The ECJ attaches particular importance to attorney-client privilege, also in the context of the mandatory exchange of information between intermediaries in aggressive cross-border tax arrangements.
In a fundamental decision, the ECJ has once again attached particular importance to the duty of confidentiality of lawyers – especially in comparison to the tax advisory professions.
Reporting obligation for aggressive cross-border tax planning
The ECJ’s decision was based on Belgian law implementing the “EU Directive on mandatory automatic exchange of information in the field of taxation on reportable cross-border arrangements” (EU Directive 2018/22). According to this directive, all intermediaries involved in potentially aggressive cross-border tax planning are obliged to report to the relevant tax authorities.
Attorney-client confidentiality takes precedence
Belgian tax lawyers have appealed to the Belgian Constitutional Court regarding the law passed in Belgium to implement this directive, which in turn has referred various questions requiring clarification to the ECJ regarding the interpretation of the directive and the compatibility of some provisions with the EU Charter of Fundamental Rights. The ECJ’s ruling on this matter is of great importance for all lawyers working within the EU, because although the ECJ has declared the relevant EU Directive 2018/22 to be essentially lawful, it has specifically given priority to the lawyer’s duty of confidentiality over the reporting obligations postulated in the directive.
Directive postulates indirect reporting obligation for lawyers
Although the Directive exempts a lawyer involved in aggressive cross-border tax planning from the obligation to report to the competent authorities in respect of legal professional privilege, the Directive requires the lawyers concerned to immediately inform other intermediaries or the taxpayer himself of the obligation to report to the competent authorities.
Reporting obligation for intermediaries generally in line with European law
In its current decision, the ECJ has declared the directive to be essentially in line with European law. According to the ECJ’s decision, the provisions of the directive
- in the choice of terminology sufficient clearly formulated and
- comply with the principles of Legal certainty and legality.
- The ECJ classifies the interference in the private lives of those involved in the reporting obligation as necessary to combat aggressive, cross-border tax planning a.
- The interference with the professional integrity of the intermediaries, including the tax advisors involved, which the Directive entails is relatively and must be accepted by those involved in the interest of tax justice.
Exceptional status of lawyers’ professional privilege
The ECJ made an exception with regard to the professional secrecy of lawyers affected by the provisions of the directive. In an earlier judgment of December 8, 2022, the ECJ had already emphasized the special status of lawyers’ professional secrecy and had already classified an indirect reporting obligation as a violation of lawyers’ professional secrecy (ECJ, judgment of December 8, 2022, C-694/20).
Singular relationship of trust between lawyer and client
In its current ruling, the BGH once again emphasises the special relationship of trust between lawyer and client. The position of the lawyer within the judicial organisation of a Member State is almost unique and requires a special duty of confidentiality in favour of an unrestricted relationship of trust between lawyer and client. Duty of confidentiality includes both the mere Existence of a mandate relationship as well as the Content of the mandateBecause of this special quality of lawyers’ professional secrecy, its principles cannot be transferred to other liberal professions.
ECJ ruling with cross-border significance
First of all, the current ECJ ruling applies to the Belgian law implementing the EU tax directive. However, with its ruling, the ECJ has also indirectly strengthened the lawyers’ duty of confidentiality as stipulated in Section 43a of the Federal Lawyers’ Act (BRAO). This is of no small importance for the legal profession, particularly in view of the tightening of the laws on combating money laundering and tax evasion, which are also being discussed repeatedly in Germany.
(ECJ, judgment of 29 July 2024, C-623/22)
