The biggest data leak on tax avoidance revealing shady transactions of multimillionaires. Tax avoidance is not an illegal practice; however, one global law firm’s name was mentioned in thousands of documents. Could the law firm have rejected those clients bearing in mind the fundamental right to legal advice we all have?
Pandora Papers are documents published by the International Consortium of Investigative Journalism (‘ICIJ’). ICIJ is a US based non-profit organisation with its own journalist network who work in order to investigate the most important issues revolving around the world. Previously they published the Panama Papers and Paradise Papers in 2016 and 2017 respectively. The Pandora Papers, or Pandora Leaks reveal how multimillionaires, politicians and even senior public officials conceal their wealth to offshore countries and get even richer. Or how they use shell companies to acquire luxury properties in countries like the United Kingdom, the United States, Monaco, or Italy. The Pandora Papers are based on nearly to 12 million records.
According to the leaks there are more than 330 politicians, including 35 country leaders, in more than 90 countries who engaged in these shady transactions. For instance, these documents revealed that former British Prime Minister Tony Blair and his wife saved £300,000 in stamp duty after acquiring property owned by an offshore company, as well as Russian President Vladimir Putin’s extraordinary hidden wealth.
Despite the tax industry causing the rich to get obtain more wealth, it subsequently makes the poor, poorer. Who guides the rich to become ultra-rich by acquiring property through shell companies? The answer is straightforward: law firms.
Tax avoidance is not an illegal practice, it merely interprets tax rules in a way that Parliament never intended and applys tax schemes in such a way that one pays as little tax as possible. Having an extensive necessary legal knowledge on tax avoidance, law firms position themselves as the main actors behind guiding these transactions.
But is it ethical for law firms to assist people in shaping offshore systems? Is it ethical to create shell companies – companies with no employees and no office but only exists on paper- so that people can easily shift their profits to tax havens and pay so much less tax than they are supposed to do?
While the Pandora Papers reveal the shady transactions of more than 330 politicians, the document mentions only one law firms name: Baker McKenzie. It is a Chicago based law firm operating in more than 46 countries. The firm’s name was mentioned in more than 7,500 documents. It seems apparent that being mentioned in the Pandora Papers disturbed them since they felt the need to publish a statement on their website explaining their global tax practices.
The statement, references how Baker McKenzie respects to the principles of integrity, transparency and the highest standards of ethics while advising their clients in accordance with laws and regulations in every jurisdiction they operate.
Accordingly what Baker McKenzie did while advising their clients was not wrong. As stated above, tax avoidance is not illegal. However, it indeed harmed their reputation. But what were they supposed to do? Reject their prospective clients just because they are rich enough to transfer their wealth to shell companies to acquire expensive properties abroad or cosmopolitan cities like London?
Everyone has a right to legal team. A legal professional’s stance like Baker McKenzie’s in this case, would most probably be that all clients are equal before law. It is true, everyone is equal before law and has a right to legal advice whether it is for tax avoidance purposes or for divorce purposes it does not matter. For a legal team, the substance of the matter should not be relevant if they have the necessary expertise or skills on the matter.
However, law professionals have a right to reject a client as well. While refusal grounds are most likely about lack of necessary specific skills or knowledge in a particular case, the Solicitors Regulation Authority (‘SRA’) allows solicitors to end their service provided that there is a ‘good reason’. In this context, it will be very likely that a law professional will be able to refuse a client where she bears ethical doubts against her client.
For some time, the UK’s international reputation for respecting rule of law has been shaky. When the Pandora Papers came to light, legal practitioners’ facilitating or guiding corruption etiquette came under question again. Professor Robert Barrington from University of Sussex defined the status as ‘lawyers no longer champions in the fight against corruption but facilitating corruption as professional enablers.’
This switch in status to professional enablers also has adverse effect on firms’ reputation. Even though these impacts are not discussed explicitly, but behind doors, it is known by all who is in this sector. Nonetheless, it is very likely that this tension will keep continuing since we have here a fundamental right at stake; the access to legal advice.
By Mehveş Selamoğlu student of Senior Status Law at Queen Mary University of London.