AG Rantos On The Exemption Of Lawyers From Reporting Information To ...

Advocate General Rantos’s advice to the Court of Justice on the validity of an EU law rule designed to discourage aggressive tax planning arrangements by imposing reporting requirements on tax intermediaries in cross-border taxation matters, and the consequences of the requirements on the rights to privacy and a fair trial considering the lawyer-client relationship, has been published today in his Opinion for the case Orde van Vlaamse Balies, IG, Belgian Association of Tax Lawyers, CD, JU v Vlaamse Regering (C-694/20).

The Belgian Constitutional Court has asked the Court of Justice whether privacy and procedural rights under Articles 47 and 7 of the Charter of Fundamental Rights are infringed if information must be shared further to such reporting obligations (set out in Article 8ab(5) of Directive 2011/16, inserted by Directive 2018/822), where the ‘tax intermediary’ in question is a lawyer, and the reporting requirement, particularly with respect to third party intermediaries, violates lawyer-client privilege.

The Advocate General’s answer takes into account as a preliminary step how the reporting requirement applies to lawyers who act as intermediaries: he recognises legal professional privilege as a general principle of EU law – drawing that conclusion from EU case law, it being common to the national legal orders, but also as it is doubly guaranteed in Articles 6 and 8 ECHR and related ECtHR case law; points out that such privilege cannot be relied upon however if the lawyer is not acting within the scope of his or her professional activities under national law; and recalls that if the reporting-exemption does apply to the lawyer that he or she must inform other intermediaries, who are in turn obliged to identify all intermediaries including that lawyer who benefits from the exemption.

Having made those preliminary remarks, he turns to whether the right to a fair trial under Article 47 has been infringed by impinging on the lawyer-client relationship (and the inherent need for trust in that relationship) – and concludes that it has not. In coming to that view he draws upon Ordre des barreaux francophones et germaphone where the Court held that reporting obligations for certain activities were unrelated to judicial proceedings and therefore did not fall within the scope of the right to a fair trial – pointing out that here too, there are no judicial proceedings concerned in the case at hand. First, the intermediary was not the defender of the client in a dispute with the tax authorities, second, the notification obligation arises before the implementation of the cross-border scheme that ought to be declared, and there is no dispute at that early stage, and third, because the exchange of information in such cases occurs at an early, preventive stage.

Unlike Article 47, the Advocate General turns to the other right invoked in the case, and notes that Article 7’s protection extends beyond the judicial context, acknowledging also that a lawyer’s role as an intermediary in the cross-border scheme can be complex, indivisible and nuanced with respect to whether, when and how legal advice may be provided. He carries out proportionality tests of the notification requirement, considers whether the right to privacy can be justified in light of the objective pursued by Directive 2018/822, and is necessary and proportionate, and also takes into account the subsidiary obligation on the intermediary third party to communicate the name of the intermediary lawyer to the tax authorities.

It is his view that there is an infringement of the protection of privacy resulting from the provision in question, but that it does not involve, in the light of the aim pursued, a disproportionate and intolerable intervention which would undermine the very substance of the guaranteed rights. He adds to that conclusion that the name of the intermediary lawyer should not however be disclosed to the tax authorities by other intermediaries (who are required to do so under the reporting obligation), as revealing the name would constitute an infringement of the right to privacy.

Read the Opinion here.