Permitted foreign investigative activities (and powers of investigators in general) in Luxembourg, and legal privilege

Max Mailliet
E2M – Etude Max Mailliet, Luxembourg
max.mailliet@e2m.lu    

Historic evolution

Luxembourg has long been (wrongly) seen and painted by its opponents as an opaque jurisdiction where investigations rarely yield results.

While this reputation may not have been totally undeserved in the last century (even if that is debatable), since the early 2000s, Luxembourg has seriously tightened its framework and should now definitely lose this reputation.

Nevertheless, the presence of a large financial center is often used as an excuse to put pressure on Luxembourg to tighten its frameworks further, with the result that, nowadays, Luxembourg has rather tough rules on international judicial cooperation but potentially also the most stringent rules in the area of the combat of terrorism financing and money laundering in the European Union, if not the world.

Powers of local investigators

Local investigators have pretty much the same powers as they have in most other countries, and their powers are being broadened with time.

Especially, when it comes to criminal matters, bank secrecy rules have been mostly ‘lifted’, in the sense that an investigating judge may now request bank records related to a person subject to prosecution. For certain types of offences, the investigating judges may also (under, however, rather stringent conditions), request that a number of banks inform them whether the person subject to the investigation has accounts at said bank^[1] and ask the banks to inform the judges of any movements on these accounts.^[2]

When it comes to data, the investigating judge has also been awarded the power to order a person to disclose the access codes to an IT system, if the judge considers that said person should be aware of such codes, with a view to circumventing cryptography.^[3]

There seem however to be no sanctions for non-compliance, except potentially an obstruction of justice charge, as Luxembourg law does not know the Anglo-Saxon principle of contempt of court. This has, to the best of the author’s knowledge, not yet been tested in practice.

Legal privilege

When it comes to legal privilege, that is, mostly professional secrecy of lawyers, there have been a number of evolutions over the last years, which have started to at least partly hollow out professional secrecy.

The base law of 10 August 1991 on the legal profession provides in its Article 35 that the place of work of the lawyer and his communications with the clients may not be violated.

Luxembourg law nevertheless allows for search and seizure orders to be carried out in lawyer’s offices, under condition that certain safeguards are nevertheless respected, which is why it is foreseen that a representative of the Luxembourg bar needs to be present during such search orders.

In the early years (this provision was implemented into the law in 2011), such search and seizure orders were mostly limited to documents held by a lawyer in connection with their activity as acting for a registered agent of domiciled companies. The scope of such orders was broadened with time, and it appears that nowadays, investigating magistrates also try to seize the correspondence between lawyers and their clients, although most such seizure orders were cancelled afterwards.

While such search and seizure orders were expected to be exceptional, with a bar of more than 3,000 lawyers, currently there appears to be at least one search by police in a lawyer’s office per week.

The argument that is being put forward (the tax administration initiated this argument in the context of the Panama Papers and received a partial confirmation in the administrative courts), is that there would be two different legal professions for lawyers, on the one hand, the pure litigation lawyer (where full professional secrecy would apply) and, on the other, the corporate/transactional lawyer, where professional secrecy may be lifted in certain circumstances.

The argument is more than debatable, but it appears to be upheld by a number of local courts and also international courts such as the European Court of Human Rights^[4] and the Court of Justice of the European Union.^[5]

Foreign investigations

Luxembourg law has a number of tools for cooperating in civil matters, two of which are used more and more frequently and summarised below.

The law of 8 August 2000 on judicial cooperation in criminal matters

The first is the law of 8 August 2000 on judicial cooperation in criminal matters, which provides for a rather stringent regime for judicial cooperation: according to this law, Luxembourg courts have a very limited room to manoeuvre, when a request for judicial cooperation comes in from a third country: there is a limited verification which is done by the Prosecutor General, who verifies mostly formal considerations, and whether a request for assistance does not concern a political case. The decision of the Prosecutor General is, however, not subject to any judicial review. This is regrettable, since the Prosecutor General only has in his hands the information provided by the requesting state, which is necessarily biased. If it transpires at a later stage that the prosecution in the requesting state is indeed of a political nature, there will be no way to stop the Luxembourg mutual assistance, as the only possible step of reviewing this question is at the level of the Prosecutor General. The result is that foreign states may be tempted to abuse the Luxembourg system. In the author’s view, the system should be reformed.

After the search is performed, the party where the search was performed, may file a written submission with observations on the validity of the search, within ten days of the search. Banks are not allowed to disclose the search to their clients, which means that their clients will mostly not be in a position to file such written submissions.

These submissions are then analysed by a court, the Chambre de conseil, which decides finally, meaning that its decisions are not subject to appeal or cassation, although some practitioners have tried workarounds to this (with more or less success).

The result is that these mutual assistance requests are handled relatively fast, and that the seized documents and information is transferred rather quickly to the requesting state.

The European Investigation Order

The second tool is the law of 1 August 2018, which implements Directive 2014/41 regarding the European Investigation Order in Criminal Matters. The procedure is rather similar to that for the law of 2000 seen above, except that the Luxembourg courts have even less room to manoeuvre and have to enforce the measures requested by the initiating country.

In a recent case, handled by the undersigned, the investigating magistrate argued that the courts had no room at all, and had to simply execute the measure requested, without being able to verify whether it would be allowed under Luxembourg law.

However, such reasoning does not appear to survive the test of validity, as the law of 2018 clearly holds that the execution of such a decision may be refused by the Luxembourg authorities if the measure could not be enforced in a similar national investigation.^[6] This case is still pending in court at the time of writing.

Notes

[1]     Article 66-2 of the Criminal Procedure Code, art 66-2.

[2]     Ibid, art 66-3.

[3]     Ibid, art 66.

[4]     European Court of Human Rights, 24 July 2008, Application no 18603/03, André and others v France, s 41.

[5]     Court of Justice of the European Union, 18 May 1982, Case C-155/79.

[6]     Article 24 of law of 1 August 2018, which implements Directive 2014/41 regarding the European Investigation Order in Criminal Matters.