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PANAMA PAPERS AND PROFESSIONAL SECRECY

The leak of 11.5 million confidential documents of the Panamanian law firm Mossack Fonseca revealed how rich and powerful people use tax havens to hide their wealth. Particularly, these papers, also known as Panama Papers, demonstrate how Mossack Fonseca assisted its clients to avoid tax, dodge sanctions and launder money. Mossack Fonseca is one of the largest law firms in Panama and operates for more than 40 years in Panama and other jurisdictions.

According to the official response of the law firm, Mossack Fonseca has never been charged with criminal wrong-doing. Specifically, Mossack Fonseca provides company incorporation services, tax law and planning consultancy, and other related services. In the official statement, the law firm articulates that Mossack Fonseca is “legally and practically limited to control the use of companies they incorporate or to which they provide other services”. In other words, Mossack Fonseca clarifies that is not directly involved in managing the companies of its clients.

Following the official statement of the company, among the main policies and legal obligation of Mossack Fonseca is to protect client confidentiality. That is to say, the company is obliged to protect client’s data within the legal framework of professional secrecy. Therefore, the leak of Panama Papers has the following two dimensions. On the one point of view, there is the issue of transparency concerning how rich and powerful people hide their wealth, and money laundering practices. On the other point of view, it emerges the issue of professional secrecy which is linked to the right to confidential legal advice.

Professional secrecy is a fundamental right that lawyers and law firms must preserve. Regarding, the lawyer-client relationship, professional secrecy consists a privilege which guarantees that any information a client provides to his/her lawyer is kept confidential. It should be stressed that professional secrecy applies to verbal and written communication between client and lawyer. Furthermore, professional secrecy establishes trust between client and lawyer since the client feels comfortable to entrust his/her lawyer with any information. In addition, professional secrecy is protected by the Court and any State or public authority.

In Cyprus, the Advocates’ Law (Cap.2) underlines the importance of professional secrecy by stressing that “Advocates must, without any time limitation, respect the secrecy of all confidential information or evidence which has come to their knowledge in the course of their professional activity”.  However, if a lawyer is a witness to a case, he/she must not appear also as an advocate. Specifically, as a witness, he/she must appear before the Court with an entirely independent opinion and has the right to refuse to answer questions that may lead him/her to a violation of secrecy.

Currently, there is an ongoing debate between transparency and data protection. On the one hand, the argument of transparency justifies that the actions of rich and powerful people need to be monitored. On the contrary, there is the issue of private data protection and confidentiality. It should be pointed out, that private data protection and confidentiality influence to a great extend other important aspects of public and private life, such as professional secrecy.

In conclusion, law firms and lawyers are legally obliged to execute their professional duties following the principles of professional secrecy. That is to say, they are not allowed to disclosed any information entrusted to them by their clients. Among the main values of Michael Chambers & Co. LLC is to build strong relationships with clients and associates established in trust and confidentiality. If you wish to receive more information about confidentiality and data protection issues, then contact one of our lawyers: info@chambers.law