Overriding importance of legal privilege reconfirmed by Belgian Constitutional Court in DAC-6 case

Sunday 3 September 2023

Peter Callens[*]
President of the Order of Flemish Bars, Brussels

Overriding importance of legal privilege reconfirmed by Belgian Constitutional Court in DAC-6 case

Legal professional privilege is not to be tampered with. It is a principle of such a fundamental nature that it imposes itself even on legislators. This is, in essence, the Belgian Constitutional Court’s message in its judgment of 20 July 2023 in a matter initiated by the Order of Flemish Bars (Orde van Vlaamse Balies or OVB) and other petitioners against the Flemish regional implementation decree of the DAC-6 Directive. The Constitutional Court had submitted a request for a preliminary ruling from the Court of Justice of the European Union (CJEU), which provided its answer in its landmark judgment of 8 December 2022 (Case C-694-20). The Constitutional Court now follows up on the CJEU guidance.

What is the case before the Belgian Constitutional Court about?

Council Directive (EU) 2018/822 of 25 May 2018, better known as DAC-6, requires professionals who advise on cross-border arrangements to report their advice to the national revenue service if it raises suspicion of seeking a tax advantage deemed undesirable. Member States had to transpose DAC-6 into national law by the end of 2019. Given the specific structure of Belgium as a federal state combined with regions and communities, five transpositions had to be carried out.

These transpositions were seen as problematic by the official representative bodies of the Bar instituted by law, OVB and its French-German speaking counterpart (OBFG), from the angle of the protection of professional secrecy. This key concept for the legal profession is determined by law, in the rules of professional conduct laid down by the Bars and, in recent years, in the case law of the Belgian Constitutional Court, the Court of Cassation, the Council of State, the CJEU and the European Court of Human Rights (ECtHR).

In the context of DAC-6 it is essential to recall that legal professional privilege is not restricted to advice in litigious situations or to representation in court. In Saber v Norway (2020), the ECtHR expressly granted protection under Article 8.2 ECHR to legal professional privilege outside the context of litigation. Building on earlier authorities, among which is another landmark case, Michaud v. France, the ECtHR reiterated that:

‘It is clearly in the general interest that any person who wishes to consult a lawyer should be free to do so under conditions which favour full and uninhibited discussion and that it is for that reason that the lawyer-client relationship is, in principle, privileged. It has not limited that consideration to matters relating to pending litigation only and has emphasised that, whether in the context of assistance for civil or criminal litigation or in the context of seeking general legal advice, individuals who consult a lawyer can reasonably expect that their communication is private and confidential.’

Any law that interferes with legal privilege must be sufficiently clear and foreseeable to ensure that the principle of it is not compromised.

In Ordre des barreaux francophones et germanophone and others (C-305/05) the CJEU found in 2007, with regard to anti-money laundering obligations, that the legal professional privilege may set aside lawyers’ reporting obligations regarding ‘information obtained in the course of related legal consultations’.

Since the 1977 directive on the freedom of establishment for lawyers, EU law has required that lawyers established in multiple Member States comply with the rules of professional conduct in each of the Member States concerned. In as early as 1974 the CJEU decided that the core activities of the legal profession are rendering legal advice and assistance, representation and defence of parties in a court of law (Reyners, C-2/74). It is precisely the advisory aspect of the legal profession that leaves no room for Member States to impose restrictions on the freedom of establishment of lawyers, on the proviso that they observe the local statutory rules and the rules of professional conduct laid down through self-regulation of the profession.

It is to be noted, in this context, that the scope of the legal professional privilege is not a harmonised matter at EU level.

The petitioners’ allegation in the proceedings is, in a nutshell, that DAC-6 undermines well-established professional secrecy rules in that they contain an obligation for lawyers (1) to report legal advice rendered to their clients, and (2) to notify any other intermediary working for the same client, if the rules of legal professional privilege to which the lawyers are subject prohibit them to report their advice, so that the reporting obligation is shifted to the other intermediaries so notified. That is what caused OVB and other petitioners to file their requests with the Constitutional Court.

Regarding specifically the obligation for lawyers to notify other intermediaries, the federal, Flemish and Brussels transpositions provided for a right for the relevant taxpayer to waive professional privilege: a novelty in a Belgian law context.

Such a waiver flies in the face of the public policy aspect of legal professional privilege in the Belgian legal tradition. The legislators’ solution was that when a taxpayer waives privilege, the intermediary will bring the matter before the self-regulating body overseeing their profession to decide what may be disclosed: the Bar. However, the Belgian Bar rules have consistently prohibited lawyers, when so requested by their client, to proceed with any such reporting to third parties – including the tax administration – regardless of the waiver of privilege granted by the client.

OVB and the other petitioners chose, as a preliminary procedural step, to enter an application for suspension of the Flemish transposition, in what is akin to summary proceedings – except that its goal is to suspend the effects of an act of the legislature, not a common thing to do. On 17 December 2020 the Constitutional Court submitted a preliminary question to the CJEU regarding the compatibility of the obligation to notify other intermediaries with the protection of (1) privacy under Article 7 of the Charter of Fundamental Rights of the European Union and (2) the rights of defence under Article 47 of the Charter. The Constitutional Court further ruled in favour of the petitioners and suspended the notification obligations for lawyers and the other aspects of the Flemish transposition decree that precluded invoking legal professional privilege in respect of periodic reporting of marketable arrangements.

What did the CJEU decide on 8 December 2022 in case C-694/20?

With reference to the case law of the ECtHR, particularly in Michaud v France and Altay v Türkiye, and its own case law in AM&S (C-155/7) and Privacy International (C-623/17), the CJEU held that the protection of privacy granted under Article 7 covers legal advice rendered by lawyers, even if it is outside the framework of court litigation. Legal professional privilege protects the independence and loyalty of lawyers in order to allow their clients to confide in them on private matters. The CJEU found that the interference of the obligation to notify with the protection of the client’s privacy was not necessary to achieve the objective of DAC-6. As to the protection for the rights of defence under Article 47 of the Charter, the CJEU considered that such protection requires a link with a lawsuit and, absent such link in the context of DAC-6, protection under Article 47 is not granted.

The judgment of 20 July 2023 of the Belgian Constitutional Court

The Constitutional Court first recites its longstanding and well-established case law on the protection of legal professional privilege, in relation both to legal advice and representation in a court of law.

The Court goes on to dismiss a number of the petitioners’ arguments, on the grounds that they are based on an erroneous interpretation of the legislative provisions. To summarise, the Court holds that:

  • to justify a failure to report, a lawyer cannot be forced to produce written evidence of any reporting made by other intermediaries, for there is no obligation for a lawyer to search what other intermediaries do or have done;
  • lawyers must notify the relevant taxpayers only if they are their clients;
  • a waiver of professional privilege can only be exercised or used by the client and the lawyer can either refuse to give effect to it and, thus, refuse to report or refer the issue to the self-regulated body (the bâtonnier or president of the Bar); and
  • regarding the conception of marketable arrangements, since at that stage no specific clients are involved, no criminal offence can be committed by reporting such arrangements.

Importantly, the Court annuls two provisions: (1) the obligation for lawyers to notify other intermediaries who are not their clients, and (2) the prohibition for lawyers to excuse themselves from periodic reporting of marketable arrangements for which they rendered advice.

The effect of the annulment proceedings on other provisions of the transposition decree awaits the outcome of CJEU case C-623/22.

The quintessence of the 20 July 2023 judgment is that legal professional privilege is, once again, confirmed as a pillar of the rule of law. Interferences with legal privilege must (1) take into account the way in which the profession is organised under the national legal tradition, (2) be narrowly interpreted and justified by overriding reasons of general interest and (3) be strictly proportionate.


[*] The author expresses special thanks to Werner Heyvaert and Paul Verhaeghe, lawyers and members of the Brussels Bar, for their invaluable input.