1. 1 Exchange on Information BCC/STEP Conference Jean-Pierre WINANDY, Avocat à la Cour, LOYENS & LOEFF

2. 2 Act of March 31, 2010 Procedural rules protecting the taxpayer Right of objection against the exchange For the holder of the information and any third party concerned Short delays for the procedure But: suspensive effect Information must be supplied within one month of the notification of the request Appeal possible before administrative tribunal –Deadline one month –Only one set of conclusions for each party: deadline one month for the response –Decision of the court within one month of the answering memorandum

3. 3 Act of March 31, 2010: Procedure Appeal possible before administrative Court Deadline: 15 days Memorandum in response: within 15 days –Only one set of conclusions for each party Answering memorandum within 1 month (at the latest) Decision of the court within 1 month after the answering memorandum

4. 4 Practical aspects Deadline for the bank to answer the request: 1 month Exposure to a fine of up to 250.000 EUR –Excessive; cannot be considered as an administrative fine i.e. may only be applied by judge : guarantees of ECHR apply Client should be informed by the bank –In order to avoid to be held liable by the client –Client has to inform the bank if he appeeal against exchange

5. 5 Assistance in criminal matters Law of October 27, 2010 on international mutual assistance in criminal matters –Art. 11: possibility to request information from banks End of tax secrecy? –Art. 12 (3): bank may not inform client of request of information (unless specific authorization from the requesting authority)

6. 6 Assistance in criminal matters Procedural rules –Council chamber verifies legal character of the procedure Any person (except the non informed client of the bank) concerned may deposit a memorandum Council chamber decides by ordeal within 20 days on the correct character of the procedure, on the transmission of the objects, documents and information to the requesting state No appeal is possible against this ordeal

7. 7 Protection against information obtained in an improper manner Example: listing of bank clients stolen by employer Principle: –Proof or information that has been obtained in an improper / unfair way should be disregarded by the court and cannot be used –Kind of contradiction if a violation of an act is sanctioned on the basis of evidence obtained illegally –Different degrees of “disloyalty” or illegality: –Extreme case: the infraction is in fact provoked by the authorities (e.g. a police agent enters into contact with a person suspect of being a drug dealer and offers to sell to him (or to buy from him) a certain quantity of prohibited drug. –Second degree: the role of the Prosecutor is more passive in the sense that he is only involved with recording the conversation with a prospective suspect. In this case the role of the Prosecuting institutions is purely passive and, arguably, the infraction will happen anyway (depending on the circumstances)

8. 8 Disloyal evidence Another distinction: the evidence is supplied by the prosecution agents or by private parties (“parties civiles”). The rules applying in this second case are not necessarily the same one as those applying in the first case. The European Convention on Human Rights (ECnHR) has had the occasion to state on the admissibility of such evidence. –Since 1988 : this question is essentially of the domain of internal law and that the Court’s role is limited to assess whether the procedure in its entirety, including the admissibility of evidence has an equitable character.

9. 9 Disloyal evidence: ECHR No general rule prohibiting the use of disloyal or illegal evidence –Even less that the collection of such evidence will entail that the whole procedure is null and void. Schenk v/Switzerland : the Convention does not rule the admissibility of evidence as such, which is a matter of internal law –Evidence collected in an illegal manner will not be excluded automatically. –It suffices that the procedure as a whole has had an equitable character which is the case if the claimant has had the occasion to discuss the authentic character and that the disputed evidence has not been the only element at the origin of the condemnation.

10. 10 Disloyal evidence: ECHR In Texeira de Castro c/Portugal this doctrine is somewhat mitigated. –Purchase of heroine by a police cover agent from a presumed drug dealer. The Court, on the basis of the fact that the suspect did not have judicial precedents, that no drugs were found at his home and that condemnation took place essentially on the basis of the testimony of two policemen, held that the claimant did not benefit from a fair trial. Court has a subtle and casuistic approach –seems to refer to the decisive character of the disloyally obtained evidence. –In no way it seems to imply a categorical rejection of such evidence.

11. 11 Disloyal evidence Case directly involving Luxembourg: KB Lux case. Judgement of December 8, 2009 of the Bruxelles Tribunal Correctionnel –Prosecution against 14 taxpayers suspected of tax evasion is null and void –Data concerning client files of KB Luxembourg, stolen from the bank by several employees on the point to be dismissed by their employer KB Luxembourg. –Public prosecutor was unable to establish that this information has not been obtained as a result of a police search which was not duly authorized. This decision of the tribunal has been appealed by the Belgian state. –The decision of the Court of Appeal is not yet available

12. 12 Disloyal evidence A lot of open questions –No general rule that disloyal evidence has to be disregarded In practice: the Belgian Court of Appeal’s decision in KB Lux upheld the first instance decision; the same was true for the cassation court The case could be important for legal practice in Luxembourg during the next years

13. 13 Practical aspects : application ratione temporis Which data are covered timewise? Ex.: New treaty applicable in 2010 Does it allow to obtain information concerning 2007(e.g.)? Lux Revenue: No. Only info concerning 2010 and later are covered. Some treaties confirm this solution expressis verbis.

14. 14 Practical aspects : multiple accounts (1) Is it possible to shield some information from exchange? Ex.: a client has several bank accounts : one declared, other(s) not declared. Official comments are silent on this question However: depends on the situation: Ex.: French Revenue asks to get information on M. Dupont’s account(s) with Dexia. M. Dupont is an IT consultant.

15. 15 Practical aspects: multiple accounts (2) When auditing M. Dupont’s clients, French Rev. found out that part of his fees invoiced to his clients are paid on a Dexia account - The info concerning these accounts have to be supplied. - But not those concerning an legacy of his wife obtained 10 years ago (for example) - Giving this info would be accepting fishing information However: care should be taken when the answer is worded

16. 16 Practical aspects Scope of article 26 (new) is limited: -Bank secrecy remains in our law: Lux Revenue is not allowed to ask info from banks for applying its tax rules; -Para 5 only concerns the case of foreign requests: Lux cannot “decline to supply information solely because the information is held by a bank…”. What about other professions bound by professional secrecy rules?

17. 17 Other professional secrecy rules? At first glance: these provisions could be used to refuse the exchange (as they do not seem to be targeted by article 26 (5). However: OCDE commentary unduly extends the wording of the provision “The term “agency” is very broad and includes all forms of corporate service providers (e.g. company formation agents, trust companies, registered agents, lawyers)”. (section 19.12).