The never-ending legal case, Jarndyce and Jarndyce, drags on. Over time, this meaningless case has become so convoluted that nobody understands it. The parties involved are the least informed, yet it’s been noted that two Chancery lawyers can’t discuss it for five minutes without disagreeing on every point. Countless children have been born into this case, young people have married into it, and the elderly have died during it. Many have unknowingly become parties in Jarndyce and Jarndyce with no explanation, and entire families have inherited bitter resentment alongside the suit. The young plaintiff or defendant, once promised a rocking horse when Jarndyce and Jarndyce concluded, has grown up, acquired a real horse, and passed away. Beautiful wards of the court have become mothers and grandmothers, a series of Chancellors have come and gone, and the numerous bills in the suit have turned into death records. There are possibly fewer than three Jarndyces left on earth after old Tom Jarndyce tragically took his own life at a Chancery Lane coffeehouse, yet Jarndyce and Jarndyce persists in court, a never-ending source of despair.
- Charles Dickens, Bleak House
Just like the dense fog of Dickens’s London, drawn-out legal battles continue to exist. Some legal systems, aiming for efficiency, enforce strict deadlines for their completion. However, while some believe delayed justice is denied justice, rushed justice also obstructs a fair outcome.
Within EU law, this restricted form of justice can be particularly problematic when it hinders the enforcement of penalties against those accused of misusing EU funds. Two years ago, in the Taricco I judgment, the ECJ proposed a solution: national courts should disregard short limitation periods if they hinder the proper prosecution of such fraudulent activities. However, this ruling ignited further legal disputes, raising concerns about national constitutional identity within the framework of EU and national courts and legal systems, particularly in criminal justice.
Recently, the ECJ revisited its ruling, suggesting a compromise regarding the concerns raised by the Italian constitutional court. This post presents two perspectives on the new judgment: one examining the broader debate on constitutional pluralism and the other focusing on the ECJ’s relationship with the Italian court.
1) Judicial dialogue after Taricco II: In the end, who has the final say?
Barbora Budinska, post-graduate researcher, Leiden University; and Zuzana Vikarska, DPhil candidate at the University of Oxford
The recent Taricco saga’s second judgment adds another layer to the continuous legal discussions between the Court of Justice and national constitutional courts. This judgment will likely spark debate on various issues. This post focuses on outlining the evolution of judicial cooperation between the Court of Justice and the Italian Constitutional Court in the Taricco saga, comparing it to the ongoing dialogue between the Court of Justice and the German Constitutional Court during and after the Gauweiler saga.
Gauweiler and Taricco II share interesting similarities: both originated from the constitutional courts in Karlsruhe and Rome (known for their doctrines on limitations to EU integration) and revolve around the complex idea of “constitutional identity,” a concept invoked by both constitutional courts, extensively analyzed by Advocates-General, yet formally unaddressed by the Court of Justice. While the Court avoided explicitly defining “constitutional identity” and “national identity” in its judgments, it demonstrated understanding for national specificities and identities, aligning with the respect for national identities outlined in Article 4(2) TEU.
The beginning: The first Taricco judgment
The Court of Justice’s landmark judgments often seem to involve alcohol. This time, the Court addressed bottles of champagne sold below market value in Italy, allegedly due to VAT fraud. An Italian district court initiated criminal proceedings against Ivo Taricco (and others) for “fraudulent ‘VAT carousel’ legal arrangements” (Taricco I, para 18).
This complex scheme involves fake companies, transactions, invoices, and VAT returns, potentially leading to seven-year prison sentences. However, Italian criminal law applies short limitation periods to these offenses, risking them being time-barred before trial completion (by February 2018). The Italian district court highlighted the usual complexity and length of tax evasion proceedings. Consequently, the combination of lengthy trials and short limitation periods often results in “de facto impunity” (Taricco I, para 24), jeopardizing EU financial interests (cf. Article 325 TFEU). Seeking guidance, the national court turned to the Court of Justice.
In Taricco I, the Court began by outlining the principles of effective VAT revenue collection and combating tax evasion, referencing the Fransson case (confirming VAT collection as an EU law matter) and the established concept of “effective, proportionate, and dissuasive” sanctions. However, the referring court’s concern wasn’t the sanction itself, but the frequent expiration of the statute of limitations before trial completion. The Court of Justice proposed that if national courts believe serious fraud cases regularly escape punishment, national provisions are ineffective and should be disregarded, “without having to request or await the prior repeal of those articles by way of legislation or any other constitutional procedure” (para 49).
EU lawyers are familiar with disregarding national provisions, a concept both established and constitutionally debated since Simmenthal. However, from a criminal law perspective, this equates to “retroactively applying a substantive criminal law rule against the defendants,” deemed unconstitutional under Italian law, as argued by Fabio Guiffrida.
Crucially, the Court acknowledged potential infringement upon the accused’s fundamental rights: disregarding a limitation clause in an ongoing case disadvantages them. However, after considering Article 49 of the Charter and Article 7 ECHR (both prohibiting retroactivity in criminal law), the Court concluded that these rights remain unviolated, as “the acts the accused are alleged to have committed constituted, at the time, the same offense and carried the same penalties as those applicable at present” (Taricco I, para 56). Importantly, the Court stated its legal assessment is “subject to verification” by the referring court, transferring responsibility to national actors.
The saga continues: Seeking clarification (or revision?) from the Corte Costituzionale
Given the pro-EU tone of the referral, the Italian district court likely welcomed the Court of Justice’s answer. This judgment, interpreted as permission to continue prosecuting suspects beyond limitation periods, pleased not only the referring court but also other Italian criminal courts. However, this disadvantaged convicted individuals to ensure compliance with EU law. Unsurprisingly, the Corte Costituzionale (ICC) was approached regarding the constitutionality of these practices.
The ICC examined the situation through the lens of the Italian constitution, recognizing a potential conflict between the Taricco I reasoning and the principle of legality as understood in their constitution. Notably, the ICC chose not to invoke its controlimiti doctrine, established in Frontini (1973); instead, it referred its questions to the Court of Justice, seeking a “revision” of Taricco I.
The ICC emphasized that “the primacy of EU law is not merely a technical configuration of national and supranational law but reflects the belief that achieving unity justifies relinquishing areas of sovereignty.” Simultaneously, the ICC stated that “the very strength of unity within a pluralistic legal order (Article 2 TEU) relies on embracing minimal diversity, essential to preserve national identity within a Member State’s structure (Article 4(2) TEU). Otherwise, the European Treaties would paradoxically undermine the constitutional foundation from which they arose.” The ICC accepts the Court of Justice’s authority in “defining EU law” but expects it to leave “the ultimate assessment regarding compliance with the supreme principles of national order” to national authorities.
The ICC presented three questions to the Court of Justice. The first addressed the insufficient legal basis for disregarding national provisions, the second highlighted limitation periods as part of substantive criminal law in Italy, and the third directly questioned whether Italian courts should disregard these periods even if it contradicts “overriding constitutional principles or inalienable individual rights.”
Taricco II: The Court’s judgment - an unenforced obligation
Utilizing an expedited process, the Court of Justice prioritized and addressed Taricco II within a year. Recognizing the Corte Costituzionale’s invitation for dialogue, it opened its reasoning with observations on judicial dialogue and the preliminary ruling mechanism as a cooperative tool (paras 22-23). The Court of Justice responded to the ICC with three messages, not directly corresponding to the questions posed.
1. We’ve assigned a task, and the method is irrelevant.
The Court reiterated that Article 325 TFEU obliges Member States to effectively punish serious VAT fraud (para 1) similar to national-level fraud (para 2). As with directives, Member States can choose how to achieve this (Taricco II, paras 32-41), with compliance largely falling on national legislatures, who must “ensure national rules don’t lead to impunity in a significant number of serious VAT fraud cases” (para 41), and national courts, who must “fully enforce obligations under Art 325(1) and (2) TFEU and disregard national provisions” if needed (para 39).
2. Acknowledging the principle of legality without perceiving a threat.
Citing cases from both Strasbourg and Luxembourg, the Court divided the principle of legality into three parts: foreseeability, precision, and non-retroactivity. Foreseeability mandates clear definitions of offenses and penalties (para 55), precision ensures individuals understand which actions are criminal offenses (para 56), and non-retroactivity prevents courts from punishing conduct not prohibited at the time or from strengthening rules during ongoing proceedings (para 57). The Court demonstrated understanding for these aspects of legality, highlighting them not as unique to the Italian legal system but shared by all Member States as common constitutional traditions and values enshrined in the ECHR (paras 53-54).
3. An imposed obligation with no obligation to comply.
Here, the Court downplayed Taricco I’s requirements, providing softer instructions to national courts. If disregarding national rules creates uncertainty, there’s no obligation to do so. If it disadvantages suspects in ongoing cases (which it does, as acknowledged in Taricco I), again, no obligation.
Essentially, if the obligation to disregard conflicts with the principle of legality, compliance is not mandatory (a striking statement). However, the Court reminds them of the assigned task and urges its completion. If courts are unable to, parliaments should intervene (para 61).
A comparison: Gauweiler and beyond
Advocate-General Bot’s opinion in Taricco II drew parallels to the 2014 referral by the German Federal Constitutional Court (Bundesverfassungsgericht or BVerfG), leading to the Court’s significant Gauweiler judgment. In its first-ever referral for a preliminary ruling, the BVerfG not only posed questions about the European Central Bank’s (ECB) Outright Monetary Transactions (OMT) programme but also offered its view on the desired answers. The BVerfG’s Second Senate believed the OMT program (based on an announcement press release) was an ultra vires act exceeding the ECB’s monetary policy mandate (Articles 119 and 127 TFEU) and circumventing the prohibition on monetary financing (Article 123(1) TFEU).
1. Referrals from constitutional courts
Advocate-General Bot highlights similarities between the orders issued by the German court in Gauweiler and the Italian court in Taricco II: both posed preliminary questions while suggesting “correct” answers, indicating potential use of their respective doctrines (BVerfG’s threefold limits and Corte Costituzionale’s controlimiti jurisprudence) against the Court’s claimed supremacy of EU law if unsatisfied.
However, a notable difference in judicial dialogue exists between Gauweiler and Taricco II. The BVerfG’s order in Gauweiler used a harsh tone, placing the Court of Justice in a difficult position. While the ECB President’s OMT program announcement calmed volatile markets, the BVerfG clearly considered it exceeding the ECB’s mandate, making it an ultra vires act violating German constitutional identity. The Court of Justice was tasked with preventing both an open constitutional conflict with the BVerfG and further market instability.
Conversely, the Corte Costituzionale’s tone in Taricco II was gentler. While the message from Rome was as final as Karlsruhe’s, with the ICC expecting a reinterpretation of Taricco I aligned with Italian constitutional identity, their approach combined flattery with diplomatic ultimatums, a “carrot and stick” method, as noted by Davide Paris and Daniel Sarmiento.
2. Responses from Luxembourg
Advocate-General Cruz Villalón attempted to soften the German referral’s harshness. His opinion in Gauweiler, aiming to reconcile the two courts, began by addressing the “functional difficulty” of the BVerfG’s request: the tension between the preliminary ruling procedure’s purpose and binding nature and the BVerfG’s claimed right to the “last word” on EU act validity (para 35).
To transform the situation into a dialogue, the Advocate-General reminded the BVerfG of its Honeywell judgment, where it committed to genuinely seeking guidance from the Court of Justice before final decisions (para 44). He also cited Article 4(3) TEU (principle of sincere cooperation) as the foundation for a “cooperative relationship” between the courts, obligating both the BVerfG and the Court of Justice. The former should accept the Court’s preliminary ruling as binding, while the latter should respond with “utmost cooperation” and address the questions’ substance, disregarding any “functional difficulties” (paras 47-49, 65-68). Regarding constitutional identity claims, the Advocate-General encouraged both courts to strive for “basic convergence between the constitutional identity of the Union and each Member State” (para 61).
Following this advice, the Court in Gauweiler adopted a pragmatic yet firm approach, engaging in a substantive dialogue with the BVerfG on the OMT program’s legality. It avoided discussing the tension with German constitutional identity and relied on established case law regarding the binding nature of its preliminary rulings. In response, the BVerfG softened its tone and accepted the Court’s analysis.
Conversely, Advocate-General Bot took a more confrontational approach in his Taricco II opinion. He reiterated his argument from Melloni (already controversial), acknowledging respect for national identities but deeming it inapplicable, unconvinced that the Italian claim was genuine: “This case concerns a fundamental right protected by the Italian Constitution, but that doesn’t automatically trigger Article 4(2) TEU application” (para 179). Marco Bassini and Oreste Pollicino labeled Bot’s opinion in Taricco II as “possibly the most conservative and radical view on EU legal order supremacy.”
This stance might be acceptable if the Italian government supported it (unlike the Spanish government in Melloni, as per para 141 of the Advocate-General’s opinion). However, in Taricco II, the identity claim came from the constitutional court, with no indication of Italy abandoning it. The Court’s handling (outlined above) is commendable; unlike the Advocate-General, it “reconciled EU law effectiveness with maintaining a healthy dialogue with national constitutional courts,” as Alessandra Silveira and Sophie Perez Fernandes optimistically predicted.
Moreover, the BVerfG seems more open to judicial cooperation after Gauweiler. In July 2017, it issued its second referral, addressing the ECB’s Quantitative Easing (QE) program, questioning whether it exceeded the ECB’s mandate (Articles 119 and 127 TFEU) and bypassed the monetary financing prohibition (Article 123(1) TFEU), challenging the Court of Justice to apply its Gauweiler standards to the QE program. Observers note a more cordial tone in this referral, acknowledging the judicial dialogue’s purpose and the BVerfG’s obligation under Article 267(3) TFEU. Depending on the Court of Justice’s response regarding the QE program, this could mark the beginning of a “true judicial dialogue.”
Conclusion
Dialogues between the Court of Justice and national constitutional courts inherently face difficulties. They represent different interests, operate within different frameworks, and seek different solutions. A constant battle for the “last word,” wielding primacy and constitutional identity as weapons, yields no satisfactory outcome. Interaction between the Court of Justice and its national counterparts requires diplomatic language for this diplomatic dialogue. While we aren’t the first to emphasize the need for a conciliatory tone, we applaud the Court of Justice’s diplomatic achievement in its Taricco II ruling - perhaps a celebratory glass of champagne is in order?
2) Taricco II: The Italian Constitutional Court asserts itself, and the Court of Justice listens
Massimo Fichera, Adjunct Professor of EU Law. Academy of Finland Research Fellow, University of Helsinki
Background
The resolution of the Taricco II case evokes a sense of “calm after the storm,” a sentiment captured in a poem by the renowned 19th-century Italian poet Giacomo Leopardi. On December 5, 2017, the CJEU delivered its highly anticipated judgment in C-42/17 Criminal Proceedings against M.A.S. and M.B. (Taricco II). Notably, this marked the first instance where the Italian Constitutional Court threatened to deploy its “counter-limits” weapon and the third time it invoked the preliminary ruling procedure.
The relationship between Constitutional Courts/Supreme Courts and the Court of Justice of the European Union (CJEU) has grown increasingly intertwined in recent times. Several rulings, including Ajos, the Hungarian asylum-seeker quota case, Melloni, and the Slovak pensions case, have tested the limits of EU law’s reach into national legal systems. The Taricco saga exemplifies this trend, holding particular significance due to its focus on: (a) the interplay between EU criminal law and human rights and (b) the concept of European constitutionalism.
The central issue in Taricco revolved around whether Italian rules on statutes of limitations contradicted EU law, specifically provisions related to state aid, economic and monetary union, competition, and the primary VAT Directive (although the CJEU solely considered the latter as infringed upon by national law). The crux of the matter was that time constraints during legal proceedings hindered efforts to combat fraud against the EU budget and financial interests, as mandated by Article 325 TFEU. Member States are obligated to implement effective and dissuasive measures (irrespective of their nature) to combat fraud, employing the same rigor used to protect their financial interests.
Furthermore, a specific obligation exists to address fraud against EU financial interests effectively and dissuasively, particularly in a significant number of VAT evasion cases, necessitating penal measures. At first glance, the solution seems straightforward: alongside the VAT Directive’s provisions, Article 325, being directly effective, dictates that national judges should disregard Italian rules on statutes of limitations when they conflict with EU law obligations. It appears to be a clear-cut application of the principles of primacy and direct effect, a textbook example for aspiring EU law students.
Indeed, this was the CJEU’s ruling in Taricco, representing a pivotal aspect of the judgment. However, the situation is far from simple. The Italian Constitutional Court, urged by ordinary courts to exercise its “counterlimits” (essentially, to express its discontent), opted for a middle ground. Faced with the choice of complying with or challenging the CJEU, it chose to make its voice heard. It returned to the CJEU, highlighting that enforcing the judgment would infringe upon fundamental principles of the Italian constitutional system, particularly the principle of legality as interpreted by Italy—applied to statutes of limitations because they are considered substantive criminal law, not procedural law as in other EU countries. This sets the stage for Taricco II.
Judgment
Advocate-General Bot’s opinion preceded the CJEU’s ruling, advocating for strict adherence to EU law. Bot argued that the progressive harmonization of criminal law, particularly through a common definition of fraud against EU financial interests (as seen in the recent Directive of the European Parliament and Council 2017/1371) and the establishment of a European Public Prosecutor (Council Regulation 2017/1939), hinges on effective measures, including uniform rules on statutes of limitations.
Admittedly, Bot acknowledged that national courts lack clear and objective criteria to definitively identify when to disregard national law in cases significantly impacting EU financial interests. While he found the “systemic risk of impunity” concept from Taricco too vague, suggesting that referring to the offense’s nature would be preferable, Bot stopped short of offering a solution. He maintained that compliance with EU law obligations is non-negotiable.
In contrast, the CJEU adopted a more cautious approach. Initially, it presented the “stick”: national judges are, in principle, obligated to fully uphold Article 325 TFEU, implying that conflicting national provisions should be disregarded. However, this was followed by the “carrot.” The Court asserted that protecting EU financial interests through criminal law falls under the shared competence of the EU and Member States.
In this context, the Court emphasized the absence of harmonized legislation on fraud against EU financial interests when the alleged offenses occurred. Consequently, Italy had considerable leeway to regulate this area, including applying the principle of legality to statutes of limitations. It’s undeniable that those accused could not have foreseen the applicability of Article 325 TFEU. The primary issue with applying the Melloni/Fransson doctrine here is that the Italian system prevents judges from assuming the legislature’s role by defining missing criteria. Therefore, not only the principles of foreseeability, clarity, and non-retroactivity but also the separation of powers would be compromised.
Given these circumstances, it’s understandable why the Italian Constitutional Court signaled its willingness to invoke “counter-limits.” The CJEU acknowledged the distinctive features of the Italian system, despite criticisms (from scholars and the ECtHR) regarding its statutes of limitations, which arguably contribute to a degree of impunity. Significantly, the CJEU, while addressing the principle of legality, recognizes its relevance to both EU and national legal orders. Moreover, it includes it within Member States’ “common constitutional traditions,” citing provisions like Article 7 (1) of the ECHR.
Comments
The Taricco saga underscores the significance of EU criminal law and its deep integration into the national sphere. The EU’s approach balances Member State discretion with setting overarching guidelines.
Furthermore, three fundamental perspectives emerge from the Taricco saga, contributing, intentionally or not, to a rich discussion not only on constitutional identity but also on interpreting the principles of primacy and direct effect, ultimately shaping the understanding of the EU legal order.
Firstly, there’s the “supremacy” perspective, evident in the first Taricco judgment and Advocate General Bot’s Opinion. Essentially, Bot mirrors his Melloni Opinion, drawing from the CJEU’s interpretation of Article 53 CFR. When EU law comprehensively harmonizes fundamental rights within a specific domain, Member States cannot demand a higher standard of protection, even if enshrined in their constitutions. In essence, the EU determines the appropriate level of fundamental rights protection by balancing rights against EU law’s effectiveness (as seen in Fransson).
Naturally, Member States can exceed EU standards in areas not fully regulated by EU law, a point not to be overlooked. Interestingly, despite acknowledging this, Bot supported the Taricco judgment. His view of the relationship between EU and domestic law is inherently hierarchical. Unsurprisingly, he considers concepts like mutual trust and mutual recognition (as in Aranyosi and Căldăraru) absolute: the Framework Decision on the European Arrest Warrant leaves no room for national judges to refuse surrender based on potential fundamental rights infringements in the issuing country. (Although the ECJ did find a compromise in those cases—the postponement of surrender until human rights could be guaranteed).
Conversely, the CJEU in Taricco II adopts a “primacy” perspective, refraining from viewing the relationship between EU and national law as hierarchical and instead seeking cooperation. Thus, its change of heart can be seen as a gesture of reconciliation with the Italian Constitutional Court. The CJEU recognizes that a crucial legal-cultural difference underlies the conflict.
The Italian legal system rejects interpreting the separation of powers to allow judges to establish legal criteria and categories typically entrusted to the legislature. While the Italian legislature could have acted sooner to address the gap, this doesn’t justify EU law encroaching upon a Member State’s constitutional balance. The CJEU’s efforts to build common principles and demonstrate the systematic interpretation of fundamental rights and principles (using the concept of “common constitutional traditions”) are commendable. While reaffirming the significance of the national identity clause (Article 4(2) TEU), the CJEU strives to bridge the gap.
The third perspective, “statist,” is evident in legal systems resistant to EU law. In Italy, for instance, some interpret “counter-limits” broadly, encompassing not only substantive constitutional norms but also the principle of conferral and “identity review.” From this viewpoint, the Italian Constitutional Court holds the power to determine the extent of EU legislative competence.
Consequently, some argued that the Constitutional Court should have invoked “counter-limits” directly rather than referring questions to the CJEU, claiming the EU acted ultra vires and misinterpreted direct effect. This implies that Article 325 TFEU cannot be directly effective, rendering EU law meaningless. It would allow any national court to challenge the applicability of direct effect (and primacy) at any time. Although a long-standing debate (as evidenced by the German Bundesverfassungsgericht and other constitutional courts), this “statist” view persists, even without resorting to radical expressions seen in Hungary or Poland.
Both the Italian Constitutional Court and the CJEU, after its shift, deserve recognition for seeking a systemic understanding of fundamental rights and principles. While they could have chosen a more rigid approach, they opted for cooperation, demonstrating the potential of dialogue between distinct yet collaborative systems. Ultimately, Taricco II highlights the importance of constructive conflict within EU law. By asserting itself, the Constitutional Court underscores the need for nuanced consideration of national diversity. Whether this approach will be effective in other contexts remains to be seen.