Judgment of the European Court of Justice of 17 January 2019 in case C‑310/16 (Dzivev and Others) regarding the use of evidence obtained in breach of national law.
Context: Reference for a preliminary ruling — Value added tax (VAT) — Protection of the European Union’s financial interests — Article 325(1) TFEU — Convention on the protection of the European Communities’ financial interests — Criminal proceedings concerning VAT offences — Principle of effectiveness — Taking of evidence — Interception of telecommunications — Authorisation granted by a court that lacks jurisdiction — Taking those interceptions into consideration as evidence — Provisions of national law — Prohibition
Articles referred to in EU (VAT) legislation
Articles 206, 250(1)and 273 of the EU VAT Directive 2006/112/EC
Article 206 (VAT Liability – Payment and arrangements)
Any taxable person liable for payment of VAT must pay the net amount of the VAT when submitting the VAT return provided for in Article 250. Member States may, however, set a different date for payment of that amount or may require interim payments to be made.
Article 250 (VAT Return)
1. Every taxable person shall submit a VAT return setting out all the information needed to calculate the tax that has become chargeable and the deductions to be made including, in so far as is necessary for the establishment of the basis of assessment, the total value of the transactions relating to such tax and deductions and the value of any exempt transactions.
Article 273
Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.
The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.
Artciles Referred to: Article 325 TFEU:
1. The Union and the Member States shall counter fraud and any other illegal activities affecting the financial interests of the Union through measures to be taken in accordance with this Article, which shall act as a deterrent and be such as to afford effective protection in the Member States, and in all the Union’s institutions, bodies, offices and agencies.
2. Member States shall take the same measures to counter fraud affecting the financial interests of the Union as they take to counter fraud affecting their own financial interests.
Facts (simplified):
Mr Dzivev, Mrs Angelova, Mr Dimov and Mr Velkov are charged with committing tax offenses via Karoli Kepital EOOD, a trading company established in Bulgaria. Dzivev is accused of having led, inter alia, a criminal organization in which the three other defendants were involved, whose purpose in this case was to enrich themselves by evading the payment of the VAT.
In the preliminary investigation, a number of applications for authorisation to initiate the interception of the telecommunications of the four defendants were granted. After the criminal proceedings commenced, the prosecutor sought and obtained a number of authorisations from the Specialised Criminal Court to intercept more of the defendants’ telecommunications.
The referring court states that none of the authorisations was reasoned and that those that were granted did not indicate correctly, in particular, whether the President or the Vice-President of the Sofiyski gradski sad (Sofia District Court) had acted. Those defects did not render the authorisations at issue in the main proceedings unlawful. All in all, there were several procedural mistakes made.
The referring court states that systemic errors were subsequently uncovered by officials in the issuing of authorisations for the use of special investigation methods, in particular the interception of telecommunications, which consequently led to the applicable law being amended.
Questions
Simplified
Is it allowed for a Member State to use evidence obtained through the deployment of “special investigation methods”, specifically through the interception of the telephone conversations of individuals subsequently charged with a VAT-related offence, where that same evidence cannot be used because that interception was ordered by a court that lacked jurisdiction?
Full question
Is it compatible with:
– Article 325(1) of the Treaty on the Functioning of the European Union which envisages that the Member States will take measures to effectively counter fraud and any other illegal activities affecting the financial interests of the European Union;
– Article 2(1) in conjunction with Article 1(1)(b) of the Convention on the Protection of the European Communities’ Financial Interests (the “PFI Convention”) in conjunction with Article 2(1)(b) of Council Decision 2007/436/EC [of 7 June 2007 on the system of the European Communities’ own resources] [Euratom], according to which every Member State is to take the necessary measures to ensure the effective punishment of VAT evasion;
– Article 47(1) and (2) of the Charter which guarantees the right to an effective remedy before a tribunal previously established by law, if, under national law, the evidence obtained through the deployment of “special intelligence methods”, specifically through the interception of the telecommunications of individuals subsequently charged with VAT fraud, cannot be used because it was ordered by a court that lacked jurisdiction, and at the same time the following requirements are met:
– At an earlier point (between one and three months previously) the interception of some of these telecommunications was requested and ordered by the same court, when at that point it still had jurisdiction;
– an application authorising the disputed interception of telecommunications (for the extension of the earlier interception of telecommunications and for the tapping of new telephone connections) was made at the same court which no longer had jurisdiction because immediately before that its jurisdiction had been transferred to a different court; despite its lack of jurisdiction the original court examined the substance of the application and made an order;
– at a later point (about one month later) a fresh application was made to authorise the tapping of the same telephone connections and granted by the court that now had jurisdiction;
– none of the orders made actually contain any reasoning supporting them;
– the statutory regulation that ordered the transfer of jurisdiction was unclear, led to numerous contradictory court decisions and caused the Varhoven sad to issue a binding interpretation decision about two years after the legal transfer of jurisdiction and the interception of telecommunications in question;
– the court examining the current case is not authorised to decide on applications authorising the deployment of special intelligence methods (the interception of telecommunications); however, it does have jurisdiction to decide on the legality of any interception of telecommunications carried out, including the finding that an order does not meet the statutory requirements and therefore to refrain from assessing the evidence obtained in this way; this power only exists if a valid order has been issued for the interception of telecommunications;
– the use of this evidence (the defendants’ telephone conversations, the interception of which was ordered by a court that had already lost its jurisdiction) is of crucial importance to the resolution of the question of [the defendant’s] liability as the ringleader of a criminal gang formed for the purpose of committing tax offences under the Bulgarian Value Added Tax Act or as an instigator of specific tax offences, but he can only be found guilty and sentenced if these telephone conversations can be used in evidence; otherwise he would have to be acquitted.
Does the judgment given in the reference for a preliminary ruling C 614/14 apply in the present case?
AG Opinion
– Article 325(1) TFEU, Article 1(1) and Article 2(1) of the Convention on the Protection of the European Communities’ financial interests, and Article 206, Article 250(1) and Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, interpreted in the light of the Charter of Fundamental Rights of the European Union, do not preclude national legislation, such as that at issue in the main proceedings, that prohibits the use of evidence obtained in breach of national law, such as that acquired by means of interceptions of telecommunications authorised by a court which did not have jurisdiction to do so.
Judgment
Article 325(1) TFEU, and Article 1(1)(b) and Article 2(1) of the Convention drawn up on the basis of Article K.3 of the Treaty on European Union, on the protection of the European Communities’ financial interests, signed in Luxembourg on 26 July 1995, read in conjunction with the Charter of Fundamental Rights of the European Union, must be interpreted to the effect that, in the light of the principle of effectiveness of the prosecution of value added tax (VAT) offences, they do not preclude a national court from applying a national provision excluding, from a prosecution, evidence such as the interception of telecommunications requiring prior judicial authorisation, where that authorisation was given by a court that lacked jurisdiction, in a situation in which that evidence alone is capable of proving that the offences in question were committed.
Summary
In the light of the principle of effectiveness of the prosecution of value added tax (VAT) offences, it is allowed for a national court to apply a national provision excluding, from a prosecution, evidence such as the interception of telecommunications requiring prior judicial authorisation, where that authorisation was given by a court that lacked jurisdiction, in a situation in which that evidence alone is capable of proving that the offences in question were committed.
Dzivev, Angelova, Dimov and Velkov are charged with tax offenses. In particular, Mr Dzivev is accused of running a criminal organization involving the three other suspects, which in the present case had as its object to benefit itself by not paying the VAT due.
During the investigation, wiretaps were placed, for which permission had been given by an unauthorized judge. The referring court adds that, in the case of Dzivev, only the wiretaps carried out on the basis of the authorizations by the unauthorized court clearly and indisputably prove that he committed the offenses against which he is accused and which enable his conviction, while the other defendants can be convicted on the basis of evidence obtained legally.
The ECJ has ruled that, in view of the principle of effectiveness in prosecuting VAT infringements, the national court does not preclude the application of national legislation under which evidence, such as wiretaps, requires prior judicial authorization , may be excluded from criminal proceedings where such authorization has been given by an unauthorized court, even if only those elements of evidence can be used to prove the infringements concerned.
Source
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