Opinion of Advocate General Bobek delivered on 25 July 2018.

• Jurisdiction: European Union
• Celex Number: 62016CC0310
• ECLI: ECLI:EU:C:2018:623
• Docket Number: C-310/16
• Date: 25 July 2018
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling

Provisional text

OPINION OF ADVOCATE GENERAL

BOBEK

delivered on 25 July 2018(1)

Case C‑310/16

Spetsializirana prokuratura

v

Petar Dzivev,

Galina Angelova,

Georgi Dimov,

Milko Velkov

(Request for a preliminary ruling from the Spetsializiran nakazatelen sad (Specialised Criminal Court, Bulgaria))

(Reference for a preliminary ruling — Protection of the European Union’s financial interests — Fight against value added tax (VAT) fraud — Tax offences — Effective collection of VAT — Scope of Member States’ duties — Limits deriving from fundamental rights, EU or national — Evidence obtained in breach of national law — Interceptions of telecommunications — Lack of jurisdiction of the court authorising interceptions)

I. Introduction

1. Mr Petar Dzivev stands accused of leading a criminal gang that has committed value added tax (VAT) fraud. In order to gather evidence of his involvement, telecommunications were intercepted (phones were tapped). However, some of those recordings were ordered by a court which apparently did not have jurisdiction to make that order. Furthermore, some orders were not properly reasoned. Under Bulgarian law, the evidence thus gathered is unlawful and cannot be used in criminal proceedings against Mr Dzivev.

2. It is within such factual and legal context that the Spetsializiran nakazatelen sad (Specialised Criminal Court, Bulgaria) asks whether, in a case like the present one, EU law precludes the application of provisions of national law that prohibits the use of evidence obtained through interceptions that were ordered by a court which had no jurisdiction and/or which were not properly reasoned, if that evidence could allegedly establish Mr Dzivev’s involvement in a VAT-related offence.

3. How far does the Member States’ duty to protect the financial interests of the European Union under Article 325 TFEU stretch? May, or even should, any national rule be disregarded if it appears to impede the proper and full collection of VAT, including the imposing of sanctions for fraud or other illegal activities affecting the financial interests of the European Union?

4. There is no denying that the rapid evolution of the recent case-law of this Court on that issue has not been free from controversy, and, to put it mildly, internal dissonance. First, the Court handed down the ruling in Taricco. (2) Then came the judgments in M.A.S.andM.B. (3)and Scialdone, (4) which seemed to steer a different (and, at least in my view, a more reasonable) course. Most recently, the judgment in Kolev was pronounced, which rather seems to revert to the position in Taricco. (5) With a number of other Court rulings orbiting that case-law, it might indeed not be entirely easy to discern what the law is at present. In this Opinion therefore, I seek to explain why I believe that the proper approach to Taricco and its progeny is through the lenses of M.A.S. and Scialdone, and not Kolev.

II. Legal framework

A. EU law

1. Charter of Fundamental Rights

5. Article 7 of the Charter of Fundamental Rights of the European Union (‘the Charter’) provides that ‘everyone has the right to respect for his or her private and family life, home and communications’.

6. Pursuant to Article 48(2), ‘respect for the rights of the defence of anyone who has been charged shall be guaranteed’.

2. Treaty on the Functioning of the European Union

7. Article 325(1) of the Treaty on the Functioning of the European Union (‘TFEU’) provides that ‘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’.

3. Convention on the Protection of the European Communities’ financial interests

8. Article 1(1) of the Convention on the Protection of the European Communities’ financial interests (‘the PFI Convention’) (6) provides that:

‘For the purposes of this Convention, fraud affecting the European Communities’ financial interests shall consist of:

…

(b) in respect of revenue, any intentional act or omission relating to:

– the use or presentation of false, incorrect or incomplete statements or documents, which has as its effect the illegal diminution of the resources of the general budget of the European Communities or budgets managed by, or on behalf of, the European Communities,

– non-disclosure of information in violation of a specific obligation, with the same effect,

– misapplication of a legally obtained benefit, with the same effect.’

9. Article 2(1) states that ‘each Member State shall take the necessary measures to ensure that the conduct referred to in Article 1, and participating in, instigating, or attempting the conduct referred to in Article 1(1), are punishable by effective, proportionate and dissuasive criminal penalties, including, at least in cases of serious fraud, penalties involving deprivation of liberty which can give rise to extradition, it being understood that serious fraud shall be considered to be fraud involving a minimum amount to be set in each Member State. This minimum amount may not be set at a sum exceeding [EUR] 50 000’.

4. Decision 2007/436

10. According to Article 2(1) of Decision 2007/436/EC, Euratom: (7)

‘Revenue from the following shall constitute own resources entered in the general budget of the European Union:

…

(b) without prejudice to the second subparagraph of paragraph 4, the application of a uniform rate valid for all Member States to the harmonised VAT assessment bases determined according to Community rules. The assessment base to be taken into account for this purpose shall not exceed 50% of GNI for each Member State, as defined in paragraph 7;

…’

5. VAT Directive

11. Article 250(1) of Directive 2006/112/EC (‘the VAT Directive’) (8) provides that ‘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’.

12. Article 273 reads as follows: ‘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 …’

B. National law

13. Article 32(2) of the Bulgarian Constitution provides for the prohibition of the interception of a person’s telecommunications, except in cases envisaged by law.

14. Article 121(4) of the Constitution sets out the obligation for court rulings to state reasons.

15. The interception of telecommunications is regulated by Articles 1 to 3, 6 and 12 to 18 of the Zakon za spetsialnite razuznavatelni sredstva (‘Law on special intelligence methods’ or ‘ZSRS’) and Articles 172 to 177 of the Procedural Criminal Code. As explained by the referring court, interceptions may be carried out both before (preliminary investigations) and after the criminal proceedings have been initiated. Where carried out earlier, a body within the Ministerstvo na vatreshnite raboti (Interior Ministry) applies for them to be effected (in the present case the Direktor na Glavna direktsia za borba s organiziranata prestapnost (Director of the General Directorate Combating Organised Crime)). After proceedings have commenced, it is the public prosecutor’s office which makes the application. Who (or what telephone connection) should be tapped, and the offence being investigated must be listed on that application.

16. The interception of telecommunications is only lawful if it has been authorised in advance, either by the president or by the vice-president of a court which has jurisdiction to decide on the application, by way of a final court decision that is not subject to appeal.

17. On 1 January 2012, the Zakon za izmenenie i dopalnenie na Nakazatelno-protsesualnia kodeks (‘Law amending and extending the Procedural Criminal Code’ or ‘ZIDNPK’) concerning the establishment and operation of the Spetsializiran nakazatelen sad (Specialised Criminal Court) entered into force. That law transferred powers over proceedings against criminal organisations from the Sofiyski gradski sad (Sofia City Court) to the Spetsializiran nakazatelen sad (Specialised Criminal Court). Pursuant to Article 5 of the ZIDNPK, jurisdiction to make orders for the interception of telecommunications in certain cases was also transferred to that court.

18. By virtue of Article 9(2) of the ZIDNPK, existing and ongoing criminal proceedings continued to be dealt with by the bodies that up until then had the relevant jurisdiction. From 6 March 2012, the provision was further amended to the effect that judicial review of interceptions will be exercised by the court that had jurisdiction prior to 1 January 2012.

III. Facts, proceedings and the questions referred

19. Mr Dzivev, Ms Galina Angelova, Mr Georgi Dimov and Mr Milko Velkov (‘the Defendants’) are accused of having, in the period between 1 June 2011 and 31 March 2012, been part of a criminal gang. It is alleged that they committed tax offences for their own benefit, through the company Karoli Kepital EOOD (‘Karoli’). In doing so they would have avoided the assessment or payment of tax for which the company was liable under the Zakon za danak varhu dobavenata stoynost (‘Law on Value Added Tax’). Those four persons also stand accused of specific tax offences committed by Karoli from 1 June 2011 to 31 January 2012. The...