Earlier this year, the European Court of Justice (the “ECJ”) issued a landmark judgment in DB v Commissione Nazionale per la Società e la Bora (“Consob”) in which it confirmed that natural persons have the right to silence under EU law, particularly in administrative proceedings of a criminal nature (the “ECJ Ruling”). The case related to insider dealing.
This ECJ Ruling affirms that the protection of human rights under EU law aligns with well-established international standards, in particular the European Convention on Human Rights (“ECHR”). The ’right to silence’ aims to preserve and uphold the application of fair procedures in (generally, criminal) investigations, and prevent miscarriages of justice in the prosecution of wrongdoing. As we have discussed before, the right to silence under Irish national law is subject to limits and can be more accurately described as a privilege against self-incrimination in that one cannot be compelled to provide information which may be incriminating in nature with respect to a criminal offence.
The ECJ Ruling could have broad implications for regulators and individuals participating in administrative proceedings based on the EU regulatory frameworks, including financial services, competition law, money laundering and environmental regulation. The Ruling is therefore of note in the Irish regulatory enforcement context, across a number of sectors. For example, under the Central Bank of Ireland (“CBI”) regulatory regime and the under the new Irish competition regime, in particular, the right to silence afforded to individuals under the ECJ Ruling will have to be considered by regulators when exercising investigation and / or enforcement powers which could result in substantial administrative sanctions.
The full text of the ECJ Ruling may be found here.
In Ireland, the implications of the judgment are relevant in a number of Irish regulatory contexts:
- CBI regulatory regime
The ECJ Ruling acknowledges that the question of whether administrative sanctions are criminal in nature is a matter of national law, however the criteria set down by the ECJ open up the possibility that Administrative Sanctions Procedure ("ASP”) sanctions may constitute administrative penalties of a criminal nature. The ECJ noted however that, according to the case-law of the ECJ, some of the administrative sanctions imposed by Consob appeared to pursue a punitive purpose and to present a high degree of severity such that they are liable to be regarded as being criminal in nature.
Further, the ECJ noted that even if the sanctions imposed by the Consob are not themselves criminal in nature, if information / evidence obtained from an individual in the administrative sanction investigation could be used in criminal proceedings against that person to establish that a criminal offence was committed, the need to respect the right to silence in the investigation will apply.
The range and potential severity of penalties which may be imposed on natural persons under the ASP are significant and (at the extreme end) have the capacity to have substantial and severe impact on individual; the range includes, for example, fines up to €1 million a prohibition on working in the regulated financial sector. The question of whether such penalties could be regarded, in an appropriate case, as being criminal in nature has not been considered by an Irish court as yet.
- Irish competition enforcement regime
The ECJ Ruling may also have significant implications for individuals (eg, directors, officers) subject to competition law investigations by the Competition and Consumer Protection Commission (“CCPC”) under the new Irish competition regime that is set to be established in the coming months.
Both individuals and undertakings may be sanctioned under the current Irish criminal regime for serious or ‘hardcore’ competition law infringements (ie, where the CCPC refers the matter to the Director of Public Prosecutions). Under the current regime, the CCPC’s civil enforcement powers against both individuals and undertakings are limited to taking an action before the Irish courts for injunctive or declaratory relief in which case right to silence under the ECJ Ruling are unlikely to afford any enhanced protections.
However, under the new Irish competition regime, the CCPC will acquire enhanced civil enforcement powers including the ability to impose fines (possibly subject to judicial oversight) which may extend to both individuals and undertakings. Since the new CCPC fining powers could arguably be viewed as administrative penalties ‘of a criminal nature’ under the ECJ’s criteria, the right to silence under the ECJ Ruling may therefore assume specific importance and afford significant protections to individual directors or officers subject to CCPC investigations under its new civil powers. Accordingly, in order to safeguard the right, the CCPC could be prevented from compelling such individuals to provide testimony or imposing penalties for non-cooperation due to their refusal and it logically flows that the CCPC would also be prevented from imposing penalties for non-cooperation on the undertaking to which the director or officer belongs. The ECJ Ruling may therefore represent a significant curb on the new CCPC powers.
In 2012 the Italian Securities Exchange Commission, Consob, imposed penalties totalling €300,000 for insider dealing on DB, a natural person. This included penalties for a failure to cooperate by refusing to answer questions during a hearing. DB appealed the penalties and ultimately the case ended up before the Constitutional Court of Italy. The Italian Court considered the constitutionality of the Italian law empowering Consob to impose administrative sanctions on DB for failing to cooperate with its investigation. The law in question was derived from the EU Market Abuse Directive, subsequently repealed and replaced by the Market Abuse Regulation and so the matter was referred to the ECJ.
The ECJ was asked to rule on whether the Charter of Fundamental Rights of the European Union (the “Charter”) guaranteed the right to silence and whether this extended to the relevant provisions of the Market Abuse Regulation.
In its ruling, the ECJ made the following key findings:
- Existence of the right to silence under the Charter – the ECJ noted that the ECHR guarantees the right to silence as an element of the broad right to a fair trial under Article 6 ECHR. The ECJ noted that the rights contained in the Charter shall have the same meaning and scope as those equivalent rights laid down in the ECHR. As a result, the ECJ held that the Charter guarantees the right to silence of natural persons under EU law.
- Scope of the right to silence under the Charter - The ECJ noted that the right to silence does not extend to every failure to cooperate with competent authorities, such as refusing to cooperate with the administrative process itself, appear at a hearing or using delaying tactics. However, the ECJ did hold that the right extends to questions of fact which may subsequently be used to support prosecution.
- Application in administrative proceedings of a ‘criminal nature’ - The ECJ noted that while the penalties in this case were administrative sanctions, the right to silence will extend to administrative penalties that are criminal in nature. The criteria for assessing whether administrative penalties are criminal in nature are (1) the classification of the offence under national law, (2) the nature of the offence, and (3) the severity of the penalty. The ECJ held that even where the administrative penalties are not criminal in nature, the right to silence may still apply if the information obtained may support future criminal prosecution.
- Application to natural rather than legal persons - the ECJ held that this right to silence only extends to natural persons. In making this finding the ECJ referred to EU competition law which protects legal persons from self-incrimination in competition cases. By contrast, the ECJ Ruling affords a far broader protection to natural persons as set out above.
As a number of important Irish legal and regulatory systems stem from EU legislation, including environmental regulation and money laundering, the right to silence affirmed by this decision will be relevant to a number of regulatory authorities, not least the Central Bank and the CCPC, and clients subject to regulatory authority, in Ireland.
Please get in touch with Karen Reynolds or your usual Matheson contact should you require further information in relation to the material referred to in this paper. Full details of Matheson's Regulatory and Investigations and Litigation group together with further updates, articles and briefing notes written by members of these teams, can be accessed at www.matheson.com.
. Directive 2006/3/EC
. Regulation 596/2014/EU