The punitive power of independent administrative authorities: focus on financial and tax violations (a comparative study)

administrative authority punitive power

THE ACCUMULATION OF CRIMINAL PENALTIES AND ADMINISTRATIVE SANCTIONS OF PUNITIVE NATURE

The Ne Bis in Idem Principle

The Legislative Basis for the Ne Bis in Idem Principle

Justice requires that any person be subject to legal punishment for their crime only once. In other words, imposing more than one penalty for infringement is impermissible. In contemporary legal systems, this principle is considered a major pillar of criminal and administrative law. For instance, the Fifth Amendment of the U.S. Constitution provides an explicit legal provision that prevents an accused person from being tried or sentenced again on the same charge (i.e. Double Jeopardy). Saba Khan, `A Defendant's Fifth Amendment Right and Double Jeopardy in Contempt Cases' (2016) 32(4) Touro Law Review 833. This legal principle is meant to ensure respect for the binding force of the final court rulings.

Furthermore, Article (50) of the Charter of Fundamental Rights of the European Union (CFR) explicitly refers to the same legal principle, which is also emphasised by the European Court of Justice (ECJ), pursuant to the provision of Article (4) of the protocol annexed to the Convention for the Protection of Human Rights and Fundamental Freedoms. `Charter of Fundamental Rights' (Citizens Information, 31 January 2023)

<https://www.citizensinformation.ie/en/government-in-ireland/european-government/eu-law/ charter-of-fundamental-rights/> accessed 10 February 2024. Several other legislations, such as German and American legislation, have granted this legal principle high constitutional value. Accordingly, the German Judiciary does not acknowledge the implementation of multiple penalties for the same act, even if these penalties fall within two different areas of law: criminal and administrative. ibid.

Article (454) of the Egyptian Criminal Procedures Law states:

“A criminal claim initiated against a defendant shall be considered as concluded by the issuance of a final court ruling, whether it is an acquittal or a conviction; thus, if a court ruling is issued on the subject-matter of this criminal claim, the claim may not be reheard again unless it is through one of the legally stated methods of an appeal.” Criminal Procedure Code of the Arab Republic of Egypt no 150 of 1950, art 454 <https://manshurat.org/node/14419> accessed 10 February 2024.

Similarly, in the UAE, Article (268) of the UAE Criminal Procedures Act states:

“A criminal claim initiated against a defendant shall be considered as concluded by the issuance of a final court ruling, whether it is an acquittal or a conviction; thus, if a court ruling is issued on the subject-matter of this criminal claim, the claim may not be reheard again, unless it is through one of the legally stated methods of appeal.” Federal Decree-Law no 38 of 2022 `Promulgating the Criminal Procedures Law', art 268 <https://uaelegislation.gov.ae/en/legislations/1609> accessed 10 February 2024.

Therefore, the ne bis in idem principle is mainly based on two legal grounds: the principle of legality and the principle of res judicata. According to the latter principle, it is illegal to have a second adjudication for the same incident; hence, the disciplinary authority may not be entitled to reconsider the same incident. Abdel-Fattah Abdel-Barr, The Disciplinary Guarantees of Public Office (Dar Al-Nahda Al-Arabia 1979) 452.

Furthermore, it is worth noting that the application of the ne bis in idem principle in the disciplinary field is actually based on the principle of double jeopardy in the criminal field. Abdel-Aziz Khalifa, The Disciplinary Guarantees of Public Office (Dar Al-Nahda Al-Arabia 1997) 175. That is, if a person is punished again for the same act, this punishment is considered unjustified and excessive, contradicting the principle of proportionality. In other words, an employee at fault may not be subject to more than one disciplinary penalty for the same violation. Youssef Helmy Khater Sherif, Means of Administrative Activity of the State (Public Employee - Administrative Decision) (Dar Al-Nahda Al -Arabia 2007) 232.

Nonetheless, this principle does not prohibit the infliction of a criminal penalty alongside the disciplinary penalty, Mohamed Majed Yakout, Explanation of Disciplinary Procedures in Public Employment, Trade Union Professions, and Private Work (Monshaat Al-Maaref 2004)665. as both belong to two different areas of law. Hence, this might not be considered contradictory to the ne bis in idem principle. Khalifa (n 30) 175. For instance, a public official who has committed an act of forgery may be subject to a disciplinary penalty in addition to a criminal penalty. To conclude, criminal liability does not preclude disciplinary liability, but both liabilities may be invoked together. Abdel-Kader Abdel-Hafez, The Disciplinary Penalties of Public Officials (Dar Al-Fiker 1983) 106.

The Judicial Basis for the Ne Bis in Idem Principle

The ne bis in idem principle is considered one of the most important legal principles for guaranteeing rights and protecting freedoms. Therefore, the Supreme Constitutional Court in Egypt has adopted it as a constitutional principle. Case no 22 Judicial Year 8 `Constitutional' (Supreme Constitutional Court of the Arab Republic of Egypt, 4 January 1992) <http://hrlibrary.umn.edu/arabic/Egypt-SCC-SC/Egypt-SCC-22-Y8.html> accessed 10 February 2024. In this context, the Court ruled on the unconstitutionality of the First Clause of Article (43) of the General Sales Tax Act, issued by virtue of Law No. 11 of 1991 (and amended in 1996), that is, the obligation to order all perpetrators jointly to pay a compensation whose value is no more than the tax itself. Case no 9 Judicial Year 28 `Constitutional' (Supreme Constitutional Court of the Arab Republic of Egypt, 4 November 2007) <http://hrlibrary.umn.edu/arabic/Egypt-SCC-SC/Egypt-SCC-9-Y28.html> accessed 10 February 2024.

The Court has provided the following reasoning in its ruling:

“According to the contested legal provision, the legislator has stipulated that a taxpayer who has been convicted of tax evasion shall pay compensation whose value is no more than the tax itself; hence, the competent judge will have no choice but to order such compensation in all cases (i.e. pursuant to the phrase 'all perpetrators jointly'); and that is in addition to the other criminal penalties that might be ordered as stated in the provision of this contested provision (i.e. imprisonment, fine or both penalties). In this sense, all of those penalties concern only one action, which is committing a violation of any of the clauses stated in the provision of Article (44) of the General Sales Tax Act, issued by virtue of Law No. 11 of 1991.”

Therefore, the Court concluded that the state's legislation may not jeopardise any of the rights and freedoms granted naturally to all people in democratic societies as basic guarantees for the protection of human rights and dignity. Of course, these rights comprise all rights concerning personal freedom, including the right not to be punished more than once for the same act; thus, whether the penalty is civil or criminal, the imposed punishment may not be excessive but rather proportional and gradual in accordance with the committed violation. Case no 3 Judicial Year 10 `Constitutional' (Supreme Constitutional Court of the Arab Republic of Egypt, 2 January 1993) <http://hrlibrary.umn.edu/arabic/Egypt-SCC-SC/Egypt-SCC-3-Y10.html> accessed 10 February 2024.

There is no doubt that any violation of the ne bis in idem principle is contradictory to the principle of legality. In other words, the most important principles of justice would be deemed violated if it is permissible to bring the defendant to a retrial and impose more than one penalty for the same action. Mohamed Gawdat El-Malat, `The Disciplinary Liability of Public Officials' (DrSc(Law) thesis, Cairo University 1967) 311.

Therefore, the Supreme Constitutional Court has ruled:

“An authority may exercise its disciplinary power by imposing a certain penalty for a specific action. However, this authority may not impose a second penalty for the same incident. Therefore, the administrative authority shall always seek balanced discretion, based on the apparent appropriateness between the gravity of the committed administrative violation on one hand, and the type and magnitude of the imposed penalty on the other hand. otherwise, such discretion will be deemed as a deviation by the disciplinary power from its purposes.” Case no 24 Judicial Year 18 `Constitutional' (Supreme Constitutional Court of the Arab Republic of Egypt, 5 July 1997) <http://hrlibrary.umn.edu/arabic/Egypt-SCC-SC/Egypt-SCC-24-Y18.html> accessed 10 February 2024.

Both Egypt and France have adopted this legal principle. The Supreme Administrative Court in Egypt has stated: “As one of the most important and unquestionable basics of justice, it is impermissible to punish an employee twice for the same administrative violation.” Case no 4360 Judicial Year 53 (Supreme Administrative Court of the Arab Republic of Egypt, 13 June 2009) <https://www.elmodawanaeg.com> accessed 10 February 2024.

The Accumulation of Criminal Penalties and Administrative Sanctions of Punitive Nature

Originally, the issue of combining two or more penalties has always been raised in relation to the sanctions imposed by independent administrative authorities on the one hand and the penalties of the criminal judiciary on the other. A similar issue of equivalent importance concerns the different nature of criminal penalties and administrative sanctions issued by independent administrative authorities, considering the issuing authority and the regulation of the committed action itself. A certain action could be criminalised by virtue of the Penal Law, hence necessitating a custodial sanction or a fine or considered a mere violation pursuant to financial and monetary laws, thus imposing a certain financial penalty. Accordingly, could the same person be punished twice for the same act?

The principle of non-accumulation of penalties is considered one of the basic doctrines of Criminal Law and prohibits any cases of double jeopardy. Martin Wasmeier, `The Principle of ne Bis in Idem' (2006) 77 (1-2) Revue International de Droit Penal 121, doi:10.3917/ridp.771.0121. Nonetheless, this field involves another application of this principle. For example, it is permissible to combine a criminal penalty and a disciplinary penalty based on the diversity and variance of protected interests (e.g. public interest, administrative interest, or professional interest). Libor Klimek, `Ne Bis in Idem as a Modern Guarantee in Criminal Proceedings in Europe' (2022) 5(4) Access to Justice in Eastern Europe 103, doi:10.33327/AJEE-18-5.4-a000439. Hence, what is the case with the criminal penalties and administrative sanctions imposed by independent administrative authorities?

Article (27) of Federal Law No. 4 of 2000 concerning the UAE securities and commodities market, the Securities and Commodities Authority may impose various disciplinary sanctions on market mediators, including a fine of no more than one hundred thousand Dirhams. In addition, as those sanctions are disciplinary in nature, they may be combined with other criminal penalties. This duality may not be considered contradictory to the ne bis in idem principle, as each penalty has a different purpose.

The UAE legislator has emphasised that the scope of administrative sanctions is different from that of criminal penalties, avoiding any duality that might be considered a violation of the ne bis in idem principle. However, it is fair to say that UAE Law indeed involves a combination of criminal penalties and administrative sanctions of a punitive nature in the field of taxes. ibid 104.

For example, with regard to Tax Procedures, the provision of Article (25) of Federal Law No. 7 of 2017 states the following:

“1. The authority shall issue an assessment for the entity's administrative fines and shall notify this entity of the matter within the period of (5) working days, with regard to any of the following violations:... 3) The taxpayer's failure to pay the tax stated as 'Payable' in his submitted tax return, or in his tax assessment after his notification during the period stated in the Tax Law.” Federal Decree-Law no 7 of 2017 `Concerning Excise Tax', art 25 <https://uaelegislation.gov.ae/ en/legislations/1223> accessed 10 February 2024.

In addition, with regard to Tax Evasion, Article (26) states that:

“1. Without prejudice to any harsher penalty that might be stated in another law, the following entities shall be subject to punishment by imprisonment and paying a fine of no more than five-fold of the due tax, or by either one of those two penalties: 1.1) A taxpayer who has deliberately abstained from paying his/her payable tax or administrative fines.” ibid, art 26.

Hence, pursuant to those two articles, there is a clear duality of penalties imposed for the same action, represented basically in the taxpayer's abstention from paying his due tax, as such an action is considered a criminal crime and an administrative violation at the same time.

Moreover, despite the severity of the sanctions imposed by independent administrative authorities, competent criminal judges may also add further financial sanctions for the same actions. Therefore, the legislator has to adopt a clear position in such a case so that an appropriate proportion between the committed action and the imposed sanction may be reached, irrespective of the precedence of inflicting a financial sanction. In other words, given that both criminal and administrative sanctions have the same (repressive) purpose, the principle of proportionality shall permit the accumulation of penalties of the same type while also providing a basic guarantee against the excessive punishment of someone with a penalty.

Position of Constitutional Judiciary regarding the Accumulation of Criminal Penalties and Administrative Sanctions of Punitive Nature

Initially, by virtue of Decree No. (248/88) issued on 17 January 1989, Decision n 88-248/DC (n 9). the French Constitutional Council adopted a legal principle stating that combining administrative, financial sanctions, and criminal penalties is impermissible. Nonetheless, this adopted legal principle was later modified in Decree No. (260-89) issued on 28 July 1989. Decision n 89-260 DC (Conseil Constitutionnel, 28 juillet 1989) <https://www.conseil-constitutionnel.fr/ decision/1989/89260DC.htm> accede 10 fevrier 2024. The Constitutional Council decided that the Stock Exchange Commission may issue financial sanctions in addition to the penalty imposed by the criminal judge, provided that the total amount of all imposed financial sanctions not exceed the amount with the highest value of one of the two imposed sanctions.

It also stipulated that this legal principle may not take effect in cases of accumulated criminal penalties and administrative sanctions unless otherwise stated by law. In fact, the French Constitutional Judiciary does not give much constitutional value to this legal principle. Pursuant to French legislation, it is permissible to combine a criminal penalty and administrative sanction, especially when those sanctions are imposed for an action that fulfils both the criminal and administrative aspects.

In this sense, in its 28 July 1989 decree, the French Constitutional Council emphasised that the ban on the accumulation of penalties indeed lacks the necessary constitutional character, especially when those various sanctions belong to two different penal systems (e.g. to combine a criminal penalty and an administrative sanction); as in this case, there are different causes for the infliction of each penalty. However, despite its approval of the permissibility of combining the criminal penalty and administrative sanctions, the French Constitutional Council highlighted the importance of adhering to the principle of proportionality, especially when each sanction is attributed to the same cause and nature. For instance, if both the criminal and administrative sanctions imposed for a violation are financial fines, the criminal and administrative fines may not exceed the maximum limit stated for each sanction in both cases. ibid.

The Judicial Court of Paris adopted the same approach. In one famous incident, the court ruled that a person who has been sanctioned by the Commission with a fine of 10,000,000.00 francs may not be subject to any other fines. Wasmeier (n 41) 121. Considering this legal provision is limited to the assumption that a competent judge will decide on the case, a major issue could be raised after the issuance of a final decision by the Stock Exchange Commission. Hence, if the Commission has yet to decide on the committed violation, the competent judge will not pay much attention to the possibility of combining the two sanctions (pursuant to the Decree issued on 3 December 1993).

In this context, it is fair to say that an independent administrative authority will not interfere in the first place unless the committed violation constitutes a criminal act. Otherwise, the authority may ask the Public Prosecution to enforce the Criminal Procedure Law, pursuant to the well-known principle that “criminal claims shall suspend administrative ones”. Nonetheless, this solution may be considered contradictory to the independence of procedures, as the independent administrative authority is not obligated to postpone its consideration of the committed violation until criminal adjudication on the matter is concluded. In addition, this solution could be considered contradictory to the ultimate purpose of granting punitive powers to independent administrative authorities, which is to ensure fast and flexible intervention, as well as effective sanctions.