Ne bis in idem principle: Court of Justice clarifies that identity of legal interest pursued by two penalties is not an essential requirement for its application

Thanks to Iago Gentile for collaborating on this article

On September 14th, 2023, the Court of Justice of the European Union (“CJEU”) rendered an important judgment[1] (the “Judgment”) clarifying the conditions for the application of the fundamental principle of ne bis in idem (or no double jeopardy) set forth in Article 50 of the Charter of Fundamental Rights of the EU (the “EU Charter”) in the context of a fine for unfair commercial practices[2], which was levied by the Italian Competition Authority (“ICA” or the “Authority”) against Volkswagen in the so-called diesel gate investigation. Notably, the CJEU confirmed that the ne bis in idem principle – by which a person cannot be repeatedly tried or punished in criminal proceedings for an offense for which the same person has already been finally judged – may also apply to administrative proceedings and financial penalties levied by different authorities or courts in different Member States and pursuant to different set of legislations, if the facts and the person involved are the same. As commented below, this principle is of great relevance for the increasing regulatory enforcement in the digital environment across the EEA.

The underlying sanctions against Volkswagen in Italy and Germany

The case originates from a decision of August 4th, 2016 (the “Italian penalty”), by which the ICA sanctioned Volkswagen Aktiengesellschaft and Volkswagen Group Italia S.p.A. (hereinafter jointly the “Applicant”) with a €5 million fine for allegedly misleading consumers about the level of pollutants in its vehicles’ emissions since 2009. According to the findings of the Authority, diesel vehicles sold by the Applicants contained software allowing the measurement of emission levels of nitrogen oxides (NOx) to be distorted during pollutant emissions inspection tests; furthermore, according to the ICA, the applicants had disseminated misleading advertisements which emphasized the compliance of those vehicles with the criteria provided for under environmental legislation.

On June 13th, 2018, whilst the appeal against the Italian penalty was still pending before the Italian administrative courts, the Public Prosecutor’s Office of Braunschweig (Germany, the “Prosecutor’s Office”) imposed a €1 billion fine (the “German penalty”) on the Applicant for the alleged manipulation of exhaust gas from certain diesel engines of the Applicant’s group, in respect of which investigations had shown that the emission requirements had been circumvented. The proceedings were based on the Ordnungswidrigkeitengesetz (i.e., the national law on administrative offenses of firms), which sanction the negligent breach of the duty of supervision in the activities of commercial undertakings. The Prosecutor’s Office applied that law to the conduct concerning the development of the same software referred to in the Italian penalty as well as to its installation in 10.7 million diesel vehicles marketed worldwide (700 thousand of which were shipped to Italy). Notably, the German penalty stated that part of the total amount of the fine, corresponding to €5 million, penalized the same conduct referred to in the Italian penalty, while the remainder of the fine was intended to deprive the Applicant of the economic advantage which it had derived from the installation of the software.

Although the German penalty happened after the one imposed by the ICA, it became final before the Italian penalty did because the Applicant paid the German penalty immediately and waived its right of appeal, while the appeal proceedings against the Italian penalty were still pending.

 The questions referred to the CJEU and the Judgment

 By invoking the principle of res judicata in its favor, the Applicant requested before the Italian Council of State that the Italian penalty be annulled for double jeopardy of the same conduct, in breach of Article 50 of the EU Charter (among others). Specifically, the Applicant argued that the Italian penalty had subsequently become unlawful due to an infringement of the ne bis in idem principle, which prohibits the duplication of both proceedings and penalties of a criminal nature for the same acts and against the same individual.

The Council of State deemed that the Applicant’s argument was founded but questioned whether a derogation to that principle might apply in this case, considering that the proceedings and penalties before the ICA are classified as administrative under Italian law, and that a provision in Article 52 of the EU Charter prescribes the conditions under which a derogation to Article 50 may be contemplated by national laws or decisions. The Council of State therefore decided to pause the proceedings and refer certain preliminary questions of the interpretation of Article 50 and its limitations to the CJEU, requesting in essence:

  1. whether the financial penalties for unfair commercial practices imposed under national legislation implementing Directive 2005/29 can be classified as criminal penalties, thus falling under the scope of ne bis in idem, even though they are classified as administrative fines under national law;
  2. whether Article 50 of the EU Charter precludes a national court of appeal of a Member State from making a financial penalty for unfair commercial practices final and enforceable (i.e., res judicata), where such final decision in the appeal proceedings is preceded by a criminal financial penalty issued under a different set of rules by another Member State for the same conduct and against the same individual, which had already become res judicata;
  3. under which conditions derogations from the application of the ne bis in idem principle, enshrined in Article 50 of the EU Charter, may be justified.

As to the first question, the answer rendered by the Court of Justice was in the affirmative, insofar as the financial fine at issue, even though classified as an “administrative” sanction under domestic law, is comparable to a criminal sanction in substance for its high degree of severity and punitive purpose. Indeed, the CJEU stated that, based on its case-law, three criteria are relevant in the context of that assessment: (i) the legal classification of the offense under national law, (ii) the intrinsic nature of the offense, and (iii) the degree of severity of the penalty. Nevertheless, the first criterion based on legal classification under national law is not sufficient in itself to determine that a certain offense is not “criminal” in nature if the other two criteria substantiate that they do have such nature in substance. As to the second criterion, the CJEU clarified that the clear punitive (and not merely deterrent) purpose pursued by the sanction is decisive in determining the intrinsic criminal nature of the offense. Said sanction is therefore not limited to repairing damage or preventing any economic advantage from the unlawful conduct. As regards the third criterion, the severity is usually measured by the maximum potential penalty, which is set at €5 million for unfair commercial practices and is also equivalent to the Italian penalty imposed on the Applicant, and it therefore certainly has a high degree of severity according to the CJEU.

On the second question, the CJEU also responded in the affirmative: the ne bis in idem principle precludes national legislation from allowing a criminal fine to be imposed on a legal person for unfair commercial practices, or the sanction to be maintained where that individual has been the subject of a criminal conviction in respect of the same facts in a different Member State. This is the case even if such a conviction is only subsequent to the decision imposing the first fine, but only inasmuch as that conviction became final before the judgment in the appeal proceedings against the first decision acquired the force of res judicata.

Notably, according to the Judgment, the conditions under which the principle in question applies are only that there are other proceedings for a criminal offense (the “bis” part) regarding the same facts and against the same individual for which a criminal penalty has already become final (the “idem” part), irrespective of the manner the latter has already become final and of whether it was issued in a different Member State under a different set of rules.

Indeed, as the CJEU already clarified in bpost[3], the manner in which national law classifies conduct and the legal interest protected by the law is not relevant for the purposes of establishing the existence of the same offense, otherwise the scope of the protection conferred by Article 50 of the EU Charter could vary from one Member State to another. Furthermore, the CJEU clarified that the “idem” condition can only be deemed satisfied where the constituent facts of the infringements underlying the two sets of proceedings are “identical” – not merely similar. In this respect, the CJEU held that the mere reference, in one of the decisions, to additional territories of other Member States in which the conduct has been carried out is not sufficient to rule out the “idem” condition. However, it is for the referring court to carry out this assessment based on whether the installation of the abovementioned software, the obtaining of type approval and the manner of the promotion and sale of the relevant vehicles constitute a set of concrete circumstances which are inextricably linked together for the finding of both sets of infringements.

On the third question, the CJEU clarified the conditions under which the application of Article 50 of the EU Charter may be subject to certain limitations.

First, it recalled that such conditions are set forth in Article 52 of the EU Charter, according to which any limitation on the exercise of the rights and freedoms recognized by the EU Charter must (i) be provided for by law, (ii) respect the essence of those rights and freedoms and (iii) be proportionate and necessary to genuinely meet objectives of general interest recognized by the European Union or the need to protect the rights and freedoms of others. Therefore, according to the CJEU, a duplication of proceedings or penalties with respect to the same facts against the same individual is possible, provided that the pieces of national legislation concerned clearly provide for a duplication of proceedings and penalties under different legislations and in pursuit of distinct public objectives. In this respect, the CJEU held that the Italian and German legislation concerned pursued distinct legitimate objectives of general interest (i.e., respectively, a high level of consumer protection and compliance of business activities with the law in general).

However, Article 52 of the EU Charter also requires that the duplication of proceedings or penalties is proportionate and does not go beyond what is strictly necessary to attain such legitimate objectives. In this regard, the CJEU states that public authorities can legitimately choose complementary legal responses to certain conduct that is harmful to society so as to address different aspects or objectives of the social problem involved, provided that: (i) the cumulative effect of the two sanctions cannot be considered excessively burdensome for the party concerned; (ii) there are sufficiently clear and precise rules making it possible to predict which acts or omissions are liable to be subject to a duplication of proceedings and penalties and that there will be coordination between different authorities; and (iii) the two sets of proceedings are conducted in a sufficiently coordinated manner between the competent authorities, also with respect to the magnitude of the penalties to be applied, and within a proximate timeframe.

The CJEU held that the last condition was not satisfied in the present case. Remarkably, the CJEU conceded that this requirement is not easily satisfied, especially when the entities concerned operate in different Member States; nonetheless, the CJEU insists on the obligation of Member States and courts to strictly apply and respect this requirement to justify a derogation from the application of the general principle of ne bis in idem.

Comments and takeaways on impact in the digital environment

This judgment, combined with the precedent in bpost, will certainly turn out to be of great relevance in guiding the application and enforcement, by either the European Commission or national courts and authorities, of the Digital Markets Act (DMA), the Digital Services Act (DSA) and the rules for the protection of consumers, privacy and competition in the digital environment. Indeed, these separate sets of legislation, which are complemented by EU and national provisions, may certainly hint at the same conduct by the same individuals, and they all pursue legitimate objectives which may be deemed distinct and complimentary, but which indisputably also partially overlap with each other (e.g. with respect to the protection of free and informed choice of consumers). The close complementarity and the proximity of the legal interest protected by these legislations have already raised disputes and questions across the EU on issues of the partition of competences and jurisdiction between different enforcers – for instance, between competition and privacy authorities with respect to the manner in which digital platforms acquire data and consent from consumers or businesses. The full application of the DMA and the DSA in the Member States’ legal order is bound to increase the interplay – and thus the possible conflict – of the competences and jurisdiction of the European Commission, national competition and regulatory authorities and national courts with respect to commercial conduct in the digital field.

So far, EU and national courts have confirmed that the same conduct may be subject to different sets of complementary legislations (e.g., privacy, competition or consumer protection) that can be applied simultaneously (since they are not incompatible and provide for clear rules in case of conflict). However, this new Judgment clarifies that the manner in which national regulatory or competition authorities in different Member States will coordinate their interventions, including the magnitude of the penalties, among and between each other and the European Commission is decisive to ensure the legality of their actions, particularly where the different sets of legislation do not provide clear rules on how such coordination should occur.

[1] Case C.27/22, the “Judgment”

[2] Under Directive 2005/29

[3] Judgment of 22 March 2022 in Case C-117/20

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