Harmonising national sanctioning administrative law: An alternative to a single capital‐markets supervisor

• DOI: http://doi.org/10.1111/eulj.12291
• Published date: 01 September 2018
• Date: 01 September 2018

ORIGINAL ARTICLE

Harmonising national sanctioning administrative

law: An alternative to a single capital‐markets

supervisor

Fabio Pascua Mateo*

Abstract

Since the disclosure in 2009 of the Larosière Report, legislative acts disciplining financial markets

have established a set of rules called to form the foundations of a sanctioning administrative law

to be enforced by the Member States. Furthermore, the ECtHR and the ECJ, are contributing to

apply here the guarantees of the Rome Convention and the Charter of Fundamental Rights. This

study, in addition to giving account of such legislation and case‐law, aims to outline the broad

principles of this new law, whose purpose is levelling the ‘playing field’amongst NCAs and fostering

supervisory convergence without creating new institutions. Should this ‘experiment’be successful,

and a new way of ‘cooperative federalism’could emerge at a global level in the Union. Otherwise,

further centralisation—which is neither possible nor desirable at this stage—should be expected in

future years, with a sort of single supervisory mechanism in securities markets.

1|INTRODUCTION: THE TENSION BETWEEN FUNDAMENTAL RIGHTS

AND THE NECESSITY OF EFFECTIVE SANCTIONS TO ENFORCE UNION LAW

In recent years, we have witnessed the emergence, within the framework of European Union law, of a common

administrative sanctioning law to be applied not by the Union institutions but by the Member States. Such law has

appeared in the very specific area of the securities markets, though it has quickly extended to other areas of capital

markets law. In other sectors, there is nothing similar, as the principle that corresponds to the Union law establishing

only the material rules and to Member States freely regulating the applicable disciplinary systems,

1

is maintained. This

novelty arises from the need to harmonise and increase sanctions against those who violate substantive rules as a

means of ensuring the homogeneity of the applicable legal regimes and thus avoiding regulatory arbitrage, and is laid

*Full Professor at the Complutense University of Madrid. Former General Counsel of the CNMV. I want to acknowledge the peer

reviewers for their comments to improve the article and to express my gratitude to Patricia Kosack, who revised the accurateness

of my use of English. Of course, any remaining mistakes remain under my whole responsibility.

1

Like almost every rule, this one also knows some exceptions, yet in a less developed stage. It is the case for Regulation (EU) 2016/

679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the process-

ing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation)

(Text with EEA relevance), which also contains a detailed sanctioning system that shall be (or has been) adopted by the Member

States.

Received: 6 February 2017 Revised: 22 December 2017 Accepted: 27 June 2018

DOI: 10.1111/eulj.12291

Eur Law J. 2018;24:321–348. © 2018 John Wiley & Sons Ltd.wileyonlinelibrary.com/journal/eulj 321

down in a series of newly passed pieces of legislation. In addition, it is complemented by a set of principles

established by the European Court of Human Rights (ECtHR) and the European Court of Justice (ECJ) case‐law,

which, on the contrary, seeks to ensure respect for the fundamental rights of Union to citizens exposed to disciplin-

ary proceedings. Both currents, of course, contribute to clarify an already dense content of this sanctioning law.

However, at the same time, they imply two opposing optics that subject Union law to a fruitful, albeit sometimes

disturbing, tension in opting for a greater protection of the defendant's guarantees or to ensure the effectiveness

of Union law, which permeates all legal solutions adopted. In this article, in addition to giving a brief account of

the process of creating this sanctioning law, we will see the contents of the case‐law of the ECtHR on the require-

ments arising from the Convention to the sanctioning rules of its signatories at the administrative level, with special

emphasis on the securities markets. Then, we will expose the developments experienced theough EU law from its

early years until the present day. We will go on to outline some rules and principles which must be observed by

all State legal systems in the light of the case‐law of the ECtHR and the rights derived from the Union. Finally, we

will defend the utility of this ‘experiment’as an alternative way of promoting coherence amongst national legislations

and the internal market, without creating new administrative structures at the Union level.

2|THE ECHR AND THE CASE‐LAW OF THE ECtHR

It was not, however, an institution or norm of the Union that was first to discipline the sanctioning administrative

systems of the Member States from outside, but the case‐law of the ECtHR. The starting point are sections 6 and

7 of European Convention on Human Rights (ECHR) and Article 4 of the Protocol 7 Annex to the aforementioned

Convention, relating, respectively, to the right to a fair trial (especially in the criminal process), and to the no punish-

ment without law right and the right not to be tried or punished twice.

From these premises, the ECtHR extended sanctioning criminal law guarantees to merely administrative sanc-

tions, with a jurisprudence that is somewhat different from the approaches made by different national constitutional

courts. In fact, whilst the latter recognise the specificity of sanctioning administrative law, but apply, with the neces-

sary adaptations, criminal process guarantees, the ECtHR establishes the general possibility of considering certain

offences and sanctions as criminal in the strict sense, regardless of what national legislation might state. In particular,

since its judgment in the case of Engel and others v. Netherlands,

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although it recognises the possibility for States to

draw a distinction between criminal and administrative sanctioning law (derived primarily from Article 7 ECHR), this

could only be done under strict conditions, in order not to void the guarantees of Article 6. For this purpose the Court

determined three criteria—in principle alternative, although exceptionally they can be construed as cumulative—to

establish the criminal nature of a sanction and, consequently, the application in its entirety of the warranties

contained in the exposed precepts: firstly, the typification of the national legislature, which can serve as a reference,

but does not offer a definitive result; secondly, the nature of the offence criminalised, in which the more general pre-

vention in its typification is pursued, the closer it will be to a criminal nature; and, thirdly, the severity of the sanctions

that can be imposed (no matter if the real sanction is lower).

Of course, the ECtHR does not ignore all these implications and tries to save to some extent the conformity of

administrative penalties with the Convention through the control exercised on them by the internal judicial bodies.

Thus, in what are known as ‘Austrian judgments’,

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it states that any organisational and procedural failures produced

2

ECtHR, Engel and others v. Netherlands, Appl. No. 5100/71; 5101/71; 5102/71; 5354/72; 5370/72, judgment of 8 June 1976, para.

81.

3

For instance, ECtHR, Schmautzer v. Austria, Appl. No. 15523/89, judgment of 23 October 1995, para. 34; ECtHR, Umlauft v. Austria,

Appl. No. 15527/89, judgment of 23 October 1995, para. 37; ECtHR, Gradinger v. Austria, Appl. No. 15963/90, judgment of 23 Octo-

ber 1995, para. 42; and ECtHR, Pramstaller v. Austria, Appl. No. 16713/90, judgment of 23 October 1995, para . 39. A comment on

their impact on sanctioning administrative law can be found in Moreno Trapiella, ‘El control judicial de las sanciones administrativas

en el convenio europeo de derechos humanos’, (2008) 280–281 Documentación Administrativa, 326 et seq.

322 PASCUA MATEO