French PACS

What are the differences between the French PACS and the UK civil partnership? Matthew Cameron explains…

In many ways the French Pacte Civil de Solidarit� (PACS) resembles the British Civil Partnerships Agreement (CPA). There are however a number of differences between the two forms of cohabitation agreement. Since their inception, there have been a number of complications and conflicts between the two systems. In this article we shall consider some of the current issues as well as looking at what the future may hold for couples who may be contemplating such contracts.By way of outline, both forms of contract constitute cohabitation agreements for nonmarrying couples. The PACS is aimed at both heterosexual and same-sex couples, while the British CPA is open only to same-sex couples. It may be argued that the British position is logical: a heterosexual couple wishing to enter into a long-term stable bond is able to marry; and it should be noted that the whole basis of the legislation is that in the past same-sex couples have not been able to marry (although this is now possible in some jurisdictions such as Spain and the Netherlands), so the CPA or PACS would offer an acceptable alternative.The initial constitutional requirements for such agreements reflect those for marriage – the couple cannot already be married or related, nor already be in any form of co-habitation agreement. Just as a marriage is recognised internationally, so the existence of CPA or PACS is recognised overseas. Article 515-2 of the code civil requires that each party is single before completing a PACS, for example. Yet some couples have tried to enter into two agreements in the past, so as to be able to take certain benefits in one jurisdiction that would otherwise not be available to them.Also, a PACS can only be completed where the couple are either French resident or at least one of them is a French national. So a British same-sex couple with a holiday home in France will not be able to complete a PACS.Why would one even need to consider entering two agreements? The treatment of each form differs between jurisdictions, especially in relation to recognition and tax treatment. The CPA is the more recent of the two. Through article 212 of the Civil Partnerships Act 2004, it specifically recognises a PACS agreement provided that a couple is of the same sex and it treats a couple under a PACS as if they had completed a CPA if they move to the UK.However, for tax purposes at least, French law does not recognise other international agreements. A couple having completed a PACS is exonerated from inheritance tax on any legacies that one would leave to the other on death, just as would be the case for a married couple. English law treats people having completed a CPA in the same way, and since it treats international agreements as if they were themselves a CPA, it also extends an exemption to inheritance tax to a couple having completed a PACS, in relation to any property that may otherwise be part of a UK estate. This is what one would expect to be the case. Yet the exoneration offered in France is expressly offered only to a couple who have completed a French PACS, not a similar international agreement, due to an overly strictly worded clause in the General Tax Code. The tax allowance applies to people in a PACS and only that, rather than to similar international agreements.This means that a couple having completed a CPA will suffer tax disadvantages in relation to any assets in France. Indeed, since there is no recognised relationship they would be treated as strangers, such that inheritance tax would be applied at 60 per cent on any legacies one may leave to the other.Thus it may be seen that it would be preferable to complete a PACS rather than a CPA, given the way the different forms are recognised in the other jurisdiction. An unusual and discriminatory double standard applies here: a CPA is recognised insofar as a couple having signed one would then not satisfy the terms of article 515-2 of the code civil, so that they would not subsequently be able to complete a PACS (which would otherwise theoretically offer them the best of both worlds), yet the CPA is not recognised for tax purposes.Major problemThis issue has been recognised by lawyers for a good while now. Legal commentators have acknowledged that the major problem from a French perspective is unsatisfactory drafting of the relevant tax legislation. The result of this poor legal drafting is discrimination between French and non-French unmarried couples. Little wonder then that some couples may have wanted to see how they can correct the situation. One option will be to sue the French state through the European Court of Human Rights on the basis that France has drafted legislation that has led to discrimination. This though would require immense time and cost, and to take a claim through the court procedures, a person would need to prove they had suffered a loss: thus they would have to have lost their partner, having completed a CPA rather than a PACS, such that the French inheritance they received from their partner is subjected to inheritance tax at 60 per cent.However, we may now be hopeful that the situation will eventually be rectified. More recently it has come to the attention of certain members of the Assembl�e G�n�rale. Written parliamentary questions have been posed as to the problems with the drafting, and the French government has now stated that it intends to rectify the mistake.It has not given any timescale, although this is at least a step in the right direction. One would hope that since the steps required for recognition of non-French cohabitation agreements should not prove too complicated, that this will be done before too long. The longer the delay, the more chance there is of a substantial loss being suffered by other couples.