Annulment of the Amendment Defining Lawyers as Obliged Parties Under the Law on the Prevention of Laundering of Proceeds of Crime
I. Introduction
Pursuant to the decision of the Constitutional Court of 18 January 2024, file no. 2021/28 and decision no. 2024/11, published in the Official Gazette dated 3 April 2024 (“Decision”), the obligation of lawyers to notify the related institution in case they encounter a situation that may give rise to the suspicion that the assets of their clients have been obtained or used illegally was annulled on the grounds that the restriction on the right to respect for private life is not proportionate and does not comply with the requirements of the democratic social order and is contrary to Articles 13 and 20 of the Constitution.
II. Provision Subject to Annulment
Law No. 5549 on Prevention of Laundering of Crime Revenues (“Law”) regulates the obligations of natural or legal persons defined as “obliged party” in relation to the prevention of laundering of proceeds of crime.
Subparagraph (d) of the first paragraph of the second article of the Law, which defines who is obliged, was amended by Article 20 of the Law on the Prevention of Financing the Proliferation of Weapons of Mass Destruction dated 27 December 2020 and numbered 7262, and the scope of the definition was expanded. With the amendment made, the definition of the expression “obliged party” has been determined as follows:
“d) Oblied Party means those who operate in the field of banking, insurance, individual pension, capital markets, money lending and other financial services, and postal service and transportation, lotteries and bets; those who deal with exchange, real estate, precious stones and metals, jewelry, all kinds of transportation vehicles, construction machines, historical artifacts, art works, antiques or intermediaries in these operations; notaries, sports clubs, freelance lawyers, pertaining to conducting financial transactions related with purchasing and selling real estate, establishing and repealing limited property rights, establishing, merging, managing, transferring and liquidating a company, foundation and association; and to managing bank accounts, securities accounts and any kind of accounts and assets in such accounts, on condition that it is not contrary to the provisions of other laws in terms of the right of defence, and excluding the information obtained through professional work performed under the scope of Article 35(1) of the Attorney’s Law 1136 of 19/03/1969 and alternative dispute resolution and those operating in other fields determined by the President,
From the underlined wording above, it can be derived that lawyers are included in the definition of “obliged party” within the scope of the Law. This situation made it obligatory for lawyers to make a report in the event that they encounter a situation that may give rise to a suspicion that the assets of their client have been acquired or used illegally, limited to the performance of financial transactions related to the purchase and sale of real estate, the establishment and revocation of limited property rights, the establishment, merger, management, transfer and liquidation of a company, foundation and association, as well as the management of bank accounts, securities accounts and all types of accounts and assets in such accounts, during the exercise of their profession.
The petition submitted to the Constitutional Court argued that this obligation conflicts with the confidentiality obligations of lawyers, and that lawyers have the right to refrain from testifying about the information they have learned due to their title or due to the judicial duty they undertake. It was also stated that lawyers are obliged to disclose information about their clients without being subject to any procedural safeguards and limitations, and that this situation violates the right to demand respect for the right to private life, the right to a fair trial, and the principle that no one may be compelled to make statements or produce evidence incriminating himself or his relatives as defined by law. For this reason, it was argued that the rule is contrary to Articles 2, 20, 36 and 38 of the Constitution, considering that the phrase “…not contrary to the provisions of other laws in terms of the right of defence…” in the definition is ambiguous and unpredictable.
III. Constitutional Court’s Assessment and Decision
The Constitutional Court has emphasised that the professional lives of individuals are closely connected with their private lives, that the right to respect for private life comes to the fore when there are interventions in the professional life, that attorney-client privilege falls within the scope of the right to respect for private life, and that the conversations and information exchange between the lawyer and his/her client should remain confidential between the lawyer and the client. Therefore, it is considered that the obligation of lawyers, who are included in the definition of obliged party under the Law, to disclose the information obtained in their relations with their clients to the administration may affect attorney-client privilege.
In this assessment, it was also noted that the right to respect for private life may be restricted if it has a legitimate purpose. Limitations will be imposed on the right in the context of legitimate purposes such as ensuring public order and/or preventing the committing of crime. Nevertheless, in terms of the legal profession, it has been emphasised that whatever the ultimate purpose of the conversation and exchange of information between the lawyer and his/her client, a strengthened protection must be provided in terms of attorney-client privilege, and the contrary would prevent the legal profession from fulfilling its basic function. In this regard, it has been stated that professional secrets and information obtained during the practice of the legal profession should have privileged protection in the context of the right to respect for private life.
In order to achieve the purposes of protecting public order and preventing the committing of crime, it has been stated that the inclusion of lawyers in the definition of obliged party under the Law, limited to certain works and transactions they perform, may be suitable to achieve these purposes. However, this can only arise from a compelling social need and there must be a proportionate intervention. When it is evaluated whether these criteria are met in terms of the regulation sought to be annulled, it is concluded that since the rule does not foresee any additional assurance or mechanism to determine whether the information to be shared is within the scope of professional secrets, in other words, since lawyers are held responsible for sharing information directly with the related institution without any preliminary examination, a burden is imposed on lawyers that they cannot bear. Therefore, it was concluded that the restriction imposed on the right to respect for private life was not proportionate and in accordance with the requirements of the democratic social order, and it was decided to cancel the regulation.
IV. Our Remarks
The assessments made in the annulment decision of the Constitutional Court in line with the majority opinion are significant in terms of the legal profession and the concept of attorney-client privilege. The Decision generally emphasises that the legal profession is a sensitive area that needs to be protected in terms of freedoms and rights, and that the effects of such regulations should be carefully considered. On the other hand, there are two dissenting votes on the Decision. In these dissenting opinions, it is stated that the proportionality requirement is met since professional secrets related to the judicial field are outside the scope and only limited cases are covered by the obligation.
At this point, it is noteworthy to refer to the judgment of the Court of Justice of the EU dated 8 December 2022, in which the Court clarified the concept of attorney-client privilege under European Union law. In the said judgment1, the Court of Justice of the European Union held that the principle of confidentiality applies to all communications between lawyers and their clients and is not limited to services relating to the exercise of defence rights. In the judgment, the CJEU stated that “individuals who consult a lawyer can reasonably expect that their communication is private and confidential” and that “those persons must have a legitimate expectation that their lawyer will not disclose to anyone, without their consent, that they are consulting him or her”.
As a result, it is possible to conclude that the Constitutional Court, with its annulment decision emphasising the right to private life, did not limit attorney-client privilege only to those related to the exercise of the right to defence and concluded that all correspondences between lawyers and their clients should be protected within the scope of the right to privacy. At this point, it is a matter of curiosity whether the legislative body will introduce a new regulation and, if so, what additional safeguards or mechanisms will be implemented.