion of the duty to maintain a dependant. The only examples of this in the countries analysed for this book are the laws of England and Wales, and Northern Ireland (see Section IV.E and F above).

F.  Category VI Sixthly, there are countries that do not have a legitimate portion rule, do not consider inter vivos gifts to be a part of the estate and do not have a discretionary rule for clawback from a third party if there has been an evasion of the duty to maintain a dependant. The examples of this in the countries analysed are Australia and South Africa (see Section IV.A and D above).

VI.  Shari’a Law The succession laws for parties who adhere to the Muslim faith are found within the Qur’an.82 Countries may follow the Shari’a Law or may have adapted the Law to meet their own requirements.83 The general succession rules within the Qur’an 82 Paul Stibbard, ‘Middle East Succession Issues’ (2009) 15 Trusts and Trustees 765. Ian Edge, ‘Middle East’ in Garb and Wood (n 10 above) 562. Nadjma Yassari, ‘Testamentary Formalities in Islamic Law and their Reception in the Modern Laws of Islamic Countries’ in K Reid, M de Waal and R ­Zimmermann (eds), Comparative Succession Law Testamentary Formalities (Oxford University Press, 2011) 283. 83 Stibbard (n 82 above) 766.

72  Clawback: A Comparative Analysis apply a system of forced heirship where one-third of the estate is regarded as the disposable portion and two-thirds is regarded as the share for the forced heirs.84 It is not necessary to go into detail as to the distinctions between the different schools under the Sunni or Shia systems, as gifts to third parties are absorbed within the disposable portion.85 It would appear that only gifts to forced heirs in anticipation of death may be clawed back.86 It is not usual under Shari’a Law for inter vivos gifts to be taken into consideration for the purpose of protecting the legitimate portion even if given to an heir, and therefore this system of law supports freedom to gift property during the deceased’s lifetime.87

VII. Conclusion In the countries studied it is clear that laws providing for clawback from a third party to protect against evasion of the duty to maintain a dependant after death are not common. Of the Member States that are currently participating in the EU Succession Regulation, the overall observation to be made is that of the 16 countries that provide for clawback of inter vivos gifts made to third-party non-heirs to satisfy the legitimate portion, no two countries have substantive rules on clawback which are the same as another. They all differ in relation to: who is entitled to a legitimate portion; the predetermined portion of the estate that they are entitled to (as some countries allow parties to choose between a fixed share or an abstract share, and the fixed shares differ); what constitutes an inter vivos gift; whether gifts can be excluded, and if so which gifts; whether the property itself can be clawed back or whether it is just a monetary claim; the limitation periods and the periods of prescription. This highlights that it would be impossible to harmonise the substantive law in the EU, and emphasises the need for a balanced private international law solution which would go some way to supporting and protecting the cultural diversity even within the EU. Amongst the different civil law traditions, the purpose of the clawback of the inter vivos gift is to protect close family inheritance. The definition of family, ie the persons entitled to the legitimate portion, is a conservative one, originally focusing on blood relatives but latterly moving towards descendants and spouses and moving away from including the deceased’s ascendants. The scope of who is entitled to a legitimate portion also varies greatly, from countries that consider solely the descendants as entitled to the legitimate portion, to those that consider the descendants, spouses, civil partners, parents, siblings 84 Ibid. 85 Ibid. 86 Ibid. In this situation, the definition of anticipating death is that the donor would be aware of having a terminal illness at the time the gift was given: see Edge (n 82 above) 571. 87 Edge, n 82 above.

Conclusion  73 and grandparents to be eligible. One surprising group of claimants of inter vivos gifts from third parties who do not fit into the expected scope of claimants is where a creditor to the estate is able to make a claim for clawback. A factor that is contentious from the perspective of a country that does not provide for clawback is that in some countries it is possible to claim the property not just from third-party donees but also, if the donee has sold the property to another third party, from the person they have sold the property to.88 This means that the legitimate expectations of a third-party buyer are also at risk, with the property having to be returned to the estate without mortgages attached, thus leaving the third-party buyer with no property and a mortgage to pay. This also raised questions as to the situation for the mortgage lender. It could be argued that there may be no connection at all between the final buyer and the original donor, and therefore it is highly questionable whether the heirs should be entitled to claw back this property.89 From the six categories as described above, the elements that can be drawn from an understanding of the substantive law as presented so far, as being relevant to the issue of constructing a pertinent private international applicable law rule that protects the legitimate expectations of the parties and comity between countries, are as follows: • If the third-party donee at the time the gift is made is unaware that the inter vivos gift forms part of the fictive estate for the purpose of succession due to a change in the succession law applicable to the donor’s estate, then their legitimate expectations of ownership of property are at risk. • If the third-party donee has gifted the property to a third party then the new donee may be unaware of the potential for the gift to be clawed back, meaning that their legitimate expectations of ownership are at risk. • If the third-party donee has sold the property to a third-party buyer, then the third-party buyer’s legitimate expectations of ownership are at risk. • If the third-party donee has died and the property has passed to the donee’s heirs, then the heirs may not have known about the potential for the gift to be clawed back and may have acted as if the property was theirs; for example they may have sold the property, gifted the property, or raised a mortgage on the property. An extreme example of clawback allows for the property to be clawed back without a mortgage being attached. Whether this works in reality is unknown, but it is suggested that the consequences for the lender and the borrower would seem unreasonable. • If the gift was immoveable property and had been registered as such within the lex situs, the ability to claw back such property leads to uncertainty and



88 See

Belgium, Section III.A.(vi) above. depicting the transfer of property may note that the property is at risk of clawback.

89 Contracts

74  Clawback: A Comparative Analysis confusion for all parties and lenders if there is no awareness that the property could be clawed back. • If the donor’s intention at the time the gift was made was to transfer his property to a third party with the intention that the transfer was irrevocable and the putative law applicable to the donor’s succession at the time of the gift gave him complete freedom to do so, then the donor’s legitimate expectations of freedom of donation are at risk if the law of his succession changes due to a change in his habitual residence. • If the donation was given in a context where it was understood that the donation formed part of the fictive estate, but then, through the change in the succession law applicable to the donor’s estate due to a change in the donor’s habitual residence, the gift is no longer part of the fictive estate, it could be argued that the heirs have theoretically lost the ability to potentially protect their inheritance. This is not a clear legitimate expectation because the gift may turn out to be within the disposable portion of the estate, but it demonstrates that there is the potential for cultural succession expectations to be lost. • Protecting the legitimate portion is not a matter of public policy in all the Member States. Therefore the degree to which a claim to claw back property from third parties would be upheld in the face of an applicable law that does not respect a legitimate portion, or in the face of a foreign judgment that has not respected a legitimate portion, is questionable. The aim of this chapter was to identify the different forms of clawback in order to be able to distil the legitimate expectations of the relevant parties. Chapter five of the book will take into account the legitimate expectations of the parties under all the legal systems discussed here.

4 Characterisation I. Introduction A.  What is Characterisation? The concept of characterisation was first identified by a German Scholar named Kahn towards the end of the nineteenth century.1 He recognised that in crossborder cases a conflict of laws occurred where: the private international law rule differed in the two countries, or the connecting factors had different meanings, or the legal problem itself was defined differently.2 These questions as to how to define the legal problem and/or the connecting factor became known as the problem of characterisation.3 This chapter will consider the issue of characterisation in relation to the claim to claw back an inter vivos gift from a third party. As the intention is to be able to identify the appropriate universal applicable law, the character of the claim will be considered within legal systems from different legal traditions. From the analysis of the substantive law in the previous chapter it is clear that the character of these claims varies greatly between different countries. Although the general assumption from the civil law perspective is that the character of the claim is one of succession, this is not the case for every civil law country. As demonstrated in the previous chapter, not all countries with a civil law background allow for clawback from third parties and of those that do, some regard it as a restitution issue. The underlying obligation to the unjustified enrichment is not always a succession obligation, but might be a maintenance right, or indeed a property right. If we also take into account the fact that inter vivos gifts are regarded, in general, as irrelevant

1 Many theories have been put forward in relation to the issue of Characterisation (also referred to as Qualification or Classification) by authors such as Kahn, Bartin, Falconbridge, Rabel. Please note that a comprehensive historical analysis of the concept is not necessary for the purpose of this book. 2 Summarised by Falconbridge in – John D Falconbridge, ‘Characterization in the Conflict of Laws’ (1937) 53 The Law Quarterly Review 235–58, 238. The unification of private international law as a method of avoiding conflict of laws, was chosen by Tobias Asser, one of the founders of the Hague Conference, as a realistic method of dealing with legal diversity as opposed to attempting to unify substantive law. 3 Robert Pascal, ‘Characterisation as an Approach to the Conflict of Laws’ (1940) 2(4) Louisiana Law Review 715–28, 717.

76  Characterisation to the lex successionis within the common law systems due to the freedom to gift property and the fact that property rights are protected (except in the context of evasion of a duty to maintain), it is clear that restricting the claim within one legal category – for example, to being one of maintenance or one of succession – is not the optimal solution from a global perspective.4

B.  So, Why is Characterisation of the Legal Problem Important? As law is divided into different categories, the ability to determine the nature or character of the legal problem is fundamental to resolving the issue fairly.5 To be able to clearly identify whether the issue falls under succession law or maintenance law, allows it to be categorised under the appropriate set of rules.6 Characterisation of the legal problem is the process by which the connecting factor such as domicile, nationality or habitual residence can be identified, which in turn points to the applicable law. For example, within the UK if something is characterised as a succession issue, the connecting factor for moveable property is the domicile of the deceased, which in turn will point to the appropriate rules. It is therefore a vital element within the practice of private international law.7 In most crossborder cases the legal category which the issue falls into will be easily identifiable. If it is, then there is no conflict and the category will point towards the appropriate set of rules to resolve the legal problem. However, as Kahn noted, in cross-border cases the ability to characterise a legal problem may not always be clear or may become complicated where one legal tradition characterises an issue differently from another legal tradition, as is the case here.8 This raises real problems as to 4 The Right Honourable Edward Richard Lambton, Earl of Durham v Lady Lucinda Lambton and others [2013] EWHC 3566 (Ch) [9], ‘15. English Choice of law rules for succession apply only to those assets which fall within the deceased’s estate. As a matter of English private international law, the only assets which fall within a deceased’s estate are those of which the deceased stood possessed at the time of his death. Assets disposed of by the deceased prior to his death do not form part of his estate upon death. The lex successionis is irrelevant to this question’. 5 For an overview of characterisation in private international law see Pascal (n 3 above); Lawrence Collins (gen ed), Dicey, Morris and Collins on the Conflict of Laws, 15th edn (Sweet and Maxwell, 2012) 38–62 and Paul Beaumont and Peter McEleavy, Anton’s Private International Law, 3rd edn (W Green/ SULI, 2011) ch 4. For a recent consideration of the issue see R Baratta, ‘General Issues of Private International Law in the European System Reflections by Italian Scholars. The Process of Characterization in the EC Conflict of Laws: Suggesting a Flexible Approach’ (2004) 6 Yearbook of Private International Law 155–69. 6 Beaumont and McEleavy, Anton, ibid, 89. 7 Paul Torremans (ed), Cheshire, North and Fawcett: Private International Law, 15th edn (Oxford University Press, 2017) 42. Christopher Forsyth, ‘Characterisation revisited: an essay in the theory and practice of the English Conflict of Laws’ (1998) 114 Law Quarterly Review141. See also Christopher Forsyth, ‘“Mind the Gap”: A Practical Example of the Characterisation of Prescription/Limitation Rules’ (2006) 2 Journal of Private International Law 169–80. 8 An example of problems arising from differences in characterisation: see Harding v Wealands [2006] UKHL 32, [2007] 2 AC 1 and whether the rules relating to the ceiling for damages fall under

Introduction  77 which characterisation should apply, especially if the different characterisations lead to different applicable laws and therefore create different outcomes for those involved.9 In practice in these types of cases it will be necessary to determine which legal system is most appropriate to solve the problem in hand.10 But when drafting legislation that is to be used by many different legal traditions it simply won’t be accepted if we allow one type of characterisation to trump others. Where the characterisation of an issue appears to be as varied as the claim to clawback appears to be, it makes sense to go back to the drawing board and devise a sui generis solution which would be acceptable to all. This conflict over how clawback of the inter vivos gift from a third party ought to be characterised remains a real issue because the EU Succession Regulation categorises this legal problem as a succession issue, even though a third of the Member States at the time of the negotiations did not recognise it as such. The consequence of it being categorised as a succession issue is that the lex successionis is applicable. Under the EU Succession Regulation, the lex successionis is the law of the habitual residence of the deceased at the time of death. A conflict may occur if the transfer took place at a time and location when the succession law was an unknown and where either the gift was transferred in a context where clawback was unknown but is known under the lex successionis, or vice versa. It is important to recognise that although the book focuses heavily on the situation within the EU, it is not simply an EU issue. Yes, the EU Succession Regulation has the propensity to affect property and ownership in third countries if the lex succesionis of the deceased falls in an EU Member State that provides for clawback and the deceased owned or gifted property in another country, but also countries around the world have systems allowing or not allowing for clawback, as the case may be, and the EU Regulation can apply those laws due to its universal application. This chapter will argue that the characterisation of the claim to claw back an inter vivos gift from a third party needs to be reassessed in order to determine an appropriate and fair legal rule that will be acceptable for future reform in private international law.

C.  Characterisation in Cross-border Cases How is a legal problem characterised in cross-border cases? And is the approach suitable for making international private international law? Traditionally, in order issues relating to substance or procedure. See Paul Beaumont and Zheng Tang, ‘Classification of Delictual Damages – Harding v Wealands and the Rome II Regulation’ (2008) 12 Edinburgh Law Review 137–44. 9 EU private international law recognises that problems do arise when there is conflicting characterisation, where the law that is pointed to may turn out to be arbitrary to the case in hand. In these situations, it is usual for EU law to offer an escape clause in order to recognise the law that has the closest and most real connection: see Geert Van Calster, European Private International Law (Hart Publishing, 2013) 6. 10 Ibid.

78  Characterisation to characterise an issue, it is first necessary to determine which law is going to be used for that purpose. Various theories have been put forward as to whether the issue ought to be characterised according to the private international law rules of the lex fori,11 or the ‘expected’ lex causae,12 or by adopting a flexible approach that takes into account policy considerations or, for example, by adopting a comparative approach.13 However, these theories relate to which national private international law rules should be used to characterise the issue in a practical crossborder case. They do not ask what is the best way to characterise an issue for the purpose of creating truly universal private international law? There is a substantial difference between the practical act of characterisation of an issue for the purpose of resolving a cross-border case where the judge is working with an existing set of laws of two States and is therefore confined within those parameters, and one where the characterisation of the issue forms part of an analysis to determine what the fairest applicable law objectively ought to be.14 The day-to-day practical act of characterisation by judges in a cross-border case requires a solution that solves a real and pressing legal problem. The parties involved look to the courts for that solution. Characterisation for the purpose of creating international private international law, however, is conducted in a completely different context. It involves the characterisation of an issue as found in multiple legal systems – an important difference. In this context, the institutions that initiate the request to consider new international or regional private international law have (ideally) a duty to

11 Beaumont and McEleavy, Anton (n 5 above), 93 notes that Bartin advocated characterising the legal problem under the lex fori as to do otherwise would be to go against the intention of the sovereign. 12 The author agrees with Peter McEleavy in Beaumont and McEleavy, Anton (n 5 above), 93 in that in order to determine the ‘expected’ lex causae there has to have been some degree of characterisation of the issue under the lex fori in order to be able to suggest what the expected applicable law is and therefore it is not possible to characterise an issue under an expected lex causae in isolation. A close analysis of the theories of characterisation are not necessary for the purpose of this book. 13 One word of caution at this point in that during the comparative analysis in Ch III it was noted that not all countries were good at keeping their private international law rules in line with changes in their substantive law which could lead to unfairness in outcome. For an overview of the development of the concept of characterisation see chapter 2 of Dicey (n 5 above). However, Dicey supports the flexible approach as does Baratta (n 5 above) and Maarja Torga, ‘Characterisation in Estonian Private International Law – a proper tool for achieving justice between the parties?’ (2011) 18 Juridica International 84. Lord Justice Auld in MacMillan Inc v Bishopgate Investment Trust plc [1995] EWCA 55 [78] noted that: ‘characterization or classification is governed by the lex fori. But characterization or classification of what? It follows from what I have said that the proper approach is to look beyond the formulation of the claim and to identify according to the lex fori the true issue or issues thrown up by the claim and defence. This requires a parallel exercise in classification of the relevant rule of law. However, classification of an issue and rule of law for this purpose, the underlying principle of which is to strive for comity between competing legal systems, should not be constrained by particular notions or distinctions of the domestic law of the lex fori, or that of the competing system of law, which may have no counterpart in the other’s system. Nor should the issue be defined too narrowly so that it attracts a particular domestic rule under the lex fori which may not be applicable under the other system.’ 14 The author is using the term ‘fair’ to mean that the rule provides legal certainty and protects the parties it is intended to protect.

Introduction  79 engage with the law at both the national private international law level and, it is argued, the substantive level in order to consider its true function.15 They should not underestimate the complexity of the law and they should not underestimate the time it takes to research these issues. Costs are clearly a factor, as is finding the researchers with the appropriate skillsets, but in the long run it would seem a false economy to spend the taxpayer’s money on the negotiation process if the rules that are created are flawed due to a lack of appropriate in-depth preliminary legal analysis. Rabel’s comparative approach to characterisation for cross-border cases advocated the development of autonomous concepts which were independent of the lex fori and the lex causae,16 and was admired for being ‘logically and ­scientifically  … incontrovertible’ but was also dismissed as being ‘difficult’, ‘not practical’ and requiring of ‘a supranational class of judges, deeply learned in comparative law, capable of dissociating problems before them from the law of the forum’.17 Whilst the author accepts that Rabel’s approach is too cumbersome to be practical for determining what the private international law is in cross-border cases, it is generally accepted that there is merit in utilising a form of the comparative approach to develop an autonomous concept, when determining what the international private international law ought to be.18 The additional benefits of a comparative approach are that it ultimately does not favour a particular lex fori, nor does it artificially attempt to make an issue fit an existing rule in order to meet an outcome that is regarded as just, as might occur in practical cases. The comparative work conducted for the purpose of this book informs the debate as to how the issue of clawback from a third party is characterised by providing clear evidence that although many countries do regard it as a succession issue, a significant number regard it as a maintenance issue, or a property issue, or

15 This is something that is lacking within the EU PIL context. ‘… the dearth of discussion’ in relation to the application of private international law ‘is unsurprising, given the technical character of private international law and its deliberate blindness, at least in the European tradition, to substantive law.’ Ralf Michaels, ‘Private International Law as an Ethics of Engaging the Other’ (24 February 2017). Paper given at the conference on ‘Private International Law: Embracing Diversity’ at the University of Edinburgh. 16 Beaumont and McEleavy, Anton (n 5 above) 94. 17 Falconbridge (n 2 above). Rabel intended to ‘emancipate characterisation from its subjection to the lex fori’ by regarding the ‘object of characterisation’ as ‘an abstract concept’ ‘to be regarded from’ ‘an international point of view’ ‘and to be characterised on the basis of a study of comparative law.’ 18 Ernst Rabel was the founder of the pragmatist movement in comparative law. For an analysis of comparative law as an approach to establish private international law, see Ralf Michaels, ‘Comparative Law and Private International Law’ in: http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=63 84&context=faculty_scholarship (accessed 14 June 2019), ‘It should have become clear that comparative law and private international law are intricately connected – not only in their objects (a plurality of laws), but also in their application. Yet, although the connection between comparative law and private international law is often mentioned in theory, it is not often operationalized in practice. Comparative lawyers rarely pay attention to private international law at all. Private international lawyers use insights from comparative law more rarely than they should. Both disciplines could benefit more from each other than they presently do.’

80  Characterisation a restitution issue or a non-existent issue, and therefore it cannot be considered as solely a succession issue from an international perspective. It is not possible to characterise a claim to claw back a gift from a third party within a single legal category, least of all succession, and therefore it is pragmatic to adopt a sui generis approach. In order to determine the characteristics of clawback from a third party that can be used to identify appropriate private international law rules this chapter will consider: • whether and if so how the issue of clawback from a third party was characterised under the 1989 Hague Convention, • whether and if so how the issue of clawback from a third party was characterised under the EU Succession Regulation, • the effect of common assumptions, misunderstandings and flaws in the handling of the characterisation of clawback, • who the relevant parties are and what their legitimate expectations are to find a solution that protects their needs, • a claim for clawback from a third party from the perspective of property law, succession law, the law of obligations and the law of maintenance, • briefly, the issue and relevance of comity, • and conclude that, as the legal problem of clawback from a third party to satisfy the legitimate portion, or to ensure a dependant’s needs can be met, cannot be characterised as falling solely within a single legal category, and as it has characteristics from many legal categories, a sui generis approach is necessary for creating a truly universal applicable law rule that respects differences in legal cultures and upholds comity. By considering the nature of the problem as perceived from the perspective of different legal categories it will be possible to identify common parties whose legal expectations need to be protected, which will form the starting point for determining appropriate applicable law rules that create fairness, legal certainty, respect legal differences and comity between countries and are practical to apply in order to meet the aims of international private international law. In order to do this, the chapter will begin by analysing the existing international and regional succession regime, the 1989 Hague Convention and the EU Succession Regulation to see what can be learnt before considering what is required to create a pragmatic solution to determining the applicable law at an international level.

II.  The 1989 Hague Convention Although the 1989 Hague Convention is not currently ratified by any State (the Netherlands having revoked its lone ratification when the EU Succession

The 1989 Hague Convention  81 Regulation came into force) it is necessary to analyse the Convention in relation to the issue of clawback of inter vivos gifts from third parties to satisfy the legitimate portion because of the influence it had during the preparation of the EU Succession Regulation and as the basis for considering what could be achieved globally in a new Hague instrument on clawback.

A.  Analysis of the Proceedings of the Sixteenth Session The questionnaire and subsequent commentary on succession in private international law used during the preparation of the 1989 Hague Convention were initially drawn up in 1969, two decades prior to the drafting of the 1989 Convention. They were updated in 1986 by Hans van Loon. The questionnaire and commentary contain little or no discussion relating to the issue of clawback of a gift from a third party. The questions that are relevant to the issue of clawback are found in Tome II concerning the extent and limits of application of the law of succession.19 The commentary acknowledges that the Member States of the Conference split into two factions: the first of which recognised the reserved share and secondly, those that recognised testamentary freedom.20 A reference is made to the ‘International Law Institute in its Resolution of the 15th September 1967 relating to testamentary succession in private international law’, recommending that ‘essential validity and the effects of testamentary dispositions should be governed by the law of succession’.21 The commentary is positive about the use of this rule in relation to the reserved share, but it acknowledges problems when used to abate inter vivos gifts which exceed the disposable portion.22 The issue that is raised is that other laws may also be relevant, For example the lex situs as such could claim to determine the definitive character of a gift; the national law of the donor at the time of the gift determines its validity in some legal systems; and finally one could consider the law applicable to the gift itself.

19 Hague Conference on private international law, Proceedings of the Sixteenth Session, Tome II, Succession to Estates, Applicable Law, 13. 20 It should be noted that just because a country has a forced heirship regime does not mean that it also has a system of clawback, for example Slovakia has a forced heirship regime but does not provide for clawback for either collation or from a third party. In contrast, just because a country recognises testamentary freedom does not mean that it doesn’t provide for clawback where there is evidence of avoidance of the duty to maintain, eg England and Wales. 21 Tenth Commission Reporter Mr Riccardo Monaco, ‘Testamentary Succession in Private International Law’, The Institute of International Law, Session of Nice 1967; Hague Conference on Private International Law, Proceedings of the Sixteenth Session, Tome II, Commentary, 33. 22 The question in Section II C(b) of the questionnaire asked: ‘If the law of succession is applied to the ‘réserve’, how far will the rules of that law result in limiting the effect of a gift inter vivos exceeding the portion of the inheritance available for disposition?’

82  Characterisation This highlights the practical difficulty in trying to abate a gift. However, the responses to the questionnaire do not specifically discuss the effect of the law on the inter vivos gift that has been transferred to a third-party donee. Gifts that have been made to third parties and exceed the disposable portion are open to the risk of clawback if the legitimate portion has not been satisfied. However, before the gifts from third parties are put at risk, it will be seen whether the legitimate portion can be satisfied through the reduction of the bequests within the will, or through the reduction of the inter vivos gifts that were made to the forced heirs. A claim for clawback of an inter vivos gift from a third party is never automatic and has to come at the behest of the legitimate heir or creditor. Waters in his explanation of Article 7(2)(c) states that‘excessive gifts’ as that term is understood in civil law jurisdictions, do not result in the donee being liable to account. Nevertheless, the position appears to be well taken that the obligation to restore or to reimburse, or to have the excess imputed to a portion to which the donee is entitled, does indeed fall within the Convention. [para 78]

Yet, sadly, just because he says that clawback is excluded in his reference to excessive gifts, this does not mean that that position is clear from the text.23 The report itself is ambiguous because the ‘Nevertheless’ sentence could be read as including clawback from third parties within the scope of the Convention by its general reference to restore or reimburse. The Hague Conference, in creating this Convention, was attempting to create private international rules in areas of perceived legal harmony. The lack of discussion surrounding the original Article 5(2)(c) of the Convention – which became Article 7(2)(c) – during the proceedings of the sixteenth session and during the final draft would indicate that the drafters did not consider the issue of collation to be contentious. However, in being content with the concept of collation, the accounting and restoring of gifts by the beneficiaries in order to create equality between the legitimate heirs, they appear, in the process, to have overlooked the separate and more contentious issue of clawback of the gift from third parties to satisfy the legitimate portion.

23 Donovan WM Waters, Explanatory Report to the Convention on the law applicable to succession to the estates of deceased persons (1988) 19 available at: https://www.hcch.net/en/publications-andstudies/details4/?pid=2959&dtid=3 (accessed 14 June 2019). Report on the preliminary draft Convention, para 38. ‘Excessive gifts’ are those which exceed the value of the ‘freeshare’. For example, if the forced share is whatever 60% of the fictive estate is and the freeshare is 40%, if the inter vivos gifts to third parties were worth less than the freeshare then they cannot be clawed back from a third party. Only gifts that exceed 40% of the fictive estate in this scenario fall within the scope of clawback. Thalia Kruger explained it as follows: ‘The reduction of the part they are entitled to is indeed only for heirs. However, if the deceased had given 70% of his estate to a friend or an organisation which trains dogs for the blind (cliché-example), the beneficiaries of the reserve can claim back from this organisation so that they get the share to which they are entitled / would have been entitled had the estate not been reduced. However, if the deceased had donated only 20%, this portion does not influence the reserve.’ Email received 26 March 2017.

The 1989 Hague Convention  83

B.  Analysis of the Waters Report Article 7 of the 1989 Hague Convention24 concerns the scope of what is meant by the term ‘succession’.25 Article  7(2) of the 1989 Hague Convention describes the substantive topics that fall within the scope of the Convention.26 The Convention does not define what is meant by the term succession but leaves that to the Contracting States. Waters holds the view that clawback from third parties is excluded from the Convention, and to some extent this is correct but the phrasing within Article 7(3) leaves the door open for it to fall within the Convention, as it allows a Contracting State to regard any topic that they consider a succession matter as falling within the scope of succession. Waters notes, however, that the ‘Contracting State cannot impose its broader definition of succession upon other Contracting States.’27 In Waters’ defence, the first paragraph of the commentary relating to Article 7(2)(c) could be seen to narrow the scope of the obligation to restore or account for inter vivos gifts to the beneficiaries of the estate, which would exclude third-party ‘non-heirs’ and would therefore support his declaration that clawback was excluded from the Convention, but it would have benefitted from greater clarity. The purpose of this sub-paragraph, once a qualified beneficiary is established or entitled to a share or to the assets in the estate, is to render subject to the applicable law of succession all questions concerning whether, and, if so, in what circumstances and to what extent the beneficiary has to account or has to restore or to reimburse. For the purposes of the determination of what the beneficiary is to receive from the estate, he may be required to list, for the benefit of the deceased’s estate, gifts received from the



24 Art

7 of the 1989 Hague Convention:

‘(1) Subject to Article 6, the applicable law under Articles 3 and 5, paragraph 1, governs the whole of the estate of the deceased wherever the assets are located. (2) This law governs a) the determination of the heirs, devisees and legatees, the respective shares of those persons and the obligations imposed upon them by the deceased, as well as other succession rights arising by reason of death including provision by a court or other authority out of the estate of the deceased in favour of persons close to the deceased; b) disinheritance and disqualification by conduct; c) any obligation to restore or account for gifts, advancements or legacies when determining the shares of heirs, devisees or legatees; d) the disposable part of the estate, indefeasible interests and other restrictions on dispositions of property upon death; e) the material validity of testamentary dispositions. (3) Paragraph 2 does not preclude the application in a Contracting State of the law applicable under this Convention to other matters which are considered by that State to be governed by the law of succession.’

25 Waters, 26 Ibid. 27 Ibid.

Explanatory Report (n 23 above) 563, para 74.

84  Characterisation deceased during his lifetime, and to bring into account, or restore or reimburse, such gifts or other lifetime transfers by the deceased to the beneficiary, or other legacies in the will.28

For the purpose of Article 7, Waters states that the ‘beneficiary’ is the ‘persons’ either heir, devisee and/or legatee; all of whom would be named within a will or would be identified by the succession law applicable to the estate as being entitled to inherit from the estate in that they are the persons who are the ‘enforced heirs or inheritors to the deceased’s estate’.29 From the fact that the beneficiary for purposes of Article 7 is either named in the will or in law as someone who will inherit from the estate, and only this group of beneficiaries have an obligation to identify the inter vivos gifts that they may be required to restore or account for, it should be inferred that gifts made to non-heirs (third parties) are excluded from falling within the scope of clawback as understood within the Convention. It implies that a gift made to a friend or charity who is not a beneficiary either of the will or in law is irrevocable. Yet in reality it is not so clear cut. The boundaries are blurred in relation to a beneficiary who receives an inter vivos gift but due to circumstances becomes a third-party non-heir. The beneficiary who received the inter vivos gift but is not a forced heir wears two hats for the purpose of this assessment. The first hat is that of a beneficiary to the will. If there is insufficient in the estate to satisfy the legitimate portion the beneficiary may have to forfeit their inheritance – this is not clawback it is simply redistribution of the estate. If the beneficiary has to forfeit their inheritance and there is still insufficient in the estate to satisfy the legitimate portion, then they wear the second hat and are now a third-party donee and their gift, having been taken into account for the purpose of calculating the fictive estate, is at risk of being clawed back. This would suggest that clawback from third parties does fall within the Convention, or at least that there is a lack of clarity. The argument that the restoration of gifts for the purpose of Article 7(2)(c) is restricted to collation would appear to be supported by the example that Waters uses to explain the sub-paragraph as being one of collation.30 However, the lack of absolute clarity in Article 7(2)(c) becomes irrelevant when Article 7(3) permits the Contracting State to define what does and does not fall within the scope of succession – meaning that a Contracting State that does allow clawback from third-party non-heirs to satisfy the legitimate portion would be able to rely on the Convention.

28 Ibid, para 78. 29 Ibid, para 76(2). 30 ‘As an example of an issue that would fall into this sub-paragraph, a son may have received substantial sums from his father during the father’s lifetime to assist the son in his business or chosen profession, and in his will the father, a widower, divides his estate equally between his three children. The applicable law … will determine whether, and, if so, to what degree the son must account for his lifetime receipts when the quantum of each child’s share is being determined.’ ibid, para 78.

The 1989 Hague Convention  85 Additional explanation as to what was intended by Article 7(3) is found in the evidence as to why the UK should not opt into the EU Succession Regulation given by Hon Mr Justice David Hayton to the House of Lords EU Committee on the EU Succession Regulation in 2009. Hayton stated that during his involvement in the drafting of the 1989 Hague Convention: It was left to civilian forced heirship jurisdictions with ‘claw-back’ rules to utilize Article 7(3) to extend the lex successionis to those rules except in regard to property that had been the subject of a valid gift unimpeachable by succession law according to the governing lex situs eg English or Irish law.31

Transfer of property other than by succession was to be excluded from the Convention under Article  1(2)(d). However, there is debate as to whether this applies to property when the claim is for clawback. Professor Jonathan Harris QC, on discussing the issue of inter vivos trusts, points to what he considers to be a legitimate argument that it is questionable whether a claim for clawback falls outside of the scope of succession, following Duckworth’s argument that if the transfer of the inter vivos gift has resulted in the legitimate portion being encroached upon then Article 7(2) automatically applies.32 From this author’s perspective Duckworth’s argument is valid, but only in relation to the reduction of the gift for the purpose of collation. The argument Duckworth puts forward does not take into account that Article 7(2) is restricted to donees who are also legitimate heirs, and therefore what is permitted under Article 7(2) is the restoration of the gift that was made by the donor to a legitimate heir, in order to create equality between the heirs. Clawback from a third-party non-heir is only possible under Article 7(3). The collation rule in the Convention for restoring or accounting for these gifts does not resolve the issues that may arise due to changes that may occur in the substantive law in the same State between the time the gift was made and when the donor actually dies. If the donee of an inter vivos gift would not have had to account under the lex successionis as that law was at the time of the gift, but is required to account by the lex successionis at it is on the death of the donor, there is a problem because of the change in the law. The Convention leaves to the conflict rules of the forum the effect of the change in the substance of the law.33

Although the Convention recognises that this issue could arise in the same State, it does not consider that this is an obvious potential conflict between States and by analogy would also be an issue for claims for clawback from third parties – another indicator that clawback from a third party was not on the drafters’ radar. 31 https://publications.parliament.uk/pa/ld200910/ldselect/ldeucom/75/75we05.htm, at para 6 (accessed 14 June 2019). 32 Anthony Duckworth, ‘An offshore view of forced heirship: global conflict and its planning implications: Part 3’ [1995] Private Client Business. Jonathan Harris, The Hague Trusts Convention (Hart Publishing, 2002) 58. 33 Waters (n 23 above) 567 para 78.

86  Characterisation

C. Conclusion The aim of the Convention was to aid the transfer of family property from one generation to the next and to facilitate estate planning.34 Yet it remains unratified. As clawback from third parties is not clearly excluded from the Convention, it may be that the applicable law rule in relation to this is a stumbling point, as it was in the EU Succession Regulation. It is difficult to know for certain, as the academic literature on the Convention does not discuss clawback from third parties. The purpose of maintaining the ability to transfer inter vivos gifts within the Convention was to encourage estate planning: to allow the parent to gift their property to their children during their lifetime in order to plan their estate, presumably to reduce the tax burden. Although the intention was for the 1989 Convention to only apply to collation35 and that clawback from the third party would only fall within the Convention if the relevant State provided for it within its succession laws (with the caveat that this could be rebutted by the donee if the putative law that applied to the transfer of the gift did not provide for clawback for the purpose of succession and also that the relevant State could not impose these rules on another State), the vocabulary used in the Explanatory Report of the 1989 Convention by Waters and the Convention itself is not clear on the issue of clawback from third parties, and to discern any rule relies on inference. The Convention neither explicitly narrows the scope to only cover ‘collation’, nor does it expressly exclude clawback from a third-party non-heir or expressly state the fact that the lex situs governs the transfer of the gift and could be unimpeachable.36 The commentary also recognises that there is further difficulty in determining the law applicable to the abatement of inter vivos gifts depending on the legal problem to be addressed, as more than one law may be applicable to the issue. In conclusion, the Convention itself does not characterise the issue of clawback of an inter vivos gift from a third party as a succession issue, but rather highlights all the associated problems, ultimately leaving it to the discretion of each Contracting State.

34 Estate planning with respect to gifts given during a lifetime would seem to be done with limited knowledge if conducted too early, as the testator cannot guarantee which law will apply to their estate if unaware of a future event which might change their circumstances. The effect of this is that they may plan accordingly for a law which allows them a free estate share of 50% and then move to another country which only allows a free share of 20%. The testator is only able to plan their estate with the knowledge of what law is applicable to their estate at that time. They also do not know the value of their final estate and therefore do not know what the value of their free estate would be or whether a gift they are giving to a third party exceeds this unknown quantity. There is greater certainty for gifts given to forced heirs, as, if there are insufficient funds in the fictive estate to meet their needs, the gifts are more likely to be able to be collated for fairness. 35 Letter from the Hon Mr Justice David Hayton (n 31 above) at para 6. 36 Waters, Explanatory Report (n 23 above). Collation inter liberos is still used in Scotland with references to advances of legitim. Collation was known as hotchpot in England and Wales, but for the purpose of intestacy in succession, was abolished by the Law Reform (Succession) Act 1995.

The EU Succession Regulation  87

III.  The EU Succession Regulation A.  The Problem with ‘Off-the-Shelf ’ Characterisation Under the Succession Regulation the rules relating to ‘clawback’ appear in Recital  14 and Article  23(2)(i).37 The text of the 1989 Convention played an important role during the drafting of the Succession Regulation. Article 7(2)(c) was transferred directly from the 1989 Convention and became Article 23(2)(i), with only one slight difference in terms of the way beneficiaries were described.38 Article 7(3) of the Convention, which extended the scope of succession, was not transferred to the Regulation and neither was the intention that an inter vivos gift governed by a lex situs that did not recognise clawback would be irrevocable. This rather random ‘off the shelf ’ approach to creating EU private international law, the decision to ‘cut’ the Article 7(2)(c) from the Convention and ‘paste’ it within the Succession Regulation, transferred only part of the story and also the lack of clarity associated with it.

37 Recital (14): ‘Property rights, interests and assets created or transferred otherwise than by succession, for instance by way of gifts, should also be excluded from the scope of this Regulation. However, it should be the law specified by this Regulation as the law applicable to the succession which determines whether gifts or other forms of dispositions inter vivos giving rise to a right in rem prior to death should be restored or accounted for for the purposes of determining the shares of the beneficiaries in accordance with the law applicable to the succession.’ Article 23 of the EU Succession Regulation: ‘The scope of the applicable law 1. The law determined pursuant to Article 21 or Article 22 shall govern the succession as a whole. 2. That law shall govern in particular: (a) the causes, time and place of the opening of the succession; (b) the determination of the beneficiaries, of their respective shares and of the obligations which may be imposed on them by the deceased, and the determination of other succession rights, including the succession rights of the surviving spouse or partner; (c) the capacity to inherit; (d) disinheritance and disqualification by conduct; (e) the transfer to the heirs and, as the case may be, to the legatees of the assets, rights and obligations forming part of the estate, including the conditions and effects of the acceptance or waiver of the succession or of a legacy; (f) the powers of the heirs, the executors of the wills and other administrators of the estate, in particular as regards the sale of property and the payment of creditors, without prejudice to the powers referred to in Article 29(2) and (3); (g) liability for the debts under the succession; (h) the disposable part of the estate, the reserved shares and other restrictions on the disposal of property upon death as well as claims which persons close to the deceased may have against the estate or the heirs; (i) any obligation to restore or account for gifts, advancements or legacies when determining the shares of the different beneficiaries; and (j) the sharing-out of the estate.’ 38 Whereas the Convention speaks of ‘determining the share of heirs, devisees or legatees’, the Regulation speaks of ‘determining the shares of the different beneficiaries’.

88  Characterisation Under the current EU Succession Regulation, the law applicable to succession is the habitual residence of the deceased at the time of death. Assuming that the deceased has not made a choice of law in favour of his or her nationality, as the Succession Regulation stands, if a donor gifts property to a third-party donee in Member State A which does not have clawback from third parties as part of its domestic succession law or the gift was made to the third party which did not exceed the disposable portion at the time the gift was made BUT 10 years later the donor moves to live in Member State B and becomes habitually resident there and that State does provide for clawback from third parties and also has no limitation period, the inter vivos gift that was transferred to the donee in Member State A 10 years beforehand now falls under the new succession rules and a claim can be raised by the legitimate heirs to claw back the property from the thirdparty donee in order to satisfy the legitimate portion. Under the new law the gift (possibly combined with the other gifts) may exceed the disposable portion of the estate. The retroactive nature of the rule within the Succession Regulation is completely unreasonable to parties in Member State A, as neither the donor nor the donee could possibly be aware that a clawback rule would apply to the transfer of the gift at the time the gift was made. The rule is only justifiable when both parties were aware that the gift would form part of the donor’s fictive estate and was therefore at risk of being clawed back. The risk only comes into being if at an unknown point in the future the donor dies leaving insufficient property in his or her actual estate to satisfy the legitimate portion, the gift has exceeded the disposable portion and then, crucially, only if the legitimate heirs decide to make a claim. In a commentary published in 2015 on the EU Succession Regulation, Lagarde, when discussing Article  23(2)(i), highlights the lack of clarity in the text and confirms that the issue of clawback from third parties falls within the scope of the Regulation, If the gifts exceeding the disposable portion have been made to third parties, it would be logical for the succession law similarly to determine whether and how these third parties can be subject to an action to obtain a reduction by way of clawback. However, this does not emerge from the text, which only envisages the reduction to the extent to which it concerns the calculation of the shares of the different beneficiaries. Nevertheless, the enumeration of the questions governed by the succession law is not exhaustive and thus permits the inclusion of action to obtain a reduction against a third party within the scope of the succession law, to the extent that it is within the overall scope of the Regulation.39

He notes that, Sub-paragraph i may have the effect of calling into question gifts made prior to the death of the deceased, which at the time when they were made did not exceed the disposable

39 P Lagarde, ‘Applicable Law’ in U Bergquist, D Damascelli, R Frimston, P Lagarde, F ­Odersky, B  Reinhartz (eds), EU Regulation on Succession and Wills: Commentary (Sellier European Law ­Publishers, 2015) 139, 141–42.

The EU Succession Regulation  89 portion as fixed by the law which would have governed the estate of the deceased if he had died on the day of the gift. It is in fact the effective succession law, as it is fixed on the date of death, which governs the reporting and reduction of gifts.40

An additional point is worth highlighting that sub-paragraph (i) may call into question gifts made prior to the death of the deceased, which at the time they were made did not exceed the disposable portion because at the time the gift was made the law governing the estate did not consider inter vivos gifts as falling within the scope of the estate. There are a significant number of Member States where ­clawback from third parties is not recognised. The Regulation as it stands does not exclude clawback from third-party non-heirs, lacks legal certainty and threatens the legitimate expectations of the donee, the donor, creditors and those entitled to the legitimate portion. So how did it happen when clawback from third parties was flagged up as a major problem by Member States from the moment the Regulation itself was conceived?

B.  Preparation for the EU Succession Regulation Negotiations The preparation for the EU Succession Regulation began with a comparative study on the conflicts of laws on succession and wills in the European Union, funded by the EU Commission, published in 2002 and prepared by the German Institute of Notaries.41 Unfortunately this study was almost immediately out of date the moment it was published and needed to be expanded prior to the drafting of the Succession Regulation, a process which did not take place. The reason it became out of date so quickly after publication was the expansion of the EU to include new Member States in 2004 and 2007.42 It seems astonishing that the laws of these countries were not considered for the purpose of the preparatory work. To add insult to injury, a report commissioned by the European Parliament in 2010, entitled ‘A Workshop on the Proposal for a Regulation on Succession, Some National Analysis’, chose not to rectify this problem but reinforced the EU Member State equivalent of the ‘old school tie’ and obtained information from Austria, France, Germany, and Finland.43

40 Ibid. 41 Étude de droit comparé sur les règles de conflits de juridictions et de conflits de lois relatives aux testaments et successions dans les Etats membres de l’Union Européenne by the Institut Notarial Allemand in co-operation with Professors Heinrich Dörner and Paul Lagarde, available at: http://ec.europa.eu/ civiljustice/publications/docs/testaments_successions_fr.pdf (accessed 10 June 2019). 42 Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia all joined the EU in 2004. Bulgaria and Romania joined the EU in 2007. Out of the 12 new Member States that acceded to the EU the Czech Republic, Estonia, Hungary, Lithuania, Malta and Slovakia do not have a clawback from third parties rule to protect the legitimate portion. 43 Legal and Parliamentary Affairs, Workshop on the Proposal for a Regulation on Succession, some national analysis, 22 March 2010: http://www.europarl.europa.eu/RegData/etudes/STUD/2010/ 419629/IPOL-JURI_DV(2010)419629_EN.pdf (accessed 14 June 2019).

90  Characterisation Out of the 12 Member States that joined between 2004 and 2007, six do not provide for a clawback from third parties rule to protect the legitimate portion within their succession laws. This was not picked up during the negotiations. A question that does need to be raised in relation to this gap in knowledge is that the majority of the new Member States who did not have a clawback from third parties rule within their legal regimes chose not to bring this to the attention of the Council Working Party at any time during the negotiations, and left it as an issue for the UK and Ireland to deal with. Ireland, the Republic of Cyprus, the Czech Republic, Slovakia and Sweden vocalised their support for amending the rule on this point.44 The new Member States went into the negotiations knowing that their legal cultures had not been taken into account for the purpose of the Succession Regulation and largely chose to remain silent. It is difficult to speculate why these countries were not willing to protect their own interests and those of their citizens. One reason might be that as new EU members they lacked confidence or felt unwilling to be seen to disagree with the perceived majority. It is hard to imagine what other reason would justify this silence. The 2002 study did not offer a specific recommendation as to what the solution to the issue of clawback from third parties should be. It did ask one general question concerning the reduction of inter vivos gifts and that was whether they were taken into account for working out the legitimate portion.45 Unfortunately, the findings in relation to clawback suffer from over generalisation, to the detriment of accuracy. The summary in relation to the reserved share asked questions such as: What was the nature of the reserved share? Was it one of obligation or maintenance? Who was entitled to the reserved share? What amount were they entitled to? And what was the period of prescription?46 The initial question concerning the nature of the reserved share highlighted that certain claims against the estate were often characterised as maintenance obligations rather than succession.47 Unfortunately, the questions did not ask from whom the gift could be taken. It therefore did not distinguish between the reduction of the gift for the purpose of collation and the reduction of the gift to a third-party non-heir in order to satisfy

44 UK delegate, private notes from ‘Counsellors’ Meeting’ on 17 February 2012. 45 Example of the range of questions in section G of the Swedish Report: http://ec.europa.eu/civiljustice/publications/docs/report_conflits_suede.pdf (accessed 14 June 2019). 46 ‘La nature du droit. S’agit-il d’un droit à la part réservataire – le cas échéant avec action en réduction, de droits ayant le caractère d’une obligation, d’une créance alimentaire ou d’une autre forme de droit? Qui a droit à une part réservataire? Quel est le montant de la part réservataire? Dans quel délai faut-il faire valoir le droit à la part réservataire? Les donations du de cujus ou les contrats matrimoniaux sont-ils respectés lors de la détermination des droits à la part réservataire? (p.e. réduction des libéralités entre vifs, réduction à cause d’un contrat de mariage)’. From the summary Germany provided for maintenance from the estate of the deceased for the divorced spouse under section 1586(b) of the Bürgerliches Gesetzbuch, Ireland provided for maintenance from the estate of the deceased for children under section 117 of the Succession Act. England and Wales provided for maintenance under s 1(2) of the Inheritance (Provision for Family and Dependants) Act 1975. See German notaries (n 41 above). 47 ibid.

The EU Succession Regulation  91 the legitimate portion, and therefore did not provide the comparative information that was required for finding the solution to the contentious element of reduction of gifts to third parties.48 The European Parliament report, which obtained revised information on the substantive laws from a select group of countries in 2010, indicated that France had undergone important changes to its substantive succession laws prior to the drafting of the Regulation, relaxing the rules in relation to the legitimate portion concerning limitation and prescription as well as restricting the claims for restoring the property to one of money and not to the property itself.49 Yet this information does not seem to have come before the Council Working Party. It is an understatement to say that joined up thinking is needed between the Parliament and the Commission in respect of what is researched prior to drafting a Regulation in order to eliminate duplication and gaps in knowledge.

C.  The Clawback Negotiations – A Timeline The parties preparing and negotiating the EU Succession Regulation were aware that clawback from third-party non-heirs was contentious. It was a visible issue for the UK, Ireland, Cyprus and Slovakia. The parties preparing and negotiating the EU Succession Regulation were also aware that the UK was comfortable with the reduction of the inter vivos gift for the purpose of collation. The UK’s acceptance of this point was one of the first points to be put on the negotiating table. Yet even though there are clear differences in the way these issues are characterised, both issues were treated as if they were the same thing, leaving the UK with no option but not to opt in and potential problems for Member States that do not have c­ lawback from third parties, which will now find themselves within its reach.

48 The lack of differentiation between the concept of collation and clawback of an inter vivos gift from a third-party non-heir for the purpose of satisfying the legitimate portion is not restricted to the initial preparatory report. Overgeneralisation on this issue is evident at all levels, from advisors to the House of Lords EU Committee on the proposed EU Succession Regulation, 2009 who warned of the extreme consequences of clawback, to the Max Planck Institute for Comparative and International Private Law, which conducted research to determine an appropriate applicable law solution to clawback (see n 74 below). The reason that this is important to highlight is that, as previously stated, collation and clawback have fundamentally different functions and should not be treated in the same manner. Collation of an inter vivos gift takes place in order to create equality of inheritance between heirs. Usually the inter vivos gift will only need to be accounted for when calculating the shares of the estate that the heirs will receive. Only rarely will the inter vivos gift need to be restored to the estate in order to create equality in inheritance, as indicated by the very low numbers of cases that come before the court. Clawback from third parties who are not heirs takes place when there are insufficient funds to meet the predetermined share of the estate reserved for the legitimate portion as specified in the rules for the legitimate portion. The purpose of clawback from third-party non-heirs is to protect the inheritance of those who are entitled to the legitimate portion and therefore prevents the deceased from avoiding providing for his heirs through the gifting of his property during his lifetime. 49 For example, French law changed on this point in 2006. See the EP study at p 43 (n 43 above).

92  Characterisation

(i) 2005 In 2005 the EU Green Paper on Succession and Wills reassured its readers that ‘the legal systems of all the Member States protect the near relatives of a deceased who tries to disinherit them’.50 The research conducted for this book has demonstrated that in terms of the ability to claw back an inter vivos gift from a third party, this is not the case. Nine out of the 25 Member States that took part in the negotiations did not allow for clawback from a third party. In England and Wales, the common law system advocates testamentary freedom, which allows a testator to disinherit a near relative and only provides for a dependant if the deceased financially maintained that person prior to death.51 In Scotland, there are rules relating to a legitimate portion or reserved share found within the protection of the legal rights of certain heirs, where they are entitled to a percentage of the moveable estate, but unlike England it does not have clawback and does not protect against disinheritance even when maintenance is required.52 Therefore, the main difficulty for the countries which do not have clawback for the purpose of protecting the legitimate portion was over the issue of characterisation of clawback for the purpose of the Succession Regulation.53

(ii) 2009 In 2009, Professor Paul Matthews appeared before the House of Lords’ European Union Select Committee and put forward three main concerns over the issue of clawback and its potential impact for the UK. The first point raised awareness of the complex and varied nature of the rules surrounding clawback within the different Member States.54 The second highlighted the lack of certainty as to whether clawback would apply to an estate, due to the law governing recovery of lifetime

50 Commission of the European Communities, Green Paper: Succession and Wills, COM(2005) 65 final, 1 March 2005, 2.5, 6. 51 Inheritance (Provision for Family and Dependants) Act 1975. ‘… Questions have been raised on the Continent as to whether the concept of forced heirship is an outdated social premise based on a child’s natural claim to their parent’s wealth along with the fact that life expectancy has increased means that children are now inheriting under forced heirship when they have built up their own wealth. … The Common Law approach of a flexible, discretionary maintenance system is mentioned as a model for possible reform of the Continental systems.’ Marius J de Waal, ‘A Comparative Overview’ in Kenneth GC Reid, Marius J de Waal and Reinhard Zimmerman (eds), Exploring the Law of Succession Studies National, Historical and Comparative (Edinburgh University Press, 2007) 16. 52 Roderick Paisley in Ministry of Justice, European Commission Proposal on Succession and Wills, Consultation Paper, CP41/09 (n 57 below), para 17. The Law Society of Scotland in their response to the Ministry of Justice’s public consultation on the European Commission’s proposal on Succession and Wills 2009 stated that ‘… clawback plays little or no part in the current law of succession, but historically did so in the restricted circumstances of “deathbed” gifts.’ The issue of evasion was brought up during a recent consideration of law reform in Scotland but there was not sufficient interest to pursue it. 53 Beaumont and McEleavy, Anton (n 5 above) 1063. 54 CP41/09, n 57 below, Annex 1.

The EU Succession Regulation  93 gifts being the law of the habitual residence of the deceased at the time of death, under the Succession Regulation.55 The final concern, and the focus of this section, was over the lack of stability that clawback creates with regard to the donee’s title to the gifted property, and the fact that it allows the validity of inter vivos gifts to be questioned.56 These final points were of particular concern for the UK: renowned for its culture of trusts and charitable giving,57 and where testamentary freedom and freedom to make inter vivos gifts is valued above the protection of the interests of beneficiaries.58 Negotiations began officially in October 2009. The Commission, in its staff working document of 20 October 2009, indicated that the reduction of gifts to a third party to satisfy the legitimate portion would be problematic for the UK.59 In order to increase awareness and understanding of the issue, the comparative research conducted by Professor Roderick Paisley on the laws of the Member States on the issue of clawback was submitted to the delegates of the working party on 26 October 2009.60 There could be no excuse for the working party not to understand the importance of reaching an agreement on this area of law in order to achieve a UK and Ireland opt-in.

(iii) 2010 In February, the UK again expressed its concern about clawback in its comments to the working party.61 The UK and Cyprus took the time to clearly explain the

55 ibid. 56 Prof Matthews, House of Lords EU Committee on the proposed EU Succession Regulation, 6th  Report of Session 2009–10: https://publications.parliament.uk/pa/ld200910/ldselect/ldeucom/ 75/7502.htm, Q. 28. Clawback was raised as a ‘redline’ issue for the UK in the Supplementary letter from Lord Grenfell, Chairman of the EU Committee, to Bridget Prentice MP, Parliamentary Under Secretary of State, Ministry of Justice of 25 October 2007 in the HL European Union Committee: http://www. publications.parliament.uk/pa/ld200708/ldselect/ldeucom/12/7101005.htm (accessed 14 June 2019). 57 See Consultation Paper CP41/09 of the Ministry of Justice on the European Commission proposal on succession and wills of 21 October 2009, para 13. Statement of the Secretary of State for Justice and Lord Chancellor of 16 December 2009, Column 140WS. J Harris, ‘The proposed EU Regulation on succession and wills: prospects and challenges’ (2008) 22 Trust Law International 181. 58 CP41/09, ibid, 8. 59 See Council of the European Union, 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, Brussels, 20 October 2009, JUSTCIV 210, CODEC 1209, at 16 and 30: http://data.consilium.europa.eu/doc/document/ ST-14722-2009-ADD-1/en/pdf (accessed 20 February 2018). 60 Council of the European Union, Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and authentic instruments in matters of succession and the creation of a European Certificate of Succession – Comparative analysis of the laws of the Member States on the issue of clawback, Brussels, 26 October 2009, JUSTCIV 213, CODEC 1228: http://data.consilium.europa.eu/doc/document/ST-14894-2009-INIT/en/pdf (accessed 20 February). This document was also available in French. 61 Council of the European Union, Proposal for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and ­authentic

94  Characterisation difference between the concepts of collation and clawback in their proposal, and put forward two options that would allow the UK and Cyprus to exclude clawback from third parties.62 In the document dated 7 April 2010, they made it clear that i­nstruments in matters of succession and the creation of a European Certificate of Succession – Comments from the United Kingdom delegation, Brussels, 29 January 2010, JUSTCIV 22, CODEC 69 [63]: http://data.consilium.europa.eu/doc/document/ST-5811-2010-ADD-10/en/pdf (accessed 20 February 2018), ‘63. Subparagraph (j): this provision creates major problems for the UK in relation to clawback claims which, in one form or another, can be brought under the laws of the majority of the Member States. The UK is concerned about the significant legal uncertainty which would result from the importation of such claims. This uncertainty would arise in relation to lifetime gifts made by the deceased, in particular as regards gifts made to charities and assets placed in trusts. The scale of these potential problems was registered very clearly in response to our national consultation exercise and was the single greatest reason behind the UK’s decision not to opt into this proposal in accordance with our Protocol on Title IV measures. Within the UK lifetime transactions are generally classified as falling outside the law of succession and instead within the law of property. It will be necessary to find a satisfactory outcome on this issue in order to secure the UK’s participation in the application of the adopted Regulation. The UK is willing to engage actively in all attempts to explore such outcomes and, in response to the Presidency’s invitation, intends shortly to submit some proposals in this regard.’ 62 Council of the European Union, Proposal from Cyprus and the United Kingdom, 7 April 2010, JUSTCIV 60, 3: ‘Option 1 – Article  1 (scope of the instrument) Substitute the following for paragraph (3)(f): “rights and assets created or transferred other than by succession, such as in joint ownership with right of survival, pension plans, insurance contracts and/or arrangements of a similar nature, and also including gifts or equivalent dispositions made by the deceased during his lifetime, unless made in favour of an heir or legatee of the deceased in accordance with the law applicable under Chapter III.” Option 2 – Article  1A (the special position of Cyprus and the United Kingdom in relation to certain lifetime gifts and dispositions) “Cyprus and the United Kingdom shall not apply this Regulation in any way which would affect property rights, interests or assets created or transferred as a consequence of gifts or equivalent dispositions made by the deceased during his lifetime, unless made in favour of an heir or legatee of the deceased in accordance with the law applicable under Chapter III.” Explanatory Note 1. Cyprus and the United Kingdom are open to considering all drafting suggestions in relation to these options which have been prepared with the primary aim of highlighting, in policy terms, two possible solutions to the difficult problem of how to deal with clawback claims. 2. The purpose of Option 1 is to exclude from the scope of the Regulation ‘clawback’ claims against natural or legal persons who have been given property by the deceased during the latter’s lifetime. It is envisaged that this exclusion from scope should not be undermined in any way by Article 19 (scope of the applicable law). In particular the broad extent of that provision as proposed by the Commission in paragraph (1) and the non-exclusive nature of the list of matters referred to in paragraph (2) should not operate so as to bring back into the scope of the Regulation clawback claims which are excluded under Article 1. 3. The exclusion of these claims from the scope of the Regulation should not mean that, to the extent that such claims are currently recognised and enforced as between certain Member States, they will not continue to be so recognised and enforced once the Regulation comes into force. However, under this option such continuing recognition and enforcement will remain a matter of national, rather than Community, law. The overall result is the preservation of the status quo in this respect. 4. The proposed exclusion of clawback claims from the Regulation is not intended to alter the position under the Regulation in relation to any obligation which may fall on heirs or legatees to restore or account for lifetime gifts made to them by a deceased testator and the taking of them into account when determining their shares. This kind of adjustment of the shares of heirs and legatees to reflect what they may have received from the testator during the latter’s lifetime is widely recognised in the laws of the Member States. Under the law of England and Wales it is known as hotchpot, and under Scots law as collation. Equivalent arrangements exist under the law of Cyprus. It is designed to ensure an equalisation of the benefits which the heirs may have received as a result of advances made by the testator in his lifetime. It does not affect the interests of third parties. Issues of this kind are therefore taken outside the scope of the proposed exclusion of clawback under Article 1. On this basis, such issues will remain within the scope of the Regulation and fall within the scope of the applicable law in accordance with Article 19,

The EU Succession Regulation  95 they were content to agree with gifts falling within the scope of the Regulation if they were made in favour of an heir or legatee of the deceased in accordance with the law of the habitual residence of the deceased. The issue of collation was not contentious.63 The UK and Cyprus also made it very clear that the element they were concerned with was the issue of clawback of inter vivos gifts from third parties.

(iv) 2011 On 20 April 2011, the Presidency asked the delegates to consider the issues that were relevant to clawback and to come back to the table in May 2011 with their responses.64 This was an opportunity for all the Member States that had joined and in particular paragraph (2)(j) of that provision. 5. Option 2 differs from Option 1 in that it confines the effect of the exclusion from the Regulation of clawback claims to certain Member States, that is the UK and Cyprus, where such claims are generally unknown and where their introduction would create significant legal uncertainty in relation to lifetime transactions entered into by a deceased person and consequently title to property transferred as a result of such transactions. Under the laws in these countries lifetime transactions are not generally regarded as falling within the law of succession, but rather under the law of property.’ (Accessed on 24 September 2019 at: https://data.consilium.europa.eu/ doc/document/ST-8223-2010-INIT/en/pdf.) All Council documents are available through the www. consilium.europa.eu/register). 63 England and Wales no longer have rules for collation, but Scotland still does. 64 Council of the European Union, 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 succession and the creation of a European certificate of succession – Restoration of lifetime gifts (‘clawback’) in the context of the future, Brussels 20 April 2011, JUSTCIV 99 CODEC 682. ‘I. ELEMENTS FOR CONSIDERATION (a)  The purpose of the obligation to restore or account for lifetime gifts 6. The aim pursued by the laws which operate with the obligation to restore or account for lifetime gifts is the protection of the deceased’s family members who are entitled to a reserved share of the estate. Under those laws the value of the estate of the deceased is calculated as the sum of all property belonging to the deceased at his death and all property disposed of by gifts during his lifetime and the reserved shares of forced heirs determined on the basis of that fictional estate. The aim is thus also to ensure that a person does not deliberately reduce the value of his estate by way of lifetime gifts so as to diminish the reserved shares. Clawback is therefore an important element in the preservation of the entitlements of forced heirs. (b)  The regime foreseen by the future Regulation 7. Under the future Regulation (as the text currently stands) it will be the law applicable to the succession which will determine whether or not lifetime gifts need to be restored or accounted for. Clawback will therefore only be applied in a given succession case when the law designated under the future Regulation requires this. When the law designated does not provide for clawback, no clawback will be operated. 8. It should however be noted that a clawback operated under the law applicable to the succession may well have repercussions on gifts made in countries whose laws do not provide for clawback. 9. An example to illustrate this could be the following: A national of Cyprus dies habitually resident in Italy. Italian law is applicable to the succession (no choice of law). During his lifetime the deceased made several gifts to people or charities in Cyprus. He leaves two children in Italy who under Italian law are forced heirs. Italian law provides for the restoration of lifetime gifts when determining the reserved shares. The gifts made in Cyprus will therefore have to

96  Characterisation the EU in 2004 and 2007 and which do not have a system of clawback from third parties to be heard. The response to the request by the Presidency was deeply disappointing. In the summary of the working party meeting that was held on 3 May 2011 there appeared to be no movement forward at all in the negotiations, and the comments made by the Commission simply continued the misrepresentation of the issue by not distinguishing between the reduction of gifts to collateral heirs for the purpose of protecting the legitimate portion (to which no one was objecting) and the reduction of gifts to third parties. The Commission’s objection to the statement that clawback is likely to create legal uncertainty or that it was ‘an unfounded value judgment’ demonstrates the lack of understanding on this point even at this stage of the negotiations. (ii) Clawback The Chair gave a general presentation of the note from the Presidency concerning the restoration of lifetime gifts (‘clawback’) in the context of the future Regulation (see document 9303/11 JUSTCIV 99 CODEC 682) the aim of which was to allow for a general debate on the issue. The Commission representative stressed that it had been a clear policy option on the part of the Commission to protect family members in the context of a succession and therefore to preserve the reserved shares foreseen in the succession laws of be restored under the applicable Italian succession law although clawback is not applied in Cyprus. (c)  The wide variety of clawback regimes 10. As is the case with many other succession law aspects, the existing clawback regimes which may have to be applied in the context of the future Regulation differ widely in various respects. For the sake of the discussions it may be worth drawing attention to some specific aspects (selected from the comparative analysis carried out by the government of the United Kingdom). (i) The extent of the various clawback regimes 11. The various clawback regimes differ in terms of against whom a claim for restoration may be brought. Under some regimes claims may be brought not only against the original recipient of the gift, but also against third parties who may subsequently have acquired the property in question from that recipient. The various regimes also differ as to what exactly has to be restored. Under some regimes there is an obligation to restore the actual gift, under others the obligation is only to account for the value of the gift. (ii) The calculation of the value of the gift 12. Not all clawback regimes contain precise rules on the moment in time at which the value of the gift is assessed. Some regimes operate with an evaluation of the gift at the moment when the gift was made, others with an evaluation at the time of death of the donor. (iii) Time limits for bringing claims 13. There seems to be no uniformity in the various clawback regimes as to prescription of clawback claims. Some regimes allow clawback claims to be brought up to 30 years after the death of the donor, others operate with shorter periods. (iv) The issue of legal uncertainty. 14. A clawback regime is likely to create a certain amount of legal uncertainty. The people or charities having received gifts would normally rely on the effectiveness of the gifts and consider themselves to have rightfully acquired whatever was given to them. Having to restore a gift, in some cases received many years before, may have unexpected consequences for those concerned.’

The EU Succession Regulation  97 many Member States. She explained that many options in relation to clawback had been ­examined during the preparation of the Commission proposal, but that none had been found workable. She pointed out that the possibility for a UK or a CY citizen to choose the law of his nationality would greatly reduce the risk of a clawback being operated with regard to that person’s succession. She acknowledged that information campaigns would be necessary once the Regulation entered into force to make citizens aware of the estate planning possibilities offered by the future Regulation.65 She stressed that the succession laws of the Member States (and of third States) differed in many respects, not just on clawback. Those laws formed a coherent whole and should be respected and applied as such. She objected to the affirmation made in paragraph 14 that clawback is likely to create legal uncertainty considering this to be an unfounded value judgment. Most delegations voiced opposition to the carving out of clawback from the scope of the applicable law on the grounds already listed by the Commission representative. A few delegations called for the carving out of clawback from the scope of the applicable law. The UK and CY delegations referred to the solutions they had presented in document 8223/10 JUSTCIV 60 CODEC 268. One delegation suggested as a possibility to let lifetime gifts be governed by the law which would have been applicable to the succession at the time the gift was made. It also suggested examining the possibility of agreeing on certain limitations of clawback, for instance set a time limit for how far back claims for clawback could be made and for how long time after the death of a person. Another delegation suggested to ensure that the future Regulation would not apply retroactively to gifts made before its entry into force. Some delegations stressed that to preserve the integrity of land registers it should not be possible to revoke a title to immoveable property acquired by way of gift. Some delegations called for the issue to be examined further (emphasis added).66

However, it was not until the end of the negotiations in 2011, when the Presidency was urging the completion of the Regulation that the opportunity to examine the issue of clawback further was given.67 By this point an extension to the negotiations had to be arranged and the tone of the negotiations became strained.68 65 The Commission’s information for citizens on the Succession Regulation which was published in 2017, with reference to gifts, is very brief and notes that succession law governs whether any gifts made during your life should be restored to the estate to protect the shares reserved to your children and your spouse. EU Commission, Cross Border Succession, A Citizen’s Guide (2017): https://publications.europa.eu/en/publication-detail/-/publication/61afb4c0-a71b-11e7-837e-01aa75ed71a1, p 15 (accessed 20 February 2018). 66 Council of the European Union, Summary of discussions, Brussels, 12 May 2011, JUSTCIV 118 CODEC 742: http://data.consilium.europa.eu/doc/document/ST-9678-2011-INIT/en/pdf (accessed 20 February 2018). 67 Note from the United Kingdom on Succession and Wills following a joint proposal from the UK and Ireland on clawback. Discussed at a meeting held on 22 November 2011. 68 Council of the European Union, General Agreement on the text of the Articles, 1 December 2011, JUSTCIV 337, CODEC 2237, para 14: ‘Before accepting to include any new provisions on clawback in

98  Characterisation At a working party meeting on 3 and 4 November 2011 the UK and Ireland put forward another compromise to solve the problem of ‘clawback of lifetime gifts from those who are not heirs.’69 They reiterated the need to find a solution to allow the UK and Ireland to opt into the Regulation and respectfully pointed out that the Working Party had not been given an ‘opportunity to discuss the issue in any detail’ and asked the ‘Presidency to provide an adequate opportunity for this to happen.’70 Proposed elements of a uniform solution (1)  an additional choice of law rule to be applied in relation to gifts made during the lifetime of the deceased, namely the application of the law of succession that would have been applicable to the gift at the time of the transaction (‘the putative succession law’): the purpose of this rule is to make predictable for the recipient of a gift the legal consequences of accepting it – this would not result from the current text of the Regulation, (2)  a limitation on the scope of clawback claims so as to exclude all lifetime gifts where the recipient is a charity or person in need. (3)  a limitation on the scope of clawback claims so as to exclude claims which involve the restoration of the gifted property itself (ie claims en nature), with the result that only financial claims may be brought against the recipients of the property (ie claims en valeur). (4)  a limitation on the scope of clawback claims so as to exclude any claims brought against third party purchasers for value of property sold to them by those to whom that property had been gifted during the lifetime of the deceased. (5)  a restriction on the period within which gifts have to be made before the death of the donor in order to be rendered potentially subject to clawback claims, ie only those gifts which have been made within a certain number of years before the death of the deceased should be vulnerable to such claims.71

In light of the research conducted for this book, points 3 and 5 ought to have been acceptable to all Member States, as (i) in the majority of countries where clawback is an option the claim is a monetary claim and not a claim for the property itself, (ii) a restriction on the number of years prior to the death of the deceased is one

the text of the future Regulation … Member States will however need to be sure that the future Regulation will apply to those two Member States.’ 69 Council of European Union, Proposal from the delegations of the United Kingdom and Ireland concerning possible components of a uniform solution in relation to the clawback of lifetime gifts from those who are not heir (Brussels, 8 November 2011) 16453/11 JUSTCIV 298 CODEC 1912, 2. http:// data.consilium.europa.eu/doc/document/ST-16453-2011-INIT/en/pdf (accessed 14 June 2019). 70 Proposal from the delegations of the United Kindom and Ireland (n 69 above). Additional documents in the private archive of the author show that the UK Government was asked to persuade the Polish Presidency to extend the negotiation process in November 2011 as the deadline of D ­ ecember 2011 for an agreement to the text would result in the UK being excluded from the Regulation. The reception to the request by the Polish Presidency was gracious, in contrast to the Commissioner’s response focused on time issues and a concern that ‘a UK opt in should not be at the expense of what had been negotiated.’ 71 Proposal from the delegations of the United Kingdom and Ireland (n 69 above).

The EU Succession Regulation  99 which is familiar to many Member States, and (iii) the limitation period for gifts made to third parties is generally restricted compared to the limitation period for gifts made to heirs. There is also evidence to show that some Member States do exclude charities from clawback or have special rules that will apply in these cases, such as not demanding clawback if the charity can prove it has spent the money. So this issue should have triggered debate, but there is a weakness to the suggestion by the UK and Ireland on this point, as it would not exclude cases where the purpose has been to evade either the duty to protect the legitimate portion or maintain a dependant. At a Friends of the Presidency Group the UK and Ireland circulated their suggestion for a revised text in the Regulation.72 The revised rule stated: Article 19b (1)  With respect to a claim made to restore or account for a gift made to a party who is not an heir, that party may object to the admissibility of the claim on the grounds that claims of this nature are not provided for under the law which would have been applicable to the succession pursuant to this Regulation at the time the gift was made. The determination of admissibility shall take account of any legal requirement concerning the intention of the deceased in making the gift. [Where such a claim is admissible, it shall be brought under the law applicable to the succession.] (2)  When applying paragraph (1), a choice of law made by the deceased shall only be relevant to the question of admissibility if the recipient of the gift knew of that choice at the time the gift was made. (3)  A claim under paragraph (1) is only possible under this Regulation where it is made against the original recipient of the gift.73

This approach was an improvement on the previous suggestions put forward by the UK and Ireland, but it seems unfair to place on the donee the burden and presumably the costs of proving that the law did not provide for clawback at the time the gift was made. The UK and Ireland were keen to stress that their preferred solution was a simple approach of applying the putative law of the succession at the time the gift was made and cite the work done at the Max Planck Institute (MPI) in support of this. However, they do not address the weakness in the MPI recommendation to undertake a cumulative application of the actual and hypothetical lex hereditatis, which would mean that the laws of multiple habitual residences would have to be taken into account if the donor had gifted property during each relocation.74

72 Council of the European Union, Proposal by the delegations of the United Kingdom and Ireland concerning clawback, Brussels, 29 November 2011, JUSTCIV 332 CODEC 2217. 73 Ibid. 74 Max Planck Institute for Comparative and International Private Law, ‘Comments on the European Commission’s Proposal for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of ­authentic

100  Characterisation The MPI’s approach to calculating the value of the estate taking into account the different laws was a logistical nightmare and could not be argued as supporting the simplification of estate planning.

(v) 2012 On 9 January 2012, the UK and Ireland followed this up with working examples of the application of the putative law of succession to lifetime gifts in order to demonstrate the improvement in private international law outcomes. They noted that the Succession Regulation already uses the putative law for dealing with succession agreements.75 At the working group meetings held on 10–12 January 2012 the Presidency put forward a new provision for the restoration of lifetime gifts.76 Article 19-1 Special rule relating to the restoration of or the accounting for gifts 1.  With respect to a claim for the restoration of or the accounting for a gift made during the lifetime of the deceased to a party who is not an heir, the admissibility of such a claim may be opposed by the party in question if no claim of that nature was provided for in the law which, pursuant to this Regulation, would have been applicable to the succession of the donor if he had died on the day the gift was made. 2.  A choice of law made by the donor in favour of a law which provides for the restoration of or the accounting for gifts shall only be taken into account for the purposes of paragraph 1 if the recipient of the gift was aware of that choice at the time the gift was made.77

Again, this is a provision that places the burden on the donee to prove the law applicable to the succession at the time the gift was made, which highlights that this solution does not resolve the issue of legal certainty for the parties. The recommendation that there needs to be awareness of the law by the donee is a positive step towards legal certainty by the Presidency. However, the main criticism of this provision centres on the use of the words ‘claim of that nature’. On 18 January the UK and Ireland responded by criticising the approach taken by the Presidency, which was ‘based on the admissibility of a clawback claim in terms of whether a claim “of that nature” would have been possible under “the putative law of succession”’ and correctly pointing out that this approach would be complex to administer in practice and would ‘likely result

instruments in matters of succession and on the creation of a European Certificate of Succession’: http://www.europarl.europa.eu/document/activities/cont/201005/20100526ATT75035/20100526ATT 75035EN.pdf (accessed 10 June 2019) 86. 75 Council of the European Union, The application of the putative law of succession to lifetime gifts, Brussels, 9 January 2012, JUSTCIV 3 CODEC 32: http://data.consilium.europa.eu/doc/document/ ST-5118-2012-INIT/en/pdf (accessed 14 June 2019). 76 Council of the European Union, Proposal from the Presidency concerning the restoration of lifetime gifts (‘clawback), Brussels, 16 January 2012, 5342/12 JUSTCIV 16 CODEC 96. 77 Ibid, 2.

The EU Succession Regulation  101 in significant legal uncertainty’.78 They again strongly reiterated their support of the putative law and put forward additional provisions to support the concept of fairness, that the Regulation should not apply to gifts given before the date of application of the Regulation and that claims that are made against a third party who is not the original donee should be treated under the property law of the country where the transaction took place. On 1 February 2012 France put forward its proposal for the applicable law rule relating to clawback. The English translation of the French proposal for the revised rule on clawback read: 1.

2.

Where the law applicable to the succession provides for a claim for the restoration of a lifetime gift aimed at preserving the rights of the beneficiaries referred to in Article 19(2)(i), the non-profit legal person who is not an heir and who had benefited from such a gift may oppose the claim [under the law applicable to the succession] according to this Regulation only to the extent that the restoration could also be claimed under the law which would have governed the succession of the donor at the time the gift was made by virtue of this Regulation. A choice of law made by the donor according to Article 17 of this Regulation shall only be taken into account for the purpose of determining the law applicable to the succession at the time the lifetime gift was made [as referred to in paragraph 1], if the choice of law had been made before the donation.

Or 3.

A choice of law by the donor according to Article 17 of this Regulation shall be taken into account for the purpose of determining the law applicable to the succession at the time the lifetime gift was made [as referred to in paragraph 1]. The provision of paragraph 1 shall not apply when the lifetime gift was made only to circumvent the protection of the reserved share of the heirs as provided by the law applicable to the succession.79

France was visibly very concerned about the rules surrounding clawback as it regarded them as a ‘very sensitive issue’.80 It was willing to consider a narrow compromise so that gifts to non-profit legal persons (charities) could be excluded, the putative law could apply and the applicable law would be the law of the Member State X.81 The UK noted that Luxembourg, Estonia and Belgium supported the French approach.82 78 Council of the European Union, Proposal by the delegations of the United Kingdom and Ireland concerning the restoration of lifetime gifts, Brussels, 18 January 2012, 5375/12 JUSTCIV 23 CODEC 105, 2. Accessed on 24 September 2019, available at: https://data.consilium.europa.eu/doc/document/ ST-5375-2012-INIT/en/pdf. 79 Council of the European Union, JUSTCIV 46 CODEC 200, ‘Proposal from the French Delegation concerning clawback’, Brussels, 1 February 2012, 3. 80 Handwritten notes – Professor Beaumont, working group meeting, 1 February 2012. 81 Council of the European Union, JUSTCIV 46 CODEC 200, ‘Proposal from the French Delegation concerning clawback’, Brussels, 1 February 2012, 3. 82 It is understandable why Luxembourg and Belgium would support this issue, but it is less clear why Estonia would feel the need to do this. The amendment concerned gifts to third parties. The succession law of Estonia would appear to only allow for collation. See description of law of Estonia within

102  Characterisation On 6 February 2012, the Presidency responding to the discussions that had taken place drew ‘up a new proposal with the view of reaching a compromise’ which was presented to the Working Party as follows:83 Article 19-1 Special rule relating to the restoration of gifts 1.

2.

Where the law applicable to the succession provides for a claim for the restoration of a lifetime gift for the purposes of preserving the rights of the beneficiaries referred to in point (i) of Article 19(2) and without taking into account the intentions of the donor when making the gift, a party who is not an heir may oppose a claim made against him for the restoration of such a gift if the law which, pursuant to this Regulation, would have been applicable to the succession of the donor if he had died on the day the gift was made did not provide for claims for restoration of that type. When determining, for the purposes of paragraph 1, the law which would have been applicable to the succession of the donor if he had died on the day the gift was made, a choice of law by the donor shall be taken into account only if the recipient of the gift expressly acknowledged that he was aware of that choice at the time the gift was made.84

The Presidency has taken on board the criticism by many delegates regarding their previous proposal that ‘the admissibility of such a claim may be opposed by the party in question if no claim of that nature was provided for in the law’. However just a few days later, after discussing the issue of clawback at a meeting of the Friends of the Presidency Group on 8 February 2012, the Presidency came up with a new proposal and asked for it to be discussed at the meeting of 17 February. Article 19-1 Special rule relating to the restoration of gifts 1.

Where the law applicable to the succession provides for a claim for the restoration of a lifetime gift for the purposes of preserving the rights of the beneficiaries referred to in point (i) of Article 19(2) and without taking into account the intentions of the donor when making the gift, a party who is not an heir may oppose a claim made against him for the restoration of such a gift if the law which, pursuant to this Regulation, would have been applicable to the succession of the donor if he had died on the day the gift was made did not provide for claims for restoration of that type.

Annex IV. Gifts made to persons in the three years prior to the death of the deceased with the intention of reducing the available estate to satisfy the legitimate portion are taken into account for the purpose of calculating and thereby increasing the legitimate heir’s share, but the claim appears to be a monetary claim against the estate rather than a claim against the donee: §106(s) Inheritance Act. 83 The Council of the European Union, JUSTCIV 51 CODEC 26, ‘Proposal concerning the restoration of lifetime gifts (Clawback)’ (accessed 24 September 2019), available at: https://data.consilium. europa.eu/doc/document/ST-6044-2012-INIT/en/pdf. 84 Council of the European Union, Proposal concerning the restoration of lifetime gifts (‘clawback’) Brussels 6044/12 JUSTCIV 51 CODEC 261.

The EU Succession Regulation  103 2.

A party who is not an heir may not oppose a claim made against him for the restoration of a gift in a situation referred to in paragraph 1 if the donor made the gift with the manifest intention of defeating the rights of the beneficiaries referred to in point (i) of Article 19(2).

If this provision were eventually to be inserted in the future Regulation some consequential changes would have to made to some of the recitals. 5)  Transitional provision to be inserted in Article 50 as a new paragraph 5: ‘5.  No claim may be made under this Regulation for the restoration of a gift made to a party who is not an heir prior to the date of adoption of this Regulation.’85

Here we can see that the Presidency has acknowledged the need to protect legitimate heirs if the donor gifted the property with the intention to evade his/her duty, and it is also putting forward a compromise to exclude gifts to third parties that were made prior to the application of the Regulation. In private notes drawn up after the meeting on 17 February the UK made it clear that choice of law should be excluded, as it was easier for the donee to work out the habitual residence of the donor than whether someone had made a choice of law to govern their succession. It also wanted the donee to be protected if he/she had acted in good faith.86 In this document which is held in the private archive of this author, it was noted at this meeting that Ireland, Cyprus, Czech Republic, Slovakia and Slovenia supported the UK’s stance in relation to clawback but that there was general opposition to the UK proposal, as it did not respect the choice of law.87 France explained that clawback is an exception for the UK in a Regulation which applies to all Member States; that it is symbolic – that it is possible to explain to their MP’s that there is an exception for charities but not for natural persons; and that when the Regulation was proposed France’s only issue was the protection of the reserved share and that they do not have at the present time the articles they want and that they are therefore in a position where it would be difficult to sell the argument that the exclusion should extend to natural persons. The Commission responded to France that the entire Regulation will better protect the reserved share than the status quo, even with clawback. UK noted that they could not accept the French proposal. The Presidency concluded that this paragraph will proceed as is.88

The UK then put forward an amendment for a new paragraph 3 to provide that there should be no clawback against third parties.89 In this case the term 85 Council of the European Union. Proposal concerning the restoration of lifetime gifts (‘clawback’) Brussels, 15 February 2012, 6491/12 JUSTCIV 58 CODEC 374: http://data.consilium.europa.eu/doc/ document/ST-6491-2012-INIT/en/pdf (accessed 14 June 2019). 86 Private UK Government document in the author’s archive. 87 Ibid. 88 UK, ‘Notes of Counsellors’ Meeting on 17 February 2012’ in private archive. 89 Ibid.

104  Characterisation ‘third party’ did not mean a ‘third party to the estate, or a non-heir’. It referred to a third party who had acquired the property from the original donee. Of particular interest was the response put forward by the Presidency during this meeting that this issue was outside the scope of the Regulation, as it concerned substantive property law.90 The Commission also agreed and believed that clawback from third parties who have acquired the property from the original donee was on the border between succession and property law and, if anything, lay more towards substantive property law.91 The Commission also noted that it was open for a third party in this context to use remedies under the property law of the relevant Member State, such as unjustified enrichment, and that it might also be covered by Rome II.92 These very-late-in-the-day observations about the character of the claim to claw back a gift from a third party as being a property law issue are enlightening, as they highlight the lack of agreement as to what the applicable law rule should be for this claim within the EU. If the Presidency and the Commission knew that this was not a succession issue they could have easily put in a recital expressly excluding a claim for clawback from third parties. However, they chose not to and left the door open for the claim to fall within the law of succession. However, when it came to the decision in Coreper, there was a blocking minority vote against the Presidency text on clawback, followed by the decision to adopt the Regulation with no compromise text on clawback.93 The Succession Regulation was adopted on 4 July 2012 and came into effect on 17 August 2015. As to the final version of the Regulation – the flaws are still there. Article 23(2) (i) does not differentiate between an ‘obligation to restore or account for gifts’ for the purpose of collation and clawback from the third party to protect the legitimate portion. Article 23(2)(i) provides that the applicable law shall govern the ‘obligation to restore or account for gifts’ for the purpose of ‘determining the shares of the different beneficiaries’. The original intention behind the EU Commission’s insertion of this article at the start of the negotiations was to visibly protect the concept of the legitimate portion, but unfortunately their data and therefore their understanding of the issue was out of date. They divided the issue between countries where inter vivos gifts were considered irrevocable and countries where inter vivos gifts could be clawed back for the purpose of protecting the legitimate interests of the relatives of the deceased.94 The information they were working from did not take into account the succession laws of the Member States who joined the EU in 2004 or 2007 of which six did not have a succession rule of clawback of gifts from third parties. They did not differentiate between the restoration of gifts for collation and the restoration of gifts for clawback. 90 Ibid. 91 Ibid. 92 Ibid. 93 Notes taken from private conversation between the author and Professor Beaumont, November 2017. 94 Council of the European Union, 16 October 2009, JUSTCIV 210, 6.

Preparation for Determining the Applicable Law  105 It does raise an important question as to why, when there were so many new Member States joining the EU, with clearly different legal traditions, the Commission did not think it wise to revise the preparatory data. This question is one that needs to be raised to avoid an assumption of complacency or desire for others to conform. The Commission’s solution to protecting the legitimate portion, as advocated by the European Parliament, was for the deceased to choose the law of their nationality to govern their succession in order to protect their cultural succession heritage and avoid the law applicable to the succession changing, which could exclude certain categories of forced heirs.95 This of course relies on the testator to be proactive in preparing their succession in order to protect their cultural succession heritage. Unfortunately, it does not protect those the E ­ uropean Parliament was attempting to protect, which were the vulnerable parties in the home State. This approach may have been supported by the report by the Max Planck Institute which informed the debate that almost all Member States used clawback (which they do if the reduction of the gift for the purpose of collation is considered clawback).96 The Regulation is of course intended to only cover private international law rules of the Member States and not the substantive law on succession, yet without an understanding of the substantive and procedural rules of succession in the Member States no one had a full picture or anywhere close to the full picture. The general private international law rule governing the law applicable to the succession that applies to clawback ultimately does not protect the three groups the European Parliament intended to protect. It does not protect the donors in countries which support testamentary freedom and where inter vivos gifts do not form part of the fictive estate. It does not protect donees in countries where an inter vivos gift is regarded as irrevocable; nor the heirs in countries entitled to a legitimate share of the estate who discover that with the change in the deceased’s habitual residence they are no longer entitled to claw back that gift or its monetary equivalent in order to satisfy an inheritance claim. Although it is clear that clawback from the original donee (non-heir) as well as from third parties who have acquired the gift from the original donee was discussed for the Succession Regulation, the refusal by many Member States to consider it as anything other than a succession issue restricted the ability to find an acceptable and fair applicable law rule.

IV.  Preparation for Determining the Applicable Law It is necessary to consider the nature of the claim in order to identify the relevant parties to be protected when considering what the appropriate applicable law 95 Ibid. 96 It should be noted that the Max Planck Institute conducted research during the negotiations in relation to clawback to try to identify a solution to the contentious rule within the Succession Regulation, but did not differentiate between clawback for the purpose of collation and clawback from a third-party non-heir.

106  Characterisation should be, as well as considering the nature of the gift itself to see if this raises additional questions. Some people may question why the character of clawback needs to be reassessed. For many countries, it fits easily within their succession law. However, as has been demonstrated, this assessment is only certain when considering the reduction of the inter vivos gift to legitimate heirs to satisfy the legitimate portion, a claim that involves close heirs to the deceased making an inheritance claim based on the reduction of ‘advancements’ that have exceeded the legitimate portion. Where the issue does not clearly fall within the scope of succession is when the inter vivos gift is made to a third party who is not an heir. The third party is not an heir and therefore does not have the donor’s succession in mind when receiving the gift. Furthermore, where the transfer has taken place in a country which does not consider the inter vivos gift as forming part of a fictive estate, with the consequence that the gift is regarded as irrevocable, it makes it even more difficult to accept that this is a pure succession issue. Creating an international private international law rule that will be acceptable to all the relevant parties requires the drafters to assess as full a picture as possible. In 2010, the Max Planck Institute (MPI) in its comments97 on the Succession Regulation focused on the character of the claim and accepted that it was one of succession but also recognised that clawback is also characterised as contract, property and succession law depending on the legal tradition it is drawn from.98 Instead of stepping back and responding to this crucial point that clawback is recognised as falling within differing legal categories depending on legal tradition, the MPI focused on trying to find a solution for making the succession law acceptable. By accepting that clawback was a succession issue, the MPI restricted itself to simply playing with a succession rule, rather than stepping back to put forward a unique international private international law rule for clawback from third parties.

A.  Legitimate Expectations Legitimate expectations are an extension of legal certainty.99 Identifying who has a legitimate expectation in relation to the claim and to the transfer of the gift is

97 Max Planck Institute (n 74 above). 98 The Max Planck Institute (n 74 above) took a majority approach to characterisation and worked on the understanding that it was a succession issue. Although they were looking at how to improve the draft of the Succession Regulation they did not look to expand the initial research to include the new members of the EU. If characterised as contract law, clawback would be considered a contract in relation to donation and would be subject to Rome I; as property law, it would be governed by the lex situs; as maintenance law it would be governed by the EU Maintenance Regulation and the Hague Convention and Protocol on Maintenance; as succession law, within the EU it would be governed under the Succession Regulation by the habitual residence of the deceased at the time of death. 99 Takis Tridimas, The General Principles of EU Law, 2nd edn (Oxford University Press, 2006) ch 6.

Preparation for Determining the Applicable Law  107 an objective way to determine whether an applicable law proposal is fair and certain.

(i)  The Donor The donor has a legitimate expectation to be able to know the consequences of making the gift, for the purpose of estate planning. Under the EU Succession Regulation, unless the donor actively chooses the law of his nationality to govern his succession and does not change his mind, there is no legal certainty for estate planning, as the will may become invalid or the donor himself may change it, or the donor may not have a will and change his habitual residence resulting in the law applicable to succession changing. This lack of legal certainty does not meet the basic requirement for estate planning. The further away from death the donor is when he makes the gift, the less certain he can be as to where he will be habitually resident at the time of his death. The only law that the donor can be aware of with certainty is the law that governed the transfer at the time of making the gift.

(ii)  The Donee The donee has a legitimate expectation to be aware of the law that applies to the gift at the time of the transfer. The donee has a legitimate expectation to consider the gift as irrevocable, unless made aware to the contrary by the donor.100 If clawback is to apply to the gift, then the donee needs to be aware of this prior to the transfer so that he or she can prepare by taking out insurance against clawback or even make the decision to refuse the gift. The donee would need disclosure at the time the gift is made as to what law will apply to any future claim for clawback by any possible legitimate heirs. This is the only way of creating certainty for both the donor and the donee (and providing predictability for those entitled to a legitimate portion).

(iii)  The Donee Sells the Gift or Gifts the Gift to Another A buyer or subsequent donee has the legitimate expectation that the property that he has purchased or been gifted in good faith is not subject to clawback at a later date (unless he is made aware of the risk at the time of purchase). This scenario would be extremely problematic in the area of immoveable property. In the UK, property titles held within the land registry do not record that a property may be at risk of clawback and therefore there would be no way of having legal certainty that the property that the buyer had purchased or had been gifted was risk-free. This would also be problematic where the buyer or donee had raised a mortgage against the property. The mortgage lender also needs to be made

100 Paisley

(n 57 above).

108  Characterisation aware of the risk. In one country, the law relating to clawback allows a legitimate heir to claw back the actual property mortgage-free from the donee or buyer or subsequent donee. In another example, the legitimate heir’s claim is against the person who currently owns the property. In another, the claim is solely against the original donee even if they have sold the property or gifted it to someone else. Once the prescription period has elapsed from when the claim can be made then the transfer of property is regarded as irrevocable. Without clear awareness as to the risk, it is unacceptable for the legal certainty of these parties to be challenged in such a way.

(iv)  The Donee’s Heir It is also possible that the property may have been unwittingly passed on under the succession of the donee’s estate. In this situation, some countries permit the legitimate heirs to pursue the property. The donee’s heir has the legitimate expectation to be able to peacefully own the property unless they were aware of the risk of clawback at the time of receiving the property. Again, if the donee’s heir raises a mortgage against the property the mortgage lender should be made aware of the risk. The mortgage lender needs to have legal certainty on this point.

(v)  The Legitimate Heir The legitimate expectations of the person entitled to a legitimate portion change depending on the point in time that their expectations are considered. Until the deceased dies and a succession law is identified and the estate is valued heirs cannot know for certain whether they are legitimate heirs entitled to have a legitimate portion of the estate, as each country has different rules as to who falls within this group. They cannot have a legitimate expectation to inherit until they know what their status is and indeed whether there is anything in the estate to inherit. The heir may have a legitimate expectation to inherit if at the time the gift was made the donee was made aware of the applicable succession law, that the gift could fall within reach of clawback if needed, and was not excluded by the donor explicitly excluding it from clawback by saying it falls within the disposable portion, and the donor does not change the succession law to his estate. However, the only legal certainty for the heir with regard to their legitimate expectations occurs at the point of the deceased’s death. In some systems, the legitimate heir becomes a creditor of the estate.

(vi)  The Third-party Creditor In certain systems third-party creditors of the estate or of the heirs are able to make a claim to claw back property from a third party who received a gift from the deceased. Their legitimate expectation to make the claim is limited and only occurs

Preparation for Determining the Applicable Law  109 after the donor has died.101 The situation for the creditor will not be considered for the purpose of this book, as it would require an analysis of insolvent estates.

(vii) Conclusion The legitimate expectations of the donor and donee exist from the date of the transfer. Their legitimate expectations are not dependent on additional events such as the death of the donor to come into being. The legitimate expectation for the heir is dependent on many factors and only has any legal consequence once the donor dies, which would suggest that the legitimate expectations of the donor and the donee should be prioritised above those of the legitimate heir.

B.  Fundamental Rights and Substantive Interests Following on the development of pragmatism in private international law to include the concept of fundamental human rights on the basis that they are an integral part of the substantive interests,102 the assessment of clawback of the inter vivos gift will be briefly considered from a human rights perspective to see whether it is possible to strengthen legitimate expectations claims.

(i)  Is there a Fundamental Right to Inherit? Contrary to the expectation of heirs armed with the protection of prior rights, legal rights and reserved shares, and national Constitutions declaring the right to inherit, there is no fundamental right to inherit. The ‘right’ to inherit that is found within international law centres around the need to avoid discrimination.103 The European Court of Human Rights has dealt with many inheritance cases, but the issues raised centre on discrimination and the right to respect for family life.104

101 It is not clear whether the creditor is treated as an heir or whether, once the property is clawed back, they become one of many creditors where a hierarchy has to be ascertained. 102 Lara Walker, Maintenance and Child Support in Private International Law (Hart Publishing, 2015) 109, 110. 103 See Art 5(d)(6) of the International Convention on the Elimination of all forms of Racial Discrimination, Art 12(5) of the Convention on the Rights of Persons with Disabilities. 104 http://www.echr.coe.int/Documents/Convention_ENG.pdf (accessed 14 June 2019). The case law that has come before the European Court of Human Rights is based on questions relating to Art 8, the right to respect for family life, see Zaiet v Romania (Application no 44958/05) 24 March 2015, [2015] ECHR 419, and to Art 14, the prohibition of discrimination, see Marckx v Belgium App no 6833/74 (13 June 1979), Inze v Austria (28 October 1987), Art 14 in conjunction with Art 1 of Protocol No 1 (right to peaceful enjoyment of ones possessions) in Mazurek v France (1 February 2000), Art 14 in conjunction with Art 8 in Camp and Bourimi v the Netherlands (3 October 2000), Art 14 in conjunction with Art 8 in Pia and Puncernau v Andorra (13 July 2004), Art 14 in conjunction with Art 8 in Brauer v Germany (28 May 2009), Art 14 in conjunction with Art 1 of Protocol No. 1 in Fabris v France (7 ­February 2013), Art 14 in conjunction with Art 8 in Mitzinger v Germany (9 February 2017).

110  Characterisation

(ii)  Is there a Fundamental Right to Own Property? There is also no international consensus regarding the fundamental right to own property. The International Covenant on Civil and Political Rights does not provide for the protection of property. Article 1 of the First Protocol of the ­European Convention on Human Rights (ECHR) does provide for the protection of property in that it provides that ‘every natural or legal person is entitled to the peaceful enjoyment of his possessions’, however this relates to State interference in the property.105 The EU Charter of Fundamental Rights provides for a person to ‘… own, use, dispose of and bequeath’ his or her legally acquired property.106 This right under the Charter of Fundamental Rights may be restricted as long as such restrictions correspond ‘to objectives of general interest pursued by the Community and do not constitute … a disproportionate and intolerable interference, impairing the very substance of the rights guaranteed.’107 Therefore, the most that can be said is that within the EU, the ability for people to gift their legally acquired property, during their lifetime, is a fundamental right. In light of this it can be argued that, within the EU, in a cross-border context, a provision which permits the retroactive application of a succession law that was unknown at the time of the transfer, and where the transfer took place in a country which does not provide for clawback would, if a claim for clawback arose, infringe the donor’s fundamental right to transfer their property and for that property transfer to be regarded as irrevocable by the donee. It raises the question as to whether the rule relating to clawback within the Succession Regulation is in breach of this right; however, this is beyond the scope of this book. There is doubt as to whether the protection of the legitimate portion is a public policy issue and therefore it is unlikely that clawback would be considered to be in the general interest of the community sufficiently to warrant the restriction of the donee’s property rights, especially when combined with the lack of an international right to inherit.108

Zoltán Csehi in Anderson and Amayuelas, The Law of Succession: Testamentary Freedom (Europa Law Publishing, 2011) 272 identifies Germany, Spain, Portugal, Slovenia, Croatia, Slovakia and the Czech Republic as having constitutions that regard succession as a right. However, in this context it should be noted that the Czech Republic and Slovakia do not recognise clawback from a third party to satisfy the legitimate portion. 105 For an explanation of Protocol 1 to the ECHR see: https://www.coe.int/en/web/echr-toolkit/ protocole-1 (accessed 14 June 2019). 106 EU Charter of Fundamental Rights Art 17. European Convention on Human Rights, Protocol No 1, Art 1 concerning the protection of property provides that ‘every natural or legal person is entitled to the peaceful enjoyment of his possessions.’ Briefing Note, European Parliament, Transnational Inheritance, 2 March 2010: http://www.europarl.europa.eu/RegData/etudes/BRIE/2010/100027/ LDM_BRI(2010)100027_REV2_EN.pdf (accessed 14 June 2019). 107 Cases C-154 and 155/04 R (Alliance for Natural Health and Others) v Secretary of State for Health and National Assembly for Wales [2005] ECR I-6485 paras 126–129. 108 All succession regimes considered for this book had rules to justify excluding a particular heir based on poor behaviour towards the testator, indicating a level of testamentary freedom.

Preparation for Determining the Applicable Law  111

C.  Comity and the Process of Characterisation For the purpose of this book, the doctrine of comity in relation to private international law will be taken to mean ‘that courteous intercourse which should subsist between civilised countries’.109 The author is of the view that the issue of clawback – which, it could be argued (in certain narrow cases), allows the claimant, if successful, to remain independent from State support at least in the interim – is one that other States will recognise as being of value. In a world with limited resources it makes sense, if the context is one of need, for countries to recognise a foreign claim of this nature.110 In order to achieve acceptance of the associated private international law rules, characterisation plays a key role. The ability to characterise an issue so that it respects all legal systems (or as many systems as the instrument is targeting) provides the basis on which the ruling will be respected by all parties. This is necessary and integral to creating fairness when determining the appropriate connecting factor and applicable law from scratch.

D.  The Character of a Clawback Claim against a Third Party As has been previously discussed, one accepted characterisation of ‘the claim to claw back an inter vivos gift from a third party in order to satisfy the legitimate portion’ is that it falls within the category of succession law, in that it is regarded by some Member States as a restitution issue with the original obligation being one of succession. However, the research conducted for the purpose of this book highlighted that this view is not common to all civil law countries, and a claim to claw back an inter vivos gift from a third party is not recognised as a succession issue within common law countries. This conflict between the differing approaches, if not resolved, leads to unfair results and risks undermining legitimate expectations of all parties. A legislative system that protects clawback in the format found within the Regulation undermines the security of inter vivos gifts in cross-border

109 Beaumont and McEleavy, Anton (n 5 above) 2.12. See also Dicey (n 5 above) 1-008 et seq. 110 The novel rules on enforcement in the requested State that are found within Ch V of the Hague Convention on the International Recovery of Child Support and other forms of Family Maintenance (the 2007 Hague Convention), that the enforcement measures are effective on the face of it, demonstrates a willingness by States to support the recovery of maintenance. It should be noted that at present the definition of maintenance does not include maintenance from the estate of the deceased. However, it is the willingness by states to recognise the value of individuals not becoming a burden on the State that is of interest. For a full analysis of the private international law of maintenance law regimes, see Walker (n 102 above) 176. For an analysis of whether a claim for maintenance from the estate of the deceased can be construed as maintenance and not succession and how this would work under the current maintenance regime see J Holliday ‘Characterisation within Private International Law: Maintenance or Succession?’ in P Beaumont, B Hess, L Walker and S Spancken (eds), The Recovery of Maintenance in the EU and Worldwide (Hart Publishing, 2014) 443–58.

112  Characterisation contexts, does not allow for estate planning, and defeats donees’ legitimate expectations in legal systems where clawback is not protected.111 The following section will consider the character of a claim to claw back gifts from third parties from the perspective of succession law, property law, contract law and the law of maintenance, using the private international laws of England and Wales as an example of a legal system where the inter vivos gift does not fall within the scope of the estate. The aim is to determine whether there is a more appropriate way to categorise these claims in order to protect all the relevant parties so that an appropriate and fair applicable law solution can be identified that will avoid the conflict that currently exists.

(i)  Characterisation of the Claim as Succession Law Does the common law characterise this claim against a third party to satisfy the legitimate portion as a succession issue? The courts of England and Wales would appear to be sympathetic to the concept of collation112 but they are not sympathetic to the concept of clawback of a gift from a third-party non-heir unless the transfer was in order to defeat a financial provision for a dependant. In order for clawback of an inter vivos gift from a third party to be considered as succession law, a legal system has to hold that a person’s estate is made up of the assets belonging to the deceased at the time of death, less his liabilities at the time of death, plus the value of the assets that the deceased gifted during his lifetime. The share for the legitimate portion is then calculated as a percentage of the ‘fictive heritable mass’ and not the actual estate at the point of death.113 The succession laws of England and Wales advocate testamentary freedom and the ability to freely gift property during a person’s lifetime. A donee will receive good title on a valid inter vivos gift. English law does not consider the estate of the deceased as comprising everything that person has ever owned.114 111 This was a concern for the UK, see Letter from the Hon Mr Justice David Hayton, House of Lords EU Committee (n 31 above). 112 Collation or hotchpot existed in statute in England from 1670 in s 3 of the Statute of Division, until it was abolished for intestacy under s 1(2) of the Law Reform (Succession) Act 1995. Vogelius v Vogelius (2005–06) 8 ITELR 619, in this case the deceased had transferred real property in London to a foreign trust but only appointed two out of his five children as beneficiaries of the trust. The trust was recognised and the court held that the effects of the trust could be taken into account for the purpose of collation and ordered that, as there were disposable assets in Argentina, an adjustment should be made in favour of the remaining three beneficiaries to compensate them for the loss of the assets that had been disposed of by the trust during their father’s lifetime. 113 CP41/09 (n 57 above), 19. 114 In Lambton v Lambton [2013] EWHC 3566 (Ch) [9], it was submitted as part of the claim that ‘English choice of law rules for succession apply only to those assets which fall within the deceased’s estate. As a matter of English private international law, the only assets which fall within a deceased’s estate are those of which the deceased stood possessed at the time of his death. Assets disposed of by the deceased prior to his death do not form part of his estate upon death. The lex successionis is irrelevant to this question.’

Preparation for Determining the Applicable Law  113 The closest analogy to clawback from a third party within England and Wales as an issue r­ elating to the estate of the deceased is the anti-evasion rule found within section 10 of the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act). This allows a person who has a claim under this Act to make a financial claim against a donee who received a gift from the deceased within six years prior to the latter’s death if it is necessary in order to satisfy the financial provision claim. However, in contrast to clawback from a third party within civil law regimes, it is necessary for the claimant to prove that the donor intended to defeat a claim to financially provide for the dependant when they gifted the property and therefore the claimant has to prove that there was bad faith. The claim under the 1975 Act is not for the property itself to be returned to the estate in order to protect the donee’s title. The nature of this anti-evasion claim is commonly recognised as a succession right, but it also has characteristics akin to a maintenance right and therefore its nature is not clear cut. The full nature of this claim under the 1975 Act will be discussed in detail later in this chapter.

(ii)  Characterisation of the Claim as Property Law Does the common law characterise this claim against a third party to satisfy the legitimate portion as a property law issue? Again, using the laws of England and Wales as the example, the courts would appear to value the ability to freely gift property during a person’s lifetime and to value testamentary freedom ‘above the protection of interests of family members upon his death.’115 Although the claim to claw back property from a third party would not be characterised as succession law in England, due to inter vivos gifts not forming part of the final estate, it does have characteristics pertaining to property law, on the basis that the gift is a transfer of property. However, the comparative research conducted for this book highlights that in the majority of cases the claim is for the monetary value of the property as a result of unjustified enrichment and is rarely for the return of the property itself. If the claim is for the return of the property, then this could give the heir a stronger claim, as it would give rise to a claim in personam or a real right, depending on what was gifted.116 However, under English private international law the law governing the rights over or in relation to immoveable property is the lex situs.117 The law governing … the validity and transfer of a tangible movable and its effect on the proprietary rights of the parties thereto and of those claiming under them in respect thereof is the law of the country where the movable is at the time of the transfer (lex situs).118



115 CP41/09

(n 57 above), 9. (n 57 above), 19. 117 Dicey (n 5 above) Rule 132. 118 Ibid, Rule 133. 116 CP41/09

114  Characterisation Under the law of England and Wales a claim for the recovery of the moveable property would be brought in the law of tort. Prior to 1996, assuming that the tort took place in another country, under common law the claimant would have to show wrongful interference with possession and that the claim was well founded under English law.119 Post 1996, the law of the country where the significant elements of the tort took place will apply.120 This is excluded from Rome II by Article 1(2)(b) read alongside Article 23(h) of the Succession Regulation. It is therefore extremely unlikely that a claim against property that was validly transferred within England and Wales and thereby governed under the law of England and Wales would be successful. Due to the claim being for the actual return of the property in so few countries, clawback from third parties, from the perspective of creating private international law, should be primarily treated as a claim for monetary value, especially when taking into account the visible move away from property claims to ones restricting the claim to a monetary claim, with the consequence that the heir becomes a creditor of the estate. Claims against property threaten the title of the donee and are in conflict with the UK’s desire to protect the security of title.121

(iii)  Characterisation of the Claim as Contract Law Does the common law characterise this claim against a third party to satisfy the legitimate portion as contract law? The claim for the clawback of a gift from a third party is between the heir and the donee. It is very unlikely that the relationship between the heir and the donee would be considered to be one of contract. The contractual connection is between the donor and the donee, and is the unilateral contract of gift.122 There is no contractual relationship between the heir and the donee unless specifically agreed either between the donor and donee or between the heir and the donee. It could be argued that there is a non-contractual obligation between the donee and the heir. If the donee is aware of the risk of a future clawback claim he or she may have a duty of care to protect the inheritance of the legitimate heirs. There may be evidence of this in civil law tradition if there is a clause in the contract for the transfer referring to the property and the risk in relation to the legitimate portion. 119 Ibid para 24-027. 120 Ibid. Part 3, s 11(1) Private International Law (Miscellaneous Provisions) Act 1995. 121 CP41/09 (n 57 above), 19. 122 Hyland, Gifts. A Study in Comparative Law (Oxford University Press, 2010), see ch 8 for different characterisations of gift as contract law, succession law, family law, property law and restitution law. See also Dicey (n 5 above) para 27-015 fn 27: ‘Gorjat v Gorjat [2010] EWHC 1537 (Ch.) where the deceased had instructed a bank to transfer certain Swiss bank accounts held in his own name into new accounts held in the joint names of himself and his second wife. When he died intestate some months later, the children from his first marriage challenged the validity of those transfers. The court characterised the issue as one relating to the validity of an inter vivos transfer, and not as a matter of succession.’ For an analysis of this case see below.

Preparation for Determining the Applicable Law  115

(iv)  Characterisation of the Claim as One of Unjustified Enrichment Many Member States within the EU characterise the claim as one of unjustified enrichment; a claim for restitution with the obligation arising from a succession right. It is based on the idea that there was an obligation between the donee and the donor. The donee has benefited from accepting the gift at the expense of the heir’s right to the legitimate portion. The heir has suffered a reduction in their wealth as a result of the transfer of the gift. The heir has a claim against the estate. The estate is required to make a claim for restitution against the donee. The donor had an obligation to satisfy the legitimate portion. Under the law of England and Wales this would be rebuttable if it could be demonstrated that the donor intended the donation to be irrevocable, as only gifts that were conferred without the intention to donate are reversible. Sherbourne, in his analysis of restitution in conflict of laws suggests that the choice of law for restitution is the proper law of the obligation.123 This would require the obligation behind the claim to be characterised in order to identify the proper law by considering which country had the closest connection to the claim. It is doubtful whether this approach would be successful in a cross-border context, as the obligation behind the claim for clawback of an inter vivos gift for the purpose of satisfying the legitimate portion is most likely to be characterised as one of succession, which would not be acceptable to judges within countries where the inter vivos gift does not form part of the fictive estate.

(v)  Characterisation of the Claim as Maintenance Law124 (a)  The Anti-Evasion Rule Approach, as found within Common Law Systems The character of a claim by a dependant to reduce an inter vivos gift to a third party for the purpose of maintenance highlights the blurring of the issue between one of maintenance, one of succession and one of gift. Although there are some countries where the underlying reasoning for clawback from a third party is that of maintenance, the anti-evasion rule differs from the common ‘clawback’ rule for the reduction of the inter vivos gift made to third parties to satisfy the legitimate portion, as it requires there to have been an intention to defeat a claim for financial provision. It does not limit the dependants to heirs. The anti-evasion rule is discretionary and is needs based. As it is needs based it is not dependent on whether the gift exceeds the disposable portion, nor whether the gift is one that falls within the scope of succession. The dependant, who, as has been mentioned, may not have been an heir, has the ability to apply for reasonable provision from the estate before resorting to reduction of gifts made to either heirs or third parties. The fact 123 AKE Sherbourne, ‘Restitution in conflict of laws: characterization and choice-of-law in Australia’ (2017) 13 Journal of Private International Law 1–34, 25. 124 Whether the claim was one of maintenance under the 1975 Act was the focus of a chapter written by the author: see Holliday (n 110 above).

116  Characterisation it applies to both heirs and third-party donees goes beyond the scope of clawback that has been argued for in this book. However, the concepts of protecting the legitimate portion, whether through collation or clawback, are fundamentally different to a pure anti-evasion rule and therefore its value is in providing a comparative perspective. The clawback rule to satisfy the legitimate portion does not in the majority of cases require there to have been a bad faith element; merely that the gift that was made by the deceased during his lifetime exceeds the disposable portion of the estate, to the detriment of the legitimate portion. There is no requirement that the claim has to be needs based. (b)  Clawback of a Gift from a Third Party in England and Wales for the Purpose of Maintenance The claim for financial provision in England and Wales under the 1975 Act is characterised by many as succession. However, it is argued that it also has characteristics that are analogous to maintenance and therefore is more sui generis in character. The claim can be made by someone who is not an heir and who does not have a right to inherit under the succession law. The claim has to be made during the administration of the estate, a process which in the UK is governed by the lex fori, and the purpose behind the claim for financial provision is one of maintenance and not inheritance. It is argued that where a dependant is able to make a claim for financial provision from the estate of the deceased, at least where any award is to meet the needs of the applicant, the character is one of maintenance and not succession.125 Freedom of testamentary disposition is an established right within the law of England and Wales.126 Part of the right of ownership of private property,127 testamentary freedom is accepted in England as an inherent part of the common law, and is protected by statute.128 If the deceased has not made a will or the will is not valid or only covers part of the estate of the deceased, then the law of intestacy will apply.129 The law of intestacy lists the family members to whom the property is to pass.130 Where the outcome of a will or the rules of intestacy leads to severe financial hardship for family members or people who were dependent on the deceased, then testamentary freedom is potentially limited by the 1975 Act. Under the 1975

125 The Law of England and Wales will be used as the example and will be known as English law for the purpose of this chapter. 126 The Wills Act 1837, s 3. Although note that there is no requirement in English law that a will must nominate an ‘heir’: see KGC Reid, MJ De Waal and R Zimmermann (eds), Testamentary Formalities, Comparative Succession Law, vol 1 (Oxford University Press, 2011) 317. 127 See Reid et al, ibid, 308 for an historical account of the development of property law on death within England. 128 The Wills Act 1837. 129 Law Commission, Intestacy and Family Provision Claims on Death (Law Com No 331, 2011). 130 Administration of Estates Act 1925 s 46.

Preparation for Determining the Applicable Law  117 Act the court is able to limit the deceased’s freedom to make inadequate provision for his surviving dependants.131 The dependant does not have to be an heir. It is based on need. This is a discretionary approach to maintaining dependants of the deceased, as opposed to the concept of utilising the legitimate portion approach where the purpose is to protect close heirs and family property.132 It should be noted that the 1975 Act is only triggered when an application for financial provision is made by a dependant, and therefore testamentary freedom is only limited in successful cases, which are very few in number.133 One policy motivation behind this limitation of testamentary freedom is to minimise the cost to the State of maintaining the dependants.134 The 1975 Act is generally regarded as forming part of the private international law of succession within England and Wales.135 It requires the deceased to have been domiciled in England and Wales.136 It allows for spouses137 and former spouses,138 those who were living in the same household as the deceased or living as the deceased’s husband or wife,139 children,140 those whom the deceased treated as a child of the family,141 and those whom the deceased ‘maintained either wholly or partly’142 to apply for reasonable financial provision from the estate of the deceased. Spouses are able to apply for financial provision that is reasonable in all the circumstances,143 whereas the other dependants are limited to the award of maintenance.144 The question that needs to be addressed is whether there is sufficient evidence to suggest that part of the 1975 Act – the anti-evasion rule which permits clawback of inter vivos gifts – should be characterised as a maintenance provision for the purposes of private international law. The element that this chapter will focus upon is a claimant from the group of dependants found within section 1(1)(e) of the 1975 Act who would not ordinarily inherit under the law of ­succession.145 It will be argued that the application for financial provision from the deceased’s estate by this group of dependants clearly falls within the character of maintenance, meaning that the 1975 Act is a hybrid of both maintenance and succession law.



131 Dicey

(n 5 above) 1429, para 27-051. Commission (n 129 above) 1.21. 133 Ibid, 1.63. 134 J Dainow, ‘Limitations on Testamentary Freedom’ (1939–40) 25 Cornell Law Quarterly 337. 135 Dicey (n 5 above) 1429, 27-051. 136 Section 1(1). 137 Section 1(1)(a). 138 Section 1(1)(b). 139 Section 1(1)(B)(a). 140 Section 1(1)(c). 141 Section 1(1)(d). 142 Section 1(1)(e). 143 Section 1(2)(a). 144 Section 1(2)(b). 145 The spouse and children of the deceased are the usual heirs to an estate within the law of succession. 132 Law

118  Characterisation (c)  The Administration of Estates within England and Wales When someone dies in England their estate has to be administered.146 In contrast to some civil law systems, the process of administration in England has never been the duty of the heir.147 The administration is carried out by a personal representative of the deceased, either an executor or an administrator,148 who gains authority to deal with the estate by obtaining a grant of representation from the court.149 This procedure for administering property after the death of its owner is fundamentally different from the civil law approach, where it is common for the property of the deceased to pass directly to the heirs on death.150 In England, the personal representative has two clearly separate duties to perform. The first is that they must clear the estate of liabilities by paying funeral expenses and debts, including taxes.151 Having dealt with the debts, the second duty is that they must distribute the remainder of the estate amongst the beneficiaries according to the applicable law.152 The general rule in English law is that every question relating to the first duty or relating to administration of the estate is to be determined in accordance with the lex fori.153 The deceased’s domicile is irrelevant at this point.154 The English law governs the priority of the debts and their extinction through lapse of time.155 It is also irrelevant whether the creditor is English or foreign.156 It is possible for an English personal representative to deal solely with the assets within England and Wales for a deceased who died domiciled outside of England.157 In this case they still apply the lex fori and have a duty to pay the creditors following the order prescribed by English law.158 If there is insufficient money then they pay the creditors pro rata. The personal representative may also have responsibility for the whole estate, in which case they will gather the deceased’s estate from outside of the UK. If the deceased died domiciled in England or Wales, all of the assets, both immoveable and moveable, need to be collected in order to pay the debts, and only then will the law of succession be applied to divide the assets between the beneficiaries.

146 Reid et al (n 126 above) 318. 147 ibid. 148 Cheshire (n 7 above) 1325. An executor is the person specifically identified in the will to deal with the estate. An administrator is the person who is given authority to deal with the estate but who was not mentioned by name in the will, or who is appointed when the deceased died intestate. 149 Dicey (n 5 above) 1393, para 26-002. 150 Ibid. 151 Ibid. 152 Reid et al (n 126 above) 318. 153 Dicey (n 5 above) 1405, para 26-032. 154 Ibid. 155 J Fawcett and J Carruthers, Cheshire, North and Fawcett, Private International Law, (14th edn, Oxford University Press, 2008) 1325. 156 Dicey (n 5 above) 1405, para 26-032. 157 Ibid 1405, para 26-033. 158 Ibid.

Preparation for Determining the Applicable Law  119 The duty to pay a maintenance debt, where a dependant is owed maintenance by the deceased, is dealt with under the first duty of administration of estates and not under succession law.159 As long as the personal representative is made aware of the debt within the first six months of the death of the deceased then the debt must be treated as any other and paid according to the priority set out in law. Changing the nature of the claim, when determining the appropriate applicable law rule for clawback from a third party, to one of a debt and not succession, is something that will be discussed in the next chapter. The nature of the claim in many civil law countries is for the monetary value of the original gift, and the claimant becomes a creditor to the estate.

E.  The Nature of the Claim for Financial Provision under Section 1(1)(e) of the 1975 Act (i)  Is Clawback under the 1975 Act in the Nature of Maintenance? The duty to consider applications for future maintenance or financial provision for dependants after the death of the deceased is currently dealt with under the law of succession.160 This is in line with the general conflict of laws rules that do not include claims of this kind in the law of maintenance, as the basis of the relationship is not one that gives a claimant a right of maintenance within the framework of family law.161 It is argued that it is only on the death of the person that the needs of the dependants appear, and the courts usually endeavour to sufficiently protect this group through the law of succession.162 However, there is a strong relationship between succession and maintenance. Referring to prior rights under French succession law Jean Carbonnier described them as ‘an extension beyond death of the duty to maintain’.163 In England there are no rules relating to a legitimate portion, but the discretionary approach found within the 1975 Act is demonstrably a duty to maintain dependants beyond death. The concept of the duty to maintain varies greatly within Europe.164 The difference can be attributed to variable cultural expectations as to how the family is 159 Under the 1975 Act, which applies to England and Wales, s 10 allows a person who has made a claim under the Act to make a claim for money against any person who benefitted from a gift made by the deceased less than six years before the death so that the claim for financial provision can be satisfied. However, this is not an issue of succession, but in global terms it falls within the administration of estates, which is not part of Succession Law. Gareth Miller, International Aspects of Succession (Ashgate, 2000) 227. 160 Although Dicey (n 5 above) 1406, para 26-035 states that the payment of maintenance out of the estate to infant beneficiaries has been held to be a matter of administration: see Re Nanton Estate [1948] 2 WWR 113 (Man). 161 D Martiny, ‘Maintenance Obligations in the Conflict of Laws’ (1994) 247 Hague Academy Collected Courses 131, 220. 162 Ibid. 163 J Carbonnier, Droit Civil, Tome II, La Famille, 16th edn (Presses Universitaires de France, 1998) 79. 164 For an analysis of the character of maintenance under the EU Maintenance Regulation see Lara Walker, Maintenance and Child Support in Private International Law (Hart Publishing 2015) 40–46.

120  Characterisation expected to support itself, as opposed to relying on State support.165 France, for example, had a higher expectation of intra-familial maintenance as a result of the expectation of family solidarity.166 However this is currently in decline, with State support on the increase.167 In contrast, the extent of maintenance in England is that there is a common law duty for the husband to maintain the wife168 and a statutory duty for spouses and civil partners to maintain each other and their ­children.169 There is no requirement to maintain the wider family, which is considered to be the duty of the State.170 Therefore it should be noted that there is no legal duty to maintain the dependants within section 1(1)(e) of the 1975 Act during the deceased’s life. When this group are maintained it is by voluntary arrangement between the parties. The definition of maintenance to be awarded to the dependants within section  1(1)(e) is found within English case law. In Re Dennis it was explained that maintenance ‘connotes only payments which directly or indirectly enable the applicant in the future to discharge the cost of his daily living at whatever standard of living is appropriate to him.’171 In Re Coventry172 it was added that: On the one hand … one must not put too limited a meaning on it; it does not mean just enough to enable a person to get by; on the other hand it does not mean only which may be regarded reasonably desirable for his general benefit and welfare.

The case of Moore v Moore173 noted the guidance from the Court of Justice of the European Union (CJEU) in Van den Boogaard174 that: First, whether a claim is for maintenance depends upon an autonomous interpretation of the term, and the label given to the claim by national law is not decisive; secondly payment of a lump sum or transfer of a property may be in the nature of maintenance if it is intended to ensure the support of the spouse; thirdly payment of a lump sum or transfer which serves only the purpose of a division of property or compensation for non-material damage is not in the nature of maintenance; fourthly a payment or transfer of property intended as a division of assets will concern rights in property arising out of a matrimonial relationship; fifthly whether a claim relates to maintenance will depend on whether it is designed to enable one spouse to provide for himself or herself or the needs and resources of each of the spouses are taken into consideration in the determination of the amount, or where the capital sum is

165 M Oldham, ‘Financial Obligations Within the Family – Aspects of Intergenerational Maintenance and Succession in England and France’ (2001) 60 Cambridge Law Journal 128–77 at 133. 166 Ibid. 167 Ibid. 168 Price v Price [1951] P 413 (CA). 169 Matrimonial Causes Act 1973, s 27(1); Civil Partnership Act 2004, Sch 5; Marriage (Same Sex Couples) Act 2013. 170 Oldham (n 165 above). 171 Re Dennis [1981] 2 All ER 140, 145. 172 Re Coventry [1980] Ch 461, 485. 173 Moore v Moore [2007] EWCA Civ 361. 174 Case C-220/95 Antonius van den Boogaard v Paula Laumen [1997] ECR I-1147.

Preparation for Determining the Applicable Law  121 designed to ensure a ­predetermined level of income; sixthly where the provision is solely concerned with dividing the property between the spouses the decision will concern the rights in property arising out of a matrimonial relationship and will not be enforceable under Brussels I.175

(a)  Statutory Interpretation The wording within the 1975 Act speaks clearly of maintenance. The precondition for a successful claim for financial provision by the dependant in section 1(1)(e) is that immediately before the death of the deceased they were ‘being maintained, either wholly or partly’.176 The definition of ‘being maintained’ is that the deceased was making a substantial contribution in money or money’s worth towards the reasonable needs of that person.177 If their application is successful then the award that they are entitled to is such ‘financial provision as it would be reasonable in all of the circumstances of the case for the applicant to receive for his maintenance’. Reasonable financial provision under the 1975 Act does not mean that the award cannot be substantial.178 The 1975 Act allows a dependant to apply for an interim order.179 This is a solution for when the applicant is in immediate need of financial assistance. In this situation the court is able to pay the applicant, out of the net estate of the deceased, such sum or sums at such intervals as the court thinks reasonable until such a date as the actual order for financial provision under section 2 of the 1975 Act has been agreed.180 Although it is not essential that maintenance be in the form of sums paid at intervals, the nature of the interim order falls within the scope of maintenance in that those sums are for the purpose of covering the fundamental needs of the dependant to survive.181 Under the 1975 Act the courts have the powers to make a variety of awards.182 If the court accepts that there has been inadequate financial provision for the dependant, either by the disposition of the will or the law of intestacy or a combination of the two, then they have various remedies available to them. These orders can take the form of periodical payments,183 lump sum awards,184 property transfers185 or property sales.186 These awards are appropriate for maintenance 175 Moore v Moore [2007] EWCA Civ 361 [80]. The reference to Brussels I should now be read as referring to the EU Maintenance Regulation. 176 Section 1(3). 177 Ibid. 178 Musa v Holliday [2012] EWCA Civ 1268. The maintenance award in this case was calculated at the not insubstantial sum of £60,000 per annum. 179 Section 5. 180 Section 5(1). 181 Case 120/79 de Cavel v de Cavel (No 2) [1980] ECR 731 [3]. 182 Section 2. 183 Section 2(1)(a). 184 Section 2(1)(b). 185 Section 2(1)(c). 186 Section 2(1)(e).

122  Characterisation in England.187 The 1975 Act also allows the court to vary both pre-nuptial and post-nuptial agreements.188 This essentially means that under the 1975 Act if the deceased died domiciled in England and there are sufficient assets in England it is impossible to leave a valid dependant in severe financial hardship. When determining the level of the award the court is able to refer to the guidelines within the 1975 Act.189 The court has to take into account the financial resources and needs of the applicant,190 the financial resources and needs of any other applicant,191 the financial resources and needs of any beneficiary,192 the obligations and responsibilities which the deceased had to any applicant or ­beneficiary,193 the size and nature of the net estate of the deceased,194 any physical or mental disability of the applicant or beneficiary,195 and any other matter which the court may consider relevant such as conduct of the applicant.196 For the purpose of determining the award for a section 1(1)(e) dependant, the court must consider the extent to which the deceased had assumed responsibility for the application of maintenance.197 The 1975 Act is primarily concerned with the concept of ‘need’. The aim is to determine what is necessary for maintenance and not to award sums that would reward the applicant by improving their standard of living beyond that which they experienced during the deceased’s life. The right to claim under section 10 of the 1975 Act is so that the claimant is able to apply for a court to order a donee who has received a disposition intended to defeat an application for financial provision, to return for the purpose of meeting the financial provision award, a sum of money or other property as determined by the court.198 In contrast to the civil law concept of the legitimate portion, the

187 In civil law systems matrimonial property and maintenance are treated as separate issues, whereas in England they are considered as a whole. This chapter will not discuss this area, as the dependant within the meaning of s 1(1)(e) is not the spouse of the deceased. 188 Section 2(1)(f). 189 Section 3. 190 Section 3(1)(a). 191 Section 3(1)(b). 192 Section 3(1)(c). 193 Section 3(1)(d). 194 Section 3(1)(e). 195 Section 3(1)(f). 196 Section 3(1)(g). 197 Section 3(4). 198 Section 10 of the 1975 Act (https://www.legislation.gov.uk/ukpga/1975/63) – Dispositions intended to defeat applications for financial provision. ‘(1)  Where an application is made to the court for an order under section 2 of this Act, the applicant may, in the proceedings on that application, apply to the court for an order under subsection (2) below. (2)  Where on an application under subsection (1) above the court is satisfied— (a) that, less than six years before the date of the death of the deceased, the deceased with the intention of defeating an application for financial provision under this Act made a disposition, and

Preparation for Determining the Applicable Law  123 court is not interested in assessing what constitutes the amount beyond the disposable part of the deceased’s estate that the donee has benefited from, but rather what the claimant needs for maintenance. The claim by the dependant who under (b) that full valuable consideration for that disposition was not given by the person to whom or for the benefit of whom the disposition was made (in this section referred to as “the donee”) or by any other person, and (c) that the exercise of the powers conferred by this section would facilitate the making of financial provision for the applicant under this Act, then, subject to the provisions of this section and of sections 12 and 13 of this Act, the court may order the donee (whether or not at the date of the order he holds any interest in the property disposed of to him or for his benefit by the deceased) to provide, for the purpose of the making of that financial provision, such sum of money or other property as may be specified in the order. (3)  Where an order is made under subsection (2) above as respects any disposition made by the deceased which consisted of the payment of money to or for the benefit of the donee, the amount of any sum of money or the value of any property ordered to be provided under that subsection shall not exceed the amount of the payment made by the deceased after deducting therefrom any capital transfer tax borne by the donee in respect of that payment. (4)  Where an order is made under subsection (2) above as respects any disposition made by the deceased which consisted of the transfer of property (other than a sum of money) to or for the benefit of the donee, the amount of any sum of money or the value of any property ordered to be provided under that subsection shall not exceed the value at the date of the death of the deceased of the property disposed of by him to or for the benefit of the donee (or if that property has been disposed of by the person to whom it was transferred by the deceased, the value at the date of that disposal thereof) after deducting therefrom any capital transfer tax borne by the donee in respect of the transfer of that property by the deceased. (5)  Where an application (in this subsection referred to as “the original application”) is made for an order under subsection (2) above in relation to any disposition, then, if on an application under this subsection by the donee or by any applicant for an order under section 2 of this Act the court is satisfied— (a) that, less than six years before the date of the death of the deceased, the deceased with the intention of defeating an application for financial provision under this Act made a disposition other than the disposition which is the subject of the original application, and (b) that full valuable consideration for that other disposition was not given by the person to whom or for the benefit of whom that other disposition was made or by any other person, the court may exercise in relation to the person to whom or for the benefit of whom that other disposition was made the powers which the court would have had under subsection (2) above if the original application had been made in respect of that other disposition and the court had been satisfied as to the matters set out in paragraphs (a), (b) and (c) of that subsection; and where any application is made under this subsection, any reference in this section (except in subsection (2)(b)) to the donee shall include a reference to the person to whom or for the benefit of whom that other disposition was made. (6)  In determining whether and in what manner to exercise its powers under this section, the court shall have regard to the circumstances in which any disposition was made and any valuable consideration which was given therefor, the relationship, if any, of the donee to the deceased, the conduct and financial resources of the donee and all the other circumstances of the case. (7)  In this section “disposition” does not include— (a) any provision in a will, any such nomination as is mentioned in section 8(1) of this Act or any donatio mortis causa, or (b) any appointment of property made, otherwise than by will, in the exercise of a special power of appointment, but, subject to these exceptions, includes any payment of money (including the payment of a premium under a policy of assurance) and any conveyance, assurance, appointment or gift of property of any description, whether made by an instrument or otherwise. (8)  The provisions of this section do not apply to any disposition made before the commencement of this Act.’

124  Characterisation section 1(1)(e) is not an heir, for financial provision or maintenance from property that does not fall within the scope of the term estate within English law, presents a strong argument that this is sufficiently analogous to maintenance to be characterised as maintenance and not succession law.199

(ii)  Is Clawback under the 1975 Act in the Nature of Succession? Traditionally the financial provision under section 1(1)(e) is characterised as a succession right within private international law. Clearly, if a dependant falls within the named beneficiaries under the laws of intestacy or is named within the will this would be a succession right. Yet the dependant in section 1(1)(e) is not commonly protected under the law of succession. Therefore, there is an argument that where a dependant was being maintained by the deceased immediately prior to death and this creates a right for maintenance to be continued after death, a voluntary arrangement becomes an obligation to maintain, at the discretion of the court. These dependants are not beneficiaries of the estate as understood in succession law. Section 1(1)(e) of the 1975 Act refers to dependants who are not spouses or civil partners, or children, or former spouses or former civil partners who have not remarried. The property that is used to satisfy the claim is not part of the estate as understood in English and Welsh succession law. The 1975 Act makes a clear distinction in the chosen vocabulary between those who are dependants and those who are beneficiaries of the estate, supporting the argument against characterising the application for financial provision by section 1(1)(e) dependants as a succession issue.

(iii) Conclusion The nature of the claim to claw back property under the 1975 Act is arguably not a succession claim and has characteristics similar to a claim for maintenance. For the purpose of this book the fact that the claim to claw back the property can have characteristics pertaining to maintenance indicates that there is a clear need to consider the applicable law rule afresh on this matter.

F.  The Character of the Gift In order to characterise the gift within private international law it is necessary to consider two factors. The first concerns the essential validity of the gift and the second concerns the nature of the relationship between the heir and the recipient of the gift, the donee.

199 For

a brief discussion on characterisation by assimilation, see Sherbourne (n 123 above) 20.

Preparation for Determining the Applicable Law  125

(i)  Essential Validity of the Gift Within the private international law of England and Wales, the essential validity of a gift, whether of immoveable or moveable property, is governed by the lex situs.200 With respect to intangible moveable property it has been argued that the proper law of the assignment governs essential validity, whether the chosen law or the law indicated under Article 4 of the Rome I Regulation.201 The characterisation of the transfer of intangible moveable property is demonstrated in the following case.

(ii)  Transfer of Moveable Property An example of a transfer of moveable property prior to death characterised as a unilateral contract occurred in Gorjat v Gorjat [2010] EWHC 1537 (Ch). In Gorjat v Gorjat, a case that challenged the validity of a late lifetime gift made by a French citizen, Jean Gorjat, domiciled in England, who was married to his second wife, Lucrecia, an Argentine citizen who was also domiciled in England, discusses the issue of gift in private international law.202 Jean owned immoveable property in England, Argentina and the US, and moveable property in England and the US, and had bank accounts in England, France, the US and Switzerland. A few months before his death, he closed all of his bank accounts (which were in his own name) and arranged to open a joint bank account with his wife in ­Switzerland. The value of the funds transferred at the date of death was £1,823,160.203 He made the arrangements for the transfers and the joint bank account from his home in London. He died intestate in the United States of ­America some months later.204 Under English law, his widow and three children by his first wife had an interest in his estate. However, the children’s share would have been substantially greater if the money, which had been transferred to the joint account, had still been part of the estate.205 The English High Court (Sarah Asplin QC sitting as a Deputy High Court Judge) discussed the issue of characterisation in relation to a transfer of money to a joint bank account prior to the death of the donor. The ‘gift’ was considered by the court to be a unilateral contract.206 When attempting to characterise the issue within this case the judge was clear to point out the need to identify the true issue in question, in order to identify the applicable law.207 The judge was clear that the

200 The Right Honourable Edward Richard Lambton, Earl of Durham v Lady Lucinda Lambton and others [2013] EWHC 3566 (Ch) [80]. 201 Miller (n 159 above) 227. 202 Gorjat v Gorjat [2010] EWHC 1537 (Ch) [1]. 203 Gorjat v Gorjat [2010] EWHC 1537 (Ch) [2]. 204 Gorjat v Gorjat [2010] EWHC 1537 (Ch) [1]. 205 Barbara Rich, ‘Case Comment Gorjat v Gorjat – identifying the “true issue” in private international law’ (2011) 17 Trusts and Trustees 320–21. 206 Gorjat v Gorjat [2010] EWHC 1537 (Ch) [12]. 207 Gorjat v Gorjat [2010] EWHC 1537 (Ch) [7].

126  Characterisation issue was one of validity of the assignment of intangible property which, although they agreed had consequences in terms of succession, was not a succession issue in itself.208 She referred to Dicey, and accepted that ‘the capacity of an individual to enter into a contract is governed by the law of the country with which the contract is most closely connected or by the law of his domicile and residence’ and the view that Article 12 of the then applicable Rome Convention (the assignment was made no later than January 2007) could apply to assignments by way of inter vivos gifts. In such a case, the law applicable to the transfer between donor and donee will be determined as if the transaction were a contract; and questions of the validity of the gift, e.g. whether it may be revoked for ingratitude, will be governed by the law which, according to the Rome Convention, governs the gift.209

Applying the Rome Convention, it was held that the law governing the essential validity of the gift was the law of England and Wales as the country where Jean Gorjat was habitually resident, given that he was the characteristic performer of the contract, being the unilateral assigner of the interest in the property, and had the closest connection to the contract. However, it has been argued that gifts do not fall within the Rome Convention and that the Rome Convention should only be applied by analogy.210 It is of particular importance to note that the English court characterised the issue as one relating to the validity of an inter vivos transfer, and not as a matter of succession which would have been the case under French law. Jean’s three adult children from his first marriage were all French nationals and domiciled in France.

V. Conclusion By considering the nature of the claim and the nature of the gift it is possible to identify the parties who have legitimate expectations and what aspects of the legitimate expectations need to be protected. Combining this information with an awareness of the need to respect different legal cultures, it is clear that the clawback of an inter vivos gift from a third party for the purpose of satisfying the legitimate portion or to meet the needs of the deceased’s dependants cannot be characterised solely as succession law, and indeed does not fall into any one legal category. It does indeed have characteristics of property law, contract law, maintenance law as well as succession law, and therefore the claim is more suited to a sui generis approach to determining the applicable law for use in a global context. There are variable motivations for the recovery of the inter vivos gift from a third party, whether it be: that the legitimate heir needs to be maintained as is

208 Gorjat

v Gorjat [2010] EWHC 1537 (Ch) [8]. v Gorjat [2010] EWHC 1537 (Ch) [10]. 210 Cheshire (n 7 above) 1287. Dicey (n 5 above) Rule 135(2) and para 24R-050. 209 Gorjat

Conclusion  127 found in some civil law countries; or the need to maintain dependants who may not be heirs such as in England and Wales; or that the laws seek to protect the concept of family property or to protect the legitimate expectations of the legitimate heirs where the succession law is known at the time of the transfer. However, there are also conflicting motivations for rejecting the recovery of the inter vivos gift, whether it be to protect the legitimate expectations of the donor, the donee, a subsequent buyer or subsequent donee, mortgage lender or heir. The respect for comity is also something that needs to be considered in the context of creating international private international law. Where it is not practical to harmonise substantive laws, there should be awareness of their differences so that private international law can be created which respects different legal traditions. The creation of international private international law requires an outward-looking approach to characterisation. Therefore, it is recommended that the most practical private international law option is to take a sui generis approach and devise an applicable law solution that protects the legitimate expectations of the parties identified above, and in turn respects cultural legal diversity. This idea will be developed in the following chapter.

5 The Applicable Law I. Introduction A.  The Legal Problem (i)  The Current Private International Law Rule in the EU Succession Regulation is Fundamentally Flawed As can be seen from the analysis in the previous chapter, a claim for the clawback of an inter vivos gift from a third party to satisfy the legitimate portion has been characterised for the purpose of the EU Succession Regulation, albeit not wholly accurately from an international perspective, as falling under the law of succession. The consequence of this is that the relevant connecting factor which is used for succession when applied to these claims gives rise to legal uncertainty and a potential lack of fairness for all relevant parties to the claim. In the case of the Succession Regulation the connecting factor for the general applicable law rule is the habitual residence of the deceased at the time of death.1 This rule has several disadvantages when applied to the claim for clawback. The disadvantages arise from the law applicable to the claim being the law at the time of death and not at the time the gift was made. The retroactive element is a cause of concern. First, it can overturn transfers of inter vivos gifts that may have been valid at the time the gift was made.2 Secondly the parties cannot be certain as to which law will apply to a clawback claim at the time the gift is made or indeed whether the law may or may not permit a claim, as the donor may change his habitual residence or may make a will at an unknown point in the future, declaring the law of his nationality to govern his estate, with consequences for the earlier donee and heirs. Under the current regional framework the donor does not have legal certainty. Legal certainty is a necessary factor for estate planning. The donor will not have legal certainty unless he chooses the law of his nationality to apply to his succession and then only if the will remains valid and he doesn’t alter it at some point.3 1 Art 21(1) Succession Regulation. 2 A Metallinos in H Pamboukis (ed), EU Succession Regulation, A Commentary (Nomiki Bibliothiki, CH Beck and Nomos, 2017) 277. 3 J Holliday, ‘Reconciling the European Union Succession Regulation with the Private International Law of the UK’ in J-S Bergé, S Francq and M Gardeñes Santiago (eds), Boundaries of European Private

Introduction  129 The donee also does not have legal certainty, as he cannot be sure that the law applicable to the donor’s succession will not change. The variables on this point are many. The applicable law may change from one where clawback was not possible to one where it is, or vice versa. If it is permitted the disposable portion may vary between the substantive rules, so that a gift made at one point may fall within the disposable portion of one system, whereas under another system, which is only known at the time of death, it exceeds it.4 Who is regarded as a potential claimant may also change. The claimant is usually a legitimate heir, but definitions of who is a legitimate heir vary enormously between countries. The trend leans towards only children being regarded as the legitimate heirs, although in some countries the scope of who can be a claimant extends to also include creditors of an heir. The donee may be told at the time the gift is given that only children are legitimate heirs under one system and that as the donor is childless at the time the gift is made the donor may regard the gift as low risk, only to discover that at the time of death the donor had become habitually resident in a country where the donor’s parents are regarded as potential claimants, meaning that the donee’s risk has increased. Under the Succession Regulation the heir also has no certainty as to whether a cross-border claim will be successful. Metallinos considers that the text of the Succession Regulation should be interpreted as supporting: ‘legal certainty and security of transactions’ and that The person acquiring an asset should be able to rely on the law governing the rights in rem over such asset without needing to examine the contents of the lex hereditatis of the donor, which may be unknown, in particular if the donor is still alive and may change his or her habitual residence or may choose the applicable law for his or her succession.

With respect, interpreting the text in this way is trying to make the best out of a bad job. Metallinos is correct to identify the flaws in the applicable law rule, but a better solution remains to create a new private international law rule for these claims rather than interpreting, amending, or tweaking the rules to avoid the flaws. If the rule is interpreted in the way put forward by Metallinos it leaves a visible weakness in that it favours the donee without considering the needs of the heirs, which from a holistic perspective is not satisfactory.

(ii)  The Claim Does Not Fall within One Legal Category As demonstrated in the previous chapter the claim for clawback of the gift from a third party to satisfy the legitimate portion or to provide for the deceased’s International Law (Bruylant, 2015) 298–309; Pfeiffer, ‘Legal certainty and predictability in international succession law’ (2016) 12 Journal of Private International Law 566–86. 4 P Lagarde, ‘Applicable Law’ in U Bergquist, D Damascelli, R Frimston, P Lagarde, F Odersky, B Reinhartz (eds), EU Regulation on Succession and Wills: Commentary (Sellier European Law Publishers, 2015) 139, 142.

130  The Applicable Law dependants has characteristics that fall within the scope of succession law, property law, maintenance law, restitution, and contract. But, solely applying the lex successionis to the claim leads to unfairness and legal uncertainty. To create a truly global private international law applicable law rule it is necessary to adopt a sui generis approach. The Max Planck Institute (MPI) in their comment on the proposed Succession Regulation accepted that there is uncertainty surrounding the law at the time the gift was made because it could be characterised as contract law or property law, but they accepted that the majority characterised it as a succession issue. They stated that: The only purpose of clawback provisions is to ensure that mandatory succession rights are not circumvented by gifts made inter vivos and that the claims of the deceased’s family members based on those mandatory succession rights can be satisfied.5

This statement is not contentious in so far as it applies to claims for the reduction of gifts for the purpose of satisfying the legitimate portion. It does not fit systems, such as the English and Welsh, where the clawback rule from a third party is discretionary and where the claimant may not be an heir. This is arguably not a succession issue but in fact a maintenance issue. The commentary by the MPI also did not criticise the lack of consideration for the legal systems of the new Member States that had joined after the initial Succession Regulation preparation and prior to the drafting of the Regulation, resulting in a lack of awareness of legal systems where a clawback claim from a third party is not possible. The MPI recognised that there were different ways of characterising this issue but by restricting themselves to working with succession rules they were left trying to make a square peg fit in a round hole, with their final recommendation being cumbersome and rather impractical. The Max Planck Institute suggested that the solution to protecting the legitimate interests of the donee and third parties was to use a cumulative application of the actual and hypothetical lex hereditatis; that is, to apply the putative law (the law that would apply to the donor’s succession at the time he made the gift) to the gifts to assess whether the gift comes under clawback and to determine the value of the gift, and then to apply the law applicable to the succession at the time of the testator’s death to oversee the succession.6 The gift would have to satisfy the criteria for clawback under both applicable laws.7 They saw this as protecting the donee from any disadvantage from a later change in law.8 5 Max Planck Institute for Comparative and International Private Law, ‘Comments on the European Commission’s Proposal for a Regulation of the European Parliament and of the Council on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession’: http://www.europarl.europa.eu/document/activities/cont/201005/20100526ATT75035/20100526ATT 75035EN.pdf (accessed 10 June 2019) 86. 6 Ibid. 7 Ibid. 8 Ibid.

A Sui Generis Approach  131 However, a weakness in this approach is that if a person was mobile within the EU during their lifetime and the law at the time of death did not operate a limitation period for when the gift was originally given, it could result in many different putative laws having to be assessed for each gift that was made, which on a practical level would be an arduous and costly process.9 A solution to this would be to minimise the number of years prior to the death of the deceased during which gifts would be subject to clawback in order to reduce the number of laws that would need consideration.10 There is merit to opting for the putative law, as it offers certainty for the legitimate expectations of the donee and the donor. However, the suggestion that the claim must be valid at both the time of the transfer and at the time of death, creating a form of certainty that the gift is subject to clawback, feels overly awkward and a rather time-consuming and costly approach, especially if other factors such as the habitual residence of the deceased are in question at the time the gift was given. The aim of this chapter is to address the question as to what the appropriate applicable law rule for a claim to claw back an inter vivos gift from a third party ought to be? The current approach is not appropriate, and it needs a clear rule of its own. The solution needs to protect the legitimate expectations of the relevant parties, provide legal certainty, be practical and create fairness.

II. A Sui Generis Approach A sui generis approach in private international law may be adopted when the character of a legal problem does not fit comfortably within a single legal category for the purpose of creating a workable private international law rule.11 In this situation, a rule may need to be created just for that one issue, and in the process of doing so the elements which are common to the categories it does fall into should be taken into account. A claim to claw back an inter vivos gift from a third party in order to satisfy a legitimate portion is in some countries treated as a succession issue, and therefore at first glance it would seem simple to apply succession choice 9 The Council of the European Union, The Application of the putative law of succession to lifetime gifts, 9 January 2011, JUSTCIV 3, CODEC 32. 10 It is accepted that this proposal to restrict the number of years for clawback goes beyond the remit of private international law and touches on the substantive law: see Paul Beaumont and Peter McEleavy, Anton’s Private International Law, 3rd edn (W Green/SULI, 2011) 1061 fn 298. However, with the number of years that are considered to be relevant for clawback being extremely variable across the EU, and with the concept of forced heirship in the process of change in Continental Europe, it is suggested that creating a level of uniformity would be a helpful step along the path to testamentary freedom. 11 The term ‘sui generis’ means ‘of its own kind’: John Gray, Lawyers’ Latin (Robert Hale Ltd, 2006) 129. An example of a sui generis approach being adopted in private international law is in relation to the issue of unjustified enrichment, which was considered to fall within both contract and tort, see TW Bennett, ‘The choice of law rules in claims of unjust enrichment’ (1990) 39 International and Comparative Law Quarterly 136.

132  The Applicable Law of law rules to the claim.12 However, this ignores the fact that in other countries it is treated as falling within the law of obligations – a restitution issue; or if we consider the position where clawback from a third party is provided for to allow for reasonable financial provision of a dependant where the donor evaded responsibility through the making of an inter vivos gift, we may accept that there is a maintenance element to the issue.13 If we consider that the claim is in connection to a transfer of property then the claim has characteristics also of property law and contract law, in that the donor makes a unilateral contract of gift to transfer property. If the claim is for the return of the actual property itself it strengthens the argument that the claim itself has property law characteristics.14 Due to the international and diverse nature of these claims it is put forward that the most pragmatic solution is to adopt a sui generis applicable law rule. The following part of the chapter will assess the connecting factors to the applicable law in light of the above.

III.  What is the Most Appropriate Connecting Factor? Traditionally, domicile or nationality has been used as the connecting factor to determine the applicable law in succession matters. Prior to the Succession Regulation, this was also largely the case within the European Union.15 Despite this, from the outset of the drafting of the Succession Regulation, the relatively recent concept of habitual residence was chosen to be the connecting factor due to the view held by the Commission that it promotes political integration amongst citizens who move between Member States.16 The choice of habitual residence was also the connecting factor of choice in the Hague Succession Convention.

12 But even in such countries there are examples where the needs of the donee are taken into account which make it difficult to characterise it as a succession issue, for example see ‘The Netherlands’ in Appendix A. 13 J Holliday, ‘Characterisation within Private International Law: Maintenance or Succession?’ in P  Beaumont, B Hess, L Walker and S Spancken (eds), The Recovery of Maintenance in the EU and Worldwide (Hart Publishing, 2014) 443, esp 445. An example of where the characterisation of a claim by a cohabitant on the estate of the deceased is considered one of maintenance and not succession is found within Art 2020 of the Portuguese Civil Code, which allows a cohabitant to claim maintenance rights from the estate of the deceased. Under Art 2156 of the Portuguese Civil Code, a cohabitant is not considered to be a legitimate heir. 14 R Paisley in Ministry of Justice, European Commission Proposal on Succession and Wills, Consultation Paper, CP41/09. 15 Holliday, Boundaries of European Private International Law (n 3 above), 303. Lagarde, ‘Introduction’ in U Bergquist, D Damascelli, R Frimston, P Lagarde, F Odersky, B Reinhartz (eds), EU Regulation on Succession and Wills: Commentary (Sellier European Law Publishers, 2015) (n 4 above), 28–30. 16 Andrea Bonomi, ‘Choice of Law Aspects of the Future EC Regulation in Matters of Succession – A  First Glance at the Commission’s Proposal’ in Katharina Boele-Woelki, Talia Einhorn, Daniel Girsberger, Symeon Symeonides (eds), Convergence and Divergence in Private International Law Liber Amicorum Kurt Siehr (Eleven International Publishing, 2010) 165.

What is the Most Appropriate Connecting Factor?  133 However it required a person also to have resided in the country for five years before the date of their death. Imposing a required fixed period of residence before habitual residence is an effective connecting factor was originally done so that there was a clear connection between the deceased and the new law of succession. If however, habitual residence is to be used as a connecting factor for the claim to reduce a gift made to a third party for the purpose of satisfying the legitimate portion, or to provide maintenance to an heir or dependant, it makes sense that the donor isn’t having to refer to a particular period of residence which is at odds with his other legal needs. If he has been living and working in a Member State and is habitually resident there for purposes of work, tax, health, education, benefits, etc, then it is unrealistic for him not to be able to plan his estate merely because his residence doesn’t meet an arbitrary time-frame. In order to identify the law applicable to the claim it is necessary to consider the appropriateness of the available connecting factors. In doing so, there are three questions that need to be considered. The first is what should the connecting factor be for the general applicable law rule for a claim to claw back an inter vivos gift from a third party? The second is what should the connecting factor(s) be for the choice of law rule? A third and arguably the most contentious question is: should we have different connecting factors depending on whether the inter vivos gift is moveable or immoveable property? Should we therefore (re) employ scission for cases where the gift was made to a third party?17 So, what are the options?18

A.  Habitual Residence How suitable is habitual residence as a connecting factor for a claim to claw back an inter vivos gift from a third party? Does it need a clear definition or should it remain flexible? The character of habitual residence has changed since its inception as a connecting factor at the turn of the twentieth century.19 Initially it was thought that to find a person’s habitual residence was simply a question of fact, decided by reference to all the circumstances of a particular case.20 However, since its adoption, the

17 Scission was abolished in the EU Succession Regulation, where the general applicable law rule applies to the ‘succession as a whole’, but remains part of private international law in the different legal systems of the UK. 18 Possible connecting factors for the claim could be habitual residence, nationality, domicile, lex situs and lex actus. 19 Beaumont and McEleavy, Anton (n 10 above) 175; Thalia Kruger, ‘Habitual Residence: The Factors the Courts Consider’ in Beaumont et al (eds), Cross-Border Litigation in Europe (Hart Publishing, 2017) 741. 20 Alexander Anton, ‘The Recognition of Divorces and Legal Separations’ (1969) 18 International and Comparative Law Quarterly 620, 629; Re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562; Nessa v Chief Adjudication Officer [1999] 1 WLR 1937.

134  The Applicable Law ability to determine a person’s habitual residence has become more difficult as the nature of society has changed.21 People have become increasingly mobile between States.22 This has created complex cross-border residence situations where it may no longer be simple to identify the person’s habitual residence. Courts have subsequently recognised that a person may be found to have no habitual residence23 or multiple habitual residences.24 This would suggest that using habitual residence as a connecting factor to determine the applicable law is inappropriate, as it may not point to anywhere or it is unclear. It could therefore be argued that in these situations the concept of habitual residence is failing to keep up with the changing nature of society.25 A more optimistic view is that it is merely in the process of evolving. The original concept of habitual residence was intended to be flexible and therefore it did not have a strict definition. However, this has not prevented (albeit unsuccessful) attempts to look for a single definition.26 With the single definition proving to be elusive, courts within the EU have found it necessary to shape it to specifically meet the purpose behind the legislation.27 As a result, these Regulationspecific definitions are not easily transferable to other areas of law, as the degree of connection can vary between them.28 Having different definitions can also be

21 Beaumont and McEleavy, Anton (n 10 above) 175. 22 Eva Lien, ‘A Further Step Towards a European Code of Private International Law: The Commission Proposal for a Regulation on Succession’ (2009) 11 Yearbook of Private International Law 107, 110. 23 (Scotland) D v D 2002 SC 33; (England) Re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562, 578; W and B v H (Child Abduction: Surrogacy) [2002] 1 FLR 1008; Other jurisdictions: see Case C-523/07 Proceedings brought by A [2009] ECR I-2805. 24 Ikimi v Ikimi [2001] EWCA Civ 873; [2002] Fam 72 CA; Mark v Mark [2005] 3 WLR 111; Paul Beaumont and Peter McEleavy, The Hague Convention on International Child Abduction (Oxford University Press, 1999) 90. The authors noted that there is no reason to disallow multiple habitual residences in child abduction cases. However, see Marinos v Marinos [2007] EWHC 2047 (Fam) [17]–[18]: for the purpose of divorce under Brussels IIa a person cannot be habitually resident in more than one country at the same time, although it is accepted that there was room for disagreement. The Hague Child Abduction Convention can still be invoked where there are alternating habitual residences in shuttle custody cases: see AFJ v TJ, Supreme Administrative Court (Regeringsratten) RA ref 52 May 9 1996 and Watson v Jamieson 1998 SLT 180, 182. 25 Beaumont and McEleavy, Anton (n 10 above) 175. 26 Paul Lagarde, ‘Explanatory Report on the Convention of 19 October 1996 on Jurisdiction, Applicable Law, Recognition and Enforcement and Co-operation in Respect of Parental Responsibility and Measures for the Protection of Children’ 555 (Lagarde Report) available at: https://www.hcch.net/ en/publications-and-studies/details4/?pid=2943&dtid=3 (accessed 14 June 2019). Irish Law Reform Commission and the Council of Europe: see Report on Domicile and Habitual Residence as Connecting Factors in the Conflict of Laws (1983). Aude Fiorini, ‘The Best Interests of the Migrant Child: Private International Law Perspective’ in F Ippolito and G Biagioni, Migrant Children: Challenges for Public and Private International Law (Editoriale Scientifica, 2016), available at: https://papers.ssrn. com/sol3/papers.cfm?abstract_id=2862361 (accessed 14 June 2019). 27 Pippa Rogerson, ‘Habitual Residence the New Domicile?’ (2009) 49 International and Comparative Law Quarterly 88; Brussels IIa, Rome I and Rome II all use habitual residence as a connecting factor but their definitions vary; Mark v Mark [2005] 3 WLR 111. 28 Alegría Borràs, ‘Explanatory Report on Brussels II’ [1998] OJ C221/27 (referred to hereafter as the Borràs Report); European Parliament Policy Department C: Citizens’ Rights and Constitutional Affairs Legal consequences of the decision by the UK not to take part in the adoption of an EU Regulation on

What is the Most Appropriate Connecting Factor?  135 problematic for uniform application in the courts. However, if we look at it objectively, Regulation-specific definitions would appear to be a step along the way to producing a connecting factor that is relevant for each area of law, ultimately minimising the need for judicial interpretation.29 For these bespoke definitions of habitual residence to work, it is argued that appropriate flexible codification should be used in order to provide the necessary discretion to determine the country of the applicable law in these complex cases.30 It is also helpful if the drafters of the legislation address all predictable and therefore preventable issues, adding model rules or guidelines as required, in order to make the concept function well. Unfortunately, this is easier said than done. It is clear from the Succession Regulation that the drafters failed to fully address the known issues surrounding habitual residence, that of no habitual residence and of multiple habitual ­residences.31 These gaps would also need to be addressed for determining the law applicable to a claim, especially if it is decided that the habitual residence at the time of the transfer should be adopted, as lack of certainty on this issue would prove costly. Determining contested prior habitual residences of the deceased is not a simple task. One solution to this problem is to limit the time period for gifts to a third party made prior to the death of the deceased to be considered for a clawback claim, in order to reduce the number of potential habitual residences that would have to be assessed. This would increase the chance of there being only one or two consecutive habitual residences to assess and move the character of the claim more clearly towards one where an underlying premise is to prevent evasion of financial provision, either for the legitimate heir or, in discretionary maintenance cases, the heir or dependant. The downside in practice, albeit a minor one, would be that the donor would have to treat every gift as if it was made within the time period for a claim (eg as if he had only five years to live) and make the applicable law known to the donee. Habitual residence is more commonly used to establish jurisdiction than to determine the applicable law.32 It is considered to be unsuitable as a connecting Succession (2010): http://www.europarl.europa.eu/RegData/etudes/STUD/2010/419626/IPOL-JURI_ DV(2010)419626_EN.pdf, 5. 29 The argument against defining the concept of habitual residence is beyond the scope of this book. For a critical view of the concretisation of habitual residence see François Boulanger, ‘L’affaire des “ mineurs nordiques”: La Cour determine la residence habituelle et precise le regime des measures convertatoires’ (2009) Semaine Juridique 33. 30 Symeon Symeonides, ‘Codification and Flexibility in Private International Law’ from KB Brown and DV Snyder (eds), General Reports of the XVIIIth Congress of the International Academy of Comparative law (Springer, 2012) 175. 31 See Beaumont and McEleavy, Anton (n 10 above) 1065 – The Succession Regulation recognises and addresses two situations where it may be difficult to identify the habitual residence of the deceased and applies the soft connecting factors of the ‘centre of interests’ test to determine the habitual residence of the posted worker (recital 24), and the ‘manifestly more closely connected’ test, as an exception to habitual residence, for the person who dies soon after relocating to a new State (recital 25). 32 CMV Clarkson and Jonathan Hill, The Conflict of Laws, 4th edn (Oxford University Press, 2011) 341; E Clive, ‘The Concept of Habitual Residence’ [1997] Juridical Review 137, 137; Rhona Schuz,

136  The Applicable Law factor for determining the applicable law, as it may generate a link that is weak, either by not generating a link to any country or by generating a link to more than one country.33 However this does not mean that it should not be used; only that it will need adaptation. Where a strong connection between a party and the applicable law is needed, as is the case between the donor and the gift – and by connection, the claimant – it will be necessary to provide additional rules or guidelines in order to strengthen the connection.34 Additional connecting factors may be required to fill the gaps where a person may be found to have no habitual residence or multiple habitual residences, in order to identify an applicable law.35 Legal certainty – one where the connecting factor is certain and points to a single law which is known to the donor and the donee at the time the gift is given and is then relayed or known, or at least identifiable, by a potential claimant – is needed. As previously noted, the main EU law argument in favour of using habitual residence as a connecting factor for applicable law is not a legal one; it is a political one.36 The political argument is that it promotes the integration of citizens as they move between Member States.37 Political integration of citizens is an important factor in the continuing development of the European internal market.38 Therefore the use of habitual residence is seen as beneficial for use within the European Union,39 when compared to other personal connecting factors such as nationality, that place emphasis on the importance of the State as opposed to the citizen.40 Its use in private international law is supported due to the element of proximity it creates between the party and the law. Proximity is valuable for devising an applicable law rule for a claim for clawback, as there needs to be a clear link between the donor and the law applicable to the transfer of the gift. Consideration of the habitual residence of the claimant as being a connecting factor for the claim, although an option in tort claims, is not a viable option due to the lack of certainty for the ‘The  Hague Child Abduction Convention: Family Law and Private International Law’ (1995) 44 International and Comparative Law Quarterly, 771, 789; Ikimi v Ikimi [2002] Fam 72 (Divorce); Re J (A Minor)(Abduction: Custody Rights) [1990] 2 AC 562 (Child Abduction); Nessa v Chief Adjudication Officer [1997] 1 WLR 1937 (Granting Income Support); R v Barnet LBC ex parte Shah [1983] 2 AC 309 (Granting loans for University). 33 Rogerson (n 27 above) 101; Clarkson and Hill, ibid 341; Law Com No 168, 3.5–3.8. 34 J Harris, ‘The proposed EU regulation on succession and wills: prospects and challenges’ (2008) Trust Law International 181, 200. ‘One might wonder how legal certainty, and the internal market, can be improved by the introduction of a connecting factor upon which no consensus as to its meaning exists.’ 35 Rogerson (n 27 above) 101. 36 Bonomi (n 16 above). 37 Ibid. 38 Xandra Kramer, Current Gaps and Future Perspectives in European Private International Law: Towards a Code on Private International Law? (2012, Directorate-General for Internal Policies) PE 462.476, 4. 39 Habitual Residence is currently used in EU Law within the Rome I, Rome II, Brussels IIa and Maintenance Regulations. 40 Beaumont and McEleavy, Anton (n 10 above) 152; Eva Østergaard-Nielsen, ‘Dual Citizenship: Policy Trends and Political Participation in EU Member States’ European Parliament Directorate General Internal Policies of the Union, Policy Dept C Citizens Rights and Constitutional Affairs (2008) PE 408.299 4.

What is the Most Appropriate Connecting Factor?  137 donee, who at the time the gift was made, may have no knowledge of the heir and therefore the law that would apply to the gift. This would also not be an option due to the lack of awareness of the law applicable to the claim for the purposes of estate planning. With respect to these points the connecting factor must clearly be primarily relevant to the donor but it must also provide certainty for the donee at the time of the transfer. Are these arguments for using habitual residence within the EU relevant to a global audience? Again, habitual residence has been a popular connecting factor within the Hague Conventions.41 It is regarded as being easy to identify in the majority of cases, but it is recognised that there are problems, such as someone having no habitual residence or multiple habitual residences. An argument for using habitual residence to determine the law applicable to the claim is that the habitual residence of the deceased often coincides with the location of assets of the deceased.42 However this is unsubstantiated. Where the two coincide then of course it would be helpful in determining an applicable law for a claim for clawback, in that the donor is likely to know the law where he is habitually resident and if his property is there, the law that would be relevant to the transfer. Another factor is that unless the donee is told to the contrary, they are likely to assume that the law of the country where the transfer took place will apply. This again is likely to be the habitual residence of the donor. If it is also the habitual residence of the donee it increases the chance that the donee is familiar with the law. In most cases habitual residence would lead to the application of the law that has a real and significant connection to the person.43 Yet, whether the person who acquires habitual residence in a new country feels that the legal culture is significant to them personally is debateable. From a purely emotive perspective, if a person relocates to a new country in order to live out their able years of retirement before moving back to their country of origin for their final days, and becomes habitually resident in the new country where the succession rules are unfamiliar to him and his family, and he and his family had expectations to the succession, it suggests that (and the author recognises that it is a generous approach) the donor

41 Paul Beaumont and Jayne Holliday, ‘Recent developments of habitual residence in alleged child abduction cases’ University of Aberdeen, Centre for Private International Law Working Paper, 2015/3, available at: https://www.abdn.ac.uk/law/research/working-papers-455.php (accessed 14 June 2019). P Beaumont and J Holliday, ‘Recent developments on the meaning of ‘habitual residence’ in alleged child abduction cases’ in M Župan (ed), Private International Law in the Jurisprudence of European Courts – Family in Focus / Međunarodno privatno pravo u praksi europskih sudova – obitelj u fokusu (University of Osijek, 2015) 39–59. 42 Rembert Suess, ‘The Proposed EU Regulation on Succession and German Law’ Deutsches ­Notarinstitut 14; Peter Kindler, ‘From Nationality to Habitual Residence: Some Brief Remarks on the Future EU Regulation on International Succession and Wills’ in Katharina Boele-Woelki, Talia Einhorn, Daniel Girsberger, Symeon Symeonides (eds), Convergence and Divergence in Private International Law Liber Amicorum Kurt Siehr (Eleven International Publishing, 2010) 254. 43 Andrea Bonomi, ‘Testamentary freedom of forced heirship? Balancing party autonomy and the protection of family members’ (2010) Nederlands Internationaal Privaatrecht 165.

138  The Applicable Law should be given a choice of options as to which law will apply to the gifts to protect his intentions and the legitimate expectations of the parties.44 In order to benefit from the potential advantages of using habitual residence as the connecting factor for the claim for clawback, it is suggested that the habitual residence of the donor at the time the gift is made would be preferable to habitual residence at the time of death, in order to avoid the legal uncertainty for the donor and the donee and to create clarity for the heir if the law is known to them. The following scenarios will consider two problem areas for habitual residence: that of there being no identifiable habitual residence and of there being multiple habitual residences, in order to ascertain weaknesses in adopting it as a connecting factor for the claim to claw back the inter vivos gift from a third party. The scenarios will look at how the concept of habitual residence has been handled in an international setting for the purpose of the 1980 Hague Child Abduction Convention. On a pragmatic note, but also a point which is outside the scope of this book, it is useful to consider the habitual residence of the child as children die, and although their capacity to make gifts as minors differs around the world, they are permitted in certain circumstances to make gifts which although voidable may be ratified when the minor comes of age.45

Scenario 1 – The Donor has no Habitual Residence Example A French national has spent the last ten years travelling. He has no fixed abode. He is however a man of means. He has gifted property to third parties in every country he has travelled to. His heirs/claimants for the clawback of his inter vivos gifts live in France. The meaning of habitual residence has been greatly influenced by the decisions concerning the habitual residence of children under the 1980 Hague Child Abduction Convention.46 However, neither the 1980 Convention nor the explanatory Pérez-Vera Report includes a definition of habitual residence. The only guidance is that it should have an autonomous definition for the purpose of the Convention.47 As there are currently 101 contracting States to the Convention,48 it is unsurprising that with a lack of an international definition, differences in understanding 44 In the UK, the connecting factor for succession is domicile, which permits someone to relocate to another country and live there for many years without the loss of their domicile if their intention is to return. 45 See R Hyland, Gifts. A Study in Comparative Law (Oxford University Press, 2010) 220 – A minor may be able to make a gift from earnings, or from money given for the purpose, make a gift in anticipation of a marriage or a guardian may make a gift on their behalf. Whether a gift that was made to a third party as a minor and ratified at a later date would be considered for the purpose of satisfying the legitimate portion is a question that needs to be addressed. 46 Clarkson and Hill (n 32 above) 331. 47 Elisa Pérez-Vera, ‘Explanatory Report’ available at: https://www.hcch.net/en/publications-andstudies/details4/?pid=2779&dtid=3 (accessed 14 June 2019). 48 The Status Table of the Hague Child Abduction Convention 1980: https://www.hcch.net/en/instruments/conventions/status-table/?cid=24 (accessed 30 November 2019).

What is the Most Appropriate Connecting Factor?  139 and interpretation have emerged, leading to divergent approaches in the different jurisdictions.49 Three differing approaches to determining habitual residence for the purposes of the Convention have become apparent.50 They are based around whose intent should be given the greatest weight as to where the child was habitually resident. The first approach gives the greatest weight to the parent with legal custody.51 The second approach gives the greatest weight to the child, depending on the child’s age.52 The third combines the intent of the parent and child.53 However when it comes to applying this for the purpose of a claim for clawback, there are obvious difficulties. The claim can only be made after the death of the deceased. If the connecting factor is to be the habitual residence of the donor at the time of the transfer of the gift then unless the donor clearly expressed their intention as to where they were habitually resident, it can only be inferred from their b ­ ehaviour prior to their death. This may lead to difficulties if the gift was given many years prior to the death and the question of where the donor was habitually resident is contested. In 1990, the House of Lords decided that habitual residence under the Hague Child Abduction Convention was a question of fact to be determined by reference to all the circumstances of any particular case, and that the words were to have their ordinary and natural meaning.54 Re J accepted that it would be possible for a person to have no habitual residence where the person had lost their habitual residence and not yet acquired a new one.55 This was not an approach that has been easy to apply to children. Some courts felt compelled to find a child’s habitual residence for the purpose of the Hague Child Abduction Convention.56 But several courts accept that a child may not be habitually resident anywhere.57 49 Linda Silberman, ‘Brigitte M. Bodenheimer Memorial Lecture on the Family. Interpreting the Hague Abduction Convention: In Search of a Global Jurisprudence’ (2005) 38 University of California Davis Law Review 1049, 1064. 50 For a brief analysis of habitual residence of the very young infant, an article that was cited by Advocate General Wahl in Case C-111/17 PPU OL v PQ, EU:C:2017:375 see Beaumont and Holliday (n 41 above). 51 Ibid. 52 Lady Hale, contrary to her comments in Re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562, 578, advocated a child-centric approach in In the matter of A (Children) [2013] UKSC 60 [54(v)]; R Schuz, ‘Habitual Residence of Children under the Hague Child Abduction Convention – Theory and Practice’ (2001) 13 Child & Family Law Quarterly 1‑23. 53 Re J. (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562. See Office of the Children’s Lawyer v John Paul Balev and Catharine-Rose Baggott 2018 SCC 16 which held that ‘The Court should adopt the hybrid approach to determining habitual residence under Article 3 of the Hague Convention …’. 54 Re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562, 578. 55 Ibid. Cases which accept that a child may have no habitual residence W & B v H (Child Abduction: Surrogacy) (No 1) [2002] 1 FLR 1008; D v D (Custody: Jurisdiction) [1996] 1 FLR 574, 582; Case 523/07 Proceedings brought by A [2009] ECR I-2805. 56 Re F (Child Abduction) [1992] 1 FLR 546, 555. 57 (Scotland) D v D 2002 SC 33; (England) Re J (A Minor) (Abduction: Custody Rights) [1990] 2 AC 562, 578; W and B v H (Child Abduction: Surrogacy) [2002] 1 FLR 1008; other jurisdictions, see CJEU Case C-523/07 Proceedings brought by A [2009] ECR I-2805 [45]; (Australia) DW & Director-General, Department of Child Safety [2006] Fam CA 93; See also In the Matter of A (Children) [2013] UKSC 60 [54(vii)].

140  The Applicable Law It seems common sense that it is not in anyone’s best interest to be connected to the law of a State that has little or no relevance to that person.58 Yet in some respects this is the approach taken in the Succession Regulation. The Regulation adopts a ‘seek and ye shall find’ approach to habitual residence and does not acknowledge that a person may not have a habitual residence as in the scenario above. Recital 25 states that when it proves difficult to identify the habitual residence of the deceased, the manifestly more closely connected test ‘should not be resorted to as a subsidiary connecting factor whenever the determination of the habitual residence proves complex.’ Which begs the question as to when should the escape clause be used? How complex does it have to become before the courts are able to use it? It is possible to infer from this that if the courts can only use it in extreme cases, there is a chance that the courts may be reduced to identifying a ‘habitual residence’ with only tenuous connections between the State and the deceased, which is obviously not in the deceased’s best interests. One major uncertainty concerns when habitual residence is actually acquired.59 It is said that ‘an appreciable period of time of residence’ is required in order to establish habitual residence.60 This is a factor that would be valuable for the purpose of estate planning, as it would protect against being able to easily change the law to apply to the claim for clawback. Yet what is meant by an appreciable period of time appears to be both fact- and context-dependent. Courts have in varying contexts found that habitual residence can be acquired in a day;61 in some situations it can’t;62 and in some cases habitual residence can be acquired in weeks.63 The ability to acquire habitual residence in a day or in a matter of weeks is certainly not appropriate for estate planning. Indeed, in certain situations, a newborn child may take the habitual residence of the parent with parental responsibility immediately, even if the child has never been to that country.64 However in

58 A lack of personal connection can also be put forward regarding the transient nature of habitual residence if it is used for the express choice of law to apply to all gifts that are made by the donor during his lifetime. A habitual residence may have a connection to the donor at the time the first gift is given but it is difficult to support the use of that connecting factor for a lifetime of gifts. 59 In the matter of A (Children) (AP) [2013] UKSC 60. 60 Re J (Abduction: Custody Rights) [1990] 2 AC 562, 578; For a then comprehensive list of cases where Re J has been followed see Beaumont and McEleavy (n 24 above) 102; the Hague Child Abduction Convention (1980) Art 12 acknowledges the possibility of the fact that a child may be settled in the state of retention after a period of one year. 61 Case C-90/97, Swaddling v Adjudication Officer [1999] ECR I-1075 [33]. 62 Nessa v Chief Adjudication Officer [1999] 1 WLR 1937. 63 Re F (Child Abduction) [1995] 1 FLR 548 (within one month); Re S (Habitual Residence) [2010] 1 FLR 1146 (within 7–8 weeks); V v B (Abduction) [1991] 1 FLR 266 (just over two months); Nessa v Chief Adjudication Officer [1999] 2 AC 1 WLR 1937 (Resuming a habitual residence can be in a short period of time). 64 B v H (Habitual Residence; Wardship) [2002] 1 FLR 388. In this case it was considered that where there had been coercion of the mother, who was habitually resident in England, to remain in ­Bangladesh where she later gave birth to a child under duress, the child had the same habitual residence as its mother: Aude Fiorini, ‘Habitual Residence and the Newborn – A French Perspective’ (2012) 61 International and Comparative Law Quarterly 530–40.

What is the Most Appropriate Connecting Factor?  141 a recent judgment from the UK Supreme Court this view was questioned.65 This case clearly demonstrated how difficult it is to determine habitual residence to the extent that four out of the five Supreme Court judges avoided doing so.66 Following the CJEU cases on habitual residence in child custody cases, demonstrating a willingness to aim for uniform interpretation, the judges discussed whether an infant really could be habitually resident in England without the child ever having been there. The mother, who was considered to be habitually resident in England, had become pregnant and given birth to a child in Pakistan against her will. Although their discussion was obiter, four of the judges could not decide whether presence was a necessary prerequisite for habitual residence and felt that this would ultimately be a question for the CJEU to answer at some point.67 The CJEU did consider this question to some degree in Case C-111/17 PPU OL v PQ, and decided that presence was a necessary requirement for habitual residence.68 They did not consider the issue of coercion. For the purpose of the claim for clawback, it would be preferable if it could be agreed within the explanatory report that residence would have to be for an appreciable period, with the requirement for the residence to have acquired an acceptable level of integration in order to prevent the donor from arbitrarily choosing the law of a country to apply to the gift.69 Under the law of the European Union, habitual residence must have an autonomous meaning.70 However, as has been previously noted, it may have different meanings depending on the statute, context and policy requirements of the relevant law.71 It may also have different definitions depending on whether it is applying to adults or children.72 The Court of Justice of the European Union (CJEU) has in recent years been asked to define the term habitual residence, most notably in Re A and Mercredi v Chaffe. In Re A the court noted that the Borràs Report on the Brussels IIbis 65 In the matter of A (Children) (AP) [2013] UKSC 60. 66 In In the matter of A, ibid, Lady Hale, Lords Wilson, Reed and Toulson all questioned what was the necessary connection for the habitual residence of the newborn child in this situation: an approach which ‘holds that presence is a necessary pre-cursor to residence and thus to habitual residence or an approach which focuses on the relationship between the child and his primary carer’? – favouring the former. 67 Ibid, Lady Hale [2013] UKSC 60 [58]. 68 C-111/17 PPU OL v PQ, 7 June 2017, ECLI:EU:C:2017:436. Habitual residence for the purpose of Art 11(1) of Brussels IIa must be interpreted as presupposing that the child has been physically present in the Member State to which return is sought. When a child born in a Member State other than the one where the child’s parents were habitually resident together prior to the birth, has remained with her mother in the Member State of her birth in breach of the initial intention of the parents that the mother would return with the child to the father’s Member State cannot constitute wrongful removal or retention within the meaning of that provision [69]–[70]. 69 For discussion on the ambiguity of habitual residence as a connecting factor see – Eva Lien, ‘A Further Step Towards a European Code of Private International Law: The Commission Proposal for a Regulation on Succession’ (2009) 11 Yearbook of Private International Law 107, 124–27. 70 Marinos v Marinos [2007] EWHC 2047 (Fam). 71 Clarkson and Hill (n 32 above) 338. 72 Ibid.

142  The Applicable Law Regulation refers to habitual residence as being defined by the CJEU for other areas of law as the place where, ‘the [person] concerned has established, with the intention that it should be of a lasting character, the permanent or habitual centre of his interests.’73 However, this definition was not viewed as suitable for determining the habitual residence of the child due to the fact that it was based on non-family law cases and it placed too much emphasis on the intention of the person concerned. It is not the child’s own will that is decisive in determining his habitual residence; nor is it the parents’ view as this is seen only as an indicator and not a sole concluding condition.74 It was accepted that the definition of habitual residence within the Borràs Report was acceptable for an adult.75 This definition may be suitable for the claim for clawback, but it falls short when the person is highly mobile. This test for habitual residence for the child found within Re A and followed in Mercredi, was interpreted as: … the place which reflects some degree of integration by the child in a social and family environment. In particular, duration, regularity, conditions and reasons for the stay on the territory of the Member State and the family’s move to that State, the child’s nationality, the place and conditions of attendance at school, linguistic knowledge and the family and social relationships of the child in that State should all be taken into consideration obviously appropriate to the child’s age.76

However, where a child’s habitual residence cannot be established then the courts of the Member State where the child is present are to have jurisdiction.77 This point of not being able to identify a habitual residence is clearly accepted by the CJEU, but was not acknowledged in the final version of the Succession Regulation. The drafters of the Succession Regulation appear to have been willing to use the vocabulary within these cases but not to follow their findings. So how transferable is this definition to a claim to claw back an inter vivos gift from a third party? At first glance, it is clear that the secondary points relating to schooling and linguistic knowledge are child-centric requirements and not necessary for succession purposes, unless to determine the habitual residence of a wealthy minor. With regards to the family and social relationships, in Mercredi it was decided that the importance of these varies according to the child’s age.78 If the child was very young and was dependent on the parent then the court needed to consider the social and family relationships of the parent with lawful custody

73 Borràs Report. Case C-90/97, Swaddling v Adjudication Officer [1999] ECR I-1075. 74 Case C-523/07, Proceedings brought by A [2009] ECR I-2805 [36]; Case C-497/10 PPU Mercredi v Chaffe [2010] ECR I-14309. 75 Case C-523/07, Proceedings brought by A [2009] ECR I-2805 [36]. 76 View of Advocate General Cruz Villalón Case C-497/10 PPU Barbara Mercredi v Richard Chaffe [2010] ECR I-4309 [65]. 77 Brussels IIa, Art 13. Ruth Lamont, ‘Habitual Residence and Brussels IIbis: Developing Concepts for European Private International Family Law’ (2007) 3 Journal of Private International Law 261, 276. 78 Case C-497/10 PPU Mercredi [53].

What is the Most Appropriate Connecting Factor?  143 in order to determine the habitual residence of the child. This therefore becomes a habitual residence test for adults if the parent’s geographical and family connections are taken into consideration.79 This aspect is transferable. Recital 24 of the Succession Regulation recognises the value of these factors for identifying habitual residence, as it gives social and family relationships priority over professional or economic connections. The general principles that the court needed to consider in order to determine the habitual residence of the child – that of ‘duration and regularity’ and the ‘conditions and reasons’ for the person’s presence in the State – were also followed in the Succession Regulation and would also be beneficial when determining the habitual residence of the donor.80 Trying to determine the habitual residence for the donor in this scenario where there is no clear habitual residence is difficult. One possible solution is that for the purpose of working out what the applicable law should be for a claim, if in the making of the gifts the donor is able to expressly choose the applicable law this will create some clarity and legal certainty. An express choice of law option within the new private international law rules will allow the donor to plan his estate, and give certainty to the donee and also to the heir if it is recommended that a record is made for the heir’s benefit. Recommending that the donor should record the gifts he makes is possibly the only way that the heirs would have any knowledge as to what had been gifted.

Scenario 2 – The Donor has Multiple Habitual Residences Example A German national divided his time between three Member States. He was not permanently settled in any of them. His first ex-wife and child live in Spain. His second ex-wife and child live in Italy. His recent partner, to whom he is not married, and newborn baby, live in France. He divided his time equally between them. He has no assets in Germany. He has gifted property of substantial value to third parties in France. His heirs/claimants live in Spain, Italy and France. A connecting factor ought to point to one applicable law; otherwise it does not do its job of clearly determining which law governs the dispute.81 If the connecting factor points to more than one applicable law a subsidiary connecting factor would be needed to break the tie.82 If at the time the gift was made it is not clear where the donor is habitually resident, then it is suggested that it may be best to go with a fall-back connecting factor such as nationality. As previously stated, the Commission are adamant that someone can only have one habitual residence, yet there are

79 Ibid

[55].

80 Succession

Regulation, Recital 23. and Hill (n 32 above) 341. 82 Beaumont and McEleavy, Anton (n 10 above) 1065. 81 Clarkson

144  The Applicable Law situations where people do lead complex lives and appear to have multiple habitual residences. For example, shuttle custody cases under the Hague Child Abduction Convention would appear to resemble multiple concurrent habitual residences in all but name, spending equal amounts of time resident in different countries.83 Yet the courts prefer to interpret these as alternating habitual residences for the purpose of the Convention.84 However, if the child has a clear close and stable connection to two or more States would it be harmful to the child if their case was heard in any of those States?85 Arguably it is irrelevant which court hears the case to determine a custody issue where there are multiple habitual residences. However, this would not be appropriate for a claim for clawback. If a person has an equal connection to more than one State it matters which law applies. The substantive laws vary greatly between countries and legal cultures, resulting in differences that could affect how the estate is distributed.86 Care is needed to find the appropriate law to claim for clawback.87

B. Nationality Would the nationality of the donor be an appropriate connecting factor for a claim to claw back an inter vivos gift? Nationality became the popular connecting factor for succession, as a replacement for domicile, towards the end of the nineteenth century as civilian law countries began to codify their laws.88 Its continuing popularity as a connecting factor for the applicable law to succession is evident in the number of Member States within the European Union who use it either as a sole connecting factor or as an option to residence for that purpose before the EU Succession Regulation came into force.89 Although nationality has currently fallen out of favour within the EU due to its theoretical discriminatory nature,90 this should not mean that it should be ignored as a valuable connecting factor for flexible private international law codification.

83 Beaumont and McEleavy (n 24 above) 110–111. 84 Ibid. 85 Beaumont and McEleavy (n 24 above) 91; Rhona Schuz, ‘Policy Considerations in Determining the Habitual Residence of a Child and the Relevance of Context.’ (2001) 11 Journal of Transnational Law and Policy 1, 26. Schuz argues that in the case of Watson v Jamieson 1998 a finding of dual habitual residence would not have changed the outcome of the case. 86 To compare the national laws of succession within the EU Member States see: www.successionseurope.eu/en/home (accessed 2 November 2013). 87 The view of multiple habitual residences for child custody cases has not yet been decided by the CJEU. 88 Beaumont and McEleavy, Anton (n 10 above) 151. 89 At the time of the drafting of the Regulation, 17 of the 27 Member States used nationality either as a sole connecting factor or alongside residence as the connecting factor to determine the applicable law to succession in their national law. 90 Bonomi (n 43 above).

What is the Most Appropriate Connecting Factor?  145 It can be argued that nationality, as a connecting factor, doesn’t hinder integration as it can be justified for objective reasons relating to the international character of the situation.91 Indeed, in most cases, the stability of nationality has advantages over habitual residence, in that a citizen would know in advance, and with certainty, which law will apply to a future claim; nationality rarely changes, whereas people change residence more often.92 The benefit to using nationality as a connecting factor to determine the applicable law to a claim is that it is recognised as a relatively simple rule.93 Whether it is the nationality of birth or a chosen nationality, in most cases a person will feel connected to the culture.94 Despite views within the EU that it is discriminatory, nationality was still chosen by the Commission as the connecting factor for choice of law within the Succession Regulation.95 This was in order to allow parties to avoid the uncertainty of habitual residence and to protect the rights of heirs.96 It is also used as a special factor during the process of identifying the habitual residence in complex cases within the Succession Regulation.97 This would imply that nationality has weight and therefore still retains relevance in the decision-making process to determine the applicable law. Of course, there are known disadvantages to using nationality, such as the fact that it is possible to be stateless or to have more than one nationality.98 However these disadvantages seem rather familiar if we consider the weaknesses of habitual residence, that a person can have no habitual residence or multiple habitual residences. Out of the two connecting factors nationality is the more commonly understood by the layman; the man on the street is more likely to be aware of his nationality than his habitual residence.99 Nationality, as a concept, may not support political integration within the EU,100 but from a global perspective it remains a useful and functioning connecting factor to have in the drafter’s toolbox and as such should not be considered to be redundant.

91 ibid. 92 Peter Kindler, ‘From Nationality to Habitual Residence: Some Brief Remarks on the Future EU Regulation on International Succession and Wills’ in Katharina Boele-Woelki, Talia Einhorn, Daniel Girsberger, Symeon Symeonides (eds), Convergence and Divergence in Private International Law Liber Amicorum Kurt Siehr (Eleven International Publishing, 2010) 254; Brussels IIa Art 12(3)(a) states that ‘nationality of the child may be an indication of a “substantial connection” with a Member State’, demonstrating the value of nationality as a tool to connect a person to a State. 93 Paul Torremans (ed), Cheshire, North and Fawcett: Private International Law, 15th edn (Oxford University Press, 2017), 171. 94 Kindler (n 92 above) 253. 95 Succession Regulation, Article 22(1). 96 Kindler (n 92 above) 256. 97 Succession Regulation, Recital 24. 98 Clarkson and Hill (n 32 above) 328. 99 Ibid. 100 Bonomi (n 43 above).

146  The Applicable Law

(i)  Dual or Multiple Nationality and the Applicable Law The instances of dual nationality are increasing.101 Dual or multiple nationalities can be acquired at birth, from naturalisation or by reacquisition of nationality by expatriates or ethnic minorities in their homeland.102 Where a person has more than one nationality, it is accepted that a further rule will be necessary to determine the most relevant nationality for the purpose of determining the applicable law.103 The Succession Regulation allows the testator to choose the law of any of the States whose nationality they possess at the time of making the choice.104 Current case law from the CJEU does not provide clear guidance for determining the applicable law where the person has dual or multiple nationalities.105 Bariatti suggests that the courts should apply the solution found for jurisdiction purposes in Micheletti,106 which held that the Member State of the forum may not consider the dual national as exclusively its own national; although this appears to be at odds with the 1930 Hague Convention, where the traditional solution is that the State may consider their own laws as prevailing if the person is a national. The current trend is in favour of the closest connection test.107 If this is applied for the purpose of determining the nationality of the person who is deceased, then the court should look to see with which nationality the deceased was most closely connected. If nationality is chosen to be the choice of law by the donor, the fact that it was chosen demonstrates that the donor’s intention was to be connected to the law of that country, which is a valuable factor when trying to determine the intentions of the deceased. A problem that is applicable to all the connecting factors is the potential for changes in the law, which means that the solicitor or notary who arranges the claim will have to be aware of the law at the time of the gift. Again, using nationality for the applicable law to a claim for clawback, we need to be aware that the

101 Eva Østergaard-Nielsen, Dual Citizenship: Policy Trends and Political Particpation in EU Member States, European Parliament Directorate General Internal Policies of the Union, Policy Dept C, C ­ itizen’s Rights and Constitutional Affairs (2008) PE 408.299 4; Thalia Kruger and Jinkse Verhellen, ‘Dual Nationality = Double Trouble?’ (2011) 7 Journal of Private International Law 601. 102 Eva Østergaard-Nielsen, Dual Citizenship: Policy Trends and Political Particpation in EU Member States, European Parliament Directorate General Internal Policies of the Union, Policy Dept C, Citizen’s Rights and Constitutional Affairs (2008) PE 408.299 4. 103 David Hayton, ‘Determination of the Objectively Applicable Law Governing Succession to Deceaseds’ Estates’ DNotl, Les Successions Internationales dans l’UE (2008) 359. 104 Succession Regulation, Art 22(1). 105 For an analysis of CJEU case law concerning multiple nationalities, see Stefania Bariatti, ‘Multiple Nationalities and EU Private International Law’ (2011) 13 Yearbook of Private International Law 1, 3. 106 C-369/90, Micheletti and others v Delegación del Gobierno en Cantabria, [1992] ECR I-4239. 107 Hague Convention on Certain Questions Relating to The Conflict of Nationality Laws 1930, Article 3; Thalia Kruger and Jinkse Verhellen, ‘Dual Nationality = Double Trouble?’ (2011) 7 Journal of Private International Law 601, 606; Paul Lagarde, ‘Le Proximité dans le Droit International Privé Contemporain. Cours Général de Droit International Privé’ (1986) 196 Hague Collected Courses 84.

What is the Most Appropriate Connecting Factor?  147 substantive law may change over time, and therefore it is recommended that if nationality is to apply then it ought to be the law of the nationality at the time the gift is made. The law at the time the gift is made is a known quantity. If the number of years prior to the death of the deceased is restricted to five years, in which a gift can be subject to clawback, then this increases the ease with which the law can be identified by the claimant. The change in the substantive law in a country over a period of time was a concern during the 1989 Hague Convention and is also a point that Lagarde was concerned with for the Succession Regulation.108 The guidance within the Convention on this issue is that there is no guidance. It simply said it was a matter for the country concerned to decide how to deal with such a case.109 The concern about changes in the law becomes less relevant if we are considering clawing back an inter vivos gift for the purpose of maintenance of a dependant, as then it is irrelevant whether the shares for the legitimate portion have changed or whether who can be a claimant has changed. The factor that is important in this case is that there was an evasion of responsibility to a dependant that can be potentially rectified. It is in a country’s interests and in the interest of comity to permit recovery of gifts for the purpose of maintaining a dependant so that responsibility to maintain that person does not fall upon a State.

(ii)  Multi-Unit States An additional weakness concerns the determining of the applicable law where the connecting factor points to a multi-unit State.110 The subsidiary reference approach taken in the EU Succession Regulation states that the internal private international law rules of the multi-unit State should be used in order to identify which ‘unit’s’ laws should be applied.111 This approach was intended to protect potential heirs or assets by protecting the internal allocation system.112 However, where the multi-unit State does not have such rules this makes the process of determining the applicable law unnecessarily complex.113 Nationality does not point to a definitive unit within a Member State. For example, if your nationality is

108 Lagarde (n 4 above) 141–42. 109 Donovan WM Waters, Explanatory Report to the Convention on the law applicable to succession to the estates of deceased persons (1988), available at: https://www.hcch.net/en/publications-andstudies/details4/?pid=2959&dtid=3 (accessed 14 June 2019) 567. 110 Gregor Christandl, ‘Multi-Unit States in European Union Private International Law’ (2013) 9 ­Journal of Private International Law 219; Succession Regulation, Arts 36–38. 111 Council Document 11067/11 JUSTCIV 152 CODEC 968, 11; Succession Regulation, Art 36(1). 112 Christandl (n 110 above) 231. An example of a multi-unit State is the UK. In Scotland the succession rules have something akin to legitimate portions but do not permit clawback; whereas the succession law of England and Wales does not have legitimate portion rules but does allow clawback from a third party for the purpose of maintenance for dependants if it can be proven that the donor intended to evade their responsibilities to leave reasonable financial provision. 113 Christandl (n 110 above) 237.

148  The Applicable Law Spanish the connecting factor does not point to which area of Spain and therefore which succession laws will apply to you. If your nationality is ‘UK’ then further assessment is required to identify which unit is relevant and therefore which laws will apply. One solution to this problem would be the application of the closest connection test to identify the appropriate unit. Another more contentious solution, in light of the abolition of scission in the Succession Regulation, would be to identify the correct unit for immoveable property by referring to the lex situs. The use of scission is discussed later in this chapter.

C. Domicile Domicile is a traditional connecting factor that connects a person with a single system of law.114 However, the use of domicile at the time the gift is made as a connecting factor for claims to claw back an inter vivos gift from a third party comes with a level of concern from this author sufficient to remove it from the drafting table for the purpose of the general applicable law.115 Just as with the concept of habitual residence, there are problems surrounding the definition of domicile and how domicile is obtained. The fact that domicile of the deceased is used within the Inheritance (Provision for Family and Dependants) Act 1975 to determine whether a claim can be brought against the estate for maintenance is fraught with problems for dependants, who may have been living with a person for many years prior to that person’s death but are unable to make a claim as they are unable to prove that the person had changed their domicile to that of England and Wales.116 A new applicable law rule for the clawback of gifts to third parties for the purpose of maintenance which solves this problem would be helpful.

114 For an account of domicile see Beaumont and McEleavy, Anton (n 10 above) 154–75, 155. P  ­Beaumont and J Holliday, ‘Some aspects of Scots Private International Law of Succession Taking Account of the Impact of the EU Succession Regulation’, Centre for Private International Law, ­University of Aberdeen, Working Paper Series, 2015/6, available at: https://www.abdn.ac.uk/law/ research/working-papers-455.php (accessed 7 June 2019) 13: ‘The case law in the seventeenth and eighteenth centuries shows that the Scottish courts were willing to hear arguments from counsel based on continental jurists and legal thinking in order to find solutions to problems that were not adequately dealt with under Scots law. In 1744, in Brown v Brown [(1744) Mor. 4604], the Inner House of the Court of Session in Edinburgh was referred to Voet’s work for inspiration, as Scots law was silent on the issue of whether succession in relation to moveables was governed by the law of the deceased’s domicile or the law of the place where the moveables were at the time of his death. The outcome was that the court followed the continental European applicable law rule on domicile of the deceased at the time of death, rejecting the idea that the lex situs which applies to immoveables should apply to movables instead of the lex domicilii, a decision which formed the basis of the principle of scission.’ 115 See Holliday (n 13 above) 443–58 where in relation to a maintenance claim, ‘Holliday argues that the habitual residence of the dependant would be a more appropriate connecting factor.’ (The argument from this chapter was mentioned in D McClean, Review Article, ‘Maintenance surveyed’ (2017) 13 Journal of Private International Law 219, 226. 116 Holliday (n 13 above).

What is the Most Appropriate Connecting Factor?  149 There are also concerns on an international level where, in some countries, a woman’s domicile is still based on that of her husband.117 If she were to divorce and then remarry in a country where her domicile was not based on that of her new husband, and if the domicile of her former husband were applied as the law applicable to the claims to claw back the gift, it is clear that the law that was chosen would have no real connection to her as the donor. It is argued that the potential lack of relevance to the person is sufficient to withdraw this connecting factor for the purpose of devising an international applicable law rule. However, the law of domicile could still be a useful option for the choice of law, as it remains the dominant connecting factor for common law countries.118

D. Scission The principle of scission is where the law applicable to the transfer of immoveable property and moveable property differ. In the UK, in the private international law of succession, immoveable property is governed by the lex situs and moveable property is governed by the domicile of the owner. However, both the 1989 Hague Convention and the EU Succession Regulation abolished the use of scission and opted for the principle of unity of succession to govern the estate, on the basis that scission can create variable outcomes in the way an estate will be divided.119 117 Pauline Siew Chai v Tan Sri Khoo Kay Peng [2014] EWHC 1519 (Fam). In this case the husband argued that the wife was domiciled in Malaysia because he was domiciled there and she had a domicile of dependence under Malaysian Law. However, the wife argued that she was domiciled in England. The issue in this case was forum non conveniens, with both courts declaring they had jurisdiction to hear the case. 118 For an analysis of the historical development of domicile, see AE Anton, ‘The Introduction into English Practice of Continental Theories as to the Conflict of Laws’ (1956) 5 International and Comparative Law Quarterly 534; Beaumont and McEleavy, Anton (n 10 above) at 8–12; and P Beaumont and P Bremner, ‘Inter-Regional conflicts within the United Kingdom relating to private international law of succession – the development of the applicable law rule’ (2010) 54 Revista Valenciana d’Estudis Autonòmics 238–71; P Bremner, ‘Bridging the gap between civil and common law: An analysis of the proposed EU Succession Regulation’ (Master’s Thesis, University of Aberdeen, 2010, 84 (quoting G  Lloyd Jacob, ‘Nationality and Domicile; with Special Reference to Early Notions on the Subject’ (1924) 10 Transactions of the Grotius Society 89–114)), ‘The word domicile is not found in Viner’s Abridgment, Bacon’s Abridgment, Comyn’s Digest, or in any of the law books from Bracton down to Blackstone, so it must be comparatively new to the English law. It is in fact borrowed from the continental usage and after it had there become the determining factor in questions of law. When we borrowed the notion of personal law, we found that domicile was established as its criterion.’. Cf the very significant impact of English Law on the historical development of the substantive law of succession and on administration of estates discussed by W David H Sellar, ‘Succession Law in Scotland – a Historical Perspective’ in Kenneth GC Reid, Marius J de Waal and Reinhard Zimmerman (eds), Exploring the Law of Succession Studies National, Historical and Comparative (Edinburgh University Press, 2007) 49. 119 Ibid. For an analysis of the effect of the unity of succession within the EU Succession Regulation on a Scottish testator see Beaumont and Holliday, ‘Some aspects of Scots Private International Law of Succession’ (n 114 above): ‘In 2009 the European Commission put forward a proposal to simplify the settlement of international successions and to make the rules governing them more predictable. The Commission proposed the use of the last habitual residence of the deceased as the connecting factor to

150  The Applicable Law A problem with the principle of unity with respect to succession law is that it often conflicts with the designated private international law of the forum.120 However, the law applicable to the claim for clawback is not to determine the amount of the share of the estate that the applicants will receive, but is rather to create proximity, legal certainty for all relevant parties and also fairness in outcome. The rule needs to be acceptable at a global level.121 The advantage to scission from a private international law perspective is that it is practical. Applying the lex situs to immoveable property, although arguably an act of deference,122 is common sense. It respects the close relationship between the law of where the property is sited and the transfer of property, preventing unenforceable titles.123 Support for applying the principle of scission to the claim to claw back property from a third party was evident during the presentation of the author’s PhD thesis at the Conference of the Journal of Private International Law held in Rio, Brazil in August 2017. The advantage of using the lex situs at the time of transfer of gifts of immoveable property is that this choice respects property law and also creates legal certainty for all parties. In the past the domicile of the owner, the lex situs and the lex actus have been considered as options to point to the law to govern moveable property and, for the most part, dismissed.124 However what is uppermost in the requirements of the appropriate connecting factor for moveables is that the donor and donee will be aware of what it is at the time of the transfer and that it provides the transfer with the necessary legal certainty. In relation to moveable property, habitual residence is a connecting factor that fits with the law of obligations based on characteristic performance125 and it is also accepted at an international and regional level. For these reasons ‑ along with the possibility that the transfer of property will occur where the donor is habitually determine both the jurisdiction and the applicable law. It was suggested that by using habitual residence as the connecting factor to determine the applicable law “(…) we are offering greater legal certainty and greater flexibility, enabling people to contemplate the future more serenely.” The Commission’s reasoning was that the existence of scission within certain States, where moveable property is governed by one law and immoveable property is governed by the law or laws of the place or places where the immoveable property is situated, created many difficulties in international succession cases such as where the different laws pointed to different heirs, or differences in the division of the succession. The abolition of the system of scission was therefore considered to be beneficial and the proposal for a single connecting factor to determine the applicable law to succession was put forward.’ 120 Jan von Hein, ‘Conflicts between International Property, Family and Succession Law – Interfaces and Regulatory Techniques’ (2017) 6 European Property Law Journal 142–57, 142. 121 Beaumont and Holliday, ‘Some aspects of Scots Private International Law of Succession’ (n 114 above). In a recent Scottish Government Consultation on Technical Issues (2014) relating to Succession see: http://www.gov.scot/Publications/2014/08/1185 (accessed 27 September 2017), there was support for the abolition of scission but no consensus as to which law should apply to the whole estate. 122 von Hein (n 120 above) 145. 123 Ibid. 124 Beaumont and McEleavy, Anton (n 10 above) 949. 125 See the EU’s Rome I Regulation.

Recommendations for a New Private International Law Solution  151 resident, to a donee with the same habitual residence, increasing the chances of them knowing what the law is ‑ it is recommended that the law of the habitual residence of the donor at the time of the transfer is used for moveables.

E. Conclusion From the above analysis, it is clear that there are arguments for and against the use of each connecting factor as a tool for identifying the applicable law for a claim to claw back an inter vivos gift from a third party. However, there are also elements that stand out as providing a distinct improvement on the current private international law rule, and should be included in the new rule. The elements that can be drawn from the above and from the previous chapter, that need to be factored into the revised applicable law solution, are: • To create legal certainty, it is necessary to remove the retroactive element to the law. The law should be known to the donor and donee at the time the gift was made. • There are benefits to offering a choice of law to the donor in order to increase legal certainty for estate planning. • There are benefits to restricting the number of years before death for claims to claw back gifts from third parties, to create a rule which is practical for the donor in terms of estate planning, the donee, who will have clarity as to whether the property is at risk of clawback, and also for the lawyer/notary in being able to identify the appropriate law. Also, limiting the time period in which a claim can be raised after the death of the deceased would also protect the donee. There needs to be a balance between a claimant becoming aware of the gift and being able to raise a claim against a third party. It is suggested that if there is a requirement for the donor to formally record the gifts, then the time factor can be minimised. • Some connecting factors do not give sufficient legal certainty, such as the habitual residence of the creditor/claimant, as this would be unknown to the donor and the donee, even if this option would protect the vulnerable party.

IV.  Recommendations for a New Private International Law Solution A.  Objective Applicable Law It is recommended that the connecting factors for moveable and immoveable property are distinguished.

152  The Applicable Law

(i)  Immoveable Property The lex situs for immoveable property satisfies the elements relating to transfer of property and contracts relating to a right in rem.126 It creates legal certainty for all parties and upholds comity.127 It is regarded as being necessary in terms of effectiveness in relation to transfer of title.128 The abolition of scission within the 1989 Convention and the EU Succession Regulation, in favour of the principle of unity of succession ‑ a principle which applies the same rules to both moveables and immoveables ‑ although perceived to be a trend within private international law,129 is in reality impractical and creates problems when a country whose laws follow the unity of succession approach has to deal with property in a country which applies the lex situs rule to immoveables.130 When trying to identify a solution that works at a global level it makes sense to identify rules that are pragmatic. If the principle of unity of succession is so successful, then it begs the question why no country has ratified the 1989 Convention. A recent brief prepared by a notary for the European Parliament on the implementation of the EU Succession Regulation at the end of 2017 notes that having a single law applying to the whole of succession only operates well when both countries have identical private international law rules, and that problems arise when the succession involves property within a third country that applies the lex situs to property located there.131 The fact that this is currently causing problems in practice for those States that are party to the EU Succession Regulation132 would suggest that the principle of unity of succession is not an appropriate approach from a global perspective and that adopting separate rules that support the concept of legal certainty is more pragmatic.

(ii)  Moveable Property There are many advantages for restricting the connecting factor for moveables to the habitual residence of the donor at the time the moveable gift was made. 126 Cheshire (n 93 above) 1255: ‘In the USA and in most of the European countries the general rule is that the law of the situs (often referred to as the lex situs) is the governing law for all questions that arise with regard to immoveable property.’ ‘This proposition is so clear as scarcely to require authorities’. However for authorities on the lex situs rule, see Lawrence Collins (gen ed), Dicey, Morris and Collins on the Conflict of Laws, 15th edn (Sweet and Maxwell, 2012) Rule 132, para 23R-062 and Janeen ­Carruthers, The transfer of property in the conflict of laws, Choice of law rules concerning inter vivos transfers of property (Oxford University Press, 2005) ch 2. 127 Cheshire, n 93 above, 1256. 128 Ibid. 129 Dicey (n 126 above) 1338. 130 François Trémosa, The state of implementation of the EU Succession Regulation’s provisions on its scope, applicable law, freedom of choice and parallelism between the law and the courts, for the ­European Parliament, (October 2017) 1 available at: http://www.europarl.europa.eu/RegData/etudes/ BRIE/2017/596822/IPOL_BRI(2017)596822_EN.pdf (accessed 14 June 2019). 131 Ibid, 5. 132 Ibid.

Recommendations for a New Private International Law Solution  153 The use of habitual residence at the time the gift was made is not alien to the EU Succession Regulation, as it is used within Article  25 in relation to the validity of succession agreements. In most cases the habitual residence of the donor will be relatively easily identifiable by the donor or by a lawyer. The choice of habitual residence meets with the political preference within the EU as a connecting factor for issues of succession and family law. If we look to the applicable law rule for agreements as to succession within the Succession Regulation, the applicable law is the law that would have been applicable to the succession of that person if he had died on the day on which the agreement was concluded. This law governs the admissibility, substantive validity and binding effect between the parties. Lagarde notes that the law for agreements as to succession differs from the law applicable to claims to claw back the inter vivos gifts from third parties ‘… which at the time when they were made did not exceed the disposable portion as fixed by the law which would have governed the estate of the deceased if he had died on the day of the gift.’133 Obviously, Lagarde’s comment covers States which permit testamentary freedom and those which have protected heirship. However, it seems unnecessary for him to point out the rule in Article 25(1) unless he was hinting that the rule for clawback from third parties should also have been restricted to the law at the time the gift was made and not at the time of death. The recommended general rule for the objective applicable law: 1.

2. 3.

A claim against third parties for the reduction of moveable inter vivos gifts, is governed by the law of the State in which the donor at the time the gift was made was habitually resident. However if, at the time the gift was made, the donor was manifestly more closely connected with a State of which he was then a national, then the law of that State will apply. A claim against third parties for the reduction of immoveable inter vivos gifts, is governed by the lex situs. The donor is obliged to disclose to the donee the applicable law for claims which heirs or dependants of the donor may have against third parties for the reduction of inter vivos gifts at the time the gift was made. If disclosure of the applicable law did not take place at the time the gift was made then the law of the State of the habitual residence of the donee at the time the gift was made will govern the claim against moveable property and the law of the lex situs will govern the claim against immoveable property.

In relation to this latter rule that in the case where there has been no disclosure then the law of the habitual residence of the donee at the time the gift was made could govern the claim against moveable property is not without risk. It is possible that the donor and donee could collude in order to avoid the effects of clawback by not disclosing the habitual residence. It would be necessary to create a discretionary rule in order to avoid such fraude à la loi.



133 Lagarde

(n 4 above) 142.

154  The Applicable Law

B.  Subjective Applicable Law (i)  Is Party Autonomy a Realistic Option? Party autonomy is accepted as a fundamental principle in many areas of choice of law in the European Union.134 The EU Succession Regulation allows for party autonomy for the testator but restricts their choice to the law of their nationality to apply to their succession.135 As previously indicated, nationality was the most common connecting factor for cross-border succession within the EU prior to the political decision to use habitual residence. Domicile is still the choice of connecting factor for the purpose of succession for common law countries.136 However, in this case party autonomy would really only work if it operated in the form of a unilateral choice made by the donor. The donee does not have the ability to influence the choice of law that will apply to the claim; it is for the donor to decide. The heirs are unlikely to be content with a choice of law that allows property to be gifted without a chance of future clawback. However, the benefits are worth striving for. The ability for the donor to set out an express choice of law that would indicate whether the gift was at risk of clawback of inter vivos gifts from third parties to protect the legitimate portion would create legal certainty for the donor, for his estate planning, and for the donee, who would be aware of whether the gift was at risk of clawback. Unfortunately, it does not provide the heir with legal certainty or automatic awareness unless the donor is obliged to inform the heir of the transfer and the relevant applicable law. Although there is a risk of an express choice of law being used for evasion purposes it could also be used as a positive tool to protect the legitimate heirs. Say, for example, the donor is a national of country A, where his heirs also reside; he is habitually resident in ­country B at the time he gifts property to a third party in country C, but then shortly after moves to country D and becomes habitually resident there. Then his ability to choose the applicable law which becomes ‘fixed’ is extremely helpful in providing certainty compared to the current general rule which uses the connecting factor of the last habitual residence of the deceased. If, in the above scenario, the donor’s heirs resided in Country B rather than A, an express choice of law of the law of the nationality of the deceased may not protect the heirs’ legitimate share either, but it does indicate that the choice of connecting factor needs to be expanded beyond that on offer in the Succession Regulation.

134 Felix Maultzsch, ‘Party Autonomy in European private international law: uniform principle or context-dependent instrument?’ (2016) 12 Journal of Private International Law 466–91. Csongor Nagy, ‘What functions may party autonomy have in international family and succession law? An EU perspective’ (2012) 30 Nederlands Internationaal Privaatrecht 576–86. Erik Jayme, ‘Party Autonomy in international family and succession law: New tendencies’ (2009) XI Yearbook of Private International Law 1–10. Janeen Carruthers, ‘Party Autonomy in the legal regulation of adult relationships: What place for party choice in international law?’ (2012) 61 International and Comparative Law Quarterly 881–913. Bonomi (n 43 above). 135 Art 22(1) EU Succession Regulation. 136 P Beaumont and P Bremner (n 118 above).

Recommendations for a New Private International Law Solution  155 Whether the choice of connecting factor should be the habitual residence or the nationality of the donor at the time the gift is made, is an interesting question. All connecting factors have strengths and weaknesses, usually pertaining to the ability to identify them. Yet in this case, as the donor would be making an express choice of law to apply to all inter vivos gifts made by him, it can be argued that the issue with identification will be lessened, as the donor is alive to state and justify their choice.

(ii)  Express Choice of Law In order to support the ability of the donor to plan his estate it makes sense to permit an express choice of law. The choice of law should be expressly made by the testator so that his intentions are clear. The intention should be recorded with a solicitor or notary overseeing the estate planning. However, it is suggested that the express choice of law is restricted to moveables. As explained above, although the EU decided to get rid of scission, from the global perspective we are a long way away from countries being willing to allow the law of another land to apply to immoveable property. The recommended choice of law clause: 1. A person may choose as the law to govern claims which heirs or dependants of the donor may have against third parties for the reduction of moveable inter vivos gifts, the law of the State whose habitual residence, domicile or nationality he possesses at the time the gift is made. 2. A person possessing multiple nationalities may choose the law of any of the States whose nationality he possesses at the time of making the choice. 3. The choice shall be made expressly in a declaration in the form of an inter vivos disposition of property. 4. The formal validity shall be governed by the law of the State where the declaration is made or by the chosen law. 5. The substantive validity, including conditions for dissolution, shall be governed by the chosen law. 6. A choice of law made by the donor shall only be taken into account for the purpose of determining the law applicable to claims against third parties for the reduction of inter vivos gifts if the donee was made aware of the choice of law at the time the gift was made.

C.  Escape Clause Is the use of an escape clause appropriate? The Succession Regulation, influenced by Article  3 of the 1989 Hague Convention,137 opted to have a flexible escape

137 Article 3

of the 1989 Hague Convention

‘(1)  Succession is governed by the law of the State in which the deceased at the time of his death was habitually resident, if he was then a national of that State.

156  The Applicable Law clause to be used when the law of the habitual residence of the deceased was not appropriate. If ‘… the deceased was manifestly more closely connected with a State other than the State whose law would be applicable … the law applicable to the succession shall be the law of the other State.’138 The escape clause only considers the issue of proximity and is only used when there is no choice of law.139 The advantages and disadvantages that apply to the escape clause in the Regulation, which governed the whole succession, are also relevant to the claim to claw back an inter vivos gift from a third party and should be considered. The advantages are that it creates flexibility and supports the theory of proximity.140 However, retroactive flexibility is not the estate planner’s friend, nor does it create legal certainty for the donee. The court decides which State the deceased was most closely connected with if it is unable to identify the deceased’s habitual residence at the time the gift was given. A disadvantage is that the further back in time the gift was made from the point of assessment, the more difficult it will be for the court to identify the habitual residence of the donor at the time the gift was given. This points to the need to restrict the period of time before death for which gifts can be subject to claims for clawback, so that determining the habitual residence of a donor is a realistic option, whilst also limiting the number of potential habitual residences to be considered by those dealing with the claim. The recommended escape clause: Where by way of exception, it is clear from all of the circumstances of the case that, at the time the gift was made, the deceased was manifestly more closely connected with a State other than the State whose law would apply under [insert the section applicable to the general rule], the law applicable to a claim to reduce an inter vivos gift to a third party shall be the law of that other State.

This exception does not apply when the donor has made a choice of law and informed the donee of this choice before the gift has taken place, unless there is fraude à la loi.

(2)  Succession is also governed by the law of the State in which the deceased at the time of his death was habitually resident if he had been resident there for a period of no less than five years immediately preceding his death. However, in exceptional circumstances, if at the time of his death he was manifestly more closely connected with the State of which he was then a national, the law of that State applies. (3)  In other cases, succession is governed by the law of the State of which at the time of his death the deceased was a national, unless at that time the deceased was more closely connected with another State, in which case the law of the latter State applies.’ 138 Article 21(2) EU Succession Regulation. 139 H Pamboukis (ed), EU Succession Regulation, A Commentary (Nomiki Bibliothiki, CH Beck and Nomos, Athens, 2017) 208. 140 Ibid.

Recommendations for a New Private International Law Solution  157

D.  Overriding Mandatory Rules and Public Policy Public policy concerns in relation to the reserved share were an issue that was raised during the Succession Regulation negotiations.141 However, it was regarded as unlikely to be a problem as very few States regarded the reserved share as a public policy issue,142 and the general view was that issues in relation to discrimination would be regarded as more likely. The recommendation within the Proposal that the public policy exception should state that the ‘application of a rule of law may not be considered to be contrary to the public policy of the forum on the sole ground that the rules regarding the reserved portion of an estate differ from those in force in the forum’ or that they shouldn’t be ‘recognised’ was not incorporated into the final draft.143 The public policy exception was left open, simply requiring that a law had to be ‘manifestly incompatible with public policy’ for the exception to apply. There is a level of common sense in this decision. The discussion centred around the fact that some laws may differ in some way between States and that would be sufficient to disregard them. However, what should we do if a State considers that clawback rules from third parties are mandatory? Admittedly, this situation may be more likely to arise if the issue arises in relation to a claim for maintenance than for a non-needs-based claim for satisfying the legitimate portion. In relation to the law applicable to immoveable property, it is possible that the lex situs may contain overriding mandatory rules that need to be taken into account.144 These mandatory rules will be taken into account, as this is the governing law whether arising from a choice of law rule or by the objective rules. Therefore, the recommended overriding mandatory rule clause could read: Nothing in this Convention shall restrict the application of the provisions of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to govern the claim.145

In addition, it is recommended that the public policy clause could read: The application of any of the laws determined by the Convention may be refused only where such application would be manifestly incompatible with public policy (ordre public).146

141 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 succession and the creation of a European Certificate of Succession (COM(2009) 154) 5. 142 Ibid, 4. In Chapter 4 it was recognised that protecting the legitimate portion for the legitimate heirs is generally not seen as a public policy issue. 143 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 succession and the creation of a European Certificate of Succession (COM(2009) 154) 5, Article 27(2). 144 von Hein (n 120) 147. 145 Wording adapted from Article 16 of Rome II. 146 Wording from Article 18 of the 1989 Hague Convention.

158  The Applicable Law

E.  Modal Law The substantive rules relating to clawback vary immensely between countries. Although the use of modal law can be regarded as controversial due to its influence on the substantive law ‘by the back door’, it is suggested that all relevant parties would benefit from the following guidance to identify the applicable law and to support the aims of legal certainty, practicality and fairness.147

(i)  Terminology – Definitions a)  Habitual Residence For the purpose of the claim for clawback of an inter vivos gift from a third party, as previously mentioned, it would be preferable if it could be agreed within the explanatory report that residence would have to be for an appreciable period, with the requirement for the residence to have entailed an acceptable level of integration in order to prevent the donor from arbitrarily choosing the law of a country to apply to the gift.148 b) The Inter Vivos Gift From a private international law perspective, there needs to be awareness as to what constitutes an inter vivos gift. This would be helpful for potential donors and donees, anyone planning their estate and claimants. There is evidence that the definition of inter vivos gift differs between legal systems for the purposes of succession, which would suggest that if the recommendations of this book were enacted then it would be beneficial to have a method whereby all relevant parties and solicitors/notaries would be able to easily identify the rules in each country. This could be achieved by having a website for uploading country profiles. From the research of the substantive law conducted for Chapter three, it was clear that some systems restrict the scope of what is meant by inter vivos gift149 and in others the term encompasses all gifts that were made by the deceased during his lifetime. In some countries gifts to charities are excluded, in others they aren’t. In order to meet the needs of heirs and dependants who may be in need of maintenance from the estate, it does not make sense to exclude gifts to certain 147 Maria Hook, The Choice of Law Contract (Hart Publishing, 2016) 118–125. Hook argues that modal choice of law rules supplement the operation of choice of law rules, that choice of law rules do not stand alone and that they ‘may require definition or explanation; or they may be subject to extraneous policy considerations, in the form of qualifications or conditions’ 119. 148 For discussion on the ambiguity of habitual residence as a connecting factor see – Lien (n 22 above) 124–27. 149 Article 931 of the French Civil Code states that an inter vivos gift shall be recorded by a notary and that the record of the contract should be retained by the notary.

Recommendations for a New Private International Law Solution  159 third parties if there has been evasion. However, this is a substantive issue, and so not relevant for this book. c)  The Third Party For the purpose of the book, the term ‘third party’ means someone who is not an heir to the estate or a dependant. However, there is some ambiguity around this term, as it can also refer to the person who receives the gift from the original donee. The latter is outside of the scope of this book. Again, general awareness of laws in each country would be helpful for the relevant parties and solicitors/notaries. Third-party objections to the concept of clawback were one of the main reasons the UK did not opt into the Succession Regulation. UK charities were particularly concerned with the potential increase in law suits for claims to reduce inter vivos gifts. Two factors were not taken into account at this point. There should have been a reminder that gifts to UK charities are not excluded from clawback in the UK if the donor gifted the property in order to evade their financial responsibilities to a dependant, and also that in some countries, gifts to charities are excluded from clawback. A definition of third party was difficult to ascertain from the research of the substantive succession laws. It was generally understood to be someone who was not an heir to the estate. However, care needs to be taken as to how ‘heir’ is defined. For some respondents to the questionnaire the term ‘heir’ meant anyone who would benefit from the succession; for others it meant a distinct sub-group of heirs, the legitimate heirs. In order to bring clarity as to who is regarded as a third party, third party could be defined as a person who would not be considered to be party to collation. However, if we are to recommend that the private international law solution for clawback is to be broadened to include discretionary maintenance applications by dependants against the estate, then it could be argued that anyone who received an inter vivos gift from the donor which was made with the intent to evade responsibility to maintain a dependant should be treated as a third party. This requires the scope of who can be presented with a claim to be broadened to include all donees, which may include legitimate heirs. In the UK, claims for maintenance from the estate of the deceased may more commonly be brought by dependant cohabitants who wish to challenge gifts given to the deceased’s children from a previous marriage. In countries where a claim for clawback is for the purpose of satisfying the legitimate portion, the cohabitant would generally not be able to make a claim, as they would not be considered to be a legitimate heir.

(ii)  Legal Certainty for the Donor The primary aim for the donor is to have legal certainty when planning their succession. The donor needs to know what law will apply to the inter vivos gift

160  The Applicable Law and the long-term effect, such as whether a claim for clawback is possible. The ability for him to choose the law allows him to protect the legitimate expectations of all parties, whether it is to uphold the ability to claw back property or to protect the property rights of the donee. By restricting the number of years prior to the death of the deceased in respect of which a potential claim can be made against third parties ‑ for example to only those gifts given to third parties in the five years before the donor’s death ‑ legal certainty for donors and donees is enhanced. In order to plan the estate the donor needs to be able to access the laws of the country where he is making the transfer so he can make an informed decision as to which rules he would like to apply to his inter vivos gifts. The country profiles on the future Hague Convention website would be sufficient for this. The donor also needs to be organised and record all the gifts he makes along with the applicable law. This information will allow him to work out what he has remaining in his free share, if that is applicable, and whether the gift is at risk of clawback. Guidance should be given that the transfer of inter vivos gifts should be recorded with a solicitor or notary. This information will be extremely helpful to the person who has to deal with the estate on the death of the deceased and brings ease of finding the information for the heirs/claimants. There is an issue that for testators in countries where clawback is not used, the awareness of the issue will only come when the testator moves to a new country where it is used. In order for the donor’s wishes to be respected it is advised that the donor’s legal capacity to make the gift is formally recorded, to minimise the chance that this is questioned at a later date.

(iii)  Legal Certainty for the Donee The donee needs to be aware of the law that applies to a claim against the gift so that they can make an informed decision as to whether to accept it or not. The impact on the donee can be great if they regift the property or sell the property and then are later sued for the property itself or the monetary value. An extreme example of the risk to a donee is where the property has to be returned to the heir/ claimant but mortgage free. The consequences for the donee and the mortgage lender at this point are complex. It is recommended that there is a disclosure rule to protect the donee. If there has not been disclosure of the applicable law, then there needs to be a default rule. A risk to a disclosure rule could be, as previously mentioned, collusion between the donor and the donee. Therefore, creating a discretionary rule could be a solution. The disclosure rule and default rule could read as follows: The donor is obliged to disclose to the donee the applicable law for claims which heirs or dependants of the donor may have against third parties for the reduction of inter vivos gifts at the time the gift was made. If disclosure of the applicable law did not take place then the law of the State of the habitual residence of the donee at the time the gift

Recommendations for a New Private International Law Solution  161 was made will govern the claim against moveable property and the law of the situs will govern the claim against immoveable property.150

(iv)  Scenarios Applying the New Rules Achieved through a Sui Generis Approach to Characterising Clawback from Third Parties.151 Example 1. Deceased remains habitually resident in one Member State and makes gifts in another. If a French national, with a spouse and children, all habitually resident in France, makes a gift of moveable property in the UK to a third party, whereas under the applicable law rule in the EU Succession Regulation, this would have been a way to circumvent the rules relating to the legitimate portion due to the UK not being a party to the Regulation, if we assume that both France and UK are now party to the new Hague Convention and French law applies to moveable property then the gift would be capable of reduction. Under the new Hague Convention rules the donor and donee would be aware of the law applicable to the claim, the donee would be protected as they could make a decision as to whether they should accept the gift and the rule now protects the legitimate heirs. If the French national with a spouse and children, all habitually resident in France makes a gift of immoveable property in the UK, whereas the donee would have previously had to defend a claim, there is now certainty that the lex situs will apply to the transfer and this will be known to the donor and donee, and recorded for the legitimate heirs. Example 2. Deceased becomes habitually resident in a Member State other than that of his nationality. If a Belgian national moves to the UK and becomes habitually resident in England and gifts moveable property in England then the law applicable to the claim would be the law of England and Wales. In this situation the donor and donee are aware that the law of England and Wales would apply and therefore there is no ability to claim for clawback. The legitimate expectations of the donor and donee are respected. If, in the above example, the donor gifts immoveable property in England and Wales then the lex situs would apply to the claim, which would uphold the expectations of the donor and donee. 150 The drafters of the new instrument would need to consider how best to craft an anti-collusion exception. 151 These examples are adapted from the scenarios presented by the UK and Ireland in Council of the European Union, ‘The application of the putative law of succession to lifetime gifts’ 5118/12 JUSTCIV 3 CODEC 32, Brussels, 9 January 2012, and assume all countries are party to the new Clawback Convention.

162  The Applicable Law If the Belgian national then moves to France, which does allow for clawback from third parties, and he becomes habitually resident there, the gift that was made in England could not be clawed back, thus protecting the donor’s and donee’s intentions. If, however, the Belgian national moves to England, gifts property then moves back to Belgium within six months or a year, it could be argued that as the donor was more closely connected to Belgium then the law of Belgium would apply to the claim, which would protect the interests of the legitimate heirs. Under the current system under the Succession Regulation this would be the result; however, it could not be enforced in the UK as the UK is not party to the Regulation. If, however, Belgium and the UK have signed up to the new Hague Convention and both the donor and donee were in agreement that Belgian law would apply to the gift then the UK would enforce the clawback claim. This would respect the legitimate expectations of all parties. Example 3. Deceased becomes habitually resident in a Member State other than that of his nationality (where clawback applies). If a Spanish national152 moves to another Member State such as France that also allows for clawback from third parties and becomes habitually resident there and makes a gift in that State, then the law of France will apply. The donor, donee and legitimate heirs will all be aware of the law and they will all accept the possibility of clawback of inter vivos gifts. Additional Example 4 If the donor chooses the law of his habitual residence, nationality or domicile to apply to claims for the reduction of inter vivos gifts made to third parties and makes the donee aware of the choice, and the transfer is recorded, then there is legal certainty for the donor, donee and legitimate heir as to whether they are able to bring a claim or not.

F. Conclusion The recommended applicable law rules promote legal certainty and protect the legitimate expectations of the donor, donee and claimant, and improve the situation which exists under current private international law rules.

V. Conclusion The use of habitual residence of the donor at the time the gift is made, or the nationality of the donor at the time the gift is made, and the lex situs of the immoveable 152 The use of a ‘Spanish national’ as an example indicates a lack of understanding of the complexity of the Spanish legal system.

Conclusion  163 property at the time the gift is made, as the pertinent connecting factors for claims for the clawback of an inter vivos gift to a third party recognises the connection that these claims have to succession law (habitual residence and also lex situs as part of the rules relating to scission), property law (lex situs), maintenance law (habitual residence), contract law (habitual residence, lex situs) and restitution (law of the obligation). If the law at the time the gift is made is used then both the donor and the donee have the ability to know what the law is, in contrast to applying the lex successionis, which is the current default approach in private international law succession regimes. The use of different laws for moveable property and immoveable property to apply to the claim creates legal certainty for the donor and the donee, supports the concept of comity and protects the legitimate expectations of the parties at the time the gift is transferred. The legitimate heirs will have certainty if the donor is obliged to inform them of inter vivos gifts and the corresponding law that applies to those gifts.

6 Conclusion This book presents the substantive law from 30 jurisdictions concerning the ­ability to claw back an inter vivos gift from a third party in the context of a succession, before going on to analyse the nature of the claim. This has been done in order to recommend a solution to a contemporary legal problem, that of categorising solely as a succession issue the claim to claw back an inter vivos gift from a third party for the purpose of satisfying the legitimate portion or to provide reasonable financial provision if the gift was given in order to evade the duty to maintain a dependant. The research for this book highlighted that the generic use of the term ‘clawback’ to mean both the reduction of a gift as against an heir or as against a third party creates confusion, when in reality only the latter is contentious. The current applicable law rule in the EU Regulation, as it stands, is not inclusive toward different legal traditions, whether they are founded on the common law or civil law, and this has proven to be a genuine stumbling block to achieving unity in the EU. The research also found that, contrary to common understanding, not all civil law countries permit clawback from a third party to satisfy the legitimate portion. The extent to which countries within the EU do not allow for clawback from a third party in order to satisfy the legitimate portion is new information. The recommendations within the book also take into account the legitimate expectations of all parties, whether the intention is to protect the legitimate portion or to obtain maintenance. In addition, the recommendation for the removal of the retroactive nature of the current rule brings the applicable law rule in line with the general principle of legal certainty which is vital for estate planning. The improvements to the applicable law rule and the introduction of modal law to support the applicable law correspond with the pragmatic approach, which seeks to find practical solutions which are fair, just and respect the legitimate expectations of all parties. The analysis of the rules relating to the claim highlighted the diversity in this area of law. From the findings, it is clear that in the countries that allow for clawback from third parties, the scope of the claim relating to who can bring a claim, the differences in the limitation and prescription periods, not to mention from whom the claim could be clawed back, vary greatly between countries. It is clear that the nature of the claim to claw back an inter vivos gift from a third party is complex. Some countries use clawback from a third party as a method to protect the legitimate portion for legitimate heirs and some countries use it as a method to protect against the evasion of the duty to maintain a dependant after death.

Conclusion  165 In some countries, the claim is seen as a succession issue. In others, inter vivos gifts do not fall within the estate and are therefore not a succession issue, and the transfer of the gift is seen as a unilateral contract of gift. A claim for clawback in order to provide maintenance has, even if commonly categorised as a succession issue, all the hallmarks of a maintenance claim, especially when the claimant is a non-heir requesting clawback from a third-party non-heir, to enable the estate to provide for the claimant’s maintenance. The nature of a claim for unjustified enrichment and restitution depends on the nature of the underlying obligation that the right is connected to, whether it be, for example, one of succession or maintenance. The only point common to all of these claims is that they are triggered by a succession, the death of the donor. However, just because it is triggered by a succession, it does not follow that such claims are a succession issue. In order to determine the appropriate private international applicable law rule – one that is inclusive of different legal traditions – it is necessary to adopt a sui generis approach to determining the applicable law rule. The lack of clarity as to what is meant by the term clawback is clearly problematic for negotiators, practitioners and academics. The author argues that the use of the term clawback to mean both the reduction of advances for the purpose of collation and the reduction of a gift made to a third party to protect the legitimate portion or financial needs of a dependant is not helpful, as only the latter is contentious. This was clear during the drafting of the 1989 Hague Convention and the EU Succession Regulation. However, it needs to be made clear that it is not just a common law issue but that it is also contentious for some civil law countries too. The reduction of a gift made to a third party, where the gift has been given in good faith, and the transfer took place in a country where the law does not provide for clawback from third parties for the protection of the legitimate portion, threatens the donee’s ability to rely on the gift and is therefore a threat to property or contract law. This book differentiates between the two issues by highlighting the fundamental differences between the underlying function of (i) the reduction of the gift or advance for the purpose of collation (to create equality between the heirs) and (ii) the reduction of a gift that was made to a third party (in civil law – to satisfy the legitimate portion). On analysis of the substantive law, it became clear that the rules surrounding the claim against a third party were substantively different from those for collation, meaning that it was possible to separate the issues cleanly. This allowed the author to focus on the main point of contention and to develop a bespoke solution. This book expands the research conducted for drafting the EU Succession Regulation, to include the countries that joined the EU prior to the drafting of the Regulation but whose laws were not taken into account, providing greater clarity as to the situation in the EU. The findings challenge the mantra that ‘almost all Member States use clawback’, which is only accurate when referring to the reduction of advances given to heirs for the purpose of collation, and points to nine countries within the EU that do not provide for clawback in relation to gifts to third parties. The narrowing of the scope of the meaning of the term ‘clawback’ to

166  Conclusion mean only the reduction of gifts made to third parties is important as a tool for focusing on the heart of the problem. The findings also challenge the commonly held myth that a claim would mean that the property itself would be clawed back. In reality the claim, in law, turned out to be primarily a monetary claim. The legitimate expectations of the parties and whether they were protected under the current applicable law rule within the Succession Regulation were also assessed with the outcome highlighting that they were not. In the section on the Succession Regulation by Kurt Lechner in the report on ‘Cross-border activities in the EU – Making life easier for citizens’ conducted in 2015, Lechner picks up the point that it was the clawback of gifts from third parties that was the issue, but speaks as if the only State it affected was the UK and without having an understanding of the diversity of the law in this area. He misses the point that the legitimate heirs that the EU Succession Regulation was purporting to protect are vulnerable the moment the testator leaves one State to become habitually resident in another if he moves to a State which does not recognise clawback from a third party.1 The rule that was chosen in order to protect the ‘fundamental concern … to leave the reserved shares and compulsory rights of inheritance of Member States and the rights and claims arising from them untouched’ within the Succession Regulation, in its current form, does not protect any of the parties in a cross-border succession. It does not protect donors to be able to gift their estate comfortably within the law of one Member State due to the risk that they will find that their becoming habitually resident in another State at an unknown time in the future could change the nature of that gift. It does not protect donees, as they can have no idea what law will apply to the donor’s succession at the date of death. It lacks legal certainty. Contrary to the Commission’s view, this is not a value judgement, it is fact.

1 ‘According to Article 23(2)(i), any obligation to restore or account for donations, advancements or legacies when determining the shares of the different beneficiaries falls within the scope of application. Donations, advancements or legacies made inter vivos can, however, not only trigger obligations to restore between legatees but also restitution claims against third parties, the recipients of the donations, advancements or legacies. These restitution claims were one of the reasons why the United Kingdom has not opted in (clawback). Repayment claims in respect of donations made inter vivos against third parties not involved in the succession would then be subject to the law on donations and not the succession law. This interpretation does not meet the requirements of the EU Succession Regulation. Besides (i), reference must also be made to (h), under which “reserved shares and the other restrictions on testamentary freedom” expressly fall within the scope of application. One of the fundamental concerns of the EU Succession Regulation, to leave the reserved shares and compulsory rights of inheritance of Member States and the rights and claims arising therefrom untouched, would be greatly infringed, leaving the door wide open to evasion. This is why the proposal to set up a separate hypothetical succession law for donations inter vivos, was also rejected. Therefore, claims to additional reserved shares and other claims for repayment arising out of donations, advancements or legacies made inter vivos also fall within the scope of the EU Succession Regulation’: Kurt Lechner, ‘EU Regulation 650/2012 on successions and on the creation of a European Certificate of Succession’ in European Parliament, Cross Border Activities in the EU – Making Life easier for citizens (Workshop for the JURI Committee, 2015) p 124 at 4.3. available at: http://www.europarl.europa.eu/RegData/etudes/STUD/2015/510003/ IPOL_STU(2015)510003_EN.pdf (accessed 4 August 2019).

Conclusion  167 The lack of case law on clawback of inter vivos gifts made to third parties in cross-border cases shows that this has not been, up until now, an issue that is often litigated. It therefore did not warrant the inflammatory descriptions used by many academics/practitioners who came before the UK Select Committee, which in turn influenced the UK’s decision not to opt into the Regulation. However, the fears expressed were based on the possibility that cross-border clawback claims against third parties would increase once a harmonised EU legal regime came into place to make it possible, whereas before the Regulation it would not have been possible in several of the EU Member States including the UK. The argument that clawback was simply a common law/civil law conflict was unfortunate and the negative influence that the senior member of the UK government had on the negotiation process through his private conversations with the senior EU person, disappointing. It begs the question why the countries within the EU which do not allow for clawback from third parties to protect the legitimate portion did not support the UK, Ireland and Slovakia during the negotiation process, especially now that they are parties to a flawed Regulation. However, the fact that a compromise was not reached means that this author has been able to take the problem and put forward suggested recommendations to resolve the issue at an international level. The recommendations focused on protecting the legitimate expectations of the parties to support the need for legal certainty and fairness. Making the general applicable law rule the law of the habitual residence of the donor at the time the gift was made means that the parties will know the law that applies to the transfer. The donee is able to make a decision as to whether or not to accept the gift and there is an awareness at the time of the transfer of whether it would be at risk of clawback. Restricting the number of years prior to death that can be considered for claiming back the gifts means that the identification of the habitual residence will be easier and makes managable the number of laws that might be applicable to clawback claims in relation to the deceased, reducing complexity and legal costs. The decision to retain the use of scission goes against what is currently fashionable. However, it is more pragmatic, if a claim to claw back immoveable property is to be enforced, to apply the law of the country in which it is situated. The additional recommendations are intended to support awareness of the law by all parties. The recommendation that all inter vivos transfers are recorded along with the applicable law, so that the heirs have a readily identifiable list, is idealistic. But the author can dream. As a final thought on the topic, several questions simmer beneath all of these rules that exist to protect heirs and dependants from disinheritance. From the author’s perspective, the questions that need to be addressed are a matter of ethics. In order to be able to develop the law in this area we ought to ask whether there is a duty to maintain a dependant after death, or indeed whether it is right to have a legal expectation that you will receive property owned by another, or indeed have a right to claw it back from a third party simply because the law says you can, potentially overriding the donor’s intentions.

168  Conclusion With the world’s population increasing, cross-border mobility rising and resources becoming increasingly limited, it is hard not to imagine that these factors will eventually have a direct effect on the laws relating to the transfer of inter vivos gifts and their related claims. A Convention that addresses this issue, particularly in relation to needs-based claims, will go some way to allowing individuals who make a successful claim the opportunity to remain independent and not become a burden on the State.

Annex I: Correspondence with the Senior Representative of the UK Sent – 30 April 2014. 15:37 Dear Kenneth Clarke, I am a PhD student at the University of Aberdeen specialising in the Private ­International Law of Succession, focusing in particular on the EU Succession Regulation that comes into force in 2015. As part of my research I have been looking into the negotiations which took place during the drafting of the Succession Regulation and if possible I would like to ask you whether you could expand on a particular point for me? Towards the end of the negotiations in 2011 there seemed to be a weight to the tone used by the Commission in their documents as to whether it was advantageous for Member States to work towards finding a compromise for the issues which were still crucial for a UK opt in, for example, the issue of clawback. Could you confirm whether the UK Government had indicated to Viviane Reding either officially or unofficially at any stage during the negotiations of the Succession Regulation, but outwith the knowledge of the UK negotiators, that the UK was very unlikely to opt in. I would very much appreciate your view of events at that time.

Received – 6 May 2014. 15:45 [email protected]

Best wishes Jayne Holliday

6th May, 2014 Dear Ms Holliday, Thank you very much for your e-mail about the EU Succession Regulation. I do not remember the details of the negotiation, but there were fundamental difficulties which could not resolve, particularly on the issue of clawback, to which you refer. The fact is that the Laws of Succession in countries like France are based on a quite different tradition from the Laws of Succession of England and Wales and neither government thought it was remotely possible to persuade their respective governments to abandon their own practice. There were obvious advantages to a European-wide Law, if they could be achieved and, as the British Minister,

170  Annex I I actually arranged further delays for experts to see if they could resolve the problem. Eventually, all States reported back to the Commission and the Council that this had proved impossible. I seem to recall that I told Viviane Reding that I would be very pleased if we could reach some European-wide Regulation, but I probably did indicate to her that I thought it very unlikely that the British would be persuaded to import the concept of clawback into our Law. Yours sincerely, Kenneth Clarke The Rt. Hon. Kenneth Clarke, QC, MP

Annex II: Draft Convention on the Law Applicable to Clawback (by the author) DRAFT CONVENTION ON THE LAW APPLICABLE TO CLAIMS WHICH, HEIRS OR DEPENDANTS OF THE DONOR MAY HAVE AGAINST THIRD PARTIES FOR THE REDUCTION OF INTER VIVOS GIFTS (Concluded (Insert Date)) The States signatory to this Convention, Desiring to establish common provisions concerning the law applicable to claims which, heirs or dependants of the donor may have against third parties1 for the reduction of inter vivos gifts, Have resolved to conclude a Convention for this purpose and have agreed upon the following provisions CHAPTER 1 – SCOPE OF THE CONVENTION Article 1 1) This Convention determines the law applicable to claims which, heirs or dependants of the donor may have against third parties for the reduction of inter vivos gifts. 2) The Convention does not apply to – a. The form of dispositions of property during life; b. Capacity to dispose of property during life; c. Issues pertaining to matrimonial property; Article 2 The Convention applies even if the applicable law is that of a non-Contracting State.

1 For the purpose of creating this Convention it would be necessary to define what is meant by ‘third party’. Whether it was within the text of the Convention or in the explanatory report would be a decision for those drafting it.

172  Annex II CHAPTER II – APPLICABLE LAW Article 3 1) A claim against third parties for the reduction of moveable inter vivos gifts, is governed by the law of the State in which the donor at the time the gift was given was habitually resident. However, if at the time the gift was given, the donor was manifestly more closely connected with the State of which he was then a national, then the law of that State will apply. 2) A claim against third parties for the reduction of immoveable inter vivos gifts, is governed by the lex situs. 3) The donor is obliged to disclose to the donee the applicable law for claims which heirs or dependants of the donor may have against third parties for the reduction of inter vivos gifts at the time the gift was given. If disclosure of the applicable law did not take place at the time the gift was given then the law of the State of the habitual residence of the donee at the time the gift was given will govern the claim against moveable property and the law of the lex situs will govern the claim against immoveable property. Article 4 1) A person may choose as the law to govern claims which, heirs or dependants of the donor may have against third parties for the reduction of moveable inter vivos gifts, the law of the State whose habitual residence, domicile or nationality he possesses at the time the gift is given. 2) A person possessing multiple nationalities may choose the law of any of the States whose nationality he possesses at the time of making the choice. 3) The choice shall be made expressly in a declaration in the form of an inter vivos disposition of property. 4) The formal validity shall be governed by the law of the State where the declaration is made or by the chosen law. 5) The substantive validity, including conditions for dissolution, shall be governed by the chosen law. 6) A choice of law made by the donor according to paragraph 1 shall only be taken into account for the purpose of determining the law applicable to claims against third parties for the reduction of inter vivos gifts if the donee was made aware of the choice of law at the time the gift was given. Article 5 Nothing in this Convention shall restrict the application of the provisions of the law of the forum in a situation where they are mandatory irrespective of the law otherwise applicable to govern the claim. Article 6 The application of any of the laws determined by the Convention may be refused only where such application would be manifestly incompatible with public policy (ordre public).

Annex III: List of National Reporters on the Law on Clawback List of National Reporters who contributed to the European Parliament Policy Department for Citizens’ Rights and Constitutional Affairs, P Beaumont, J Fitchen and J Holliday, ‘The evidentiary effects of authentic acts in the Member States of the European Union, in the context of successions’ (2016). The report is available online at: http://www.europarl.europa.eu/RegData/etudes/STUD/2016/556935/ IPOL_STU(2016)556935_EN.pdf Country

National Reporter

Austria

Dr Eva Lein

Belgium

Professor Patrick Wautelet

Bulgaria

Dr Boriana Musseva

Croatia

Professor Aleš Galič

Cyprus

Professor Nikitas Hatzimhail

Czech Republic

Professor Monika Pauknerova and Magdelene Pfeiffer

Estonia

Maarja Torga

Finland

Katja Karjalainen

France

Celine Camara

Germany

Dr Eva Lein

Greece

Aimilios Koronaios

Hungary

Professor Csongor Nagy

Italy

Professor Costanza Honorati and Paolo Pasqualis

Latvia

Gatis Litvins

Lithuania

Dr Dalia Perkumiene

Luxembourg

Celine Camara

Malta

Dr Clement Mifsud Bonnici

174  Annex III Netherlands

Professor Xandra Kramer

Poland

Dr Monika Drela

Portugal

Raquel Ferreira Correia

Romania

Professor Csongor Nagy

Slovakia

Dr Katarina Trimmings

Slovenia

Professor Aleš Galič

Spain

Professor Maria Font and Professor Miriam Anderson

Sweden

Jayne Holliday

Annex IV: Member States of the European Union: Laws on Clawback A. Austria 1.

Where can the rules relating to the legitimate portion and clawback from third parties be found? The provisions relevant to the legitimate portion and clawback are found within the Austrian Civil Code, Sections 762, 782, and 789 et seq.1 2. Who is entitled to a legitimate portion? Austria has legitimate portion rules known as the compulsory reserved share.2 Those who are entitled to claim a compulsory reserved share of the estate are the spouse or civil partner of the deceased and the heirs of the deceased under the rules of intestacy, provided that they have not been disinherited or waived their right to the reserved share.3 3. What share of the estate are they entitled to? A spouse is entitled to a greater compulsory share than a same-sex civil partner.4 A spouse and children are entitled to 50 per cent of the reserved share of the estate. Any other person entitled to a compulsory reserved share is entitled to one third of the reserved estate. 4.

Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift by the deceased to a third party that diminished the value of the estate? Clawback of an inter vivos gift from a third party for the purpose of satisfying the legitimate portion is possible but only under exceptional circumstances.5 Inter vivos gifts are used to calculate the value of the succession so that the value of the legitimate portion can be identified.6 However, the child is only entitled to 1 Allgemeines bürgerliches Gesetzbuch (ABGB/Austrian Civil Code) is available online at: https:// www.ris.bka.gv.at/GeltendeFassung.wxe?Abfrage=Bundesnormen&Gesetzesnummer=10001622. 2 Sections 757, 758, 762 Allgemeines bürgerliches Gesetzbuch (ABGB). The compulsory reserved share is made up of one quarter of the estate of the deceased. The final estate of the deceased is a fictive hereditary estate and includes inter vivos gifts made by the deceased. 3 Section 758 ABGB. 4 Louis Garb and John Wood, International Succession, 4th edn (Oxford University Press, 2015) 46; Eva Lein, Questionnaire, 16. 5 Eva Lein, Questionnaire, 16. 6 Section 785 ABGB.

176  Annex IV consider gifts that were made by the deceased during the child’s lifetime for the purpose of clawback and the spouse is only entitled to take into consideration gifts that were made by the deceased during the time of the marriage.7 Charitable donations that do not affect the moral duties of the testator will not be considered as ‘gifts’ for the purpose of the reserved share.8 5. How is a claim for clawback from a third party commenced? A claim for clawback is usually made before the estate is transferred to the heirs. The claim can be made by anyone entitled to a reserved share or in some cases at the request of a legatee.9 If the gift is discovered after the estate has been transferred to the heirs then it is necessary for the notary to inform the relevant parties.10 The claim is a monetary claim which can turn into a clawback claim for the inter vivos gift by the heir if the donee is not able to cover the amount needed to cover the increased reserved shares.11 If the gift is no longer in the possession of the donee, or if its value has been reduced by dishonest behaviour then the donee is liable to cover the amount needed to cover the increased reserved share from their assets.12 If the claim for clawback is successful, the inventory is then amended to account for the new information.13 A party who is entitled to a higher share of the estate as a result of the new information is entitled to make a claim against the donee(s).14 6. What is the limitation period for a claim for the clawback of an inter vivos gift? Gifts that were made by the deceased to third parties (who are not entitled to a legitimate portion) more than two years before the death of the deceased will not be considered for the purpose of the reserved share, thereby limiting the liability of the third-party donee.15 Gifts made to private foundations can also be clawed back unless given more than two years prior to the death of the deceased.16 Gifts to charities and gifts made from the income of the deceased are excluded when calculating the value of the estate.17 7.

What is the period of prescription for a claim for the clawback of an inter vivos gift from a third party? The period for prescription for a claim to overturn the reserved share or to request that it be supplemented (and for all other claims under succession law) is three 7 Section 785(2) ABGB. 8 Section 785(3) ABGB. 9 Eva Lein, Questionnaire, 20. 10 Section 183 Auβerstreitgesetz (AussStrG). 11 Eva Lein, Questionnaire, 16. 12 Garb and Wood, (n 4 above) 46. 13 Section 183(2)(3) AussStrG. 14 Eva Lein, Questionnaire, 16. 15 Section 785(3) ABGB. Garb and Wood (n 4 above) 48. Highlights difficulty in language. This use of the term ‘third party’ could mean family member or heir who is simply not a forced heir as opposed to a third-party non-heir, for example friend of the deceased. 16 Garb and Wood (n 4 above) 47. 17 Garb and Wood (n 4 above) 48.

Belgium  177 years from the point where the claimant knew that a claim existed and 30 years without that knowledge.18 8. Does the value of the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? The value of the donation is valued at the time the donation was made.19 Additional Information The testator is able to declare that the inter vivos gift should not be considered for the purpose of the compulsory share.20 Comment The ability to clawback an inter vivos gift from a third party appears to be heavily restricted within the succession law of Austria, and only applies to gifts made in the two years prior to the death of the deceased, and only where the reduction of gifts made to heirs was insufficient to satisfy the legitimate portion. The claim is not automatic and is a monetary claim. Notably, charities are excluded from clawback. The exclusion of charities from clawback for the purpose of satisfying the legitimate portion is a point that could have helped reach a compromise for the Succession Regulation if the compromise was restricted to developing a rule that was only considering clawback from a third party for the purpose of satisfying the legitimate portion and not also the anti-avoidance rule under the common law systems as per the aim of this book. The prescription period in cases where reserved heirs were not aware of the existence of the transfer does not support the concept of legal certainty, as it allows up to 30 years from the death of the deceased to raise a claim. Third parties for the purpose of Austrian law are anyone who is not entitled to a legitimate portion, meaning that a third party for the Austrian legislative negotiator may still be a member of the family and a beneficiary to the estate.21

B. Belgium 1.

Where can the rules relating to the legitimate portion and clawback from third parties be found? The provisions relevant to the legitimate portion and clawback are found within Articles 914, 915 and 920–930 of the Belgian Civil Code.22



18 Section

1487a ABGB. 752 ABGB. 20 Section 784–9 ABGB. 21 Austrian Notary, Questionnaire, 19. 22 Belgian Civil Code is available online: http://www.droitbelge.be/codes.asp#civ. 19 Section

178  Annex IV 2. Who is entitled to a compulsory share? Belgium has rules for the legitimate portion which are known as the reserved compulsory share.23 The first group entitled to a reserved share are the descendants of the deceased, principally the children and failing surviving children, the grandchildren.24 The second group entitled to a reserved share is the surviving spouse or surviving partner. The final group to be entitled to a reserved share are the parents of the deceased. Belgium is one of the few remaining countries within the EU where parents are protected against a will that does not consider them.25 3. What share of the estate are they entitled to? A child is entitled to at least 50  per  cent of the deceased’s fictive estate.26 The fictive estate includes inter vivos gifts. This process is known as restitution.27 Any inter vivos gift that can be made without any formal method of transfer has to be returned to the estate if the donor dies within three years of having gifted the moveable property.28 The donor is able to expressly exclude an inter vivos gift from being clawed back, but this does not reduce the reserved share available to the heirs.29 If the deceased left more than one child then the amount available for the reserved share will increase.30 If the deceased left two children then he or she is only free to dispose of one third of his assets.31 If he left three or more children, then he is only entitled to freely dispose of one quarter of his assets.32 The surviving spouse is entitled to choose either an abstract or fixed reserved share. They may choose a fixed reserved share which entitles them to a usufruct on the family home at the date of the death of the deceased and the furniture or an abstract reserved share in usufruct.33 The abstract reserved share entitles the spouse to a right of usufruct on half of the deceased’s estate and a right of usufruct on the immoveable property where both spouses lived together.34 A party who is entitled to a reserved share is able to make a clawback claim. The estate comprises the actual assets at the time of the death of the deceased and inter vivos gifts made by the deceased.35

23 R Paisley, European Commission Proposal on Succession and Wills – A Public Consultation, CP41/09, 29. 24 Ibid, Art 914 Belgian Civil Code (BCC). 25 Member States that still protect parents of the deceased under their forced heirship rules are: Belgium, Bulgaria, Croatia, Cyprus, Hungary. 26 Professor Patrick Wautelet, Questionnaire, 18. 27 Garb and Wood (n 4 above) 84. 28 Ibid. 29 Ibid. 30 Professor Patrick Wautelet, Questionnaire, 18. 31 Ibid. 32 Ibid. 33 Art 915bis BCC. 34 Professor Patrick Wautelet, Questionnaire, 18; Art 915bis BCC. 35 Ibid; Art 922 BCC.

Belgium  179 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? A party entitled to a reserved share of the estate may make a claim for clawback from a third party if there are insufficient funds to satisfy the legitimate portion and request that an inter vivos gift by the deceased is reduced. 5. How is a claim for clawback from a third party commenced? The reduction does not happen automatically even though matters relating to the reserved share are considered to be an issue of public policy.36 The application for clawback has to be made by an heir entitled to a reserved share. The issue can be raised informally by the party entitled to make the claim and if a notary is handling the division of the estate then they must be told that a claim for clawback needs to be made. It is for the notary to decide whether the claim for clawback is legitimate and should be pursued. The decision by the notary for clawback to be sought can be appealed in the court that is supervising the distribution of the estate.37 A decision by the notary to not pursue the clawback can also be appealed in that court.38 A successful claim for clawback annuls all inter vivos gifts made by the deceased, if it is considered that the gifts affect the reserved share.39 The gifts must be handed back to the estate. This applies to both immoveable and moveable property.40 A claim may also affect bequests in the will that have been performed. For example, if the deceased gave away a house to a third party before they died, this inter vivos gift can be challenged by an heir who is entitled to a reserved share on the ground that the gift affected the amount available for the reserved share.41 If the claim is successful the inter vivos gift will be considered to be null and void.42 The donee will be considered to have no legitimate claim to the property.43 If the donee has sold the property to a third party then this sale is also considered to be null and void.44 However, the claim for compensation is initially directed to the original donee.45 Only if that claim is unsuccessful can the heir with a legitimate claim for clawback seek compensation from the third party.46 The claim made to the third party is a monetary claim and the heir cannot request the return of the asset.47 If the property is recovered, it is clawed back free from charges of debt or mortgages.48

36 Ibid.

37 Ibid;

Art 2262 Belgian Code of Civil Procedure (BCCP).

39 Ibid,

23.

41 Ibid.

Art 930 BCC.

38 Ibid. 40 Ibid. 42 Ibid. 43 Ibid. 44 Ibid. 45 Ibid, 46 Ibid. 47 Ibid. 48 Art

24.

929 BCC.

180  Annex IV If a gift was immoveable property and is found to be null and void, it should be noted that the donee will not be considered to have been the legitimate owner, and any sale to another third party will be considered to be null and void. This has the potential to affect the recording of the title of the property.49 If the property has been sold the claimant must first seek compensation from the original donee. If this fails they may seek redress from the third-party buyer, but the redress can only be in the form of compensation and not for the actual property.50 6. How long is the limitation period for such a claim? The gifts made by the deceased during his lifetime will be considered in chronological order from the date of the death of the deceased. If clawback of the latest inter vivos gift restores the reserved portion then gifts made prior to that gift remain legitimate.51 7. How long is the prescription period for such a claim? The period of prescription applicable to a clawback claim is 30 years from the death of the deceased.52 8. Does the value of the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? Inter vivos gifts will be valued according to their state at the time of the donation and valued at the date of the death of the deceased.53 Family companies and business are valued at the time of the gift and not at the date of the death of the deceased.54 Comment Belgium’s rules for clawback from a third party to protect the legitimate portion are amongst the most severe within the EU, next to those of Greece.55 However, it should be noted that this is tempered by the fact that it is common practice for inter vivos gifts to be recorded by a notary for the purpose of succession. The claim is not automatic. However, clawback from a third party is possible and as Belgium uses the reverse chronological approach to reduction of gifts to satisfy the legitimate portion it means that all gifts to third parties need to be regarded as at risk of clawback until the succession is settled. If the first gift to be clawed back restores the reserved portion then all the other gifts will be regarded as irrevocable. However, as the prescription period is 30 years, the period of

49 Patrick Wautelet, Questionnaire, 24. 50 Patrick Wautelet, Questionnaire, 24. 51 Belgian Notary, Questionnaire, 22. 52 P Wautelet, Questionnaire, 24; Art 2262 Belgian Civil Code. 53 Ministry of Justice, ‘European Commission proposal on succession and wills – A public consultation’ (Consultation Paper CP41/09, 2009) 31. 54 Ibid, 32. 55 See section K below for an account of the rules on clawback in Greece.

Bulgaria  181 uncertainty for the donee is exceptional. A third-party donee is extremely unlikely to know the donation habits of the donor throughout the donor’s lifetime in order to know if theirs is the only gift of value or one of many. Nor are they likely to know the value of the donor’s estate to know whether their gift risks exceeding the disposable portion and is therefore at risk of clawback. Nor are they likely to know the lex successionis with certainty. The ability to claw back a gift from a third party is regarded as an obligation and is primarily a monetary claim for restitution or compensation, although the property can be brought back into the estate if the donee is unable to compensate the estate. Of concern to a common law country would be the fact that not only can an heir bring a claim against the original donee but they can also bring a claim against the original donee if they have sold the property on. In these cases, if the property is returned then it is returned without mortgage or debt. How this works in practice for financial institutions is beyond the scope of this book, but raises questions as to how property at risk of clawback can be used as security. The Belgian rules relating to clawback of gifts made to third parties epitomise the lack of legal certainty surrounding this issue.

C. Bulgaria 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The provisions relevant to the legitimate portion and clawback are found within Articles 28–37 of the Inheritance Act.56 2. Who is entitled to a legitimate portion? Bulgaria has legitimate portion rules which are known as the reserved portion. The reserved portion is taken from the disposable part of the estate of the deceased.57 Those who are entitled to claim a reserved share of the estate are the children and grandchildren, including adopted children. 3. What share of the estate are they entitled to? When the deceased had no surviving spouse, if there is one child the child is entitled to one half of the reserved portion. Two or more children are entitled to two thirds of the reserved portion.58 The reserved portion for the parents of the deceased is one third.59

56 For a translation of the Bulgarian Inheritance Act into English see – http://www.bulgariainheritance-law.bg/law.html. 57 Art 28(2) Inheritance Act. 58 Art 29(1) Inheritance Act. 59 Art 29(2) Inheritance Act.

182  Annex IV If the spouse is the sole beneficiary of the reserved portion, they are able to inherit 50  per  cent of the reserved portion. If the testator also left parents, the spouse is only entitled to a third of the reserved portion. If the testator has also left children, then the spouse is entitled to the same share as a child, ie one third of the reserved portion if there is one child, and one quarter if there are two children, and one sixth if there are three or more children.60 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? It is possible for a person who is entitled to a reserved portion of the estate to make a claim to claw back an inter vivos gift made to a third party by the deceased.61 The reserved portion of the estate is based on a fictive hereditary mass which includes inter vivos gifts made by the deceased.62 5. How is a claim for clawback from a third party commenced? A claim for clawback requires the person entitled to a legitimate portion to lodge a civil claim.63 6. How long is the limitation period for such a claim? There is not a clear limitation period for a clawback claim as, in order to satisfy the reserved portion, testamentary bequests are reduced before inter vivos gifts, which are dealt with in reverse chronological order.64 Therefore it is possible to go as far back in time to claw back an inter vivos gift as is necessary in order to satisfy the reserved share. 7. How long is the prescription period for such a claim? With regard to the period of prescription for a claim for clawback of an inter vivos gift, this has to be made within five years from the moment when the heir accepts their right to inherit, in order to claim for monetary compensation. If a person who is entitled to a reserved portion is unable to supplement his reserved portion of the estate with a monetary claim, he is able to repeal any real rights in gifted immoveable property made by the deceased if he claims within one year of the opening of the succession or after the claim for reduction has been made.65 This also applies to inter vivos gifts or valuable agricultural machines and vehicles.66



60 Art

29(3) Inheritance Act. 30(1)(2) Inheritance Act. 62 Art 31 Inheritance Act. 63 Boriana Musseva, Questionnaire, 18. 64 Art 33 Inheritance Act. 65 Art 37(1) Inheritance Act. 66 Art 37(2) Inheritance Act. 61 Art

Croatia  183 Comment The claim is not automatic and the reverse chronological reduction of the inter vivos gift to satisfy the legitimate portion means that all gifts to third parties will need to be regarded as at risk of clawback by an heir until the prescription period for the claim is exceeded. However, the prescription period of five years for a monetary claim is much more restricted than the situation of 30 years in Belgium. This goes some way to making it clear to a donee when the gift that they have received will be regarded as irrevocable. It is possible under Article 30(2) of the Bulgarian Civil Code for an heir to request the reduction of an inter vivos gift from a third-party non-heir as long as the claimant who is a reserved heir has accepted the inheritance. The claim is primarily a monetary claim. The ability to claim for the return of the gift is possible, although this is restricted to one year after the death of the deceased.

D. Croatia 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The provisions relevant to the legitimate portion and clawback are found within Article 70 et seq of Chapter VIII of the Inheritance Act.67 2. Who is entitled to a legitimate portion? Croatia has legitimate portion rules which are known as the reserved share. The people entitled to inherit from the estate are: the descendants (including adopted children) and their issue, parents and the spouse of the deceased.68 The grandparents and siblings of the deceased may be entitled to inherit if they are permanently incapable of work. However, whether this group is able to inherit part of the reserved share depends on order of inheritance. If the spouse and children are alive then a sibling is not entitled to a reserved share. 3. What share of the estate are they entitled to? The reserved share for the spouse and the children is 50 per cent of what they are entitled to under the rules of intestacy. Other heirs are entitled to a third of the reserved share.

67 Available in Croatian at: http://www.zakon.hr/z/87/Zakon-o-nasljeđivanju (accessed 7 June 2016). Although Croatia only became a member of the European Union in 2013 the author has considered the rules on clawback in order to create a complete picture of the existing rules within the EU. 68 Art 69 Inheritance Act.

184  Annex IV 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? The legitimate portion is protected. If the total value of the estate including the inter vivos gifts is insufficient to provide for the legitimate portion, then the person entitled to the legitimate portion is able to make a civil claim against the donee in connection with the inter vivos gift. In order to calculate the value of the estate, the value of inter vivos gifts made by the deceased to third parties that are not beneficiaries of the estate, if made within a year before the death of the deceased, will be added to determine the reserved share.69 5. How is a claim to claw back a gift from a third party commenced? The right to a reserved share can be brought in civil litigation proceedings if there is no agreement during the succession proceedings.70 6. How long is the limitation period for such a claim? Inter vivos gifts made to third parties in the year immediately prior to the death of the deceased are considered for the purpose of establishing and satisfying the legitimate portion. 7. How long is the prescription period for such a claim? The prescription period for a claim for clawback for the return of the inter vivos gift is three years from the death of the deceased.71 A claim for clawback is against the beneficiary of the gift.72 8.

Does the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? An inter vivos gift will be valued at the date of the death of the deceased but based on the condition it was in at the time the gift was given.73 Additional information An inter vivos gift for a charitable purpose is not considered a gift for the purpose of clawback.74 Comment Clawback from third parties takes a very limited format in that only gifts made in the year prior to death are considered and gifts to charities are excluded.75

69 Art

71(1), (4) Inheritance Act. Notary, Questionnaire, 15. 71 Art 84 Inheritance Act. 72 Croatian Notary, Questionnaire, 22. 73 Art 73 Inheritance Act. 74 Art 71(2) Inheritance Act. 75 Gifts made to heirs fall under a three-year prescription period. 70 Croatian

Cyprus  185 The exclusion of charities from clawback for the purpose of satisfying the legitimate portion is a point that could have helped reach a compromise for the Succession Regulation if the compromise was restricted to developing a rule that was only considering clawback from a third party for the purpose of satisfying the legitimate portion and not also the anti-avoidance rule under the common law systems as per the aim of this book. Of note is that the parties that may be classified as forced heirs are even wider than those of Belgium in that it allows for grandparents and siblings to be considered forced heirs if there are no other parties that qualify before them and the grandparents are incapable of work.

E. Cyprus 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The provisions relevant to the legitimate portion and ‘claw back’ are found within Article 41 of the Wills and Succession Law (Cap 195).76 2. Who is entitled to a legitimate portion? The Republic of Cyprus has legitimate portion rules whereby the part of the estate that is reserved for this purpose is known as the statutory portion of the estate.77 The statutory portion is distributed according to the rules on intestacy.78 The heirs entitled to a statutory portion are: the deceased’s spouse, the deceased’s children/ issue, or in the absence of a spouse or issue, the deceased’s parents. If a spouse and a child are living, then the statutory portion consists of three quarters of the deceased’s estate.79 3. What share of the estate are they entitled to? If there are no children but a spouse and the parents of the deceased are living, then the statutory portion consists of half the estate.80 Where there is no spouse, issue, or parents the whole of the estate is disposable by the testator.81 Civil partnerships are not recognised in Cyprus.82

76 http://www.cylaw.org/nomoi/arith/CAP195.pdf (accessed 7 June 2016). 77 Garb and Wood (n 4 above) 227. 78 Art 41 Wills and Succession Law; Garb and Wood (n 4 above) 221 ‘… Cyprus succession law also enshrines the concept of forced heirship … intestacy is based on the Italian Civil Code and reflects Continental law.’ 79 Art 41(1)(a) Wills and Succession Law. 80 Art 41(1)(b) Wills and Succession Law. 81 Art 41(1)(c) Wills and Succession Law. 82 Garb and Wood (n 4 above) 225.

186  Annex IV 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? Any person who is entitled to a share of the statutory portion is entitled to bring a claim to claw back an inter vivos gift made by the deceased.83 However, it is necessary to prove that the deceased gifted the property specifically to reduce the statutory portion. 5. How is a claim to claw back a gift from a third party commenced? The claim is not automatic. A successful claim for clawback is most likely to be in a monetary form to compensate the claimant. It would be difficult to claw back the property itself. The law that the claimant is able to rely on is the Fraudulent Transfers Avoidance Act (Cap 62).84 A successful claim could potentially void an inter vivos gift. 6. How long is the limitation period for such a claim? Gifts that were made by the deceased to third parties in the year prior to death are eligible. 7. How long is the prescription period for such a claim? Anyone entitled to make a claim for clawback has 8 years from the date of the death of the deceased to do so. If they have been living abroad then the period can be extended for another year.85 Additional information Until 2015, Article 42 of the Wills and Succession Act permitted anyone who was born in the UK, or whose father had been born in the UK to freely dispose of all of their estate and to not have to abide by the legitimate portion rules.86 This rule has now been abolished.87 Comment The example of Cyprus is interesting. It has a system of forced heirship but the reserved share is based on the value of estate at the time of death and does not include the value of inter vivos gifts. It does however provide for clawback from third parties but due to its history with the United Kingdom, the type of clawback

83 N Hatzimihail, Questionnaire, 20; Fraudulent Transfers Avoidance Law (Cap 62) [περί Δολίων Μεταβιβάσεων (Ακύρωση) Νόμος] 84 N Hatzimihail, Questionnaire, 20; Fraudulent Transfers Avoidance Law (Cap 62) [περί Δολίων Μεταβιβάσεων (Ακύρωση) Νόμος]. 85 Art 9 Limitation of Actionable Rights Law 2012. 86 Art 41(2) Wills and Succession Law. 87 N Hatzimihail, Questionnaire, 15.

Czech Republic  187 it uses is similar to that of England and Wales. It does not provide for the reduction of an inter vivos gift for the purpose of collation.88 This is another example of very limited clawback rules in that it is possible to reduce an inter vivos gift given to a third party which was given in the year prior to the death of the donor but only if it can be proven that the deceased gifted the property to avoid leaving sufficient to pay for the legitimate portion. It is narrower than the evasion rule under the English and Welsh Inheritance (Provision for Family and Dependants) Act 1975 (section 10(2)(a)), which allows for gifts made in the six years prior to the death of the deceased to be clawed back if it can be demonstrated that they were given with the intention of evading the duties to maintain a dependant. The discretionary approach here favours the heir, as opposed to the Netherlands where the discretionary approach favours the donee.

F.  Czech Republic 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The provisions relevant to the legitimate portion are found within Section 1642 et seq of the Civil Code.89 However Czech law does not provide for clawback of an inter vivos gift from a third party.90 2. Who is entitled to a legitimate portion? The people entitled to a reserved share of the estate include the children of the deceased and/or the children’s children.91 3. What share of the estate are they entitled to? Adult descendants must receive at least a quarter of what they would have been entitled to under the laws of intestacy and minor children must receive three quarters of what they would have received under the laws of intestacy.92 If the person entitled to the legitimate portion was excluded fully or partly by the testator from the will, he or she is entitled to a reserved share as long as he or she has the capacity to inherit.93 The person entitled to the legitimate portion is a creditor of the heirs

88 Garb and Wood (n 4 above) 229, ‘If the value of the property to be brought into account by a dependant exceeds the share to which he or she is entitled he or she receives nothing, but there is no obligation to refund the excess.’ 89 Professor Monika Pauknerova and Magdalena Pfeiffer, Questionnaire, 22. 90 Professor Monika Pauknerova and Magdalena Pfeiffer, Questionnaire, 22. 91 Section 1643 Civil Code. 92 Professor Monika Pauknerova and Magdalena Pfeiffer, Questionnaire, 22. 93 Section 1646 Civil Code.

188  Annex IV and has a right to make a monetary claim against the heirs and legatees for a sum equal to the reserved share.94 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? No. Comment It is not possible to clawback inter vivos gifts for either collation or from a third  party to satisfy the legitimate portion. Inter vivos gifts that were made to forced heirs in the three years prior to the death of the deceased, or longer if the donor stipulated so, are taken into account when calculating the legitimate portion but there is no obligation to return the gift or to offer monetary compensation.95

G. Estonia 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The provisions relevant to the legitimate portion are found within Chapter 5 of the Law of Succession Act.96 Clawback of an inter vivos gift from a third party is not provided for. The value of a gift that was made to a third party in the three years prior to death that was given with the intention to deliberately reduce the available estate is notionally added to the value of the fictive estate in order to increase the share of the legitimate heirs. 2. Who is entitled to a legitimate portion? If the deceased has by will or succession contract disinherited a person who is entitled to inherit under the rules of intestacy and to whom the deceased had a duty of maintenance under the Family Law Act,97 then that person has a right to claim a compulsory portion from the heirs.98 A testator has a right to disinherit someone who is entitled to a compulsory portion if they have committed a crime against the testator or the testator’s spouse, parent, child or someone close to the testator.99 The testator is also able to 94 Professor Monika Pauknerova and Magdalena Pfeiffer, Questionnaire, 22. 95 Professor Monika Pauknerova and Magdalena Pfeiffer, Questionnaire, 27. 96 The official version of the Law of Succession Act is available here: https://www.riigiteataja. ee/akt/129062014010, and in English here: https://www.riigiteataja.ee/en/eli/ee/Riigikogu/act/ 520012015004/consolide. 97 The Family Law Act is available in English here: https://www.riigiteataja.ee/en/eli/513032015005/ consolide. 98 Art 104(1) Law of Succession Act. 99 Art 108(1) Law of Succession Act.

Estonia  189 disinherit anyone who did not meet a legal obligation to maintain the testator.100 The ability to disinherit is void if the testator does not indicate the reason for the disinheritance.101 The claim for the compulsory portion arises at the opening of the succession.102 The claim is heritable and transferable.103 3. What share of the estate are they entitled to? A claim for a compulsory portion is for one half of the amount the person would have been entitled to under the rules of intestacy.104 The size of the compulsory portion is based on the property that forms the estate at the opening of the succession.105 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? No. Clawback of an inter vivos gift from a third party is not possible.106 If the testator makes an inter vivos gift to a third party to deliberately reduce the amount available to a person entitled to a compulsory share, then the person whose compulsory portion has been harmed is entitled to make a claim that takes the value of that gift into account for the purpose of calculating their compulsory share, as long as they make the claim within one year of the opening of the ­succession.107 The claim for compensation is a monetary claim against the heirs and not against the third party. 5. How is a claim to claw back a gift from a third party commenced? A person may not bring a claim to clawback of a gift from either an heir or from a third party. The person entitled to the legitimate portion has a right to make a claim only for their reserved share against the successors of the estate.108 It is a monetary claim. §106 (5) If a bequeather makes a gift to a third person with the purpose of causing damage to the person entitled to claim a compulsory portion, the person entitled to claim a compulsory portion may within one year of the opening of the succession claim supplementation of the compulsory portion by the amount by which the compulsory portion would increase if the gift would be deemed to form part of the estate.



100 Art

108(1) Law of Succession Act. 108(2) Law of Succession Act. 102 Art 104(4) Law of Succession Act. 103 Art 104(4) Law of Succession Act. 104 Art 105(1) Law of Succession Act. 105 Art 106(1) Law of Succession Act. 106 Estonian Notary Questionnaire, 16. Maarja Torga, Questionnaire, 16. 107 Art 106(5) Law of Succession Act. Maarja Torga, Questionnaire, 16. 108 Maarja Torga, Questionnaire, 19. 101 Art

190  Annex IV §106 (6) The claim specified in subsection (5) of this section shall not be satisfied if ten years have passed from making the gift. If a gift is made to the bequeather’s spouse, the term shall not commence before termination of the marriage.

6. How long is the limitation period for such a claim? With respect to a claim for the legitimate portion, when determining the value of the estate, provisional bequests, the spouse’s preferential share and inter vivos gifts that were made within three years prior to the death of the deceased are included.109 7. How long is the prescription period for such a claim? With respect to a claim for the legitimate portion, the ability to claim the compulsory share expires after three years from the moment the person becomes aware of the opening of the succession.110 The person who is entitled to a compulsory share has 10 years after the opening of the succession to make such a claim.111 Comment Estonia has legitimate portion rules but does not provide for clawback of an inter vivos gift from a third party. They do have an evasion rule that allows for the value of the gift that was made in the three years prior to death with the intention of evading a duty to maintain, to be notionally added to the estate in order to increase the share that is ascribed to the legitimate portion. This information did not emerge during the negotiation of the Succession Regulation.

H. Finland 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The provisions relevant to the legitimate portion are found within Chapter 7, Article 1 of the Inheritance Code (Perintökaari 5.2.1965/40).112 Clawback is not provided for in Finnish law. 2. Who is entitled to a legitimate portion? The entitlement is known as the lawful share of the estate. Under these rules a direct descendent and an adopted child, as well as the issue of the adoptive child, are entitled to a lawful share of the deceased’s estate. 109 Art 106(2) Law of Succession Act. 110 Art 109(1) Law of Succession Act. 111 Art 109(2) Law of Succession Act. 112 The Inheritance Code is available here in Finnish: http://www.finlex.fi/fi/laki/ajantasa/ 1965/19650040 (updated), here in Swedish: http://www.finlex.fi/sv/laki/ajantasa/1965/19650040 (updated), here in English: http://www.finlex.fi/fi/laki/kaannokset/1965/en19650040.pdf (amendments up to 1228/2001 included).

Finland  191 3. What share of the estate are they entitled to? The lawful share amounts to half of the value of the share of the estate that the heir would have been entitled to under the normal rules of intestacy.113 In order to calculate the estate for the purpose of the lawful share, the estate will consist of the property of the deceased at the time of death, any advance distribution of the estate and any gift made by the deceased that equates to a bequest. 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? There is no ability under Finnish law to make a claim to claw back the property. Instead it is a monetary claim against the estate for their lawful share to be increased in light of the inter vivos gift.114 Inter vivos gifts can be taken into consideration under the rules relating to advancement when considering the lawful share of the estate but there is no obligation to return the property, but this is a collation issue. 5. How is a claim to claw back a gift from a third party commenced? Clawback of an inter vivos gift made to a third party is not available in Finnish law. 6. How long is the limitation period for such a claim? With respect to a claim for the legitimate portion, in order to make the claim to increase the lawful share, the claim must be brought within one year of the date when the heir entitled to a lawful share was made aware of the death of the deceased and of the gift made by the deceased that infringes on their rights to that share. 7. How long is the prescription period for such a claim? With respect to a claim for the legitimate portion, the ability to make a claim expires within 10 years of the death of the deceased.115 Comment The legal system in Finland does have rules for the legitimate portion but does not provide for clawback of an inter vivos gift from a third party. Even the rule relating to claims against unfair advances to heirs would appear to be restricted to compensation from the estate and not for the reduction of the property or for compensation from the heir.



113 Chapter

7, s1 Inheritance Code. Karjalainen, Questionnaire, 13. 115 Chapter 7, s 10 Inheritance Code. 114 Katja

192  Annex IV

I. France 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The provisions relevant to the legitimate portion are found within Chapter III, Article 912 et seq of the French Civil Code.116 2. Who is entitled to a legitimate portion? Only the descendants of the deceased and the spouse of the deceased are entitled to a compulsory share of the estate, ‘la réserve’.117 3. What share of the estate are they entitled to? If the deceased has left issue but no spouse, the portion that has to be reserved is: 50 per cent of his estate if he had one child, and two thirds of his estate if he has left two children, and three quarters of the estate if he has left three or more children.118 If there are direct descendants then the spouse is not entitled to a legitimate portion. However, if the deceased has left a spouse but no children then the spouse is entitled to a compulsory share of one quarter of the estate.119 If there is a spouse and surviving children, then the spouse will be entitled to the disposable share of the estate, or one quarter of the estate and the remainder in usufruct for life or the entire estate in usufruct for life.120 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? The claim is one of reversion or reduction.121 The compulsory share is calculated by determining the relevant share of the estate at the time of death, taking into account debts, inter vivos gifts and advance division, creating a fictive hereditary mass.122 The ability of a person entitled to a compulsory share to make a claim to claw back an inter vivos gift does not distinguish between gifts that were made by the deceased to heirs and gifts made to non-family members.123 An heir who has been

116 The Civil Code is available in French here: https://www.legifrance.gouv.fr/affichCode.do?cidTexte =LEGITEXT000006070721&dateTexte=20151014 and in English here: https://www.legifrance.gouv.fr/ Traductions/en-English/Legifrance-translations. 117 Garb and Wood (n 4 above) 280, ‘Until 2006, only direct descendants had a right to a compulsory share’. 118 Art 913 Civil Code. 119 Art 914(1) Civil Code. 120 Art 1094(1) Civil Code. 121 Garb and Wood (n 4 above) 284. 122 Art 922 Civil Code; Garb and Wood (n 4 above) 284. 123 In order to obtain clarity on whether French law allowed for clawback the author contacted Cécille Peres, Professor in Private Law at the University of Paris II Panthéon-Assas and author of the chapter of French law in Garb and Wood. She very kindly clarified that ‘Les règles relatives à la réserve héréditaire

France  193 given a gift by the deceased at any point during their lifetime may be asked to return the gift to the estate so that the heirs can be treated equally.124 If the deceased intended to favour a particular heir, then the heir only needs to return the amount that exceeds the disposable share of the estate.125 The gift may be returned in kind or in monetary value.126 5. How is a claim to claw back a gift from a third party commenced? The legal right to an inheritance is a public policy issue.127 However, protecting the compulsory share is not automatic and clawback relies on the heir who is entitled to a compulsory share to make a claim.128 It is a monetary claim. 6. How long is the limitation period for such a claim? There is no time limit on how long ago the gift was given by the deceased.129 The gifts will be considered for reduction in reverse chronological order until the compulsory share has been satisfied.130 7. How long is the prescription period for such a claim? It is possible to reduce a gift that infringes on the compulsory share131 within five years of the opening of the succession or within two years from when the heirs entitled to a compulsory share became aware of the impingement on the reserve. An heir is unable to bring a claim after 10 years from the date of the death of the deceased.132 8.

Does the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? The value is assessed at the date of death by relevance to the state of the item as at the date of the gift.133 et à la réduction des libéralités excessives sont prévues par les articles 912 et suivants du Code civil. Toutes les donations entre vifs sont prises en compte pour le calcul de la réserve héréditaire (art 913 du code civil): peu importe leur date, peu importe aussi qu’elles aient été consenties à un tiers, étranger à la famille, ou à un membre de la famille. On ne distingue pas suivant le bénéficiaire de la donation.’ Which translates as ‘The rules relating to the hereditary reserve and to the reduction of excessive gifts are laid down in articles 912 and following of the Civil Code. All inter vivos gifts are taken into account for the calculation of the hereditary reserve (article 913 of the Civil Code): whatever their date, it also does not matter whether they were granted to a third party, a stranger to the family, or a member of the family. There is no distinction between the recipients of the donation. Email received 31 March 2017. This should be read in light of the fact that the inter vivos gift is limited to those that are recorded by the notary. 124 Garb and Wood (n 4 above) 284. 125 Ibid, 284. 126 Ibid, 284. 127 Ibid, 280. 128 Celine Camara, Questionnaire, 18. 129 Garb and Wood (n 4 above) 284. 130 Art 923 Civil Code. 131 Art 920 Civil Code. 132 Art 921 Civil Code. 133 Art 922 Civil Code.

194  Annex IV Comment The rules in relation to clawback and the legitimate portion underwent great change in 2006. The claim changed from a being a right in rem to a monetary claim. The scope of who could bring a claim was narrowed in part in that parents of the deceased were no longer considered to be legitimate heirs if the deceased had no descendants. But it was also widened in that a spouse, if the deceased had no descendants, could be a legitimate heir. Also, gifts made to certain institutions were also excluded from clawback. Unfortunately, ‘this information was not mentioned by the French negotiators during the Succession Regulation negotiations.’134 The description of clawback from third parties within the French legal system is still quite broad in that because it operated by reducing gifts in chronological order there is still a door open for very old gifts to be reduced. The prescription period is also generous in that it is dependent on awareness of the impingement on the estate as the mitigating factor, and therefore provides for different prescription periods dependent on knowledge of the gift. As discussed in the introductory chapter the experience of clawback from a third party under the French legal system is much more nuanced than portrayed by some parties.135 It begs the question why the French negotiator did not explain the changes to their law on this point and discuss the move by France towards restricting the clawback rule during the negotiations.

J. Germany 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The rules relating to the legitimate portion and clawback from third parties are found within Section 2303 et seq of the BGB.136 2. Who is entitled to a legitimate portion? Under Section 2302 BGB the descendants of the deceased (if there are no descendants then the parents of the deceased) as well as the spouse are entitled to a legitimate portion of the estate. 3. What share of the estate are they entitled to? The forced heirs are entitled to half of the share they would have been entitled to under intestacy.

134 Quote taken from private meeting with Professor Paul Beaumont, October 2016. 135 Chapter 1, section I.B.(ii), text to fns 39–56, of this book. 136 Bürgerliches Gesetzbuch – BGB (Civil Code) see: http://www.gesetze-im-internet.de/bgb/ BJNR001950896.html (accessed 9 August 2016). For an official version in English see: http://www. gesetze-im-internet.de/englisch_bgb/index.html (accessed 9 August 2016). Eva Lein, Questionnaire.

Germany  195 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? Clawback is permitted but it is rarely used. Under German succession law, a person entitled to a legitimate portion may request that the value of the reserved share is amended to take into account the inter vivos gift(s) and may claim from the estate the amount by which their share has been reduced.137 Section 2329 (1) BGB allows for where ‘an heir is not obliged to augment a compulsory share, the person entitled to a compulsory share may, in accordance with the provisions concerning the return of unjust enrichment, demand from the recipient of a gift that he return it for the purpose of making up the shortfall. If the person entitled to a compulsory share is the sole heir, he has the same right.’ 5. How is a claim to claw back a gift from a third party commenced? The claim is one of unjustified enrichment.138 The claim is for the property itself or for monetary compensation for the shortfall in the reserved share. 6. How long is the limitation period for such a claim? The gift will be taken into account at its full value if it was given in the year prior to the succession being opened. If the gift was given more than 10 years prior to the death, then it will no longer be taken into account either for the purpose of calculating the fictive estate or for a claim for clawback.



137 Section

2325 BGB:

‘Claim for the augmentation of compulsory shares in the event of gifts (1)  Where the testator made a gift to a third party, a person entitled to a compulsory share may claim, as an augmentation of his compulsory share, the amount by which the compulsory share is increased if the object given is added to the estate. (2)  A consumable thing is assessed at the value that it had at the time of the donation. Any other object is assessed at the value which it had at the time of the devolution of the inheritance; if its value was lower at the time of the donation, then only this value is taken into account. (3)  The gift is fully taken into account within the first year prior to the devolution of the inheritance, and is taken into account by one-tenth less within each further year prior to the devolution of the inheritance. If ten years have passed since the donated objected was given, the gift is not taken into account. If the gift was made to the spouse, the period does not commence until the dissolution of the marriage.’

138 Section

2329: ‘Claim against the recipient of a gift (1)  To the extent that an heir is not obliged to augment a compulsory share, the person entitled to a compulsory share may, in accordance with the provisions concerning the return of unjust enrichment, demand from the recipient of a gift that he returns it for the purpose of making up the shortfall. If the person entitled to a compulsory share is the sole heir, he has the same right. (2)  The recipient may avoid the return of the gift through the payment of the shortfall. (3)  Among more than one recipient of gifts, a prior recipient is liable only to the extent that a subsequent recipient is not obliged.’

196  Annex IV 7. How long is the prescription period for such a claim? The prescription period for making a claim according to Section 2325 BGB is three years.139 The claim is time barred in 30 years from the death of the deceased. 8.

Does the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? A consumable is valued at the time the gift was made.140 The value of any other inter vivos gift is calculated at the date of the death of the deceased, unless it was lower in value at the date the gift was made, in which case it will be valued at the time it was made.141 However, there is a taper effect in that a gift made in the year prior to the death of the deceased will be given its full value, but for every year prior to that the value of the inter vivos gift will be reduced by 10 per cent.142 If the gift was given more than 10 years prior to the death then it will no longer be taken into account. Comment The tapering of the value of the gift that is being considered for clawback, in the 10 years prior to the death of the deceased, appears to be unique to Germany and leans towards protecting security of ownership by the donee.

K. Greece 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The rules relating to the legitimate portion are found within Article  1825(1) of the Greek Civil Code.143 The rules relating to clawback are found within Articles 1835–1838 of the Greek Civil Code.144 2. Who is entitled to a legitimate portion? Those who are entitled to a legitimate portion are the descendants of the deceased as well as the surviving spouse and the parents of the deceased.145 Half siblings are not considered to be forced heirs.146

139 Section 195 BGB. 140 Section 2325(2) BGB. 141 Section 2325(2) BGB. 142 Section 2325(3) BGB. 143 There is no official website for this legislation available in either Greek or English. Aimilios ­Koroneos, Questionnaire, 17. 144 Aimilios Koroneos, Questionnaire, 17. 145 Aimilios Koroneos, Questionnaire, 17. Garb and Wood (n 4 above) 321. 146 Garb and Wood (n 4 above) 321.

Greece  197 3. What share of the estate are they entitled to? The legitimate portion consists of one half of the portion that would have devolved under the rules of intestacy.147 Under the rules of intestacy there are six classes of heirs.148 The spouse receives a quarter share of the estate if there are children, and half the estate if there are no children. The remainder of the estate is shared with the appropriate class of heirs who receive an equal portion.149 The descendants are regarded as the first class of heir, followed by the parents and siblings if there are no descendants, then grandparents, then great-grandparents.150 The State inherits if there are no heirs.151 Under Article 1831 of the Greek Civil Code the legitimate portion is calculated by assessing the condition and value of the estate of the deceased at the time of death, after the deduction of debts. In addition, an estimate as to the value of all the gifts given to compulsory heirs will be added to the net assets of the estate, and any donation made by the deceased in the last 10 years before his death, creating a fictive estate.152 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? It is possible to bring a claim for clawback under Articles 1835 to 1838 of the Greek Civil Code.153 Article 1835 of the Greek Civil Code allows for any gift that has to be taken into account for the purpose of calculating the estate to be the subject of reversal;154 the aim being to create sufficient funds to fulfil the requirement to cover the legitimate portion.155 5. How is a claim to claw back a gift from a third party commenced? A claim for clawback is started by making a legal claim against the lifetime gift, governed by Articles  1835 to 1838 of the Greek Civil Code.156 If the claim is successful, the donee is obliged to return the property to the estate, to the extent necessary to fulfil the legitimate portion as per Article 904 et seq of the Greek Civil Code.157 Under Article 1836(1) of the Greek Civil Code it is possible for the donee to pay the equivalent sum in monetary form instead of returning the actual gift.158



147 Ibid.

148 Garb 149 Ibid.

and Wood (n 4 above) 320.

150 Ibid. 151 Ibid.

152 Aimilios

Koroneos, Questionnaire, 17. Koroneos, Questionnaire, 17. 154 Aimilios Koroneos, Questionnaire, 17. 155 Aimilios Koroneos, Questionnaire, 17. 156 Aimilios Koroneos, Questionnaire, 17. 157 Aimilios Koroneos, Questionnaire, 23. 158 Aimilios Koroneos, Questionnaire, 23. 153 Aimilios

198  Annex IV However the obligation for the donee is to return the actual property.159 If this is not possible due to the fact that the gift has been disposed of during the deceased’s lifetime then under Article 908 of the Greek Civil Code, the donee is obliged to return to the estate the sum that was received in exchange.160 6. How long is the limitation period for such a claim? Gifts that were made to a reserved heir and gifts to third parties made in the 10 years prior to the death of the deceased will be considered for the purpose of calculating the legitimate portion.161 Gifts made as part of a moral duty, eg maintenance, will not be taken into consideration.162 7. How long is the prescription period for such a claim? Article 1836(2) of the Greek Civil Code allows for a claim for clawback for up to two years after the death of the deceased.163 The action can be raised against the donee and his heirs for the rescission of the inter vivos gift to the extent of the amount missing to fulfil the legitimate portion.164 The donee can retain the property if they are able to pay the amount requested.165 Comment Greek law allows for the clawback of gifts from third parties made in the 10 years prior to the death of the deceased in order to satisfy the legitimate portion. The fact that the claim can only be raised in the two years after the death of the deceased is sensible, as it brings any uncertainty to a close. The claim does not invalidate the gift.166 The donee is required to return the value of the property to the extent that they have been unduly enriched, as provided by Article 904 et seq of the Greek Civil Code.167

159 Aimilios Koroneos, Questionnaire, 23. 160 Aimilios Koroneos, Questionnaire, 23. 161 Aimilios Koroneos, Questionnaire, 17. 162 Aimilios Koroneos, Questionnaire, 17. 163 Aimilios Koroneos, Questionnaire, 23. 164 Article 1836. 165 Ibid. 166 Aimilios Koroneos, Questionnaire, 23. 167 The following was found in the online International Encyclopaedia of Laws: Family and Succession Law (Aspen Publishers) under the national report for Greece that ‘… If the other heirs refuse to give the forced heir assets of the estate corresponding to his share, he has the right to institute an action demanding restitution. Grants and donations of the testator during his lifetime to the detriment of the estate and, consequently, to the legitimate portion, are added to the estate or cancelled if the estate at death does not suffice to cover such share (Articles 1833, 1835 AK) (emphasis added).’ by Ismene Androulidakis-Dimitriadis and Elisabeth Poulou, Greece Part IV Ch 3, [432] (accessed Westlaw International, 13 February 2018). The ability for the value of an inter vivos gift to be notionally added to the estate or not, depending on whether there is sufficient in the existing estate to cover the legitimate portion would seem to be contrary to the concept of clawback which adds real value to the estate.

Hungary  199

L. Hungary 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The rules are found within Part 4 of the Hungarian Civil Code, Title XII concerning the Entitlement to the Compulsory Share. The rules relating to forced heirship are found under Section 7:75 of the Hungarian Civil Code. The rules relating to advancements are found under Section 7:84(1)(b) of the Hungarian Civil Code. It is not possible to claw back gifts from third parties in order to satisfy the legitimate portion. 2. Who is entitled to a legitimate portion? The parties that are entitled to the legitimate portion are the same as those that have a right to inherit on intestacy, ie, the descendants of the deceased. If there are no descendants then the spouse and the deceased’s parents are entitled to claim. The testator is able to disinherit an heir who is entitled to a share of the legitimate portion but there are strict criteria as to when this can happen.168 3. What share of the estate are they entitled to? A party entitled to a share of the legitimate portion is entitled to one third of what would be due on intestacy.169 Under the rules of intestacy this amounts to: Section 7:55 [Inheritance by descendants] (1) The child of a decedent shall be the primary legal heir. (2) Two or more children shall succeed in equal shares. (3) In the place of a child or a more distant descendant debarred from succession, the children of a debarred person shall succeed in equal shares.

4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? No. The law changed between the drafting of the EU Succession Regulation being completed to when it came into force. The law changed from ‘the donees receiving donations from a testator within fifteen years prior to death’ to ‘persons receiving advancements’, thus removing clawback from third-party non-heirs and restricting the obligation to heirs.170 The claim is therefore now against other heirs and collateral family members who received advancements.

168 For the Hungarian Civil Code see: http://net.jogtar.hu/jr/gen/hjegy_doc.cgi?docid=A1300005.TV (accessed 2 August 2016). For an English translation of the Hungarian Civil Code available online see: https://tdziegler.files.wordpress.com/2014/06/civil_code.pdf (accessed 2 August 2016). See Section 7:78 of the Hungarian Civil Code for a list of justifiable reasons for disinheritance. 169 Section 7:82(1) of the Hungarian Civil Code. 170 See Hungarian Civil Code 1959 §669(1)(b) and Hungarian Civil Code 2013 Section 7:84.

200  Annex IV 5. How is a claim to claw back a gift from a third party commenced? The ability to claim for the clawback of a gift from a third party is no longer evident within Hungarian law. The person entitled to a legitimate portion of the estate is able to make a claim for the value of the property or service that has been gifted during the 10 years prior to the death of the deceased, but is not able to make a claim for the property itself.171 The obligation to fulfil the legitimate portion is a debt on the estate and falls within the same list as the funeral costs for the deceased.172 6. How long is the limitation period for such a claim? Ten years for the purpose of collation. 7. How long is the prescription period for such a claim? The period of prescription is five years after the death of the deceased.173 8.

Does the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? The value of the claim made by the heirs is based on the value of the advancement at the time the advancement was given.174 If it is considered that this is grossly unfair then it is possible for the donee to ask the court to revise the figure, taking into account the prevailing circumstances.175 Comment The author received conflicting accounts as to whether the Hungarian Civil Code allows for the reduction of property given by the donor to a third-party non-heir donee during his lifetime in order to satisfy the legitimate portion. The ability to claw back the property to satisfy the legitimate portion was used by both the national reporter and the Notary to describe the bringing about of a claim for a reserved share (which in relation to clawback implies collation) on the one hand, and on the other it was said that clawback was permitted from a gift given to anyone. The reading of the current Civil Code would suggest that the gifts that form part of the estate are restricted to advancements that were given by the donor to heirs, meaning that clawback from third parties has now been excluded from Hungarian law. From the author’s research, the law changed on this point in 2013. Csehi, writing in 2011, notes that the Hungarian Civil Code 1959 §669(1)(b) stated that ‘donees receiving donations from a testator within fifteen years prior to his or her death shall be responsible for that part of the compulsory share that cannot be satisfied from the estate irrespective of the temporal order in which the donations

171 Section

7:86 of the Hungarian Civil Code. 9:94 of the Hungarian Civil Code. 173 Section 7:76 of the Hungarian Civil Code. 174 Section 7:80(1) of the Hungarian Civil Code. 175 Section 7:80(2) of the Hungarian Civil Code. 172 Section

Hungary  201 were received’. Hungarian law does not exclude any gratuitous transfer from the basis of calculation of the forced share, so that the establishment of foundations or gifts to charities must also be taken into account. Therefore, the foundation or charity may be obliged to pay the compulsory share if the estate is insufficient to satisfy the beneficiaries’ claims. ‘… the charity may be released from paying the compulsory share if it proves that it has already used the donation for charity purposes.’ (Section 361(2)CC 1959).176 Hungarian Civil Code 1959 (1) Dispensation, or completion, of compulsory shares of inheritance can be demanded in the following order: a) b)

responsibility for satisfaction of a compulsory share of inheritance primarily falls on persons having a share of the estate; the donees receiving donations from a testator within fifteen years prior to his death shall be responsible for that part of the compulsory share of inheritance that cannot be satisfied from the estate, irrespective of the temporal order in which the donations were received (emphasis added).

(2) The share of responsibility of several persons shall be determined by the applicable value of their grants (Section 670). (3) A person who has lost a grant through no fault of his own shall not be liable for a compulsory share of inheritance.’

However, Hungarian Civil Code 2013 reads: Section 7:84 [Responsibility for satisfaction of a compulsory share] (1) Dispensation, or completion, of compulsory shares can be demanded in the following order: a) responsibility for satisfaction of a compulsory share primarily falls on persons having a share of the estate; b) the persons receiving advancements from a testator within ten years prior to his death shall be responsible for that part of the compulsory share that cannot be satisfied from the estate, irrespective of the chronological order in which the advancements were received (emphasis added). (2) The share of responsibility of several persons shall be determined by the applicable value of their grants. (3) A person who has lost a grant through no fault of his own shall not be liable for a compulsory share.

Hungary discussed the possibility of reforming or eliminating the compulsory share prior to the 2013 Civil Code.177 It would appear that satisfying the compulsory share changed in 2013 from applying to all donations to just advancements, 176 Z Csehi, ‘The Law of Succession in Hungary’ in M Anderson and E Arroyo i Amayuelas (eds), The Law of Succession: Testamentary Freedom (Europa Law Publishing, 2011) 183. 177 Ibid, 184.

202  Annex IV and from donations given up to 15 years prior to the death of the deceased to advancements given within 10 years prior to the death of the deceased. The fact that it is a claim against the estate and the vocabulary used within the Civil Code would suggest that Hungary does not have clawback from third parties. This change took place after the negotiations had taken place for the Succession Regulation, although the negotiators ought to have been aware of the discussion concerning the compulsory share within their country, as there was evidence of this from 1998 onwards.178

M. Italy 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The rules relating to the legitimate portion and clawback are found in Articles 536 to 564 of the Italian Civil Code.179 2. Who is entitled to a legitimate portion? Under Articles 536 to 564 of the Italian Civil Code the spouse and the children are entitled to claim for a legitimate portion of the estate. The spouse is entitled to a legitimate portion even if they were separated from the deceased if the court says the separation was not the fault of the remaining spouse.180 The reserved share is composed of the property of the deceased, minus the debts, plus the value of inter vivos gifts.181 The value of the inter vivos gifts that form part of the fictive estate is calculated according to the rules in Articles 747 to 750 of the Italian Civil Code. Partners, cohabitants and divorced partners are not entitled to the legitimate portion.182 3. What share of the estate are they entitled to? If there are no issue then the spouse is entitled to half of the estate.183 If there is an existing spouse and one child, then the spouse and the child are entitled to one third of the estate each.184 If there is more than one child, then the spouse is entitled to one quarter of the estate and the children are entitled to half of the estate.185

178 Ibid. 179 http://www.diritto.it/codici/1-codice-civile (accessed 2 July 2016). There is no official English translation of the Italian Civil Code. 180 Andrea Fusaro, ‘Freedom of Testation in Italy’ in M Anderson and E Arroyo i Amayuelas (eds), The Law of Succession: Testamentary Freedom (Europa Law Publishing, 2011) 191–202, 196. 181 Article 556 of the Italian Civil Code. 182 Andrea Fusaro, ‘Freedom of Testation in Italy’, n 180 above, 196. 183 Article 540(1) of the Italian Civil Code. 184 Article 542(1) of the Italian Civil Code. 185 Article 542(2) of the Italian Civil Code.

Italy  203 If there is no spouse, then the children are entitled to two thirds of the estate.186 If there are no children, then the parents are entitled to one quarter if the spouse is living and one third of the estate if there is no spouse.187 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? Yes, the claim for clawback is found under Articles 533 to 564 of the Italian Civil Code. It is also possible for the right to the reduction of gifts to be waived by the legitimate heirs.188 5. How is a claim to claw back a gift from a third party commenced? The clawback claim is commenced by judicial proceedings only after the death of the deceased. The claim does not create a right in rem but makes the act of the donation by the deceased ineffective.189 6. How long is the limitation period for such a claim? The donations that will be considered for the purpose of clawback will be reduced in reverse chronological order from the date of the death of the deceased until the legitimate portion is satisfied.190 If 20 years have passed since a donee transferred an immoveable property to a third party the reserved heir cannot claim against the third party. It is possible for an heir or spouse to register a notice of intent to challenge the gift, which will extend the period in which to claim the property by another 20 years (renewable).191 7. How long is the prescription period for such a claim? The period of prescription is 10 years from the date of the death of the deceased. Comment Clawback of an inter vivos gift from a third party can be made to satisfy the legitimate portion if it has exceeded the disposable portion, but only if the legitimate portion cannot be satisfied by advancements and testamentary gifts made to the reserved heir, followed by testamentary gifts made to heirs.192 Due to the ability to extend the limitation period combined with the 10-year prescription period, this is a very broad system of clawback.

186 Article 537(2) of the Italian Civil Code. 187 Article 538(1) of the Italian Civil Code. 188 Andrea Fusaro, ‘Freedom of Testation in Italy’, n 180 above, 196. 189 http://mioblog.notaiopescaradambrosio.it/riduzione-donazione-testamento-legittima/ (accessed 12 December 2016). 190 Article  559. http://www.professionisti.it/enciclopedia/voce/1857/Eredita-riduzione-delle-disposi zioni-testamentarie (accessed 12 December 2016). 191 Article 616. Andrea Fusaro, ‘Freedom of Testation in Italy’, n 180 above, 198. 192 Kindly confirmed by Dr Justin Borg-Barthet, School of Law, University of Aberdeen.

204  Annex IV

N. Latvia 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The rules relating to the legitimate portion are found within Section 422 et seq of the Latvian Civil Code.193 The rule relating to clawback of inter vivos gifts is found within Section 1922 of the Latvian Civil Code. The terminology of Section 1922 is rather ambiguous and it is not clear whether it relates only to reducing gifts made to forced heirs or whether it applies to third parties. 2. Who is entitled to a legitimate portion? The spouse and the descendants of the deceased are entitled to a legitimate portion.194 If there are no descendants then the parents of the deceased are entitled to a legitimate portion.195 3. What share of the estate are they entitled to? There is no automatic reserved share. An heir who is entitled to the preferential share has to specifically state that they wish to apply for it in writing to the notary.196 If a preferential share cannot be agreed between the heirs then the notary will inform the forced heir of their right to bring a civil claim.197 The preferential share is one half of the value of that share of the estate that the person is entitled to under intestacy, dependent on the value of the property on the date of the death of the deceased.198 Section 425 must be read in light of Section 757. Section 425 states that The preferential share shall be one half of the value of that share of the estate which a person entitled to preferential share inherits pursuant to law. This share shall be determined on the basis of the contents and value of the property on the day of the testator’s death. The preferential share includes that which the testator has left to an heir as an inheritance or a legacy, as well as that which has been received while the testator was alive, if the duty to add such in the estate applies (Section 757 and subsequent sections). The preferential share shall be calculated on the basis of the net assets of the testator, having subtracted all the testator’s debts.

Section 757 states that: A surviving spouse and all descendants, who on whatever basis wish to inherit from the deceased spouse or the common ancestor, shall add to the entirety of property of the

193 Latvian Civil Code is available in English at: http://unpan1.un.org/intradoc/groups/public/ documents/UNTC/UNPAN018388.pdf (accessed 27 March 2017). 194 Section 423 Latvian Civil Code. 195 Section 423 Latvian Civil Code. 196 Gatis Latvins, Questionnaire, 20. 197 Ibid. 198 Section 425 Latvian Civil Code.

Lithuania  205 estate prior to its division all that he or she has received from the estate-leaver while the estate-leaver was alive or also shall include it in his or her shares of the estate.

4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? Yes/Ambiguous. The duty to take into account the value of inter vivos gifts received applies only to those given to the forced heirs. However, ‘if a gift is of such magnitude that it deprives forced heirs of their preferential shares (Section 422 and the following Sections), then the forced heirs may demand that the donee give them such shares. The preferential shares shall be calculated based on the donor’s financial state at the time of making the gift. However, if later such property has increased, then the increase shall be taken into account, as well as that which is bequeathed to forced heirs by instructions in contemplation of death.’199 Under Section 1923, ‘If a donor with no children later has children within a marriage, then he or she may revoke the gift to the extent it is necessary to provide the preferential shares of the children born later.’ 5. How is a claim to claw back a gift from a third party commenced? This is not automatic and is a monetary claim against the donee to the extent of the legitimate portion. Comment The claim to claw back an inter vivos gift from a third party falls under Part Four of the Civil Code, the Law of Obligations. The claim is a monetary claim against the donee. The author has not been able to identify the limitation period applicable to a claim to claw back an inter vivos gift from third parties to satisfy the legitimate portion, from her reading of the Latvian Civil Code. The information was not offered by the national reporter.

O. Lithuania 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The rules relating to the legitimate portion are found within Article 5:20 of the Lithuanian Civil Code.200 There are no rules on clawback, either for the purpose of collation or from a third party to satisfy the legitimate portion.201

199 Section 1922 Latvian Civil Code. 200 Lithuanian Civil Code available at: http://www3.lrs.lt/pls/inter3/dokpaieska.showdoc_l?p_id=245495 (accessed 9 August 2016). 201 Lithuanian Notary, Questionnaire, 15

206  Annex IV 2. Who is entitled to a legitimate portion? Under Article 5:20 of the Lithuanian Civil Code: Article 5.20. Right to the mandatory share of the inheritance 1.

2.

The testator’s children (adoptees), spouse, parents (adoptive parents) who were entitled to maintenance on the day of the testator’s death shall inherit irrespective of the content of the will a half of the share that each of them would have been entitled to by operation of law (mandatory share) unless more is bequeathed by the will. The mandatory share shall be determined taking in regard the value of the inheritable estate, including ordinary house furnishing and household equipment.

3. What share of the estate are they entitled to? The forced heirs are entitled to a half of the share that they would have been entitled to under the mandatory share unless they have been bequeathed more in the will.202 The forced heirs must apply to the notary to claim their share of the ­legitimate portion.203 However inter vivos gifts do not form part of the estate.204 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? No, an inter vivos gift cannot be clawed back for the purpose of fulfilling the reserved share.205 Comment The legal system in Lithuania has forced heirship but does not provide for clawback of gifts from either heirs or third parties in order to satisfy the legitimate portion.206

P. Luxembourg 1. Where are the rules relating to the legitimate portion and clawback from third parties found? Articles 913 and 914 of the Luxembourg Civil Code refer to the heirs entitled to the legitimate portion. Article 924(2) refers to clawback of inter vivos gifts from third parties but it is reduction in kind. 2. Who is entitled to a legitimate portion? Only legal descendants, ie children, are entitled to claim a legitimate portion.

202 Article 5.20

of the Lithuanian Civil Code. Notary, Questionnaire, 15. 204 Article 5.20 of the Lithuanian Civil Code. 205 Lithuanian Notary, Questionnaire, 15. 206 Lithuanian Notary, Questionnaire, 13. 203 Lithuanian

Luxembourg  207 3. What share of the estate are they entitled to? If there is one descendant, they are entitled to half of the estate. If there are two descendants, they are entitled to two thirds of the estate. If there are three or more descendants, they are entitled to three quarters of the estate. All of the inter vivos gifts given by the deceased are taken into account in determining the fictive hereditary mass, apparently without exception.207 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? 208 Yes. Article 924-2. (L. March 12, 1982) Donations made to non-successors who exceed the available quota are subject to reduction in kind. 5. How is a ‘clawback claim’ commenced? A claim for clawback must go before the court. It is a monetary claim.209 The gifts for clawback are considered in reverse chronological order from the date of death.210 6. How long is the limitation period for such a claim? The request to claw back the gift has to be made within one year of the date of the donor’s death.211 7. How long is the prescription period for such a claim? General prescription rules apply. The general prescription rules are found within Article 2262 et seq of the Civil Code.212 8.

Does the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? The value of the gift is assessed as at the date the gift was made.213 Comment Of note is that under Article  931 of the Civil Code the inter vivos gifts for the purpose of succession are recorded by a notary. This would appear to restrict the scope of what is considered to be an inter vivos gift as compared to the very broad definition under the common law. The additional advantage is that the notary and 207 Aaron Schwabach, ‘Of Charities and Clawback. The European Proposal on Succession and Wills As a threat to Charitable Giving’ (2011) 17 Columbia Journal of European Law: https://works.bepress. com/aaron_schwabach/3/ p 12 (accessed 27 March 2017). 208 Article  924(2) Civil Code of Luxembourg: http://www.legilux.public.lu/leg/textescoordonnes/ codes/code_civil/CodeCivil_PageAccueil.pdf (accessed 19 December 2016). 209 Article 924(2) Civil Code of Luxembourg. 210 Article 930 Civil Code of Luxembourg. 211 Article 928 Civil Code of Luxembourg. 212 The general prescription period is for 30 years. The length of time changes depending on whether the property has been acquired in good faith and with good title: see Article 2265. 213 Article 922 Civil Code of Luxembourg.

208  Annex IV therefore the legitimate heirs will be aware of the gifts that can be revoked for the purpose of satisfying the legitimate portion.214

Q. Malta 1. Where are the rules relating to the legitimate portion and clawback from third parties found? The rules relating to the legitimate portion are found within Section 615 of the Maltese Civil Code.215 Maltese law does not provide for clawback of an inter vivos gift from a third party. 2. Who is entitled to a legitimate portion? The surviving spouse and the descendants of the deceased are entitled to a legitimate portion of the estate.216 3. What share of the estate are they entitled to? If there are descendants the spouse is entitled to one quarter of the estate.217 If there are no descendants then the spouse is entitled to one third of the estate.218 Up to four children are entitled to one third of the estate, shared equally between them.219 If there are more than four children then they are entitled to one half of the estate, shared equally between them.220 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? Maltese Law does not allow for clawback of an inter vivos gift from a third party.221 Descendants who have received inter vivos gifts from the deceased are duty bound to redress the balance in favour of the other descendants only if the deceased did not exempt the inter vivos gift in his or her will.222

214 Article 931. ‘Tous actes portant donation entre vifs seront passés devant notaires dans la forme ordinaire des contrats et il en restera minute, sous peine de nullité.’ 215 The Maltese Civil Code is available in English at: http://www.justiceservices.gov.mt/Download​ Document.aspx?app=lom&itemid=8580&l=1 (accessed 3 August 2016). Section 845 of the Maltese Civil Code – ‘The ability to demand a legitimate portion expires after ten years from the death of the deceased or within 1 year after a minor has reached majority’. 216 Section 615 of the Maltese Civil Code; Garb and Wood (n 4 above) 536. 217 Section 616 of the Maltese Civil Code; Garb and Wood (n 4 above) 536. 218 Section 616 of the Maltese Civil Code; Garb and Wood (n 4 above) 536. 219 Section 616 of the Maltese Civil Code; Garb and Wood (n 4 above) 536. 220 Section 616 of the Maltese Civil Code; Garb and Wood (n 4 above) 536. 221 Dr Justin Borg-Barthet, Senior Lecturer in Law at the University of Aberdeen and a Maltese national, very kindly confirmed this interpretation of the Maltese law. 222 Garb and Wood (n 4 above) 538.

Netherlands  209 Comment The response to the questionnaire highlighted the confusion by some parties to the distinction between reduction of gifts for the purpose of collation and clawback of an inter vivos gift from a third-party non-family member. The response only spoke of the reduction of gifts in the context of collation. In response to the question as to ‘whether a person with a claim to a reserved share of the estate could bring a claim to claw back a life-time gift by the deceased’ the Maltese reporter responded that ‘Yes, this is possible. Courts consider large donations given to one child, and not to the other children as forming part of the deceased’s estate.’

R. Netherlands 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The rules relating to the legitimate portion are found within Articles 4:64 and 4:79 of the Dutch Civil Code.223 Article 4:89 concerns the abatement of gifts that have infringed on the legitimate portion. 2. Who is entitled to a legitimate portion? Only the children are entitled to a legitimate portion of the estate.224 The spouse is not entitled to a legitimate portion.225 3. What share of the estate are they entitled to? The forced heirs are entitled to a monetary claim on the estate to fulfil the obligations for the legitimate portion.226 If the forced heir claims their legitimate portion they become a creditor of the estate and not an heir.227 Neither the spouse nor the parents of the deceased are entitled to a legitimate portion.228 The legitimate portion is calculated by adding the value of the estate at the time of the death of the deceased to the value of the inter vivos gifts made by the deceased during his or her lifetime.229 Inter vivos gifts are not automatically considered for collation. Collation will occur only if the deceased stipulated that the gift should be set off against the succession.230 The prescription period for a claim for the legitimate portion is five years from the death of the deceased.231 223 Civil Code in Dutch accessed 3 August 2016; for an unofficial version of the Dutch Civil Code in English see: http://www.dutchcivillaw.com/civilcodegeneral.htm (accessed 3 August 2016). 224 Article 4:63 of the Dutch Civil Code. 225 Garb and Wood (n 4 above) 597. 226 Ibid. 227 Notary – Netherlands, Questionnaire, 13. 228 Notary – Netherlands, Questionnaire, 13. 229 Article 4:67 of the Dutch Civil Code. 230 Garb and Wood (n 4 above) 599. 231 Notary – Netherlands, Questionnaire, 16.

210  Annex IV Gifts that are considered for the purpose of calculating the legitimate portion are set out in Article 4:67. In calculating the forced shares of the forced heirs, the following gifts, made by the testator, are taken into account: a.

gifts which are obviously made and accepted with the prospect that they will cause a disadvantage to the forced heirs; b. gifts which the testator could have revoked at all times during his life or which he explicitly has submitted to a possible abatement when he made the gift; c. gifts of which the benefit is intended to be enjoyed only in full after the death of the testator; d. gifts, made by the testator to a descendant, provided that this person or his descendant is a forced heir of the testator; e. other gifts as far as the performance of the obligation arising from the gift has been carried out [within the] five years before the death of the testator. ‘Article 4:67 applies to all gifts (so also to gifts to third parties (charities and friends), except for those gifts listed in subsection d. the gifts in subsection d only apply to the gifts to descendants.’232

4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? The value of an inter vivos gift that falls within Article 4:67 is added to the estate of the deceased in order to calculate the legitimate portion. The legitimate heir is not entitled to the return of the property itself.233 It is possible to bring a claim for clawback against a donee; however, it is a monetary claim. The legitimate portion changed from being an actio in rem to a monetary claim on the value of the estate.234 This change occurred in 2003.235 ‘It is indeed the case that those legatees in the current legal system only have a right to a monetary claim towards the beneficiary. They cannot claim the gifted object itself back.’236 Article 4:79 Claim against the joint heirs or a donee With regard to his forced share the forced heir may obtain a claim: a. b.

against the joint heirs or against the spouse of the testator: by claiming his forced share in accordance with Article 4:80 paragraph 1, or; against a donee: by an abatement made pursuant to Article 4:89.

Article 4:89 Abatement of gifts - 1. If what a forced heir may obtain on the basis of his debt-claim as referred to in Article  4:80 paragraph 1, is insufficient to provide him his forced share, then he



232 Ian

Curry-Sumner – Email to author received 30 March 2017. – Netherlands, Questionnaire, 13. 234 Garb and Wood (n 4 above) 597. 235 Notary – Netherlands, Questionnaire, 13. 236 Ian Curry-Sumner – Email to author received 30 March 2017. 233 Notary

Netherlands  211 may abate the gifts that are eligible for abatement, as far as they are detrimental to his forced share. In determining the debt-claim, any possible reduction pursuant to Article  4:80 paragraph 2 and 4:87 paragraph 3 is taken into account. The increase, meant in Article 4:84, as well as the part of the debt-claim that has ceased to exist due to Article 4:85 paragraph 2, are not taken into account. - 2. The gifts referred to in Article 4:67 may be abated. - 3. A gift only qualifies for an abatement as far as the forced heir cannot obtain his forced share through the abatement of more recent gifts. Gifts of which the benefit will only be fully enjoyed after the death of the testator, are taken into account as gifts made at the moment of the testator’s death.

5.

How is a ‘clawback claim’ commenced? Article 4:90 Effectuation of the abatement of a gift - 1. An abatement of a gift is effectuated by a declaration to the donee (the one who has received the gift). The donee must compensate the forced heir for the value of the abated part of the gift, as far as this is not unreasonable in regard of all circumstances. - 2. A gift cannot be abated as far as this would lead to a reduction of the forced share of another forced heir.

6. How long is the limitation period for such a claim? Article  4:89(3) A gift only qualifies for an abatement as far as the forced heir cannot obtain his forced share through the abatement of more recent gifts. Therefore, the gifts are treated in chronological order. 7. How long is the prescription period for such a claim? Article 4:90 (3) states that the right of a forced heir to abate a gift, ends on the expiry of a reasonable period set by the donee for this purpose, and at the latest five years after the testator’s death. 8.

Does the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? The value of the gift is at the date the gift was made Comment ‘The position of the forced heir is but a shadow of what it was … and it now struts and frets its hour upon the stage.’237

It is possible to make a monetary claim against a third party under the law of the Netherlands for the purpose of satisfying the legitimate portion.238 An interesting

237 J Michael Milo, ‘Acquisition of Property by Succession in Dutch Law, Tradition between Auto­ nomy and Solidarity in a Changing Society’ in M Anderson and E Arroyo i Amayuelas (eds), The Law of Succession: Testamentary Freedom (Europa Law Publishing, 2011) 204–27, 266. 238 The author would like to thank Ian Curry-Sumner for his help in interpreting the law of the Netherlands.

212  Annex IV point is that the donee sets the time period for prescription that a claim can be brought after the death of the deceased provided it is ‘reasonable’ against a backdrop of a five-year prescription period (Article 4:90 (3)). The benevolence towards the donee is seen again in Article 4:90 in that it has to be reasonable to demand the compensation for the gift, ie it depends on the financial position of the donee. The heir’s status changes to one of creditor. This is not uncommon, but would not be treated as a succession issue in the common law systems, but would be dealt within under the administration of estates which occurs immediately prior to the succession. There also seems to be a discretionary element in that the claim must not be ‘unreasonable’ in all the circumstances. This would have helped in identifying a compromise during the drafting of the Succession Regulation if the working party had been aware of this.239

S. Poland 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The rules relating to the legitimate portion and clawback are found within Articles 991 and 1000 of the Polish Civil Code.240 2. Who is entitled to a legitimate portion? Under Article 991(1) of the Polish Civil Code, anyone who would inherit under the rules of intestacy is entitled to a legitimate portion of the estate. In this case, the descendants, spouse and parents of the deceased are entitled to a legitimate portion. 3.

What share of the estate are they entitled to? 679. The freedom of testamentary disposition is one of the most important rules in Polish succession law; however, if the testator’s dispositions completely exclude his or her relatives from the estate, there is a danger that the interests of his or her closest family will be infringed. Meanwhile, succession law is based on the assumption that the estate of the deceased should first and foremost devolve to his or her family, since in most cases they are the ones who contributed to its creation. Therefore, it would be unjust for third parties to acquire the estate with the complete exclusion of at least some members of the testator’s closest family. 680. The Polish institution of legitim is not based on the French system of forced heirship, in which the forced heir is in fact an heir of the estate and has a share in that estate.

239 Professor Paul Beaumont, private notes in author’s archive. 240 An English version of the Polish Civil Code is available at: https://supertrans2014.files.wordpress. com/2014/06/the-civil-code.pdf (accessed 3 August 2016). The Polish version is available at: http:// www.infor.pl/akt-prawny/461486,ustawa-kodeks-cywilny.html (accessed 22 June 2018).

Poland  213 The Polish legitim does not cause the protected persons to become heirs of the estate but instead grants them a claim to receive a sum of money equivalent to the value of a part of the share they would have inherited in intestate succession. This system may be described as forced heirship by calculation (as opposed to the French system of forced heirship by fraction). 681. The legitim does not compromise the principle of the freedom of testamentary dispositions in the sense that the testator may effectively provide for all of his or her estate to devolve to third persons and completely exclude members of family from inheriting. It does, however, oblige the heirs to pay a sum of money to the persons entitled to legitim and in this way allows them to benefit from the succession after their close relative. Only disinheriting the persons entitled to legitim will prevent them from acquiring any benefits from the succession, but the reasons for disinheritance are specified in succession law and cannot be extended to include situations not enumerated by the legislator.241

The forced heir is entitled to half of the value of the share they would have received under the rules of intestacy. If the forced heir is not fit for work or is a child, then they are entitled to two thirds of the value of the share they would have received under the rules of intestacy. This would appear to be a discretionary, needs based approach to the legitimate portion. When calculating who is entitled to the legitimate portion, heirs who have been disinherited or have rejected the inheritance are not included.242 When calculating the value of the legitimate portion, inter vivos gifts made by the deceased and legacies designed to undermine the legitimate portion are taken into account.243 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? A claim for clawback is clearly established within Polish law. It is a monetary claim unless the donee is unable to satisfy the debt.244 If the heirs are not able to satisfy the legitimate portion of the estate then it is possible for the person entitled to the legitimate portion to make a claim against the donee. The donee is liable for the payment of the clawback claim whether they are an heir themselves or a third party. The donee is only liable for the sum amounting to the enrichment he or she gained from the gift. No official guidance is given as to how to value the property. If there are many donees then gifts are taken in reverse chronological order until the legitimate portion is satisfied.245

241 (footnote excluded) Stanislawa Kalus and Magdalena Habdas, Poland, Part IV Ch 3 ‘­Testamentary Succession’ in International Encyclopaedia of Laws: Family and Succession Law (Wolters Kluwer) [679]–[681]. 242 Article 992 of the Polish Civil Code. 243 Monica Drela, Questionnaire, 17. 244 Article 1000 of the Polish Civil Code. Article 1000(3) of the Polish Civil Code. 245 Article 1001 of the Polish Civil Code. See also Kalus and Habdas (n 241 above) [693].

214  Annex IV 5. How is a claim to claw back a gift from a third party commenced? In order to make a claim for clawback the forced heir has to write to the donee.246 It is a monetary claim. If the donee does not pay voluntarily then the forced heir is able to take civil action for the payment.247 If the claim for clawback is accepted by the heirs to the estate it is considered a debt, for which the estate is liable. … the donee is obliged to pay the mentioned sum only within the limits of the enrichment resulting from the donation. If the donee is himself or herself entitled to legitim, his or her liability for legitim of other entitled persons is limited by the amount which exceeds the value of his or her own legitim. The donee may discharge himself or herself from the duty to pay legitim by handing over the object of the donation (Article 1000 PCC). If there are several donees, the entitled person should make his or her claim against the one who received his or her donation most recently. Access to less recent donees is admissible only when more recent ones cannot satisfy the claim of the person entitled to legitim (Article 1001 PCC).248

6. How long is the limitation period for such a claim? There is no official limitation period for claims for clawback of inter vivos gifts. It is taken in reverse chronological order until the requirements to satisfy the legitimate portion are met. 7. How long is the prescription period for such a claim? The prescription period for a claim for clawback is five years from the date of the death of the deceased.249 8.

Does the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? The value of the inter vivos gift is calculated according to the prices at the time the right to the legitimate portion is established, but based on the condition the gift was in at the time it was given.250 Comment It is possible to make a claim against a third-party donee but it is a monetary claim rather than the clawback of the property, unless the donee is unable to pay the debt. In reality, the rules concerning the donees as debtors of legitim are particularly difficult to apply.251 The lack of a limitation period makes Polish clawback rather wide.



246 Monica

Drela, Questionnaire, 22. Drela, Questionnaire, 22. 248 Kalus and Habdas, Poland, Part IV Ch 3, n 241 above, [693]. 249 Monica Drela, Questionnaire, 22. 250 Article 995, Polish Civil Code. 251 Kalus and Habdas, Poland, Part IV Ch 3, n 241 above, [691]. 247 Monica

Portugal  215

T. Portugal 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The rules relating to succession are found within Chapter V of the Portuguese Civil  Code.252 The rules relating to the legitimate portion are found under Article 2156 et seq of the Portuguese Civil Code. The rules relating to clawback are found under Article 2169 of the Portuguese Civil Code. 2. Who is entitled to a legitimate portion? Under Article  2156 of the Portuguese Civil Code, the spouse, descendants and parents of the deceased are entitled to a legitimate portion of the estate. 3. What share of the estate are they entitled to? Under Article 2158, if there is a surviving spouse but no descendants or parents of the deceased then the spouse is entitled to half of the estate. Under Article 2159, if there is a surviving spouse and children then they are together entitled to two thirds of the estate. Under Article 2159 if there is only one child and no spouse then the child is entitled to one half of the estate. If there are two or more children but no spouse, then the children are entitled to two thirds of the estate. Under Article  2161 if the deceased does not leave a surviving spouse or children, but there are surviving parents, then the parents are entitled to one third of the estate. Article 2162 provides the rule for calculating the legitimate portion of the estate of the deceased, which must take into account the value of the property belonging to the deceased at the time of death, plus the value of inter vivos gifts made by the deceased, taking into account the debts of the estate and also collation. 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? It is possible for a person entitled to a legitimate portion of the estate to make a claim to claw back an inter vivos gift made by the deceased.253 Inter vivos gifts that affect the legitimate portion of the estate may be reduced or restituted to the extent necessary to satisfy the legitimate portion.254 5. How is a claim to claw back a gift from a third party commenced? A claim for clawback should be brought during the inventory proceedings under Law number 23/2013.255 If the inter vivos gifts made by the deceased were unknown 252 For online link to Portuguese Civil Code, see: http://www.pgdlisboa.pt/leis/lei_mostra_articulado. php?ficha=2001&artigo_id=&nid=775&pagina=21&tabela=leis&nversao=&so_miolo= (accessed 3 August 2016). 253 Articles 2168 to 2178 of the Portuguese Civil Code. 254 Article 2169 of the Portuguese Civil Code. 255 Raquel Ferreira Correia, Questionnaire, 28.

216  Annex IV at the time the inventory of the estate is taken, then in theory it is brought to the attention of the estate during partition.256 The inter vivos gifts are treated in reverse chronological order from the date of death of the deceased in order to satisfy the legitimate portion.257 If several inter vivos gifts were made at the same time by the deceased then the claim to satisfy the legitimate portion is treated pro rata.258 6. How long is the limitation period for such a claim? Inter vivos gifts are treated in reverse chronological order until the legitimate portion is satisfied. 7. How long is the prescription period for such a claim? The prescription period in order to make a claim to claw back the inter vivos gift is two years from the acceptance of the inheritance, although this does not apply if the claim is between forced heirs in relation to collation.259 8.

Does the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? The compensation claim made by the heirs assesses the value of the gift as at the date of the opening of the succession.260 Comment The short prescription period of two years is good in that it aids certainty for all parties, but the potentially unlimited limitation period is not helpful in this respect.

U. Romania 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The rules relating to the legitimate portion are found within Articles 659 et seq of the Romanian Civil Code.261 Article 847 states that inter vivos gifts that exceed the disposable portion are reducible for the purpose of satisfying the legitimate portion. 256 Ibid. 257 Article 2173(1) of the Portuguese Civil Code. 258 Article 2173(2) of the Portuguese Civil Code. 259 Raquel Ferreira Correia, Questionnaire, 28; with thanks to Raquel Ferreira Correia for identifying the following Portuguese cases concerning the reduction of inter vivos gifts between collateral heirs – Supreme Court decision dated 4 September 2002 available in Portuguese at: http://www.dgsi.pt/ jstj.nsf/954f0ce6ad9dd8b980256b5f003fa814/26280c8fb3f9dfd880256ba50037b654?OpenDocument (accessed 3 August 2016); and the Lisbon Appeal Court decision dated 2 August 2007 in proc. 10633/06-2, available in Portuguese at: http://www.dgsi.pt/Jtrl.nsf/e6e1f17fa82712ff80257583004e3ddc/ 5d0991ce64e5ec4a802572de00361c82?OpenDocument (accessed 3 August 2016). 260 Article 2109 of the Portuguese Civil Code. 261 An online version of the Romanian Civil Code is not available.

Romania  217 2. Who is entitled to a legitimate portion? A surviving spouse, descendants and parents of the deceased are entitled to a legitimate portion of the estate.262 Heirs who have been disqualified are not entitled to make a claim for the legitimate portion.263 3. What share of the estate are they entitled to? The forced heirs are entitled to one half of the amount they would have been entitled to in law under the rules of intestacy.264 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? It is possible to claw back inter vivos gifts made by the deceased in order to satisfy the legitimate portion. However, notably, not only can a claim be raised to claw back an inter vivos gift for the purpose of satisfying the claims of those entitled to a legitimate portion, but if they do not make the claim themselves then creditors of the estate are able to raise a claim.265 5. How is a claim to claw back a gift from a third party commenced? The right to make a claim to clawback is through a civil action to request that the inter vivos gift be reduced to satisfy the legitimate portion.266 The claim is for the property itself or for payments to be made no greater than the value of the gift until the legitimate portion is satisfied. 6. How long is the limitation period for such a claim? Inter vivos gifts are ‘clawed back’ in reverse chronological order from the donees.267 7. How long is the prescription period for such a claim? The period for prescription to be able to make a civil action for clawback is three years.268 Comment The claim to claw back the inter vivos gift for the purpose of satisfying the legitimate portion falls under the law of obligations. The situation in Romania points to clawback being used as a tool when the estate is insolvent, as creditors of the estate can make a claim to claw back an inter vivos gift to recover money owed to them. The limitation period is long in that it follows the relatively common approach of reverse chronological order and consequently there is no time limit.

262 Article 659 263 Ibid.

et seq of the Romanian Civil Code.

264 Article 1088

of the Romanian Civil Code. Nagy, Questionnaire, 29. Articles 1092 to 1093 of the Romanian Civil Code. 266 Romanian Notary, Questionnaire, 19. See Civil Procedure Code. 267 Article 850 Romanian Civil Code. 268 Romanian Notary, Questionnaire, 19. 265 Csongor

218  Annex IV

V. Slovakia 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The rules relating to the legitimate portion are found in Act No 40/1964 of the Slovakian Civil Code.269 Clawback is not possible within the Slovakian legal system. 2. Who is entitled to a legitimate portion and what share are they entitled to? The heirs that are entitled to a legitimate portion are divided into different ­categories.270 The first category of heirs consists of the children and spouse, who are treated equally.271 If the child is unable to inherit then their issue are able to inherit the child’s portion.272 If the deceased has not left any descendants or the descendants have refused the succession, then the second category of heirs are entitled to inherit.273 The second category of heirs consists of the spouse and the deceased’s parents, and also anyone who has been maintained by the deceased or lived in a common household for at least one year prior to the death of the deceased and looked after the household is able to inherit.274 Beneficiaries in the second category inherit equally but the spouse must inherit half of the estate in this case. If there are no second class beneficiaries, then the deceased’s siblings, plus anyone living in the common household for at least a year prior to the death of the deceased who took care of the household or who was maintained by the deceased, are able to inherit.275 If there is no one in that third category, then the fourth category allows the grandparents of the deceased to inherit, failing which the estate goes to the State by default.276 3. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? No, the legal system of Slovakia does not provide for clawback from third parties. It does recognise collation.277

269 Slovakian Civil Code: https://www.slov-lex.sk/pravne-predpisy/SK/ZZ/1964/40/20150401#pred​ pis.cast-siedma (accessed 11 August 2016). 270 Dr Katarina Trimmings, Questionnaire, 15. 271 Ibid. 272 Ibid. 273 Ibid. 274 Ibid. 275 Ibid. 276 Ibid, 16. 277 Ibid, 16.

Slovenia  219 Comment Slovakia has a legal system that clearly does not provide for clawback. As a Member State, it did raise its concerns about the issue of clawback during the Succession Regulation negotiations.

W. Slovenia 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The rules relating to the legitimate portion are found in Article 25 et seq of the Inheritance Act.278 2. Who is entitled to a legitimate portion? The descendants, adopted children and issue, spouse and parents of the deceased are entitled to a legitimate portion of the estate of the deceased.279 The grandparents and siblings of the deceased can also be forced heirs if they do not have the capacity to work and are unable to sustain a livelihood.280 However, the people entitled to a legitimate portion follow the statutory order of inheritance; so if the spouse and children are alive then the second category of heirs will not receive a legitimate portion.281 3. What share of the estate are they entitled to? Descendants and the spouse are entitled to half of what they would have been entitled to under the rules of intestacy.282 Other parties entitled to a legitimate portion are entitled to one third of what they would have been entitled to under the rules of intestacy.283 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? It is possible to make a claim in connection to an inter vivos gift made by the deceased.284 Gifts that were given to non-heirs in the year prior to the death of the deceased will also be considered for the purpose of satisfying the legitimate

278 For an online version of the Slovenian Inheritance Act, see: http://www.pisrs.si/Pis.web/ pregledPredpisa?id=ZAKO317 (accessed 4 August 2016). 279 Article 25(1) of the Inheritance Act. 280 Ales Galic, Questionnaire, 15. 281 Ales Galic, Questionnaire, 15. 282 Article 26 of the Inheritance Act. 283 Article 26 of the Inheritance Act. 284 Ales Galic, Questionnaire, 15.

220  Annex IV portion unless their value is small.285 Gifts that were made to charities or for other philanthropic purposes are exempt from clawback for the purpose of satisfying the legitimate portion.286 5.

How is a claim to claw back a gift from a third party commenced? 537. The heir must request his forced share during the court probate procedure. However, in case that actual basis for the request between heirs is disputed, the probate court directs the party with the less likely right to file a lawsuit. Forced heir must claim a diminution of testamentary dispositions and, if forced, a return of gifts from the other beneficiary heirs. The probate court has no jurisdiction to decide on a request for the return of gifts if the recipients of the gifts are third people, not co-heirs, and as such not parties to the proceedings. The entitled forced heir has to claim his right in a way of a direct lawsuit. The forced heir will also have to file a direct lawsuit if he/she did not participate in the proceedings (Article 223 of the IA); if he/she did not file a lawsuit during the proceedings in accordance with court’s referral to the litigation, or if the court did not refer him to litigation unjustifiably (Article 213, paragraphs 4 and 5 of the IA); if reasons for a rehearing exist (Article 224 of the IA); or if there were no probate proceedings, because decedent had no property left at the time of death (emphasis added).287

6. How long is the limitation period for such a claim? Inter vivos gifts that were made to third parties in the year prior to the death of the deceased will be taken into account for the valuation of the estate and for claims for clawback.288 The gift that was made closest to the date of the death of the deceased will be clawed back first. Usual, small inter vivos gifts given by the deceased will not be considered for clawback.289 7. How long is the prescription period for such a claim? The prescription period for the protection of the legitimate portion is three years from the date of the death of the deceased.290 8.

Does the compensation claim made by the heirs assess the value of the gift as at the date the gift was made or at the date of death? The gift is valued at the date of the death of the deceased.291 Comment It is possible to claw back an inter vivos gift that was made to a third party, unless the gift is exempt, in order to satisfy the legitimate portion, if the gift was made in 285 Article 28(5) of the Inheritance Act. 286 Article 28(6) of the Inheritance Act. 287 Suzana Kraljić and Vesna Rijavec, Slovenia, Part III Ch. 3 in International Encyclopaedia of Laws: Family and Succession, (Aspen Publishers) (accessed Westlaw International, 13 February 2018). 288 Article 38 of the Inheritance Act. 289 Article 55 of the Inheritance Act. 290 Article 41 of the Inheritance Act. 291 Article 30 of the Inheritance Act.

Spain  221 the year immediately prior to the death of the deceased. This is an example of very restricted clawback.

X. Spain 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The rules relating to the legitimate portion and clawback are found within Articles 806–822 of the Spanish Civil Code and in the regional Civil Codes.292 2. Who is entitled to a legitimate portion and what share of the estate are they entitled to? The situation as to who is entitled to the legitimate portion and what share of the estate they are entitled to is more complex due to Spain being divided into different regions. However, most of the regions have a system for forced heirs to a greater or lesser extent, apart from Navarre, which appears to have forced heirship in name only.293 If there are no forced heirs the testator is free to dispose of all property. Article 806 of the Spanish Civil Code defines the legitimate portion as the portion that the testator cannot dispose of as it is reserved for heirs who are described within Article 807. The forced heirs include descendants, ascendants and spouse.

292 P Beaumont, J Fitchen and J Holliday, ‘The evidentiary effects of authentic acts in the Member States of the European Union, in the context of successions’ Study for the European Parliament Policy Department for Citizens’ Rights and Constitutional Affairs, (2016) 218: http://www.europarl.europa. eu/RegData/etudes/STUD/2016/556935/IPOL_STU(2016)556935_EN.pdf ‘Spain consists of multiple legal systems all of which belong to the civil law family. There are 17 Autonomous Communities and 2 Autonomous Cities (Ceuta and Melilla). Political and administrative powers are variously devolved and distributed between the central and the autonomous authorities. Six Autonomous Communities have their own Succession Laws, which coexist with the rules on succession contained in the Spanish Civil Code. Certain areas of Spanish law are however not devolved and Spanish legislation applies throughout Spain in these areas of law. The non-devolved areas of law include: procedural law (derecho procesal); Private International Law (derecho internacional privado); notarial law; and, land registration law. Equally, the provisions contained in the Spanish Civil Code may apply by default when an Autonomous Community either has no power to legislate in civil matters or has such a power but has not yet exercised it completely. The Spanish State has implemented the European Union Succession Regulation via various legislative provisions and amendments to its national laws and procedural rules.’ 293 ‘A summa divisio can be drawn between Spanish Systems which set a fixed share for the children and descendants that the testator cannot dispose of in favour of other people (Spanish Civil Code, ­Catalonia, Galacia, Balearic Islands, Aragon and part of the Basque Country) and those systems (Navarre and the Fuero of Ayala in the Basque Country) that give absolute freedom to the testator to exclude these forced heirs and appoint only the heirs he or she wishes.’ Sergio Cámara Lapuente, ‘Freedom of testation, Legal Inheritance Rights and Public Order under Spanish Law’ in M Anderson and E Arrroyo i Amayuelas, The Law of Succession: Testamentary Freedom (Europa Law Publishing, 2011) 273. For a comprehensive list of the situations for forced heirs in the different regions, see Sergio Cámara Lapuente, ibid, 271 et seq. Maria Font and Miriam Anderson, Questionnaire, Annex Q.9A.

222  Annex IV The rules describing the division of the legitimate portion are found within Article 808 and 809. The children are entitled to two thirds of the estate. But only one third of this is shared equally, whilst one third can be distributed according to the testator’s wishes. 3. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? Yes, once it is clear that the legitimate portion cannot be satisfied from the mortis causa beneficiaries, then it is possible for the person entitled to the legitimate portion to pursue a donee or donees with a claim in connection with an inter vivos gift.294 The inter vivos gift is taken into account when calculating the value of the estate for the purpose of identifying the percentage share of the legitimate portion.295 4. How is a claim to claw back a gift from a third party commenced? If it the clawback claim is not successful on an informal level between the parties, the person entitled to the legitimate portion is able to file a civil claim against the donee.296 The action to reduce gifts and bequests is on the basis of a lack of ­validity.297 The gifts and bequests lack validity if they undermine the legitimate portions of the forced heirs.298 Article 815. The forced heir who has been left less than the forced share which corresponds to him by the testator, pursuant to any title, may demand that his share be supplemented. Article  816. Any waiver or settlement regarding the future forced share between the person obliged to give it and his forced heirs shall be null and void, and the heirs may claim their share upon the decedent’s death; but they must bring to collation what they received in exchange for the waiver or settlement. Article 817. Testamentary dispositions which reduce the forced share of the forced heirs shall be reduced, at the request of the heirs, to the extent that they do not exceed the disposable portion. Article  818. In order to set the value of the forced share, the value of the property remaining at the time of the testator’s death shall be calculated, deducting any debts and liens, without including therein any which are imposed by the will. The value of any gifts capable of collation shall be added to the net value of the estate. Article 819. Gifts made to children, which are not betterments, shall be attributed to their forced share. Gifts made to strangers shall be attributed to the part of the estate of which the testator would have been freely able to dispose by testamentary disposition.



294 Maria

Font and Miriam Anderson, Questionnaire, 38. Font and Miriam Anderson, Questionnaire, 31. 296 Maria Font and Miriam Anderson, Questionnaire, 38. 297 Articles 636 and 817 of the Civil Code. 298 Spanish Notary, 26. 295 Maria

Spain  223 To the extent that they exceed the available share, they shall be reduced in accordance with the rules provided in the following articles. Article 820. After establishing the forced share in accordance with the two preceding articles, the reduction shall be made as follows: • Gifts shall be respected to the extent that the forced share is covered, reducing or annulling, if necessary, any bequests made in the will. • The reduction of bequests shall be pro rata, without any distinction whatsoever. If the testator should have provided that a certain legacy must be paid with preference to the rest, the former shall suffer no reduction until after having applied the latter in full for the payment of the forced share. • If the bequest should consist of a usufruct or life annuity, whose value is considered greater than the available portion, the forced heirs may choose between complying with the testamentary disposition or delivering to the legatee the part of the estate of which the testator could freely dispose.

5. How long is the limitation period for such a claim? The Spanish Civil Code does not set a limitation period for a claim of this nature, which means in theory that any inter vivos gift made by the deceased could be taken into account for the purpose of satisfying the legitimate portion. However, it does provide that the inter vivos gifts should be reduced in chronological order beginning with the gift that was made closest to the date of the death of the deceased.299 This also applies within the regions of Aragon, Balearic Islands, the Basque Country and Galicia.300 In contrast, the Catalan Civil Code restricts the limitation period to inter vivos gifts made by the deceased in the 10 years prior to his or her death, with the exception of inter vivos gifts that are subject to the rules of collation.301 6. How long is the prescription period for such a claim? General prescription periods vary greatly throughout the different regions within Spain with 30 years for personal claims in the Navarre region being the l­ ongest.302 There appear to be variable prescription periods for a clawback claim within the different regions in Spain. The Spanish Civil Code states that the period for prescription is four years from the date of the succession; however, Spanish case law leans towards five years being the appropriate period of time from the death of the deceased.303 There is uncertainty as to whether the general prescription period of 15 years304 should apply to clawback claims. Regionally, Article 451-24.2 of the Catalan Civil Code provides that the prescription period is four years from the death of the deceased even if the prescription period under Article  451-27.1 to



299 Maria 300 Maria 301 Ibid.

302 Maria

Font and Miriam Anderson, Questionnaire, 31. Font and Miriam Anderson, Questionnaire, 31.

Font and Miriam Anderson, Questionnaire, 38. Article 39 of the Compilation of Navarre. of the Spanish Civil Code; Maria Font and Miriam Anderson, Questionnaire, 38. 304 Article 1964 of the Spanish Civil Code. 303 Article 646

224  Annex IV demand the legitimate portion is 10 years from the death of the deceased.305 In the Aragon region the period of prescription for both the ability to claim the legitimate portion and to claim clawback of the inter vivos gift is five years.306 In the Navarre region, the claim to reduce an inter vivos gift is regarded as an action of rescission and the period of prescription is four years, subject to Article 34 of the Compilation.307 Comment Under Spanish law the inter vivos gifts made to third parties are attributed to the disposable part of the estate unless they exceed the legitimate share. If the legitimate portion is not satisfied by the act of collation or the reduction of bequests, only then can an inter vivos gift that has exceeded the legitimate portion be considered for reduction. For almost the past two decades, Spanish academic writing has shown a tendency towards supporting the reform of the forced share system to one of testamentary freedom. One recommendation of note, as to how the system could be reformed, points to the elimination of the forced heirship system and the creation of a new maintenance right against the estate or heirs. This would then be a discretionary, needs-based approach.308

Y. Sweden 1.

Where are the rules relating to the legitimate portion and clawback from a third party found? The rules relating to forced heirship are found within Chapter III of the Swedish Inheritance Code. 2. Who is entitled to a legitimate portion? The direct heirs (children and their issue) have a right to a legitimate portion of the estate.309 3. What share of the estate are they entitled to? The direct heirs are entitled to a portion of the estate. The spouse is entitled to receive from the estate of the deceased, if there are sufficient assets and once the spouse has received the division of matrimonial property, ‘an amount equal to four times the base amount under the National Insurance Act.’310 305 Maria Font and Miriam Anderson, Questionnaire, 38. 306 Ibid. Article 493 of the Aragon Civil Code. 307 Maria Font and Miriam Anderson, Questionnaire, 38. 308 Sergio Cámara Lapuente, ‘Freedom of testation, Legal Inheritance Rights and Public Order under Spanish Law’ n 293 above, 277. 309 Garb and Wood (n 4 above) 794. 310 Ibid. In 2015 the base amount under the National Insurance Act was SEK 44,500.

Sweden  225 4. Is it possible for a person entitled under a domestic legitimate portion rule to bring a claim in connection with a life-time gift made by the deceased to a third party that has diminished the value of the estate? Swedish law allows for the deduction of the value of inter vivos gifts for the purpose of collation between direct heirs only if it is expressly stated that the inter vivos gift was an advance.311 It is possible for a gift to be reduced for the purpose of collation if the donee (heir) was aware that the receipt of the gift was detrimental to the other heirs. There is a five-year prescription period for this.312 As far as third parties are concerned, it would appear that reductions of inter vivos gifts are kept for inter vivos gifts that are comparable to a will, eg the testator gifting property on his death bed. Chapter 7, section 4 of the Inheritance Code provides the following. If the deceased made a lifetime donation of property in such circumstances or on such terms that the purpose of the gift may be equated with that of a will, a direct heir shall be entitled to call for the adjustment of the gift in order to obtain his forced share (‘legal share’), unless there are special reasons to the contrary. And when the gift is abated, a corresponding part of the donated property shall be returned or, if this is not possible, compensation for its value be paid. For the purpose of calculating the forced share, the value of the donated property shall be added to the estate. If a direct heir wishes to enforce a right of this kind against the donee, that heir shall commence proceedings within one year of the inventory of the estate of the deceased being completed. If this time elapses without proceedings being commenced, the right of action shall be lost.313

Comment It would seem that the legitimate heirs are only protected against gifts to third parties mortis causa. Donatio mortis causa is a gift that becomes valid on the death of the donor. This type of gift does not fall within the definition of the inter vivos gift to a third party (ie a gift between two living parties) and is outside of the scope of this book. For the purpose of this book, Sweden shall be considered not to provide for clawback of an inter vivos gift to third parties to satisfy the legitimate portion.

311 Garb and Wood (n 4 above) 796. See p 728 of the following report on the scope of the applicable law: http://ec.europa.eu/civiljustice/publications/docs/report_conflits_suede.pdf. Also Chapter 3, section 3 of the Inheritance Act. 312 See Mikael Elinder, Oscar Erixson, Sebastian Escobar and Henry Ohlsson, ‘Estates, bequests, and inheritances in Sweden – A look into the Belinda databases’, Uppsala Centre for Fiscal Studies, Department of Economics, Working Paper 2014/14, 4: https://www.diva-portal.org/smash/get/diva2:766280/ FULLTEXT01.pdf (accessed 21 March 2017). 313 http://ec.europa.eu/civiljustice/publications/docs/report_conflits_suede.pdf, p 739 (accessed 4 August 2019).

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Bibliography  231 Waal, M, ‘A Comparative Overview’ in Kenneth GC Reid, Marius J de Waal and Reinhard Zimmerman (eds), Exploring the Law of Succession Studies National, Historical and Comparative (Edinburgh Studies in Law, 2007). Yassari, N, ‘Testamentary Formalities in Islamic Law and their Reception in the Modern Laws of Islamic Countries’ in Reid, de Waal and Zimmermann (eds), Comparative Succession Law Testamentary Formalities (Oxford University Press, 2015). Journal Articles Anton, A, ‘The Recognition of Divorces and Legal Separations’ (1969) 18 International and Comparative Law Quarterly 620. Augustin, M, ‘The Drafter’s Role in the Drafting Process’ (2013) 15(3) European Journal of Law Reform 177–205. Baerer, G and Mills, A, ‘TMC Asser and Public and Private International Law: The Life and Legacy of a Practical Legal Statesman’ XIII Yearbook of Private International Law 2011, 3–36. Beaumont, P and Bremner, P, ‘Inter-regional conflicts within the United Kingdom relating to private international law of succession – The development of the applicable law rule’ (2010) 54 Revista Valenciana d’Estudis Autonòmics 238–71. Beaumont, P and Tang, Z, ‘Classification of Delictual Damages – Harding v Wealands and the Rome II Regulation’ (2008) 12 Edinburgh Law Review 137–44. Bennett, TW, ‘The choice of law rules in claims of unjust enrichment’ (1990) 39 International Comparative Law Quarterly 136 (accessed via Westlaw). Boulanger, F, ‘L’affaire des “mineurs nordiques”: La Cour determine la residence habituelle et precise le regime des measures convertatoires’ (2009) Semaine Juridique 33. Carruthers, J, ‘Party Autonomy in the legal regulation of adult relationships: What place for party choice in international law?’ (2012) 61 International and Comparative Law Quarterly 881–913. Christandl, G, ‘Multi-Unit States in European Union Private International Law’ (2013) 9 Journal of Private International Law 231. Clive, E, ‘The Concept of Habitual Residence’ (1997) 109 Juridical Review 137. Dainow, J, ‘Limitations on Testamentary Freedom’ (1939–40) 25 Cornell Law Quarterly 337. Duckworth, A, ‘An offshore view of forced heirship: global conflict and its planning implications: Part 3’ [1995] Private Client Business 408. Falconbridge, JD, ‘Characterisation in the Conflict of Laws’ (1937) 53 The Law Quarterly Review 235–58. Fiorini, A, ‘Habitual Residence and the Newborn – A French Perspective’ (2012) 61 International and Comparative Law Quarterly 530–40. Forsyth, C, ‘“Mind the Gap”: A Practical Example of the Characterisation of Prescription/Limitation Rules’ (2006) 2 Journal of Private International Law 169–80. —— ‘Characterisation revisited: an essay in the theory and practice of the English Conflict of Laws’ (1998) 114 Law Quarterly Review 141. Harris, J, ‘The proposed EU regulation on succession and wills: prospects and challenges’ (2008) 22 Trust Law International 181 (Online – accessed via Westlaw) Hartley, T, ‘Review: Private International Law by AE Anton, Third edition by PR Beaumont and PE McEleavy’ (2012) 8 Journal of Private International Law 407. Hayton, D, ‘Determination of the Objectively Applicable Law Governing Succession to Deceaseds’ Estates’ DNotl, Les Successions Internationales dans l’UE, (2008) 359. Jayme, E, ‘Party Autonomy in international family and succession law: New tendencies’ XI Yearbook of Private International Law 2009 1–10. Kruger, T and Verhellen, J, ‘Dual Nationality = Double Trouble?’ (2011) 7 Journal of Private International Law 601. Lamont, R, ‘Habitual Residence and Brussels IIbis: Developing Concepts for European Private International Family Law’ (2007) 3 Journal of Private International Law 261, 276.

232  Bibliography Lein, E, ‘A Further Step Towards a European Code of Private International Law; The Commission Proposal for a Regulation on Succession’ XI Yearbook of Private International Law 2009 124–27. Maultzsch, F, ‘Party Autonomy in European private international law: uniform principle or contextdependent instrument?’ (2016) 12 Journal of Private International Law 466–91. Nagy, C, ‘What functions may party autonomy have in international family and succession law? An EU perspective’ (2012) 30 Nederlands Internationaal Privaatrecht 576–86. Oldham, M, ‘Financial Obligations Within the Family – Aspects of Intergenerational Maintenance and Succession in England and France’ (2001) 60 Cambridge Law Journal 128. Pascal, R, ‘Characterisation as an Approach to the Conflict of Laws’ (1940) 2 Louisiana Law Review 715–28. Pfeiffer, M, ‘Legal certainty and predictability in international succession law’ (2016) 12 Journal of Private International Law 566–86. Popelier, P, ‘Legal Certainty and Principles of Proper Law Making’ (2000) 2 European Journal of Law Reform 321–42. Rabel, E, ‘An Interim account on Comparative Conflicts Law’ (1948) 46 Michigan Law Review 625. Rogerson, P, ‘Habitual Residence the New Domicile?’ (2009) 49 International and Comparative Law Quarterly 88 Schuz, R, ‘Policy Considerations in Determining the Habitual Residence of a Child and the Relevance of Context’ (2001) 11 Journal of Transnational Law and Policy 26. —— ‘The Hague Child Abduction Convention: Family Law and Private International Law’ (1995) 44 International and Comparative Law Quarterly 771. Schwabach, A, ‘Of Charities and Clawbacks: The European Union proposal on Successions and Wills as a Threat to Charitable Giving’ (2011) 7 Columbia Journal of European Law 447–76. Sherbourne, AKE, ‘Restitution in the conflict of laws: characterization and choice of law in Australia’ (2017) 13 Journal of Private International Law 1–34. Silberman, L, ‘Brigitte M. Bodenheimer Memorial Lecture on the Family. Interpreting the Hague Abduction Convention: In Search of a Global Jurisprudence’ (2005) 38 University of California Davis Law Review 1049. Stibbard, P, ‘Middle East Succession Issues’, (2009) 15(10) Trusts and Trustees 765. Torga, M, ‘Characterisation in Estonian Private International Law – a proper tool for achieving justice between the parties?’ (2011) Juridica International 84. Van Meerbeeck, J, ‘The principle of legal certainty in the case-law of the European Court of Justice: from certainty to trust’ (2016) 41 European Law Review 275–88. Voermans, W, ‘Concern about the quality of Legislative Drafting’ (2009) 2 Erasmus law Review. Von Hein, J, ‘Conflicts between International Property, Family and Succession Law – Interfaces and regulatory Techniques’ (2017) 6 European Property Law Journal 142–57. Miscellaneous Hans van Loon, ‘The Hague Conference on Private International Law: Current Problems and Perspectives’ Lecture given at the Universidad del Pais Vasco (2002) available at: http://www.ehu. eus/cursosderechointernacionalvitoria/ponencias/pdf/2002/2002_1.pdf. The Status Table of the Hague Child Abduction Convention 1980. Available at: https://www.hcch.net/ en/instruments/conventions/status-table/?cid=24. Tenth Commission Reporter Mr Riccardo Monaco, ‘Testamentary Succession in Private International Law’, The Institute of International Law, Session of Nice 1967. Max Planck Institute for Comparative and International Private Law, Comments on the European Commission’s Proposal for a Regulation of the European Parliament and of the Council of 4 July 2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession. M Benton and M Petrovic, ‘How free is free movement? Dynamics and drivers of mobility within the European Union’ (2013) Migration Policy Institute Europe. Oliver Hawkins, Migration Statistics, House of Commons Library, 2 December 2016.

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234

INDEX administration of estate England and Wales  118–119 lex fori  118 adopted child Bulgaria  181 Croatia  183 Finland  190 legitimate portion  47 Lithuania  206 Slovenia  219 advance see also hotchpot; inter vivos gift inter vivos, to heir  4–5, 7, 8–9, 17–18, 49, 56 applicable law change of  128–129 characterisation and  76–77, 129–131, 165 clawback from third party, generally  30–32, 45 connecting factor see connecting factor cross-border cases, generally  4 determining  105–127 EU Succession Regulation  4, 8, 8n, 23, 25, 33–34, 43, 45–46, 51, 55, 77, 88, 97, 99–102, 104, 105–127, 128–131, 164 fairness, issue of  128, 130 habitual residence of deceased  4, 23, 44, 45, 46, 51, 77, 88, 93, 95, 99, 103, 105, 107, 128–129, 132–144, 154 Hague Conference on Private International Law  23 inter vivos gifts  18, 45, 106–127 legal certainty and  5, 33–34, 43–46, 107, 130 legitimate expectations  106–109, 166 lex successionis  77, 130 nationality of deceased  144–148 nature of claim  105–106 nature of gift  106 recommendations for new private international law  132–167 retroactivity  43–45, 88, 128, 164 succession law, generally  106, 128, 165

sui generis approach  126, 127, 130, 131–132, 131n, 165 third party, gifts to  106–127 Australia comparative analysis  53, 68–69 succession law  27, 42, 64, 69, 71 testamentary freedom  68 Austria charity, gifts to  60n child, clawback by  16 clawback  57, 58, 59, 60, 61, 70, 175–177 gifts to third party  57, 70, 175–177 inter vivos gifts  70, 175–177 legitimate portion  70, 175 limitation period  61, 176 prescription period  61, 176–177 Belgium calculation of legitimate portion  21–22 clawback  41, 57, 58, 59–60, 70, 177–181 gifts to third party  41, 57, 70 inter vivos gifts  70, 177–181 legitimate portion  41, 70, 177–179 limitation period  180 order of reduction  70 prescription period  61, 62, 70, 180 transfer/sale by donee  59–60 beneficiary meaning  14–15 Borràs Report  141–142 Bulgaria adopted children  181 clawback  57, 59, 70, 181–183 gifts to third party  57, 70 inter vivos gifts  70, 181–183 legitimate portion  70, 181–182 capacity to make gift children  138 recording  160 characterisation 1989 Hague Convention  80–86 applicable law, identification  76–77, 129–131, 165

236  Index character of gift  124–126 civil law tradition  75, 111 clawback against third party  111–124 collation and  23 comity between countries and  111 common law tradition  111 comparative approach  79–80 conflicting  77, 77n connecting factors  75, 76, 128 cross-border cases  75, 76–80 domicile  76 EU Succession Regulation  77, 80, 87–105 importance  76–77 legislative drafting and  35 lex causae  78, 78n, 79 lex fori  78, 78n, 79 meaning  75–76 nationality  76 residence  76 unjustified enrichment, as  115, 165 Waters Report  83–85 charitable donation EU Succession Regulation  10, 38, 60, 60n, 93, 158, 159 generally  8, 9, 60, 60n UK law  9, 38, 93 child see also family; heir; legitimate portion adopted see adopted child capacity to make gift  138 civil law tradition  40–41 England and Wales  41, 69, 117, 120 EU countries allowing claim by  59 evasion of duty to maintain  117 Germanic legal tradition  41 habitual residence  138 Hague Child Abduction Convention  29, 138–144 illegitimate  16, 47 Ireland  42, 65, 69 Nordic legal systems  41 Northern Ireland  41, 69 Scotland  67 second family, of  16 South Africa  66 choice of law connecting factor for  145 England and Wales  112, 112n escape clause  155–156 estate planning  151, 154–155 EU Succession Regulation  4, 39–40, 43–45, 51, 145, 146, 154–155

legal certainty and  4, 43, 128, 151 recommendations for new private international law  143, 151, 154–155 unjustified enrichment  115, 165 will made after gift transferred  45 civil law tradition see also individual countries characterisation  75 children  40–41 clawback, generally  5, 6–9, 21–22, 41–42, 49, 75, 111 common law tradition, reconciling  29, 54–55 creditor of estate  31 EU Succession Regulation  3, 54–55 family-centric approach  40–41, 49, 52, 72 legal certainty under  9 legitimate portion see legitimate portion Napoleonic Code  40 property conveyance  9 property passing on death  118 protected heirship  41 spouse  40–41 succession rights  40–41 testamentary freedom, restriction  6–7 valuation of fictive estate  49 civil partner England and Wales  120 legitimate portion  72–73 claimant generally  31 habitual residence  136–137, 151 Clarke, Kenneth  37, 37n, 169–170 classification see characterisation clawback 1989 Hague Convention  81–82, 83–86 anti-avoidance strategy, as  7 applicable law, identification  23 approaches to  41–42 Austria  57, 58, 59, 60, 60n, 61, 70, 175–177 Belgium  41, 57, 58, 59–60, 70, 177–181 bequests  49 Bulgaria  57, 59, 70 characterisation and see characterisation civil law tradition  5, 6–9, 21–22, 41–42, 49, 75, 111 collateral heir, from  56 collation and  4n, 6, 8–9, 16–19, 23, 91n, 165 common law tradition  5, 7–9, 41–42, 49–50, 92, 111, 112, 114 comparative analysis  49–74, 96

Index  237 conflict of laws  10–11, 23, 38–39, 53 contract law, characterisation as  114, 165 creditor of estate, to satisfy  6, 31, 108–109 Croatia  57, 58, 60, 60n, 70, 183–185 cross-border cases  10–11, 53, 111–112 Cyprus  41, 57, 58, 59, 61, 70, 185–187 defraud, gifts intended to  5, 7, 18–19, 32, 115–116 discretionary  41, 70, 115, 117, 130 disposable portion, gifts exceeding  49, 54, 59, 60, 62–63, 82, 82n donee’s title to gifted property  93 England and Wales  7, 14, 14n, 32, 42, 47, 55n, 66, 68, 71, 92–95, 93n, 112, 130 EU Succession Regulation  4, 10–11, 20, 23, 31–32, 37–39, 39n, 43–47, 51–74, 87–105, 106, 130 evasion of duty to maintain see maintenance, evasion of duty evasion of legitimate portion rules  45, 70 forced heirship and  81n France  11–14, 41, 52, 57, 58, 59, 60n, 61, 70, 192–194 French Civil Code  11–14 function  6–7 fundamental rights and  109–110 Germany  41, 57, 58, 59, 61, 70, 194–196 gifts excluded from  17, 18, 60, 62–63 Greece  57, 58, 60n, 61, 70, 196–198 heirs, from  4–15 hotchpot distinguished  4n, 6, 18, 20 initiating claim for  7, 49, 55, 82 insuring against  107 inter vivos gifts, generally  4, 17–22, 43–45, 49, 62–63, 106 international legal diversity  41–42, 54–56, 69–71, 164–166 Ireland  27, 41–42, 55n, 64–65, 71 irrevocable gifts excluded from  17, 18 Italy  41, 57, 58, 59, 61, 70, 202–203 Latvia  57, 58, 59, 70, 204–205 legal certainty and  43–45, 93, 128–129, 130 legitimate portion, to satisfy  5, 6–7, 18, 41, 49 lex situs for immoveable property  152, 153 limitation by donor  16 limitation period  7, 60–62 Luxembourg  57, 59, 70, 206–208 maintenance law, characterisation as  115–124, 165 meaning  4, 4n, 6, 16–21, 164, 165–166 monetary property  52, 59, 72

Netherlands  41, 57, 59, 61, 70, 209–212 non-heirs, from  4–15 Northern Ireland  42, 68, 71 notifying risk to donee  51 order of reduction  12, 21, 49, 70 Poland  41, 51, 57, 58, 59, 70, 212–214 Portugal  57, 58, 59, 70, 215–216 procedural law, meaning under  16–17, 19 property law, characterisation as  113–114 protection against disinheritance  49 purpose of provisions  130 real property  52, 59, 72 research methodology  25–30, 50–54 restitution issue, treatment as  111, 115, 129–131 retroactivity  8–9, 43–45, 88, 110, 128 Romania  57, 58, 59, 70, 216–217 Scotland  14n, 55n, 67, 92 Shari’a Law  72 Slovenia  57, 58, 59, 61, 70, 219–221 Spain  41, 57, 58, 59, 61, 70, 221–224 substantive law, meaning under  17–21 succession law, characterisation as  76, 77, 79–80, 111, 112–113, 117, 119, 124, 126–127, 128 third party, from  49, 56 triggering claim to  7 unjustified enrichment, characterisation as  115, 165 who can claim  57–59, 72–73 cohabitant English law  5, 41, 47, 159 evasion of duty to maintain see maintenance, evasion of duty generally  5, 7–8, 61 Northern Ireland  41 protected heirship regimes  41 collation 1989 Hague Convention  82, 84–85, 86 advances to legitimate heirs  17, 56 characterisation and  23 England and Wales  112, 112n equality/fairness between, creation  4–5, 7, 8, 19, 165 EU Succession Regulation  10, 56, 91, 91n, 93–94, 104 French Civil Code  11–14 function  18, 165 generally  4n, 6, 8–9, 16–19, 23, 91n, 165 gifts not subject to  18 inter vivos gifts  5, 7, 8–9, 17–18, 56, 64 rapport des libéralités  5, 13

238  Index Scots law  38n South Africa  66 triggering claim to  7 United Kingdom and  91 comity between countries characterisation and  111 principle, generally  30, 39, 78n, 80, 111, 111n, 127, 163 protection  73 common law tradition see also individual countries characterisation of clawback claim  111 civil law tradition, reconciling  29, 54–55 clawback, generally  7–9, 41–42, 49–50, 92, 111, 112, 114 cohabitants  5, 41 dependants  5, 7–8, 14, 41 disinheritance, prevention  7–8, 49 domicile as connecting factor  154 EU Succession Regulation  41–42, 54–55, 92 evasion of duty to maintain see maintenance, evasion of duty hotchpot  20 inter vivos gifts  49–50, 75–76 non-heirs, clawback from  5, 7–8 protection of property rights  76 spouse  40, 41 succession rights  5, 40 testamentary freedom  40, 41, 92, 116 valuation of estate  5, 9 conflict of laws clawback of inter vivos gifts  10–11, 23 cross-border  53 EU Succession Regulation  10–11, 38–39, 42 restitution and  115 connecting factor 1989 Hague Convention  132–133 characterisation and  75, 76, 128 choice of law, for  145 domicile  76, 132, 148–149, 154 escape clause  155–156 EU Succession Regulation  128, 132–145, 149–150n, 153, 154 habitual residence of deceased  76, 128, 132–144, 145, 149–150n, 150–151, 153, 154–156 legal certainty and  128, 136, 151 moveable property  149–151 nationality  76, 132, 144–148, 153, 154–155 recommendations for new private international law  132–151, 154–155, 162–163

contract law characterisation of clawback claim as  114, 126–127, 129–131, 165 Court of Justice of the European Union (CJEU) gaps in EU law  39 creditor of estate clawback to satisfy  6, 31, 59, 108–109 forced heir as  59, 73 habitual residence  151 legitimate expectation  108–109 treatment of right-holder as  52 valuation of fictive estate  21 Croatia adopted children  183 charity, gifts to  60n clawback  57, 58, 60, 60n, 70, 183–185 EU Succession Regulation  55 gifts to third party  57, 70, 183–185 inter vivos gifts  70, 183–185 legitimate portion  70, 183–184 limitation period  60, 184 prescription period  184 cross-border cases see also comity between countries applicable law see applicable law characterisation  75, 76–80 choice of law see choice of law clawback  10–11, 53, 111–112 conflict of laws  53 estate planning  1–2 EU Succession Regulation  4, 10–11, 167 gift to third party  8 increasing number  1–2 testator changing nationality  4 UK, generally  30–31, 30n Cyprus clawback  41, 55n, 57, 58, 59, 61, 70, 185–187 EU Succession Regulation  91, 93–95, 93–95n evasion of duty to maintain  41, 57, 70, 187 gifts to third party  41, 70, 185–187 legitimate portion  41, 70, 185–186 limitation period  61, 186 succession rules  56, 57 Czech Republic legitimate portion  70, 187–188 succession rules  56, 57, 70, 187–188

Index  239 defraud gift intended to see maintenance, evasion of duty Denmark clawback provisions  27, 55n comparative analysis  53, 64 EU Succession Regulation and  23n, 27, 55, 64 forced heirship  68 legitimate portion  70 succession rules  64, 70 dependant England and Wales  5, 7–8, 14, 55n, 68, 69, 120 evasion of duty to maintain see maintenance, evasion of duty legal certainty for  46–47 legitimate expectation  47 Northern Ireland  41, 68, 69 unrelated  59 discrimination fundamental rights and  109 disinheritance common law tradition  92 European Union  92 Ireland  41–42, 65 lawful  49, 49n protection against  7–8, 22–23, 42, 49 testamentary freedom and  92 disposable portion calculation  18, 21–22, 49 change of  129 gifts exceeding  49, 54, 59, 60, 62–63, 82, 82n domicile characterisation and  76 connecting factor  76, 132, 148–149, 154 England and Wales  47, 118 inter vivos gifts and  10–11 meaning  148 scission and  148n, 149 wife, of  149 donee see also gift to third party; inter vivos gift charities  8, 9, 10, 60, 60n claims against  31 collateral heir as  8, 56 contractual relationship  114 cross-border cases  8 death  73 English law clawback provisions  7–8 EU Succession Regulation  105

generally  31 gift of property by  31 heirs of  31, 73, 108 institutions  8 insuring against clawback  107 legal certainty for  4, 33, 46, 93, 107–108, 129, 154–155, 156, 160–161 legitimate expectation  107–108, 109 notifying donee of risk of clawback  51, 107 obligation of donor  115 relationship with heir  124 subsequent donee/buyer  107–108 title to gifted property  93 transfer/sale of property by  15–16, 31, 59–60, 73, 107–108 unjustified enrichment  115, 165 donor change of habitual residence  44, 45, 51, 74, 105, 107, 128–129, 137–138 choice of law  154–155 choosing lex successionis  107 contractual relationship  114 estate planning see estate planning evasion of duty to maintain see maintenance, evasion of duty generally  31 gift to third party see gift to third party habitual residence  3–4, 23, 46, 76, 77, 88, 93, 95, 103, 105, 107, 128–129, 132–144 informing heirs of property transfers  51 legal certainty for  33, 45–46, 107, 128, 137, 154–155, 159–160 legitimate expectation  74, 107, 109 multiple habitual residences  99, 134, 135, 136, 137, 138, 143–144 nationality  144–148 no habitual residence  134, 135, 136, 137, 138–143 notifying donee of risk of clawback  51, 107 obligation to donee  115 drafting see legislative drafting England and Wales see also Inheritance (Provision for Family and Dependants) Act 1975 administration of estates  118–119 adult children  69 charitable donations  9, 38, 93 children  41, 69, 117, 120 choice of law  112, 112n civil law clawback provisions and  9

240  Index civil partner  120 clawback provisions  7, 14, 14n, 32, 42, 47, 55n, 66, 68, 71, 92–95, 93n, 112–113, 116–124, 130 cohabitant  5, 41, 47, 159 collation  112, 112n common law tradition  7, 92, 112–113 comparative analysis  68, 69 cross-border clawback  30–31, 30n dependant, generally  120 dependant in need of financial provision  5, 7–8, 14, 55n, 68, 69, 115–124 domicile  47, 118 EU Succession Regulation and  9–11, 24–25, 50–51, 93–95, 93–95n, 97n, 98–104, 167 evasion of duty to maintain  5, 7–8, 14, 32, 40n, 42, 47, 55n, 66, 68, 69, 71, 113, 115–124 French law compared  14 gifts to third party  42, 55n, 66, 68 heritable property  41 hotchpot see hotchpot immoveable property  107, 113–114, 125, 149 intangible moveable property  125–126 inter vivos gift, meaning  15, 15n intestacy  116–117, 125 Land Register  9 lex situs  113–114, 125, 149 life insurance policies  9 limitation period  55n, 66, 113, 119 maintenance, duty generally  120 moveable property  114, 125–126, 149 nationality  118 non-heirs  7–8, 117, 124, 130 pension policies  9 pre- and post-nuptial agreements  122 property conveyance  9 property which may be clawed back  14 scission  149 spouse  41, 120 succession law and property law, conflict between  14n, 15, 112 testamentary freedom  41, 42, 68, 92, 93, 112–114, 116–117 title to property  9, 93 tort law  114 trust law  9, 93 validity of gift  125–126 estate administration  118–119 creditors see creditor of estate

disposable portion  18, 21 fee share  16 legitimate portion see legitimate portion valuation see valuation of fictive estate estate planning 1989 Hague Convention  86, 86n choice of law  151, 154–155 cross-border  1–2, 24, 33 EU Succession Regulation  45, 107 generally  23 inter vivos trusts  9 legal certainty  33, 107, 128, 151, 154–155, 159–160, 164 legitimate expectation  107 Estonia legitimate portion  41, 70, 188–189 succession rules  57, 70, 188–190 EU Succession Regulation Article 23  87, 87n, 104 Article 25  153 Recital 7  43, 45 Recital 14  20, 87 Recital 24  143 Recital 25  140 1989 Hague Convention and  87 2010 Proposal  89, 91, 93–95, 93–95n 2011 Proposal  95–100, 95–96n adoption  104 aims  25, 43, 45, 103, 105 applicable law rule  4, 8, 8n, 23, 25, 33–34, 43, 45–46, 51, 55, 77, 88, 97, 99–102, 104, 105–127, 128–131, 164 characterisation and  77, 80, 87–105, 128–131 charitable donations  10, 38, 60, 60n, 93, 158, 159 choice of law  4, 39–40, 43–45, 51, 103, 115, 145, 146, 154–156 civil and common law traditions  3, 41–42, 54–55 clawback, generally  4, 10–11, 20, 23, 31–32, 33, 36, 37–39, 39n, 43–47, 51–74, 87–105, 130 clawback from third party  23, 43–45, 55, 56, 59–60, 88–105 clawback negotiations timeline  91–105 collation  10, 56, 91, 91n, 104 comparative analysis of clawback rules  49–74, 96 conflict of laws  10–11, 42, 53, 77 connecting factor  128, 133–145, 149–150n, 153, 154

Index  241 cross-border cases  4, 10–11, 24, 53, 167 dependants  46–47 donee  46, 105, 129 donor  45–46, 128 escape clause  155–156 estate planning  45, 107, 128 fairness, issue of  128, 130 family, differing concepts of  40–41 family-centric approach  143 Franco/Germanic bias  42, 89 free share  45 generally  3, 10–11 German Notaries’ preparatory report  56, 89 habitual residence of deceased  4, 23, 44, 45, 46, 51, 77, 88, 93, 95, 99, 103, 105, 107, 128–129, 132–144, 149–150n, 150–151, 153, 154–155, 166 immoveable property in EU state  23, 107 initiating claim for clawback  49, 55 inter vivos gifts  3–4, 43–47, 60, 87–106 legal certainty and  4, 32, 39–40, 43–47, 107, 128–129, 130 legal diversity within EU  41–42, 54–56, 69–74, 164–166 legitimate expectation  106–109, 166 legitimate heir  46–47, 105 legitimate portion  45, 46–47, 54, 59, 74, 90–91, 105 lex successionis  20, 25, 51, 77, 130 Max Planck Institute comment on proposals  99–100, 105, 105n, 106, 130–131, 130n member states not bound by  23n monetary property  59, 114 monetary value  114 nature of claim  105–106 nature of gift  106 non-EU nationals  23 non-member states  77 non-opted in states  55, 64–65, 66–68, 91, 159, 167 Paisley’s report  3n, 9, 18–19, 27, 50–51, 54, 96 political policies, influence  25, 36–39, 132, 136, 153, 154 preparation and drafting  10–11, 24–25, 29, 31, 35–40, 42, 48, 50–52, 55–56, 87, 89–127, 165 prescription period  90 real property  59 research methodology  25–30, 50–54 retroactive nature  88, 110, 128, 164

scission, abolition  149, 149–150n, 152 states joining post-2004  25, 31, 48, 55, 56, 56n, 89–90, 89n, 104–105 testamentary freedom  52, 105 testator changing nationality  4 third party, definition  23n, 159 UK law and  9–11, 23n, 24–25, 36–39, 91, 92–95 unity of succession principle  149, 152 weaknesses  3–4, 24–25, 36–39, 87, 89–90, 91n, 104–105, 128–131, 164 who can claim be brought against  59–60 who can claim for clawback  57–59 European Convention on Human Rights (ECHR) property ownership  110 right to inherit  47 European Union Charter of Fundamental Rights  110 Green Paper on Succession and wills  92 harmonisation within, generally  42 legal certainty principle  43 legitimate expectation principle  43 non-retroactivity principle  43–45, 110 res judicata principle  43 Succession Regulation see EU Succession Regulation evasion of duty to maintain see maintenance, evasion of duty executor administration of estate  118–119 family see also child; heir; spouse civil law tradition  40–41, 49, 72 definition  72 differing concepts of  40–41 evasion of duty to maintain see maintenance, evasion of duty Germanic legal tradition  41 legitimate portion concept  6–7 Nordic legal systems  40, 41 property/family hierarchy  6 protected heirship regimes  41 succession law and  1 Finland adopted children  190 legitimate portion  41, 70, 190–191 succession rules  57, 70, 190–191 forced heir clawback and  81n creditor of estate, as  59

242  Index Denmark  68 EU Succession Regulation and  54–55, 105 generally  22 Ireland  41–42, 65, 68–69, 71 legitimate portion see legitimate portion needs based approach  55 Roman law  54 Scotland  41, 50, 55n, 68, 92 Shari’a Law  72 Slovakia  70, 81n, 218–219 Spain  57, 57n, 221–224 valuation of fictive estate  18n France 2006 reforms  11, 15n, 52, 91n charitable gifts  60n clawback  11–14, 41, 52, 57, 58, 59, 60n, 61, 70, 192–194 education costs for descendants  12 English law compared gifts to third party  41, 57, 192–194 institutions, gift to  12 inter vivos gifts  11–14, 15n, 60, 70, 192–194 legitimate heirs  12 legitimate portion  12–13, 41, 52, 70, 192–193 limitation period  193 living costs for descendants  12 maintenance, expectation of  120 Napoleonic Code  40 prescription period  61, 193 rapport des libéralités  5, 13 réduction des libéralités  5, 13 registered transfers  11, 11n, 60, 63, 63n spouse  40 testamentary bequests  12 waiver of right by heir  52 fundamental rights legitimate expectations and  109–110 pragmatic approach to law  29–30, 109 Germanic legal tradition children  41 spouse  41 Germany clawback  41, 57, 58, 59, 61, 70, 194–196 date at which gift valued  62 gifts to third party  41, 57, 194–196 inter vivos gifts  70, 194–196 legitimate portion  41, 70, 194–195 limitation period  61, 195 prescription period  61, 196

gift to third party see also inter vivos gift 1989 Hague Convention  81–82, 83–86 applicable law  18, 23, 33–34, 45, 105–127 Austria  57, 70, 175–177 Belgium  41, 57, 70, 177–181 Bulgaria  57, 70, 181–183 character of gift  124–126 charity as donee  8, 9, 10, 60, 60n child’s capacity to make  138 choice of law and  45, 128 clawback, generally  8–9, 17–22, 45–47, 49, 56, 59–60, 106 conflict of laws  10–11, 23 Croatia  57, 70 cross-border cases  8 Cyprus  41, 57, 70, 185–187 date of valuation  62 death of donee  73 domicile and  10–11 donee-heir relationship  124 donee unaware of risk  73 donor  31 England and Wales  42, 55n, 66, 68, 116–124 EU Succession Regulation  23, 43–45, 55, 56, 59–60, 60n, 87–105, 106 exceeding disposable portion  49, 54, 59, 60, 62–63, 82, 82n excluded  72 France  41, 57, 192–194 Germany  41, 57, 194–196 gift to heir compared  4–5, 8–9 Greece  57, 196–198 habitual residence of deceased  3–4, 23, 45, 77, 107, 128–129, 132–144 hotchpot  63 Hungary  199–202 institution as donee  8 inter vivos gifts to heirs and  8, 17 Ireland  41–42, 64–65, 71 irrevocable  18 Italy  41, 57, 202–203 Latvia  57, 204–205 legal certainty  33, 43–47, 73, 107–108 legitimate expectation of donee  73, 107–108 Luxembourg  57, 206–208 Malta  208–209 moral purpose, gifts with  60 Netherlands  41, 57, 209–212 Northern Ireland  42, 55n, 68

Index  243 notifying risk to donee  51, 73 Poland  41, 57, 212–214 Portugal  57, 215–216 retroactivity and  8–9, 43–45, 88, 110, 128 Romania  57, 216–217 Shari’a Law  72 Slovenia  57, 219–221 Spain  41, 57, 221–224 transfer/sale by donee  15–16, 31, 59–60, 73, 107–108 UK law  9 validity of gift  124–126 valuation  27, 49, 62–63 who can claim be brought against  59–60 who can claim for clawback  57–59, 72–73 Gorjat v Gorjat  125–126 grandchild EU countries allowing claim by  59 grandparent Croatia  58, 73 great-grandparent Greece  57, 73 Greece clawback  57, 58, 60n, 61, 70, 196–198 gifts to third party  57, 196–198 inter vivos gifts  70, 196–198 legitimate portion  70, 196–197 limitation period  61, 198 prescription period  62, 198 habitual residence acquisition  140–141 centre of interests test  135n, 142 change of  44, 45, 51, 74, 88, 105, 107, 128–129, 137–138 characterisation and  76 child, of  138 claimant, of  136–137, 151 connecting factor, as  76, 128, 132–144, 145, 149–150n, 150–151, 153, 154–156 creditor, of  151 deceased, of  3–4, 23, 46, 76, 77, 88, 93, 95, 103, 105, 107, 128, 132–144 deceased’s choice of law  88 determining  134, 139–144 escape clause  155–156 EU Succession Regulation  4, 23, 44, 45, 46, 51, 77, 88, 93, 95, 99, 103, 105, 107, 128–129, 132–144, 149–150n, 150–151, 153, 154, 166 meaning  134–135, 141–144 moveable property  150–151

multiple habitual residences  99, 134, 135, 136, 137, 138, 143–144 no habitual residence  134, 135, 136, 137, 138–143 personal connection  140, 140n recommendations for new private international law  152–153, 158, 162–163 retroactive application  4 Hague Conference on Private International Law aim  2, 39 applicable law and  23 legal certainty  39 pragmatic approach  28–29 Hague Convention on the Applicable Law to the Succession to the Estate of Deceased Persons 1989 aim  86 Article 1(2)(d)  85 Article 7  83–84, 83n Article 7(2)  85 Article 7(2)(c)  82, 84 Article 7(3)  84–85 changes in substantive law over time  146–147 characterisation  80–86 clawback provisions  81–82, 83–84 collation  82, 84–85, 86 connecting factor  132–133 generally  3, 27, 32 lex situs  81–82 non-ratified status  80–81, 86, 152 preparation and drafting  81–82, 165 scission, abolition  149 unity of succession principle  149, 152 Waters Report  82, 83–85, 86 Hague Convention on the Civil Aspects of Child Abduction 1980  29, 138–144 Hague Convention on the Conflicts of Laws Relating to the Form of Testamentary Dispositions 1961  2–3 heir collateral  8, 56 donee’s  31, 73, 108 forced see forced heir; legitimate portion gift intended to defraud see maintenance, evasion of duty legitimate see legitimate heir legitimate portion see legitimate portion

244  Index maintenance see maintenance, evasion of duty meaning  159 relationship with donee  124 heritable property England and Wales  41 hotchpot clawback distinguished  4n, 6, 18, 20 England and Wales  38n, 112n function  18 inter vivos gifts, generally  64 meaning  6, 20 human rights see fundamental rights Hungary legitimate portion  70, 199 limitation period  200 prescription period  200 succession rules  57, 70, 199–202 illegitimate child legitimate portion  16, 47 inherit discrimination and  109 right to inherit  47, 109 Inheritance (Provision for Family and Dependants) Act 1975 case law  120–121 clawback under  119–124 court powers  121–122 domicile of deceased  47, 148 generally  7–8, 14, 27, 37, 40n, 66, 113 pre- and post-nuptial agreements  122 Section 10  122, 122–123n statutory interpretation  121–124 testamentary freedom, limitation  116–117 insolvency generally  31 institution, gift to French Civil Code  12 generally  8 inter vivos gift see also gift to third party 1989 Hague Convention  81–82, 83–86 applicable law  18, 23, 33–34, 45 Austria  70, 175–177 Belgium  70, 177–181 Bulgaria  70, 181–183 calculation of fictive estate  15–16, 21–22, 49 character of gift  124–126 charitable  8, 9, 10, 60, 60n, 93, 158, 159 choice of law and  45

chronological order, reduction in  12, 21 civil law tradition  49 clawback from see clawback collation  5, 8–9, 17–18, 56, 64, 91 common law tradition  49–50, 75–76 contracting gift out of fictive estate  15–16 Croatia  70, 183–185 date of valuation  62 death of donee  73 domicile and  10–11 donee  31, 93 donee-heir relationship  124 donor  31 England and Wales  15n, 55n, 66, 68, 116–124 EU Succession Regulation  3–4, 23, 43–47, 55, 60, 87–106 evasion of duty to maintain see maintenance, evasion of duty exceeding disposable portion  49, 54, 59, 60, 62–63, 82, 82n excluded  72 fictive estate including  15–16, 18, 20, 41, 105, 106 France  11–14, 15n, 60, 60n, 70, 192–194 Germany  70, 194–196 Greece  70, 196–198 heir, to  4–5, 7–9, 17–18 hotchpot  64 Hungary  199–202 intention to defraud see defraud, gift intending to irrevocable  17–18 Italy  70, 202–203 Latvia  70, 204–205 legal certainty  33, 43–47, 93, 107–108, 128 legitimate expectation see legitimate expectation legitimate portion and see legitimate portion Luxembourg  60, 60n, 70 maintenance of dependants  19, 68 Malta  208–209 meaning  15–16, 60, 72, 158–159 moral purpose, gifts with  60 nature of gift, applicable law  106 non-heir, to  4–5, 7–8, 13 Northern Ireland  55n, 68 Poland  70, 212–214 Portugal  70, 215–216 rapport des libéralités  5, 13 reduction  4, 16–17 réduction des libéralités  5, 13

Index  245 registered  11, 11n, 15, 15n, 49, 60, 70 retroactivity and  8–9, 43–45, 88, 110, 128 Romania  70, 216–217 Slovenia  70, 219–221 South Africa  66 Spain  70, 221–224 third party, to see gift to third party transfer/sale by donee  15–16, 31, 59–60, 73, 107–108 UK law  15, 32n, 91, 93 validity  93, 124–126 valuation  27, 54, 62–63 who can claim be brought against  59–60 who can claim for clawback  57–59, 72–73 International Covenant on Civil and Political Rights  110 intestacy England and Wales  116–117, 125 Ireland children  42, 65, 69 clawback  27, 41–42, 55n, 64–66, 71 comparative analysis  53, 64–66 EU Succession Regulation and  23n, 27, 55, 66, 91, 93, 97n, 98–103 forced heirship  41–42, 65, 68–69, 71 gifts to third party  41–42, 71 legitimate portion  41–42, 71 limitation period  65, 69 Northern see Northern Ireland protection against disinheritance  41–42, 65 spouse  42, 65, 69, 71 succession rules  64–66 testamentary freedom  42 Italy clawback  41, 57, 58, 59, 61, 70, 202–203 gifts to third party  41, 57, 202–203 inter vivos gifts  70, 202–203 legitimate portion  41, 70, 202–203 limitation period  61, 203 prescription period  203 Justinian legitimate portion concept  6 Lagarde, Paul  17, 88–89, 147, 153 Lambton v Lambton  19, 20–21 Latvia clawback  57, 58, 59, 70, 204–205 gifts to third party  57, 204–205 inter vivos gifts  70, 204–205 legitimate portion  70, 204–205

legal certainty aim of legislative drafting  39 applicable law and  5, 33–34, 43–46, 107, 130 choice of law and  4, 43–45, 128, 151 civil law rules, generally  9 clawback and  43 connecting factor and  128, 136, 151 cross-border estate planning  33 dependants  46–47 donee  4, 33, 46, 93, 107–108, 129, 154–155, 156, 160–161 donee’s heir  108 donor  33, 45–46, 107, 128, 137, 154–155, 159–160 estate planning and  33, 107, 128, 151, 154–155, 159–160, 164 EU Succession Regulation  4, 32, 39–40, 43–47, 107, 128–129, 130 gifts to third party  33, 43–47 Hague Conference  39 heirs  5, 46–47, 54 inter vivos gifts  33, 43–47 legitimate expectation  43–45, 107–109 legitimate heir  108 lex situs for immoveable property  152, 153 limitation periods and  69 prescription period and  108 principle, generally  43–45 property conveyance  9 protection of principle within EU  43 recommendations for new private international law  159–161, 164 res judicata principle  43 retroactivity and  43–45, 128, 151 rule of law and  43 third party buyers  73 legislative drafting comparative research  40–42, 48 conflict of laws  38–39 EU Succession Regulation  10–11, 24–25, 29, 31, 35–40, 55–56 expertise required  35 generally  31 legal certainty  39 legal diversity and  40–42, 164–165 political policies, influence  25, 36–39, 132, 136, 153, 154 private international law  36, 39 legitimate expectation applicable law and  106–109, 166 dependants  47

246  Index donee  107–108, 109 donee’s heir  108, 109 donor  74, 107 estate planning  107 fundamental rights and  109–110 identifying  106–109 legal certainty  43–45, 106–109 legitimate heir  11, 46–47, 108, 109 principle, generally  43–45 protection of principle within EU  43 recommendations for new private international law  164, 167 subsequent donee/buyer  107–108 third party creditor  108–109 third party donee  73 legitimate heir adopted child  47 advance to  17, 56 changes  129 clawback from  4–15 collateral  7, 8–9, 18–19, 56, 64 disinheritance  49, 49n donee, of  31, 73, 108 equality/fairness between, creation  4–5, 7, 8, 19 EU Succession Regulation  46–47, 105 French Civil Code  12 generally  17–18, 23, 41, 46–47 gift to non-heir compared  4–5, 8–9 illegitimate child  16, 47 informing of property transfers  51 initiating claim for clawback  49, 55 inter vivos gift/advance to  4–5, 7, 8–9, 17–18, 49, 56 legal certainty for  5, 46–47, 108 legitimate expectation  11, 46–47, 108, 109 living costs, treatment  12 meaning  14–15, 129, 159 protected  41, 49 right to inherit  47 second family  16 statutory  14 triggering claim by  7 waiver of right by  52 who can claim for clawback  57–59, 72–73 legitimate portion adopted children  47 Austria  70, 175 Belgium  21–22, 41, 70, 177–179 Bulgaria  70, 181–182 calculation  20–22, 49, 62

civil law, generally  49 civil partner  72 clawback to satisfy  5, 6–7, 18–19, 41, 165 creditor of estate, treatment of right-holder as  52 Croatia  70, 183–184 Cyprus  41, 70, 185–186 Czech Republic  70, 187–188 debts of deceased  21 Denmark  70 equality between heirs  4–5, 7 Estonia  41, 70, 188–189 EU Succession Regulation  45, 46–47, 59, 90–91, 105 evasion of rules  45 Finland  41, 70, 190–191 fixed or abstract shares  72 forced heirs  22 France  41, 52, 70, 192–193 free share  45 French Civil Code  12–13 function  6–7 generally  22, 31, 49, 72, 74 Germany  41, 70, 194–195 gift to third party and  18 Greece  70, 196–197 Hungary  70, 199 illegitimate children  16, 47 initiating claim for clawback  49, 55 inter vivos gift to third party and  18–19 Ireland  41–42, 71 Italy  41, 70, 202–203 Latvia  70, 204–205 Lithuania  70, 205–206 Luxembourg  59, 70, 206–207 Malta  70, 208–209 Netherlands  209–211 Poland  41, 70, 212–213 Portugal  70, 212 réduction des libéralités  5, 13 reserved share  49, 52, 59, 72 Roman law  6, 54 Romania  70, 216–217 Scotland  41, 70, 92 second family  16 Slovakia  41, 70, 81n, 218–219 Slovenia  70, 219–220 Spain  41, 70, 221–222 spouse  69, 72 Sweden  41, 70, 224–225 testamentary freedom, restriction by  6–7 valuation of fictive estate  20–21, 49

Index  247 valuation of gift  62 who can claim for clawback  57–59, 72–73 lex causae characterisation  78, 78n, 79 lex fori administration of estate  118 characterisation  78, 78n, 79 lex situs 1989 Hague Convention  81–82 England and Wales  113–114, 125, 149 evasion of legitimate portion rules  45, 73–74 overriding mandatory rules  147 recommendations for new private international law  152, 153, 162–163 scission  148, 149, 150–151 lex successionis donor choosing  107 EU Succession Regulation  20, 25, 43, 51, 77, 130 life insurance policy UK law  9 limitation period Austria  61, 176 Belgium  180 Croatia  60, 184 Cyprus  61, 186 England and Wales  55n, 66 France  193 generally  7, 60–62 Germany  61, 195 Greece  61, 198 Hungary  200 international diversity  72, 164 Ireland  65 Italy  61, 203 legal certainty and  69 Luxembourg  207 Netherlands  211 Poland  214 Portugal  216 Romania  217 Slovenia  61, 220 Spain  61, 223 Lithuania adopted children  206 legitimate portion  70, 205–206 succession rules  57, 70, 205–206 Loon, Hans van  81 Luxembourg

clawback  57, 59, 70, 206–208 gifts to third party  57, 206–208 inter vivos gifts  60, 70, 206–208 legitimate portion  59, 70, 206–207 limitation period  207 prescription period  62, 207 registered transfers  63, 63n maintenance, evasion of duty Australia  68, 69 case law  120–122 characterisation of law  119–124 children  117 claim, generally  117, 119n cohabitant  5, 41, 49, 117, 159 common law tradition  5, 7–8, 40, 50, 76, 115–116 concept of duty to maintain  119–120 Cyprus  41, 57, 70, 187 definition of maintenance  120–124 dependants  5, 7–8, 14, 41, 47, 49 discretionary approach to clawback  7–8, 115, 117, 119 domicile of deceased  47, 148 England and Wales  14, 32, 40n, 42, 47, 55n, 66, 68, 69, 71, 113, 116–124 former spouse  117 inter vivos gift to third party  19 limitation period  7, 14, 113 nature of claim under 1975 Act  119–124 needs based approach  7–8, 55, 115, 119, 121–122 non-family members  7–8, 117 non-heirs  7–8, 117, 124, 130 Northern Ireland  42, 55n, 68, 69, 71 pre- and post-nuptial agreements  122 proof of evasion  55n, 113 South Africa  69 spouse  117 statutory interpretation  121–124 time limit for gifts made  7 maintenance issue characterisation of clawback claim as  76, 79–80, 115–124, 126–127, 129–131, 165 Malta gift to third party  208–209 inter vivos gifts  208–209 legitimate portion  70, 208–209 succession rules  57, 70, 208–209 Mercredi v Chaffe  141, 142–143 Metallinos, A  129

248  Index Micheletti … v Delegación del Gobierno en Cantabria  146 minor see child Moore v Moore  120–121 moral purpose, gift with  60 mortgage gifted property, over  9, 60, 73, 107 Napoleonic Code  40 nationality 1930 Hague Convention  146 characterisation and  76 closest connection test  146, 148 connecting factor  76, 132, 144–148, 153, 154–155 determining  146–147 dual/multiple nationality  145, 146–147 England and Wales  118 multi-unit states  147–148 stateless individuals  145 Netherlands clawback  41, 57, 59, 61, 70, 209–212 gifts to third party  41, 57, 209–212 legitimate portion  209–211 limitation period  211 prescription period  61, 70, 211 non-heir clawback from  4–15 evasion of duty to maintain  7–8, 117, 119, 124, 130 inter vivos gift to  4–5, 7–8, 13 Nordic legal systems children  41 family  41 spouse  40, 41 Northern Ireland children  41 clawback provisions  42, 55n, 68, 71 cohabitants  41 comparative analysis  68, 69 dependants  41, 68 evasion of duty to maintain  42, 55n, 68, 69, 71 generally  50 gifts to third party  42, 55n, 68 inter vivos gifts  55n, 68 spouse  41 succession law  68 testamentary freedom  68 time limit for gifts made  55n

OL v PQ  141 Paisley, Roderick  26 collation, hotchpot and clawback compared  6, 18 report on EU Succession Regulation  3n, 9, 18–19, 27, 50–51, 54, 96 parent EU countries allowing claim by  58, 72–73 pension policy UK law  9 Pérez-Vera Report  138 Poland clawback  41, 51, 57, 58, 59, 70, 212–214 gifts to third party  41, 57, 212–214 habitual residence  51 inter vivos gifts  70, 212–214 legitimate portion  41, 70, 212–213 limitation period  214 prescription period  214 Portugal clawback  57, 58, 59, 70, 215–216 gifts to third party  57, 215–216 inter vivos gifts  70, 215–216 legitimate portion  70, 215 limitation period  216 prescription period  62, 216 pragmatism pragmatic approach to law  28–30, 109, 164 pre- and post-nuptial agreements England and Wales  122 prescription period Austria  61, 176–177 Belgium  61, 62, 70, 180 Croatia  184 EU Succession Regulation  90 France  61, 193 Germany  61, 196 Greece  62, 198 Hungary  200 international diversity  72, 164 Italy  203 legal certainty and  108 Luxembourg  62, 207 Netherlands  61, 70, 211 Poland  214 Portugal  62, 216 Romania  217 Slovenia  220 Spain  62, 223–224 Sweden  225

Index  249 private international law see also recommendations for new private international law call for harmonisation  42 characterisation see characterisation clawback from third party, generally  23 cross-border cases see cross-border cases drafting  36, 39 Hague Conference  2, 23, 28–29, 39 legal certainty  33 need for reform  30–34 succession law and  1–4 procedural law clawback, meaning  16–17, 19 property conveyance, legal certainty  9, 15–16 EU Succession Regulation  59 immoveable  23, 45, 73–74, 107, 113–114, 125, 149–150, 151–152, 153, 162–163 lex situs  45, 73–74, 113–114, 150–151, 152, 153 monetary  52, 59, 72, 114 mortgage over  9, 60, 73, 107 moveable  114, 149–151, 152–153, 163 ownership, fundamental rights  110 protection of rights under common law tradition  76 real  52, 59, 72 scission see scission transfer, right to  110 transfer, security of title  22, 23 transfer/sale by donee  15–16, 31, 59–60, 73, 107–108 property law characterisation of clawback claim as  113–114, 126–127, 129–131, 165 England and Wales  113–114 property/family hierarchy  6 succession law and  1 UK, generally  9, 14n qualification see characterisation Rabel, Ernst  28, 79 rapport des libéralités  5, 13 Re A  141–142 Re Coventry  120 Re Dennis  120 Re J  139 recommendations for new private international law applicable law  132–167 choice of law  143, 151, 154–155

connecting factor  132–151, 154–155, 162–163 default rule  160–161 disclosure rule  160–161 draft convention  171–172 escape clause  155–156 generally  164–168 habitual residence  154, 158, 162–163 immoveable property  151–152, 153, 162–163 inter vivos gift, definition  158–159 legal capacity of donor, recording  160 legal certainty  159–161, 164 legitimate expectations of parties  164, 167 modal law  158–162, 164 moveable property  151, 152–153, 163 objective applicable law  151–153 overriding mandatory rule clause  147 party autonomy  154–155 public policy clause  157 removal of retroactive element  151, 164 scission  149–151, 163 subjective applicable law  154–155 sui generis approach  126, 127, 130, 131–132, 161–162, 165 third party, definition  159 reduction order of  12, 21, 49 use of term  4, 16–17 réduction des libéralités  5, 13 res judicata legal certainty and  43 reserved share see legitimate portion residence see habitual residence restitution issue treatment of clawback as  111, 115, 129–131 retroactivity clawback, generally  8–9, 43–45, 88, 110, 128 EU Succession Regulation  88, 110, 128, 164 legal certainty and  43–45, 128, 151 non-retroactivity principle within EU  43–45, 110 recommended removal  151, 164 Roman law forced heirship  54 legitimate portion concept  6, 54 Romania clawback  57, 58, 59, 70, 216–217 creditor, claim for clawback by  59 gifts to third party  57, 216–217

250  Index inter vivos gifts  70, 216–217 legitimate portion  70, 216–217 limitation period  217 prescription period  217 rule of law legal certainty and  43 scission abolition in EU Succession Regulation  149, 149–150n, 152 domicile and  148n, 149 England and Wales  149 lex situs  148, 149, 150–151 meaning  149 Scotland children  67 clawback  14n, 55n, 67, 92 collation  38n comparative analysis  67–68 forced heirship  41, 50, 55n, 68, 92 legitimate portion  41, 70, 92 spouse  67 succession rules  27, 50, 67–68, 70 security of title transfers to third party  22, 23 Shari’a Law  71–72 Sherbourne, AKE  115 sibling EU countries allowing claim by  58, 72–73 Slovakia EU Succession Regulation  55, 91 legitimate portion  41, 70, 81n, 218–219 succession rules  57, 70, 218–219 Slovenia adopted children  219 clawback  57, 58, 59, 61, 70, 219–221 gifts to third party  57, 219–221 inter vivos gifts  70, 219–221 legitimate portion  70, 219–220 limitation period  61, 220 prescription period  220 South Africa children  66, 69 collation  66 comparative analysis  53, 66, 68–69 spouse  66, 69 succession law  27, 42, 66, 69, 71 testamentary freedom  68 Spain clawback  41, 57, 58, 59, 61, 70, 221–224 forced heirship  57, 57n, 221–224 gifts to third party  41, 57, 221–224

inter vivos gifts  70, 221–224 legitimate portion  41, 70, 221–222 limitation period  61, 223 prescription period  62, 223–224 spouse civil law tradition  40–41 common law tradition  40, 41 England and Wales  41, 69, 117, 120 EU countries allowing claim by  58 evasion of duty to maintain  117 former  117 France  40 Germanic legal tradition  41 Ireland  42, 65, 69, 71 legitimate portion  69, 72–73 Nordic legal systems  40, 41 Northern Ireland  41, 69 Scotland  67 South Africa  66 strengthening position of  42 substantive law changes in over time  146–147 clawback, meaning  17–21 succession see also applicable law civil law tradition  40–41, 49 clawback as succession issue  76, 77, 79–80, 111, 112–113, 117, 119, 124, 126–127, 128, 129–131, 165 common law tradition  5, 40, 41, 49–50 family-centric approach  40–41, 49, 52, 72 international legal diversity  1–2, 4, 38–39, 54–56, 69–71, 164–166 private international law, generally  1–4 restitution issue, clawback as  111, 115, 129–131 testamentary freedom  40, 41 Succession (Scotland) Act 1964 generally  27 Sweden legitimate portion  41, 70, 224–225 prescription period  225 succession rules  57, 70, 224–225 testamentary freedom Australia  64, 68 case-law  47 civil law tradition  6–7 common law tradition  40, 41, 92 disposable portion  21 England and Wales  41, 42, 68, 92, 93, 112–114, 116–117

Index  251 EU Succession Regulation  52, 105 generally  22 Ireland  42 Northern Ireland  68 Shari’a Law  72 South Africa  68 testator change of habitual residence  128–129 change of nationality  4 choice of law  4, 128 third party clawback from see clawback donee as  31 EU Succession Regulation  23n, 55 gift to see gift to third party recommended definition  159 third party buyers  73 transfer of property to, security of title  22, 23 tort law moveable property, England and Wales  114 trust inter vivos, UK law  9, 93 United Kingdom see also England and Wales; Northern Ireland; Scotland administration of estates  52 characterisation in  76 charitable donations  9, 38, 93 clawback from third parties  27, 36–37, 92–95 collation and  91 comparative analysis  53, 66–69 cross-border clawback  30–31, 30n domicile of deceased  76 EU Succession Regulation and  9–11, 23n, 24–25, 27, 37–39, 55, 91, 92–95, 98, 159

inter vivos gifts  15, 32n lex fori  52 monetary claims  52, 114 report on EU Succession Regulation  3n, 9, 18–19, 27, 50–51 unjustified enrichment claim for reduction of property  59, 115, 165 sui generis approach  131n underlying obligation  75 validity of gift generally  124–126 valuation of fictive estate Belgium  21–22 civil law tradition  49 common law tradition  5, 9 debts of deceased  21 forced heirs  18n, 20 heirs contracting gift out  15–16 inter vivos gifts  15–16, 18, 21–22, 41, 49, 105, 106 legitimate portion, calculation  20–22, 49, 62 valuation of gift date of valuation  62 generally  27, 54 Van den Boogaard  120–121 will administration of estate  118–119 alteration  128 change of habitual residence  128–129 existence of  51, 105 intestacy  116–117, 125 testamentary freedom see testamentary freedom validity  51, 107, 116–117, 128

252