European Court of Justice rules that the German prohibition of investing in a law firm for purely financial purposes is justified by the regulatory objective to ensure the independence of lawyers

In the long-awaited judgement in the case Halmer ./. Rechtsanwaltskammer München (Case C-295/23) delivered on December 19, 2024, the European Court of Justice (ECJ) ruled that a national law prohibiting the participation of purely financial investors in a law firm does not contravene against EU-law. The Court concluded that this restriction of the freedom of establishment (Art. 49 TFEU) and the free movement of capital (Art. 63(1) TFEU) in the EU is justified by the objective of ensuring that lawyers act independently and in compliance with their professional rules and obligations.

In 2021, Halmer Rechtsanwaltsgesellschaft brought an action before the Bavarian Lawyers’ Court against a decision by the Munich Bar Association revoking its membership in the bar and right to practise after an Austrian limited liability company had acquired shares in it for purely financial purposes. According to the relevant German regulations at the time, only lawyers and members of certain liberal professions could become partners in a law firm. The Bavarian Lawyers’ Court referred the question whether these rules are compatible with EU-law to the European Court of Justice.

The Court decided that a Member State could legitimately assume that a lawyer would not be able to practice his profession independently and in compliance with his professional and ethical obligations, in particular the prohibition of conflicts of interest, if he belonged to a company whose shareholders included persons who were only interested in the financial returns of the firm. The latter might influence the lawyers in their choice of clients and business decisions for purely financial reasons.

The Court explicitly confirmed its jurisprudence that the rules applicable to the legal profession may differ greatly from one Member state to the other thus emphasizing that the competence for professional rules lies in the competence of the EU- member states.

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