Hengeler Mueller advises German law firm Halmer in landmark case: European Court of Justice to review third-party ownership ban

In a landmark case, the Bavarian Lawyers' Court (BayAGH) has requested the European Court of Justice to review the German ban on third-party ownership of law firms.

The plaintiff is Halmer Rechtsanwaltsgesellschaft UG, a law firm founded by Dr Daniel Halmer, who is a lawyer and also the founder and managing director of the legal tech company Conny GmbH. After receiving its licence to practice law from the Munich Bar Association (RAK) in 2020, the firm assigned 51 of its 100 shares to an Austrian limited liability company in 2021. The Munich RAK, the defendant in this case, then revoked the plaintiff's licence because the Austrian limited liability company was not licenced to practice law either in Germany or in Austria and, under the German Federal Lawyers' Act (BRAO), was not allowed to be a shareholder in a law firm as a mere financial investor. In its complaint to the BayAGH, Halmer UG challenged the constitutionality of Germany's so-called third-party ownership ban (Fremdbesitzverbot) and its compatibility with EU law.

German regulations currently provide that financial investors may not hold any interest in 'anwaltlichen Berufsausübungsgesellschaften' (companies for the joint practice of law) even if other legal provisions and the company's articles of association ensure compliance with lawyers' professional obligations and lawyer autonomy. Halmer UG argued that the German regulatory framework violates EU law and the BayAGH, in turn, has referred these regulations as well as the German principle obliging professionals to be actively involved in their joint practice companies. The ECJ will now review whether these constraints violate the freedom of capital movement and the freedom of establishment as well as the Services Directive. Although the provisions of Germany's BRAO that were in force until 31 July 2022 are the ones at issue in the proceedings, the ECJ's decision will equally apply to the reaffirmed third-party ownership ban in the major reform of the BRAO that took effect on 1 August 2022. Additionally, the Court's decision will impact comparable restrictions applicable to other liberal professions, in particular tax advisors.

Prof. Dr Dirk Uwer, partner at Hengeler Mueller and member of the German Bar Association's Professional Law Committee, is advising and representing Halmer Rechtsanwaltsgesellschaft UG as well as the third parties to the proceedings, the Austrian GmbH and Dr Daniel Halmer, together with Moritz Quecke, lawyer and partner at GQL Gussone Quecke Legal, Berlin.