Foreseeable relevance’ and the impact on Taxpayers’ rights in the EU, by Pasquale Pistone


Foreseeable relevance is important for tax treaties and European Union Law, but its concept is defined by neither of them. Nevertheless, it has been an object of interpretation, also by the Court of Justice of the European Union (CJEU), which has also taken into due consideration the boundaries of such concept in the international tax practice reflecting the Commentary on Article 26 OECD Model Convention. This post sheds light on three main points, namely (1) foreseeability in European Union law, (2) foreseeable relevance in EU tax law, and (3) the requirements of effective protection of taxpayers’ rights in European Union law.

1.- Foreseeability in European Union law

Foreseeability has long been used by legal reasoning to express the likelihood that persons anticipate the potential results of actions. For instance, in tort law it applies to breaches of obligations and in contract law it helps determining the reasonable harms produced by the action of the person who infringed the clauses of the contract.

The key aspect of foreseeability in legal reasoning relates to the idea of reasonableness in the assessment of likelihood. This standard is visible in case law from the European Court of Human Rights, such as for instance on entrapment and the right to fair trial (Art 6.1. European Convention of Human Rights), but also on tax matters, in cases such as Vegotex International S.A. vs Belgium. This case is still pending before the Grand Chamber of the European Court of Human Rights and involves the retroactive application of penalties introduced by a possibly unforeseeable legislative amendment. In the latter context, foreseeability triggers additional nuances, which relate to the awareness of violating the rules at the time that the action is conducted.

2.- Foreseeable relevance in EU tax law

In the absence of a specific definition of “foreseeability”, the issue is whether the tax context in which it operates present different features for applying international and European tax law. The most important reference to foreseeable relevance in tax matters is included in the context of cross-border exchange of information between tax authorities. In the European Union, States provide mutual assistance along the pattern established by Article 26 OECD Model Convention, which applies to all bilateral tax treaties and to the European directive on administrative cooperation, also known as DAC.

In principle, it should make no difference for the concept of foreseeable relevance in this context if tax authorities provide such assistance under a tax treaty or an EU directive. However, EU law requires primacy of its law over that of the Member States and prevents its Directives to conflict with general principles of EU law and primary law. Since the Berlioz judgment (in particular, paras. 67-68), case-law from the European Court of Justice has acknowledged the origin and function of foreseeable relevance in this context but adjusted it to the EU tax context. Under Article 26 of the OECD Model Convention, foreseeable relevance prevents the use of exchange of information for an open-ended outsourcing of fact finding to the requested authorities. Therefore, before asking for certain information to another State, the tax authorities of the requesting State must have done a preliminary activity that allows them to know what information they are asking for and, in my view, also to exclude that they can gather this information without requesting it to another State.

This has not prevented the CJEU from recognizing in such context the legal standing of private parties – with the assistance of the judiciary – to question whether tax authorities have exercised their powers in conformity with the Rule of Law and, in fact, whether it is reasonable to assume that this information would be relevant for the requesting authorities.

Foreseeable relevance was developed in the context of the tax treaty clause on exchange of information upon request. However, when it operates under EU law, the object of interpretation is article 1 of the Directive of Administrative Cooperation (DAC), which has to be read in a way that complies with the general principles of EU law. Article 1 applies to all forms of exchange of information contained in the Directive, thus including Automatic Exchange of Information (AEOI). This means that foreseeable relevance can also be important to protect taxpayers’ rights in the connection with AEOI, also in respect of the use of big data or of mandatory disclosure of aggressive tax planning schemes under DAC6. The foreseeable relevance of its indicators of reportable transactions, known as “hallmarks”, is often uncertain and doubts also arise as to their reasonableness.

Reaching this point, what are the potential consequences of the regulation of mutual assistance within EU Law? Since mutual assistance is regulated under the DAC, foreseeable relevance is interpreted in the context of secondary law, yet secondary law must not be interpreted in a way that generates an outcome that ends up in an open conflict with the primary law of the European Union. Consequently, EU law must also consider the impact on taxpayers’ rights, among which there is the right to an effective legal remedy regulated under article 47 EU Charter. EU Law gives rights to persons; hence within mutual assistance for tax matters taxpayers should also be regarded as holders of such rights and not just mere objects of information to be exchanged between tax authorities.

3.- The requirements of effective protection of taxpayers’ rights in EU law

Taxpayers are non-State actors of international law and, thus, EU Law must conform to the standards that apply within international law. From this perspective, there is absolutely no doubt that taxpayers -and other private entities that are liable to tax obligations, such as intermediaries obliged to grant information to the tax authorities- are holders of rights also under international tax law. From the moment that tax treaties allocate taxing powers between States, the enforcement of those treaties must occur in good faith and in conformity with the Rule of Law.

The DAC system regulates how mutual assistance operates under EU law but does not prevent the application of EU primary law in such context. As indicated in the Ciola judgment administrative authorities of EU Member States must comply with the primacy of EU law. Complying with the EU primary Law is thus also crucial for the reasonableness test that applies under DAC in connection with the specific meaning of foreseeable relevance and the fact that it is important to secure a judicial review for taxpayers. In the field of direct taxation, the Berlioz judgment acknowledged that private parties are entitled to an effective legal remedy that secures consistency with the Rule of Law, but don’t have full access to the information. The latter is instead possible in VAT, as the CJEU indicated in its Ispas judgment.

There is evidence that this right to judicial review is applied in other jurisdictions elsewhere in the world, such as New Zealand, Bermuda, Singapore or Switzerland. This right to a judicial review should be accompanied by a right to an ex-ante protection within mutual assistance procedures. This means that all taxpayers should have the opportunity to have a judicial review before mutual assistance takes place. In Berlioz we saw that such review could take place in connection with the levying of a penalty. However, judicial review shouldn’t just be in connection with penalties, but in more general way. Moreover, it should not only be limited to third party holders of information, but also be made available to the affected persons with an ex-ante approach (which the Court denied in the Berlioz II case). The right to data protection and other substantive rights should also protect information from being publicly available. This does not mean that tax authorities don’t have access to that, but there should be no public disclosure of such data.


Certainly, Article 26 of the OECD Model Convention is the main source of inspiration for the EU law rules that apply the concept “foreseeable relevance”. However, the European Union’s interpretation of what foreseeable relevance is should not be strictly limited to the original concept but must determine with a level of reasonableness and in line with the general principles of EU law when the information to be exchanged may be relevant for tax purposes. In that sense, the concept of foreseeable relevance not only operates in connection with exchange of information upon request and not just to protect the requested tax authorities, but also as an instrument that secures the effective protection of the affected persons and their fundamental rights under EU law. The ex-ante protection subject to a judicial review before mutual assistance takes place would guarantee a better protection for the affected persons and the operational mode of the information exchanged.

Posted by Prof. Dr. Pasquale Pistone (Salerno University, Academic Chairman IBFD).

Suggested citation: P Pistone, “‘Foreseeable relevance’ and the impact on Taxpayers’ rights in the EU”,, available at