Applicable law for marital property: How to make a choice of law, and what if no choice is made?
What law governs the marital property of a Polish wife and British husband who were married in the UK and then moved to Poland? What law governs the marital property of a Polish/French couple residing in Spain but holding real estate in Poland and France? Will a choice of law by a Polish/Swedish married couple to govern their marital property be recognised by an English court? These and other questions are answered by conflict-of-law regulations, knowledge of which is the point of departure for analysis of property relations between spouses.
The legal systems of different countries use various ways for determining the law applicable to marital property issues. These differences involve the scope of the parties’ autonomy (i.e. the ability to choose the applicable law) as well as the types and hierarchies of links enabling a determination of the applicable law if the spouses have not made, or could not make, a choice of their own preferred law. Given the variety and complexity of the conflict-of-law regulations in force in different countries, it is often difficult to predict which national law will apply in a particular case.
Autonomy of the parties
Under Art. 52(1) of the Polish act known as the Private International Law, spouses may decide for themselves which law should govern their property relations, but their range of choice is not unlimited.
Spouses may designate the law of a country of which one of them is a citizen or the law of a state in which one of them has a domicile or habitual residence at the time the choice is made. A choice of law may be made before or during the marriage. If the spouses have not made a choice of law, a marital property agreement between them is governed by the law applicable to personal and property relations between the spouses at the time the agreement is concluded (Private International Law Art. 52(2)).
When making a choice of law, it is sufficient to comply with the form provided for such agreements by the law selected or the law of the state in which the choice of law was made (Private International Law Art. 52(3)). Under Polish law, a marital property agreement must be concluded in the form of a notarial deed (Art. 73 §2 of the Civil Code and Art. 47 §1 of the Family and Guardianship Code).
Unless otherwise decided by the spouses, a choice of law exerts effects only for the future, but there is nothing preventing the spouses from deciding to give their choice of law retroactive effect. However, a choice of law made after a given legal relationship has arisen shall not affect the rights of third parties.
Thus before making a choice of law, it is worth analysing which law the parties may choose will be most advantageous in the parties’ specific personal and professional situation.
It should be borne in mind that while in countries such as Poland, Belgium or Italy, a communal marital property estate arises upon entering into a marriage, this effect is not the rule in all countries.
For example, in Germany and Switzerland the rule is a division of assets comparable to the contractual separate property regime provided for in the Polish Family and Guardianship Code, but with an equalisation of assets. And in Scandinavian countries, the fundamental regime is known as “deferred community.” (Under this system, after entering into the marriage, each of the spouses continues to manage the entirety of his or her own assets for the duration of the marriage, but either spouse is entitled to a special claim against the assets of the other spouse upon separation or divorce. This essentially means an implied right to half of the value of the marital property of both spouses (including premarital assets), after deducting debts.)
In England and Wales, a separate property regime remains in effect from the time of entering into a marriage, but the spouses can apply for a financial order providing discretionary compensatory relief. Alongside full separation of property during the course of the marriage, this system provides protection for the interests of the spouse in the form of the possibility of awarding compensatory funds belonging to the other spouse in the event of divorce or separation. The scope of this relief is determined by the court, also taking into account principles of equity and the requirement to protect the interests of minor children.
An essential issue is whether a choice of law made in one jurisdiction will be recognised in another jurisdiction a party is considering moving to in the future. The Danish, English and Swedish courts, for example, apply the law of the forum (lex fori, the law in force at the location of the court) in divorce cases, and the spouses are deprived of the ability to designate the applicable law.
Indirect choice of law
It should be borne in mind that even by not agreeing on a choice of applicable law, the parties are indirectly making a choice of substantive law. If for example a Polish couple move to England, and their marriage falls apart there, either of the spouses may file a divorce petition either in Poland or in the UK under the Brussels II bis Regulation (2201/2003) (at least until the end of the transition period following Brexit). The Polish court will apply Polish law (the law of country of which both parties are citizens), while the English court will apply lex fori, i.e. English law. By filing a divorce petition in a specific jurisdiction, the spouses choose not only the court that will rule on the divorce but also the law the court will apply.
When choosing where to file, it is important to consider first whether the choice will give the party access to the system of laws that is overall more advantageous form the party’s point of view.
So what regulations will apply if the spouses do not make a choice of applicable law?
Enhanced cooperation in certain EU member states
Poland currently remains outside the group of member states implementing enhanced cooperation in the area of jurisdiction, applicable law, and recognition and enforcement of decisions in matters of matrimonial property regimes pursuant to Council Regulation (EU) 2016/1103 of 24 June 2016, which entered into force on 29 January 2019.
Regulation 2016/1103 harmonises the conflict-of-law rules involving the law applicable to matrimonial property regimes, so long as the marriage or change in the matrimonial property regime occurred after the regulation entered into force.
The provisions on applicable law are universal in scope, although Regulation 2016/1103 currently applies in only 18 EU member states. This means that the law of any state may be recognised as applicable regardless of whether that state is a party to the regulation.
Although Poland has not yet joined Regulation 2016/1103, it can still have an impact on the legal situation of Polish citizens.
First, Regulation 2016/1103 will apply to Polish citizens residing in the territory of an EU member state where the regulation is in force.
Second, the rules established in Regulation 2016/1103 may come into play in proceedings before Polish courts on the basis of Polish rules calling for reference to foreign law. A situation could arise where the rules of the Polish Private International Law indicate that the applicable law is the law of a member state where Regulation 2016/1103 is in force, and then it will be necessary to examine that country’s conflict-of-law rules.
Poland is not a party to any multilateral treaties governing choice-of-law rules for personal and property marital relations. Nonetheless, the country is a party to a dozen or more bilateral treaties, which must be taken into consideration when examining issues of the law applicable to marital property matters. Examples include the Polish/French Treaty on Applicable Law, Jurisdiction, and Enforcement of Rulings on Personal and Family Law of 5 April 1967 and the Polish/Ukrainian Treaty on Legal Assistance and Legal Relations in Civil and Criminal Matters of 24 May 1993.
Private International Law
In the absence of relevant bilateral treaties, Poland’s Private International Law will apply. It governs personal and property relations between spouses from the date when the law entered into force, 16 May 2011, even if the marriage was contracted earlier.
Under Private International Law Art. 51(1), personal and property relations between spouses are subject in every case to the law of the country of which both parties are citizens.
If there is no such law, the law of the country in which both spouses are domiciled will apply, and if there is no such residence, the law of the state where both spouses have their habitual residence. If the spouses do not have their habitual residence in the same country, the law of the state with which the spouses otherwise are both most closely connected will apply (Private International Law Art. 51(2)).
Lawyers practising international family law are typically familiar with a range of legal systems. This does not necessarily mean that they have a deep knowledge of the regulations in force in different countries, but they have an awareness of the differences in legal constructions, experience in comparing regulations between countries, and skill in assessing the practical impact the regulations can have on their clients’ personal and professional situation.
Thus for spouses to effectively secure their own interests, before filing of a divorce petition it is worth discussing issues of jurisdiction and applicable law for marital property relations with a lawyer experienced in cross-border family-law matters.
Anna Olejniczak-Michalska, attorney-at-law, Private Client practice, Reprivatisation practice, Wardyński & Partners