The application of the double jeopardy or ne bis in idem principle in the context of administrative sanctions is sometimes controversial. In four recent judgments, the Court of Justice of the European Union has shed further light on the application of this principle as set out in Article 50 of the Charter of Fundamental Rights of the European Union. The four judgments arose in the context of securities market manipulation, insider dealing and non-payment of VAT and are likely to be of particular interest to those working in the financial services industry.
Double Jeopardy under EU Law
Article 50 sets out the ne bis in idem principle as follows:
“no one shall be liable to be tried or punished again in criminal proceedings for an offence for which he or she has already been finally acquitted or convicted within the Union in accordance with the law”.
In essence, the ne bis in idem principle prohibits a duplication of proceedings and of penalties which are criminal in nature in respect of the same acts and against the same person. However, it does not preclude a combination of criminal penalties and other types of penalties which are not criminal in nature (see, for example, Case C-617/10 Ǻklagaren). The ne bis in idem principle is essentially the equivalent of the double jeopardy principle in common law jurisdictions, including Ireland.
According to the CJEU’s case-law, three criteria are relevant when assessing whether proceedings and penalties are criminal in nature:
- the legal classification of the offence under national law;
- the intrinsic nature of the offence; and
- the degree of severity of the penalty.
An offence will be regarded the same as another offence where there is identity of the material facts, understood as the existence of a set of concrete circumstances which are inextricably linked together and which resulted in the final acquittal or conviction of the person concerned.
In certain cases it is possible to justify a limitation to the ne bis in idem principle guaranteed by Article 50 on the basis of Article 52(1) of the Charter (see Case C-129/14 Spasic). In accordance with Article 52(1), such limitations must be provided for by law and may be made only if they are necessary and genuinely meet objectives of general interest recognised by the EU or the need to protect the rights and freedoms of others.
Pursuant to Article 52(2) of the Charter, Article 50 must be read in the light of Article 4 of Protocol No 7 to the European Convention on Human Rights.
The Four Judgments
As mentioned, the CJEU’s most recent judgments were handed down in four cases, each delivered on 20 March 2018.
Case C-537/16 Garlsson Real Estate SA v Commissione Nazionale per le Società e la Borsa (Consob) (here) concerned the imposition of criminal and administrative penalties on Mr Ricucci for market manipulation. Mr Ricucci appealed the administrative penalty, arguing that he had already been convicted and sentenced in respect of the same acts in criminal proceedings.
In Case C-524/15 Menci (here) the Italian tax authorities imposed an administrative penalty on Mr Menci for having failed to pay VAT for the year 2011. Criminal proceedings were then brought against Mr Menci in Italy with respect to the same acts.
Joined Cases C-596/16 and C-597/16, Di Puma and Zecca (here) concerned administrative fines imposed on Mr Di Puma and Mr Zecca in respect of several cases of insider dealing. In appealing those fines, Mr Di Puma and Mr Zecca argued that they had already been subject to criminal proceedings in respect of the same acts giving rise to those fines, and that the courts had acquitted them on the basis that the acts constituting the offence had not been established. Each of the courts referred a number of questions to the CJEU including regarding the scope of Article 50.
The Scope of the Double Jeopardy Principle
In its judgments, the CJEU gives guidance on the application of the three criteria relevant to assessing whether proceedings and penalties are criminal in nature, when proceedings and penalties relate to the “same offence”, the effect of an acquittal on subsequent proceedings as well as on the limitations of Article 50.
The Three Criteria
The legal classification of the offence: the application of Article 50 is not limited to proceedings and penalties which are legally classified as criminal and it extends to those which should be considered to have a criminal nature on the basis of the two other criteria. Consequently, the fact that an offence is classified as administrative under national law will not preclude the relevant offence from being considered a criminal offence on the basis of the other two criteria.
The intrinsic nature of the offence: when assessing the nature of the offence, it is necessary to ascertain whether the purpose of the penalty is punitive. This criterion will be fulfilled where a penalty has a purely punitive purpose. It will also be fulfilled where a penalty is intended both to punish and to deter unlawful conduct. In contrast, a measure which merely repairs the damage caused by an offence is not criminal in nature.
The degree of severity of the penalty: when considering this criterion, the court focuses on the severity of the relevant fine for the purpose of determining whether the penalty is only intended to repair the harm caused by the offence, or also pursues a punitive purpose.
Article 50 prohibits the imposition of several criminal penalties at the conclusion of different proceedings with respect to identical facts. According to the CJEU in di Puma, the fact that the imposition of criminal penalties depends on the existence of a subjective element (for example, criminal intent) is not of itself capable of calling into question the identity of the material facts at issue.
The effect of an acquittal
As mentioned above, in di Puma, the criminal proceedings against the defendants had resulted in an acquittal on the basis that there were no factors constituting an offence of insider dealing. The CJEU held that in light of that acquittal, the administrative proceeds seemed devoid of any basis. Consequently, Article 50 precluded the bringing of proceedings for an administrative fine of a criminal nature in respect of the same facts. This was without prejudice to the possibility of reopening, where appropriate, criminal proceedings where there is evidence of new or uncovered facts, or if there has been a fundamental defect in the previous proceedings, which would affect the outcome of the criminal judgment.
Justification for the limitation of the right guaranteed in Article 50
The CJEU considered limitations on the rights guaranteed in Article 50 in both Garlsson and Menci. According to the CJEU in those cases:
- national legislation which allows duplication of proceedings and penalties must, first of all, provide for clear and precise rules allowing individuals to predict which acts or omissions are liable to be subject to such a duplication of proceedings and penalties;
- a duplication of criminal proceedings and penalties may be justified where, for the purpose of combatting infringements of important objectives of EU law, those proceedings and penalties pursue complementary aims relating, as the case may be, to different aspects of the same unlawful conduct at issue,
- regarding market manipulation and VAT offences, it is legitimate for a member state to seek first to deter and punish any violation of the relevant rules, where appropriate, on a flat-rate basis and secondly, to deter and punish serious violations of those rules, which are particularly damaging for society and which justify the adoption of more severe criminal penalties;
- any disadvantages resulting from such a duplication for the persons concerned must be limited to what is strictly necessary to achieve the objectives mentioned in the last bullet point. Where there is a choice between several appropriate measures, recourse must be had to the least onerous and the disadvantages caused must not be disproportionate to the aims pursued; and
- competent authorities must be obliged, in the event of the imposition of a second penalty, to ensure that the severity of all of the penalties imposed does not exceed the seriousness of the offence identified.
It is clear from the CJEU’s case law that while administrative sanctions may fall within the ne bis in idem principle, there is no absolute prohibition on being subject to both administrative and criminal sanctions for the same offence.
This appears consistent with the approach taken under regulation 47 of the European Union (Market Abuse) Regulations 2016 (“2016 Regulations”) which prohibit penalising a person twice for the same contravention of those regulations, including for example, market manipulation and insider dealer.
Specifically, as a result of regulation 47, a person that has been subject to a penalty set out in regulation 41(j),(k) or (l) of the 2016 Regulations for acts that constitute a prescribed contravention is not liable to criminal prosecution or sanction for those acts under law, where those acts also constitute an offence. Similarly, a person that has been found guilty or not guilty of a criminal offence under the 2016 Regulations or under section 1368 of the Companies Act 2014, cannot be the subject of sanctions in respect of a prescribed contravention for the same acts that gave rise to the offence.
However, the 2016 Regulations do not prohibit the imposition of double sanctions in other instances. For example, it appears possible to subject a person to administrative sanctions such as a disgorgement of profits or a direction to pay the relevant investigation costs as well as to a criminal sanction. This also appears consistent with the CJEU’s case-law. Moreover, for financial service providers and other corporates, one of the most serious impacts of any type of sanction procedure, whether administrative or criminal, may be the associated adverse publicity. Unfortunately, there is no limit to how often that impact may arise.