Advocate General at the European Court of Justice considers German rules on third-party ownership of law firms

In May 2023, the Bavarian Higher Lawyers’ Court requested a ruling from the European Court of Justice on an issue which has important implications for third party ownership of law firms in Germany. The ruling relates to the question of whether an Austrian company which is not authorised to provide legal advice services is nonetheless entitled to acquire part of the share capital of a law firm operating in Germany. The questions that the Court is addressing are:

  • whether, when a financial investment involves a certain degree of influence over the management of a law firm, any approval or rejection of a proposed investment must be conducted in the light of wider EU rules and regulations
  • whether national legislation which restricts the holding of shares in law firms to lawyers and the members of certain professions, and in all cases reserves to lawyers the majority of the share capital and votes, is compatible with EU law.

The Court has reached the first stage of its consideration of these questions, which is the publication of an initial opinion by the appointed Advocate General for the case.

In his opinion in the case Halmer ./. Rechtsanwaltskammer München, delivered on July 4, 2024, the Spanish Advocate General Manuel Campos Sanchez-Bordona, states that whilst EU-member states have a broad discretion regarding the regulation of the legal profession and specifically the legal forms of their practice, the imposed restrictions must be consistent with one another and with the public-interest reasons upon which they are based. Therefore, he concludes that the German professional rules that restricted the shareholding rights to certain professions and further require that the shareholder has to pursue a professional activity in the law practice violate Article 15 of the Services Directive (2006/123/EC). This is also the case for the requirement that lawyers have the majority of votes in a capital company.

It will be interesting to see whether the Grand Chamber of the European Court of Justice will follow the opinion of the Advocate General, as is the case in the majority of decisions. If this happens there could be wide reaching implications for a number of EU legal professions.

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