The majority of occupational pension schemes in companies are restructuring cases – not only because of poor funding, but above all because of serious design errors. There is a threat of reversal.
The establishment or design of occupational pension schemes in companies regularly leads insurance brokers and their “model suppliers” into the area of prohibited tax and legal advice. Time and again, company audits reveal massive design errors in “ready-to-sign contracts”, as in the case of the “Dr. Hochstapler bAV-Institut” (name changed). The Federal Court of Justice (BGH) dealt with a U-cash scheme in which, among other things, a deduction of the endowment as an operating expense was denied (BGH ruling of 20.3.2008, Ref.: IX ZR 238/06).
The plaintiff, a tax consultancy firm, was only left with the tax loss itself as an exception because a tax consultant (StB) must know that a bAV company consultant is not licensed for tax structuring.
One could derisively conclude from this that occupational pension advice with the “one-stop solution” invented by the marketing of certain financial houses is possible without liability at best vis-à-vis lawyers (RA), notaries and accountants.
Without exception, banks, insurance companies and their subsidiaries in the field of occupational pensions are not licensed to provide legal or tax advice. They sometimes try to remedy this shortcoming by employing lawyers or accountants “as employees” in the consultative sale of “occupational pension solutions”.
However, this has several catches.
Firstly, such an in-house lawyer or auditor may not give legal advice to third parties (the occupational pension clients).
Secondly, commercial acquisitive activity leads to the withdrawal of the licence by the professional body, as “succession planners” have also painfully experienced.
Thirdly, VSH coverage is effectively unavailable for such legally prohibited activities. Finally, this activity leads straight to the personal liability of the actors.
According to the established case law of the Federal Court of Justice (e.g. ref. no. IX ZR 41/04), an association for occupational pension schemes and a GmbH (limited liability company), for example, require a separate licence to provide legal or tax advice, even if their respective managing directors or other employees are admitted to practise as lawyers or accountants.
The BGH has confirmed that it would also be an unsuitable attempt to import legal or tax advice cross-border for German clients. For some time now, insurance brokers have even been allowed to give advice for a fee, provided that the contracts in question are not in their portfolio and the client is not a consumer (Section 34d of the Trade Regulation Act). The insurance broker may advise his clients in his field, i.e. in insurance law, without constraint, but also represent them out of court in the event of a claim.
If he then fails to inform his customer of a current deadline, he must also be held liable for this (BGH, III ZR 21/09 of 16.7.2009). In other areas (labour, occupational pension, company, insolvency and tax law), insurance brokers are only permitted to give advice on simple questions, the handling of which is absolutely necessary for the proper exercise of their profession.
The insurance broker must therefore ensure that the insurance business and economic issues are in the foreground, because the broker can provide this without other legal and tax advice without further ado.
If even a single point outside of insurance law requires in-depth legal knowledge, the broker exposes himself to the risk that his consulting or brokerage contract is “null and void”. According to the kindest interpretation of higher courts, tax and other legal issues must remain clearly in the background in any case.
The constitutional status of pension advisers The privilege of pension advisers to provide legal advice on occupational pensions depends on what is part of the compulsory programme of their training (cf. OLG Düsseldorf, decision of 1.6.1983, 2 Ss (OWi) 16/83). For example, they are not allowed to work in the field of unemployment insurance (BVerfG, decision of 22.12.2000, 1 BvR 727/97), as there is no examination of expertise for their admission. The purpose of the prohibitions in the field of legal and tax advice is to protect “against improper advice and representation by incompetent and unsuitable advisers”. The “bAV company consultant” or the “CEP succession consultant”, which are often advertised by financial institutions, are stillborns in terms of constitutional law:
For by “inventing untypical forms of activity” no one can introduce a “legally established profession” (e.g. StB or RA) through the back door in a different form (BVerfG decision of 18.6.1980, 1 BvR 697/77). Anyone wishing to offer legal or tax advice in occupational pension schemes is obliged to choose a profession defined by law for this purpose and then also to have a licence to do so. Mandatory notice requirements.
Who omits to point out the own borders of permitted consultation, runs because of unsatisfactory clearing-up into the obligation to pay damages after § 311 II BGB.
As the BGH emphasises, this even applies to customers with legal and commercial experience. Accordingly, occupational pension consultants are forbidden, for example, to take over the preparation of a U-casualty fund statute “taking into account labour and tax law provisions” (OLG Düsseldorf, judgement of 5.12.2006, I-23 U 54/06) or to act as an intermediary.
Those providers are also on the wrong track who think that it would be sufficient to “only” point out to the client that he or she does not have a licence to provide legal and tax advice. Whoever nevertheless agrees to the advice and thus consciously accepts that the transaction will later fail, acts “recklessly and unconscionably”, which leads to the accusation of intentional immoral damage, § 826 BGB.
The actual assumption of a consultation produces – despite reference to missing authorization – with the customer the error of a qualification and thus a adhesion because of entrance fraud (chamber court Berlin, judgement of 14.12.2006, Az.: 23 U 128/04). However, no insurance broker has any liability coverage for such activities.
The marketing for “support by one contact person in all areas” usually proves to be a boomerang for the providers. For if the prohibition of legal or tax advice by “non-professionals” has been violated, the invalidity of the contract follows.
The consultant is thus threatened with total loss of remuneration. This is because the client may argue that he would have turned to another advisor in the first place if he had known that the advisor was providing prohibited legal and tax advice. Even for the correctly implemented parts of the service, the consultant can then no longer demand partial remuneration.
Nevertheless, the intermediary is liable for compensation for the damage incurred. Recently, pension advisors have been promoting a cooperative model in which legal advisors, tax advisors and financial service managers are to “provide the service through a professional network.”
Such cooperations have become permissible in principle since 1 July 2008. However, great caution is advised here, because advertising for and contracts with such “networks” lead directly to liability for the activities of all network partners – which, however, is regularly not insurable in the respective own pecuniary loss liability.
by Dr. Johannes Fiala
by courtesy of
www.performance-online.de (published in Performance, issue 04/2010, pages 94-95)
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About the author
Dr. Johannes FialaPhD, MBA, MM
Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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