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Sweden / Supreme Court / B5191-13

F.L. v Public Prosecutor’s Office

Policy area:
Deciding Body type:
National Court/Tribunal
Deciding Body:
Sweden / Supreme Court
Decision date:

Key facts of the case:

The public prosecutor brought charges against F. L. for serious tax crime and serious accounting fraud at the Gothenburg District Court. During the fiscal years 2004-2007 F.L. was engaged in consultancy work via his own firm. The business consisted of F. L.’s own consultancy work for Stena Line through the mediation of Alistair Millar Design Engineering Ltd (AM Design), based in the UK. F.L. invoiced AM Design for their services whereupon AM Design paid F.L. in accordance with the invoice, partly to an account in Sweden, and partly to an account at Lloyds TSB Bank, Jersey. For the years in question F.L. only declared the part of the income payed to his Swedish account, meaning that he failed to report income of a total of 2,268,191 SEK. By omitting significant income from his taxation the fiscal years 2005-2008, F.L. intentionally provided false information which increased the risk that he would be able to avoid tax of a total of 1,319,824 SEK. Furthermore, as the sole owner of the firm, F.L. had the obligation to keep accounts of the accounting obligation in accordance with the Book-keeping Act (1999:1078). F.L. has intentionally or negligently breached this obligation for the fiscal years 2004-2007 by completely failing to keep records of business transactions of a total of 2,268,191 SEK, which consisted of all deposits from AM Design into F.L.'s account in Jersey. This has led to a situation where a correct assessment of the progress of his firm has not been possible on the basis of its accounting records. The prosecutor demanded that F.L. should be charged with both serious tax crime and serious accounting fraud, because of the the amounts involved and the nature of the procedure. The later has been cunning and have put up a system for the fraud through the use of a foreign account. Furthermore, F. L. should be banned from further business activities. F.L. argued that the prosecutor’s claim regarding punishment for serious tax crime should be dismissed on the grounds of prohibition of dual punishment. F.L. claimed that since he had been imposed with tax penalties he could not be sentenced in accordance to the penal code for the same deed. The District Court of Gothenburg sentenced F.L. to one year in prison for the tax crime and the accounting fraud. He was also banned from any business activities for a period of 3 years. The District Court based their argument on the Supreme Court’s ruling in the cases NJA 2010 p. 168 I and II, where it reached the conclusion that the Swedish system with dual sanctions, i.e. tax penalties and criminal sanction, and two proceedings for incorrect information in the taxation procedure (skatteförfarandet), is in harmony with the prohibition against dual punishment and prosecution in accordance with Article 4 in the Seventh Additional Protocol of the ECHR. The also agreed with the prosecutor’s assessment of the crimes as being serious in nature. F.L. appealed the sentence in the Court of Appeal for West Sweden (Hovrätten för Västra Sverige). He demanded that the Court of Appeal should dismiss all charges or secondly dismiss the charges on their merits or lower the sentence. The public prosecutor agreed with the claim for dismissal of the charge for serious tax crime, but demanded that F.L. should be sentenced for serious accounting fraud and that the choice of sanction should be prison. The Court of Appeal shared the District Court's assessment that F.L.'s actions have had the aim to evade tax by the amount stated by the prosecutor. Instead the Court of Appeal focused on the question of prohibition against dual punishment and prosecution, the ne bis in idem principle in Article 4 of the Seventh Protocol to the ECHR and Article 50 of the EU Charter of Fundamental Rights. The question is if the decision to impose tax penalties prevents an examination of the prosecutor's action for tax crime and accounting fraud. Sweden is obligated to comply with both the ECHR and the Charter of Fundamental Rights. The Court of Appeal pointed out that case law of the Supreme Court underlines the importance attached to Swedish courts giving full effect to the rights of ECHR, and that the courts, if necessary, do not apply national provisions contrary to the Convention. This is an obligation that applies even in cases where the provision’s legislative history and case law is contrary to the interpretation of the convention reflected in the rulings of the European Court of Human Rights. The Court of Appeal argued that the same requirement must also apply in relation to the Charter of Fundamental Rights. Taking this as a point of departure, the Court of Appeal used the case Zolotukhin from the European Court of Human Rights to examine the case. The Zolotukhin case clarifies the principle of Ne bis in idem in detail and clarifies the two parts of the right in question – “the same action” (idem) and “twice” (bis). After the examination, the Court of Appeal argued that F.L.’s accounting fraud and tax crime must be seen as “the same action” and the imposition of the tax penalties as a punishment leading the Court to dismiss the charges against F.L. since he had already been punished for the action in question. The Prosecutor General appealed to the Supreme Court and demanded that the ruling of the Court of Appeal should be set aside when it came to the charges for accounting fraud and that these parts of the case should be remanded to the Court of Appeal for a new trial. The Supreme Court agreed with the District Court and the Court of Appeal when it came to the actions and intent of F.L. Since F.L. had already been imposed with the tax penalties at the time of the prosecution of the case in question, the Supreme Court focused on whether these tax penalties referred to the same crime (deed) as the serious accounting fraud or not. The Supreme Court interpreted the accounting fraud and the tax crime to be two separate deeds on the following grounds. The serious accounting fraud in focus refers to F.L.’s failure to record business transactions deposited in his account in Jersey approximately once a month during the years 2004-2007. In accordance with Chapter 5, paragraph 2 of the Book-keeping Act (1999:1078) and the Swedish Accounting Standards Board’s (Bokföringsnämnden).