September 06 2011
According to the principle of ne bis in idem ('not twice for the same'), legal action cannot be instituted twice in relation to the same cause of action. The legal principle has been adopted in most countries, including Finland. Over the years, the European Court of Human Rights has issued several decisions regarding the interpretation of the ne bis in idem principle in light of Article 4(1), Protocol 7 of the European Convention on Human Rights.
The Supreme Court and the Supreme Administrative Court have recently considered the implications of the ne bis in idem principle and the European Court of Human Right's position thereon in three judgments regarding tax liability. This update discusses the cases and considers their implications.
"No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State."
According to the European Court of Human Rights, cases shall be deemed as being the same if they arise from either identical or substantially identical facts. Therefore, a penalty rendered in a national administrative procedure can, under certain circumstances, be considered as being a criminal penalty referred to in Article 4(1). In respect of a taxpayer's conduct, the European Court of Human Rights has in its precedents drawn parallels between punitive tax increases and tax offences, whereas a punitive tax increase is not a criminal sanction under Finnish law.
According to Finnish law, failure to comply with relevant provisions of tax law may result in:
These consequences are determined according to different procedures by different courts. Furthermore, in Finland, the instigation of criminal proceedings is prohibited if criminal (but not administrative or civil) proceedings regarding the same issue are already pending (lis pendens) or if a final judgment regarding the same factual circumstances has already been issued in previous criminal proceedings.
In two recent decisions – KKO 2010:45 and KKO 2010:46 – the Supreme Court considered the possible effect of ne bis in idem in cases where either a decision regarding a punitive tax increase has become final prior to instigation of the criminal proceedings or a decision regarding the same was not final while criminal proceedings were pending in the court.
According to the court, a final decision rendered in an administrative procedure including a penalty such as a punitive tax increase, following the European Court of Human Rights' interpretation, indeed has a ne bis in idem effect on criminal proceedings and, accordingly, the res judicata effect of such final decision prohibits the instigation of subsequent criminal proceedings regarding the same factual circumstances. Criminal proceedings, however, shall not be discontinued by virtue of the ne bis in idem principle, due to the simultaneous pendency of administrative proceedings or the issuance of a decision which is not final in such proceedings, because this would entail an expansive interpretation of Article 4(1), Protocol 7 of the convention. According to the Supreme Court, the ne bis in idem principle has not been interpreted under the convention so as to have an effect on parallel proceedings.
In Decision KHO 2011:41, the Supreme Administrative Court went even further and, referring to the aforementioned decisions of the Supreme Court, ruled that the ne bis in idem principle does not prevent the rendering of a judgment in an administrative procedure regarding a punitive tax increase, even when a judgment rendered in criminal proceedings has previously become final, as long as the administrative procedure was pending before the judgment became final.
The reasoning of the Supreme Court and the Supreme Administrative Court is based on the wording of Article 4(1), Protocol 7 of the convention and European legal precedent, and established interpretation of the principles of Finnish criminal law.
Ultimately, the reason that an administrative procedure regarding, for example, a punitive tax increase or a non-final judgment regarding the same has no effect on simultaneously pending criminal proceedings is that the lis pendens effect of an administrative procedure does not extend to criminal proceedings. As punitive tax increases have not been stipulated in Finnish criminal law, a procedure regarding tax increases and a procedure regarding tax fraud can be simultaneously pending. Moreover, according to the interpretation of the Supreme Administrative Court, a procedure shall not be discontinued on the grounds that a judgment which has been rendered in another type of procedure (despite its focus on the same factual circumstances) has become final, provided that the previous procedure was pending before the judgment became final.
Furthermore, based on Decision KKO 2011:35, the ne bis in idem principle does not prevent a procedure regarding liability for damages, even if a final judgment regarding criminal liability issues based on the same factual circumstances has been rendered.
Given the European Court of Human Rights' view that a procedure regarding, for example, a punitive tax increase is comparable to criminal proceedings, it remains to be seen whether the European Court of Human Rights will in future assess whether parallel de facto criminal proceedings are acceptable in light of Article 4(1), Protocol 7, as well as Article 6 of the convention, which relates to the right to a fair trial.
For further information on this topic please contact Jussi Ikonen or Satu Sirén at Merilampi Attorneys Ltd by telephone (+358 9 686 481), fax (+358 9 6884 8484) or email (firstname.lastname@example.org or email@example.com). The Merilampi Attorneys website can be accessed at www.merilampi.com.
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