Key facts of the case:
THE CIRCUMSTANCES OF THE CASE
- The first applicant, Mr A, was born in 1960 and lives in Norway. The second applicant, Mr B, was born in 1965 and lives in Florida, United States of America.
- The applicants and Mr E.K. owned a Gibraltar-registered company Estora Investment Ltd. (“Estora”). Mr T.F. and Mr G.A. owned the Samoa/Luxembourg-registered company Strategic Investment AS (“Strategic”). In June 2001 Estora acquired 24% of the shares in Wnet AS. Strategic acquired 46% of the shares in Wnet AS. In August 2001 all the shares in Wnet AS were sold to Software Innovation AS, at a substantially higher price. The first applicant’s share of the sale price was 3,259,341 Norwegian kroner (NOK) (approximately 360,000 euros (EUR)). He transferred this amount to the Gibraltar-registered company Banista Holding Ltd., in which he was the sole shareholder.
The second applicant’s share of the sale price was NOK 4,651,881 (approximately EUR 500,000). He transferred this amount to Fardan Investment Ltd., in which he was the sole shareholder.
Mr E.K., Mr G.A. and Mr T.F. made gains on similar transactions, while Mr B.L., Mr K.B. and Mr G.N. were involved in other undeclared taxable transactions with Software Innovation AS.
The revenue from these transactions, amounting to approximately NOK 114.5 million (approximately EUR 12.6 million), was not declared to the Norwegian tax authorities, resulting in unpaid taxes totalling some NOK 32.5 million (approximately EUR 3.6 million).
- In 2005 the tax authorities started a tax audit on Software Innovation AS and looked into the owners behind Wnet AS. On 25 October 2007 they filed a criminal complaint against T.F. with Økokrim (the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime) with regard to matters that later led to the indictment of the first applicant, along with the other persons mentioned above and the second applicant, for aggravated tax fraud.
The persons referred to in paragraph 12 above were subsequently prosecuted, convicted and sentenced to terms of imprisonment for tax fraud in criminal proceedings. It may also be noted that:
- the prison term to which Mr E.K. was sentenced at first instance was upheld at second instance, even though the second-instance court found it somewhat mild; in the meantime he had had a 30% tax penalty imposed on him;
- the length of Mr B.L.’s term of imprisonment was fixed in the light of his having previously had a 30% tax penalty imposed on him;
- Mr G.A. was neither sentenced to a fine nor had a tax penalty imposed on him;
- Mr T.F. was in addition sentenced to a fine corresponding to the level of a 30% tax penalty;
- Mr K.B. and Mr G.N. were each sentenced to a fine in accordance with the approach set out in the Supreme Court’s ruling in Rt. 2011 p. 1509, with reference to Rt. 2005 p. 129, summarised at paragraph 50 below.
Results (sanctions) and key consequences of the case:
FOR THESE REASONS, THE COURT
- Declares, unanimously, the applications admissible;
- Holds, by sixteen votes to one, that there has been no violation of Article 4 of Protocol No. 7 to the Convention in respect of either of the applicants.
- In his opinion delivered on 12 June 2012 in the above case before the Court of Justice of the European Union, the Advocate General Cruz Villalón stated as follows:
“2. Analysis of the second, third and fourth questions
70. The questions referred by the Haparanda tingsrätt [District Court] are particularly complex and are just as difficult as the issue which I dealt with above. On the one hand, the imposition of both administrative and criminal penalties in respect of the same offence is a widespread practice in the Member States, especially in fields such as taxation, environmental policies and public safety. However, the way in which penalties are accumulated varies enormously between legal systems and displays special features which are specific to each Member State. In most cases, those special features are adopted with the aim of moderating the effects of the imposition of two punishments by the public authorities. On the other hand, as we shall see below, the European Court of Human Rights recently gave a ruling on this subject and confirmed that such practices, contrary to how things might initially appear, infringe the fundamental right of ne bis in idem laid down in Article 4 of Protocol No 7 to the ECHR. However, the fact is that not all the Member States have ratified that provision, while others have adopted reservations or interpretative declarations in relation to it. The effect of that situation is that the requirement to interpret the Charter in the light of the ECHR and the case-law of the European Court of Human Rights (Article 52(3) of the Charter) becomes, so to speak, asymmetrical, leading to significant problems when it is applied to this case.
a) Article 4 of Protocol No 7 to the ECHR and the relevant case-law of the European Court of Human Rights
i) Signature and ratification of Article 4 of Protocol No 7 to the ECHR
71. The ne bis in idem principle was not an explicit part of the ECHR at the outset. It is common knowledge that the principle was incorporated into the ECHR by means of Protocol No 7, which was opened for signature on 22 November 1984 and entered into force on 1 November 1988. Among other rights, Article 4 contains the guarantee of the ne bis in idem principle, with the aim, according to the explanations on the protocol drawn up by the Council of Europe, of giving expression to the principle pursuant to which no one may be tried in criminal proceedings for an offence in respect of which he has already been finally convicted or acquitted.
72. Unlike the other rights laid down in the ECHR, the right in Article 4 of Protocol No 7 to the ECHR has not been unanimously accepted by the States signatories to the convention, including a number of Member States of the European Union. As at the date of delivery of this Opinion, Protocol No 7 has still not been ratified by Germany, Belgium, the Netherlands and the United Kingdom. Among the Member States which have ratified the protocol, France lodged a reservation to Article 4, restricting its application solely to criminal offences. ... In addition, at the time of signature, Germany, Austria, Italy and Portugal lodged a number of declarations leading to the same situation: restriction of the scope of Article 4 of Protocol No 7 so that the protection under that provision applies only to double punishment in respect of criminal offences, within the meaning laid down in national law. ...
73. The foregoing demonstrates clearly and expressively the considerable lack of agreement between the Member States of the European Union regarding the problems resulting from the imposition of both administrative and criminal penalties in respect of the same offence. The problematic nature of the situation is reinforced in the light of the negotiations on the future accession of the European Union to the ECHR, in which the Member States and the Union have decided to exclude, for the time being, the protocols to the ECHR, including Protocol No 7. ...
74. That lack of agreement can be traced back to the importance of measures imposing administrative penalties in a large number of Member States, in addition to the special significance also afforded to criminal prosecution and penalties in those Member States. On the one hand, States do not wish to abandon the characteristic effectiveness of administrative penalties, particularly in sectors where the public authorities seek to ensure rigorous compliance with the law, such as fiscal law or public safety law. On the other hand, the exceptional nature of criminal prosecution and the guarantees which protect the accused during proceedings incline States to retain an element of decision-making power as regards actions which warrant a criminal penalty. That twofold interest in maintaining a dual – administrative and criminal – power to punish explains why, at the moment, a significant number of Member States refuse, by one means or another, to be bound by the case-law of the European Court of Human Rights, which, as I shall now go on to examine, has developed in a direction which practically excludes that duality.”
- On 26 February 2013, the Court of Justice of the European Union (Grand Chamber) held, inter alia, as follows:
“Consideration of the questions referred
Questions 2, 3 and 4
32. By these questions, to which it is appropriate to give a joint reply, the Haparanda tingsrätt asks the Court, in essence, whether the ne bis in idem principle laid down in Article 50 of the Charter should be interpreted as precluding criminal proceedings for tax evasion from being brought against a defendant where a tax penalty has already been imposed upon him for the same acts of providing false information.
33. Application of the ne bis in idem principle laid down in Article 50 of the Charter to a prosecution for tax evasion such as that which is the subject of the main proceedings presupposes that the measures which have already been adopted against the defendant by means of a decision that has become final are of a criminal nature.
34. In this connection, it is to be noted first of all that Article 50 of the Charter does not preclude a Member State from imposing, for the same acts of non‑compliance with declaration obligations in the field of VAT, a combination of tax penalties and criminal penalties. In order to ensure that all VAT revenue is collected and, in so doing, that the financial interests of the European Union are protected, the Member States have freedom to choose the applicable penalties (see, to this effect, Case 68⁄88 Commission v Greece  ECR 2965, paragraph 24; Case C‑213⁄99 de Andrade  ECR I‑11083, paragraph 19; and Case C‑91⁄02 Hannl-Hofstetter  ECR I‑12077, paragraph 17). These penalties may therefore take the form of administrative penalties, criminal penalties or a combination of the two. It is only if the tax penalty is criminal in nature for the purposes of Article 50 of the Charter and has become final that that provision precludes criminal proceedings in respect of the same acts from being brought against the same person.
35. Next, three criteria are relevant for the purpose of assessing whether tax penalties are criminal in nature. The first criterion is the legal classification of the offence under national law, the second is the very nature of the offence, and the third is the nature and degree of severity of the penalty that the person concerned is liable to incur (Case C‑489⁄10 Bonda  ECR, paragraph 37). 36. It is for the referring court to determine, in the light of those criteria, whether the combining of tax penalties and criminal penalties that is provided for by national law should be examined in relation to the national standards as referred to in paragraph 29 of the present judgment, which could lead it, as the case may be, to regard their combination as contrary to those standards, as long as the remaining penalties are effective, proportionate and dissuasive (see, to this effect, inter alia Commission v. Greece, paragraph 24; Case C‑326⁄88 Hansen  ECR I‑2911, paragraph 17; Case C‑167⁄01 Inspire Art  ECR I‑10155, paragraph 62; Case C‑230⁄01 Penycoed  ECR I‑937, paragraph
36; and Joined Cases C‑387⁄02, C‑391⁄02 and C‑403⁄02 Berlusconi and Others  ECR I‑3565 paragraph 65).
37. It follows from the foregoing considerations that the answer to the second, third and fourth questions is that the ne bis in idem principle laid down in Article 50 of the Charter 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.”
DISSENTING OPINION OF JUDGE PINTO DE ALBUQUERQUE
- Within the European Union, the exhaustion-of-procedure principle (Erledigungsprinzip) was affirmed by Article 1 of the 1987 Convention between the Member States of the European Communities on Double Jeopardy (“not be prosecuted”), Article 54 of the 1990 Convention implementing the Schengen Agreement (CISA – “not be prosecuted”), Article 7 of the 1995 Convention on the protection of the European Communities’ financial interests (“not be prosecuted”), Article 10 of the 1997 Convention on the Fight against Corruption involving Officials of the European Communities or Officials of the Member States of the European Union (“not be prosecuted”), Article 2 § 1 of the European Central Bank Regulation no. 2157/1999 on the powers of the European Central Bank to impose sanctions (“No more than one infringement procedure shall be initiated”), Article 50 of the 2000 Charter of Fundamental Rights of the European Union (“the Charter” – “tried or punished”) and the 2003 Initiative of the Hellenic Republic with a view to adopting the Council Framework Decision concerning the application of the “ne bis in idem” principle (“cannot be prosecuted for the same acts”).
- The Charter radically changed the legal obligations of those member States of the European Union to which it is applicable. Since the right not to be tried or punished twice in criminal proceedings for the same offence is set out in Article 54 of the CISA and in Article 50 of the Charter, Article 54 must be interpreted in the light of Article 50. In the light of Article 52 § 3 of the Charter, when implementing Charter rights and freedoms which correspond to rights and freedoms guaranteed by the European Convention on Human Rights (“the Convention”) and the Protocols thereto, member States of the European Union are bound by the meaning and scope of those rights and freedoms laid down by the Convention and Protocols, as interpreted by the Court, even when they have not ratified these Protocols. This is also the case for Article 50 of the Charter and consequently Article 54 of the CISA, which evidently must be interpreted and applied in the light of the Court’s case-law on Article 4 of Protocol No. 7, even in the case of those European Union member States which have not ratified this Protocol.
- In the judicial arena, the Court of Justice of the European Union held, in Walt Wilhelm and others v. Bundeskartellamt, that concurrent sanctions could be imposed in two parallel sets of proceedings pursuing different ends. In competition law, the possibility that one set of facts could be submitted to two parallel procedures, one at Community level and the other at national level, followed from the special system of the sharing of jurisdiction between the Community and the Member States with regard to cartels. If, however, the possibility of two procedures being conducted separately were to lead to the imposition of consecutive sanctions, a general requirement of natural justice would demand that any previous punitive decision must be taken into account in determining any sanction which is to be imposed. Later on, the Court of Justice further developed its case-law within the ambit of the third pillar on bis (Gözütok and Brügge, Miraglia, Van Straaten, Turanský, M., Kussowski), on “idem” (Van Esbroeck, Van Straaten, Gasparini, Kretzinger, Kraaijenbrink and Gasparini) and on the enforcement clause (Klaus Bourquain, Kretzinger and Spasic). In the tax law domain, the landmark judgment was Hans Åkeberg Fransson, which reached the following conclusion: “It is only if the tax penalty is criminal in nature for the purposes of Article 50 of the Charter and has become final that that provision precludes criminal proceedings in respect of the same acts from being brought against the same person.” By refusing the Advocate General’s proposal based on the accounting principle, the Luxembourg Court decided, in a remarkable move towards convergence with the Strasbourg Court, that a combination of tax penalties with a criminal nature according to the Engel criteria and criminal penalties would constitute an infringement of Article 50 of the Charter.