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Inheritance of EU Nationals in the UAE

Guiding Principle

As of August 17, 2015, the adoption of the uniform rules of a new EU Regulation No. 650/2012 must find consideration for inheritance cases of EU nationals in the United Arab Emirates as well. The Regulation addresses such issues as appropriate jurisdiction and applicable law and shall facilitate cross-border successions and harmonize the conflict-of-law rules of 24 EU states with the effect that in principle only one single criterion remains for determining the jurisdiction and the law, namely the last habitual residence of the deceased.

 

A. Effects of the EU Regulation on Succession of EU Nationals resident in the UAE:

  I. General Principles of the EU Regulation:

The EU Regulation No. 650/2012 is a directive and as such directly applicable in all EU member states except Denmark, United Kingdom and Ireland since August 2015. However, it affects all persons of all EU Member States, including nationals of the three Member states where it is not applicable, as well as nationals of Non-EU States if these persons are resident in any of the “Regulation Zone States = RZS” (all EU states less Denmark, UK & Ireland) at the moment of their death.

The Regulation governs everything related to inheritance law and succession and excludes specifically everything related to tax and administrative matters. In addition, civil matters related to marital status, legal capacity, matrimonial economic regime, donations, company law, real estate rights and the registration of the rights over properties are excluded.

Quite clearly, the main aim of the EU Regulation is to streamline inheritance cases within the RZS and as such shall ensure that

  • a given succession is treated coherently, by one single court applying one single law;
  • the inheritance shall include the worldwide assets;
  • citizens are able to choose whether the law applicable to their succession should be that of their last habitual residence (by default) or that of their nationality (by last will/testament);
  • splitting of inheritance should be prevented;
  • parallel proceedings and conflicting judicial decisions are avoided; and
  • decisions relating to successions given in one EU state are recognized and enforced in other EU states.

It has to be noted though that the EU Regulation is not a uniform law i.e. it does not harmonize the internal succession rules of the RZS but only the conflict-of-law and jurisdiction rules regarding inheritance and succession.

  1. Jurisdiction:

Concerning jurisdiction the main doctrine as per Art.4 of the EU Regulation is that courts at the place of residence shall be competent:

Article 4 General Jurisdiction

The courts of the Member State in which the deceased had his habitual residence at the time of death shall have jurisdiction to rule on the succession as a whole.

However, the following exceptions are included in Art 10 of the EU Regulation:

Article 10 Subsidiary Jurisdiction

  • Where the habitual residence of the deceased at the time of death is not located in a Member State, the courts of a Member State in which assets of the estate are located shall nevertheless have jurisdiction as a whole in so far as:
  1. The deceased had the nationality of that Member State at the time of death; or, failing that,
  2. The deceased had his previous habitual residence in that Member State (…) and a period of not more than 5 years has elapsed since that habitual residence changed.

Another exception is that the heirs may conclude a so-called choice-of-court agreement, provided the deceased, which includes a choice of law, did a last will/testament.

Result: The authorities of the country of the last residence shall handle the whole inheritance unless the heirs conclude a choice of forum agreement or a court in one of the RZS where assets are located may assume jurisdiction.

  1. Applicable Law:

The provisions of the EU Regulation are conflict-of-law rules and as such determine which law the competent court shall apply on cases with connection to multiple laws i.e. residence, nationality, location of assets etc. The EU Regulation replaces the international private laws of the RZS, hence it provides succession and inheritance cases that the law applicable by the competent courts is the law at the place of the last residence of the deceased:

Article 20 Universal Application

Any law specified by this Regulation shall be applied whether or not it is the law of a Member State.

Article 21 General Rule

(1) (…) the law applicable to the succession as a whole shall be the law of the State in which the deceased had his habitual residence at the time of death.

(2) Where, by way of exception, it is clear from all the circumstances of the case that, at the time of death, the deceased was manifestly more closely connected with a State other than the State whose law would be applicable under paragraph 1; the law applicable to the succession shall be the law of that other State.

The default concept stipulated by the EU regulation is that there is no last will/testament and that therefore the applicable law in inheritance cases and for succession wil be that law of the state where the deceased was last resident. Only in exceptional cases, as described above, the law of another state may apply if the deceased did choose the applicable law in a last will/testament or another close connection can be established.

Result: The EU Regulation provides for the law at the place of the last residence of the deceased, unless the deceased has issued a last will or testament including a choice of law, which determines otherwise; for example choosing the law of the nationality.

  II. Practical Implications of the EU Regulation for Inheritance cases of EU National resident in the UAE

  1. Scope of Application:

Although predominantly designated to govern EU matters the principles of the EU Regulation does have certain effects beyond the prescribed scope of application and must find consideration in general for inheritance cases of

a)  EU Nationals resident abroad i.e. outside the EU, particularly if assets are held in one of the RZS; and

b)  Nationals of Denmark, UK and Ireland holding assets in one of the RZS; and

c)  Non-EU Nationals having their last habitual residence and/or holding assets in one of the RZS.

  1. Matters of Succession and Inheritance of EU Nationals resident in the UAE:

When faced with succession and inheritance matters brought before them by foreigners, the UAE courts in the past have always tended to apply as “lex fori” their own principles and national laws to determine which court is competent and which law applies; notwithstanding the nationality and religion of the deceased and whether there is a foreign will or not.

          a)  UAE courts shall be competent to deal with inheritance matters of foreigner i.e. EU nationals:

The concept that the UAE courts and authorities by default will assume competence for inheritance matters also of non-muslim of EU nationals resident in the UAE in fact provides the same result as the EU Regulation would i.e. the authorities/courts at the place of the last residence shall be competent to handle inheritance cases of foreigners/EU nationals. The matters, which the UAE courts will deal with, may include the transfer of real estate property located in the UAE, release of the funds on bank accounts in the UAE, transfer of ownership of all other assets such as cars, boats or transfer of a lease agreement or other contracts etc.

          b)  UAE courts shall be competent to issue judgments and court orders governing the worldwide assets:

Whenever a UAE court assumes competence to rule on an inheritance matter of foreigners in the UAE it has always been clear and undisputed that the UAE court will only decide on assets – movable or immovable – located in the UAE. The result of this is that the application of Sharia rules and any distribution is limited to assets in the UAE.

Consequently, if the inheritance includes assets outside the UAE and such assets are located in one of the RZS the heirs based on the EU Regulation can refer the matter to the courts at the place of the location of the assets to obtain a decision on such assets or even on the inheritance as a whole (Art.10 EU Regulation).

 

  1. UAE/Sharia Law will apply on inheritance matters of EU nationals resident in the UAE:

The EU Regulation stipulates that the last place of residence of the deceased EU National henceforth will determine the applicable law not the nationality.

If, therefore, a German or any other EU court is competent to decide on a succession matter involving an EU national with last residence in the UAE the application of the EU Regulation is mandatory. From now on this will result in the consequence that the German/EU courts may have to apply UAE i.e. Sharia Law on the succession case (or any other foreign law for that matter).

Even though the international private law rules of the UAE Civil Code in its Art. 17 (1) indeed stipulates, “Inheritance shall be governed by the law of the deceased at time of death” this is not a rule applied by UAE courts. As per the legal practice, UAE courts in all cases where they assume competence will always apply their own local laws on inheritance matters submitted to them.

B. Effects of a Choice of Law in a Last Will/Testament for Inheritance cases of German nationals resident in the UAE:

  I. Enforcement of a Choice of Law:

The result of above is that indeed the application of the EU Regulation may result in the circumstance that an EU court situated in the RZS may have to apply UAE / Sharia Law on inheritance matter of EU Nationals resident in the UAE. The only possible way to avoid this appears to be do a last will/testament and clearly determine by choice the law applicable to the inheritance for example the law of the nationality of the testator.

  1. Acknowledgment of Last wills/testaments:

             a)  Competence of German courts:

If therefore the heirs can submit a last will/testament including a choice of law declaring the law of the nationality of a EU National as governing law, the provisions of the EU Regulation stipulate that this chosen law shall be applied as per the last will of the testator. This will be directly acknowledged by the competent German or other RZS courts and the courts will apply the law of choice rather than the law of the place of the last residence.

The choice of law in a last will / testament indeed may avoid that a court in Germany or the EU will have to apply UAE law.

             b)  Competence of UAE courts:

From the current legal practice it must be concluded that the UAE courts will neither honour a last will/testament nor a choice of law included in such last will/testament for that matter, but will rather completely ignore any last will/testament therefore invalidating any included choice of law and instead will decide on the applicable law in their own discretion.

  1. Exceptional Competence of EU courts:

Considering that the application of UAE law cannot be avoided in any event where UAE courts assume competence testators should make use of certain provisions included in the EU Regulation:

a) The heirs appointed in a last will/testament including a choice of law may approach the courts and authorities in the country of the law of choice directly and apply for a probate for individual assets which are located in that country or other EU states, although the deceased may have been resident in the UAE.

b) Furthermore, if the heirs because of certain circumstances i.e. their residence in EU countries wish that other courts and authorities should handle the whole matter the heirs could agree on and conclude a choice of forum agreement.

However, both options are only possible if there is a last will/testament including a choice of law, as only this provides other courts and authorities with the basis to assume competence.

II. Recommendations:

  1. Review of Existing Last Wills/Testaments done prior to August 17, 2015:

The clauses included in any last will and testaments done prior to the EU Resolution taking effect will have to be checked if they continue to be valid as per the stipulations of the EU Regulation particularly concerning the choice of law.

  1. Including a Choice of Law in Last Wills/Testaments later than August 17, 2015:

It is recommendable to do a last will for assets outside the UAE and to include a choice of law to determine the law of any of the EU countries corresponding to the nationality of the deceased in order to safeguard inheritance and succession of assets as per the wishes of the deceased.

Concerning the assets in the UAE the conclusion of this article is that despite a choice of law in a last will/testament or rather despite a last will/testament all together only UAE law will be applied. Therefore alternative solutions will have to be considered for the inheritance and succession of assets within the UAE i.e. registering a will with the DIFC Wills & Probate Registry.

October, 2015 Elena Schildgen
Meyer-Reumann & Partners, Dubai Office
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