By: Michele Petito – National Institutions Subcommitee – 27-03/2023
The ‘ne bis in idem‘ principle originated in criminal law to guarantee an individual’s fundamental right not to be tried or punished twice for the same act. This principle was subsequently extended by the national legislator to the tax field also. In fact, Article 19 of Legislative Decree No. 74/2000 provides that when the same act is punished by a criminal sanction and by a tax sanction, the special provision applies, with the consequence that the criminal sanction always rises to the status of a special rule, as it requires for its applicability the existence of specific intent or the exceeding of certain thresholds of evasion. The prohibition of double jeopardy in the criminal justice system finds its legal basis in Article 649 of the Code of Criminal Procedure, while in the European context, it is enshrined in Article 4, prot. 7 of the European Convention on Human Rights and Article 50 of the Charter of Fundamental Rights of the European Union. These provisions state that no one may be prosecuted or convicted for an offence for which he or she has already been finally acquitted or sentenced. The problem of the correct application of the principle of ‘ne bis in idem’ came back into the news with judgment No. 18460/2010 (so-called Grande Stevens) issued by the European Court of Human Rights, in which the Strasbourg judges reaffirmed the principle according to which the choice of a national system to apply to the same person an administrative sanction, with an afflictive and deterrent character, and a criminal sanction for the same violation, is contrary to the rule of prohibition of double jeopardy. In practice, the Court does not absolutely exclude the possibility of the concurrence of an administrative sanction and a criminal sanction; however, it considers that when an administrative sanction is, in fact, punitive in nature and not compensatory, it must be considered a criminal sanction and consequently a further criminal sanction cannot subsequently be applied to the same person for the commission of the same offence. The European Court of Human Rights reiterates, as it had already done in the past, that the criminal nature of a sanction does not depend on the formal qualification conferred by national law, but on the nature of the sanction itself, as well as the degree of its severity. The Strasbourg judges use a substantive and not a formal notion of criminal matters, holding that when an administrative sanction has a punitive, dissuasive and particularly afflictive character, it has the nature of a criminal sanction regardless of the legal qualification used by national law. This principle had already been enunciated by the European Court of Human Rights in an earlier judgment of 8 June 1976, Case No. 5100/71, “Engel and Others v. the Netherlands”, in which the judges enumerated the three alternative criteria that characterise a criminal sanction: 1) qualification as a criminal sanction in domestic law; 2) nature of the sanction, which must be punitive and deterrent and not compensatory; 3) degree of severity of the sanction.
In 2016, the European Court of Human Rights, with judgments Nos. 24130/11 and 29758/11 (A and B v. Norway) further clarified its orientation, stating that the principle of ne bis in idem is not violated when a criminal trial is held despite the fact that the defendant for the same act has already been administratively sanctioned with a final measure and/or judgment, provided that the two proceedings are sufficiently closely connected in substance and time, so as to be considered a single integrated system.The temporal connection does not necessarily mean that the proceedings are simultaneous, but that they are consecutive in order to avoid uncertainty, delay and excessive length of time. Material connection, on the other hand, exists when:
- the two proceedings pursue complementary purposes, relating to the same conduct (the administrative proceedings must have a compensatory purpose, the criminal proceedings a punitive purpose);
- the foreseeability of a cumulative conviction for the same conduct;
- coordination and interaction of the two proceedings and thus the possibility of circulation of evidence;
- The second penalty must take into account the one already imposed to ensure proportionality between the conduct and the overall penalty.
The ruling of the European Court of Human Rights also has effect in relation to Article 50 of the Charter of Fundamental Rights of the European Union, by virtue of the so-called “upward clause” linking the two legal systems and contained in Article 53 of both legal texts, with the difference that the European Union provision has direct effect in the domestic law of the Member States, with the consequence that the national court is authorised to disapply domestic legislation in conflict with the European Union provision. Fifty-three of both legal texts, with the difference that the EU norm has a direct effect on the domestic law of the Member States, with the consequence that the national court is authorised to disapply domestic legislation in conflict with the EU norm; whereas the European Convention on Human Rights has no direct effect in domestic law. Therefore, in the event that the national court finds a conflict between domestic law and the Convention, it may raise a question of the constitutionality of domestic law.
The European Court of Justice itself, which was asked by some Italian judges for a preliminary ruling on the correct interpretation of Article 50 of the Charter of Fundamental Rights of the European Union, followed the principles already expressed by the European Court of Human Rights, pronouncing important decisions (Joined Cases C-524/15 Menci; C-537/16 Garlsonn; C-596/16 Di Puma and C-597/16 Zecca). In these judgments, the Court noted that the ne bis in idem principle may be restricted, pursuant to Article 52(1) of the Charter of Fundamental Rights of the European Union, as long as the two procedures:
- respect the principle of proportionality;
- they have complementary purposes;
- have clear and precise rules so as to make the use of a double penalty system foreseeable;
- ensure coordination between the two procedures.
The European Court of Justice also clarified that it is not within its competence to intervene in national events, but that it is up to the national judge to verify compliance with the requirements, bearing in mind that the application of the criminal sanction should be suitable to repress this offence in an effective, proportionate and dissuasive manner, with the consequence that a further administrative sanction would entail a breach of the principle of proportionality between the seriousness of the offence committed and the sanctioning treatment applied.
The Court of Cassation shared the principles enunciated by the European Court of Justice, stating that it is up to the national judge to assess the proportionality of the accumulation of sanctions, deeming the criminal sanction prevalent and admitting the opportunity not to apply the administrative sanction (Cass. Penale sent. no. 45829/2018).
Finally, the Constitutional Court was also asked the question of the constitutionality of Article 649 of the Code of Criminal Procedure, for contrast with Article 117 Const, c. 1, in relation to art. 4, Prot. 7 ECHR, raised by the Court of Monza, insofar as it does not prohibit criminal proceedings against a person who has already been definitively sentenced to an administrative penalty of a criminal nature (art. 13, c. 1 Legislative Decree no. 471/97 and art. 10 ter- Legislative Decree no. 74/2000). The Constitutional Court by Order no. 114/2020 declared inadmissible the question of constitutionality because the judge in question (Court of Monza) did not demonstrate the non-conformity of the censured discipline with the criteria set out in the European case law.
Therefore, the applicability of criminal and tax penalties for the commission of the same offence depends, according to EU and national case law, on the existence of a sufficient connection between the criminal and tax proceedings (sufficiently closely connected in substance and time), so much so that they are considered a single integrated system.
In relation to the national legal system, it can be said that both proceedings have a temporal connection because they are consecutive to each other. In fact, if in the course of a tax assessment proceeding, an evasion is detected that exceeds the thresholds of punishability provided for by the criminal law, the assessing officers will draw up and forward to the judicial authority a specific crime report and vice versa, if in the course of a criminal proceeding, tax evasion is detected, the judicial authority will forward the documents to the competent financial offices so that they can proceed with the recovery of the evaded tax. More controversial, however, is the existence of a material connection between criminal and tax proceedings. In fact, there are two contrasting theses, the first in favour of the material connection between criminal and tax proceedings; the second argues that there is no single integrated criminal and tax system in the Italian legal system for sanctioning purposes.
The proponents of the first thesis bring the following arguments in their support:
- the existence of bonus mechanisms (such as non-punishment) in the event of voluntary extinction of the debt and administrative penalties (Article 13 of Legislative Decree No 74/2000)
- the positive effects of debt payment on confiscation (Article 12 bis of Legislative Decree No. 74/2000);
- the possibility of using the results of criminal investigations for tax purposes (Article 63 of Presidential Decree No. 633/72).
The supporters of the second orientation, on the other hand, consider that there is no material connection between the two proceedings for the following reasons:
- the autonomy and separation of the two proceedings (Article 20 of Legislative Decree No. 74/2000): <<the administrative assessment proceedings and the tax proceedings cannot be suspended due to the pendency of criminal proceedings concerning the same facts or facts on the assessment of which the relative definition in any event depends>>;
- the principle of sanction speciality in VAT matters (Article 19 of Legislative Decree No. 74/2000): <<when the same fact is united by one of the criminal provisions and a provision providing for an administrative sanction, the special provision applies>>;
- the reservation clause in customs matters (Article 303 of the TULD) in the case of importation: <<if the total border duties due according to the assessment are greater than those calculated on the basis of the declaration and the difference in duties exceeds five per cent, the administrative penalty, if the fact does not constitute a more serious offence, is applied as follows…>>;
- the lack of circulation of evidence between the two proceedings. In fact, evidence acquired in tax proceedings cannot be used in criminal proceedings because it was acquired without the defence guarantees provided for in criminal proceedings;
- the limitation of the taking of evidence in tax proceedings. In fact, testimonial evidence is not admitted in tax proceedings, which, on the contrary, represents the ‘princely’ evidence in criminal proceedings;
- the binding effect of the criminal judgment does not operate in tax proceedings due to the lack of identity of the evidence regime (Article 654 of the Code of Criminal Procedure)
The Constitutional Court, with the aforementioned Order No. 114/2020, reaffirmed the legitimacy of the first thesis, considering the national legal system to be compliant with the criteria set forth in European case law. In this regard, however, it should be noted that the Constitutional Court’s ruling concerned the connection between the criminal-tax procedure governing the evasion of VAT and direct taxes provided for by Legislative Decree No. 74/2000 and the sanctioning procedure concerning VAT and direct taxes governed by Legislative Decree No. 471/97. In this case, in fact, the national legislation (Article 19 of Legislative Decree No. 74/2000) allows the applicability of both criminal and tax penalties provided that there is an identity of the offender, i.e. the tax penalty and the criminal penalty must affect the same legal entity, the author of the tax violation. This is, therefore, the case for offences committed by a natural person, a self-employed person and a sole proprietorship, but not, for example, in the case of a company, since the latter as a legal person will only be liable for the tax penalty, whereas the natural person (the legal representative of the company) will be affected by the criminal penalty. In summary, the principle of speciality does not exclude the application of the tax penalty against companies in the presence of offences committed by their legal representative. On the other hand, the sanctioning discipline contemplated by customs legislation is different, since Article 303 of the Consolidated Text of Customs Laws provides for a reservation clause that excludes the applicability of customs sanctions if the act constitutes a criminal offence.
Without prejudice to what the Constitutional Court held, it is appropriate to consider some practical implications resulting from the applicability of criminal sanctions and tax sanctions for the same violation. In this regard, it should be noted that the jurisprudence of the European Court of Justice and of the Court of Cassation holds that the application of the criminal sanction should be suitable to repress such offence in an effective, proportionate and dissuasive manner, with the consequence that a further administrative sanction would entail the violation of the principle of proportionality between the seriousness of the offence committed and the sanctioning treatment applied. The customs sanction provided for by Article 303 of the Consolidated Text of Customs Laws should also be suitable to repress the offence in an effective, proportionate and dissuasive manner, leaving no margin of applicability to criminal sanctions. In this regard, it should be noted that customs penalties have been deemed disproportionate by the jurisprudence of the Court of Cassation (Court of Cassation judgment no. 14908 of 11 May 2022), even if imposed in the minimum measure provided for by the Italian law, and must therefore be significantly reduced in order to comply with the European principle of proportionality, enshrined in Article 42 of the Union Customs Code. It, therefore, appears clear that the applicability of the criminal or customs penalty excludes tout court from the possibility of imposing a second penalty, under penalty of violation of the principle of proportionality. VAT sanctions deserve a different assessment, since the application of the principle of speciality, as already mentioned, only applies if there is an identity of the offender. This circumstance occurs when the offences are committed by a natural person, a self-employed person or a sole proprietor, whereas the case of an offence committed by a director of a company is different, since, in this case, as already mentioned, both penalties apply: the tax penalty against the company and the criminal penalty against the director.
Lastly, it should be noted that the draft enabling act for tax reform provides for a thorough revision of the customs penalty system inspired by the principle of proportionality of the penalties that will be applied on the basis of punishment thresholds that will vary in relation to the amount of the evaded tax. In this regard, it should be noted that the rules contained in the Consolidated Text of Customs Laws are now obsolete, as they have been superseded by the prevailing EU legislation which, being contained in EU Regulations, is directly applicable in the national legal system. Therefore, the internal customs legislation has a subsidiary character, i.e. it intervenes to regulate those matters that the Union legislator has left to the free discretion of each Member State, such as, for example, the matter of sanctions. The report accompanying the Draft Law identifies the areas that will be subject to reform: a) organisation of customs structures and services; b) the requirements for the performance of customs representation functions; c) the powers attributed to the customs administration in the supervision and control of customs procedures; d) the revision of the penalty system.
Particular attention is paid to:
- to the telematisation of customs procedures and institutions in order to computerise communications between operators and the customs administration, thereby improving the services offered to businesses;
- to the strengthening of the Single Customs Window that will simplify the interaction between the Customs and Monopolies Agency and other bodies involved in the control of the cross-border movement of goods;
- to the reorganisation of the assessment and collection procedures that provides for a review of the institution of the customs dispute to coordinate it with the other remedies available in the assessment
- to the revision of the customs penalty system, which is inspired by the principles contained in Article 42 of the Union Customs Code and, in particular, the proportionality of the customs penalties imposed with respect to the amount of the evaded tax
- the rewriting of smuggling hypotheses that will make it possible to overcome the current stratification of rules that provide for three types of smuggling: 1) minor administrative smuggling, when the amount of border duties does not exceed €3,996.96; 2) decriminalised smuggling when border duties exceed €3,996.96 but not €10,000.00; 3) criminal smuggling when border duties exceed €10,000.00.
Returning to the topic of the ne bis in idem principle, it is worth highlighting that the correct application of this principle is of particular interest to the European Public Prosecutor’s Office and the Customs and Monopolies Agency, which recently held a meeting on the topic of ‘Application of administrative sanctions in the assessment of duties and evaded VAT in cases where the European Public Prosecutor’s Office has opened criminal proceedings (ne bis in idem)‘.
This issue is of both criminal and administrative relevance:
- from the criminal point of view, it may be the case that in the course of the criminal investigation, the suspect is willing to pay the duty due and to plea bargain the penalty on the condition that he is not also subjected to the additional and burdensome customs penalty. Therefore, the applicability of only the criminal sanction would entail the undoubted procedural advantage of being able to accept the plea bargaining request, the rationale of which is precisely to streamline the course of the trial, allowing it to be closed earlier;
- as regards the administrative aspect, the Offices of the Customs and Monopolies Agency need to know whether or not to proceed with the contestation of administrative sanctions in the event that a criminal sanction has already been applied in order to avoid the lapse of the time limit provided for by Article 20 of Legislative Decree No. 472/1997.
In conclusion, it is considered that, given the wide scope of the ne bis in idem principle and the consequences that its correct application may have in the protection of fundamental human rights to a fair trial and a fair penalty, it would be advisable for the conflict between the Union’s ne bis in idem principle and the internal criminal-administrative penalty system to be resolved by a specific intervention of the legislature and not by way of interpretation by the case-law, so as to ensure the full implementation of the principle of legal certainty, thus reducing the margin of discretion of the national court. The most consistent solution is to return to the exclusive application of the criminal sanction when the offence committed constitutes a criminal offence without the possibility of overlapping with administrative sanctions.