„You have the right to remain silent” during punitive administrative proceedings, CJEU confirms – Case C‑481/19 DB v. Consob
With its recent judgment of 2 February 2021 the Grand Chamber of the CJEU has for the first time recognised the right to silence of natural persons during administrative investigations concerning insider trading, when their answers may establish their liability for an offence punishable by administrative sanctions of a criminal nature or their criminal liability. Therefore, some early commentators on the case have already rightly labelled it a ‘landmark case’ (see, for example, here and here). The Court has so far only dealt with the issue concerning the right to silence of legal persons in the field of competition law proceedings (see, inter alia, the landmark Orkem case). It follows from this settled CJEU case-law that, while legal persons cannot be compelled by the competent authorities to provide answers which might involve admission of an unlawful anti-competitive conduct, they must provide all necessary information on facts and disclose documents, even if these may be used to establish an anticompetitive conduct against them (see, Orkem case, paras 27, 34, 35, Mannesmannröhren-Werke case, para. 78, SGL Carbon AG case, paras 41-44 and 48 and recent Qualcomm case, para. 143). A broader interpretation of the right to silence for natural persons during administrative market abuse proceedings is now guaranteed by the current CJEU judgment:
‘The right to silence cannot reasonably be confined to statements of admission of wrongdoing or to remarks which directly incriminate the person questioned, but rather also covers information on questions of fact which may subsequently be used in support of the prosecution and may thus have a bearing on the conviction or the penalty imposed on that person’ (para. 40).
This judgment can have further impact outside of the field of market abuse, affecting all administrative law proceedings leading to the imposition of sanctions of criminal nature (punitive administrative proceedings) and safeguarding a wider EU fundamental rights protection to natural persons. Such a CJEU step should be welcomed not only from the perspective of EU fundamental rights protection, but also as a contribution to a uniform EU legal order, as it aligns with the well-established case-law of the European Court of Human Rights (ECtHR) on the matter, as already suggested by AG Pikamäe in his recent Opinion on the case (for a thorough commentary on the AG Pikamäe Opinion and the relevant ECtHR case-law see, here). This article provides a brief overview of the theoretical foundations of the right to silence and the background to the current CJEU ruling and highlights the most important reasonings of both the referring and ruling court.
Review of the theoretical foundations of the right to silence
Neither in the Charter of Fundamental Rights of the EU (Art. 48 CFR) nor in the European Convention of Human Rights (Art. 6 ECHR), the right to silence is mentioned explicitly. An explicit legal basis has been given to it in Art. 7 of the Directive (EU) 2016/343 on the Presumption of Innocence, whose scope of application is however limited to natural persons and traditional or so-called ‘hard-core’ criminal proceedings (for an analysis of the Directive see, here). It is however deemed under the ECtHR case-law as a generally recognised international standard, which lies at the heart of the notion of a fair procedure (see, inter alia, John Murray v. the United Kingdom case, para. 45). Looking for its theoretical foundations, the three most common rationales are: protection against the cruelty of causing harm to oneself (cruelty argument), defence against the use of improper compulsion and avoidance of miscarriages of justice (fair procedure argument) and maintenance of the person´s mental privacy (privacy argument) (for a thorough analysis on the justification of the right to silence see here, pp. 424-427). All three rationales enjoy recognition as well as criticism. A fourth justification closely related to the defence rights should also be stressed: Only when the right to silence of the undertakings is guaranteed, they can shape their defence strategy freely and therefore apply their defence rights effectively (in this sense also Limburgse Vinyl Maatschappij and Others case, para. 273).
Background of the DB v. Consob case
Mr DB was subjected to a series of administrative sanctions imposed by Consob (the Italian Financial Market Supervisory Authority): Among them, financial penalties for the administrative offences of insider dealing and of violating his duty to cooperate with the supervisory authority by systematically postponing the date of the hearing and refusing to answer to the questions once he appeared. Mr DB using the national legal route and the legal remedies provided to him, brought the case before the Corte suprema di cassazione (Italian Supreme Court of Cassation), which referred two constitutional issues to the Corte costituzionale (Italian Constitutional Court). The latter lodged a request for a preliminary ruling from the CJEU asking, first, how the relevant secondary EU law provisions (Art. 14(3) of Directive 2003/6 (MAD I) and Art. 30(1)(b) of Regulation No 596/2014 (MAR)) should be interpreted. Do they allow Member States not to penalise a natural person´s refusal to answer to questions of the supervisory authorities during administrative market abuse proceedings, when this could lead to self-incriminating statements and therefore to their liability for an administrative offence punishable by administrative sanctions of criminal nature? Second, are those secondary EU law provisions of MAD I and MAR compatible with primary EU constitutional law, namely with Arts 47 and 48 CFR, in the light of the ECtHR case-law on Art. 6 ECHR and the common constitutional traditions of the Member States?
The point of view of the Italian Constitutional Court
The Italian Constitutional Court is called upon to decide on the (un)constitutionality of the national law provision (see Art. 187quinquiesdecies Testo Unico della Finanza (TUF)), which penalises the failure to comply, within the specified time limit, with Consob´s requests and the causing of delay in the performance of Consob’s duties during investigations for insider dealing. This provision was introduced in Italian law in implementation of the general duty to cooperate with the supervisory authorities, as initially regulated under MAD I and later replaced by MAR. According to the referring court, the imposition of penalties for the non-cooperation with the competent authorities appears to be contrary to fundamental rights and principles of the national and EU legal order, such as the defence rights and the principle of equality of the parties in the proceedings (see, Order for reference, p. 3). However, as the relevant Italian law provisions implement secondary EU law, the Italian Constitutional Court would essentially contradict EU law if it annulled these provisions. So, does this secondary EU law require to penalise silence in those cases? Should the relevant provisions of MAD I and MAR be understood as imposing an obligation on the Member States to penalise such conduct, or do they leave them a broad discretion to choose the necessary measures under their own (not necessarily criminal) national weaponry? Would a Member State obligation to penalise such conduct be compliant with the protection of the right to silence in the EU legal order (Arts 47 and 48 CFR and Art. 6 ECHR)?
The Italian Constitutional Court tries to draw its own red line as to what is included in the scope of the right to silence, stating that a refusal or delay to appear at the hearing of the supervisory authority does not fall under the protective scope of the right. Moreover, it emphasises the tension in the uneasy relationship between, on the one hand, the duty to cooperate with the supervisory authorities, which, to be added as well, serves the purpose of effective enforcement of EU competition law in order to ensure the integrity of EU financial markets and to enhance the public confidence in financial instruments (see Spector Photo Group and Van Raemdonck case, para. 37), and, on the other hand, the de facto risk of self-incriminating statements from the suspect for an administrative offence resulting in a sanction of criminal nature (para. 21). Here it should be mentioned that under the Italian law insider dealing is both an administrative and a criminal offence and the parallel conduct of both administrative and criminal proceedings, as happened also in the current case, was deemed to be compliant with the ne bis in idem principle under Art. 50 CFR (see CJEU, Garlsson Real Estate and Others case, paras 42-63).
On the admissibility issue
The CJEU considers the preliminary questions admissible, reminding of the presumption of relevance of the factual and legal background of the case as described by the referring court and the lack of any ground for refusal to rule on the questions (para. 29). Moreover, an overall examination of the analogous provisions of Arts 14(3) of MAD I and 30(1)(b) of MAR is justified by the consistency and continuity of those two EU legal acts (para. 30).
The highlights of the CJEU judgment
On the scope of the right to silence
Not that groundbreaking, but always good to be reminded of is the relationship between the CFR and the ECHR when it comes to the interpretation of EU fundamental rights. In the case at hand, the right to silence and therefore Arts 47 (right to a fair trial) and 48 (presumption of innocence) CFR come to the fore. Art. 6 ECHR and the relevant ECtHR case-law should however be considered as well, according to Art. 6(3) TEU, as the ECHR fundamental rights constitute general principles of EU Law. Moreover, Art. 52(3) CFR emphasises the consistency between fundamental rights in CFR and ECHR, which means that when the rights correspond to each other, they should be understood as having the same meaning and scope (para. 36). So, when the CJEU interprets the rights in Arts 47(2) and 48 CFR, which correspond to Arts. 6(1) and 6(2) and (3) ECHR respectively (see here), it should consider the ECtHR case-law ‘as the minimum threshold of protection’ (para. 37).
On the theoretical justification of the right to silence, the CJEU follows the ECtHR case-law and favours the fair procedure rationale repeating that, although the right to silence is not explicitly mentioned in the CFR or ECHR, it is considered as a generally recognised international standard which lies at the heart of the notion of a fair trial. Its quintessence is to protect against improper coercion by the authorities, avoid miscarriages of justice and secure the aims of Art. 6 ECHR (para. 38). Traditionally related to criminal proceedings, its imperative is to protect the accused and to prevent the prosecution from establishing the guilt resorting to evidence obtained through methods of coercion or oppression in defiance of the will of the accused (para. 39). However, the fair procedure rationale is extended now from pure criminal to punitive administrative proceedings, such as those in the context of market abuse cases.
Rationale and scope of the right are two sides of the same coin. And the novelty of the current case precisely lies in the extension of the scope of the right: Not only statements of admission of wrongdoing or other directly incriminating remarks from the person questioned fall under the protective scope of the right to silence, ‘but it rather also covers information on questions of fact which may subsequently be used in support of the prosecution and may thus have a bearing on the conviction or the penalty imposed on that person’ (see para. 40). A clear-cut line of what falls outside of the protective scope of the right and therefore under the duty to cooperate, in line with the Italian Constitutional Court, is drawn by the CJEU: A refusal to appear at a hearing planned by the supervisory authorities or delaying tactics designed to postpone it are not included in the scope of the right to silence (see para. 41).
If we had to summarise the CJEU judgment in a single sentence, it would be the following: ‘The right [to silence] is intended to apply in the context of proceedings which may lead to the imposition of administrative sanctions of a criminal nature’ (para. 42). Assessing if the administrative sanctions imposed by Consob are criminal in nature is a subsumption that has to be done under the guidance of the Engel/Bonda criteria (see here, para. III.1.) by the referring national court. However, both the CJEU with its rather recent case-law (see, Garlsson Real Estate and Others case, paras 34 and 35 and Di Puma and Zecca case, para. 38) and the ECtHR with its former jurisprudence (see, Grande Stevens and Others v. Italy case, para. 101) have ruled on the issue, confirming the criminal character of the Consob sanctions (see, to that effect also, the similar Menarini Diagnostics S.R.L. v. Italy case, para. 42 for punitive administrative sanctions imposed by the Italian Competition Authority AGCM). In the case at hand, although the CJEU does not make a new assessment of the criminal nature of the specific administrative sanctions imposed on Mr. DB, it cites its above-mentioned case-law and mentions that ‘some of the administrative sanctions imposed by Consob appear 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’ (para. 43).
The following ‘even-if’ argument of the CJEU seems to revel a particular interest and refers to the above-mentioned Italian double-track enforcement system concerning insider dealing: Even-if we ignore the legal nature of the present sanctions by Consob, so even-if they are not characterised as criminal in nature, the right to silence still applies in the proceedings before Consob, because under the Italian law there is the risk that the evidence obtained during those proceedings may be used in the often parallel conducted criminal proceedings against the same person in order to prove the commission of a criminal offence (para. 44). This is reminiscent of the ECtHR case of Saunders v. the United Kingdom (see, para. 71), where it was held that statements obtained in administrative proceedings (this was the case with Mr Saunders´s self-incriminating answers to interviews by DTI (Department of Trade and Industry) Inspectors under sections 434 and 436 of the Companies Act 1985) could not later be used as evidence in criminal proceedings to support the conviction of the suspected person, as this would violate the right not to incriminate oneself.
Therefore, the CJEU concludes in para. 45 that the right to silence must be respected also in the context of the administrative market abuse proceedings and no penalties can be issued by the supervisory authorities to the questioned persons, for refusing to provide the competent authorities with self-incriminating answers, meaning ‘answers which might establish their liability for an offence that is punishable by administrative sanctions of a criminal nature, or their criminal liability’.
In conclusion, the Court tries to emphasise that its current judgment does not conflict with the previous CJEU case-law in competition law matters for two reasons. The previous settled case-law is as follows: ‘the undertaking concerned may be compelled to provide all necessary information concerning such facts as may be known to it and to disclose, if necessary, such documents relating thereto as are in its possession, even if the latter may be used to establish, inter alia in its regard, the existence of anti-competitive conduct’. But first, it is the same case-law which clarifies that this does not involve answers equivalent to admission respecting the nemo tenetur se ipsum accusare principle and second, it concerns only legal persons and cannot be applied by analogy to natural persons (paras 46-48 and interesting reflections in the AG Pikamäe Opinion about the non-accepted analogy between legal and natural persons, paras 96-99). In its case-law on the right to silence, the CJEU therefore clearly distinguishes between natural and legal persons. It remains to be seen whether the ECtHR, which has not yet ruled on the right to silence of legal persons, will follow the same approach. For the time being, there seems to be a perfect balance and symbiosis between the two courts in terms of their jurisprudence on the right to silence, at least as far as natural persons are concerned.
On the validity of secondary EU Law provisions of MAD I and MAR with primary EU Law (CFR)
The CJEU recognises that the wording of Arts 14(3) of MAD I and 30(1)(b) of MAR is open to many interpretations but states that preference should be given to the one that promotes the compatibility with primary EU law (para. 50). Both Articles do not require Member States to impose penalties on natural persons for refusing to provide self-incriminating answers to the competent authorities, and therefore the secondary EU law provisions are compatible with Arts 47 and 48 CFR. The current MAR merely requires Member States ‘to ensure that the competent authorities have the power to take appropriate sanctions and other measures’ if there are breaches on the duty to cooperate in the context of administrative market abuse proceedings (para. 54).
Finally, the CJEU mentions in a ‘yes-but’ argument that yes, the secondary EU law provisions grant broad discretion to the Member States and do not oblige them to penalise natural persons for refusing to give self-incriminating answers leading to their liability for both administrative and criminal offences, but this discretion should be understood and interpreted in a way compliant with the fundamental rights protection in the EU legal order (para. 57).
The CJEU thus provides us for the first time in the post-Lisbon era with such a judgment recognising the right to silence of natural persons in punitive administrative proceedings (market abuse), following in the footsteps of the ECtHR, which in its well-established case-law has already assigned a wider scope to the right to silence in such proceedings. The ruling should also not surprise the Italian Constitutional Court, which this time, according to the order for reference, seems to share the CJEU’s views on the scope of the right, so that the current decision could also be described as a healthy dialogue between the two courts. The impact of the case is expected to be broader, reaching beyond the area of administrative market abuse proceedings to all relevant proceedings that could be characterised as punitive in nature.