CJ, 19-12-2024, nr. C-295/23

Recitals 6, 33, 39, 40, 55, 56, 73 and 101 of Directive 2006/123 state:

Article 1(1) of that directive provides:

Article 2(1) of that directive states:

Article 4 of Directive 2006/123 provides as follows:

Article 9(1) of Directive 2006/123 provides:

Under Article 11(4) of that directive:

Article 15 of the directive, which is headed ‘Requirements to be evaluated’, states:

Article 25 of that directive, entitled ‘Multidisciplinary activities’, provides in paragraphs 1 and 2 thereof:

In the wording of the first, third and fourth questions, which it is appropriate to examine together, the referring court refers to national legislation which provides for a law firm's registration with the bar association to be revoked where a shareholding in that firm is transferred to a person who is not permitted under that legislation to become a member in that type of firm, where a member does not exercise a professional activity in the law firm or where the members who are lawyers no longer hold the majority of the shareholdings or voting rights. It is apparent from the request for a preliminary ruling that that legislation seeks, in essence, to prevent purely financial investors which do not intend to exercise a professional activity in that firm from influencing the operational activities of that firm.

In order to provide a useful answer to the referring court, it must be found that, by those questions, that court is asking, in essence, whether Article 49 and Article 63(1) TFEU as well as Article 15(2)(c) and Article 15(3) of Directive 2006/123 must be interpreted as precluding national legislation which, if the law firm concerned is not to have its registration with the bar association revoked, prohibits shares in that company being transferred to a purely financial investor which does not intend to exercise, in that company, a professional activity covered by that legislation.

While, in its third question, the referring court also refers to the freedom to provide services, it is not apparent from the documents before the Court that SIVE intends to rely on that freedom in order to provide legal services in Germany. That freedom is therefore irrelevant in the case in the main proceedings.

In so far as the referring court refers to both freedom of establishment and the free movement of capital, it is necessary to determine, as a preliminary point, which fundamental freedom applies to the dispute in the main proceedings, which involves taking into account the purpose of the national legislation at issue in the main proceedings and, as the case may be, the facts of the present case (see, to that effect, judgments of 13 November 2012, Test Claimants in the FII Group Litigation, C-35/11, EU:C:2012:707, paragraphs 90, 93 and 94, and of 24 February 2022, Viva Telecom Bulgaria, C-257/20, EU:C:2022:125, paragraphs 78, 82 and 83).

In that regard, national legislation intended to apply only to those shareholdings which enable the holder to exert a definite influence on a company's decisions and to determine its activities falls within the scope of freedom of establishment. On the other hand, national provisions which apply to shareholdings acquired solely with the intention of making a financial investment without any intention to influence the management and control of the undertaking must be examined exclusively in light of the free movement of capital (judgment of 24 February 2022, Viva Telecom Bulgaria, C-257/20, EU:C:2022:125, paragraphs 79 and 80 and the case-law cited).

If follows that national legislation which is not intended to apply only to those shareholdings which enable the holder to have a definite influence on a company's decisions and to determine its activities but which applies irrespective of the extent of the holding which the shareholder has in a company may fall within the ambit of both freedom of establishment and free movement of capital (see, to that effect, judgments of 24 May 2007, Holböck, C-157/05, EU:C:2007:297, paragraphs 23 and 24, and of 21 October 2010, Idryma Typou, C-81/09, EU:C:2010:622, paragraph 49).

That being the case, in principle, the Court will examine the measure in dispute in relation to only one of those two freedoms if it appears, in the circumstances of the dispute in the main proceedings, that one of them is entirely secondary in relation to the other and may be considered together with it (judgments of 3 October 2006, Fidium Finanz, C-452/04, EU:C:2006:631, paragraph 34, and of 17 September 2009, Glaxo Wellcome, C-182/08, EU:C:2009:559, paragraph 37).

In the present case, the national legislation at issue in the main proceedings is intended, inter alia, to prevent any holding, regardless of its scale, in a law firm being obtained by persons who are neither lawyers nor members of a profession referred to in the first sentence of Paragraph 59a(1) and Paragraph 59a(2) of the former Federal Lawyers' Code.

Indeed, SIVE acquired 51% of HR's share capital. National provisions which apply to holdings by a company of a Member State in the capital of a company established in another Member State, giving it definite influence on the company's decisions and allowing it to determine its activities, come within the substantive scope of the freedom of establishment (see, to that effect, judgment of 17 September 2009, Glaxo Wellcome, C-182/08, EU:C:2009:559, paragraph 47), which is the case for a holding of the majority of its capital (see, to that effect, order of 10 May 2007, Lasertec, C-492/04, EU:C:2007:273, paragraph 23, and judgment of 21 December 2016, AGET Iraklis, C-201/15, EU:C:2016:972, paragraphs 46 and 47).

However, HR's articles of association were amended in order to deprive SIVE of any ability to influence to which it could have laid claim based on the shareholding criterion. As is apparent from the documents before the Court, such an amendment is capable of meaning that SIVE's acquisition of shares in HR took place with the sole objective of providing HR with capital intended to enable it to finance the development of an innovative legal model based on the new technologies.

It follows that the case in the main proceedings concerns freedom of establishment just as much as the free movement of capital, and that neither of those freedoms can be regarded as secondary in relation to the other.

As regards, in the first place, freedom of establishment, it follows from recital 6 of Directive 2006/123 that barriers to freedom of establishment may not be removed solely by relying on direct application of Article 49 TFEU, owing, inter alia, to the extreme complexity of addressing barriers to that freedom on a case-by-case basis. It follows that, where a restriction of the freedom of establishment falls within the scope of that directive, there is no need to examine it in the light also of Article 49 TFEU (judgment of 26 June 2019, Commission v Greece, C-729/17, EU:C:2019:534, paragraphs 53 and 54).

First, as stated in recital 33 of Directive 2006/123, legal advice services, which include legal services provided by lawyers, fall within the material scope of that directive (see, to that effect, judgment of 13 January 2022, Minister Sprawiedliwości, C-55/20, EU:C:2022:6, paragraph 88).

Second, the national legislation at issue in the main proceedings, in particular the limitation of the class of persons able to become members of a law firm and the requirement to cooperate actively within the firm, laid down in the first and second sentences of Paragraph 59e(1) of the former Federal Lawyers' Code corresponds to ‘requirements’, within the meaning of point 7 of Article 4 of that directive, which relate, in essence, to the shareholding of a company and therefore fall within Article 15(2)(c) of that directive.

In that regard, Article 15(1) of Directive 2006/123 states that Member States must examine whether, under their legal system, any requirements such as those listed in Article 15(2) are imposed and ensure that any such requirements are compatible with the conditions laid down in Article 15(3). In addition, Article 15(5)(a) and (6) of that directive permits Member States to maintain or, if necessary, introduce requirements of the type referred to in Article 15(2), on condition that those requirements satisfy the conditions laid down in Article 15(3) (see, to that effect, judgments of 16 June 2015, Rina Services and Others, C-593/13, EU:C:2015:399, paragraph 33, and of 29 July 2019, Commission v Austria (Civil engineers, patent agents and veterinary surgeons), C-209/18, EU:C:2019:632, paragraph 80).

The cumulative conditions listed in Article 15(3) of Directive 2006/123 relate, first, to the non-discriminatory nature of the requirements in question, which may not be directly or indirectly discriminatory according to nationality or, with regard to companies, according to the location of the registered office; second, to their necessity, in other words they must be justified by an overriding reason relating to the public interest; and, third, to their proportionality, meaning that they must be suitable for securing the attainment of the objective pursued and must not go beyond what is necessary to attain that objective, and it must not be possible to replace those requirements with other, less restrictive measures which attain the same result (judgment of 29 July 2019, Commission v Austria (Civil engineers, patent agents and veterinary surgeons), C-209/18, EU:C:2019:632, paragraph 81).

In the present case, as regards, first of all, the first condition, relating to whether the requirements at issue in the main proceedings are non-discriminatory, none of them is discriminatory, with the result that they satisfy that condition.

Next, as regards the second condition, relating to whether those requirements are necessary, it is apparent from the request for a preliminary ruling that their purpose is to ensure the independence and integrity of the profession of practising as a lawyer and to ensure compliance with the principle of transparency and the obligation of legal professional privilege.

Those objectives are incontestably linked to the protection of recipients of services, in the present case legal services, and the sound administration of justice, which constitute overriding reasons relating to the public interest within the meaning of Article 4(8) of Directive 2006/123, read in conjunction in particular with recital 40 of that directive. In addition, since Article 4(8) of Directive 2006/123 does no more than codify the case-law of the Court of Justice, it must be noted that, when interpreting primary law, the Court has found the protection of litigants to be an overriding reason relating to the public interest (see, to that effect, judgments of 12 December 1996, Reisebüro Broede, C-3/95, EU:C:1996:487, paragraph 38; of 17 March 2011, Peñarroja Fa, C-372/09 and C-373/09, EU:C:2011:156, paragraph 55; and of 18 May 2017, Lahorgue, C-99/16, EU:C:2017:391, paragraphs 34 and 35) and likewise for the proper practice of the legal profession (see, to that effect, judgment of 19 February 2002, Wouters and Others, C-309/99, EU:C:2002:98, paragraph 107).

In that regard, it should be recalled that the lawyer's task of representation, which is carried out in the interests of the sound administration of justice, consists above all in protecting and defending the principal's interests to the greatest possible extent, acting in full independence and in line with the law and professional rules and codes of conduct (see, to that effect, judgments of 4 February 2020, Uniwersytet Wrocławski and Poland v REA, C-515/17 P and C-561/17 P, EU:C:2020:73, paragraph 62, and of 24 March 2022, PJ and PC v EUIPO, C-529/18 P and C-531/18 P, EU:C:2022:218, paragraph 64). Lawyers are assigned the fundamental role in a democratic society of defending litigants, which entails, on the one hand, that any person is to be able, without constraint, to consult a lawyer whose profession encompasses, by its very nature, the giving of independent legal advice to all those in need of it and, on the other, the correlative duty of the lawyer to act in good faith towards his or her client (see, to that effect, judgment of 8 December 2022, Orde van Vlaamse Balies and Others, C-694/20, EU:C:2022:963, paragraph 28 and the case-law cited).

Finally, as regards the third condition, which concerns whether the requirements at issue in the main proceedings are proportionate, that condition presupposes that those requirements are appropriate for ensuring that the objective pursued is attained, that they do not go beyond what is necessary to attain it, and it is not possible to replace them with other, less restrictive measures which attain the same result.

In the present case, in so far as they are intended to help ensure that the independence of lawyers is respected and that conflicts of interest are prohibited, in particular by excluding purely financial investors from having the capacity to influence the decisions and activities of a law firm, those requirements appear to be appropriate for ensuring that the objective of protecting the sound administration of justice and the integrity of the profession of practising as a lawyer are attained.

The desire of a purely financial investor to make a return on his or her investment could have an impact on the organisation and activity of a law firm. Accordingly, if such an investor were to consider that the return on his or her investment was insufficient, that investor might be tempted to demand that the firm reduce costs or seek a certain type of client, if he was not to withdraw his investment. Such a threat is sufficient to establish that a purely financial investor has the ability to exert influence, even if only indirectly.

First, whereas the objective pursued by a purely financial investor is limited to seeking to make a profit, lawyers do not exercise their activities purely for an economic purpose but are required to comply with professional conduct rules.

In that regard, it must be stated that the absence of conflicts of interest is essential to the practice of the profession of lawyer and requires, in particular, that lawyers should be in a situation of independence, including financial, vis-à-vis the public authorities and other operators, by whom they must never be influenced (judgment of 2 December 2010, Jakubowska, C-225/09, EU:C:2010:729, paragraph 61). In the absence of such financial independence, economic considerations focused on a purely financial investor's short-term profit could prevail over considerations guided exclusively by the defence of the interests of the law firm's clients. In addition, the existence of any links between a purely financial investor and a client is also such as to influence the relationship between the lawyer and that client in such a way that a conflict with rules of professional conduct cannot be ruled out.

Second, in the absence of harmonisation at EU level of the rules of professional conduct applicable to the profession of practising as a lawyer, each Member State remains, in principle, free to regulate the exercise of that profession in its territory. For that reason, the rules applicable to that profession may differ greatly from one Member State to another (see, to that effect, judgment of 19 February 2002, Wouters and Others, C-309/99, EU:C:2002:98, paragraph 99; of 2 December 2010, Jakubowska, C-225/09, EU:C:2010:729, paragraph 57; and of 7 May 2019, Monachos Eirinaios, C-431/17, EU:C:2019:368, paragraph 31).

In those circumstances, having regard to the discretion thereby conferred on it, a Member State is entitled to conclude that a lawyer would not be able to exercise his or her profession independently and in compliance with his or her professional and ethical obligations if that lawyer were part of a firm whose members are persons who, first, are neither practising lawyers nor members of any other profession subject to the moderating effect of rules of professional conduct and, second, act exclusively as purely financial investors with no intention of exercising, within that company, an activity falling within the scope of such a profession. That is all the more so where, as in the case in the main proceedings, such an investor intends to acquire the majority of the shares in the law firm in question.

Having regard to that margin of discretion, a Member State is entitled to take the view that there is a risk that the measures laid down by national legislation or in the articles of association of the law firm in order to preserve the independence and professional integrity of lawyers working within that firm may, in practice, be insufficient to ensure that the objectives referred to in paragraphs 64 to 66 of the present judgment are met in an effective manner in a situation where a purely financial investor has a holding in the capital of that company, having regard to the influence, even if only indirect, which that investor could exert over the management and activities of that firm by means of investment or disinvestment choices which are essentially, or even exclusively, guided by making profits.

As regards, in the second place, the free movement of capital, which is guaranteed in Article 63 TFEU, that article covers in particular direct investments in the form of participation in an undertaking through the holding of shares which confers the possibility of participating effectively in its management and control, and also the acquisition of securities solely with the intention of making a financial investment without wishing to influence the management and control of the undertaking (see, to that effect, judgments of 17 September 2009, Glaxo Wellcome, C-182/08, EU:C:2009:559, paragraph 40, and of 21 December 2016, AGET Iraklis, C-201/15, EU:C:2016:972, paragraph 58 and the case-law cited).

The measures prohibited by Article 63(1) TFEU, as restrictions on the movement of capital, include inter alia those which are likely to discourage non-residents from making investments in a Member State (see, to that effect, judgment of 6 March 2018, SEGRO and Horváth, C-52/16 and C-113/16, EU:C:2018:157, paragraph 65). Thus, national measures must be regarded as ‘restrictions’ within the meaning of Article 63(1) TFEU if they are liable to prevent or limit the acquisition of shares in resident companies or to deter investors from other Member States from investing in their capital (see, to that effect, judgment of 21 October 2010, Idryma Typou, C-81/09, EU:C:2010:622, paragraph 55).

In the present case, the effect of the national legislation at issue in the main proceedings is to prevent persons other than lawyers and members of the professions referred to in Paragraph 59a of the former Federal Lawyers' Code from acquiring shares in a law firm, with the result that it deprives investors from other Member States who are neither lawyers nor members of such a profession from acquiring holdings in firms of that kind (see, to that effect, judgment of 19 May 2009, Commission v Italy, C-531/06, EU:C:2009:315, paragraph 47). Accordingly, that national legislation deprives law firms of access to capital which could assist in their creation or development. It therefore constitutes a restriction on the free movement of capital.

Restrictions on the free movement of capital which apply without discrimination on grounds of nationality may, however, be justified by overriding reasons in the general interest, provided that the restrictions are appropriate for securing attainment of the objective pursued and do not go beyond what is necessary for attaining that objective (see, to that effect, judgment of 19 May 2009, Commission v Italy, C-531/06, EU:C:2009:315, paragraph 49).

In that regard, the assessment made in paragraphs 64 to 74 of the present judgment in the light of Article 15(3) of Directive 2006/123 does not lead to a different conclusion in the light of Article 63 TFEU.

In those circumstances, the answer to the first, third and fourth questions is that Article 15(2)(c) and Article 15(3) of Directive 2006/123 and Article 63 TFEU must be interpreted as not precluding national legislation which, under penalty of the law firm concerned having its registration with the bar association revoked, prohibits shares in that firm from being transferred to a purely financial investor who does not intend to exercise, in that firm, a professional activity covered by that legislation.

By its second question, the referring court is asking, in essence, whether Article 63 TFEU must be interpreted as precluding national legislation which provides that a member who is not authorised to exercise one of the professions enabling him or her to become a member in a law firm does not have the right to vote, where the firm's articles of association contain a number of provisions capable of protecting the independence of the firm's lawyers and of the firm's legal activities.

In reply to a question from the Court, the German Government explained at the hearing that the measure depriving voting rights imposed on members who are not authorised to exercise one of the professions set out in the first sentence of Paragraph 59e(1) of the former Federal Lawyers' Code, which is specifically referred to by the referring court in its second question, is intended to apply in transitional situations brought about, inter alia, by the death of an authorised member or the adoption of a measure depriving an authorised member of the right to exercise his or her profession.

Since the dispute in the main proceedings does not involve any situation of that kind, an answer to that question is not necessary for the effective resolution of that dispute and falls outside the scope of the Court's jurisdiction under Article 267 TFEU (see, to that effect, judgments of 16 December 1981, Foglia, 244/80, EU:C:1981:302, paragraph 18, and of 26 March 2020, Miasto Łowicz and Prokurator Generalny, C-558/18 and C-563/18, EU:C:2020:234, paragraph 44).

The second question is therefore inadmissible.