In a recent preliminary reference ruling (Orde van Vlaamse Balies) the Court of Justice of the EU (CJEU) clarified that EU legal professional privilege applies to legal advice in general, such as regulatory or commercial advice, as opposed to only advice that is prepared in the context of the client's rights of defence in legal proceedings. The CJEU held that Article 7 of the EU Charter of Fundamental Rights (the Charter) protects the confidentiality of exchanges between a lawyer and their client, with that protection covering "not only the activity of defence but also legal advice". In its analysis the CJEU refers to ECtHR caselaw, as it has an obligation to interpret the provisions of the Charter in light of the corresponding rights under the ECHR as interpreted by the ECtHR.
The ruling therefore extends the current definition of EU legal professional privilege as set out in the EU caselaw to date. Based on the AM&S and Akzo cases, both of which arose in the context of competition law dawn raids, it was generally recognised that EU legal professional privilege only applies to written communications between external lawyers and a client, relating to the subject-matter of the proceedings at hand, that:
- were made for the purpose and in the interest of a client's right of defence
- by an external lawyer qualified to practice in an EEA Member State
The requirement for the communication to be made in the interest of the client's rights of defence could have created a gap for legal advice in areas unrelated to competition law and the rights of defence in legal proceedings.
The judgment therefore provides an important and very useful clarification on the scope of EU legal privilege with the CJEU now explicitly holding that it covers legal advice in general.
It should be noted that the CJEU's latest ruling does not affect the requirement for the advice to be provided by an external lawyer as this point did not arise in this case.
Background to the case
The case relates to a dispute around the extent of legal professional privilege in the context of disclosure obligations for lawyers advising on cross-border tax arrangements.
EU Directive 2011/16/ on administrative cooperation in the field of taxation, as amended by Directive 2018/822, establishes a system of cooperation between the national tax authorities of the Member States and lays down the rules and procedures to be applied when exchanging information for tax purposes. It imposes an obligation on intermediaries (any person who designs, markets, organises or manages the implementation of a reportable cross-border arrangement) to report any potentially aggressive cross-border tax planning to the competent tax authorities.
The reporting obligation applies to lawyers, but Member States can take the necessary measures to exempt an intermediary from their reporting obligation where it would be in breach of the legal professional privilege rules under the national law of that Member State.
To that extent the Belgian implementing legislation provides that, where an intermediary is bound by legal professional privilege, they are required to notify another intermediary in writing, giving reasons why they are unable to comply with the reporting obligation, following which the reporting obligation is passed on to another intermediary.
The Flemish Bar Association and the Belgian Association of Tax Lawyers challenged this requirement before the Belgian Constitutional Court on the basis that the obligation to inform other intermediaries concerned in writing, with reasons as to why they cannot fulfil the reporting obligation, is in itself a breach of their legal professional privilege. They also argued that the obligation to provide that information is not necessary to ensure that cross-border arrangements are reported as the client can itself inform other intermediaries and ask them to comply with their reporting obligation.
The Belgian Constitutional Court asked the CJEU, by way of preliminary ruling, whether these requirements for lawyers to inform other intermediaries are in breach of the right to a fair trial and the right to respect for private life under the EU Charter of Fundamental Rights (the Charter).
The CJEU's ruling
Right to fair trial
As regards the right to a fair trial (set out in Article 47 of the Charter) the CJEU held that this presupposes a link with judicial proceedings. The obligation to notify arises at an early stage, at the latest when the reportable cross-border arrangement has been finalised and is ready to be implemented. At this stage the lawyer is not acting as the defence counsel for the client in a dispute and the notification obligation does therefore not interfere with the right to fair trial.
Right to respect for private life
As regards the right to private life (set out in Article 7 of the Charter), based on the caselaw of the ECtHR (Michaud v France), the CJEU recognises that this protects the confidentiality of all correspondence between individuals, with strengthened protection for exchanges between lawyers and their clients. That protection covers not only the activity of defence, but also legal advice, both with regard to its content and its existence. Individuals who consult a lawyer can reasonably expect that their communication is private and confidential (Altay v Turkey no2) and have a legitimate expectation that their lawyer will not disclose to anyone, without their consent, that they are being consulted by them.
The obligation for the lawyer-intermediary to notify other intermediaries of their reporting obligation under the amended Directive 2011/16 requires the disclosure of the identity of the notifying lawyer, the fact the lawyer was consulted and their assessment that the relevant arrangement is reportable.
The obligation to notify therefore infringes the right to respect for communications between lawyers and their clients as guaranteed in Article 7 of the Charter.