Professional content

Ne bis in idem - Changes necessary?

17.6.2014 Gunnar Egill Egilsson

New finding of the European Court of Human Rights raises questions whether criminal proceedings, followed by administrative sanctions imposed by Icelandic Tax Authorities, may be in breach of the classical principle know in Roman Civil Law as Ne bis in idem.

On June 5 two interesting rulings where handed down in the field of Icelandic tax law. Firstly there was a judgement in the District Court of Reykjanes, case no. S-111/2014, which pertains to breach of the Icelandic VAT legislation. Secondly there was a judgement in the Supreme Court of Iceland, case no. 538/2013, which regarded breach of the Income Tax legislation. Even though the cases are somewhat different, they have one common thread. In both instances the defendants had been subject to administrative surcharges imposed by the Directorate General, based on sanctions under relevant law, for failing to obey the legislation. Following that, the defendants where prosecuted for that same breach of law.

Both defendants pleaded that their case should be dismissed, as if they would be subject to sanctions allowed under the penal code, that would entail two separate procedures for a single breach of law, which goes against Article 4 of Protocol No. 7 to the European Convention on Human Rights (hereinafter referred to as the Convention).

The district court held that the surcharge imposed by the Directorate General under the VAT act, constituted a criminal proceeding. Additionally the court held that the defendant had been subject to criminal proceedings for the breach the VAT act. Thereby, a second criminal proceeding would be in breach of Article 4 of Protocol No. 7 of the Convention. Therefore the case was partially dismissed. In it's reasoning the court referred to a finding of the European Court of Human Rights in the case of Zolotukhin v. Russia

The Supreme Court denied the motion of dismissal. The court based its finding on prior Icelandic case law, were the court had upheld that the sanction imposed by the Directorate General would not preclude later criminal proceedings. The existing case law was, among other, based upon findings of the European Court of Human Rights in the cases of Ponsetti and Chesnel v. France, and Rosenquist v. Sweden.

The above mentioned cases will not be compared at this time, but what is curious is that, in neither of the cases did the courts refer to the new case of Nykänen v. Finland, from May 20 2014. That case involved circumstances that where identical to the circumstances in Iceland. The defendant had been subject to sanctions, due to breaches of the Finish Income Tax Act, which was fallowed by a separate criminal proceeding.

The European Court of Human Rights agreed with the Finish defendant, and considered the two proceedings to be a breach of the aforementioned article 4. The reasoning for that conclusion was as follows:

  • Under the Finnish system the criminal and the administrative sanctions are imposed by different authorities without the proceedings being in any way connected.
  • Both sets of proceedings follow their own separate course and become final independently from each other. 
  • Neither of the sanctions is taken into consideration by the other court or authority in determining the severity of the sanction, nor is there any other interaction between the relevant authorities. 
  • The tax surcharges are under the Finnish system imposed following an examination of an applicant's conduct and his or her liability under the relevant tax legislation which is independent from the assessments made in the criminal proceedings.

The reasoning of the district court seems to be more in accordance with this new case, rather than the reasoning of the Supreme Court. Having said that, it should be noted that the two cases are not completely identical.

However, shortly the European Court of Human Rights will hand down it's finding in a case of an Icelandic defendant, that had been subject criminal prosecution following administrative sanction, due to a breach of the Income Tax Act. If the finding will be in line with the case of Nykänen v. Finland, amendments are necessary.