To bow at the rhythm of an Italian tune

“Do not correct a fool, or he will hate you; correct a wise man and he will appreciate you”.

One can wonder how much hatred or appreciation the judges of the Court of Justice felt when the Italian Constitutional Court referred the explosive reference in the M.A.S. case, questioning a Grand Chamber judgment of the Luxembourg court and inviting the wise European judges to rectify the recently enacted decision in the case of Taricco.

After all, as the Spanish saying goes, to rectify is for the wise.

And rectify they did. This very morning, on 5 December 2017, the Court of Justice bowed to the good reasons of the Italian Constitutional Court and corrected the harshness of the judgment in Taricco, rendered by the Grand Chamber in 2015. It is quite spectacular how and why the Court is adjusting its case-law, but the story needs a little bit of context.

In 2013 the Court of Justice ruled in the case of Akerberg Fransson that the Charter of Fundamental Rights has a broad scope of application in Member States, particularly when Member States are enforcing fiscal measures that concern the Union’s own resources (ie, VAT). Shortly after, the German Constitutional Court (among others) accepted the Akerberg Fransson rationale, but on the grounds of the specific competence of the Union in the area of its own resources. Nothing of the kind would ever be accepted in other fields of shared competence. The Court of Justice took good note and started rendering Orders in which it argued, in a wide array of cases, how the Charter did not apply when Member States implemented EU law.

In 2015, a new Akerberg Fransson case reached the Court, straight from Italy, in Taricco. In fact, it was a reverse Akerberg Fransson case, because it concerned national measures that precluded Member States from effectively collecting VAT. Akerberg Fransson was a typical fundamental rights case in which an individual fights against disproportionate State action. Taricco raised the opposite situation: individuals profited from rules on the time-limitations of criminal proceedings, which tied the hands of criminal courts when launching judicial investigations and, eventually, making a conviction. In good Akerberg Fransson rationale, the Court of Justice stated that EU law precluded a Member State from introducing a rule on time-limitations like the Italian one, which undermined the State’s ability to fight fraudulent practices that undermined the Union’s own resources.

And then, all hell broke loose in Italy.

By setting aside the Italian provision on time-limitations, criminal judges reopened thousands of criminal charges that had been time-barred under the illegal rule. A sort of delayed retroactive application of the criminal offence was the odd result of the Taricco judgment. Criminal lawyers were perplexed. Academia was stunned. The Corte Costituzionale, as the ultimate guardian of fundamental rights in Italy, was enraged. It was obvious that a rule on time-limitations of criminal proceedings was not a mere procedural provision, but a very relevant rule as to the substance that governs the criminal liability of a person accused. The Corte Costituzionale had no doubt that Taricco had triggered a severe blow to the principles of legality of criminal offences and of non-retroactivity of criminal law. What mesmerized the Corte Costituzionale was that the Court of Justice had not seen it coming.

The Italian court’s perplexity and ire appear quite clearly, and for all of us to see, in the reference for a preliminary ruling that it made in early 2017 to the Luxembourg court. In a beautiful exercise of judicial diplomacy, in which a stick and carrot strategy appears in all its bizarre elegance, the Corte Costituzionale reminds the Court of Justice what the principle of legality is, what is Strasbourg’s position on the matter, and how this could be amended by interpreting Taricco in a way that is consistent with the fundamental rights of individuals. The reference was an outright challenge to the Court of Justice, but in such terms that it showed a reasonable way out of the cul-de-sac that Luxembourg had driven itself into.

This morning (and in stark contrast with the Advocate General’s Opinion) the Court of Justice accepted the Italian court’s reading and it admitted that Taricco can be made conditional on the protection of fundamental rights under national law. In other words, the fight against tax fraud is relevant, particularly when it concerns the Union’s own resources, but national fundamental rights are prevalent. Thus, if the setting aside of a national rule on time-limitations entails a breach of a national fundamental right, such as the right of legality and non-retroactivity of criminal offences, the rule on time-limitations must stand. It is for the European or national legislature to find a balance between legal certainty and effectiveness in the fight against tax fraud, but, as long as there is uncertainty in the law, the national judge must ensure that the protection of fundamental rights prevails.

The M.A.S. judgment can be interpreted as an incredible self-inflicted blow on the part of the Court of Justice. The Italian court gave the Court of Justice no other option and thus this pathetic result shows the weakness of the European court and its unsuitability to deal with fundamental rights issues. It can also be interpreted as the first of many other humiliating and inevitable concessions to national constitutional courts in the near future.

But the M.A.S. judgment can also be seen from a different angle.

First, the judgment does not overrule Taricco, it complements it with another additional layer. It is true that Taricco reviewed the issue in light of Article 49 of the Charter and it quite bluntly rejected the argument that setting aside the rule on time-limitations entailed a breach of the said provision. In M.A.S. there is a much more thorough analysis of the consequences resulting from the setting aside of the time-limitation, and it is clear that the outcome, from the perspective of Article 49 of the Charter, is exactly the opposite to the one in Taricco. The Court has thought things twice and its decision is different now. It’s wiser too.

Second, the M.A.S. judgment makes a reasonable application of the Melloni criteria, according to which national courts can choose between the standards of fundamental rights under national law or EU law when implementing European provisions in areas “not completely determined” by EU law. In Melloni there was no discretion for the Member State, so the standard of the Charter was applied and the more protective standard in the Spanish Constitution was set aside. Now, in M.A.S., the Member State has quite a lot of discretion under EU law, and the Court recognizes such discretion and allows the Constitutional Court to make full use of it in order to uphold the higher standard of protection under Italian law. It could be argued that Taricco could act as the derogation that so much intrigued commentators in Melloni (“primacy, unity and effectiveness EU law”), but that has not been the case. The Court makes no reference at all to this derogation, even though the protection of the financial interests of the Union could be perfectly located under the terms of the derogation.

Third, the Court has balanced the effectiveness of EU law in the area of own resources against the protection of fundamental rights under national law, and the latter have prevailed. This is a very relevant development that downplays the critique of many authors who argued that the Court of Justice has devalued the Charter and the role of fundamental rights in EU law by boycotting the EU’s accession to the ECHR. I would say (and I have been saying for quite some time now) that Opinion 2/13 had to be understood in its own peculiar light and context. In fact, the Court’s evolution on fundamental rights has been, overall, quite positive since 2013. The evolution has been slow, some decisions have been disappointing, but the overall result is one of a Court coming to grips with a revolutionary new tool of momentous potential. Putting the Charter at work is no easy task, as any constitutional judge who has experienced a similar process at State level well knows. Today’s decision is another example of how the Court is playing a new tune with its new instrument, and the outcome is very promising.

And finally, it is fascinating to see that the Court of Justice has finally bowed to the good sense of a Constitutional Court, and how that Constitutional Court has not been the one we were all thinking of. I think it is very wise for the Court of Justice to show that it can be proved wrong by a Constitutional Court, and it is wise to say so in the context of a preliminary reference, and one that is coming from Italy.

The Italian Constitutional Court was the first constitutional jurisdiction of a founding Member State to make a preliminary reference, back in 2007 (the Belgian Constitutional Court was created after the founding of the Communities). The contralimiti to EU law have been fleshed out by the Italian Constitutional Court throughout the years, but in a much more cooperative tone and approach that has contrasted with the bluntness and, at times, arrogance of other constitutional jurisdictions. The Corte Costituzionale is a paradigm of what a Constitutional Court should be in the always complex relations between EU law and national Constitutions.

Whether it is a coincidence or not, the truth is that no other Constitutional Court deserves, like the Corte Costituzionale, the honor of having called the Court of Justice’s hand. It is a rare but important privilege that the judges of the Palazzo della Consulta can now be proud of.