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Fransson and the application of the EU Charter of Fundamental Rights to State measures – nothing new under the sun of Luxembourg

By on 1 Marzo, 2013

In
case C-617/10
Fransson, the elusive
matter of the application of the Charter to national measures came to the
forefront once more (see this
previous post
that touched on the issue). The Swedish referring court asked
the CJEU whether the principle of ne bis
in idem
(a general principle of EU law, but in any case one codified in the
Charter, see Art. 50) could apply and be used to set aside certain domestic provisions.
Under these norms, when a taxpayer provides false information to the
authorities for the purpose of tax assessment, not only might she incur a tax
surcharge, but she could also face criminal prosecution for the same
misconduct. The claimant in the main proceedings argued that this scheme of
penalties amounted to a violation of the principle of ne bis in idem, contained in the EU Charter (Art. 50) and the ECHR
(Art. 4 of Protocol No 7), and requested the judge to set aside the Swedish
provisions.

Fff


The judge, however, could not conclude with certainty whether the
Charter applied in the case at stake, as it was controversial whether Swedish dual
system of tax penalties had an impact on the ‘implement[ation of] Union law,’
or in any case fell, ratione materiae,
within the scope of application of EU law, as required by Art. 51(1) of the
Charter. Some ‘presence’ of EU law was traceable in the form of Directive
2006/112. Art. 273 of the Directive entitles States to ‘impose other obligations which they deem
necessary to ensure the correct collection of VAT and to prevent evasion.’ Would that be enough to consider the Swedish bifurcated system of
imposing tax surcharges and prosecuting tax offences as falling within the
purview of EU law (for the purpose of the application of the Charter)?

Advocate
General Cruz Villalón
conceded that the case-law has not yet clarified the
specific import of Art. 51(1) of the Charter, and daringly suggested a
principled approach to interpret it, which would help clarify its construction
also pro futuro. He took cues from
the rationale behind the possibility that State action be reviewed for
conformity with EU principles. He saw in this possibility an exception to the
rule that it is for member states to review acts of their public authorities. The controlling criterion, the AG
said, is the existence of a ‘specific interest’ of the Union to centralize the
human-rights review of measures governing certain matters. Not every exercise
of power whose ultimate origin is located in EU law needs to be informed by the
EU-conception of a fundamental right: it must be possible to isolate those
situations in which ‘the Union’s interest in leaving its mark … should take priority
over that of each of the Member States.’ [41] Only in such cases, where the
Union has an interest to review the lawfulness of the exercise of State public
authority, is it possible to subject state measure to the provisions of the
Charter (and to EU general principles at large).

As regards the instant case, the AG ultimately
argued that the link between the EU legislation and the Swedish measures
appeared to be too tenuous to substantiate this interest. The AG distinguished
between the case in which national legislation is ‘based directly on Union law’
and the hypothesis that it is ‘used to secure objectives laid down in Union law’
[60], referring to the difference between causa
and occasio. In the main proceedings,
the commencement of criminal prosecution – the only element that could fall
within the reach of the ne bis in idem
rule – was simply an inessential circumstance, a Member-specific normative contingency
incapable of affecting the EU competence on VAT collection.

The
CJEU thought otherwise
. It ignored the AG’s invitation to investigate the
EU’s specific interest and to mind
the gap between causæ and occasiones, and stuck to the classic
(and sibylline) interpretation of Art. 51(1) of the Charter, whereby domestic
acts must comply with EU law when they fall within the scope thereof (see Annibaldi,
[21-23]). In short, the CJEU recalled all provisions of
EU law that require member states to ensure the collection of VAT and to
prevent VAT evasion and noted that any shortcoming in the domestic collection
of VAT affects the EU budget, in so far as the latter depends directly on the
former [26]. Moreover, since member states are obliged to counter all
wrongdoing affecting the EU’s financial interests, under Art. 325 TFEU, the
Court concluded resolutely that:

tax penalties and criminal proceedings for
tax evasion, such as those to which the defendant in the main proceedings has
been or is subject because the information concerning VAT that was provided was
false, constitute implementation of Articles 2, 250(1) and 273 of Directive
2006/112 (previously Articles 2 and 22 of the Sixth Directive) and of Article
325 TFEU and, therefore, of European Union law, for the purposes of Article
51(1) of the Charter [28].

Even if the Swedish legislation at bar was not designed to transpose
Directive 2006/112, its application ‘is designed to penalise the infringement
of that directive’ and, therefore, ‘intend[s]’ to implement the Treaty-derived
obligation to safeguard the financial interests of the EU through the
imposition of effective penalties. As a result, the Charter applied, and the
CJEU just made a point to quote the Melloni
decision, published on the very same day, to remind Sweden that it was still
possible to apply national standards, provided that the level of protection
required by the Charter was complied with, lest the ‘primacy, unity and
effectiveness’ of EU law be compromised.

A couple of comments are in order. First, the CJEU should be excused
for the generous use of words like ‘designed’ and ‘intended’ to describe the
link between the application of national measures and the implementation of EU
obligations. Not only are the relevant provisions of Swedish laws on tax
offences and tax assessments referred to taxes in general, and do not contain
an express reference to VAT, but a factual remark might suffice to appreciate
how the ideas of design and intention are ill-suited. The relevant Swedish
provisions, quoted in the judgment, were adopted in 1971 and 1990. Since Sweden
joined the EU only in 1995, it is hard to believe that the Swedish legislator designed them with the intention to implement obligations that
did not bind Sweden at the time. A semantic shift from the area of intentions
and aims to that of effects and results would certainly be appropriate (a
well-rehearsed topic of international trade law, see here,
for example). Moreover, it would certify that the focus idea of implementation
of Art. 51(1) of the Charter is not the subjective
element of state measures but their objective
contribution to the implementation of EU law. This shift would better explain
situations like the Swedish one, in which national measures happen, more or
less unintentionally, to govern matters covered by EU law, and are therefore
capable of hindering or promoting the attainment of the objectives set therein.

Second, a look at the EU provisions ‘implemented’ might provide
further insight on the CJEU’s take on Art. 51(1) of the Charter. Of the
provisions of Directive 2006/112 that were mentioned, one simply lists the
transactions subject to VAT (Art. 2), one simply requires that all taxable
persons submit their VAT return (Art. 250(1)), and one empowers member states
to impose additional obligations to ensure the correct collection of VAT and
prevent evasion (Art. 273). Of the three, only Art. 273 seemingly bears a link
with the Swedish system of sanctions for tax evaders, whereas the other two are
only useful to identify who is under the obligation to pay VAT, for which
transactions, and through which assessment procedure. The CJEU, it is argued,
should have kept Art. 2 and Art. 250(1) of the Directive out of the discussion
on the relationship between the Swedish scheme of sanctions and EU law. To be
sure, these provisions clarify the reach of the obligation to whose enforcement
Art. 273 refers. However, unlike the latter provision, Articles 2 and Art.
250(1) of the Directive are hardly implemented by the Swedish measures. As to
Art. 325 of the TFEU, instead, it is arguably uncontroversial that the national
provisions sanctioning tax evasion, in so far as they also apply to VAT
evasion, act as a deterrent implementing EU-imposed obligation to ‘counter
fraud and any other illegal activities affecting the financial interests of the
Union.’

Although the CJEU missed the opportunity to set the record straight
and devise a brand new test for the application of Art. 51(1) of the Charter,
as suggested by the AG, at least it gave helpful guidance to the national
judge, unlike in previous cases like Kamberaj
and Scattolon.
Yet the mixture, in the decisive paragraphs, of EU provisions that are arguably
implemented by the national measures and others that are not might prove
confusing, and the impression is that some of them would not have justified the
application of the Charter under Art. 51(1) thereof, if considered separately.

Parsing one judgment is not the ideal starting point to venture into
a far-reaching analysis of how Art. 51(1) of the Charter might be construed in
the future. If anything, one should keep an eye on the Court’s practice of
considering within the scope of EU law those national measures that, simply,
contribute to the implementation of an EU obligation without being primarily
designed to transpose it. There might be cases where the link might prove too
thin to matter, and the Court may then regret having discarded Cruz Villalón’s suggestion
to exercise value-judgment, in order to make that call with more confidence.

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