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

The Principle of Non-Accumulation of Criminal Penalties and Administrative Sanctions

The French Constitutional Council has adopted the principle of non-accumulation of criminal penalties and administrative sanctions as long as all four requirements are fulfilled:

- the committed action itself shall be punishable in accordance with the concerned legal provisions;

- the imposed sanctions shall protect the same social interests;

- the imposed sanctions shall be of a similar nature;

- and the imposed sanctions shall be issued by virtue of the same legal system. Decision n 2014-453/454 QPC et 2015-462 QPC (Conseil Constitutionnel, 18 mars 2015) <https://www.conseil-constitutionnel.fr/decision/2015/2014453_454QPCet2015462QPC.htm> accede 10 fevrier 2024.

Contradiction of the Preferential Approach towards the Accumulation of Criminal and Administrative Sanctions between the Taxation and Financial Law

The French Constitutional Council has permitted the accumulation of criminal penalties and administrative sanctions of a punitive nature in the field of tax disputes based on the following two standards: a) the grossness of the committed action itself and b) the integration of tax and criminal procedures. Decisions n 2016-545 QPC (Conseil Constitutionnel, 24 juin 2016) considerants 22 <https://www.conseil-constitutionnel.fr/decision/2016/2016545QPC.htm> accede 10 fevrier 2024; Decision n 2016-546 QPC (Conseil Constitutionnel, 24 juin 2016) considerants 22 <https://www.conseil-constitutionnel.fr/decision/2016/2016546QPC.htm> accede 10 fevrier 2024 Decision n 2018-745 QPC (Conseil Constitutionnel, 23 novembre 2018) considerant 19 <https://www.conseil-constitutionnel.fr/decision/2018/2018745QPC.htm> accede 10 fevrier 2024; Vincent Dussart, `Cumul des sanctions penales et fiscales: une validation constitutionnelle definitive?' (Lexbase freemium, 12 juillet 2016) N3859BWT <https://www.lexbase.fr/article-juridique/33333856jurisprudence-cumul-des-sanctions-penales-et-fiscales-une-validation-constitutionnelle-definitive > accede 10 fevrier 2024. There could be a clear contradiction in the French Constitutional Council's application of these standards. While acknowledging these standards in the field of tax disputes, they have been dismissed in the field of market or financial disputes, thus banning any duality of sanctions regarding the latter.

In French Law, Article (1729) of the General Tax Law determines some tax sanctions for fraudulent actions and other intentional violations concerning tax returns, while Article (1741) of the same law determines criminal penalties for the taxpayer who deliberately conceals part of the money subject to the stated tax. Code general des impots (1950) arts 1729, 1741 <https://www.legifrance.gouv.fr/codes/ texte_lc/LEGITEXT000006069577/> accessed 10 February 2024. In this regard, the French Constitutional Council confirmed that both legal provisions may apply to the same person committing the same actions. In addition, they stress that tax evasion control is based on the ultimate goal of constitutional value, Anne-Valerie Le Fur et Dominique Schmidt, `Le Traitement du Cumul des Sanctions Administratives et Penales en Droit Interne: Entre Incoherences et Insecurity Juridique' (2016) 36 Recueil Dalloz 4. which is mainly based on Article (13) of the Declaration of the Rights of Man and the Citizen. The Constitutional Council added that both criminal penalties and tax sanctions should protect social interests.

To justify their exclusion of the ne bis in idem principle from the tax dispute field, the French Constitutional Council explained that the adopted procedures for inflicting both criminal and tax sanctions are not different from each other and may be considered integrative procedures. A and B v Norway App nos 24130/11, 29758/11 (ECtHR, 15 November 2016) <https://hudoc.echr.coe.int/ eng?i=001-168972> accessed 10 February 2024.

A thorough investigation should have been conducted regarding the fulfilment of all four standards, as issued on 18 March 2015. Decision n 2014-453/454 QPC (n 50). This could prevent any duality of sanctions, as previously mentioned. However, the French Constitutional Council has clarified its logic through a different approach, as it has confirmed that criminal and administrative procedures may together enable the protection of the state's financial interests and ensure equality before the tax authority. ibid.

Therefore, we respectfully disagree with the French Constitutional Council, believing that a reference to the constitutional value of public contribution to taxes shall systematically constitute any incident of tax evasion as a gross action, hence leading to the duality of sanctions in all conditions, despite the fact that the concept of the grossness of actions shall be left solely to the discretion of the legislator. In addition, all criminal actions may originally be considered gross actions; hence, the legislator intervenes by making such actions subject to criminal penalties.

However, who decides cases where actions of greater grossness justify the initiation of different procedures, leading to the infliction of several penalties? For instance, by virtue of Articles (L.228) and (231a) of the Tax Procedures Act, the initiation of any criminal prosecution for tax evasion shall be based on prior complaints by the Tax Department after the approval of these complaints by the Tax Crimes Commission. In this way, the French Constitutional Council grants the administrative authority the power to evaluate any duality of sanctions, which will, in turn, lead to the cancellation of any criminal penalties in favour of the administrative sanctions in case it decides not to submit these complaints to the competent criminal prosecution authorities. ibid.

Grossness of Actions is a Standard of Inconsistency and Contradiction concerning the Duality of Sanctions

The French Constitutional Council permits the accumulation of criminal penalties and administrative sanctions of a punitive nature in the field of tax disputes based on the fulfilment of the standard of grossness of actions. Why would the French Constitutional Council adopt the same approach as the financial markets? If its logic is based on the fact that tax fraud control shall have priority over financial markets fraud control, as the state's role is to protect collective interests (e.g. tax disputes), then we will find that public funds deserve much larger protection than investors' interests, justifying the application of a double punishment, which is not the case here. Le Fur and Schmidt (n 53) 5.

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However, we believe that this conclusion is far from realistic. In other words, the misuse of financial market rules will undermine the reliability of those markets, a problem that could produce serious repercussions for the state's economy as a whole. Therefore, we believe that the French Constitutional Council should have permitted the duality of sanctions for financial markets as well, considering that it has clearly stated that the objectives desired from the infliction of both criminal penalties and administrative sanctions in the field of stock market disputes are the same, the ultimate goal of which is the protection of public interest.

The Position of the French Court of Cassation and European Judiciary regarding the Accumulation of Criminal Penalties and Administrative Sanctions of Punitive Nature

In a well-known case, the Sanctions Commission, affiliated with the Financial Market Authority, fined an investor EUR 250,000.00. Subsequently, the public prosecution initiated prosecution procedures before the criminal judiciary, litigation which was concluded by the issuance of a court ruling for three-month imprisonment with suspension to avoid any obstruction to the market function pursuant to Article (465-2) of the Monetary and Financial Law.

This court ruling was appealed before the French Court of Cassation on the grounds that the administrative sanctions imposed by the Financial Market Authority are sanctions of a punitive nature and, hence, may not be accumulated with other penalties issued for the same actions as the result of criminal procedures. In other words, the procedures of criminal prosecution should not have been initiated on the basis of the defendant's right to avoid double jeopardy, which has been clearly stated by virtue of all of the following legal provisions: Article (4) of Additional Protocol No. 7 of the Convention for the Protection of Human Rights and Fundamental Freedoms; Article (14) of Part VII of the International Covenant on Civil and Political Rights (ICCPR); and Article (50) of the Charter of Fundamental Rights of the European Union (CFR).

However, the French Court of Cassation dismissed this appeal in a precedent that ended any controversy regarding the duality of criminal and administrative sanctions in the financial field. The Court of Cassation decided that there is no contradiction between Article (50) of the CFR and the permissibility of accumulating administrative sanctions imposed by the Financial Markets Authority and criminal penalties for the same actions, which are, in fact, misdemeanours, Pourvoi n 12-83.579 (Cour de cassation, Chambre criminelle, 22 janvier 2014) <https://www.legifrance.gouv.fr/juri/id/JURITEXT000028511881> accede 10 fevrier 2024. provided the fulfilment of the following two conditions:

1) This duality of sanctions shall always be based on the principle of inflicting a punishment that is effective, proportional, and deterrent. This is supported by Article (14-1) of Directive No. (CE/6/2003) issued on 28 January 2003, commonly used as a basis for the fulfilment of public interest as recognised by the European Union. ibid. This is also affirmed by Article (52) of the Charter to ensure the integration of European financial markets and the consolidation of investor trust.

2) The total value of the applicable fine may not exceed the maximum limit of the imposed higher sanctions.

On this basis, it is evident that the legitimacy of the principle of accumulation of penalties (i.e. criminal and administrative sanctions) has been subject to a process of modification through a number of procedural developments. For instance, the Coulon Report suggested that public prosecutors should be concerned with evaluating the appropriateness of criminal prosecutions and selecting the most appropriate methods for such prosecution. Jean-Marie Coulon, La depenalisation de la vie des affaires: Rapport au garde des Sceaux, ministre de la Justice (Coll des rapports officiels, La Documentation fran^aise 2008).

In a decision dated 13 September 2017, the Criminal Chamber of the Court of Cassation ruled that the Financial Markets Council did not qualify as a criminal court within the context of the ne bis in idem principle. Therefore, it was deemed entirely permissible for the accused, who had previously received sanctions from the Financial Markets Council for actions that were also subject to prosecution before a criminal court, to be found guilty of fraud and subsequently sentenced by the criminal court. Pourvoi n 15-84.823 (Cour de cassation, Chambre criminelle, 13 septembre 2017) <https://www.legifrance.gouv.fr/juri/id/JURITEXT000035574367> accede 10 fevrier 2024.

Hence, acts falling under the jurisdiction of independent administrative authorities, tax administration, and administrative courts can be excluded from the offences falling within the jurisdiction of French courts in criminal matters Pierpaolo Rossi-Maccanico, `A Reasoned Approach to Prohibiting the Bis in Idem: Between the Double and the Triple Identities' (2021) 4 EU Crim 268, doi:10.30709/eucrim-2021-032.. Additionally, in a decision issued on 6 December 2017, the Criminal Chamber rejected the application of Article 4P7 to a defendant charged with tax fraud in criminal court, citing that they had already been penalised by the tax administration for the same acts. Pourvoi n 16-81.857 (Cour de cassation, Chambre criminelle, 6 decembre 2017) <https://www.legifrance.gouv.fr/juri/id/JURITEXT000036176844> accede 10 fevrier 2024. The Criminal Chamber of the Court of Cassation has determined that the European rule of non bis in idem applies exclusively to offences falling under French law within the jurisdiction of courts handling criminal matters. It does not prohibit the imposition of tax sanctions in addition to penalties imposed by the criminal court Pourvoi n 94-85.796 (Cour de cassation, Chambre crimine, 20 juin 1996) <https://www.legifrance.gouv.fr/juri/id/JURITEXT000007067811/> accede 10 fevrier 2024.. This interpretation is supported by the legislative basis in tax law, specifically the first paragraph of Article 1741 of the General Tax Code, which states that prescribed penalties are applicable “independently of any applicable tax sanctions.”

Position of the European Court of Human Rights and the European Court of Justice

The European Court of Human Rights has stated that pursuant to the Convention for the Protection of Human Rights and Fundamental Freedoms; there is indeed a contradiction between the ne bis in idem principle in the field of taxes--Article (4) of Protocol No. 7 of the Convention issued on 22 November 1984--and the permissibility of criminal prosecution of the same person in this field, after already incurring another criminal or semi-criminal sanction for the same actions. Sergey Zolotukhin v Russia App no 14939/03 (ECtHR, 10 February 2009) <https://hudoc.echr.coe.int/?i=001-91222> accessed 10 February 2024; Ruotsalainen v Finland App no 13079 (ECtHR, 16 June 2009) <https://hudoc.echr.coe.int/?i=001-92961> accessed 10 February 2024.

However, the European Court of Justice (ECJ) has emphasised that to safeguard the financial interests of the European Union; each member state shall be entitled to determine its own applicable sanctions, as those sanctions may take the form of administrative sanctions, criminal penalties, or a combination of both types. That is, Article (50) does not prohibit the initiation of new criminal procedures to issue a criminal penalty against the same person if the already issued tax sanction is punitive. Marie-Claire Sgarra, `La CJUE se prononce sur le cumul des sanctions penales et fiscales: le juge fran^ais au pied du mur!' (LexBase freemium, 11 mai 2022) N1397BZR <https://www.lexbase.fr/ article-juridique/84739394-breveslacjueseprononcesurlecumuldessanctionspenalesetfiscaleslejuge francaisaupied> accede 10 fevrier 2024.

The national legislation may authorise criminal proceedings against an individual for failing to pay value-added tax within specified time limits, even if the person has already received a final administrative penalty of a criminal nature for the same acts. This authorisation is contingent upon the legislation aiming to achieve the public interest objective that justifies any duplication of procedures and penalties, particularly in combating VAT fraud, and ensuring that these measures also serve any additional necessary objectives. Additionally, the legislation must incorporate rules that ensure coordination to minimise the additional harm caused to individuals by duplicative procedures and establish rules to ensure that the severity of all imposed penalties is proportional to the seriousness of the crime committed. Case C-524/15 Luca Menci (CJEU (Grand Chamber) ECJ, 20 March 2018) <https://curia.europa.eu/juris/liste.jsf?language=en&num=C-524/15> accessed 10 February 2024.

Furthermore, the European Court of Human Rights has decided to evaluate the nature of the imposed sanctions (to decide whether they are criminal penalties or administrative sanctions of a punitive nature) based on their own concept of the criminal field. Sergey Zolotukhin v Russia (n 66); Ruotsalainen v Finland (n 66). The European Court of Justice (ECJ) has, however, decided that this discretionary power does not fall within its jurisdiction but is a matter for the criminal judiciary, in accordance with the three major standards as stated by the European Court of Justice (ECJ):

Standard (I): the legal characterisation of the committed action itself as stated by virtue of the internal laws;

Standard (II): the nature of the committed crime itself;

and Standard (III): the nature and grossness of the imposed sanction. In this sense, the national judiciary shall consider and respect all stated national principles concerning the ne bis in idem principle, considering that the imposed sanctions shall be effective, proportional, and deterrent. Case C-617/10 Aklagaren v Hans Akerberg Fransson (CJUE (Grand Chamber), 26 February 2013) <https://curia.europa.eu/juris/liste.jsf?num=C-617/10> accessed 10 February 2024; Case C-399/11 Stefano Melloni v Ministerio Fiscal (CJUE (Grand Chamber), 26 February 2013) Consid 60: Juris-Data N 2013-004004 <https://curia.europa.eu/juris/liste.jsf?num=C-399/11&language=EN> accessed 10 February 2024; C-570/20 BV (CJUE (First Chamber), 5 May 2022) <https://curia.europa.eu/juris/ liste.jsf?num=C-570/20> accessed 10 February 2024.

1) The European Court of Human Rights, in its landmark judgment A and B vs Norway A and B v Norway (n 54)., allowed for an exception to the principle of ne bis in idem, which prohibits double jeopardy. It determined that the accumulation of criminal and administrative proceedings is permissible when integrated to form a coherent whole. Rossi-Maccanico (n 63) 268. When the procedures involved are connected by a “sufficiently close material and temporal link,” A and B v Norway (n 54) para 130; Johannesson and others v Iceland App no 22007/11 (ECtHR, 18 May 2017) para 49 <https://hudoc.echr.coe.int/eng?i=001-173498> accessed 10 February 2024. this link “must be sufficiently close so that the individual is not exposed to uncertainty and delays.” Rossi-Maccanico (n 63) 268. Regarding the assessment of the material connection, the Court states that four relevant elements must be taken into account Benjamin Ricou, `Actualite du cumul de sanctions penales et fiscales: des divergences aux convergences' (LexBase freemium, 27 Fevrier 2019) N7870BXR <https://www.lexbase.fr/articlejuridique/50112027-lepointsuractualiteducumuldesanctionspenalesetfiscalesdesdivergencesauxcon vergences> accede 10 fevrier 2024., which, when available, allows the combination of administrative and criminal penalties in separate proceedings to be allowed under four conditions, which are:

2) the complementary purposes pursued by the proceedings, addressing different aspects of the prohibited conduct;

3) whether the duplication of proceedings is a foreseeable consequence, both in law and in practice, of the same prohibited conduct;

4) whether there is coordination between the relevant sets of proceedings to avoid duplication in the collection and assessment of evidence and

5) the proportionality of the overall amount of the imposed penalties.

CONCLUSIONS

The French Constitutional Council has affirmed the constitutionality of independent administrative authorities imposing sanctions, asserting that neither the principle of separation of powers nor any other constitutional principles hinder their legal authority, provided sanctions fall within their jurisdiction. Additionally, the Council has ruled that combining criminal penalties and administrative sanctions is impermissible unless four conditions are met: the action is punishable under the law, both sanctions protect the same social interests, they are of a similar nature, and all proceedings and sanctions fall under the same legal system. These rulings uphold the balance between administrative powers and constitutional principles, ensuring fairness and consistency in the enforcement of penalties.