Lex Rei Sitae and the EU Internal Market – towards mutual recognition of property relations

Abstract

For as long as our modern legal systems exist they have operated on the basis of the lex rei sitae rule. As an expression of the principle of territoriality, the law of a country applies to all objects that are situated on the territory. In domestic cases, of course, the regular rules apply, but in international disputes a legal system uses its own rules to be able to apply its own domestic law. The doctrine of lex rei sitae becomes relevant in a situation in which two legal systems come into contact with one another. A conflict of laws or conflit mobile arises when the law of one country is to be applied in the law of another country. Over the last centuries an intricate system of rules has developed with which private international lawyers resolve conflict of laws by pointing towards one of these legal systems as the applicable law. They do so - at least in theory - blindfolded, so that they cannot favor one legal system over the other. Instead of choosing one system over another, a set of impartial and objective rules is used to determine what legal system is to be applied. Private international law theory is, however, less facilitative in practice. In the European Union there is an internal market in which there is free movement of goods, persons, services and capital. This internal market is governed by principles and theory that are very different from the principles and theory underlying private international law. EU law works on the basis of a market functionalism that seeks to allow legal relations to remain to be governed by their country of origin. Property private international law rules are aimed to have legal relations governed by the host country. This tension between two opposite viewpoints is part of a larger tension between the unifying nature of EU Law and the procedural autonomy of the EU Member States. Rather than having EU law decide what is to be the applicable law, in general private international law cases, the host country, i.e. the lex fori, decides this by itself. In the past decade, however, many private international law rules have become EU law to centralise the rule deciding on applicable law and jurisdiction. The EU has therefore claimed competence in the area of applicable law and jurisdiction. However, when property law has been concerned, mostly connection has been sought, also at the EU level to the traditional lex rei sitae rule. In practice however, also an EU lex rei sitae rule turns out to be difficult to apply. The best example of this is perhaps the EU Succession Regulation that allows one single legal system to be applied to an entire cross-border succession case.