Another option for International Finance Centres

Tuesday, 01 February 2011
Progress on Brussels IV is slow.

The EU Parliament family day on 30 November was not designed for young children, but was a workshop entitled ‘How to facilitate the life of European Families and citizens’ to enable EU and national parliamentarians to discuss the ongoing work of the EU in attempting to solve number of issues for EU citizens.

As and when the Brussels IV zone has a Regulation up and running, choice of law will look more usual. Citizens residing both inside and outside the zone will be encouraged to exercise such choice

Katharina Boele-Woelki, author of the highly recommended bestselling Hague Pocketbook Unifying and Harmonizing Substantive Laws and the Role of Conflict of Laws, gave an excellent exposition on the reason not to join in Rome III.

In my opinion, her work is always so useful in understanding the language problems that the building blocks of private international law (PIL) present; PIL is the European phrase that includes issues of jurisdiction, recognition and enforcement as well as those of applicable law. The Americas instead tend to refer to ‘Conflicts of Law’ but in the European context this phrase can be restricted to questions as to the applicable law. In the US they usually refer to applicable law issues as ‘choice of law’.

In Europe, ‘choice of law’ usually means the ability to make a choice; a professio juris.

Choice of law in commercial and business contracts is widespread. However, in succession law it is very limited. The law in the Netherlands is that of the Hague Succession convention and incorporates a choice of law. Finland has a similar but slightly more extensive choice. Italy since its 1995 PIL changes has a specific choice of habitual residence. Switzerland has the choice of national law. Germany permits the choice of German law in relation to German immovables.

Brussels IV proposes that, like Switzerland, a choice of national law will be permitted. Many commentators (including the STEP response) have suggested that a wider set of choices should be permitted. The excellent Max Planck Institute proposals, for example, suggest additional choices of the habitual residence at the time of choice and that of a matrimonial property regime.

As and when the Brussels IV zone has a Regulation up and running, choice of law will look more usual. Citizens residing both inside and outside the zone will be encouraged to exercise such choice.

Traditionally, international financial centres offered trust and foundation models to exclude succession law and have attempted to exclude the operation of other succession laws including any obligations to restore – clawback. The successfulness of such protections always depends on the physical situs of the underlying assets.

For many clients, trust structures are not appropriate, but for many reasons they still want to see a corporate structure operated from an IFC.

As choice of law becomes more commonplace, such clients will be swayed in their choice of IFC as to what succession law choice is available for movables situated there. If I was trying to make my IFC look more attractive, changing my PIL now so that choice of law is available before the EU Brussels IV Regulation arrives would have my money.

Offering better and more extensive succession law choices than Brussels IV or Switzerland would also be a great marketing tool. Jersey, Guernsey or Isle of Man, might you be interested? If only I could also persuade the government of the London IFC to think along these lines.

Author block
Right
Richard Frimston

Richard Frimston TEP is a Partner at Russell Cooke LLP and Chairman of the STEP EU Committee.

The content displayed here is subject to our disclaimer. Read more