On January 12, 2017 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Campos Sánchez-Bordona in the joined Cases C‑217/15 (Massimo Orsi) and C‑350/15 (Luciano Baldetti) (ECLI:EU:C:2017:14) was published.
In summary the question that the Court has to answer is under what conditions the principle ne bis in idem does apply when the laws of some Member States make it possible to combine administrative and criminal penalties to punish non-payment of high amounts of value added tax (VAT)?
In its judgment of February 26, 2013, Åkerberg Fransson (‘the Åkerberg Fransson judgment’), the Court established the line to be taken by national courts with regard to a person’s right not to be tried twice for a single breach of the obligation to pay VAT. It did so by incorporating solutions developed by the European Court of Human Rights (ECtHR) but according to the Advocate General the reply given in that judgment has created difficulties and disagreements between the courts of some Member States, such as Italy.
The Court is called upon to develop and refine its case-law on this matter, especially after the recent judgment of the ECtHR of November 15, 2016. However, this is not the best time to do so, since the answer to both references for a preliminary ruling depends on the least problematic element of the principlene bis in idem, which concerns whether the person on whom sanctions are imposed is the same.
The national proceedings and the questions referred for a preliminary ruling
· The Court is required to rule on two references for a preliminary ruling which have been referred by the Tribunale di Santa Maria Capua Vetere (District Court, Santa Maria Capua Vetere, Italy).
· Case C‑217/15 has arisen from criminal proceedings brought against Mr Massimo Orsi, in his capacity as the legal representative of Servizi Ambiente e Commercio s.r.l., for non-payment, within the period laid down, of EUR 1 014 288.00 in respect of VAT for the tax year 2011.
· The criminal proceedings were initiated by a complaint by the Agenzia dell’Entrate (Taxation Agency, Italy) to the Procura della Repubblica (Public Prosecutor’s Office, Italy), claiming that the undertaking which Mr Orsi represented had failed to pay VAT, which was an offence under Article 10b, in conjunction with Article 10a, of Legislative Decree 74/2000. In the course of those criminal proceedings, Mr Orsi challenged the measure ordering the precautionary seizure of his assets.
· Before the criminal proceedings were commenced, the tax offence was investigated by the Italian tax authorities which, in addition to calculating Mr Orsi’s tax liability, imposed a fine on him equivalent to 30% of the amount owed. At the end of the procedure, both parties reached a settlement as a result of which the Taxation Agency waived the penalty provided for and agreed that Mr Orsi would pay only the amounts of VAT owed; that brought the procedure to a definitive conclusion as it had not been contested.
· In those circumstances, the Tribunale di Santa Maria Capua Vetere (District Court, Santa Maria Capua Vetere) decided to refer the following question to the Court of Justice for a preliminary ruling:
‘On a proper construction of Article 4 of [Protocol No 7 to the ECHR] and Article 50 [of the Charter], is the provision made under Article 10b of Legislative Decree No 74/[2000] consistent with [EU] law, in so far as it permits the criminal liability of a person to whom a final assessment by the tax authorities of the State has already been issued imposing an administrative penalty in the sum of 30% of the unpaid amount to be assessed in respect of the same act or omission (non-payment of VAT)?’
· Case C‑350/15 has its origin in very similar facts. Mr Luciano Baldetti, in his capacity as the legal representative of Evoluzione Maglia s.r.l., declared that he was liable to pay to the State the sum of EUR 1 071 836 in respect of VAT for 2010 and 2011, but he did not pay that sum within the time limit laid down. The Taxation Agency began an investigation procedure against Mr Baldetti, as the representative of that undertaking, during which it proceeded to calculate the tax liability and imposed the corresponding fines. At the end of the investigation procedure, the Agency agreed with the taxable person that he should pay the amounts of tax owed and 50% of the penalties, waiving its claim to the remaining 50%, whereupon the procedure, which had not been contested either, came to a definitive conclusion.
· However, the Italian tax authorities complained to the Public Prosecutor’s Office that Mr Baldetti, in his capacity as the undertaking’s legal representative, had failed to pay VAT, conduct which it considered to constitute an offence contrary to Article 10b of Legislative Decree 74/2000. In those criminal proceedings, Mr Baldetti appealed against the decision ordering the precautionary seizure of his assets.
· In those circumstances, the Tribunale di Santa Maria Capua Vetere (District Court, Santa Maria Capua Vetere) took the view that it was necessary to refer the following question to the Court for a preliminary ruling, which is identical to that referred in Case C‑217/15:
‘On a proper construction of Article 4 of [Protocol No 7 to the ECHR] and Article 50 [of the Charter], is the provision made under Article 10b of Legislative Decree No 74/[2000] consistent with [EU] law, in so far as it permits the criminal liability of a person to whom a final assessment by the tax authorities of the State has already been issued imposing an administrative penalty in the sum of 30% of the unpaid amount to be assessed in respect of the same act or omission (non-payment of VAT)?’
· Given its similarity, the Court of Justice joined those two cases with Case C‑524/15, Menci, also relating to the double application in Italy of fiscal and criminal penalties for unpaid VAT. On 8 September 2016, at the end of the written phase, a joint hearing was held for the three cases, in which neither Mr Orsi nor Mr Baldetti took part, and only Mr Menci’s lawyer, the Italian Government and the European Commission presented their arguments.
· Although the delivery of the Advocate General’s joint Opinion for the three cases which, until then had been joined, which had been announced for 17 November 2016, the delivery of the judgment of the ECtHR in A and B v. Norway led to its postponement. For the same reason, the President of the Fourth Chamber of the Court of Justice decided, on 30 November 2016, to disjoin the Menci case from the Orsi and Baldetti cases, on the basis of Article 54(2) and (3) and Article 11(4) of the Rules of Procedure of the Court of Justice.
Conclusion
The Advocate General proposes that the Court reply as follows to the questions referred for a preliminary ruling:
Article 50 of the Charter of Fundamental Rights of the European Union, is not applicable where there are two sets of proceedings and both administrative and criminal penalties in respect of the same offence and the tax penalties are imposed on a legal person, such as a company, while the criminal proceedings are brought against a natural person, even if that person is the legal representative of the company.
From the assessment as made by the Advocate General
· In the two references for a preliminary ruling, the Court is asked, in summary, whether national legislation, like the Italian legislation, which makes it possible to combine tax penalties and criminal penalties to punish the same offence — consisting of non-payment of VAT — is compatible with Article 50 of the Charter, in conjunction with Article 4 of Protocol No 7.
· There are several variants of the principle ne bis in idem in EU law and the approach to these has not yet been harmonised by the Court despite calls for it to do so by a number of advocates general.
· The case-law of the Court on the application of the principle ne bis in idem to concurrent tax and criminal penalties as a response by the State to non-payment of taxes (in particular, VAT) was laid down in the Åkerberg Fransson judgment.
· In the Åkerberg Fransson judgment, after accepting that it had jurisdiction to give a preliminary ruling, the Court observed that the principle ne bis in idem ‘does not preclude a Member State from imposing successively, for the same acts of non-compliance with declaration obligations in the field of VAT, a tax penalty and a criminal penalty in so far as the first penalty is not criminal in nature, a matter which is for the national court to determine’. The freedom of Member States to choose penalties is justified by the need to ensure that all VAT revenue is collected and, in so doing, that the financial interests of the European Union are protected.
· However, the Court of Justice imposed a limit on the imposition of both tax and criminal penalties: ‘if the tax penalty is criminal in nature for the purposes of Article 50 of the Charter and has become final … that provision precludes criminal proceedings in respect of the same acts from being brought against the same person’. Therefore, it is possible to impose tax and criminal penalties concurrently but not to impose a nominally administrative penalty which is really of a criminal nature in addition to another criminal penalty.
· In order to establish, for its part, whether a tax penalty is criminal in nature, the Court used the ‘Engel criteria’ which it had previously adopted inBonda. In fact, since its judgment in Engel and Others v. Netherlands, the ECtHR has developed specific and independent criteria in order to clarify the concept of ‘charged with a criminal offence’ in Article 6 of the ECHR and the concept of ‘penalty’ in Article 7 of the ECHR, in view of administrative law penalties of a repressive nature. In particular, in order to interpret Article 4 of Protocol No 7, the ECtHR has used those criteria, namely the legal classification of the offence under national law, the nature of the offence, and the degree of severity of the penalty that the person concerned risks incurring.
· The Court of Justice, in its judgment in Åkerberg Fransson, did not itself apply the ‘Engel criteria’ to a law like the Swedish law, but entrusted the referring court with the task, warning that it would only be able to find that the imposition of both tax and criminal penalties was contrary to Article 50 of the Charter if the remaining penalties were effective, proportionate and dissuasive.
· Based on that premiss, it must be determined whether, in the disputes in the main proceedings, the three elements necessary for the application of the principle ne bis in idem, which are (a) the person on whom the penalty is imposed is the same; (b) the existence of two sets of proceedings in which a penalty is imposed; and (c) the acts being judged are the same, are satisfied.
· As regards the fact that the person on whom the penalty is imposed is the same, there are no specific rulings of the Court of Justice and there is little case-law from the ECtHR, because this is the least problematic element of the principle ne bis in idem. In some judgments, the ECtHR and the Court of Justice practically subsume the element of the person on whom the sanction is imposed is the same within the situation in which the acts being judged are the same (idem).
· The ECtHR, in its judgment in Pirttimäki v. Finland, considered the situation in which the Finnish tax authorities imposed tax penalties on various limited liability companies of British ownership, but in reality controlled by Mr Pirttimäki and other Finnish citizens. Subsequently, criminal proceedings were brought against Mr Pirttimäki and the others for tax fraud for failing to declare dividends received from those companies. The ECtHR held that the principle ne bis in idem in Article 4 of Protocol No 7 was not applicable because in the administrative proceedings the tax penalties were imposed on the companies, whereas the criminal proceedings were directed against natural persons (Mr Pirttimäki and others) who had a legal personality separate from those companies, although they had participated in the adoption of their resolutions.
· I take the view that this approach is also the most suitable for interpreting Article 50 of the Charter.
· According to the respective orders for reference, in those disputes, the tax penalty was imposed on two legal persons in the form of a company (Servizi Ambiente e Commercio s.r.l., in the first case, and Evoluzione Maglia s.r.l. in the second), whereas the criminal proceedings were brought against the respective legal representatives of those companies. I agree with the Italian Government that, in those circumstances, it is not possible to refer to double punishment (or to double prosecution) of the same person, since a tax penalty imposed on a limited liability company is not comparable to the commencement of criminal proceedings against that company’s legal representative even though, in both cases, the same non-payment of VAT is at issue.
· I repeat that, in those two cases, the condition concerning the same persons being tried or punished in administrative proceedings and criminal proceedings, which is essential in order to apply the right guaranteed by Article 50 of the Charter, is not fulfilled. The absence of that condition makes it unnecessary for the Court of Justice to decide whether the remainder of the specific criteria for the application of the principle ne bis in idem have been met.
· Accordingly, I suggest that the answer to the questions referred for a preliminary ruling in Cases C‑217/15 and C‑350/15 should be that the right protected by Article 50 of the Charter does not come into play where, although concerned with the same non-payment of VAT, the tax penalties were imposed on a company and the criminal proceedings were initiated against its legal representative.
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