Speed read: Anita Clifford analyses two Opinions delivered by the Advocate General of the European Court of Justice on 12 September 2017 on double jeopardy arising in the context of financial wrongdoing. The Opinions call for a rejection of a recent decision of the European Court of Human Rights which considered that the protection would not be infringed where two proceedings were integrated and sufficiently connected in time and substance. The analysis follows an earlier examination of the difficulties that can arise when there is a concurrent or ‘dual track’ response to financial wrongdoing. Practitioners working in the field of financial services regulation need to follow these developments in cases where, as in the UK, parallel criminal and civil jurisdiction can be invoked.
Recent decisions of the European courts illustrate that they are wrestling with the double jeopardy (ne bis in idem) principle particularly where financial wrongdoing attracts an administrative and criminal response. Adding to the complexity are two Opinions recently delivered by Manuel Campos Sanchez-Bordona, Advocate General at the European Court of Justice (ECJ), on the extent to which the principle permits Member States from jointly imposing administrative and criminal penalties. Delivered on 12 September 2017, the Opinion in Luca Menci C-524/15 concerns penalties for market abuse whereas the Opinion in Galrsson Real Estate SA, in liquidation, Stefano Ricucci, Magiste International SA v Commissione Nazionale per la Societa e la Borsa (Consob) C-537/16 relates to penalties for non-payment of VAT. Although advisory in nature and the underlying issues will be determined by the ECJ in due course, the Opinions detail the double jeopardy protection in the European Charter and its interaction with dual track responses to financial wrongdoing. Notably, the Opinions also foreshadow a potential divergence in the approach to double jeopardy by the ECJ, which is concerned with the protection under the Charter of Fundamental Rights of the European Union, and the European Court of Human Rights (ECtHR) which is focused on the rights afforded by the European Convention and its associated Protocols. As distilled, the Advocate General has called for the ECJ to be robust in its protection and suggested that recent case law of the ECtHR places unreasonable limits on the double jeopardy principle.
The Opinion in Menci
In 2013, Mr Menci, following an investigation by the Italian tax authorities, was issued with a revised tax assessment and penalty notice relating to his non-payment of VAT. In 2014, criminal proceedings were commenced against him for the same conduct, resulting in the Italian court referring the matter to the ECJ for a preliminary ruling on whether an issue of double jeopardy arose.
In considering this matter, the Advocate General relied heavily on the 2013 ECJ decision of Akerberg Fransson C-617/10 which resolved that the double jeopardy principle, enshrined in the EU Charter, does not preclude a Member State from imposing successively for the same acts of VAT non-compliance a tax penalty and criminal penalty providing that the first penalty is not in substance of a criminal nature. The Advocate General highlighted that in assessing whether this was the case, the ECJ looked to the criteria developed by the ECtHR in the seminal case of Engel & Ors v Netherlands  ECHR 3, requiring an assessment of the formal classification and legal nature of the penalty, as well as its severity. However, the Advocate General found it difficult to accept more recent ECtHR case law on double jeopardy.
Effect of A and B v Norway
In the 2016 case of A and B v Norway  ECHR 987, the Grand Chamber of the ECtHR considered that there was no double jeopardy in breach of Article 4 of Protocol No. 7 where administrative and criminal proceedings relating to the same underlying conduct – part of a Norwegian integrated approach to tax wrongdoing – were sufficiently connected in time and substance. After a tax investigation, A and B were found to have not declared transactions to the Norwegian authorities. They were both convicted of tax fraud and sentenced to terms of imprisonment. Additionally, they were subjected to administrative sanctions which, in the case of A, resulted in a 30% tax penalty. However, although the Grand Chamber agreed that the tax penalty was criminal in nature, it did not consider that the twin proceedings amounted to double jeopardy. Critical to this finding was the perceived complementarity of the proceedings. Norway had opted to pursue an integrated process in relation to tax wrongdoing, requiring one set of proceedings to consider the other at all times. The proceedings also pursued different aims – the administrative proceedings aimed to rectify the social harm of non-payment of tax and encourage compliance with the tax system whereas the criminal proceedings served to punish, deter and hold the individual culpable. No prejudice was suffered and, according to the Grand Chamber, neither of the applicants could be said to have tried or punished again for an offence for which they had been finally acquitted or convicted.
Consequently, a temporal and substantive connection between the proceedings was for the first time considered relevant to whether dual proceedings infringed the double jeopardy protection. According to the ECtHR in A and B, such a connection could be demonstrated by the complementary nature of the proceedings, their duality being a foreseeable consequence from the outset, interaction between various authorities so that the facts underlying one set of proceedings were used in the other set and an ability to take into account the first penalty when the second penalty is imposed in order to avoid unnecessary burden. It follows that since A and B, the ECtHR has arguably left the door open to a twin track approach to financial wrongdoing including, subject to certain conditions, where an administrative penalty is criminal in nature.
An autonomous approach?
The Opinion in Menci makes abundantly clear that the approach taken by the ECtHR in A and B has not found favour with the Advocate General. Whilst the Advocate General is careful to acknowledge the mutual respect between the ECJ and ECtHR, A and B is referred to as a deliberate decision to “limit the content of the right guaranteed to individuals by the principle ne bis in idem where penalties of the same nature (those which are criminal in substance) are imposed twice in respect of the same acts”. The Advocate General further takes aim at any requirement for “disproportionately complex assessments”, a reference to assessing the sufficiency of time and connection when deciding whether double jeopardy arises. The Advocate General further cautions that, “If there are dual proceedings, even if they are combined proceedings, this will normally result in infringement of the principle ne bis in idem”. An autonomous ECJ position on double jeopardy is called for, in line with Akerberg Fransson C-617/10. The Advocate General concludes by proposing that the ECJ respond to the Italian referring court, reiterating, inter alia, that the issue of double jeopardy fundamentally requires a consideration of whether the administrative penalty imposed in Menci, in substance, a criminal penalty in accordance with the criteria in Engel. If it is, the double jeopardy protection has been breached.
The Opinion in Garlsson Real Estate
Separately, in his Opinion in Garlsson Real Estate, the Advocate General makes several observations about dual track penalties for market abuse.
In Garlsson Real Estate, the Italian regulator imposed an administrative penalty on a company director and two of his companies for market manipulation in 2007. In parallel criminal proceedings, the director was subsequently convicted following a plea bargain of the same acts in 2008. Intimating that it considered the dual track approach to market manipulation difficult to reconcile with Article 50 of the EU Charter and Article 4 of Protocol No. 7, the Italian Supreme Court of Cassation referred the matter to the ECJ for consideration.
In considering this matter, the Advocate General referred substantially to his Opinion in Menci and reiterated the importance of the Engel criteria, rather than the decision of A and B, to an assessment of double jeopardy. He also observed, after charting the history of the European directives relating to market abuse, the scope for both administrative and criminal sanctions to apply to market abuse (see paragraph ). However, the Advocate General expressed the view that if a dual track response is to be maintained it is incumbent on national authorities “to establish appropriate procedural mechanisms to prevent the duplication of proceedings and ensure that a person is prosecuted and punished only once in respect of the same acts”.
In concluding that the administrative penalty imposed by the Italian regulator was in fact of a criminal nature, the Advocate General applied the Engel criteria and found three factors particularly influential, namely the Italian regulator’s the power to impose sanctions intended both as a deterrent and punishment; its ability to impose high fines which set a criminal tone; and the absence of any clear procedural mechanisms to prevent double prosecution and double punishment. The Advocate General roundly rejected an argument, grounded on the ECtHR’s findings in A and B, that even if the administrative penalties were criminal in nature the two proceedings were sufficiently closely connected in time and substance and therefore not in breach of the double jeopardy protection. He was also not persuaded that to effectively combat market abuse, double criminal and administrative punishment is required, noting “Whatever the mechanism chosen, the system of penalties must be effective and, at all events, must respect the right of ne bis in idem…”.
Broadly, the views so robustly expressed by the Advocate General confirm that the issue of double jeopardy when it comes to dual track responses is controversial. It has captured the attention of both the ECtHR and the ECJ and is in a state of development.
Whilst careful not to criticise the ECtHR, the Opinions demonstrate clearly that any softening of the double jeopardy protection to better accommodate a dual response to financial wrongdoing is not supported by one of the ECJ’s eminent advisers. Although the Opinions are non-binding and the issues will be determined by the ECJ in due course, they are influential. If adopted, a divergence in the approach to double jeopardy by the ECJ and ECtHR will result. For practitioners across the EU navigating clients through two sets of proceedings, this is something to note and factor into case strategy.
Further, if indeed the Advocate General’s call for the ECJ to take an autonomous stance on double jeopardy is met by the ECJ, the question arises as to what this autonomous approach will look like. As distilled, the Advocate General has called in his two Opinions for a return to ‘first principles’, namely the Engel criteria, when assessing a double jeopardy concern and is steering the ECJ towards being more assertive in its protection. It follows that where financial wrongdoing attracts two types of response, factors relevant to an assessment of double jeopardy will include whether the administrative proceeding or penalty, wholly or partly, is directed at deterrence or punishment. This is something which can be assessed by the imposition of a high fine even though it may be called an ‘administrative’ penalty or, suggestive of scope for a punitive and deterrent approach, the regulator’s ability to take a broad range of steps depending on the conduct to be addressed.
As for other issues to note, a clear view has been expressed by the Advocate General that enforcement authorities should establish clear mechanisms and procedures to prevent duplication of action. At a minimum, the Advocate General has suggested that ‘combined proceedings’ merits close scrutiny. Such comments could lead to enforcement authorities’ reviewing their policies and procedures to see whether dual responses are sufficiently delineated.
Watch this space
Lastly, how the ECJ propose to deal with dual track responses to financial wrongdoing and the potential difference in the approach taken by the ECJ and ECtHR is flagged for attention. The UK is not a signatory to Article 4 of Protocol No. 7, with which the ECtHR is concerned, whereas it is to the EU Charter. Matters that engage EU law, such as the directives on market abuse, could conceivably be referred to the ECJ. The ECJ’s consideration of dual track proceedings and its development of a more assertive position on double jeopardy, independent of recent ECtHR case law, therefore requires monitoring. Practitioners working in the field of financial services regulation need to follow these developments in cases where, as in the UK, parallel criminal and civil jurisdiction can be invoked.