On December 8, 2022, the Court of Justice delivered its judgment in the Orde van Vlaamse Balies and Others v. Vlaamse Regering case[1] following a request for a preliminary ruling from the Belgian Constitutional Court on the validity of a Flemish decree designed to implement an EU directive discouraging aggressive tax planning arrangements. The judgment is noteworthy for broadening the scope of the legal professional privilege applicable in competition law cases.
Background
At the core of the dispute was an EU directive, which provided that all intermediaries involved in aggressive cross-border tax-planning arrangements (i.e., arrangements that could result in tax avoidance and evasion) were bound to report such practices to the competent tax authorities. The Flemish decree transposing the directive into national law required lawyers involved to disclose the fact that they are advising on cross-border tax arrangements. The Order of the Dutch-language legal professional association challenged the law before the Belgian Constitutional Court, which referred the matter to the Court of Justice to understand whether the disclosure obligations imposed on lawyers breached the Charter of Fundamentals Rights of the EU, which affords confidentiality to communications between legal counsel and clients.
The judgment
Relying on Article 7 of the Charter of Fundamental Rights of the EU, the Court of Justice recalled the importance of a lawyer’s role and of the confidentiality of its correspondence with its clients. In particular, it upheld that Article 7 of the Charter covered “not only the activity of legal defence but also legal advice.”
Assessing the Flemish decree against this background, the Court of Justice stressed that the disclosure requirement would constitute a direct interference with the special protection afforded by Article 7 of the Charter of Fundamental Rights that was not justified or proportionate.
Significance for EU competition law
Despite the tax-related nature of the referral, the Court of Justice’s findings on privilege, and in particular, its interpretation of Article 7 of the Charter, are equally applicable to competition law proceedings. To date, the Commission has followed a strict approach to the legal professional privilege designation in competition proceedings by only accepting privilege for communications that related to the parties’ rights of defense in competition proceedings.
In practice, this left communications between external counsel and undertakings on other legal aspects (including among others, advice from deal teams on corporate law, patent lawyers on IP law, and labor lawyers on employee disputes) defenseless against the Commission’s increasing requests for information in behavioral investigations and for internal documents in merger proceedings. Against this background, the Court of Justice’s interpretation of legal professional privilege as expanding beyond legal defense and covering all legal advice provides ground for undertakings to claim privilege over communications that confer legal advice on the often forgotten non-competition law related aspects of a business decision. While the Court of Justice also upheld that Article 7 of the Charter precludes disclosure of privileged communications “both with regard to its content and to its existence,” it remains unlikely that the Commission would stop requesting privilege logs that disclose the existence of privileged communications (together with high-level information on its authors/senders, addressees, and date, among others).
[1] Orde van Vlaamse Balies and Others v. Vlaamse Regering (Case C-694/20) EU:C:2022:963.