Case C‑295/23

Halmer Rechtsanwaltsgesellschaft UG

Rechtsanwaltskammer München

(Request for a preliminary ruling from the Bayerischer Anwaltsgerichtshof)

Judgment of the Court (Grand Chamber) of 19 December 2024

(Reference for a preliminary ruling – Article 49 TFEU – Freedom of establishment – Article 63 TFEU – Free movement of capital – Establishing the applicable freedom – Services in the internal market – Directive 2006/123/EC – Article 15 – Requirements which relate to the shareholding of a company – A purely financial investor’s holding in a law firm – Revocation of that law firm’s registration with the professional body on account of that holding – Restriction on freedom of establishment and on the free movement of capital – Justifications based on protecting the independence of lawyers and recipients of legal services – Necessity – Proportionality)

Freedom of establishment – Free movement of capital – Provisions of the Treaty – Respective scope – Criteria – Shareholdings which allow a definite influence to be exerted on a company’s decisions and its activities to be determined – Shareholdings acquired solely with the intention of making a financial investment without any intention to influence the management and control of the undertaking – Secondary application of one freedom in relation to the other – Examination in relation to only one of those freedoms – National legislation intended to prevent any holding in a law firm being obtained by persons who are neither lawyers nor members of a profession referred to in the Federal Lawyers’ Code – Case concerning both freedom of establishment and free movement of capital

(Arts 49 and 63(1) TFEU; European Parliament and Council Directive 2006/123, Art. 15(2)(c) and (3))

(see paragraphs 50-57)
Freedom of establishment – Free movement of capital – Restrictions – Directive 2006/123 – Requirements to be evaluated – National legislation prohibiting the transfer of shares in a law firm to a purely financial investor which does not intend to exercise, in that law firm, a professional activity covered by that legislation – Revocation of the registration with the bar association of a law firm contravening that prohibition – Restriction on freedom of establishment and on the free movement of capital – Justification – Protection of recipients of legal services and the sound administration of justice – Whether permissible

(Arts 49 and 63 TFEU; European Parliament and Council Directive 2006/123, recital 40, Arts 4(7) and (8) and 15(1) to (3), (5)(a) and (6))

(see paragraphs 60-62, 64-67, 69-76, 78-80, operative part)

Résumé

Hearing a reference for a preliminary ruling from the Bayerischer Anwaltsgerichtshof (Higher Bavarian Lawyers’ Court, Germany), the Court, sitting as the Grand Chamber, gives a ruling on the compatibility with Article 63 TFEU and Directive 2006/123 ( 1 ) of national legislation which, under penalty of a law firm having its registration with the bar association revoked, prohibits shares in that firm from being transferred to a purely financial investor which does not intend to exercise, in that firm, a professional activity covered by that legislation.

HR, a law firm located in Germany, was established as a limited liability entrepreneurial company subject to the Law on limited liability companies. Its director and sole member was originally Mr Daniel Halmer, who practised as a lawyer.

HR, which was created by contract in January 2020, was entered in the commercial register and at the Munich Bar Association that same year.

In 2021, Mr Halmer transferred 51 of the 100 shares in HR to SIVE Beratung und Beteiligung GmbH (‘SIVE’), a limited liability company governed by Austrian law.

HR’s articles of association were then amended in order to allow shares to be transferred to a limited liability company which was not registered with the bar association, while reserving the management of HR only to lawyers registered with the bar association, in order to guarantee its independence.

The amendment of HR’s articles of association and the transfer of shares in HR were entered in the commercial register, and HR informed the bar association of the amendment to its articles of association and of the transfer of 51 of its 100 shares to SIVE.

However, the bar association informed HR that the transfer of shares to SIVE was prohibited pursuant to the Bundesrechtsanwaltsordnung (Federal Lawyers’ Code) (‘the Federal Lawyers’ Code’), in the version applicable to the facts in the main proceedings, and that, therefore, HR’s registration with the bar association would be revoked if that transfer were not undone. Nonetheless, HR informed the bar association that that transfer would not be undone. The bar association therefore revoked that firm’s registration, on the ground, in essence, that only lawyers and members of the professions listed in the Federal Lawyers’ Code, as well as doctors and pharmacists, may be members in a law firm. ( 2 )

HR then brought an action before the Bayerischer Anwaltsgerichtshof (Higher Bavarian Lawyers’ Court, Germany) against the decision adopted by the bar association to revoke its registration. In support of its action, HR submits that the Federal Lawyers’ Code infringes, inter alia, the right to free movement of capital, guaranteed in Article 63(1) TFEU, and the rights which it derives from Article 15 of Directive 2006/123. It submits that that decision also infringes SIVE’s right to freedom of establishment, as guaranteed by, inter alia, Article 49 TFEU.

In that context, the referring court seeks to ascertain whether that national legislation is compatible with Article 49 and Article 63(1) TFEU, as well as Article 15(2)(c) and Article 15(3) of Directive 2006/123.

The Court answers that question in the affirmative.

Findings of the Court

As a preliminary point, the Court examines, in the light of the purpose of the national legislation at issue and the facts of the present case, which fundamental freedom – freedom of establishment or the free movement of capital – applies to the dispute in the main proceedings.

In that regard, it recalls that, according to settled case-law, 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.

Thus, 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.

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.

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 Federal Lawyers’ Code applicable in the present case.

In this instance, 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.

However, the Court emphasises that HR’s articles of association were amended in order to deprive SIVE of any definite influence, so that the acquisition of shares in HR could have had the sole objective of providing HR with capital intended to enable it to finance the development of an innovative legal model based on new technologies.

The case in the main proceedings therefore concerns both freedom of establishment and the free movement of capital, and neither of those freedoms can be regarded as secondary in relation to the other.

Regarding the substance, as concerns, in the first place, the freedom of establishment, it is apparent from Directive 2006/123 that, where a restriction of the freedom of establishment falls within the material scope of that directive, which is the case for legal advice services, including those provided by lawyers, there is no need to examine it in the light also of Article 49 TFEU.

Accordingly, the Court examines the compatibility with Directive 2006/123 of the requirements of the Federal Lawyers’ Code relating to the limitation of the class of persons able to become members of a law firm and the requirement to cooperate actively within the firm; more specifically, whether those requirements are necessary.

In that regard, it finds that the purpose of those requirements 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 legal services and the sound administration of justice, which constitute overriding reasons relating to the public interest under Directive 2006/123 and primary law.

As regards whether the requirements at issue in the main proceedings are proportionate, the Court specifies that 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. 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 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. Thus, a Member State is entitled to take the view that there is a risk that the measures laid down 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 of protecting the sound administration of justice and the integrity of the profession of practising as a lawyer are met in an effective manner in a situation where a purely financial investor has a holding in the capital of that company.

As concerns, in the second place, the free movement of capital, which is guaranteed in Article 63 TFEU and which covers both the holding of shares conferring the possibility of participating effectively in the management and control of an undertaking and the acquisition of securities solely with the intention of making a financial investment without wishing to influence the management and control of the undertaking, prohibited measures include inter alia those which are likely to discourage non-residents from making investments in a Member State, including in the capital of resident companies.

The Court finds that 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 the 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 professions from acquiring holdings in firms of that kind. 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.

However, on the same grounds as those set out in the context of Directive 2006/123, the Court concludes that those restrictions on the free movement of capital are justified and proportionate in the light of overriding reasons relating to the public interest.

( 1 ) Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ 2006 L 376, p. 36).

( 2 ) Pursuant to Paragraph 59a(1) and (2) of the Federal Lawyers’ Code, lawyers may set up a partnership with members of a bar association, industrial property agents, tax advisers, tax representatives, accountants and certified auditors to practise their profession jointly in the framework of their respective areas of professional competence. Lawyers may also practise their profession jointly with members of the legal profession of other States who are authorised to establish themselves in accordance with the Federal Lawyers’ Code and have their law firm abroad.