Case C‑42/17
Criminal proceedings
against
M.A.S. and M.B.
(Request for a preliminary ruling from the Corte costituzionale)
(Reference for a preliminary ruling — Article 325 TFEU — Judgment of 8 September 2015, Taricco and Others (C‑105/14, EU:C:2015:555) — Criminal proceedings for infringements relating to value added tax (VAT) — National legislation laying down limitation periods liable to prevent the prosecution of infringements — Activities affecting the financial interests of the EU — Obligation to disapply any provisions of national law liable to have an adverse effect on the fulfilment of the Member States’ obligations under EU law — Principle that offences and penalties must be defined by law)
Summary — Judgment of the Court (Grand Chamber), 5 December 2017
Own resources of the European Union—Protection of the European Union’s financial interests—Fight against fraud and other illegal activities—Obligation of the Member States to establish effective and deterrent penalties—Scope—Tax offences in the field of value added tax
(Art. 325(1) TFEU)
Own resources of the European Union—Protection of the European Union’s financial interests—Fight against fraud and other illegal activities—Obligation of the Member States to establish effective and deterrent penalties—Scope—Tax offences in the field of value added tax—Determination of limitation periods—Competence of the Member States—Limits
(Arts 4 (2) TFEU and 325 TFEU; European Parliament and Council Directive 2017/1371)
EU law—Principles—Principle that penalties must be defined by law—Scope
(Charter of Fundamental Rights of the European Union, Art. 49)
Own resources of the European Union—Protection of the European Union’s financial interests—Fight against fraud and other illegal activities—Obligation of the Member States to establish effective and deterrent penalties—Scope—Tax offences in the field of value added tax—National legislation preventing the application of effective and deterrent penalties—Not permissible—Obligation of the national court to disapply the national provisions in question—Condition—Compliance with the principle that offences and penalties must be defined by law
(Art. 325(1) and (2) TFEU; Charter of Fundamental Rights of the European Union, Art. 49)
It is for the Member States to ensure effective collection of the Union’s own resources (see, to that effect, judgment of 7 April 2016, Degano Trasporti, C‑546/14, EU:C:2016:206, paragraph 21). On that basis, they are obliged to collect sums corresponding to the own resources which, because of fraud, have been withheld from the EU budget. To ensure that all VAT revenue is collected, and thereby that the financial interests of the EU are protected, the Member States are free to choose the applicable penalties, which may take the form of administrative penalties, criminal penalties or a combination of the two (see, to that effect, judgment of 26 February 2013, Åkerberg Fransson, C‑617/10, EU:C:2013:105, paragraph 34, and the Taricco judgment, paragraph 39).
It should be observed, however, first, that criminal penalties may be essential to combat certain cases of serious VAT fraud in an effective and deterrent manner (see, to that effect, the Taricco judgment, paragraph 39). Thus the Member States, if they are not to disregard their obligations under Article 325 (1) and (2) TFEU, must ensure that, in cases of serious fraud affecting the EU’s financial interests in relation to VAT, criminal penalties that are effective and deterrent are adopted (see, to that effect, the Taricco judgment, paragraphs 42 and 43). Consequently, it must be considered that Member States are in breach of their obligations under Article 325 (1) and (2) TFEU if the criminal penalties adopted to punish serious VAT fraud do not enable the collection in full of VAT to be guaranteed effectively. The Member States must also ensure that the limitation rules laid down by national law allow effective punishment of infringements linked to such fraud.
(see paras 32-36)
It is primarily for the national legislature to lay down rules on limitation that enable compliance with the obligations under Article 325 TFEU, in the light of the considerations set out by the Court in paragraph 58 of the Taricco judgment. It is that legislature’s task to ensure that the national rules on limitation in criminal matters do not lead to impunity in a significant number of cases of serious VAT fraud, or are more severe for accused persons in cases of fraud affecting the financial interests of the Member State concerned than in those affecting the financial interests of the European Union. It should be recalled here that an extension of a limitation period by the national legislature and its immediate application, including to alleged offences that are not yet time-barred, do not, in principle, infringe the principle that offences and penalties must be defined by law (see, to that effect, the Taricco judgment, paragraph 57, and the case-law of the European Court of Human Rights cited in that paragraph).
That being so, it should be added that the protection of the financial interests of the Union by the enactment of criminal penalties falls within the shared competence of the Union and the Member States within the meaning of Article 4 (2) TFEU. In the present case, at the material time for the main proceedings, the limitation rules applicable to criminal proceedings relating to VAT had not been harmonised by the EU legislature, and harmonisation has since taken place only to a partial extent by the adoption of Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against fraud to the Union’s financial interests by means of criminal law (OJ 2017 L 198, p. 29). The Italian Republic was thus, at that time, free to provide that in its legal system those rules, like the rules on the definition of offences and the determination of penalties, form part of substantive criminal law, and are thereby, like those rules, subject to the principle that offences and penalties must be defined by law.
(see paras 41-45)
As to the requirements that follow from the principle that offences and penalties must be defined by law, it must be observed, in the first place, that the European Court of Human Rights has held in relation to Article 7(1) of the ECHR that, under that principle, provisions of criminal law must comply with certain requirements of accessibility and foreseeability, as regards both the definition of the offence and the determination of the penalty (see ECtHR, 15 November 1996, Cantoni v. France, CE:ECHR:1996:1115JUD001786291, § 29; ECtHR, 7 February 2002, E.K. v. Turkey, CE:ECHR:2002:0207JUD002849695, § 51; ECtHR, 29 March 2006, Achour v. France, CE:ECHR:2006:0329JUD006733501, § 41; and ECtHR, 20 September 2011, OAO Neftyanaya Kompaniya Yukos v. Russia, CE:ECHR:2011:0920JUD001490204, §§ 567 to 570). In the second place, the requirement that the applicable law must be precise, which is inherent in that principle, means that the law must clearly define offences and the penalties which they attract. That condition is met where the individual is in a position, on the basis of the wording of the relevant provision and if necessary with the help of the interpretation made by the courts, to know which acts or omissions will make him criminally liable (see, to that effect, judgment of 28 March 2017, Rosneft, C‑72/15, EU:C:2017:236, paragraph 162). In the third place, the principle of non-retroactivity of the criminal law means in particular that a court cannot, in the course of criminal proceedings, impose a criminal penalty for conduct which is not prohibited by a national rule adopted before the commission of the alleged offence or aggravate the rules on criminal liability of those against whom such proceedings are brought (see, by analogy, judgment of 8 November 2016, Ognyanov, C‑554/14, EU:C:2016:835, paragraphs 62 to 64 and the case-law cited).
(see paras 55-57)
Article 325 (1) and (2) TFEU must be interpreted as requiring the national court, in criminal proceedings for infringements relating to value added tax, to disapply national provisions on limitation, forming part of national substantive law, which prevent the application of effective and deterrent criminal penalties in a significant number of cases of serious fraud affecting the financial interests of the European Union, or which lay down shorter limitation periods for cases of serious fraud affecting those interests than for those affecting the financial interests of the Member State concerned, unless that disapplication entails a breach of the principle that offences and penalties must be defined by law because of the lack of precision of the applicable law or because of the retroactive application of legislation imposing conditions of criminal liability stricter than those in force at the time the infringement was committed.
It follows, first, that it is for the national court to ascertain whether the finding, required by paragraph 58 of the Taricco judgment, that the provisions of the Criminal Code at issue prevent the imposition of effective and deterrent criminal penalties in a significant number of cases of serious fraud affecting the financial interests of the Union leads to a situation of uncertainty in the Italian legal system as regards the determination of the applicable limitation rules, which would be in breach of the principle that the applicable law must be precise. If that is indeed the case, the national court is not obliged to disapply the provisions of the Criminal Code at issue. Second, the requirements mentioned in paragraph 58 above preclude the national court, in proceedings concerning persons accused of committing VAT infringements before the delivery of the Taricco judgment, from disapplying the provisions of the Criminal Code at issue. The Court has already pointed out in paragraph 53 of that judgment that, if those provisions were disapplied, penalties might be imposed on those persons which, in all likelihood, would not have been imposed if those provisions had been applied. Those persons could thus be made subject, retroactively, to conditions of criminal liability that were stricter than those in force at the time the infringement was committed.
(see paras 59, 60, 62, operative part)