On 08 December 2022, the Court of Justice of the European Union (CJEU) issued a decision in case C 694/20, with the subject of a preliminary inquiry made on the basis of Article 267 TFEU by the Constitutional Court of Belgium, in a case concerning Directive 2011/16/EU of Council of 15 February 2011 on administrative cooperation in the field of taxation (better known as DAC 6) and the limitation of some of the duties of lawyers in connection with its application.
The reference for a preliminary ruling concerns the validity of Article 8ab, paragraph 5 of Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (OB L 64, 2011 , p. 1), amended by Council Directive (EU) 2018/822 of 25 May 2018 (OB L 139, 2018, p. 1) (hereinafter referred to as “amended Directive 2011/ 16”), in view of Articles 7 and 47 of the Charter of Fundamental Rights of the European Union (hereinafter referred to as “the Charter”).
The request was made in the context of disputes led by the Orde van Vlaamse Balies (Chamber of Flemish Bar Associations), the Belgian Association of Tax Lawyers, as well as the three lawyers – IG, CD and JU, against the Vlaamse Regering (Flemish Government, Belgium) on the validity of certain provisions of the Flemish legal framework on administrative cooperation in the field of taxation.
I. What is the legal framework?
The law of the Union
Directive 2011/16 introduces a system of cooperation between the national tax authorities of the Member States and establishes the rules and procedures to be applied in the exchange of information for tax purposes. The directive has been amended many times, such as the sixth amendment and by Directive 2018/822. The main objective of the Directive is to create rules aimed at improving transparency and preventing aggressive cross-border tax planning by creating obligations for so-called intermediaries to disclose potentially aggressive tax planning schemes with a cross-border element – involving participants from more by one Member State or a Member State and a third country.
Directive 2018/822 was transposed in Belgium by the Decree on administrative cooperation in the field of taxation of 21 June 2013. It regulates the mandatory submission by intermediaries or the relevant taxable persons of information relating to reportable cross-border tax arrangements.
According to Art. 11/6 of the decree defines the relationship between the obligation to disclose and the professional secrecy to which some intermediaries are bound.
II. The dispute in the main proceedings and the preliminary question
By appeals filed on 31 August and 1 October 2020, the appellants in the main proceedings appealed to the referring court, the Grondwettelijk Hof (Constitutional Court, Belgium), seeking to suspend and annul the Decree of 26 June 2020 in whole or in part.
It is clear from the document for a preliminary inquiry that the applicants in the main proceedings dispute in particular the obligation provided for the lawyer acting as an intermediary, when he is bound by professional secrecy, to notify the other relevant intermediaries in writing, stating specific reasons, that he is unable to fulfill its disclosure obligation. According to the appellants in the main proceedings, this obligation to notify cannot be fulfilled without breaching the professional secrecy to which lawyers are bound.
The Grondwettelijk Hof (Constitutional Court) decided to stay the proceedings and refer the following question to the Court for a preliminary ruling:
“Does Article 1(2) of Directive [2018/822] infringe the right to a fair trial guaranteed by Article 47 of the [Charter] and the right to respect for private life guaranteed by Article 7 of the [Charter] in so far as the new Article 8ab(5) introduced by that Directive in [Directive 2011/16] provides that if it takes the necessary measures to grant intermediaries the right to exempt themselves from the obligation to submit information on a reportable cross-border arrangement, where the obligation to disclose would violate a legally established obligation to preserve professional secrecy under the national law of that Member State, the latter should oblige intermediaries to immediately notify any other intermediary or, if there is none, the relevant taxable person, of their obligations to disclose the relevant information, provided that in order to fulfill this obligation, a lawyer acting as an intermediary should provide to another intermediary who is not his client, information that the lawyer has learned in the exercise of the essence of his profession, including and outside the framework of a specific legal dispute, namely – in the defense or procedural representation of the client before the courts and in the provision of legal advice?”.
On the preliminary question
It is clear from the reference for a preliminary ruling that, with its question, the referring court is essentially asking the Court to examine, in the light of Articles 7 and 47 of the Charter, the validity of Article 8ab(5) of the amended Directive 2011/16, insofar as its implementation by States Member States has the effect of obliging the lawyer acting as an intermediary within the meaning of this Directive to immediately notify any other intermediary who is not his client of his disclosure obligations, when the said lawyer is exempted from the obligation of disclosure provided for in the Directive due to the professional a secret he is bound by.
It should be noted that in the exercise of their activity, lawyers may be “intermediaries” within the meaning of Article 3, point 21 of the amended Directive 2011/16, since they themselves may carry out activities of drafting, marketing, organizing, providing for the implementation or management of the implementation of notifiable cross-border arrangements or, if this is not the case, as they may assist, assist or provide advice for such activities. That is why lawyers carrying out such activities are, in principle, carriers of the disclosure obligation provided for in Article 8ab, paragraph 1 of this Directive.
Each Member State shall take the necessary measures to introduce a requirement for intermediaries to immediately notify any other intermediary or, failing that, the relevant taxable person, of their disclosure obligations under paragraph 6 of this Article. This paragraph provides that in this case the duty of disclosure is on the notified intermediary or, if there is none, on the relevant taxable person.
In this respect, it should be noted that Article 7 of the Charter, which recognizes everyone’s right to respect for his private and family life, his home and the secrecy of his communications, corresponds to Article 8, paragraph 1, of the European Convention on the Protection of human rights and fundamental freedoms, signed in Rome on November 4, 1950 (hereinafter referred to as “ECHR”), while Article 47, which guarantees the right to an effective remedy and a fair trial, corresponds to Article 6, paragraph 1 of the ECHR.
The special protection afforded by Article 7 of the Charter and Article 8(1) of the ECHR to the lawyer’s privilege and which finds expression above all in the duties of lawyers is justified by the fact that lawyers are entrusted with a fundamental task in a democratic society, namely the protection of legal entities. This fundamental task includes, on the one hand, the requirement, the importance of which is recognized in all Member States, that every subject should be able to consult freely with his lawyer, whose very profession essentially includes the task of providing independent legal advice to all, who need them, and the corresponding requirement of the lawyer’s loyalty to his client.
The obligation provided for in Directive 2011/16 for the intermediary lawyer – when, due to the professional secrecy to which he is bound, he is exempt from the obligation of disclosure provided for in Article 8ab, paragraph 1 – to immediately notify other intermediaries who are not his clients of the obligations their disclosure under Article 8ab(6), however, has the inevitable consequence that those other intermediaries will become aware of the identity of the intermediary lawyer who notified them, of his judgment that the relevant arrangement should be disclosed, and of the fact that he is consulted in connection with it. In this way, notified third-party intermediaries disclose to the tax administration the identity of the intermediary lawyer and the fact that he has been consulted. It should therefore be considered whether these interferences with the right to respect for the confidentiality of communications between lawyers and their clients guaranteed in Article 7 of the Charter can be justified.
Under these conditions, it cannot be assumed that the obligation to notify provided for in Article 8ab, paragraph 5 of the amended Directive 2011/16, affects the essential content of the right to respect for the confidentiality of communications between lawyers and their clients enshrined in Article 7 of the Charter.
The fight against aggressive tax planning and the prevention of the risk of tax evasion and tax fraud constitute objectives of general interest recognized by the Union within the meaning of Article 52(1) of the Charter, which may allow the introduction of a limitation in the exercise of the rights guaranteed by Article 7.
However, even assuming that the notification obligation introduced by Article 8ab(5) of the amended Directive 2011/16 is indeed suitable to contribute to the fight against aggressive tax planning and to the prevention of the risk of tax avoidance and tax fraud, the conclusion , that it cannot, however, be considered strictly necessary to achieve those objectives, and in particular to ensure that information on notifiable cross-border arrangements is submitted to the competent authorities.
From the above considerations, it follows that Article 8ab, Paragraph 5 of the amended Directive 2011/16 violates the right guaranteed in Article 7 of the Charter to respect for the confidentiality of communications between the lawyer and his client, insofar as it essentially provides that the lawyer-intermediary bound by professional secrecy is required to notify any other intermediary who is not its client of its disclosure obligations.
Article 8ab, paragraph 5 of Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC, as amended by Council Directive (EU) 2018/822 of 25 May 2018, is invalid in view of Article 7 of the Charter of Fundamental Rights of the European Union, insofar as its application by the Member States has the effect of obligating the lawyer acting as mediator within the meaning of Article 3, point 21 of this amended directive , to immediately notify any other intermediary who is not his client of his disclosure obligations pursuant to Article 8ab(6) where the said lawyer is exempted from the obligation of disclosure provided for in Article 8ab(1) of the amended Directive by reason of professional secrecy, with which is bound.
Or to put it briefly:
The obligation of a lawyer acting as an intermediary within the meaning of DAC 6 to notify immediately any other intermediary who is not his client regarding information that has become known to him in connection with the performance of his professional duties, due to the professional secrecy with which is bound.