A foundation supports the disciplinary tribunals for the legal profession. The Netherlands Bar Association (NOvA) pays an annual contribution for this purpose. The foundation considers that it is not a VAT-registered business, as it does not operate independently and its services serve the public interest. The Supreme Court has ruled otherwise.
Triangular relationship
The foundation was established in 2015 to support the disciplinary tribunals in their work. It recruits registrars and administrative staff, hires courtrooms and workspaces, manages the disciplinary tribunals’ websites and handles press relations. The registrars are formally employed by the foundation, but are appointed and dismissed by the disciplinary tribunals themselves. Since 2018, the costs of disciplinary proceedings have been borne by the NOvA rather than the State. The foundation therefore receives an annual cost-covering contribution from the NOvA. It does not charge the disciplinary tribunals anything.
Three arguments against VAT liability
The foundation takes the view that it is not liable for VAT on the contribution from the NOvA. Firstly, it does not operate independently, as it is organisationally intertwined with the disciplinary tribunals and is entirely dependent on their instructions. Secondly, it does not participate in economic activity, as its specialist services are not offered on a general market. Thirdly, there is no direct link between its services and the contribution from the NOvA, as it acts in the general interest of the rule of law.
Independence
The Supreme Court rejects all three arguments. The concept of independence must be interpreted broadly. The foundation enters into contracts with suppliers in its own name, negotiates the terms and conditions itself, and enters into employment contracts with its staff. The fact that the registrars are formally appointed by the disciplinary tribunals and are accountable to them for the substance of their work does not alter this. Those statutory provisions are intended to safeguard the independence of disciplinary proceedings, not to make the foundation subordinate to the disciplinary tribunals.
Economic activity and a direct link
Nor does the argument that the foundation does not participate in economic activity hold water. The foundation’s services extend beyond mere registry duties. It is responsible for the entire organisation and coordination of disciplinary proceedings. Such support services may also be provided by other parties. The fact that the foundation is statutorily bound to the disciplinary tribunals as its sole clients does not preclude participation in a general market. Finally, the Supreme Court rejects the argument based on the public interest. The fact that disciplinary proceedings serve the rule of law and society does not mean that there is no direct link between the services and the remuneration. The disciplinary tribunals are the identifiable consumers of the services, and the NOvA’s contribution constitutes the consideration. The appeal in cassation is unfounded.