INSIDER TRADING AND CONSOB SANCTIONS: CAN THE DISMISSAL OF CRIMINAL PROCEEDINGS PRECLUDE – IN ACCORDANCE WITH THE NE BIS IN IDEM PRINCIPLE – THE IMPOSITION OF ADMINISTRATIVE SANCTIONS?
In its judgment of 6 July 2023, the Court of Appeal of Milan, Civil Division, responded positively to the question by once again addressing the issue of the relationship between criminal proceedings and Consob sanctioning proceedings on insider trading.
In the administrative proceedings, Consob (the Italian Supervisor) had charged an insider trader with violation of Article 187-bis, paragraph 1, letter b) of the Consolidated Law on Finance, imposing interdictory and pecuniary sanctions at the outcome of the administrative proceedings.
In the meantime, for the same facts, Consob had sent a notice of offence for the crime under Article 184 of the Consolidated Law on Finance to the competent Prosecutor’s Office, which then commenced criminal proceedings that ended with a decree of dismissal by the Judge for Preliminary Investigations pursuant to Article 409 of the Code of Criminal Procedure.
The Civil Division of the Court of Appeal of Milan, called upon to issue a judgement on the appeal against a sanctioning decision, found itself faced with the presence of a measure favourable to the suspect/defendant other than an irrevocable judgement and, therefore, apparently outside the literal scope of Article 649 of the Code of Criminal Procedure.
As is well known, in fact, Article 649 of the Code of Criminal Procedure sanctions the prohibition of retrial for the defendant who has been acquitted or definitively convicted for the same fact by a final judgment or criminal decree that has become irrevocable without any mention of the decree of dismissal.
Notwithstanding this, the Court of Appeal decided to provide an extensive reading of the principle of ne bis in idem, already adopted in the past by the Constitutional Court and the ECHR, according to which the preclusion of the principle in question also operates in the presence of decisional measures other than those indicated in Article 649 Code of Criminal Procedure, observing how even the order to archive can well be considered a “definitive” measure insofar as it is rendered at the outcome of a thorough investigation and this may be sufficient “for the application of ne bis in idem as a fundamental human right recognised by the ECHR“.
The Court of Appeal considered it paradoxical that “the suspect – for the purposes of the preclusive effects of ne bis in idem – can avail himself of a favourable ruling only if it is made by a final judgment” and cannot “invoke invoking this principle in case the judge hearing the crime did not even consider continuing the prosecution against him because of the absence of indicia of guilt“.
On the basis of these arguments, the Court of Appeal of Milan also recognised the preclusive effect of the archiving decree and annulled the CONSOB resolution applying the administrative sanctions set forth in Articles 187 bis and 187 ter of the Consolidated Law on Finance.
SPECIAL POWER OF ATTORNEY FOR CASSATION JUDGMENTS: WE’RE FINALLY GETTING DOWN TO BUSINESS!
With judgment nos. 2075 and 2077 of 19 January 2024, the United Sections of the Supreme Court of Cassation clarified that the issue of a special power of attorney for litigation in proceedings of legitimacy, when authenticated by lawyers, does not require the spatial and temporal simultaneity of the assisted party’s signature with the drafting, service and/or filing of the deed by the lawyer.
The United Sections, in fact, were called upon to rule on the question of particular importance (sic!) concerning the conferment of a special power of attorney to file an appeal before the Court of Cassation and, in particular, whether this may also be issued on a date prior to the drafting of the appeal and in a place other than that indicated in the document itself.
In this regard, the United Sections – drawing inspiration without reservations from the principles of our Constitution (Articles 24 and 111 of the Constitution) and from the legal traditions shared at supranational level (Article 47 of the Nice Charter, Article 19 of the Treaty on European Union, Article 6 ECHR) – have stated, without ambiguity, that:
– the right of defence has a fundamental ‘centrality’;
– the ultimate purpose to which the trial is per se oriented is the effectiveness of judicial protection;
– too much red tape shall be avoided, as well as restrictions on a party’s right of access to a court that are not the result of reasonable and proportionate criteria;
– the lawyer’s ‘function having great social impact’ is of particular importance in the exercise of jurisdiction and cannot, therefore, take place ‘without the mutual and continuous cooperation between lawyers and magistrates, which must be based on the principle of loyalty; therefore, if the professional betrays this trust, he can certainly be called to answer, in another forum, for his unfaithful work; but as a result of the existence of possible abuses, which do sometimes occur, one must not infer a rule of judgement that presupposes a general and unjustified distrust in the work of the legal profession”.
Given these principles (which represent the beacon that should indicate the road to trial), on the other hand, with regard to the special power of attorney for proceedings before the Court of Cassation, it has been clarified that,
– the date of issue of the power of attorney does not constitute an element of form-content of the power of attorney, nor a condition for the effectiveness of the defence counsel’s certification;
– whether the power of attorney was conferred on a date prior to the date on which the appeal was drafted is irrelevant, whereas what is important for the admissibility of the cassation appeal is that the conferment of the power of attorney to litigate takes place within the time window marked by the (initial) moment of publication of the measure to be appealed and the (final) moment of service of the appeal: therefore, neither before nor after, respectively.
Hence, the declaration of the following principles of law:
1. “On the subject of appeal for cassation, the requirement of the special nature of the power of attorney, referred to in Articles 83, paragraph 3, and 365 of the Code of Civil Procedure, does not require the simultaneous nature of its conferment with respect to the drafting of the document to which it accedes, since for this purpose, it is only necessary that it be joined, materially or electronically, with the appeal and that the conferment is not prior to the publication of the measure to be appealed and not subsequent to the notification of the appeal itself.”
2. “In the case of a native digital appeal, served and filed electronically, the attachment by electronic means – to the public certified electronic mail (PEC) message with which the document is served or by insertion in the “electronic envelope” with which the document is filed – of a digitized copy of the power of attorney drawn up on paper, signed by the party and authenticated with a digital signature by the lawyer, constitutes the case, pursuant to Article 83, third paragraph, of the Code of Civil Procedure, of a special power of attorney appended at the bottom of the appeal, with the result that the power of attorney itself is to be considered valid in the absence of expressions that unequivocally lead to the exclusion of the party’s intention to appeal before the Court of Cassation”.
All this with the approval of colleagues (and assisted parties) who have been unjustly barred access to judicial protection by virtue of previous rulings of inadmissibility of appeals to the Court of Cassation based on excessive red tape, such as the date affixed to the special power of attorney before that of the deed.
THE NEW ADVERSARIAL PRINCIPLE IN THE ITALIAN STATUTE OF THE TAXPAYER.
With Legislative Decree no. 219 of December 30, 2023, in force as of January 18, 2024, the Italian Government introduced article 6-bis of Law no. 212 of 2000, so-called Italian Statute of the Taxpayer, which provides for the obligation of prior adversarial proceedings between the tax authority and the taxpayer for any tax and for any case.
Legislative Decree no. 219 of 2023, following a reminder by the Italian Constitutional Court that, considering the inconsistent regulatory framework, clarified that it would be necessary to extend the adversarial procedure in tax matters (Constitutional Court, Judgment no. 47 of March 21, 2023), introduced article 6-bis, entitled “Principle of adversarial proceedings”, to the Statute of the Taxpayer.
Under the previous legislative framework, there was no general right of prior adversarial procedure for the taxpayer: it was available only if and to the extent provided for by a specific rule.
At the same time, the new legislation repealed article 12, par. 7, of the Statute of the Taxpayer, which granted the taxpayer the opportunity to submit defensive pleadings within 60 days following the delivery of the tax audit report. The rule has now been “absorbed” by the new article 6-bis.
With respect to the new rules on prior adversarial procedure, the obligation to establish it applies to all acts that can be independently appealed, failing which the act may be annulled.
The procedure is as follows:
– before issuing the notice of tax assessment, the tax administration makes available to the taxpayer an outline of the act;
– the taxpayer shall be given a period of not less than 60 days to submit any counter-arguments or, upon request, to access and extract a copy of the documents in the file.
At the end of this procedure, the tax authority shall issue the notice of assessment taking into account the observations of the taxpayer and giving reasons for it by referring to the observations it does not intend to accept.
If an adversarial procedure is not established, the tax assessment issued is automatically voidable, and the so-called “proof of resistance” will not be necessary to prove that if the adversarial procedure had been established, the assessment procedure would have had a different outcome.
DOES THE COMPETITOR’S FISCAL REGULARITY HAVE TO PERSIST THROUGHOUT THE ENTIRE TENDER PROCEDURE?
As is well known, according to Article 80, paragraph 4 of Legislative Decree No. 50/2016 (according to the new Code, this provision is re-proposed in Article 94, paragraph 6 of Legislative Decree No. 36/2023), if an economic operator has committed serious violations, definitively ascertained, with respect to obligations relating to the payment of taxes or social security contributions, according to Italian law or the law of the State in which they are established, it constitutes grounds for exclusion from the tenders.
Over time, administrative case law has interpreted this case of exclusion differently:
(i) in the face of decisions (the most numerous) that have stated that the certifications relating to the contributory and tax regularity of participating companies, issued by the competent bodies, are binding on the contracting authorities, which cannot in any way review their content, since no power of assessment on the content or assumptions of these certifications rests with them;
(ii) to others that, on the other hand, have pointed out that precisely because verification can take place at all stages of the procedure, the constant possession of the said admission requirements must be deemed to be required, as a guarantee of the company’s continued seriousness and willingness to submit a credible bid and also the reassurance for the contracting authority of the relationship with a party, who, from the tender application until the conclusion of the contract and then again until the fulfilment of the contractual obligation, is provided with all the general and technical-economic-professional requirements necessary to contract with the public administration.
For these reasons by means of Order No. 161 of January 4, 2024 the Council of State (Sec. III) has finally called upon the Plenary Assembly for clarification on the various guidelines, proposing some questions on the need to verify that the tax regularity of the competitor persists throughout the entire duration of the open public procedure.
The case concerns an appeal brought against the award in favor of an operator who, according to another competitor, should have been excluded from the tender due to tax irregularities pursuant to Article 80, paragraph 4 of Legislative Decree no. 50 of April 18, 2016.
According to the general rule of the necessary continuity in the possession of the participation requirements throughout the duration of the tendering procedure invoked by the appellant (who classified second in the tender), it was deemed that the winner of the tender would have evidently lost the requirement of fiscal regularity during the tendering procedure, without the contracting authority having taken note of this and without it having made the necessary classifications in terms of exclusion of the same winner from the selective procedure.
On the contrary, the successful tenderer, in his defence, refers to the well-established case law that excludes any power by the contracting authority to review the findings of the certificates issued by the competent authorities (in this case, the Italian Revenue Agency (Agenzia delle Entrate)), which are evidence of the economic operator’s regularity from a tax point of view: in the present case, the absence of significant irregularities was ascertained – precisely – by means of the above-mentioned certificates, obtained by the contracting authority at various stages of the procedure (and, most recently, during the verification of the possession of the requirements prior to the award of the contract).
According to the Board, this contrasting position reveals some possible friction between the above-mentioned interpretative positions, such as to prompt the intervention of the Plenary Assembly of the Council of State.
In particular, in the Board’s opinion, first of all it is unclear whether there is always an obligation for the tenderer to inform itself, and above all to promptly inform the contracting authority, of all situations of tax or social security contribution irregularities that may arise during the tender. Secondly, conversely, is there an uninterrupted obligation for the contracting authority to verify the possible existence of irregularities (through the acquisition of certificates from the Italian Revenue Agency which also reflect the “historical” position of the operator) in every stage of the tendering procedure, given that in case-law the verification “may” take place at any time during the tendering procedure but does not necessarily imply that it “must” be carried out at every stage and in the manner referred to above?
Finally, in the event that the “timely ” verification carried out by the contracting authority through the acquisition of the certification at a given moment of the procedure is reaffirmed, the procedural issue arises as to whether a competitor who challenges the award is allowed to go beyond what is sufficient for the contracting authority, and thus document the existence of ‘excluding’ irregularities at any time during the tendering procedure other than that at which the latter conducted its verifications, with the consequent obligation for the court to ascertain the unlawfulness of the award and annul it.
This therefore gives rise to the following questions presented to the Plenary Assembly:
1. Without prejudice to the principle that the contracting authority has no power to review the findings of the certificates issued by the Italian Revenue Agency attesting to the absence of tax irregularities on the part of participants in a public tendering procedure, which are required to be issued by the administration itself, does the principle of the necessary continuity in the fulfilment by tenderers of the general requirements for participation in selection procedures always entail the duty of each tenderer to inform the contracting authority promptly of any irregularity that may arise during the tendering procedure?
2. Without prejudice to the rule referred to above concerning the sufficiency of the certificates issued by the competent authorities, is the contracting authority obliged to extend the verification of the absence of irregularities of the successful tenderer in relation to the entire duration of the procedure, where appropriate by means of the acquisition of certificates covering the entire period from the submission of the tender to the award of the contract?
3. Whether, in any event and irrespective of the sufficiency or otherwise of the verifications carried out by the contracting authority, a tenderer challenging the award of the contract can demonstrate, and by what means, that – at any time during the tendering procedure – the successful tenderer has lost the requirement of the absence of irregularities, with the consequent obligation for the administration to exclude it from the procedure?
It is quite clear that the principles as well as the above-mentioned questions that the Plenary Assembly is called upon to answer will also have repercussions on the other participation requirements that are usually verified at the application stage through the submission of certifications by the competent bodies.
THE ENTRY INTO FORCE OF THE DATA ACT, A NEW STEP TOWARDS THE CREATION OF A EUROPEAN SINGLE DIGITAL MARKET
On 11 January 2024, the Data Act, the new European Data Regulation on “harmonised rules on fair access to and use of data”, entered into force. It is part of the broader European strategy to create a single digital market and to acquire the Union’s leadership in the data sector and which will allow a greater flow of data for the benefit of businesses, citizens, and public administrations.
The Data Act represents the second most important European initiative on data, and together with the Data Governance Act (Regulation 2022/868), it is part of the broader European strategy to create a single digital market and to acquire the Union’s leadership in the data sector, already announced by the European Commission in February 2020. The aim of this strategy is to create a single European market in which data can circulate, be shared and used freely by both public and private actors in the field of research and innovation in the European Union, for example for the benefit of the modernisation of public services, the production of personalised medicines, the achievement of more efficient mobility and better policymaking.
The aim of the Data Act is to create a fairer and more innovative data economy by introducing harmonised rules to ensure a fair distribution of the value of data among data economy players. More specifically, the Data Act regulates the access to and use of data from a “product” or related service, i.e. an item that “obtains, generates, or collects, data concerning its use or environment, and that is able to communicate data via a publicly available electronic communication service”, such as connected vehicles, industrial machinery and machinery used in the healthcare sector. This means that all connected products placed on the European market, in the so-called Internet of Things (IoT) sector, have to be designed and manufactured in a way that allows users to easily and securely access, use and share the data they generate.
Specifically, companies that produce and supply such IoT-connected products, with the exception of small or micro enterprises, must ensure that users have access to and portability of the data generated by the product, as well as the related metadata necessary to interpret such data, making them available in a comprehensive, structured, commonly used and machine-readable format. In addition, among the measures aimed at regulating the efficient circulation of data, the following are envisaged:
i) The data monetisation, which means the payment of a price, reasonable and non-discriminatory, corresponding to the investments made for the data production and collection, as well as the cost to be incurred in making them available;
(ii) The protection of trade secrets, through security measures designed to protect information whose circulation would harm the interests and property rights of enterprises;
(iii) The interoperability of cloud services, thanks to measures that allow users to effectively switch between different data processing service providers to unlock the Union cloud market.
Moreover, the Data Act includes measures to contrast the abuse of contractual imbalances that prevent fair data sharing in order to protect small and medium-sized enterprises against unfair contract terms imposed by companies with a significantly stronger market position. In this regard, the Data Act provides for a list of ineffective contractual terms, distinguishing:
a) terms that are certainly unfair (e.g. terms that exclude or limit the liability of the party that unilaterally imposed the term for intentional acts or gross negligence, terms that exclude the remedies available to the party upon whom the term has been unilaterally imposed in case of non-performance of contractual obligations or the liability of the party that unilaterally imposed the term in case of breach of those obligations);
b) terms that are presumed unfair (e.g. terms that allow access to the data of the other party and to use it against the interests of the latter, terms that prevent the weaker party from being able to unilaterally terminate the contract within a reasonable period).
In addition, public authorities – such as the European Commission, the European Central Bank and other European Union bodies – may request access to data collected from businesses and private users in case of particular circumstances of necessity and urgency, for a reasonable fee.
Although Regulation 2023/2854 is already in force, the Data Act will become applicable in September 2025 regarding both personal data and non-personal data, supplementing and not affecting the provisions of the GDPR on the protection of personal data. Non-compliance with data access rights is subject to GDPR fines (up to 4 % of the yearly world-wide turnover or € 20 Million, whatever is higher).
The enactment of the Data Act confronts companies in many industries with a momentous change right from the design of their products or services, a change that will have to be addressed in the right way and by complying with the new regulation in order not to incur penalties and remain competitive in the market.
DISCLAIMER: This newsletter merely provides general information and does not constitute legal advice of any kind from Macchi di Cellere Gangemi. The newsletter does not replace individual legal consultation. Macchi di Cellere Gangemi assumes no liability whatsoever for the content and correctness of the newsletter.
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