Case C-358/16, UBS – stopping a lawyer accessing innocence-establishing documents

The Grand Duchy of Luxembourg is home to a lucrative trade in investment banking and investment companies. Policing that market is Luxembourg’s financial regulator, the CSSF. It has stopped a lawyer from working as a company director. He is challenging the correctness of the regulator’s decision. As part of preparing his legal action, he wants to see certain documents held by the regulator. However, the regulator is refusing to disclose any documents. Furthermore, the regulator’s position is reinforced by a bank that has already been censured by the regulator in precisely the same matter. Therefore, the legal issue in this case is the degree to which the alleged confidentiality of the documents prevails over the individual lawyer’s EU Charter rights.

Luxembourg’s financial regulator is known as the CSSF. In 2010, it wrote to a lawyer practising in Luxembourg. The letter told the lawyer that the CSSF had decided that he should to stop all work arising from his company directorships. This was because one of the companies of which he had been a director had been the object of regulatory censure by the CSSF.

The lawyer challenged the CSSF’s decision that he should stop work as a company director. He sued the CSSF in his local administrative court. As part of his action in effect to prove his innocence, he wanted the CCSF to hand over various documents in the possession of the CSSF. Some of the documents concerned how the CCSF had acted in an American case, documents which he believed would show that the CCSF had not acted in the way that it had claimed.

The CSSF declined to disclose the documents. It justified its refusal on the basis that the documents were covered by rules governing commercial confidentiality in the banking sector, and rules governing the exchange of information between regulatory authorities.

By 2014, the dispute between the lawyer and the CSSF had been appealed up to Luxembourg’s appellate court for administrative law matters. The court sensed that a regulatory decision requiring someone to stop work was akin to a criminal sanction so the Article 6 ECHR ‘right to a fair trial’ was at stake and it required scrupulous care. In that context, the point blank refusal of the regulator to supply information did not seem not justified to the appellate court and ordered disclosure.

In 2016, a bank connected to the censured company through having been represented on the company’s board, decided to interpose in the litigation. (Although the Luxembourg court had redacted the name of the bank in the ‘Tierces oppositions’, the CJEU’s docket name and number indicates that the bank to be the Luxembourg branch of the Swiss bank ‘UBS’.)

The bank’s intervention challenged the appellate court’s disclosure order and believed the regulator’s refusal to have been correct. The bank’s objection was based on Article 54 of EU’s ‘markets in financial instruments’ Directive 2004/39/EC (OJ [2004] L145/1).

Article 54 of that directive, entitled ‘Professional Secrecy’, states:

1. Member States shall ensure that competent authorities, all persons who work or who have worked for the competent authorities … are bound by the obligation of professional secrecy. No confidential information which they may receive in the course of their duties may be divulged to any person or authority whatsoever, save in summary or aggregate form such that individual investment firms, market operators, regulated markets or any other person cannot be identified, without prejudice to cases covered by criminal law or the other provisions of this Directive.
2. Where an investment firm … has been declared bankrupt or is being compulsorily wound up, confidential information which does not concern third parties may be divulged in civil or commercial proceedings if necessary for carrying out the proceeding.
3. Without prejudice to cases covered by criminal law, the competent authorities … which receive confidential information pursuant to this Directive may use it only in the performance of their duties and for the exercise of their functions … However, where the competent authority or other authority, body or person communicating information consents thereto, the authority receiving the information may use it for other purposes.
4. Any confidential information received, exchanged or transmitted pursuant to this Directive shall be subject to the conditions of professional secrecy laid down in this Article. Nevertheless, this Article shall not prevent the competent authorities from exchanging or transmitting confidential information … with the consent of the competent authority or other authority or body or natural or legal person that communicated the information.
5. This Article shall not prevent the competent authorities from exchanging or transmitting in accordance with national law, confidential information that has not been received from a competent authority of another Member State.

The bank recalled that Article 54 had been interpreted by the CJEU in Case C-140/13, Altmann ECLI:EU:C:2014:2362. In Altmann, the CJEU had reasoned from paragraph 33 onwards:

34 The specific cases in which the general prohibition on divulging confidential information covered by professional secrecy does not preclude their transmission or use are set out in detail in Article 54 of Directive 2004/39.

35 It follows that there are no exceptions to the general prohibition on divulging confidential information other than those specifically provided for in that article.

36 In the present case, and in view of the fraudulent nature of the activities carried out by Phoenix, the sentences of imprisonment imposed on its executives and the fact that it was put into compulsory liquidation, it must be observed, first, that Article 54(1) of Directive 2004/39 provides that the obligation to maintain professional secrecy is ‘without prejudice to cases covered by criminal law’.

37 Second, it must be recalled that Article 54(2) of that directive provides that, where an investment firm has been declared bankrupt or is being compulsorily wound up, ‘confidential information which does not concern third parties may be divulged in civil or commercial proceedings if necessary for carrying out the proceeding’.

38 Therefore, as regards information concerning investment firms declared bankrupt or being compulsorily wound up, such as that at issue in the main proceedings, the obligation to maintain professional secrecy may be disregarded, without prejudice to cases covered by criminal law, only where the three conditions referred to in the preceding paragraph — namely that the confidential information must not concern third parties, that that information is divulged in civil or commercial proceedings and that that information is necessary for carrying out that proceeding — are fulfilled.

39 It does not appear from the order for reference that the dispute in the main proceedings, which concerns an administrative procedure relating to a request for access to information and documents held by a national supervisory authority on the basis of the IFG, is covered by criminal law, since that request was submitted after the criminal convictions of Phoenix’s executives, nor that it is made in the course of civil or commercial proceedings brought by the applicants in the main proceedings.

40 If that is the case, which is for the referring court to ascertain, none of the provisions of Article 54 of Directive 2004/39 enable the obligation to maintain professional secrecy to be disregarded.

Consequently, the bank placed great reliance on paragraph 35, which said there were to be no exceptions to the rule in Article 54.

However, that interpretation of EU law was challenged by the lawyer who pointed out that his right to a fair trial – as enshrined in both the ECHR and the EU Charter – was being eviscerated in circumstances where the regulator now appeared to be judge and jury, as well as being a defendant in court.

Questions Referred
The official translation of the questions asked by the Luxembourg Cour Administrative has yet to appear on the EUR-Lex website but my unofficial translation of them reads:

1. Particularly in light of Article 41 of the EU Charter (which enshrines the principle of good administration), does the exception for ‘cases covered by criminal law’ in Article 54 of Directive 2004/39/EC […] and Article 54(3) apply to a case in which a sanction – a matter of administrative law under national law but having a criminal law character under ECHR law – has been applied by the national regulatory authority and that sanction takes the form of a ban on a member of the nation’s Bar from either working as a director in an entity which is under the supervisory control of the regulator, and bans him from exercising any other function that would need the approval of the regulator, and where that ban comes attached to an order that stops the same person from doing any similar work of the same nature with immediate effect?

2. If the aforementioned sanction, which is an administrative one for the purposes of national law and issued in the context of an administrative procedure, then to what degree is the obligation of professional secrecy in Article 54 of the Directive and which is invoked by the supervisory authority, influenced by the requirements of a fair trial (including that of an effective remedy) as enshrined in Article 47 of the EU Charter, and in light of the parallel provisions in Articles 6 and 13 of the ECHR and taking into account all the other the guarantees enshrined in Article 48 of the EU Charter, particularly those relating to a punished citizen who is seeking to mount a defence in order to protect his legal interests and civil rights, of the right to access the complete administrative dossier of the authority which has issued that administrative sanction, and which is also simultaneously the national supervisory authority?

The issue of information orders, information exchange, and a fair trial, are also at stake in another preliminary reference emanating from Luxembourg Cour Administrative; see further, Case C-682/15, Berlioz Investment Fund – tax information exchanges not fishing expeditions.

The issue of the confidentiality of information exchanged between financial authorities and the scope of the Altmann judgment is also at stake in preliminary reference from the German Supreme Court; see further, Case C-15/16, Baumeister – seeking access to documents held by financial services authorities.

The issue of accessing information from an official body is also at stake in a recent preliminary reference from the Irish Supreme Court about data processing law; see further, Case C-434/16, Nowak – seeking to access his exam script because it is personal data.

Update – 29 August 2016
There is another ‘access to information file’ preliminary reference, Case C-298/16, Ispas. According to today’s Official Journal, the Curtea de Apel Cluj has asked:

Is an administrative practice consisting in the taking of a decision imposing obligations on an individual without allowing that individual to have access to all of the information and documents considered by the public authority when it adopted that decision, being information and documents contained in the administrative file (not a public file) drawn up by the public authority, compatible with the principle of respect for the rights of the defence?

The scope of the Romanian court’s question is not limited by subject area; consequently, there is a chance that the CJEU’s eventual judgment in ISPAS could impact upon areas of the law as diverse as immigration law or environmental law.

Update – 30 November 2016 and 16 December 2016
[…] The material in this update was about an ‘access to impounded evidence’ preliminary reference from the Dutch Supreme Court. This reference has now been docketed by the CJEU and so the material has its own post; see further, Case C-644/16, Synthon – resisting its impounded documents being inspected by a rival.

Update – 10 January 2017
There is preliminary reference from the Italian Council of State about a person’s right to access information held by the Italian Central Bank, which has regulatory oversight over Italian banks; see further, Case C-594/16, Buccioni – Dear Central Bank, Documents please. Regards, Mr E. Swindled.