In depth
On 26 September 2024, the ECJ has delivered a judgment in the matter between F SCS c.s. v. Luxembourg (C 432/23). An English translation of the ruling has not yet been published. The judgment concerns important issues regarding the protection of legal professional privilege within an EU law context.
Summary of the facts
In short, the decision confirms that the protection afforded of legal privilege in the context of EU law. That right is guaranteed under Articles 7 and 51(2) of the Charter, which affords protection to privileged communications between an external EEA qualified counsel and his or her client. The protection applies also in situations where a Member State requests another Member State to retrieve information under Directive 2011/16 (on administrative cooperation in the field of taxation), even though that Directive does not refer to the right of legal professional privilege.
The factual background comes down to the following: The Spanish government requested information from Luxembourg on a Spanish group of companies who were being advised by a Luxembourgian lawyer. Based on that request, Luxembourg issued an injunction to that lawyer to, on pain of a fine, produce in full, accurately and without alteration, basically all the information related to the engagement. Luxembourg took the position that the lawyer would have no protection under legal privilege, as the advice by the lawyer likely related to tax law. Luxembourgian law only affords legal professional privilege in tax matters in the event the clients would otherwise run the risk of criminal prosecution. The lawyer contested that the advice did not exclusively relate to tax matters (rather: it related to setting up an investment structure), but eventually also refused to provide the information on even broader grounds, arguing that the interference with LPP that was caused by the interaction between Luxembourgian law and the information request under Directive 2011/16 ran contrary to, and was an infringement on, the protection afforded by Article 7 and 51(2) of the Charter.
Decision
This decision follows the judgment of the ECJ of 8 December 2022 in Case C-694/20 (Orde van Vlaamse Balies c.s. v Belgium), in which the ECJ delimited the scope of legal professional privilege under EU law, specifically in the context of the DAC6 reporting obligations. Case law before the 2022 ruling seemed to only provide protection for communications for the purposes and in the interests of the client's rights of defense (see ECJ 18 May 1982, Case 155/79, AM & S Europe v Commission; ECJ 14 September 2010, Case C-550/07, Akzo v European Commission). That narrow interpretation was departed from in the Orde van Vlaamse Balies-case, with the ECJ extending the protection afforded to attorney-client communications to encompass all legal advice, whether or not it was given in the context of the exercise of the client's rights of defenses. Affording broader protection, the ECJ ruled that, other than in exceptional situations, individuals consulting a lawyer must have a legitimate expectation that what has been entrusted to a lawyer in confidence will stay confidential. That confidence also extends to the fact that a client has engaged a lawyer for legal advice. In the particular context of the Orde van Vlaamse Balies-case, this meant that a mandatory reporting obligation under DAC6 could not be imposed on external EEA qualified counsel.
Following a similar opinion by A-G Kokott, the ECJ in F SCS has now ruled that, when applying Luxembourgian law within the context of the Directive, it indeed infringes on the right guaranteed by Article 7 and Article 51(2) of the Charter. While remarking that the protection offered by Article 7 of the Charter is not meant to be absolute, the ECJ notes that the limitation set out by Luxembourgian law essentially would remove a whole branch of law in which lawyers provide advice (i.e., tax law) from the fundamental protection that LPP offers. The position of the Luxembourgian government further extends this infringement to include other areas that border tax advice, such as advice on corporate investment structures. Considering the foregoing, the ECJ ruled that an interference with legal professional privilege through national legislation on the protection offered by the Charter, under which advice and representation by a lawyer in tax matters is removed from protection except where there is a risk of criminal proceedings against the client, should be considered an infringement of the rights guaranteed by Article 7 of the Charter.
Takeaways
The F SCS-decision confirms the right of legal privilege in EU context and makes clear that tax advice also falls under the scope of protection of the Charter. Within the context of previous judgment on legal professional privilege in the EU, a few things can furthermore be inferred. Firstly, while it is not mentioned in either the Orde van Vlaamse Balies-case or the F SCS-case, it can be assumed that – in accordance with the reasoning in the Akzo-case – in-house counsel will not enjoy legal professional privilege in an EU context. While the ruling in the Akzo-case was provided in relation to EU competition law and it is sometimes assumed that its merit is limited to that field, the scope of the reasoning in the judgment is not limited to competition cases. With the expansion of 'EU legal professional privilege', it is good to err on the side of caution in this regard and assume in-house counsel will not be afforded privilege in an EU context. Secondly, the ECJ has reconfirmed its position that the protection of legal professional privilege under Article 7 of the Charter is by no means absolute. Both in the Vlaamse Balies and the F SCS cases, the ECJ's finding that professional privilege is protected under the Charter is followed by a test to determine whether the infringement is justified by (in short and amongst other things) weighing the necessity and proportionality of that infringement. In the Orde van Vlaamse Balies-case, Belgium failed that test because other intermediaries also had a mandatory reporting obligation and the court ruled that it was not necessary that this obligation would therefore also apply to legal counsel. In the F SCS case, Luxembourg failed the test because of the strict exclusion of privilege in the Luxembourgian law, along with the unsympathetic and fundamental nature of injunction issued to the lawyer. Because of this, however, there certainly could be more nuanced cases in which infringement on legal professional privilege could be found necessary, proportionate and (therefore) justified. The opinion of the A-G provides some further clues in this regard (in particular, see para. 63 of the Opinion). Exceptions to the right of legal professional privilege in an EU context can furthermore already be found across the EU in the context of reporting obligations under the various AML directives. Thirdly, while the legal professional privilege of (external) EEA qualified counsel seems to be firmly established, privilege of ancillary professions – such as civil notaries – still remains unconfirmed. In this regard, Kokott mentions that the principle of privilege may apply not only to lawyers but also to tax advisors and other groups of professionals, "in so far as these, as independent collaborators in the interest of justice, are treated in the same way as lawyers under the relevant national law and are therefore authorized to give legal advice to clients and represent them in court" (see para. 60 of the Opinion). Civil notaries do not seem to fit all of these criteria. Lastly, it should be noted that the Charter only came into play because of the information request under Directive 2011/16, which brought the matter under the protection of the Charter and granted the ECJ jurisdiction. If this was solely a Luxembourgian matter, EU law would not be in play and the Charter would offer no protection.
