European Commission Green Paper on Conflict of Laws Concerning matrimonial property regimes

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1 European Commission Green Paper on Conflict of Laws Concerning matrimonial property regimes The Law Society of Scotland s Response November 2006 The Law Society of Scotland

2 INTRODUCTION The Family Law Sub-Committee of the Law Society of Scotland ( the Committee ) welcomes the opportunity to comment on European Commission s Green Paper on conflict of laws concerning matrimonial property regimes. GENERAL COMMENTS The Commission is addressing a hugely complex issue, with potentially profound policy implications for the family. The papers raise questions in the following areas: Status. The preliminary issue underpinning the matters raised relates to the relationships subsisting between individuals. Are the individuals concerned married, in another formal relationship, in an informal relationship, or unrelated? This will have to be determined before financial issues could be decided. Property consequences of status. Here the issue is whether the status of the parties affects their property rights. Remedies on termination of relationship. This concerns the question of what a court or other authority is able to do to assist parties at the point that the relationship between the parties comes to an end. The EU has addressed issues of jurisdiction and enforcement of maintenance obligations, jurisdiction in respect of termination of the relationship itself, jurisdiction in respect of children, and enforcement in respect of children. Scotland has resisted imposition of conflict of law rules, on the basis that these will be confusing, expensive to apply, cause delay and yield no material benefit. The present position has a number of drawbacks. Persons being divorced in Scotland have a disadvantage in trying to enforce an order for financial provision for divorce in Europe, because a Scottish order cannot easily be characterised as maintenance. An English order for ancillary relief may be treated as maintenance (Van den Bougaard v Laumen QB 759) and may be enforced. If the proposals result in better enforcement provisions, then there is a potential benefit. There is also a problem although there is a procedure to allow persons of the same sex to enter into civil partnerships in terms of the Civil Partnership Act 2004, this cannot guarantee civil partners that their partnership will have property consequences outside the UK. It is consistent with free movement of persons that in other parts of the EU recognise the financial implications of civil partnership status. There is a similar argument in relation to cohabiting couples. They have rights to make a claim on cessation of a relationship, in terms of the Family Law (Scotland) Act 2006, but if they leave Scotland, they may not be entitled to any claim on cessation of the relationship. The Law Society of Scotland

3 That said, the issues raised by the Commission paper raise unfamiliar concepts, and if translated into regulation there is likely to be a lack of comprehension expense and delay in local sheriff courts. Scope Question 1 This question contemplates imposition of an EU regime in respect of matters such as protection of the family home, and the couple s relationships with third parties. It is however limited to marriage. Broad scope may result in a Regulation that is exceptionally difficult to apply: Would it mean that a Scottish court would be expected to exercise jurisdiction over a matrimonial home in another country? Or that a sheriff would apply the protective regime of French law to a house in Scotland? Would the police and other authorities have to enforce a Scottish order made in terms of French law? How would third parties know that their relationships with a couple might be governed by the law of another state? Narrow scope would be preferable, and the matter should be limited to orders dealing with disputes between spouses/civil partners and orders made on termination of a relationship. Conflict of laws Question 2 This proposal is confusing in so far as it encompasses both the rules on regime and rules on dissolution of the relationship. They are different issues and it would be helpful to consider them separately. In Scotland the general rule is that marriage does not affect property rights (Family Law (Scotland) Act 1985, section 24), subject to the law of succession and the provisions of enactments (e.g. in respect of the right to occupy the matrimonial home). There is no matrimonial property regime as such. The rule of private international law now encapsulated in section 39 of the Family Law (Scotland) Act 2006 is that lex rei sitae governs immoveable property, and the law of common domicile governs moveable property, which failing rights to moveable property are generally governed by rights immediately prior to marriage, albeit this is subject to contrary agreement. The court will intervene to adjust property rights on divorce. The court has a discretion, which would allow it to take account of a different property regime when making a decision about sharing the net value of matrimonial property (1985 Act, s 10(1) and (6)). The Law Society of Scotland

4 The EU proposal will result in Scottish courts having to cope with persons whose property is subject to a matrimonial property regime. This is a fundamental change. It will challenge the way Scottish lawyers think about individuals as economic entities. If there were to be a rule as to the law defining the relevant matrimonial property regime, then the Committee considers a different law to rights arising on dissolution could be applied. For example, if the applicable law specified that the parties, as spouses, had joint ownership of particular property, Scots law could then be applied to orders for financial provision on divorce, which specified what would happen to the property. This is however subject to the general caveat that applying any foreign law would introduce a significant and unwelcome level of complexity into Scots family law. Question 3 Section 39 of the 2006 Act provides for depeçage. That said, it is not an everyday occurrence in Scots family law. A Scottish court will apply Scots law to financial provision on divorce, but is unlikely to make an order which cannot be enforced. This drives the issue on to the question of enforcement. The usual route in Scotland would be to ordain a party to take steps to give effect to the order (but to refrain from an order which could not otherwise be enforced). Question 4 In effect Scotland imposes an automatic change of regime on many persons who come here. Scots law is applied to persons before Scottish courts for the purposes of divorce, regardless of their expectations when they married, or before they moved to Scotland. However, if the court is required to consider financial provision on divorce, there is some flexibility in the 1985 Act, which would allow the court to take account of another regime, which had previously applied to the parties (s 10(1) and (6)). This discretion is helpful, as it allows the court to take account of both the background and the current circumstances. The Scottish provisions, achieve the aims of the EU, albeit this is a matter of discretion, not a requirement of law. Questions 5 and 6 Section 39 of the 2006 Act allows for some choice in relation to regime. Choice in a matrimonial context causes difficulties where parties do not have equal bargaining powers. It would be a concern if one party may impose a regime on the other. If such an agreement impacts on financial provision on divorce it could potentially fall within section 16(1) of the 1985 Act, which allows the court to set aside an agreement on financial provision, where it was not fair and reasonable at the time it was entered into. This would be a valuable safeguard to preserve. The Law Society of Scotland

5 There needs to be clarity about rules applying to regime, as opposed to dissolution. Different laws may affect the proprietorship of different assets, but how can a mixed law apply to the financial consequences of divorce. Jurisdiction Question 7 There are two conflicting points to make. In Scotland rules on financial provision are designed to operate on the point of dissolution of the marriage or civil partnership. Divorce and financial provision usually take effect together. The Scottish rules on financial provision do not easily lend themselves to separation of divorce from financial matters. This is in contrast to other parts of the United Kingdom, which looks at divorce and ancillary relief separately. For Scotland, it would be difficult were jurisdiction in relation to financial matters separated from jurisdiction in respect of divorce. From our perspective the court with jurisdiction in divorce should also deal with financial provision. If the proposal were for separation of divorce and financial provision this would constitute a significant interference with our substantive law. It would make Scottish rules on financial provision difficult to apply. Having said that, there is an exception, which is found in the Matrimonial and Family Proceedings Act 1984, Part IV. This Act allows an application for financial provision after an overseas divorce. It is an important facility, as it allows us to recognise divorces under the Family Law Act Before the 1984 Act was passed, UK courts were refusing to recognise overseas divorces, because public policy required that financial provision should be made (see Chaudhary v Chaudhary [1985] Fam 19; cf Tahir v Tahir 1993 SLT 194). There are very few cases under the 1984 Act and there is not a significant body of case law on how the courts approach separation of divorce and financial provision. The Committee considers that there could be difficulties. It is necessary, however, to preserve the capacity to make financial provision after an overseas divorce i.e. separation should be possible, but the exception. The Committee has no comment on the succession question. Question 8 This question is out of place. The previous question related to dissolution and separation. This question related to disputes during continued cohabitation, which is an entirely separate issue. The rules of jurisdiction cannot be quite the same for cohabiting spouses. They are likely to be more limited (common habitual residence, common nationality or domicile). The Law Society of Scotland

6 Question 9 The aim should be that one court should rule on all types of assets. Requiring parties to litigate in different jurisdictions in relation to different assets is going to result in considerable inconvenience and expense. There is a concern about the position of an economically weaker partner, who could be seriously disadvantaged by complex and expensive litigation. The potential for this to happen should be restricted. The position of third parties is difficult. In Scotland third parties may be drawn into divorce actions where the court may make an order, which affects their interests. For example the court could set aside a transaction involving a third party, or make a transfer order which affects a third party loan, or property held in trust by the third party as trustee. These matters should be considered in the context of the divorce. This facility should not be displaced by a provision for the rules of the ordinary law (presumably as to jurisdiction) to apply. However, some consideration should be given to a third party forced to litigate in another member state, in order to protect his or her interests. This may be a case for considering an application for transfer (as contemplated in question 11). Question 10 The Committee has concerns about prorogation. There is a need to avoid the potential for inadvertent prorogation, by simply failing to object at the commencement of proceedings. Rome III proposed prior written agreement on choice of court. A similar provision would limit any concern. Question 11 Scots law is familiar with the principles of forum conveniens. Transfer between courts on similar principles, modelled on Regulation (EC) No 2001/2003, article 15, may be helpful. Question 12 If is difficult to see the application of a question relating to non-judicial authorities in a Scottish context, save in respect of Separation Agreements and Agreements on Financial Provision, which may be registered in the Books of Council and Session. These may be recognised as authentic instruments in terms of Brussels I (in so far as this Regulation applies), and it would be useful to ensure recognition and potential for enforcement generally. Question 13 Scottish courts are able to enforce judgments overseas, where they have a sanction against one of the parties. There must be reservations about the courts of a member state operating directly in the territory of another member state, either for a Scottish court to intervene elsewhere, or in respect of another EU court operating in Scotland. The existing structure is for EU instruments to provide for the courts of the state where property is situated to assist the court, which has made an order (save in two special cases relating to children). This avoids the practical (and political) complexities of direct enforcement. The Law Society of Scotland

7 Question 14 The Committee considers that this question is phrased too vaguely to be able to give a considered response. Recognition and enforcement Question 15 There should be some safeguard for EU citizens, allowing a challenge to enforcement, where, for example it can be shown that an action has not been served, or there is a public policy difficulty. Enlargement (and the potential for yet further enlargement) means that there has to be a residual ground of protection. Even within Scotland, there have been actions for reduction, where divorce and financial provision have been obtained in circumstances where they should not have been. Some actions for reduction of divorce etc. are successful. A party must be able to challenge enforcement and deal with a decree that should not have been granted. Question 16 Automatic recognition may be helpful, provided there is scope to prevent enforcement and mount a challenge to a decree that should not have been granted (see response to question 15). Question 17 See response to question 12. It would be helpful to have recognition and enforcement of Agreements registered in the Books of Council and Session. Question 18 Given that Scotland does not have a matrimonial property regime as such, this is difficult to answer. Registered partnerships Questions As explained at the outset, recognition of civil partnership and of orders on dissolution of civil partnership may be a benefit to be secured in the course of current discussions. Not all states recognise civil partnerships. Conflict rules will not assist, if they require the application of a law that does not recognise a civil partnership. It may be worth trying to secure rules which are as consistent as possible with the rules applying to marriage, which failing that the law of the place the partnership was registered should apply. The Law Society of Scotland

8 De facto unions Question 22 De facto relationships are not easily equated with contracts. There is a strong element of relationship and status, which argues for specific conflict rules. The present Scottish problem is that a couple who have been cohabiting in Scotland risk losing all remedies on cessation of cohabitation, if they cannot access the jurisdiction of the Scottish court, or another court which will afford financial remedies. The domestic legislation applies the same rules of jurisdiction as for divorce (see Family Law (Scotland) Act 2006, section 28(9)). This is in effect Brussels II bis. Extended jurisdiction or conflict rules may assist. The Law Society of Scotland

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