Today’s decision by the Grand Chamber in C-617/10 Åkerberg Fransson is a landmark decision on the scope of the Charter of Fundamental Rights, EU constitutional law, and the relationship between national and EU law in general. As I explained in an earlier post, it was not clear, until today, whether the Charter had the same scope of fundamental rights protection as under the ‘old’ regime of fundamental rights protection ensured by the CJEU. The CJEU dealt with the issue head on stating that article 51 (1) of the Charter ‘confirms the Court’s case-law relating to the extent to which actions of the Member States must comply with the requirements flowing from the fundamental rights guaranteed in the legal order of the European Union’ (para. 18).
The case concerned criminal proceedings initiated against Hans Åkerberg Fransson for tax fraud. Mr Åkerberg Fransson, a fisherman active on the Kalix river, allegedly provided false information concerning his income tax and value added tax (harmonised by directive 2006/112/EC), resulting in a loss of revenue for the Swedish exchequer. He received tax fines for the years 2004 and 2005 in 2007. Subsequently, in 2009, criminal proceedings were initiated against Mr Åkerberg Fransson for the same facts. In that case, which lead to the preliminary reference, Mr Åkerberg Fransson submitted that these criminal charges should be dismissed on the ground that he had already been punished for those acts and that these criminal proceedings were therefore in violation of the ne bis in idem principle laid down in article 50 of the Charter.
The contentious issue was whether the Charter applied in such a case. On the one hand, it was clear that Sweden needed to take all the necessary measures to collect value added tax as required by directive 2006/112/EC. On the other hand, the national legislation which provided for tax penalties and criminal proceedings was not a transposition of the directive and therefore the situation might fall within the ‘scope’ of EU law but Member States were not ‘implementing’ EU law. The question was thus whether national rules for administrative and criminal penalties applicable to infringements of VAT legislation (that VAT legislation being an implementation of directive 2006/112/EC) can be considered implementation of Union law.
As I mentioned in my previous post, it was not clear whether the Charter (which entered into force with the Treaty of Lisbon) had lead to an alteration of the scope of the EU fundamental rights standard. The source of this discussion is Article 51 of the Charter, which was the object of much disagreement among the drafters of the Charter. Its wording reflects the desire of Member States to limit the scope of the Charter. Article 51 states that the Charter only applies to acts of the Member States ‘when they are implementing Union law’. It thus leaves out the broader category of ‘the scope of EU law’. However, the Explanatory Note on Article 51 seems to contradict the idea that the Charter would lead to a restriction of the previous case-law of the Court on fundamental rights. In any case, what actually constitutes “implementation” and what does not is also not clear.
To recall, the Advocate General adopted a rather cautious approach. He argued that
In my view, the competence of the Union to assume responsibility for guaranteeing the fundamental rights vis-à-vis the exercise of public authority by the Member States when they are implementing Union law must be explained by reference to a specific interest of the Union in ensuring that that exercise of public authority accords with the interpretation of the fundamental rights by the Union. The mere fact that such an exercise of public authority has its ultimate origin in Union law is not of itself sufficient for a finding that there is a situation involving the implementation of Union law.
The Advocate General considered that the system of penalties in Sweden was completely independent from VAT collection, and thus should not be considered implementation of Union law:
In short, it appears to be risky to assert that, by means of a provision such as Article 273 of Directive 2006/112, the legislature was anticipating the transfer of all the constitutional guarantees governing the exercise of the Member States’ power to impose penalties – including the collection of VAT – from the Member States to the Union.
In today’s judgment, however, to the CJEU simply applied the Charter in a straightforward manner, dismissing the arguments advanced by five Member States and (surprisingly) the Commission that the CJEU did not have jurisdiction since the Charter did not apply in this case. Rather unusually, the CJEU went the extra mile in its reasoning, referring to another Grand Chamber judgment of today Melloni (we will have a post on that shortly too).
First, the CJEU firmly took sides in the debate on whether the Charter has a different scope of application than the case law based fundamental rights regime. It held that article 51 (1) of the Charter ‘confirms the Court’s case-law relating to the extent to which actions of the Member States must comply with the requirements flowing from the fundamental rights guaranteed in the legal order of the European Union’ (para. 18). The CJEU continued that ‘in essence’ ‘the fundamental rights guaranteed in the legal order of the European Union are applicable in all situations governed by European Union law, but not outside such situations. In this respect the Court has already observed that it has no power to examine the compatibility with the Charter of national legislation lying outside the scope of European Union law. On the other hand, if such legislation falls within the scope of European Union law, the Court, when requested to give a preliminary ruling, must provide all the guidance as to interpretation needed in order for the national court to determine whether that legislation is compatible with the fundamental rights the observance of which the Court ensures’ (para. 19).
On that basis the CJEU states that this also applies to the protection guaranteed by the Charter:
20 That definition of the field of application of the fundamental rights of the European Union is borne out by the explanations relating to Article 51 of the Charter, which, in accordance with the third subparagraph of Article 6(1) TEU and Article 52(7) of the Charter, have to be taken into consideration for the purpose of interpreting it (see, to this effect, Case C-279/09 DEB  ECR I‑13849, paragraph 32). According to those explanations, ‘the requirement to respect fundamental rights defined in the context of the Union is only binding on the Member States when they act in the scope of Union law’.
21 Since the fundamental rights guaranteed by the Charter must therefore be complied with where national legislation falls within the scope of European Union law, situations cannot exist which are covered in that way by European Union law without those fundamental rights being applicable. The applicability of European Union law entails applicability of the fundamental rights guaranteed by the Charter.
To put it succinctly: the Court squarely equated “implementation” with “scope of application”.
Applying these considerations to the case at hand, the CJEU concluded that Sweden had to observe the Charter when imposing tax fines and criminal penalties when giving effect to the VAT directive. It held that it follows from the provisions of the directive that ‘every Member State is under an obligation to take all legislative and administrative measures appropriate for ensuring collection of all the VAT due on its territory and for preventing evasion’ para. 25). Additionally, the CJEU referred to article 325 TFEU which ‘obliges the Member States to counter illegal activities affecting the financial interests of the European Union through effective deterrent measures and, in particular, obliges them to take the same measures to counter fraud affecting the financial interests of the European Union as they take to counter fraud affecting their own interests [...].Given that the European Union’s own resources include, as provided in Article 2(1) of Council Decision 2007/436/EC, Euratom of 7 June 2007 on the system of the European Communities’ own resources (OJ 2007 L 163, p. 17), revenue from application of a uniform rate to the harmonised VAT assessment bases determined according to European Union rules, there is thus a direct link between the collection of VAT revenue in compliance with the European Union law applicable and the availability to the European Union budget of the corresponding VAT resources, since any lacuna in the collection of the first potentially causes a reduction in the second’ (para. 26).
Obiter, the CJEU added that
28 The fact that the national legislation upon which those tax penalties and criminal proceedings are founded has not been adopted to transpose Directive 2006/112 cannot call that conclusion into question, since its application is designed to penalise an infringement of that directive and is therefore intended to implement the obligation imposed on the Member States by the Treaty to impose effective penalties for conduct prejudicial to the financial interests of the European Union.
29 That said, where a court of a Member State is called upon to review whether fundamental rights are complied with by a national provision or measure which, in a situation where action of the Member States is not entirely determined by European Union law, implements the latter for the purposes of Article 51(1) of the Charter, national authorities and courts remain free to apply national standards of protection of fundamental rights, provided that the level of protection provided for by the Charter, as interpreted by the Court, and the primacy, unity and effectiveness of European Union law are not thereby compromised (see, in relation to the latter aspect, Case C-399/11 Melloni  ECR I-0000, paragraph 60).
This last point is an interesting one, and our blog will cover it more extensively in the post on Melloni. As regards to the scope of application of the Charter, the approach of the CJEU is to be welcomed in my opinion. The CJEU rightfully avoids a lacuna in the system of fundamental rights protection, and also avoids legal difficulties as to how a different scope of the Charter would be reconciled with older case law on fundamental rights protection. I don’t see the difficulties the Advocate General discussed in his musings on implementation of EU law. If Member States are enforcing substantive EU norms through administrative and criminal penalties, the CJEU clearly should be able to oversee uniform application of EU law, especially considering the fact that article 2 TEU states that the ‘Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities’. Simply passing the buck to Member States is not part of that.