Berlioz: EoI and taxpayers’ rights: we’re not quite there yet


– Right to effective remedy applicable in EoI under DAC in case of penalty
– Court can review the legality of the EoI request
– This does not imply participation rights for the taxpayer in general

One of my favourite side-projects is conducting research on rights of taxpayers in relation to Exchange of Information (EoI). I heavily anticipated the Berlioz case (C‑682/15 & ECLI:EU:C:2017:373) as it could finally shed some additional light on recent cases involving EoI. The judgment met my expectations. At least partly.


Berlioz, a Luxembourg based company received dividends from its French subsidiary. The French tax administration wanted to verify compliance with the requirements for applying its domestic withholding tax exemption and asked information from the Luxembourg tax authorities on the basis of Dir. 2011/16 (‘DAC’). In turn, the Luxembourg tax authorities asked the requested items of information from Berlioz, the parent company of the taxpayer to whom the dividends were distributed. Berlioz refused to provide an item of information (i.e. the names and addresses of its members), because that information was allegedly not foreseeably relevant as required for applying the DAC. The tax authorities disagreed and a fine was imposed on Berlioz. When challenging the penalty, the domestic court refused to determine whether the information request was well founded. During the appeal proceedings, Berlioz argued that its right to an effective judicial remedy as referried to in Art. 6(1) of the European Convention on Human Rights jo. Art. 47 of the EU Charter of Fundamental Rights was breached.


What can we learn from Berlioz?

  •  A first important point is that the CJEU decided that the EU Charter was indeed applicable. In principle, The EU Charter only applies vis-à-vis a MS when that MS “implements EU law”. In its earlier case-law, the Court has already explained that transposing EU Directives engages applicability of the Charter. In Åkerberg Fransson, concerning VAT penalties, it was also confirmed that this the case when the Directive leaves a certain latitude to the MS as regards these obligations (in casu “to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory and for preventing evasion”). The decision in Berlioz is thus not surprising, despite the vagueness of the relevant provision of the DAC (“MS shall take all necessary measures to ensure the smooth operation of the Directive“). This provision arguably leaves less leeway for MS to implement a comprehensive sanction regime and the link between the Directive and national penalties appears more remote than under the VAT Directive. However, the Court hints at the principle of effectiveness to justify application of the Charter.
  • Second, the CJEU held that Article 47 of the Charter could indeed be relied upon to grant the supplier of the information a right to an effective judicial remedy. At first blush, it appears that this decision departs from the heavily criticized Sabou case. In that case, the Court ruled that the involvement of the taxpayer in the EoI process was not required, as EoI procedures apparently merely took place in the investigation stage (i.e. information collecting), which must be distinguished from the contentious stage. Noteworthy is that in Sabou, information was exchanged among tax administrations, and the taxpayer wanted to participate in the exchange process. According to some researchers, the Court in Berlioz departs from the Sabou case. However, this is not really the case. Sabou has to be distinguished from the Berlioz situation in three ways.
    1. First, the information stream originates from a third party (i.e. Berlioz), and the information was to be transmitted first to the Luxembourg tax authorities, and then passed on to the French authorities.
    2. Second, a penalty was imposed on the supplier of the information (i.e. Berlioz) because they refused to comply with the request.
    3. Third, the legality of the decision to exchange information was assessed as a means to challenge that penalty.
  • The criterion of ‘foreseaably relevant’ must be complied with when requesting information. A tax administration cannot engage in fishing expeditions. (Note that in its reasoning, the CJEU included a relatively rare reference to the OECD MC on this point.)
  • National courts can vary the penalty imposed and also have jurisdiction to review the legality of the information order. However, with regard to the relevance of the information, the Court’s review is limited to verifying whether the requested information manifestly has no relevance. Interesting in this respect is that currently it is still debated whether the right to a fair trial (Art. 6 ECHR) allows a Court to actually change the amount of penalties imposed (as opposed to merely quashing the penalty altogether). The CJEU apparently reads this possibility in Art. 47 of the Charter.
  • In order to assess the legality of the request, the Court must have access to the request of information. Conversely, the ‘relevant person’ (in casu Berlioz, from whom information was requested) does not have a right of access to the whole of that request (cfr. the ‘minimum information rule’ in Art. 20(2) DAC: only access to the identity of the taxpayer and the tax purpose). For the relevant person, minimum information has to suffice. The national court can, however, deviate from that rule to make sure that person is granted a fair hearing.

I do not share the optimism on social media as regards this decision. It does not in any case grant participation rights to the taxpayer nor the supplier of the information. A positive note is that the CJEU recognises the competence of the national courts to review the information order.

EOI and its interaction with the right to privacy is still an underresearched area.

At the same time, the judgment sheds some light upon how the CJEU views the relationship between all the different parties to the information exchange. I wonder whether the outcome would have been similar if the legality of the request would have been challenged by the taxpayer in France (i.e. the subsidiary). The decision remains silent on this issue and I’m afraid that on the basis of the reasoning in this case, one cannot directly draw any conclusions.

It appears that more cases on EoI are making their way to the courts. Note that this was a very straightforward case of the application of the right to a fair trial on an exchange upon request. The case provides no direct insight on the application of the right to a fair trial on automatic EoI (incl. CbC, exchange of rulings, etc.). Another point which is underresearched is the impact of the right to privacy on this process. Recently, I have co-authored an attempt to establish some basic guidelines in that area, but more research is definitely required .

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