Until recently, each EU Member State had its own set of rules and requirements regarding succession and inheritance, which were often contradictory. This frequently meant that the wishes of the testator were not respected, and potential beneficiaries had to incur costs in order to determine and assert their legal rights. In effect legislation and local law determined the wishes of the testator and not the testator himself thus giving way to the individual states and countries paternalistic legal appetites. 

This proved to be particularly troublesome when the testator owned immovable property across the EU, as the principle of lex loci dictates that the applicable law would be the law of the jurisdiction in which the immovable property is situated, regardless of the testator’s wishes, nationality, or country of residence.  As a result, heirs could be involved in parallel proceedings in multiple jurisdictions for the same inheritance. Unsurprisingly, Věra Jourová, EU Justice Commissioner recently emphasized that with over 1.3 million European citizens residing in a different Member State, approximately half a million families are involved in cross-border successions per year, making this an area of law that was in urgent need of reform.

The European Parliament set out to create uniformity and harmonization, to ensure that in a situation where there is cross-border succession, only the courts of one EU country will have jurisdiction to deal with the inheritance for both moveable and immoveable property. On July 4, 2012 it introduced the Succession Regulation 650/2012, also referred to as ‘Brussels IV’, which was implemented in Cyprus on 17/08/2015. The regulation has no retrospective effect – it can only apply to persons whose death took place on or after the 17th of August 2015 – nor does it apply to the United Kingdom, Ireland or Denmark.

National courts or even competent authorities of each Member State can now issue the ‘Inheritance Certificate’ which can be presented and enforced in every Member State. It constitutes proof that the EU citizen is a legitimate heir of property that extends to more than one Member State, allowing the administrator(s) and heir(s) to distribute the estate through a single process, without the need to incur costs in several different Member States.

Article 21 of the regulation stipulates that, save for any provisions to the contrary, the applicable law is that of the country where the deceased kept his habitual residence. Thus far, Courts in Cyprus have been using the domicile rule in order to determine the relevant jurisdiction, which took into consideration not only where the deceased was established at the time of his death, but also what his intentions were. The Wills and Succession Law Cap. 195 required the Courts to examine whether a non-Cypriot national actually wanted to establish his permanent home here, not just whether he spent a large percentage of his time on the island. The requirement of habitual residence introduced by Article 21 means that in the future, the decision of the Courts with regards to the appropriate jurisdiction could be vastly different.

According to the existing provisions of Cap. 195, a refugee living in Cyprus would not gain Cypriot domicile of choice simply due to his presence on the island over a period of time, as it would be presumed he did not intend on establishing himself here. However, the same refugee could be said to have his habitual residence in Cyprus, since the Courts will only be looking at the facts i.e. whether he was in fact habitually resident here or not. While this undoubtedly simplifies the process for the Courts, it could potentially lead to a situation where a person dies intestate unaware that they are legally considered to be habitually resident in a country, thus their inheritance would be subject to the laws of the Host Member State, rather than their country of origin. 

Article 22 is an attempt to ensure that this does not happen, as it gives every European Citizen the right to choose the law that will be applied though the drafting of a will. The EU citizen can choose either that of the country in which they are habitually resident, or the law of their country of origin. Arguably, this is a desirable and much-needed development for residents of Cyprus. Article 41 of Cap. 195 clearly states that a deceased person who leaves first-class relatives can only freely dispose of a specific percentage of his inheritance. For persons who are succeeded by a spouse, only 50% of their inheritance can be disposed of freely and in the way that they choose to do so. If the testator is succeeded by a child, then this is further reduced to 25%.

It has long been evident that Cyprus Courts and legislators greatly value the importance of family as an institution, with an abundance of case law and legal provisions highlighting this, but it has been argued by many that these rigid regulations do not accurately represent a modern society where relations may not be as straightforward. Similar cases have been heard in recent years in the UK, with the Supreme Court deciding that the adult child of the deceased was entitled to no more than 10% of the estate which was worth half a million GBP.  (Lott v The Blue Cross and Others, [2017] UKSC 17). 

Residents of Cyprus can now use Succession Regulation 650/2012 as a tool for estate planning, by carefully drafting a will that identifies exactly which Member State shall have jurisdiction over the inheritance and how their assets should be distributed upon their passing. Considering that investors from across the globe consider Cyprus to be a financial hub, being able to plan out the succession of their wealth and their estate in a way that best suits their individual needs will definitely prove to be an added bonus to those who choose to reside here for financial purposes.

Succession Regulation 650/2015 has certainly attempted to bridge the differences in the laws of succession of EU Member States, in ways that prima facie appear very promising. It still remains to be seen whether the consequences of the regulation will be as was intended by its writers, although it is undeniably a step in the right direction for further uniformity across Europe.

 

Tatyana Passiadou

Associate

KAIMAKLIOTIS & CO LLC 

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