Towards limitations to the ne bis idem principle notably in banking and financial matters : the extent to which bankers and financial operators may be exposed to the duplication of proceedings and penalties of criminal and administrative fines and other sanctions

C-524/15 & C-537/16
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Preliminary rulingMenci ; Garlsson et al.Court of Justice Grand ChamberT. von DanwitzM. M. Campos Sánchez-BordonaNe bis in idem principle – Protection of the integrity of financial markets and public confidence in financial instruments
KeywordsReference for a preliminary ruling — Directive 2003/6/EC — Market manipulation — Penalties — Value added tax (VAT) — Directive 2006/112/EC — Failure to pay VAT due National legislation which provides for an administrative penalty and a criminal penalty for the same acts — Charter of Fundamental Rights of the European Union — Article 50 — Ne bis in idem principle — Criminal nature of the administrative penalty — Existence of the same offence — Article 52(1) — Limitations to the ne bis in idem principle — Conditions
Significant pointsThe Court of Justice delivered two judgements on the same day concerning the application of the ne bis in idem principle, which provides, pursuant to Article 50 of the Charter of Fundamental Rights of the European Union (“EU Charter”), that a person cannot be criminally prosecuted or punished twice for the same offence.

The first case (C-537/16) regarded the imposition by the Italian authority for the financial markets (“Consob”) of an administrative penalty for market abuse (Directive 2003/6) on a person who had previously been sentenced (and later pardoned) to a criminal penalty with respect to the same acts. The second case (C-524/15) regarded VAT collection, where a person liable for payment was imposed an administrative penalty by tax authorities for failing to pay VAT, and against which criminal proceedings were also brought with respect to the same acts.

Having determined in both cases that a unique offence was subject to two separate proceedings of a criminal nature (one of which being an administrative proceeding), the Court then assessed whether these limitations of the ne bis in idem principle were compatible with the EU Charter in light of Article 52 of the latter. Following the provisions of the EU Charter and a judgment delivered under the urgent preliminary ruling procedure (C-129/14 PPU Spasic) in 2014, the Court stated that any restriction of this principle must be provided for by law, respect the essence of the ne bis in idem principle and respect the following conditions:
- it must pursue an objective of general interest which is such as to justify a duplication of proceedings and penalties, it being necessary for those proceedings and penalties to pursue additional objectives;
- it must establish clear and precise rules allowing individuals to predict which acts or omissions are liable to be subject to such a duplication of proceedings and penalties;
- it must ensure that the proceedings are coordinated in order to limit to what is strictly necessary the additional disadvantage which results, for the persons concerned, from the duplication of proceedings, and
- it must ensure that the severity of all of the penalties imposed is limited to what is strictly necessary in relation to the seriousness of the offence concerned.

Of particular interest, the Court considered that provisions seeking to protect the integrity of the financial markets of the European Union and public confidence in financial instruments (C-537/16) and provisions seeking to combat VAT offences (C-524/15) meet an objective of general interest. The Court noted that, in light of the importance that is given in the Court’s case law to combating market abuses and VAT infringements, a duplication of criminal proceedings and penalties may be justified where those proceedings and penalties pursue, for the purpose of achieving such an objective, different aspects of the same unlawful conduct at issue.

The Court also assessed whether the provisions respected the principle of proportionality, which implies the existence of rules ensuring coordination so as to reduce to what is strictly necessary the additional disadvantage associated with such duplication for the persons concerned. In the case relating to VAT, the Court considered that the legislation ensures the proportionality of all of the penalties imposed given that, among other things, a criminal conviction would prevent the enforcement of an administrative penalty. On the contrary, in the case relating to market manipulation, the Court was of the opinion that the principle of proportionality was not respected – a question which is for the referring court to ultimately determine – given the absence of a similar limitation.

Henceforth, in the VAT case, the Court agreed in principle to a duplication of proceedings of a criminal nature. Finally, the CJ affirmed such that such a conclusion is in line with the ne bis in idem principle as set by the European Convention on Human Rights (“ECHR”) and the case law of the European Court of Human Rights. According to the CJ, the required conditions for a duplication of proceedings ensure a level of protection of that fundamental right that do not conflict with its meaning and scope in the ECHR.
NoteworthyIn these two judgments, the CJ reiterated its attachment to the decisions handed down by the European Court of Human Rights.

First, the Court implicitly relied on the Grande Stevens decision (ECHR, 4 March 2014, Grande Stevens v. Italy), which was expressly mentioned in the AG's opinion, to assert, on the one hand, that the provisions in question were aimed at guaranteeing the integrity of the financial markets and maintaining public confidence in the security of transactions and, on the other hand, that the Consob sanctions were aimed at both a preventive and a punitive objective (paras. 46 and 47).

Second, these judgments constitute a reversal of case law in relation to the C-617/10 Åkerberg Fransson judgment rendered in 2013. In that judgment, the CJ had established that the ne bis in idem principle does not preclude the duplication of fiscal and criminal penalties, in so far as the first penalty is not of a criminal nature. From now on, the CJ has relaxed its case law by admitting the possibility of a combination of two criminal sanctions, under certain conditions. In doing so, the CJ aligns its case law with that of the ECHR, which in 2016 had already admitted the accumulation of different criminal penalties in the case of an integrated mixed procedure, i.e. administrative and criminal, provided that the procedures, although different, have a sufficiently close material and temporal link between them and form part of an integrated sanctions mechanism (ECHR, 15 November 2016, A and B v. Norway). The judgment in A and B v. Norway did not constitute a genuine reversal of case law by the ECHR but rather the clarification of the contours of case law initiated by the Nilsson judgment in 2005, in the case of the parallel execution of linked procedures that form a coherent whole.

Third, the judgments represent a step further towards the convergence (without there being identity) of the two European Courts on the complex issue of the appraisal of the link between parallel procedures. While most of the criteria laid down by the CJ overlap with those of the ECHR (complementary goals, need for clear rules, proportionality of the severity of all penalties), some minor differences appear to persist. Firstly, the CJ requires that the limitation of the ne bis in idem principle meets an objective of general interest. Secondly, the ECHR seem to attach particular importance to the temporal link between the procedures, while the CJ basically requires that procedures are coordinated with each other.

The judgment of the CJ in the case C-537/16 is of the utmost importance given the increasing severity of EU law and of the supervising authorities towards breaches of the rules by banking and financial operators, which is also in line with the recommendations of the Financial Stability Board and the 2010 Communication from the EU Commission “Reinforcing sanctioning regimes in the financial services sector”.