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By Manyl Benredouane and Thomas Rousset, University of Montpellier, Centre du Droit de l'Entreprise, Program of Master 2 "Droit du Commerce International"

Overview

Today, more and more statutes enacted by the legislative authorities have a retroactive effect. This Quick Overview aims at highlighting the protection against such retroactivity, as granted by the European Court of Human Rights, especially regarding tax and criminal law matters.

Retroactivity and Tax Law

One question the European Court on Human Rights (ECtHR) had to settle through its case law was whether retroactive tax statutes are contrary to the Convention on Human Rights (ECHR). In cases concerning this matter, the ECtHR and national courts based their reasoning on Article 1 of Protocol No 1 of the Convention which relates to the peaceful enjoyment of possessions.

I. European Rules

In Burden v United Kingdom, the ECtHR ruled that a taxation is in principle an interference with the right guaranteed by Article 1 of Protocol No 1 as it deprives individuals of a possession.

However, the ECtHR does not wish to interfere excessively with tax legislation because it remains one of the most important prerogative of Member States. For this purpose, in M.A. and 34 Others v Finland, the ECtHR has developed a proportionality test to set some limits. In this case, a claim alleging an infringement of Article 1 of Protocol No 1 due to the retroactivity of a tax statute was considered as not being substantiated. This was because the Court did not construe the question of the retroactivity of tax statutes as based upon the principle of non-retroactivity that is otherwise granted in criminal matters.

In its case law, the ECtHR decided that a retroactive tax statute does not amount per se to a breach of the ECHR if it "strikes a 'fair balance' between the demands of the general interest of the community and the requirements of the protection of the individual's fundamental rights" (see, for example, Spadea and Scalabrino v Italy).

II. National Illustrations of the European Rules

In the United Kingdom, the Court of Appeal of England and Wales considered in the case APVCO 19 v Revenue and Customs Commissioners that the Convention does not (under Article 1 of Protocol No 1 or even under Article 6 relative to the right of a fair trial) establish a general prohibition of a retroactive application of tax legislation. This Protocol was considered by the Court of Appeal as imposing two conditions: the statute must have legal certainty and must not be arbitrary. Nevertheless, in this case, the legislation (albeit of a retroactive nature) was not considered as being in breach of those two conditions. Regarding legal certainty, the Court observed that the Government had explicitly stated before the adoption of the legislation that it would have a retroactive scope; therefore, the consequences of the application of the statute were not unforeseeable. Concerning the arbitrariness criterion, the Court ruled that a balance must be struck between the public interests to ensure the payment of tax and the protection of individuals' right to property.

In France, the French Supreme Administrative Court established a theory of "little retroactivity" which was validated by the Constitutional Council in its decision of 29 December 2012. Under this theory, the Constitutional Council refuses to consider retroactive the provisions of the bill applicable to the income generated during the past year. Although the bill will be published at the end of the civil year, it will be applicable to the income generated before its entry into force.

In a decision of 7 November 1997, the French Constitutional Council ruled that the principle of non-retroactivity is not protected by the Constitution and in particular by the 1789 Declaration of the Rights of Man and of the Citizen, except in repressive matters. Therefore, it is possible for the legislator to adopt retroactive tax statutes.

However, in this 1997 decision, the French Constitutional Council used the principle of legal certainty to limit the retroactivity of statutes so as to protect the economy of contracts legally formed, and to reinforce its control over validation laws. In another decision of 18 December 1998, the Council provided for another limit to the retroactivity of statutes in tax matters. The French Constitutional Council added that the legislator can only do so in consideration of grounds of general interests and subject to not depriving legal guarantees based on constitutional requirements.

In Sweden, Chapter 2 of the Swedish Instrument of Government explicitly states that tax statutes cannot be applied retroactively. However, in practice this Instrument is of limited importance when it comes to the legislative process. Thus, there is no absolute prohibition of retroactive tax provisions and the Constitution opens a possibility for the Parliament to establish exceptions if there are special circumstances that require the Parliament to act in such way. These circumstances can be war risk or economic crisis. Furthermore, it is also possible for the government to allow tax legislation to enter into force earlier than the date it was introduced; the only condition being for the government to make a written proposal of the change to the Parliament. This possibility has been justified to prevent undesired consequences of tax law such as tax planning or tax evasion.

Retroactivity and Criminal Law

The protection against retroactivity in criminal law is granted by article 7§1 of the European Convention on Human Rights. The retroactivity principle is construed by the Court of Strasbourg as comporting two sub-elements: first, a principle of prohibition of retroactivity of for more severe repressive statutes, and secondly a corollary principle of admission of retroactivity for more lenient repressive statutes.

I. The Principle of Non-Retroactivity for More Severe Criminal Statutes

The ECtHR has had multiple opportunities to recall the principle of non-retroactivity for more severe criminal statutes: see, for example, cases such as Del Río Prada v Spain, Kokkinakis v Greece or Ould Dah v France. Yet, its implementation is sometimes tricky.

In France, the regime for time-limits applied to initiate prosecution has been revised by a statute of 27 February 2017 which consequently doubled such limits for crimes and offences. In accordance with its article 4 and the aforementioned principle of non-retroactivity, the 2017 statute will not be applied to change previous situations which were subject to the previous limitation rules. However, this reform may have given more protection than intended to "white-collar" crimes such as misuse of corporate assets. Indeed, before this revision, the limit for barring prosecution started to run only when such offences were discovered by the authorities. It meant that these wrongdoings were not subject to a statute of limitations until their discovery (a situation which is usually reserved to crimes against humanity). Thus, the new regime has now implemented time-bars. The starting point of these limits is set on the day the offence or the crime is committed, and not on the day they are discovered, therefore resulting in a possible de facto reduction of the time limit, in favor of such offence.

II. The Corollary Principle of Retroactivity for More Lenient Criminal Statutes

The ECtHR recognized that, although the principle of retroactivity of more lenient criminal statutes is not expressly set out in Article 7§1 of the ECHR, it can nevertheless be deducted from this provision as a "fundamental principle of criminal law": see, in particular, the case of Scoppola v Italy.

In the same manner, the ECJ, in a decision of 3 May 2005 where former Italian Prime Minister Silvio Berlusconi was the claimant, re-enacted that "the principle of the retroactive application of the more lenient penalty forms part of the constitutional traditions common to the Member States". As such, it is enshrined in Article 2 of the Italian Criminal Code or Article 112-1 para. 3 of the French Criminal Code for example.

More recently, the ECtHR extended the application of the principle to a person who was already convicted. Indeed, the Court chose to do so in Gouarré Patte v Andorra because the domestic legislation in Andorra provided for a mandatory ex officio review by the national courts if a retroactive and more lenient statute was passed.

Conclusion

In spite of its universal recognition, the retroactivity effect of statutes varies.

It depends on the legal matters. In tax law, there is no automatic prohibition of retroactive statutes, be they more or less favorable to tax payers, as long as the motives are sufficiently detailed and proportional. On the contrary, in criminal matters, the protection granted is more significant.

The extent of the prohibition of the retroactivity effect also depends on the particular national legislations.

Additional Sources

CASES

European Court of Human Rights: Kokkinakis v Greece (1993, no. 14307/88); Spadea and Scalabrino v Italy (1995, no. 12868/87); M.A. and 34 Others v Finland (2003, no. 27793/95); Burden v United Kingdom (2008, no.13378/05); Scoppola v Italy (2009, no. 10249/03); Ould Dah v France (2009, no. 13113/03); Di Belmonte v Italy (2010, no. 72638/01); Del Río Prada v Spain (2013, no. 42750/09); Gouarré Patte v Andorra (2016, no. 33427/10).

European Court of Justice: decision of 3 May 2005 (no. C-387/02); decision Dansk Røindustri v Commission of 28 June 2005 (no. C189/02 P); decision Akzo Nobel v Commission of 10 September 2009 (no. C-97/08).

English & Welsh Court of Appeal: R. (on the application of APVCO 19 Ltd) v Revenue and Customs Commissioners, 30 June 2015.

French Constitutional Council: decision no. 97-391, 7 November 1997; decision no. 98-404, 18 December 1998; decision no. 2012-661, 29 December 2012.

French Cour de cassation: decision no. 66-91.972, 7 December 1967; decision no. 96-81.482, 5 May 1997.

DOCTRINE

Christophe Soulard, "Communautés européennes - CJCE, 3 mai 2005", Gazette du palais 141 [2005] 6.

Damien Gerard, "Breaking the EU antitrust enforcement deadlock: re-empowering the courts?" E.L.R [2011] 457.

Franco Peirone, "May the Rule of Law Be Retroactive? Berlusconi's Case Before the ECtHR" [2017] 1-26.

Philippe Baker, "Retrospective tax legislation and the European Convention on Human Rights" B.T.R [2005].

INTERNATIONAL

Council of Europe, Guide on Article 7 of the European Convention on Human Rights, 30 April 2017.

European Commission, Rules Applicable to Antitrust Enforcement - General Rules, 1 July 2013.

Hans Gribnau, Melvin Pauwels, Retroactivity of Tax Legislation: General Report for EATLP, 2010.

Region: European Union, Finland, France, Italy, Sweden, United Kingdom
The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.
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