Case C‑694/20
Orde van Vlaamse Balies and Others
v
Vlaamse Regering,
(Request for a preliminary ruling from the Grondwettelijk Hof)
Judgment of the Court (Grand Chamber), 8 December 2022
(Reference for a preliminary ruling – Administrative cooperation in the field of taxation – Mandatory automatic exchange of information in relation to reportable cross-border arrangements – Directive 2011/16/EU, as amended by Directive (EU) 2018/822 – Article 8ab(5) – Validity – Lawyer’s legal professional privilege – Exemption from the reporting obligation for lawyer-intermediaries subject to legal professional privilege – Obligation on that lawyer-intermediary to notify any other intermediary who is not his or her client of that intermediary’s reporting obligations – Articles 7 and 47 of the Charter of Fundamental Rights of the European Union
1. Approximation of laws – Administrative cooperation in the field of taxation – Directive 2011/16 – Exchange of information on request – Intermediary – Concept – Lawyer exercising his or her activity – Included
(Council Directive 2011/16, as amended by Directive 2018/822, Art. 3(21))
(see paragraphs 21, 22)
2. Fundamental rights – Respect for private and family life – Right to effective judicial protection – Affirmed both by the Charter of Fundamental Rights of the European Union and by the European Convention on Human Rights – Level of protection provided for by the Charter not infringing that guaranteed by that convention
(Charter of Fundamental Rights of the European Union, Arts 7, 47 and 53(3))
(see paragraph 26)
3. Fundamental rights – Charter of Fundamental Rights – Respect for private and family life – Limitation on the exercise of the rights and freedoms enshrined in the Charter – Requirements – Limitation provided for by law – Respect for the essence of the rights – Observance of the principle of proportionality – Pursuit of an objective of general interest – Scope – Combating of aggressive tax planning and prevention of the risk of tax avoidance and evasion – Included
(Charter of Fundamental Rights of the European Union, Arts 7 and 52(1))
(see paragraphs 34-41, 44)
4. Approximation of laws – Administrative cooperation in the field of taxation – Directive 2011/16 – Exchange of information on request – Obligations on lawyers to provide information and cooperate – Infringement of the right to a fair hearing – None
(Charter of Fundamental Rights of the European Union, Art. 47; Directive 2011/16, Art. 8ab(5))
(see paragraphs 60-65)
5. Approximation of laws – Administrative cooperation in the field of taxation – Directive 2011/16 – Exchange of information on request – Obligations on lawyers to provide information and cooperate – Lawyer’s legal professional privilege – Exemption from the reporting obligation for lawyer-intermediaries subject to legal professional privilege – Obligation on that lawyer-intermediary to notify any other intermediary who is not his or her client of that intermediary’s reporting obligations – Infringement of respect for private and family life – Invalidity
(Charter of Fundamental Rights of the European Union, Art. 7; Directive 2011/16, Art. 8ab(5))
(see paragraphs 19, 27-32, 46-53, 56-66, operative part)
Résumé
As regards the administrative cooperation of Member States’ national tax authorities, an amendment to Directive 2011/16 (1) by Directive 2018/822 introduced a reporting obligation to the competent authorities on intermediaries participating in potentially aggressive tax-planning cross-border tax arrangements. (2) Thus, all those who are involved in designing, marketing, organising or managing the implementation of such arrangements, and all those who provide assistance or advice in relation thereto and, if there are no such persons, the taxpayer him- or herself, are subject to that reporting obligation.
According to another provision of amended Directive 2011/16, (3) each Member State may take the necessary measures to give intermediaries bound by legal professional privilege who participate in those arrangements the right to a waiver from the reporting obligation where that obligation would breach that legal professional privilege under national law. In such circumstances, the Member State concerned is to ensure that those intermediaries are required to notify, without delay, any other intermediary or, if there is no such intermediary, the relevant taxpayer of their reporting obligations. However, intermediaries bound by legal professional privilege may be entitled to a waiver from the reporting obligation only to the extent that they operate within the limits of the relevant national laws that define their profession.
In order to satisfy the requirements introduced by Directive 2018/822 and to ensure that legal professional privilege does not prevent the necessary reporting, the provisions of the Flemish legislation on administrative cooperation in the field of taxation transposing that directive provide, inter alia, that where an intermediary is bound by legal professional privilege, he or she must notify the other intermediary or other intermediaries in writing, giving reasons, that he or she cannot comply with the reporting obligation, transferring that obligation automatically to the other intermediary or other intermediaries.
The Orde van Vlaamse Balies (Flemish Bar Association), the Belgian Association of Tax Lawyers (4) and three lawyers dispute that notification obligation on lawyers acting as intermediaries. In their submission, it is impossible to comply with that obligation to notify without infringing the legal professional privilege by which lawyers are bound. Moreover, that obligation to notify is not necessary, since the client, whether or not assisted by the lawyer, can him- or herself inform the other intermediaries and ask them to comply with their reporting obligation. The applicants thus brought an action before the Grondwettelijk Hof (Constitutional Court, Belgium) seeking suspension of the provisions of national law concerned and their annulment in whole or in part.
The referring court asks the Court about the validity of the provision of amended Directive 2011/16 (5) which imposes an obligation to notify.
By its judgment, the Court, sitting as the Grand Chamber, holds that that provision is invalid in the light of Article 7 of the Charter of Fundamental Rights of the European Union, (6) in so far as the Member States’ application of that provision has the effect of requiring a lawyer acting as an intermediary, where he or she is exempt from the reporting obligation on account of the legal professional privilege by which he or she is bound, to notify without delay any other intermediary who is not his or her client of that intermediary’s reporting obligations.
Findings of the Court
The Court specifies, as a preliminary point, that the question concerns the validity, in the light of Articles 7 and 47 of the Charter, of the obligation to notify laid down in amended Directive 2011/16 only in so far as the notification must be made, by a lawyer acting as an intermediary, to another intermediary who is not his or her client. Where the notification is made by the lawyer-intermediary to his or her client, whether that client is another intermediary or the relevant taxpayer, that notification is not capable of calling into question respect for the rights and freedoms concerned, which are guaranteed by the Charter.
In order to determine whether the obligation to notify is valid, the Court interprets Article 7 of the Charter in the light of the case-law of the European Court of Human Rights on the corresponding provision, namely Article 8 of the European Convention on Human Rights. (7) According to that case-law, that Article 8 protects the confidentiality of all correspondence between individuals and affords strengthened protection to exchanges between lawyers and their clients. The Court concludes from this that Article 7 of the Charter guarantees not only the activity of defence but also the secrecy of legal advice, as regards both its content and its existence. Therefore, other than in exceptional situations, persons who consult a lawyer must have a legitimate expectation that their lawyer will not disclose to anyone, without their consent, that they are consulting him or her.
That protection afforded to lawyers’ legal professional privilege is justified by lawyers’ fundamental role in a democratic society, that of defending litigants. That role entails the requirement that any person must be able, without constraint, to consult a lawyer in order to obtain independent legal advice whilst relying on his or her good faith.
The obligation expressly laid down by amended Directive 2011/16 for a lawyer-intermediary exempt from the reporting obligation to notify without delay other intermediaries who are not his or her clients of their reporting obligations necessarily means that those other intermediaries become aware of the identity of the notifying lawyer-intermediary, of his or her assessment that the arrangement at issue is reportable and of his or her having been consulted in connection with the arrangement. The Court finds that this entails an interference with the right to respect for communications between lawyers and their clients, guaranteed in Article 7 of the Charter. Furthermore, that obligation to notify leads, indirectly, to another interference with that right, resulting from the disclosure, by the third-party intermediaries thus notified, to the tax authorities of the identity of the lawyer-intermediary and of his or her having been consulted.
As regards a possible justification for those interferences, the Court recalls that the right to respect for communications between lawyers and their clients may be limited provided that those limitations are provided for by law, that they respect the essence of those rights and that, in compliance with the principle of proportionality, they are necessary and genuinely meet objectives of general interest recognised by the European Union or the need to protect the rights and freedoms of others.
In the present case, the Court finds that both the principle of legality and the essence of the right to respect for communications between lawyers and their clients have been satisfied.
As regards the proportionality of the interference, the Court recalls that the amendment made in 2018 to Directive 2011/16 forms part of international tax cooperation, the objective of which is to contribute to the prevention of the risk of tax avoidance and evasion, which constitute objectives of general interest recognised by the European Union.
However, even if the obligation to notify on the lawyer subject to legal professional privilege is indeed capable of contributing to the combating of aggressive tax planning and the prevention of the risk of tax avoidance and evasion, it is not necessary in order to attain those objectives and, in particular, to ensure that the information concerning the cross-border arrangements is filed with the competent authorities. All intermediaries are, in principle, required to file that information with those authorities. No intermediary can therefore usefully argue that he or she was unaware of the reporting obligations, which are clearly set out in the Directive, to which he or she is directly and individually subject.
Furthermore, since each intermediary is exempt from the reporting obligation only if he or she has proof that it has already been discharged by another intermediary, there is no reason to fear that the intermediaries would rely, without verification, on the lawyer-intermediary making the required report. Furthermore, by expressly providing that legal professional privilege may lead to a waiver from the reporting obligation, the Directive makes a lawyer-intermediary a person from whom other intermediaries cannot, a priori, expect any initiative capable of relieving them of their own reporting obligations.
As regards the disclosure, by notified third-party intermediaries, of the identity of the lawyer-intermediary and of his or her having been consulted to the tax authorities, that disclosure also does not appear to be necessary for the pursuit of the objectives of the Directive. The reporting obligation on other intermediaries not subject to legal professional privilege and, if there are no such intermediaries, that obligation on the relevant taxpayer ensure, in principle, that the tax authorities are informed. In addition, the tax authorities may, after receiving such information, request additional information directly from the relevant taxpayer, who will then be able to consult his or her lawyer for assistance, or they may conduct an audit of that taxpayer’s tax situation.
The Court therefore holds that the obligation to notify laid down in the EU Directive infringes the right to respect for communications between a lawyer and his or her client, guaranteed in Article 7 of the Charter, in so far as it provides that a lawyer-intermediary, who is subject to legal professional privilege, is required to notify any other intermediary who is not his or her client of that other intermediary’s reporting obligations.
Moreover, the Court finds in the present case that Article 47 of the Charter is not applicable given that that article presupposes a link with judicial proceedings. However, there is no such link in the present case, given that the obligation to notify arises at an early stage, at the latest when the reportable cross-border arrangement has just been finalised and is ready to be implemented, and thus outside the framework of legal proceedings or their preparation. Accordingly, the obligation to notify replacing, for the lawyer-intermediary bound by legal professional privilege, the reporting obligation laid down in Article 8ab(1) of amended Directive 2011/16 does not entail any interference with the right to a fair trial, guaranteed in Article 47 of the Charter.