I INTRODUCTION

The European Union has been a structure under stress, facing significant change, for many years. Its development from the European Coal and Steel Community into a European Economic Community and then a European Community and now a European Union was one of incremental steps. It was perhaps the fall of the Berlin wall, the reunification of Germany and addition of many more Member States after 1990 that was initially the catalyst for some of the strains it faces today. The fact that the costs of the financial crisis of 2008 have been perceived to be borne by citizens who consider themselves unconnected with its causes has driven the rise in populism.

The competence of the EU in relation to taxation has, in the past, been limited to the European sales tax, value added tax. The problems with the single currency, the euro, wax and wane. Concerns as to Greece's place in it have been replaced by those of Italy. The structural difficulties of the euro currently remain unchanged. It seems less likely that France and Germany will find any acceptable common ground for its reform. The referenda in Denmark and the United Kingdom demonstrated a general unhappiness of EU citizens with the direction of travel. The trends in Italy, Austria and the Visegrad Group of Poland, Hungary, Slovakia and the Czech Republic have been seen to be away from the liberal social democratic model of the majority of Member States. The 2019 EU Parliament election results did not produce any clear messages, but reinforced old prejudices. In some Member States, right-wing anti-EU parties did not do as well as they had hoped, while elsewhere they did. The improving economic outlook in 2018 gave the European Union and its various institutions hope that a corner had been turned. The year 2019 has brought further uncertainty to all.

All Member States continue to be focused on economic growth and maximising tax collection, particularly from corporations, while dealing with their citizens' concerns over immigration. Debt reduction has been placed lower on the agenda. The EU institutions are conscious of the overwhelming priority to maintain the euro as a single currency and to produce economic growth notwithstanding global headwinds. The eurozone perspective and priorities continue to drive those Member States towards ever-closer union, but dealing with a populist government in Italy presents the EU with limited options. Relations with the United States also continue to be strained. The US disputes with China and Iran have given the EU difficult decisions to make; geopolitics may push the Eurozone states more firmly together, but Chinese foreign policy has been skilful at finding and exploiting differences. The US threat of tariffs has hurt the EU; it is possible that Chinese and EU retaliation might do more damage to the US than themselves. Globalisation is certainly stalled if not in retreat.

Uncertainties in Ukraine and with Russia moved the Baltic States firmly into the euro, in contrast to the non-euro Member States such as the Czech Republic, Sweden and Poland who remain firmly outside. Fear of Russia continues, even though its economic power has waned and it may well be on the way to coming under a Chinese sphere of influence. The two-tier Euro/non-Euro EU has already created significant tensions. The stark divisions within the United Kingdom exacerbated by its referendum would objectively call for some form of compromise, but the inability to find a simple Brexit solution has actually resulted in almost complete political paralysis and deepening divisions. The EU is frightened of contagion and other dominoes falling. Brave political leadership may continue to be in short supply, but other differences are, in any event, producing a more complex and multilayered EU.

While strictly not a federation, at many levels the EU behaves as if it were one. Since the Lisbon Treaty of 2009, the Treaty on European Union and the Treaty on the Functioning of the European Union govern its constitution and legislative processes. The relationship between its civil service (the Commission), the Member States' governments (the Council of Ministers) and the European Parliament (EP) is still a work in progress. The results of the EP elections, held in May 2019, have seen gains by Liberals, Greens and Nationalists at the expense of the two big political party groupings, the European Peoples' Party (EPP) and the Progressive Alliance of Socialists and Democrats (S&D), who have lost their powerbroking ability; more coalitions will be needed. The persons who will be placed in the key roles of Commission president, Council president, Parliament president and European Central Bank president will indicate the direction of the EU for its next term.

The EU, even if reduced to 27 Member States, is a place of significant wealth. With a combined population of 510 million or just under 7 per cent of the world's population, it has approximately 22 per cent of the world's GDP and is its second largest economy.2 The European Economic Area (EEA) consists of the EU, Iceland, Liechtenstein and Norway (Switzerland being a member with Iceland, Norway and Liechtenstein of the European Free Trade Association (EFTA) but not in the EEA). Whether the UK will remain in the EU or the EEA is still an open question.

The economic prosperity of the EEA made it an increasingly attractive destination for those fleeing conflict and poverty to its south and east. Whether or not the UK exits the EU, the strength and prosperity of both the UK and the EEA have already been affected.

To the tensions of the multi-speed EU were added the problems of mass migration. Under the Treaty of the European Union, the two-year timetable started once the UK served notice under Article 50. The 2016 referendum in the UK as to whether it should remain within the EU and subsequent serving of Article 50 notice in March 2017 to leave the EU cast something of a shadow over the workings of the EU, but having been extended twice so far, is probably now, somewhat down its list of priorities. The migration of both EU and non-EU nationals to the wealthier parts of the EU, within and between Member States, bring the fundamentals of the EU into sharp focus and strengthen populist forces. The free movement of labour and capital was designed to produce economic growth for both Member States and business. The demographics of most Member States require immigration to feed economic growth and counter falling birth rates. However, mass migration is an issue for all front-line Member States, such as Italy, Malta and Greece, and is also one for indigenous citizens who perceive that their own wages and standard of living are being reduced by the competitive market. In practice, most Member States have quietly found ways to limit freedom of movement, particularly for those not in employment. This has not stopped the flow of young economically active citizens away from the countryside to the cities and the hollowing out and ageing of many non-urban areas.

In 2016 and 2017, France, Germany and the UK all suffered from very public terrorist attacks. Being seen to deal with such threats effectively, while maintaining European traditions of tolerance and freedom, gave EU governments common problems and reasons to work together. However, memories fade fast, and the political pressure for unity within the EU always overrides any calls for cooperation with third states. EUROPOL and the Galileo project are examples of issues where the EU cannot treat the UK as a special case.

However, against a backdrop of continuing security threats, it is unlikely that the EU, its Member States and the EEA will be able easily to square the circle in relation to mass migration and economic growth. Freedom of movement will be quietly further curtailed, but this may not be enough to reverse the causes of populism.

II UNITED KINGDOM

The United Kingdom, which was in the middle of a constitutional crisis, has now been in complete political paralysis for some time. The referendum in September 2014 in Scotland as to whether it should be independent, focused much thought on the continuing nature of the strange ragbag of arrangements between the UK government in Westminster and those in Scotland, Wales and Northern Ireland. Northern Ireland, a product of its history and geography, is also caught between numerous forces, its recent uneasy peace, having perhaps been taken for granted. London, while having a larger population than each of those jurisdictions, has limited local government, while England as a whole has none.

The UK 2017 snap General Election result that produced no clear winner came as a surprise to many, but the rise of the Conservative Party in Scotland in protest at the one-party Scottish Nationalist Party should not have done. The Labour Party ran a much more effective and optimistic campaign while the Conservative Party was in general blamed for calling an unnecessary election and asking voters to give it a blank cheque. They declined to do so. It would seem that many electors voted against a party rather than necessarily for one.

The timetable for Brexit ticked and politicians were unable to find any acceptable solutions to the extremely difficult and complex fundamental questions that should have been considered before the EU Referendum rather than after Article 50 notice had been served. In doing so, both the Conservative and Labour parties painted themselves into different corners. The EU helped the UK politicians out of their corners, by moving the walls and agreeing to further extensions to the Article 50 notice period currently expiring on 31 October 2019. Notwithstanding differing views between Germany and France, it is very likely that further extensions would be granted; no EU politician wishes to be seen to be pushing the UK out of the EU. Although Conservative and Brexit politicians say that a no-deal exit is the way forward, there is no evidence that there is any majority for this or any other course of action.

The margin of 4 per cent on a 73 per cent turnout in the EU Referendum left the UK completely divided. The 2017 general election, the 2019 English local elections and the 2019 EP elections have shown that the divisions have deepened. London and Scotland by a 20 per cent majority and Northern Ireland by a smaller one voted to remain in the EU. The remainder of England and Wales with the exception of some cities such as Bristol, Liverpool and Oxford voted by a significant majority to leave. The population appear to be deserting the main political parties that themselves are still riven by the question of the EU, in favour of the Brexit party for leavers and the Liberal Democrat and Green parties for remainers. Prime Minister May surprised many by surviving so long, but the battle for her successor has produced more divisions. The Conservative and Labour parties do not currently show any sign of finding a way out of the quagmire they have got themselves into. Whether or not the UK leaves the EU, Brexit has fundamentally changed their relationships and that change is likely to rumble on for at least a generation.

Most English politicians of left or right felt constrained by the result of the referendum. However, as time passes, that constraint begins to fade and committed leavers become more worried at the prospect that Brexit may be slipping away. The negative economic effects and the unpalatable political choice of either no deal, membership of the EEA or signing a blank cheque have created the current political stasis. The Irish question added further historical and current complications. The Scottish question has also not been fully resolved.

The EU institutions had seen the referendum as a distraction that was unnecessary. The UK had been regarded as a pragmatic and effective major EU Member State, but is now seen as a laughing stock that is shooting itself in the foot, if not the head and without any clear realistic vision as to its future. Whether it will have a government able to follow through any negotiations and enact any necessary treaty arrangements is still seen as questionable.

The downsides for the EU of the UK leaving have not been openly discussed. The necessary reductions in EU income are unlikely to result in reductions in spending. Current proposals to move economic support from the east to the south of the EU create winners and losers. The exercise of raw political power may not be pretty.

The loss of a major common law state will leave a more homogeneous civil law EU, a less open market and will leave the EU less outward-looking. It will be the poorer for it.

The UK government and institutions have been expending virtually all of their energies in negotiating with the EU and attempting to resolve the effects of exit from the EU on its laws and structures, while being blown and buffeted by events. This is likely to continue for many years to come. While the absence of a written constitution has enabled flexible and incremental change in the UK, all of these tensions will continue to create mounting pressure for some new relationships between the various existing UK structures. In the meantime, it is very likely that the UK and EEA economies will decline, while at the same time the proportion of UK government spending in the UK will inevitably increase.

III TAX

Generally, the EU has had no competence over personal taxation for individuals, such matters being for individual Member States and outside its competence. However, with increasing frequency the European Court of Justice has held3 that the right to free movement of persons, goods, services and capital within the EU applies to limit the taxation rights of Member States. Inheritance was found to be a movement of capital and many Member State governments have been forced to amend existing tax rules. In the case of Austria, this led directly to the abolition of gift and inheritance tax.

As a result, the EU Commission looked at two separate initiatives:

  1. the effects of inheritance taxes on the rights of free movement;4 and
  2. double non-taxation.5

The limited competence of the EU in these areas has, however, meant that the recommendations were advisory only.

Over the years, the EU has developed various cross-border structures such as the European Company (SE) and the now-lapsed proposal for a European Foundation (FE). However, the tax treatment of these structures is not uniform. There has as yet been no proposal for an EU wide tax transparent vehicle such as an LLC, LLP or SCI.

By contrast, the EU has concentrated much firepower on corporate taxation. There is broad consensus on the part of EU institutions, MS and the Organisation for Economic Co-operation and Development (OECD) on tackling aggressive tax planning by corporations. Tax justice and a level playing field are seen as a priority. The EU Commission has presented its Action Plans for Fair and Efficient Corporate Taxation in the EU and has relaunched the Common Consolidated Corporate Tax Base (CCTB). The UK and French solutions for taxing tech companies are seen as temporary measures until a more global approach is agreed. The G20 do seem to be making progress here.

The EU–Canadian agreement (CETA) was finalised in the EU Parliament in February 2017 subject to ratification by national legislatures. Although still not ratified, it entered into force provisionally on 21 September 2017 and therefore most of it is applied. The EU–Japan agreement came into force on 1 February 2019. The EU appears to be making good progress with a free trade agreement with Australia and New Zealand. The US is very much the odd man out.

The Regulation on Mutual Recognition of Protection Measures in Civil Matters came into force in January 2015 and binds the United Kingdom and Ireland but not Denmark. The Brussels I Regulation was reviewed and amended: Brussels I bis came into force in January 2015.6 The Brussels II bis Regulation has been under review and is likely to be finalised under the new Commission. The EU (now including Denmark), Mexico, Montenegro and Singapore have ratified Hague 37 on choice of court agreements that entered into force on 1 October 2015. It applies in Ireland (and the UK).

Rome IVa, (EU) 2016/1103, dealing with matrimonial property7 and Rome IVb, (EU) 2016/1004, dealing with the property effects of registered partnerships,8 became fully effective on 29 January 2019, but were Regulations subject to enhanced cooperation and only apply in 18 Member States. This is dealt with more fully below.

The Regulation (EU) 2016/1191 of 6 July 2016 on promoting the free movement of citizens by simplifying the requirements for presenting certain public documents in the European Union was not subject to any opt out by the UK or Ireland and became fully effective on 16 February 2019.

The EU had no appetite for further legislation and the new Commission will almost certainly remain that way.

Replacing the numerous EU trade agreements would take the UK a long time and extracting itself from the EU acquis built up over 40 years, is not straightforward. The proposed transitional arrangements on judicial cooperation in civil and commercial matters, suggested by the EU Commission Task Force,9 were very sensible but highlight the practical difficulties and complexities of disengagement in whatever form.

IV TAX COLLABORATION, ENFORCEMENT AND REGULATION

Although the European Union is not a fully functioning federal state, its role in world organisations such as the OECD and the Financial Action Task Force (FATF) over money laundering and fraud or the Hague Conference over private international law, and in negotiating with world powers such as the United States in relation to matters such as the Foreign Account Tax Compliance Act (FATCA), should not be underestimated.

The European Union data protection laws appear to be what forced the United States into its FATCA Model 1 agreements with Member States.10 The European Commission played a significant role in those negotiations. However, while the Commission hoped to introduce a European FATCA, this was not politically acceptable in all Member States. The former Savings Tax Directive is now dead and is likely to be repealed.

In parallel, however, the OECD developed its Common Reporting Standard (CRS), which seems to have been accepted by the EU as the model for automatic tax information exchange and brought to an end further changes to the Savings Tax Directive. There seems, however, to be no realistic prospect of the US abandoning FATCA in favour of the CRS at the moment.

The EU continues to revise its Directive on Administrative Co-operation (DAC). Council Directive 2011/16/EU established procedures for better cooperation between tax administrations in the EU – such as exchanges of information on request – was amended in 2014 by Council Directive 2014/107/EU, which extended the cooperation between tax authorities to automatic exchange of financial account information and in effect incorporated CRS in the EU. Council Directive 2018/822 of 25 May 2018 (DAC6) controversially regulates financial intermediaries such as banks, lawyers and accountants in cross-border structures that may avoid tax and will be applicable from 1 July 2020.11

Money Laundering Directives were originally introduced to counter terrorist activity. Tax evasion and 'abusive' tax avoidance are now increasingly in the sights. The proposals for registers of beneficial interests in companies inevitably led to strong calls from the EP for registers for trusts and beneficial interests. The fourth Money Laundering Directive EU 2015/849, came into force on 26 June 2015 and should have been implemented in each Member State by 26 June 2017. Article 31 imposes different obligations on the trustees of express trusts to the obligations imposed in relation to beneficial ownership information required for legal entities under Article 30.

The Panama Papers and other calls from NGOs resulted in the Commission and the EP very quickly revisiting the effectiveness of the fourth Money Laundering Directive EU 2015/849. The ever-increasing demand particularly from journalists and various NGOs for public registers of beneficial ownership in relation to all structures in all jurisdictions has clearly influenced EU institutions. The fifth MLD 2018/843 became law on 9 July 2018,12 and is to be implemented in each Member State by 10 January 2020. It extends the reporting obligations, particularly for trusts and trust-like structures but leaves it to MS to decide the exact working of the registers. It is now likely that the UK will implement it in full. The EU Commission is to produce a consolidated list of trusts and trust like structures prepared by each Member State by 10 September 2019. The EU Parliament Report from the Committee on the Panama Papers inevitably called for full open registers and focus on financial intermediaries. Since 1 March 2018, this committee has now metamorphised into the special committee on financial crimes, tax evasion and tax avoidance (TAX3).13

Since Henry VIII's attempt to tax its use, equity has been successful in adapting and evolving to meet the demands modern society placed on it. Equity's success is perhaps now under attack particularly from the civil law world and civil society that sees it as a hindrance against corruption and tax fairness. It will be interesting to see how equity develops in response. Whether, if the UK leaves the EU, it will pull back from some EU developments is yet to be seen.

Practitioners therefore face continuing change, multiple registration and compliance obligations and public pressure for transparency all of which will push up the costs of practice.

V SUCCESSION AND MATRIMONIAL PROPERTY

It is in the area of succession law that the EU demonstrates its particular complexities. The substantive laws in Member States vary considerably in all areas. Individual forms of wills and succession agreements vary, as do the rules on forced heirship and reserved portions. Clawback or obligations to restore in states such as Italy last for the full lifetime of a donor and are enforceable rights in rem, while in Germany they are monetary claims and diminish by 10 per cent per annum and disappear after 10 years. Sweden and Austria have models of administration, while in France and Spain assets vest directly in the family heirs who can then be personally liable for the deceased's debts even if greater than the value of the deceased's assets. In addition, the private international law or conflicts of law rules (PIL) also varied considerably. Some Member States used connecting factors of habitual residence, while others used those of domicile. The majority used that of nationality.

While the EU has not sought to affect Member States' internal substantive law, it has for many years been seeking to harmonise MS PIL in this area. The Succession Regulation (EU) No. 650/2012 finally entered into force and became fully effective in all Member States (other than Denmark, Ireland and the United Kingdom) (the SR Zone) on 17 August 2015. In the SR Zone, the universal connecting factor is now that of habitual residence and the SR Zone Member State of habitual residence has universal jurisdiction. Renvoi has been abolished unless it is sending back into the SR Zone or to a Third state that accepts such a renvoi. A choice of national law (with no renvoi) is also permitted and a choice made prior to 2015 is still effective. Wills and succession agreements are now accepted throughout the SR Zone. The Succession Regulation also created the European certificate of succession (ECS) for use throughout the SR Zone. Recognition of the ECS, decisions of the Member State with jurisdiction and of clawback or obligations to restore throughout the SR Zone has changed the landscape for estate planning worldwide not only in relation to SR Zone nationals and residents, but also in relation to SR Zone situated assets for all individuals. The case of Winkler v Shamoon [2016] EWHC 217 (Ch) is an example in England and Wales of the effect that the Succession Regulation has had on other areas of law. For the purposes of Brussels I, 'succession' has been interpreted extremely widely and included oral proprietary estoppel as a matter for the Succession Regulation and therefore outside the scope of other regulations. If the UK leaves the EU, its relationship with the Succession Regulation will remain unchanged and it will continue to apply the Succession Regulation in accordance with its own private international law rules. The CJEU has begun to rule on various aspects of the Succession Regulation.14

Similar issues also affect matrimonial property and matrimonial property regimes. The EU has an even more complex patchwork quilt of substantive laws and of PIL. Regimes vary from full community in the Netherlands (until it was amended on 1 January 2018 for marriages after that date), to limited community in other Member States and to marital gains in Germany. PIL was governed by the 1978 Hague Convention in France, Luxembourg and the Netherlands. In other Member States connecting factors can vary from that of nationality or residence and changes in these during a marriage sometimes do and sometimes do not produce a change, whether retroactive or not. France and Germany have agreed a new form of matrimonial regime that can be used in both countries. Again, the EU did not propose to amend Member States' substantive law but wished to legislate in order to harmonise Member States' PIL. Rome IVa deals with the property effects of marriage and Rome IVb with the property regimes for registered partnerships. Owing to the significant differences in the recognition of same sex relationships throughout the EU, there was strong political opposition. The Visegrad Four of Hungary, Poland, Slovakia and Czech Republic have become increasingly more vocal and some of its members vetoed (as a family matter it required unanimous support) both Rome IVa and Rome IVb. In record time, the EU put in their place both of the Regulations under the enhanced cooperation mechanism so that they have been adopted by all EU MS (other than Croatia, Cyprus, Denmark, Hungary, Ireland, Latvia, Lithuania, Poland, Slovakia or the UK) that became fully effective from 29 January 2019. Rome IVa deals with the property rights of all married couples, whether mixed sex or same sex and similarly Rome IVb deals with the property effects of all registered partnerships whether mixed sex or same sex. It is understood that Estonia intends to ratify.

Although many practitioners consider that the issues involved in matrimonial property regimes do not concern them if the domestic law of their particular state does not use the concept, the England and Wales case of Slutsker v. Haron Investments Ltd15 is an example of PIL bringing such matters into play. They will continue to be of vital importance for international couples.

While the International Commission on Civil Status16 (ICCS/CIEC) has made proposals for a convention dealing with the recognition of registered partnerships, this has met with little support in the EU and the future of the ICCS seems less assured. The diversity of arrangements for the registration of marriage for same sex couples, and for registered partnerships for same-sex and mixed-sex couples and for the recognition of such marriages and registered partnerships, cause considerable conflict. In many Member States such as Sweden, the Netherlands, Belgium, France, Spain and Portugal, marriage is available to both mixed-sex and same-sex couples. The Marriage (Same Sex Couples) Act 2013 in England and Wales and the Marriage and Civil Partnership (Scotland) Act 2014 in Scotland recognised same-sex marriage from 2014. Ireland is also to introduce such legislation. The Civil Partnerships, Marriages and Deaths (Registration etc) Act 2019 will enable mixed sex couples in England and Wales to register a civil partnership by 2020. The ability to convert a registered partnership to a marriage does create its own PIL problems. There appears to be no indication of any change in the law in Northern Ireland. In many states, one party must be a national or habitually resident in the particular Member State in order to register a marriage. In other Member States, such as Romania, Latvia and Lithuania, there are protection of marriage laws that make it unlawful for marriage to be other than between a man and a woman. In yet others such as Austria, the Czech Republic, Finland, Germany, Hungary, Ireland, Italy, Slovenia and Northern Ireland, registered partnerships are permitted. The Netherlands permits both marriages and registered partnerships for either same-sex or mixed-sex couples. The French PACS is a form of registered contract that is available to both same-sex and mixed-sex couples. The changes to the law in Scotland and in England and Wales do not permit mixed-sex registered partnerships. Thus, while Northern Ireland will recognise a same-sex marriage from another jurisdiction as a registered partnership and Scotland and England and Wales as a marriage, it is currently only England and Wales that will not recognise a mixed-sex Dutch registered partnership or French PACS as a civil partnership. Whether a Scottish, English or Welsh same-sex marriage between a couple, one of whom is domiciled in a state that does not recognise same-sex marriage, would be valid in the United Kingdom is uncertain. Adoption and recognition of surrogacy for same-sex couples is not available or recognised in many MS. It may be another generation before MS substantive laws begin to converge sufficiently to permit some measure of harmonisation. However, Italy has now introduced the concept of a registered partnership. The CJEU decision in Coman17 which required Romania to accept the rights of a same sex spouse of a Romanian citizen to live in Romania, even though the marriage was not accepted in Romania, may have far-reaching effects. The impact of the United States Supreme Court decision in Obergefell v. Hodges18 of 26 June 2015, which required the acceptance of same sex marriage in the USA, continues to reverberate in the US and around the world.

VI MENTAL IMPAIRMENT

As populations live longer, the problems for individuals with diminished mental capacity across borders are also growing. The Hague Convention 35 of 13 January 2000 on the International Protection of Adults (HCCH 35) deals with the PIL issues of the recognition and enforcement and the applicable law of protective measures and the applicable law for private mandates. HCCH 35 has already been ratified by Austria, Cyprus, the Czech Republic, Estonia, Finland, France, Germany, Latvia, Monaco, Portugal, UK (Scotland only) and Switzerland. Greece, Ireland, Italy, Luxembourg, the Netherlands and Poland have all signed but not yet ratified. It is anticipated that Ireland may ratify during 2020. Belgium is also likely to accede shortly and Spain, Sweden and Italy are also now working towards ratification. Northern Ireland may also do so, using a similar model to Schedule 3 of MCA 2005 in Schedule 9 to the Mental Capacity Act (Northern Ireland) 2016. The changes to the internal law in Ireland and Northern Ireland will be significant and Scotland is undertaking a further review.

For England and Wales, there is considerable confusion since the Mental Capacity Act 2005 came fully into force on 1 October 2007 and gives full effect to the Convention notwithstanding the fact that England and Wales has not yet ratified.

The EU Parliament passed a further Resolution 2015/20185(INL), P8_TA(2017)0235 on 1 June 2017,19 and this issue may be on the EU programme during the next five years. Member States will be encouraged to ratify and further EU legislation is possible. HCCH 35 is, however, not without its own problems and further developments are likely. The inherent conflicts in the UN Convention on the Rights of Persons with Disabilities (UN CRPD) between the protection of rights under Article 12 and the protection from abuse under Article 16 are probably impossible to square. It is argued that HCCH 35 and the legislation of many states bound by UN CRPD are not compatible with it. The debate is one that will continue.

VII WEALTH STRUCTURING AND REGULATION

As a result of the lack of EU competence in the area of personal taxation, there are no vehicles to provide structures that are comprehended throughout the EU. Trusts, while used in Cyprus, Ireland, Italy (now increasingly less novel), Malta and the United Kingdom, are not accepted in many other Member States for law purposes. The changes to French tax law in 2011 and the EU AML Directives have been a partial acceptance of trusts and other structures for tax purposes, but even so they have not been welcomed. Belgium and Spain have followed France with similar moves. In many Member States, life insurance is given beneficial tax status, while structures such as usufructs or partnerships are also often used.

As mentioned above, Article 31 of the fourth Money Laundering Directive EU 2015/849, as amended by the fifth Money Laundering Directive EU 2018/843 imposes compliance obligations on trustees of express trusts and other types of legal arrangements. Notwithstanding that access can be limited to those with legitimate interests, pressure for public registers will continue, although now subject to the countervailing pressures of the General Data Protection Regulation (GDPR) 2016/679.20 While seen as problematic, logically, public registers should lead to further acceptance and enforcement of trusts in the long term.

VIII Outlook and CONCLUSIONS

Harmonisation of PIL in the EU is now likely to stall. Free movement of EU nationals (mostly), goods, services and capital, although with some restraints, is still seen as an engine for growth, even though the EU is under pressure to legislate less. The role of the Court of Justice of the European Union will also continue to increase although in response to political trends, it may tend towards protecting national sovereignty against EU encroachment.

All Member States are focused on controlling immigration and economic growth. The EU institutions are likely to retain the overwhelming priority of maintaining the euro as a single currency and mitigating recessionary forces. As a result, the EU institutions are likely to be proactive in encouraging any OECD and FATF initiatives that might be perceived to increase revenue share. The eurozone perspective and priorities are likely to drive those Member States in the eurozone towards ever closer union. Some Member States still consider Anglo-Saxon light-touch regulation as principally to blame for the economic and banking crises developing particularly since 2008. Pressure for increased regulation is likely to continue.

Whether the process of the UK negotiating its exit from the EU and the 2019 EU Parliament elections will encourage some Member States to review the previous direction of travel for the EU and whether some Member States may themselves be encouraged to become more detached is not yet clear. It is perhaps more likely that the EU will become more homogeneous, civil law focused and perhaps more protectionist, but the tensions between those Member States inside and outside the eurozone may well deepen.


Footnotes

1 Richard Frimston is a consultant and Christopher Salomons is a senior associate with Russell-Cooke LLP.

3 In, for example, Case C-364/01 Barbier [2003] ECR I–15013 (treatment of immovable property), Case C-513/03 van Hilten-van der Heijden [2006] ECR I–1957 (inheritance tax within 10 years of being resident was permissible), Case C-464/05 Geurts [2007] ECR I–9325 (exemption for Belgian businesses only), Case C-256/06 Jäger [2008] ECR I–123 (reduction for German agricultural property only), Case C-11/07 Eckelkamp [2008] ECR I–6845 (reductions for Belgian residents only), Case C-43/07 Arens-Sikken [2008] ECR I–6887 (provisions for Dutch residents only), Case C-67/08 Block [2009] 2 CMLR 39 (double taxation by Spain and Germany was permissible), Case C-510/08 Mattner [2010] All ER (D) 167 (Apr) (exemptions for German residents only), Case C-133/2013 re Q (restriction of exemption to Dutch land was permissible) and Case C-682/2017 Panayi (taxation of trusts leaving the UK).

6 Regulation No 1215/2012 (recast) effective from 10 January 2015, replaced Regulation No. 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters of 22 December 2000.

10 The starting point for all US FATCA Model 1 Agreements.

14 For example in Kubicka C-218/16, Mahnkopf C-558/16 and the case of Oberle C-20/17.

15 Slutsker v. Haron Investments Ltd [2013] EWCA Civ 430.

17 C-673/16.

18 James Obergefell, et al., Petitioners v. Richard Hodges, Director, Ohio Department of Health, et al. 576 US No.14-556 reinforcing the previous 2013 decision in United States v. Edith Schlain Windsor 570 US No.12-307.