Making European Union Property Law: Missed Opportunities in Property Succession-Regimes?

It has long been held that there is no fun in the law of property; a static area of – basically – Roman law, technical, dare I say boring, where nothing ever changes. Typical property law professions, Conveyancers, the Notariat and the Land Registry, do not have the most appealing image for most.

An overview of modern day 21st century property law can hardly lead to this picture: it is a state-of-the-art area of law, dealing with issues of virtual ownership or the ownership of SMS-bundles for mobile phones, technical linking of land registration systems, e-registration, and e-conveyance. Moreover, it is an area of law now responding to the financial crisis with changes in century old security rights legislation, the introduction of financial collateral arrangements and, most recently, proposals to modernise the property law of marriage and succession.

For many marriage and succession law are separate areas of law and to a very large degree this is of course true. However, both cannot function without the ground-rules of the system of property law that they need to function. Property held by spouses in a marriage, registered partnership or civil union of some kind, is first and foremost held jointly or separately under the general rules of property law. Property that is passed on by someone upon death does not exclude itself from the law of property simply because succession law now also applies. To the contrary, special rules on holding property rights and transfer or passing of property rights apply to the general system of property entitlements.

When I started working on my PhD thesis in 2004, really no-one had ever heard of European Union Property Law. It was before the time that the term EU Private Law became more common. We used the term European Property Law in research and teaching to refer to comparing law in European legal systems. Around 2004 a new age of European private law started. In the Oxford Handbook of Comparative Law Reinhard Zimmermann wrote about the Europeanisation of private law and described the EU consumer contract law acquis and some of the case law of the Court of Justice of the European Union (CJEU). He also noted that there was not much development in other fields of private law (tort, unjust enrichment and property law). In 2012 a new field of study and teaching had arisen: the private law in the European Union.

EU private law includes the European Union law of property, a version of property law that has shaken of all of its static and boring characteristics. Trade and movement of persons on the internal market forces property law into a context and therefore conflict it has not functioned in yet. The natural reaction to this can, especially for property lawyers, hardly be anything but protectionism. Like other areas of law, property law is governed by doctrine. Internal doctrine that has come about in over 2000 years of development. Property relations are durable relations and legal certainly in this area takes on a whole different dimension. Predictability of outcomes of problems is extremely relevant as not only contractual parties, but also successors in title or other market participants are involved. Intra-Union movements bring property law systems into contact with each other. Member State law responds to this in the most protectionist way: lex rei sitae, the law the governs the place where the subject-matter of a property relationship is located at the time an answer to a legal question is needed.

There are almost only good reasons for this: the national coherence and therefore legal certainty and predictability of the legal system must be protected and preserved. However, within the European Union context, there is an increasing problem. When we take the internal market as our starting point, and not the legal systems of a single Member State, differences in systems of property law cause problems. They cause, as I have defended before, problems to the free movement of goods, but, as I will be defending in the upcoming book The Future of European Property Law, also to the free movement of services and capital. Next to this, there is increasing attention to problems differences in property law regimes cause to the free movement of persons.

I submit that Private International Law in this context – contrary to popular believe, which holds it to be neutral – is pure politics here. It serves as a protection mechanism to prevent the application of foreign property law in a receiving Member State. I am not the only one who seems to be recognising this. In matters of marriage and succession the different property regime European Union Citizens are confronted with may offer problems. The proposals of the European Commission in this respect seek to go beyond this, and especially beyond lex rei sitae, by offering EU Citizens a limited choice of law. Not just any choice, but a choice that governs the whole of the marital property regime or the whole of the succession.

To say it is a step forward is an understatement. The proposals bring – to borrow from European political science – the ‘misfit’ between EU and national law to the surface and force National policy to come in line with EU policy. To be more specific: to give up lex rei sitae when its application is contrary to the rules governing the EU internal market.

But in all matters politically sensitive, negotiations in the Council have led to a text that seeks to limit the effect of these measures on national property law. Two examples from Proposal for a Regulation on Succession: The Proposal for a Regulation dealing with Succession contains an article (now numbered 22a) that allows Member States to transform property relations created in a succession when these are unknown in the receiving Member State. In other words, this article seeks to codify the status quo whereby Member States impost their own legal system – through the lex rei sitae rule – on foreign property relations.

The second example is the article (now numbered 27) that deals with public policy allowing Member States to prevent application of the Regulation if this is contrary to the public policy (ordre publique) of that Member State. Although the article was rightly modified in the last phase to say it can only be used when the application of the Regulation is manifestly incompatible with national public policy, there is still a problem here. Especially Member States such as France treat the whole of property law as public policy.

With these two examples we come into undiscovered territory. Of course we are used with dealing with matters of transformation of foreign property right or the application of national public policy to foreign legal relations, but this is something completely different. We will now have – as agreement seems to have been reached on the Succession Regulation – a European Union instrument which primary aim it is to offer a choice of law to accommodate EU Citizens in intra-Union succession cases, whereby Member States are given a set of tools to circumvent the main aspects of its application. I can hardly see how the Court of Justice of the European Union can do different than declaring the Regulation of EU public policy and preventing Member States from taking away effect of the essence of the choice of law made by the parties under this Regulation. The national level must therefore give way for the European, and the ‘misfit’ is somewhat resolved by the choice of the parties protected by the force of EU law.

Legal uncertainly however results. Any party using the Succession Regulation will want to do this because if offers advantage over using the current situation. For example to use the mandatory division of assets between heirs or to create a special property right, such as a right of usufruct including consumable objects (this is possible under e.g. Dutch law). However, whether that choice survives the exceptions of Articles 22a and 27, remains to be seen.

With that the Regulation is a step in the right direction but a choice halfway on the way to Europeanising the field, almost doomed to lead to more protectionism by using the tools under the Regulation. It is a missed opportunity therefore to move beyond the Member State level and make it work.