In a case involving a Luxembourg law firm which had been ordered by the Luxembourg Tax Authorities to disclose all documentation relating to advice given to a client for the purpose of an exchange of information upon request with the tax authority of another EU Member State, the Luxembourg Higher Administrative Court (Cour administrative) decided to stay proceedings and to refer a number of questions to the Court of Justice of the European Union (the “ECJ”) for a preliminary ruling on the compatibility of Directive 2011/16/EU and Luxembourg national legislation with the Charter of Fundamental Rights of the European Union and, more specifically, with the protection of lawyers' professional secrecy guaranteed by Article 7 of that Charter. Please refer to our October 2023 Newsletter for more details on the background of the case and the reference for preliminary ruling.
On 30 May 2024, Advocate General Juliane Kokott (the “AG”) presented her opinion to the ECJ.
Key points of the advocate general's Opinion
First of all, the AG points out that lawyers' professional secrecy enjoys a special protection, which is justified in particular by the fact that lawyers are entrusted with a fundamental task in a democratic society, namely the defence of litigants. Lawyers' professional secrecy is not only meant to protect the individual interests of lawyers and their clients, but also the general interest of an administration of justice that meets the requirements of a State governed by the rule of law.
The AG deduces from the above that the protection of professional secrecy excludes any distinction between different areas of law: legal advice in the field of company law and tax law should therefore be considered as being protected in the same way as representation of individuals in criminal or civil law proceedings for instance. Similarly, the legal form under which the lawyer or client acts is irrelevant.
The AG concludes that an injunction decision issued in the context of an exchange of information on request in tax matters, requesting a law firm to disclose all documentation relating to advice given to a client in connection with certain transactions, including the set-up of an investment structure, constitutes an infringement of the right to respect for communications between lawyer and client, guaranteed by Article 7 of the Charter of Fundamental Rights of the European Union.
While such an infringement may in some cases be justified in the light of the legitimate objective of combating tax avoidance and evasion, a strict proportionality test is required, according to the AG, in which the requested Member State must take account of the particular importance attached to the lawyer as an independent auxiliary of justice in a State governed by the rule of law. Directive 2011/16/EU gives the Member States a sufficient margin of discretion to meet the requirements of Article 7 of the Charter when transposing it into national law.
Implications for Luxembourg Legislation
The current Luxembourg legislation, under which advice and representation provided by a lawyer in tax matters, with the exception of criminal tax law, are generally excluded from the protection of legal professional privilege, when it comes to the collection of information by the tax authorities, does not allow for the required case-by-case balancing and is therefore, in the AG’s view, contrary to Article 7 of the Charter.
Although the AG’s opinion is often followed by the ECJ in practice, it is not binding and only the judgment to be delivered by the ECJ will acquire the force of res judicata.
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