On March 10, 2016 on the website of the Court of Justice of the European Union the opinion of Advocate General Sharpston in Case C‑543/14 Ordre des barreaux francophones et germanophone and Others, Vlaams Netwerk van Verenigingen waar armen het woord nemen ASBL and Others, Jimmy Tessens and Others, Orde van Vlaamse Balies and Ordre des avocats du barreau d’Arlon and Others versus Conseil des ministres was published (ECLI:EU:C:2016:157).
By virtue of a transitional provision dating from the Sixth VAT Directive, which was originally intended to apply for five years from 1 January 1978 but is still present in the current VAT Directive, Belgium exempted services supplied by lawyers from VAT until 31 December 2013. It was the only Member State to make use of that derogation.
A number of Belgian bar councils, together with several human rights and humanitarian associations and a number of individuals having incurred lawyers’ fees subject to VAT, have brought proceedings before the Cour constitutionnelle (Constitutional Court) challenging the abolition of that exemption with effect from 1 January 2014. The main thrust of their arguments is that the resulting increase in the cost of litigation breaches various guarantees of the right of access to justice.
Before deciding on those arguments, the Cour constitutionnelle (Constitutional Court) requests a preliminary ruling on the interpretation and validity of certain provisions of the VAT Directive.
The dispute in the main proceedings and the question referred for a preliminary ruling
· Between November 2013 and February 2014, four applications, each challenging the contested measure, were received by the Cour constitutionnelle (Constitutional Court).
· The first was submitted by the Ordre des barreaux francophones et germanophone (Council of French- and German-language Bars), together with a number of associations whose aims fall broadly within the area of justice, including human rights, and the defence of workers and less-privileged members of society, and which are not taxable persons in a position to deduct VAT if they use the services of lawyers. The second application was made by a number of individuals (‘Jimmy Tessens and Others’) who were using the services of a specialist lawyer in order to pursue challenges to expropriations of land, and found the lawyer’s fees now increased by 21% which, as individuals acting in a private capacity, they are not in a position to deduct. The third applicant was the Orde van Vlaamse Balies (Council of Flemish Bars). The fourth application was submitted jointly by 11 French-language bar councils and an individual lawyer. The Conseil des barreaux européens (Council of Bars and Law Societies of Europe, ‘the CCBE’) was granted leave to make submissions in intervention in the second to fourth cases.
· In its order for reference, the Cour constitutionnelle (Constitutional Court) sets out the applicants’ arguments relevant to the request for a preliminary ruling.
· First, they submit that, in the context of the right to a fair hearing, the contested measure impedes the right of access to the courts and the right to the assistance of a lawyer, and is not counterbalanced by any adjustment of the system of legal aid.
· Second, the contested measure places the services of lawyers on the same footing as supplies of ordinary goods and services, while supplies which relate to the exercise of fundamental rights are exempt from VAT, for reasons of financial accessibility.
· Third, the services of lawyers are not comparable to those of other liberal professions, being characteristic of, and essential to, the rule of law.
· Fourth, the contested measure discriminates against litigants who are not taxable persons using lawyers’ services for the purpose of their taxed transactions, and who are thus unable to deduct the VAT on those services; such persons are, moreover, often economically weaker.
· Fifth, in the alternative, a reduced rate of VAT should have been applied to reflect the nature of lawyers’ services, which are comparable to those of doctors and access to which is a fundamental right, not a luxury.
· Finally, the legislature should have provided for a dispensation in the case of proceedings brought by individuals against a public authority, in order to ensure an equitable balance between parties.
· The Cour constitutionnelle (Constitutional Court) examines a number of judgments of the European Court of Human Rights (‘the Strasbourg Court’) concerning Articles 6 and 14 of the ECHR, and concludes that the legislature must give concrete effect to general principles such as the right of access to the courts and equality of arms between litigants.
· It then notes that an increase of 21% in the cost of lawyers’ services could, for some litigants, interfere with the right of access to legal advice. Moreover, the fact that some litigants are able to deduct the VAT on the supply of such services while others are not (although some of the latter will benefit from legal aid), and that opposing litigants may be in different positions in that regard, is liable to interfere with the equality of arms between litigants.
· The Cour constitutionnelle (Constitutional Court) takes the view that the aim of the contested measure was principally budgetary. In that regard, the legislature had a broad discretion, but such an aim could not reasonably justify discrimination in matters of access to the courts and to legal advice or as regards equality of arms between litigants. It notes also that, in Commission v France, the Court took the view that, even supposing that services provided by lawyers under the legal aid scheme are related to social wellbeing and can be classified as ‘engagement in welfare or social security work’, that is not sufficient to conclude that such lawyers may be classified as ‘organisations … devoted to social wellbeing … and engaged in welfare or social security work’ within the meaning of point 15 of Annex III to the VAT Directive. However, the Court did not in that case examine the compatibility of the directive with the right to a fair hearing. Finally, the Cour constitutionnelle (Constitutional Court) notes that, since the VAT Directive is a harmonising directive, it is not for the Belgian legislature to devise its own, different rules but that the phrase ‘in accordance with the conditions applying in the Member State concerned on that date’ in Article 371 of that directive might allow some leeway in that regard.
· Having regard to those considerations, therefore, the Cour constitutionnelle (Constitutional Court) seeks a preliminary ruling on the following questions:
1.
(a) By making services supplied by lawyers subject to VAT without taking account, having regard to the right to the assistance of a lawyer and the principle of equality of arms, of whether or not a client who does not qualify for legal aid is subject to VAT, is [the VAT Directive] compatible with Article 47 of the [Charter] in conjunction with Article 14 of the [ICCPR] and with Article 6 of the [ECHR], in so far as that article recognises that everyone is entitled to a fair hearing and has the possibility of being advised, defended and represented and that there is a right to legal aid for those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice?
(b) For the same reasons, is [the VAT Directive] compatible with Article 9(4) and (5) of the [Aarhus Convention], in so far as those provisions establish a right of access to justice without the cost of those procedures being prohibitively expensive through “the establishment of appropriate assistance mechanisms to remove or reduce financial and other barriers to access to justice”?
(c) May services provided by lawyers under a national legal aid scheme be included in the services referred to in Article 132(1)(g) of [the VAT Directive] which are closely linked to welfare and social security work, or may they be exempted under another provision of the directive? If that question is answered in the negative, is [the VAT Directive], interpreted as not permitting a VAT exemption for services supplied by lawyers for clients who qualify for legal aid under a national legal aid scheme, compatible with Article 47 of the [Charter] in conjunction with Article 14 of the [ICCPR] and with Article 6 of the [ECHR]?
2. If the questions mentioned in paragraph 1 are answered in the negative, is Article 98 of [the VAT Directive], in so far as it does not provide for the possibility of applying a reduced rate of VAT to services supplied by lawyers, as the case may be depending on whether or not a client who does not qualify for legal aid is subject to VAT, compatible with Article 47 of the [Charter] in conjunction with Article 14 of the [ICCPR] and with Article 6 of the [ECHR], in so far as that article recognises that everyone is entitled to a fair hearing and has the possibility of being advised, defended and represented and that there is a right to legal aid for those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice?
3. If the questions mentioned in paragraph 1 are answered in the negative, is Article 132 of [the VAT Directive] compatible with the principle of equality and non-discrimination enshrined in Articles 20 and 21 of the [Charter] and Article 9 TEU, in conjunction with Article 47 of the Charter, in so far as it does not provide, among activities in the public interest, for VAT exemption for services of lawyers, when other supplies of services are exempted as activities in the public interest, such as the supply of services by the public postal services, various medical services or services connected with education, sport or culture, and when that difference in treatment between services of lawyers and services exempted by Article 132 of the [VAT Directive] raises sufficient doubts because services of lawyers contribute to respect for certain fundamental rights?
4.
(a) If the questions mentioned in paragraphs 1 and 3 are answered in the negative, can Article 371 of [the VAT Directive] be interpreted, in accordance with Article 47 of the [Charter], as authorising a Member State of the European Union partially to maintain the exemption for services supplied by lawyers where those services are performed for clients who are not subject to VAT?
(b) Can Article 371 of [the VAT Directive] also be interpreted, in accordance with Article 47 of the [Charter], as authorising a Member State of the European Union partially to maintain the exemption for services supplied by lawyers where those services are performed for clients who qualify for legal aid under a national legal aid scheme?’
· Written observations have been submitted to the Court by the Ordre des barreaux francophones et germanophone and Others, by the Orde van Vlaamse Balies, by the CCBE, by the Belgian, French and Greek Governments, by the Council of the European Union and by the European Commission. At the hearing on 16 December 2015, the same parties — with the exception of the French and Greek Governments but with the addition of Jimmy Tessens and Others — presented oral argument.
Conclusion
The Advocate General is of the opinion that the Court should answer the questions raised by the Cour constitutionnelle (Constitutional Court, Belgium) to the following effect:
(1) On a proper construction of Article 371 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, a Member State which, in accordance with that provision, has continued to exempt the supply of services by lawyers from VAT, may limit the scope of that exemption without abolishing it in its entirety. However, having once abolished the exemption in its entirety, such a Member State may not reintroduce the same exemption with a more limited scope.
(2) Neither Article 132(1)(g) nor any other provision of Directive 2006/112 authorises Member States to exempt from VAT the supply of services by lawyers under a national legal aid scheme as services which are closely linked to welfare and social security work.
(3) Examination of the questions referred has disclosed nothing capable of affecting the validity of Directive 2006/112.
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