Case C-682/15, Berlioz Investment Fund – tax information exchanges not fishing expeditions

When the French tax office writes to the Luxembourg tax office asking them to get the names and addresses of people who have received a dividend that was paid from a French daughter company to its parent company in Luxembourg, can the Luxembourg parent company refuse to provide that information to the Luxembourg tax office?

Background
A French company decided to pay a dividend to its Luxembourg parent company, the Berlioz Investment Fund. The French company did not pay tax at source on the dividend.

The French tax authority objected to this. It pointed out that for the dividend to be exempt from tax, French law set down a number of requirements that needed to be satisfied. From the lack of information provided by the French daughter company, the French tax office could not tell if the requirements of French law had been satisfied.

Changing tack, the French tax authority put in a request to the Luxembourg tax authority. It asked them to get various pieces of information from the Luxembourg company about who had received the dividend, and their shareholdings in the parent company. Pursuant to the French request, the Luxembourg tax authority wrote to the Luxembourg parent company requesting the director to provide the information requested by the French authority.

The director of the Luxembourg company cordially declined to provide the information to the Luxembourg tax office, and he explained his refusal in light of the law as he understood it.

That is to say, the principle of non-taxation at source was an exemption not of French national law or French procedure but it was legal creature of EU law and the CJEU’s, ‘Denkavit’ judgment, Case 170/05 ECLI:EU:C:2006:783.

He also pointed out that information about the names and addresses of people who had received the dividend and the percentages of their shareholdings, were pieces of information that were irrelevant to any investigation by the French tax office as to whether the dividend concerned was free from taxation at source.

The response of the Luxembourg tax authority was to apologise and then slap a ‘failure to cooperate’ fine on the Luxembourg company. The amount of the fine was 250 000 euro.

The Luxembourg company duly appealed the tax office’s decision and fine. The Luxembourg administrative court of first instance lowered the fine to 150 000 euro but its decision dealt with neither the substance of the Luxembourg company’s complaint about the application of EU law nor whether the information sought by the Luxembourg/French authorities was relevant to the purpose of the French authority’s investigation into whether the dividend was exempt from taxation at source.

Consequently, the Luxembourg company decided to add the issue of Article 6(1) ECHR to its lengthy list of complaints, and it decided to mount an appeal to the Luxembourg’s appellate court for administrative law, the Luxembourg Cour Administrative.

At the Luxembourg Cour Administrative
The judges at the Luxembourg Cour Administrative noted that the request to provide information was in part grounded in EU law, namely the EU Council’s Directive 2011/16/EU on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (OJ [2011] L64/1).

Article 1(1) provides:

This Directive lays down the rules and procedures under which the Member States shall cooperate with each other with a view to exchanging information that is foreseeably relevant to the administration and enforcement of the domestic laws of the Member States concerning the taxes referred to in Article 2.

Furthermore, Article 5 contained a provision devoted to ‘the exchange of information’ and the text reads:

This Directive lays down the rules and procedures under which the Member States shall cooperate with each other with a view to exchanging information that is foreseeably relevant to the administration and enforcement of the domestic laws of the Member States concerning the taxes referred to in Article 2.

In that context, Article 6 went on to explain: ‘Administrative enquiries’:

1. The requested authority shall arrange for the carrying out of any administrative enquiries necessary to obtain the information referred to in Article 5.

The judges noted that Article 5 talked about ‘information that is foreseeablely relevant’ to the enforcement of the domestic laws of a Member State.

However, could that information deal with the names and addresses of people and percentages of shareholdings? The Luxembourg company was also relying on Article 8 of the EU Charter in respect of the protection of personal data. In that context, they emphasised that Recital 28 of the Directive expressly recognises that: “This Directive respects the fundamental rights and observes the principles which are recognised in particular by the Charter of Fundamental Rights of the European Union.”

Furthermore, the company pointed out that there was no legal basis for the requested information in the Council’s Directive as the information sought was immaterial to the investigation being pursued by the French authorities. The Luxembourg authority should also have indicated the purpose of its request for wanting personal data.

Article 17 of the Directive also set out the limits to a data request, and decreed:

Limits
1. A requested authority in one Member State shall provide a requesting authority in another Member State with the information referred to in Article 5 provided that the requesting authority has exhausted the usual sources of information which it could have used in the circumstances for obtaining the information requested, without running the risk of jeopardising the achievement of its objectives.

2. This Directive shall impose no obligation upon a requested Member State to carry out enquiries or to communicate information, if it would be contrary to its legislation to conduct such inquiries or to collect the information requested for its own purposes.

3. The competent authority of a requested Member State may decline to provide information where the requesting Member State is unable, for legal reasons, to provide similar information.

4. The provision of information may be refused where it would lead to the disclosure of a commercial, industrial or professional secret or of a commercial process, or of information whose disclosure would be contrary to public policy.

5. The requested authority shall inform the requesting authority of the grounds for refusing a request for information.

In light of this, the three Luxembourg judges on the bench decided to ask six questions of the CJEU about what should be done in this case, and the legitimacy of the administrative pecuniary penalty. Their detailed questions are self-explanatory.

Questions Referred
According to the Curia website, the Luxembourg Cour Administrative has asked:

1. Is a Member State implementing EU law and thus rendering the Charter [of Fundamental Rights of the European Union] applicable in accordance with Article 51(1) thereof in a situation such as that in the main proceedings when it imposes an administrative pecuniary penalty on a person on account of that person’s alleged failure to fulfil his obligations to cooperate pursuant to an order requiring him to provide information (‘information order’) made by the competent national authority of that State under national procedural rules introduced for that purpose, in the context of that Member State’s execution, in its capacity as the requested State, of a request for exchange of information from another Member State that is based by the latter State, inter alia, on the provisions of Directive 2011/16 […] on the exchange of information on request?

2. In the event that it is established that the Charter is applicable to the present case, can a person rely on Article 47 of the Charter if he takes the view that the aforementioned administrative pecuniary penalty imposed on him is designed to place him under an obligation to provide information in the context of the execution, by the competent authority of the requested Member State of which he is a resident, of a request for information from another Member State for which there is no justification as regards the actual fiscal aim, there being therefore no legitimate aim in the present case, and which is intended to obtain information that has no foreseeable relevance to the tax case concerned?

3. In the event that it is established that the Charter is applicable to the present case, does the right to an effective remedy and to a fair trial as laid down by Article 47 of the Charter require — without the possibility of restrictions being imposed under Article 52(1) of the Charter — that the competent national court must have unlimited jurisdiction and accordingly the power to review, at least as a result of an objection, the validity of an information order made by the competent authority of a Member State in the execution of a request for exchange of information submitted by the competent authority of another Member State, inter alia, on the basis of Directive 2011/16 in an action brought by the third party holder of the information, to whom that information order is addressed, such action being directed against a decision imposing an administrative pecuniary penalty for that person’s alleged failure to fulfil his obligation to cooperate in the context of the execution of that request?

4. In the event that it is established that the Charter is applicable to the present case, are Articles 1(1) and 5 of Directive 2011/16, in the light, on the one hand, of the parallels with the standard of foreseeable relevance arising out of the OECD Model Tax Convention on Income and on Capital and, on the other, of the principle of sincere cooperation laid down in Article 4 TEU, together forming the objective of Directive 2011/16, to be interpreted as meaning that the foreseeable relevance, in relation to the tax case referred to and to the stated fiscal purpose, of the information sought by one Member State from another Member State constitutes a condition which the request for information must satisfy in order to trigger an obligation on the part of the competent authority of the requested Member State to act on that request, and in order to justify an information order issued to a third party by that authority?

5. In the event that it is established that the Charter is applicable to the present case, are the provisions of Article 1(1) in conjunction with Article 5 of Directive 2011/16, and Article 47 of the Charter to be interpreted as precluding a legal provision of a Member State that generally limits the examination by its competent national authority, acting as the authority of the requested State, of the validity of a request for information to a review as to whether the request is in order, and as requiring a national court seised of court proceedings such as those described in the third question above to verify, in the context of those court proceedings, that the condition of foreseeable relevance of the information requested has been satisfied in all its aspects regarding the links to the particular tax case in question, the stated fiscal purpose and compliance with Article 17 of Directive 2011/16?

6. In the event that it is established that the Charter is applicable to the present case, does the second paragraph of Article 47 of the Charter preclude a legal provision of a Member State that precludes a request for information made by the competent authority of another Member State from being submitted to the competent national court of the requested State in court proceedings before it such as those described in the third question above; and does it require that document to be produced to the competent national court and access to it to be granted to the third party holding the information, or, indeed, that document to be produced to the national court without access to it being granted to the third party holding the information, owing to the confidential nature of that document, provided that any difficulties caused to the third party by a limitation on his rights are sufficiently counterbalanced by the procedures followed by the competent national court?

Comment
In the area of data processing law and privacy law, information given to the tax office for one purpose but subsequently used by another part of the state, has recently been discussed by the CJEU in Bara.

In the area of financial services, the ability of a duped investor to ask their national financial services authority to release information held by that authority, and how that authority is to determine the confidential nature of any particular document, are issues at stake in Baumeister.

Update – 3 April 2016
The ability of a police force to disclose information in its database to a third party is at the heart of a recent ‘data processing’ reference from a Latvian court; see further, Case C-13/16, Rīgas satiksme – our police data request is necessary for our legitimate interest.

Update – 10 May 2016
Article 47 of the EU Charter and privacy in tax matters is also at stake in a fresh reference from the Slovak Supreme Court for Administrative Law; see further, Case C-73/16, Puškár – privacy requires removal from a tax office blacklist.

Update – 10 August 2016
The Luxembourg court which referred Berlioz has now referred another one, this time concerning access to documents held by the banking regulator and relating to the Luxembourg branch of a Swiss bank; see further, Case C-358/16, UBS – stopping a lawyer from seeking access to documents that could establish his innocence.

Update – 9 October 2016
The Grand Chamber is due to hear this case on 8 November 2016.

Update – 11 December 2016
The Opinion of Advocate General Wathelet is due on 10 January 2017.

Update – 17 December 2016
The EU Charter right in Article 47 is now also at stake in a preliminary reference from the Dutch Supreme Court; see further, Case C-644/16, Synthon – resisting its impounded documents being inspected by a rival.

Update – 10 January 2017
The EU Charter right in Article 47 is now in the background of another financial preliminary reference, this time from the Italian Council of State; see further, Case C-594/16, Buccioni – Dear Central Bank, Documents please. Regards, Mr E. Swindled.