Property rights for international couples: MOJ consults on EU proposals

Practical Law UK Legal Update 6-505-8257 (Approx. 5 pages)

Property rights for international couples: MOJ consults on EU proposals

by PLC Private Client

Background

On 16 March 2011, the European Commission published two draft regulations (Rome IV Regulations), one dealing with marital property regimes (COM(2011) 126) and one with the property consequences of registered partnerships, such as civil partnerships in England and Wales (COM(2011) 127). The draft regulations cover jurisdiction, applicable law and recognition and enforcement of decisions in these areas, and would replace existing rules of private international law in the participating EU member states.

The UK must decide whether to opt into negotiations about the Rome IV Regulations by the end of June 2011. If it does, it will be bound by the regulations as adopted by the Council of Ministers. If it does not, it will not be bound but can decide to adopt them later.

The UK previously decided not to opt into negotiations about a draft regulation on conflict of laws rules in matters of succession (Succession Regulation).

For more information about the Rome IV Regulations and the Succession Regulations, see PLC Private Client legislation tracker: Property rights for international couples and Succession and wills.

Ministry of Justice consultation

On 15 April 2011, the Ministry of Justice (MOJ) opened a consultation on whether the UK should opt into the Rome IV Regulations. The consultation closes on 20 May 2011.

The MOJ asks four questions:

Whether it is in the national interest for the UK to opt into negotiations on the Rome IV Regulations.
What consultees' views are on the specific issues raised in the consultation paper. See Specific issues raised in the consultation.
Whether consultees agree with the impact assessment published with the consultation paper. The impact assessment analyses the potential costs and benefits for the government and individuals.
Whether consultees wish to make any other specific comments.

Specific issues raised in the consultation

The consultation paper sets out the provisions of the draft Rome IV Regulations, followed by the government's preliminary assessment in each area. The government's assessments raise a number of specific issues, which are summarised below.

The consultation covers all the UK jurisdictions (England & Wales, Scotland and Northern Ireland).

Scope and rules on jurisdiction

The government considers that there may be fragmentation of proceedings on divorce, dissolution of registered partnerships and succession.

In the case of divorce or dissolution, this is because the Rome IV Regulations do not cover all aspects of financial provision, which may lead to courts in different member states having jurisdiction to deal with different aspects. Courts in the UK take account of a wider range of issues than matrimonial property regimes in other member states usually cover, for example:

Maintenance.
The division of capital (including gifts and jointly owned companies, which are excluded from the Rome IV Regulations).
Pension sharing and discretionary trusts (where the scope of the proposals is unclear).

This point is reinforced by the fact that there is no obligation on the parties to a divorce to submit to the jurisdiction of the court on property matters as well. Under the Rome IV Regulations, the court can only hear the property matters if the parties agree to it.

In the case of succession proceedings, fragmentation may result because:

It is unclear what constitutes "matrimonial property".
It is unclear whether the draft Rome IV Regulation is fully aligned with the draft Succession Regulation.
Joint property interests passing by survivorship on death are excluded from the Succession Regulation and also fall outside the scope of English succession proceedings, but may fall within the Rome IV Regulations.

The consultation paper also points out that if the rules on jurisdiction affect where people choose to litigate, this could have a commercial impact for lawyers. It invites the legal professions to consider the commercial effect of UK participation or non-participation.

Applicable law

The government has identified the following issues:

Courts in the UK (unlike those in many other member states) do not normally apply foreign law in family cases. The need for expert evidence on foreign law may increase costs, particularly if spouses change the applicable law without retrospective effect, so that more than one law may apply. The law may not be the law of an EU member state.
Because the choice of law rules in the draft Succession Regulation are different to those in the draft Rome IV Regulations, different law could apply to different aspects of the same succession proceedings.
It is not clear why registered partners should not at least have a choice between the law of those member states that recognise registered partnerships, rather than the law of the state of registration applying automatically.
Whether or not the UK opts in, the applicable law rules in the Rome IV Regulations should refer to the concept of domicile for parties from the UK or Ireland.

Effects in respect of third parties

The government's initial assessment is that the effects of the applicable law rules on third parties require further consideration. Specific issues are that:

If the UK opted in, it would probably be necessary to create a requirement to disclose the relevant applicable law or a system for registering it.
It does not appear to be possible for spouses or registered partners to agree with third parties to contract out of the applicable law where the third party has notice of that law.

Comment

While the government recognises the benefits of greater legal certainty for international couples, the issues it has identified arise partly from the differences between the laws of the UK jurisdictions and other member states and partly from a lack of clarity on some points in the draft Rome IV and Succession Regulations. It seems unlikely that the UK will opt into the negotiations at this stage unless it changes its stance on the Succession Regulation.

Next month we will publish an article about the draft regulations by Richard Frimston of Russell-Cooke LLP, who is a member of PLC Private Client's consultation board.

Sources

MOJ: Matrimonial property regimes and the property consequences of registered partnerships. This landing page provides links to the following documents:
- Matrimonial Property Regimes and the property consequences of registered partnerships - How should the UK approach the Commission's proposals in these areas? (Consultation Paper CP 8/2011).
- Impact Assessment on proposed European Community Regulations on Matrimonial Property Regimes and the property consequences of registered partnerships.
- List of questions for response. (This opens as a Word document so we cannot link to it directly.)

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