Subject Matter: Court of Justice of the European Union Judgement dated 8th December 2022 invalidating a specific provision of DAC6 regarding Advocates informing other intermediaries

CIBA Announcement dated 9^th December 2022

CIBA would like to inform, with the aid of the legal consultants of CIBA, the Law Office of L. PAPAPHILIPPOU & CO LLC,  its Members regarding the Court of Justice of the European Union (CJEU) Judgement dated 8^th December 2022 in Case C‑694/20 Orde van Vlaamse Balies, IG, Belgian Association of Tax Lawyers, and others v Vlaamse Regering (see Link to the Judgement’s text), in which the CJEU decided, on a final basis, the following:

1. Regarding combatting the so – called aggressive tax planning, the obligation for a lawyer, under the provisions of the DAC6 EU Directive, to inform other intermediaries involved is not necessary and infringes the right to respect for communications with his or her client, infringed Article 7 of the Charter of Fundamental Rights of the European Union, enshrining the Right to Privacy.

2. All the other intermediaries involved in such planning, and the taxpayer him- or herself, are subject to that reporting obligation, which makes it possible to ensure that the tax authorities are informed.

3. Article 7 of the Charter of Fundamental Rights of the European Union protects the confidentiality of all correspondence between individuals and affords strengthened protection to exchanges between lawyers and their clients. That specific protection afforded to lawyers’ legal professional privilege is justified by the fact that lawyers are assigned a fundamental role in a democratic society, that of defending litigants. That role requires that any individual is able to seek advice freely from his or her lawyer, a principle recognised in all Member States. Legal professional privilege also covers legal consultation, both with regard to its content and its existence.

4. However, the obligation laid down by DAC6 for a lawyer-intermediary subject to legal professional privilege to notify without delay other intermediaries of their reporting obligations implies that those other intermediaries become aware of the identity of the lawyer-intermediary. They also become aware of his or her analysis that the tax arrangement at issue is reportable and of his or her having been consulted in connection with the arrangement. That obligation to notify entails an interference with the right to respect for communications between lawyers and their clients, guaranteed in Article 7 of the Charter of Fundamental Rights. Given that other intermediaries are required to inform the competent tax authorities of the identity of the lawyer and of his or her having been consulted, that obligation also leads indirectly to a second interference with the right to legal professional privilege.

5. The CJEU considered that the notification obligation on a lawyer subject to legal professional privilege is not necessary in order to attain that objective. All intermediaries are required to file that information with the competent tax authorities. No intermediary can claim that he or she was unaware of the reporting obligations – which are clearly set out in the Directive – to which he or she is directly and individually subject.

6. Accordingly, the CJEU rendered a specific provision of DAC6 (Article 8ab(5)) ineffective, and hence legally invalid, in the light of Article 7 of the Charter of Fundamental Rights of the European Union, in so far as the Member States’ application of that provision has the effect of requiring a lawyer acting as an intermediary, within the meaning of DAC6, where he or she is exempt from the reporting obligation laid down in DAC6, as amended, on account of the legal professional privilege by which he or she is bound, to notify without delay any other intermediary who is not his or her client of that intermediary’s reporting obligations under DAC6.

A copy of the relevant CJEU Press Release in English regarding the 8^th December 2022 Judgement is attached.

It is noted that the CJEU has based a significant part of the legal reasoning of its Judgement in Case C‑694/20 on the previous Judgement of CJEU dated 22^nd November 2022 in Luxembourg Business Registers and Sovim, C‑37/20 and C‑601/20, whereby the Public Access to the Ultimate Beneficial Ownership related Registries was held illegal and invalid, contrary to Articles 7 and 8 of the EU Charter of Fundamental Rights and the Principle of Proportionality.

CIBA had duly raised, with the legal consultation and assistance of L. PAPAPHILIPPOU & CO LLC, the relevant legal concerns as to the illegality of DAC6 features during the written submission of views before the Ministry of Finance as well as during the discussion regarding the draft Bill transposing DAC6 in the legal order of the Republic of Cyprus before the House of Representatives’ Parliamentary Committee on Finance and Budget.

Further, CIBA has sent yesterday, 8^th November 2022, e-mail communications to:

1. the Ministry of Finance, requesting immediate placement of a Bill before Parliament so as to amend the Republic of Cyprus relevant DAC6 primary and secondary legislation, in order for the Republic of Cyprus to comply with the CJEU Judgement dated 8^th November 2022, and

2. the esteemed President of the House of Representatives and the esteemed President and Members of the Parliamentary Committee on Finance and Budget, informing them regarding the above.

CIBA has further called today, by issuing and publishing a relevant Press Release dated 9^th November 2022 (a copy of which is also attached), upon the esteemed President of the House of Representatives and the esteemed President and Members of the Parliamentary Committee on Finance and Budget, for the House of Representatives to discuss on an urgent basis the above so as to comply with the Principles of Legality and Transparency.

Lastly, it is noted that CIBA will be updating its Members, as always, regarding any further developments.