19 Mar 2021

Silent, but not Uncooperative – an Important Decision by the ECJ

As the famous Arabic proverb says, ‘Silence is golden’.  And it seems that this nugget of ancient wisdom still holds true today – even in law; even when it comes to a high-profile case before the European Court of Justice.  To find out why would silence be so important as to cause a stir among lawyers throughout Europe, we must track back to the beginning. 

What happened?

On February 2, 2021, the European Court of Justice (ECJ) released a landmark ruling on due process rights in preliminary reference from the Italian Constitutional Court in DB v Commissione Nazionale per le Società e la Borsa (Consob).  The case concerns penalties imposed on a natural person (DB) for insider dealing and for failure to cooperate in the context of an administrative investigation.

Namely, the ECJ recognizes that (i) the EU Charter of Fundamental Rights (Charter) affords natural persons a right to remain silent (ii) this right precludes the imposition of penalties on natural persons who refuse to provide potentially self-incriminating answers to investigating authorities.

Whoa!  That’s huge… I guess.  Could you please dumb it down?

Let’s make it simpler:

  • Italy’s National Companies and Stock Exchange Commission (Consob) fined DB EUR 300,000 in total, for an administrative offence of insider dealing.  (To oversimplify it, insider dealing means – illegal – trading of a company’s securities based on nonpublic information about a company.  If you want to find out more click here). 
  • Furthermore, Consob fined DB EUR 50,000 – for non-cooperation in the administrative investigation.  DB had repeatedly postponed the hearing before Consob, and then declined to answer questions Consob asked him.
  • The Court of Appeal in Rome quickly dismissed his appeal against the EUR 50,000 fine.  Not one to be deterred, DB appealed to the Supreme Court of Cassation.  
  • That Court requested assistance from the Italian Constitutional Court.  Italian law states that failure to cooperate before Consob should be penalized.  However, a question sprang up – is that compatible with the right to remain silent?

Wait a second!  The right to remain silent.  What’s that? 

Broadly speaking, the right to remain silent (or the right of silence) is a legal principle that releases one from the obligation to answer questions.  Before the police, court, or even a similar authoritative body – such as Consob. 

OK, I got it.  So, was DB rightfully tacit? 

 That’s something that was hard even for the Italian Constitutional Court to decipher.  It was a complicated question because:

  • The right of silence is a well-established legal principle in police investigations and in court in a criminal proceeding.  Both in Italy and worldwide (it’s even in the Fifth Amendment!). 
  • But DB was taking part in an administrative investigation, in which the question of the relevance of the right to remain silent had not been addressed.  Even though he participated in an administrative investigation, DB could have – by not remaining silent and giving away… inconvenient information – potentially exposed him in an eventual criminal proceeding.  Or even trigger one against him. 
  • Based on an Italian norm (Decreto legislativo n. 58, Article 187) DB was fined EUR 50,000 for his refusal to cooperate in the investigation.  That provision was, in turn, adopted as an implementation of Directive 2003/6/EC of the European Parliament and Council (the Directive) and Regulation (EU) No 596/2014 of the European Parliament and of the Council (the Regulation).  These two provisions basically state that someone that does not cooperate in an administrative investigation ought to be punished.
  • On the other hand, it was not clear if all these provisions were in accordance with the Charter of Fundamental Rights of the European Union which is the key document in terms of fundamental and human rights in the EU.  Note: the Charter does not mention the right to remain silent explicitly! 

You’re right – it’s complicated.  And what did the Constitutional Court decide?

Nothing.  It had to ask the ECJ whether the aforementioned Italian provision, the Directive and the Regulation were compatible with the Charter and the presumed right to remain silent it makes provision for.  Essentially, the Constitutional Court asked the ECJ to interpret the EU law before it rules.  That process is called preliminary ruling.  What can I say?  There is a reason lawyers exist – law is complex! 

I’ve realized that so far, thank you.  Please go on…

All in all, the question was answered first by the Advocate General (AG) Pikamäe.  Advocates General are not judges.  They do not give any decisions, but rather assist the Court and give opinions on the cases given to them.  However, their opinions carry considerable weight and are usually followed in the Court’s judgment.  AG Pikamäe’s opinion can be summarized in four important points:

  • Whenever the relevant penalties are of a criminal nature – there is a right to remain silent. 
  • Concerning the compatibility of the Directive and the Regulation with the Charter, he stated that they give broad discretion to individual countries in implementation.  Countries can punish the infringements such as one that DB made: (i) with criminal penalties and (ii) administrative penalties of a criminal nature, and even mere administrative measures.  Also, while they were made as unconditional, they should be interpreted in accordance with the Charter and fundamental rights. 
  • AG deems the right to remain silent to be contained in Articles 47 (Right to an effective remedy and to a fair trial) and 48 of the Charter (Presumption of innocence and right of defence). 
  • European Court of Human Rights (ECtHR) has introduced a principle that the right to remain silent is related to the questions which have ‘a bearing on the guilty verdict or the penalty.’  Therefore, he used that principle in this case too, stating that it is ‘likewise applicable where those statements have had a bearing on a conviction or penalty imposed at the end of administrative proceedings that fall under the criminal head of Article 6 ECHR.’

And what did the judges say?

Well, you could have guessed from the outset!  ‘Silence is golden’, said the court assertively.  Its opinion reflected that of the AG.  But… there is more to it than that.  Let’s point out the major things in the decision (yes, I promise, there won’t be any more bullet points!) 

  • The right to remain silent can be deduced from Articles 47 and 48 of the Charter – it is one of the essences of the right of a fair trial. 
  • MOST IMPORTANT: The right to remain silent PRECLUDES (among other things) ‘penalties being imposed on natural persons who are ‘charged’ for refusing to provide the competent authority, under the Directive and the Regulation, with answers which might establish their liability for an offence that is punishable by administrative sanctions of a criminal nature, or their criminal liability.’  This judgment also considers relevant ECtHR case-law, as did AG Pikamäe.
  • Member States must make sure that this preclusion is enforced. 

Does that mean that one can simply not cooperate with the competent body?  That the Directive and the Regulation are not compatible with the Charter?  No.  They must be interpreted consistently with it.  There are many other ways of being uncooperative in an administrative proceeding.  All of them can and should be sanctioned.  ‘The right to silence cannot, however, justify every failure to cooperate on the part of the person concerned with the competent authorities, such as refusing to appear at a hearing planned by those authorities or using delaying tactics designed to postpone it’, the Court decided.  So, penalties for uncooperativeness in the administrative investigation are still mostly safe and sound. 

Why does all this matter?  And what happens next?

This decision disentangles a conundrum that will probably have implications in many future and similar cases to come.  It is a judgment that sets an important precedent in EU law and it’s needless to say that just the EU alone has 27 member states, and its law is relevant to a large number of countries worldwide.  How could it not matter? 

Finally, it is clear that the decision should be applicable to all relevant proceedings arising under EU legislation.  Nevertheless, in competition law, the judgment raises interesting questions regarding the right of defense in proceedings in which sanctions can be applied to individuals and corporations.  

Hence, in case that individuals refuse to cooperate under the right to silence, the judgment implies that the authorities should refrain from imposing sanctions for non-cooperation. Against that background, should this be taken to mean that companies should get off scot-free too?

However, as to what happens next, it is far too early to say.  How exactly will this new interpretation of EU law be implemented in practice?  How is it going to impact national laws?  That remains to be seen. 

Author: Nikola Vjetrović