Article 49 - Principles of legality and proportionality of criminal offences and penalties
Key facts of the case:
Request for a preliminary ruling from the Administrativen sad - Blagoevgrad. Reference for a preliminary ruling – Article 63 TFEU – Free movement of capital – Directive (EU) 2015/849 – Scope – National legislation requiring payments exceeding a certain amount to be made only by transfer or deposit into a payment account – Article 65 TFEU – Justification – Combating tax evasion and tax avoidance – Proportionality – Administrative penalties of a criminal nature – Article 49 of the Charter of Fundamental Rights of the European Union – Principles of legality and proportionality of criminal offences and penalties.
Outcome of the case:
On those grounds, the Court (First Chamber) hereby rules:
1) This request for a preliminary ruling concerns the interpretation of (i) Article 63 TFEU, (ii) Article 2(1) of Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (OJ 2015 L 141, p. 73), read in the light of recital 6 and in conjunction with Articles 4 and 5 of that directive, and (iii) Article 58(1) and Article 60(4) of that directive, read in the light of Article 47 and Article 49(3) of the Charter of Fundamental Rights of the European Union (‘the Charter’).
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36) In the third place, if the second question is answered in the affirmative, the referring court considers that it would be necessary to determine, having regard to Article 58(1) and Article 60(4) of Directive 2015/849, read in the light of Article 49(3) of the Charter, the extent to which a national provision such as Article 5(1) of the ZOPB may provide, in respect of all financial transactions, for a financial penalty, payable by legal persons, in a fixed amount representing half the total amount of the cash payment. The further question arises, in the view of the referring court, of whether such a national provision infringes the principle of effective judicial review, enshrined in Article 47 of the Charter, given that it is apparent from Article 27(5) of the ZANN that, in the event that an action is brought against the penalty, the competent national court cannot reduce it below the minimum amount laid down by Article 5(1) of the ZOPB.
37)
In those circumstances, the Administrativen sad Blagoevgrad (Administrative Court, Blagoevgrad) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) Must Article 63 TFEU be interpreted as precluding national legislation such as that in question in the main proceedings, under which domestic payments amounting to [BGN 10000] or more are only to be made by transfer or deposit into a payment account and which restricts the cash payment of dividends from undistributed profits of BGN 10000 or more? If Article 63 TFEU does not preclude [such legislation], is such a restriction justified by the aims of [Directive 2015/849]?
(2) Must Article 2(1) of [Directive 2015/849], in consideration of recital 6 and Articles 4 and 5 thereof, be interpreted as not precluding a general national legislative provision such as that in question in the main proceedings, under which domestic payments of BGN 10000 or more are only to be made by transfer or deposit into a payment account and which has no interest in the person and in the reason for the cash payment and at the same time covers all cash payments among natural and legal persons?
[(a)] If that question is answered in the affirmative, does Article 2(1)(3)(e) of [Directive 2015/849], in consideration of recital 6 and Articles 4 and 5 thereof, allow the Member States to provide for additional general restrictions of domestic cash payments in a national legislative provision such as that in question in the main proceedings, under which domestic cash payments of BGN 10000 or more are only to be made by transfer or deposit into a payment account, if the reason for the cash payment is “undistributed profit” (dividends)?
[(b)] If that question is answered in the affirmative, does Article 2(1)(3)(e) of [Directive 2015/849], in consideration of recital 6 and Article 5 thereof, allow the Member States to provide for restrictions of cash payments in a national legislative provision such as that in question in the main proceedings, under which domestic payments of BGN 10000 or more are only to be made by transfer or deposit into a payment account, where the threshold value is below EUR 10000?
(3) [(a)] Must Article 58(1) and Article 60(4) of [Directive 2015/849], with regard to Article 49(3) of the [Charter], be interpreted as precluding a national legislative provision such as that in question in the main proceedings, which stipulates a fixed level of administrative penalties for infringements of the cash payment restrictions and does not allow any differentiating assessment taking account of the specific relevant circumstances?
[(b)] If the answer is that the provisions of Article 58(1) and Article 60(4) of [Directive 2015/849], with regard to Article 49(3) of the [Charter], allow a national legislative provision such as that in question in the main proceedings, which stipulates a fixed level of administrative penalties for infringements of the cash payment restrictions, must the provisions of Article 58 and Article 60(4) of [Directive 2015/849], in consideration of the principle of effectiveness and the right to an effective remedy under Article 47 of the [Charter], be interpreted as precluding a national legislative provision such as that in question in the main proceedings, which restricts judicial review, if that provision does not allow the court to determine an administrative penalty for infringements of the cash payment restrictions, in the event of an appeal, below the amount that has been set, taking account of the specific relevant circumstances?’
59) By its first and third questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 63 TFEU, read in conjunction with Article 49(3) of the Charter, must be interpreted as precluding legislation of a Member State which, first, prohibits natural and legal persons from making domestic payments in cash where the amount of the payment is equal to or exceeds a set threshold and requires, to that end, a transfer or deposit into a payment account, including as regards the distribution of dividends of a company, and second, provides for a system of penalties for infringing that prohibition in the context of which the amount of the fine that may be imposed is calculated as a fixed percentage of the total amount of the payment made in breach of that prohibition, without it being possible to adjust that fine depending on the particular circumstances of the case.
85) In that context, it should also be borne in mind that the fundamental rights guaranteed by the Charter are applicable in all situations governed by EU law and that they must, therefore, be complied with inter alia where national legislation falls within the scope of EU law (see, in particular, judgment of 21 May 2019, Commission v Hungary (Usufruct over agricultural land), C‑235/17, EU:C:2019:432, paragraph 63 and the case-law cited).
88) The use by a Member State of the exceptions provided for by EU law in order to justify an impediment to a fundamental freedom guaranteed by the Treaty must be regarded as ‘implementing Union law’ within the meaning of Article 51(1) of the Charter (judgment of 21 May 2019, Commission v Hungary (Usufruct over agricultural land), C‑235/17, EU:C:2019:432, paragraph 65 and the case-law cited).
89) In the present case, as is apparent from paragraphs 66 and 71 of this judgment, a prohibition such as that provided for by the national legislation at issue in the main proceedings constitutes a restriction on the free movement of capital which is capable of being justified by overriding reasons in the public interest. In those circumstances, the compatibility of that legislation with EU law must be examined in the light both of the exceptions thus provided for by the Court’s case-law and of the fundamental rights guaranteed by the Charter, one of which is the principle of proportionality of penalties set out in Article 49(3) of the Charter, to which the referring court’s third question refers (see, by analogy, judgment of 21 May 2019, Commission v Hungary (Usufruct over agricultural land), C‑235/17, EU:C:2019:432, paragraph 66 and the case-law cited).
90) Given that Article 49(3) of the Charter, which provides that the severity of penalties must not be disproportionate to the criminal offence, relates to penalties of a criminal nature, it is first necessary to determine whether the system of penalties at issue in the main proceedings is criminal in nature.
92) Although it is for the referring court to assess, in the light of those criteria, whether the penalties provided for by the national legislation at issue in the main proceedings are criminal in nature for the purposes of Article 49(3) of the Charter, the Court, when giving a preliminary ruling, may nevertheless provide clarification designed to give the national court guidance in its assessment (see, by analogy, judgment of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 27 and the case-law cited).
94) Next, that penalty is not limited to compensation for the harm caused by the infringement, but is punitive in nature, in that it seeks to suppress infringements of the prohibition. It thus appears that that penalty has a punitive purpose, which is the hallmark of a penalty of a criminal nature for the purposes of Article 49 of the Charter (see, by analogy, judgment of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 32).
95) Lastly, the severity of that penalty is liable to support the view that it is of a criminal nature for the purposes of Article 49 of the Charter, which is however for the referring court to determine (see, by analogy, judgment of 20 March 2018, Menci, C‑524/15, EU:C:2018:197, paragraph 33). In that regard, it is apparent from the order for reference that the administrative penalty provided for by the ZOPB takes the form, in accordance with Article 5 thereof, of a fine in an amount equivalent, where the infringing party is a natural person, to 25% of the total amount of the payment made, or 50% in the case of a repeat infringement, or of a financial penalty in an amount equivalent, where the infringing party is a legal person, to 50% of the total amount of the payment made, or 100% in the case of a repeat infringement.
96) Consequently, it appears that the system of penalties provided for by the national legislation at issue in the main proceedings is criminal in nature and can therefore be assessed in the light of the principle of proportionality enshrined in Article 49(3) of the Charter.
97) In that regard, it should be borne in mind that the severity of a penalty must correspond to the seriousness of the offence concerned, that requirement following both from Article 52(1) of the Charter and from the principle of proportionality of penalties in Article 49(3) of the Charter (see, to that effect, judgment of 4 October 2018, Link Logistik N&N, C‑384/17, EU:C:2018:810, paragraph 42 and the case-law cited).
111) In the light of all the foregoing considerations, the answer to the first and third questions is that Article 63 TFEU, read in conjunction with Article 49(3) of the Charter, must be interpreted as not precluding legislation of a Member State which, with a view to combating tax evasion and tax avoidance, first, prohibits natural and legal persons from making domestic payments in cash where the amount of the payment is equal to or exceeds a set threshold and requires, to that end, a transfer or deposit into a payment account, including as regards the distribution of dividends of a company, and second, provides for a system of penalties for infringing that prohibition in the context of which the amount of the fine that may be imposed is calculated as a fixed percentage of the total amount of the payment made in breach of that prohibition, without it being possible to adjust that fine depending on the particular circumstances of the case, provided that that legislation is appropriate for securing attainment of those objectives and does not go beyond what is necessary for attaining them.
