ECJ: Hungary’s restrictions on the foreign funding of civil organisations do not comply with EU law

3 hét 6 nap ago

In its judgment in Case C-78/18 Commission v Hungary, delivered on 18 June 2020, the European Court of Justice condemned Hungary for its 2017 adoption of the “Transparency Law”[1] which imposed an obligation on civil organisations to register as “organisations in receipt of support from abroad” if the yearly sum of the donations they received from abroad (including both other Member States and third countries) exceeded a certain threshold and to publicly disclose the donations received, including the name, the country and the city of residence (or in the case of legal persons, the registered office) of the donors whose donations reached HUF 500,000 (around €1400). This information was then published on a freely accessible electronic platform.

The Commission, following a pre-litigation procedure that included the issuance of a letter of formal notice and a reasoned opinion, brought an action for failure to fulfil obligations before the ECJ against Hungary, claiming that the Transparency Law infringed on both Article 63 of the Treaty on the Functioning of the European Union (TFEU) concerning the free movement of capital and on Articles 7, 8 and 12 of the Charter of Fundamental Rights of the European Union, concerning, respectively, the right to respect for private and family life, the right to the protection of personal data and the freedom of association. Hungary claimed that the action of the Commission must be dismissed as inadmissible due to the Commission’s unlawful conduct during the pre-litigation stage, namely the requirement that Hungary submit its comments on the letter of formal notice and then on the reasoned opinion within a period of one month, instead of that of two months normally applied in pre-litigation procedures.

The Court of Justice dismissed Hungary’s argument, noting that the short time limits of the pre-litigation procedure can only lead to the inadmissibility of the subsequent action if the Commission’s conduct provably made it more difficult for the member state concerned to refute the complaints raised in the case. In this case, however, Hungary couldn’t prove such conduct, especially since the Commission accepted – and duly took into consideration – comments submitted by Hungary’s on the formal letter and the reasoned opinion several weeks after the original one-month deadline had passed.

On the substance of the case, the Court first examined whether Hungary’s conduct constituted an unjustified restriction on the free movement of capital enshrined in Article 63 TFEU. The Court held that the transactions covered by the Transparency Law fell within the scope of Article 63’s concept of ‘movements of capital’ and that the law in question does indeed constitute a restrictive measure of a discriminatory nature, as it establishes a difference in treatment between domestic and cross-border movements of capital which does not correspond to any objective difference in the situations at issue and which is apt to deter natural or legal persons established in other Member States or third countries from providing financial support to the organisations concerned. The obligations of registration, declaration and publication and the penalties for failing to comply are meant to create a climate of distrust with regard to the organisations in receipt of support. The public disclosure of information on persons established in other Member States or in third countries providing financial support to these organisations is also such as to deter them from providing such support.

On the question of the possible justification of this restriction, Hungary argued that the law is justified both by an overriding reason in the public interest, specifically the objective of increasing the transparency of financial support received by civil society organisations that have a significant influence on public life, and on the grounds of public policy and public security mentioned in Article 65(1)(b) TFEU, as a measure in the fight against money-laundering, the financing of terrorism and organised crime. Considering the first argument, the Court held that, while increasing the transparency of the financing of organisations may indeed be considered a legitimate justification, Hungary had not demonstrated why this objective warrants the restrictive measures implemented by the Transparency Law, especially since they apply indiscriminately to all the organisations which fall within the scope of that law, instead of targeting only those that are genuinely likely to have a significant influence on public life and public debate. On the second argument, the Court noted that the grounds of public policy and public security may only be relied on if there is a genuine, present and sufficiently serious threat to a fundamental interest of society; Hungary, however, had not submitted any argument proving the existence of such a threat and instead based the Transparency Law on a presumption made on principle and indiscriminately that any financial support of civil organisations that is sent from abroad and the organisations in receipt of such support are intrinsically suspect. Consequently, the Court concluded that the restrictions were not justified and therefore that Hungary had failed to fulfil its obligations under Article 63 TFEU.

The Court of Justice then examined whether the provisions of the Transparency Law constituted a limitation of the rights enshrined in Articles 7, 8 and 12 of the Charter. As regards the right to freedom of association (Article 12(1)), the Court pointed out that it constitutes one of the essential bases of a democratic and pluralist society, inasmuch as it allows citizens to act collectively in fields of mutual interest and in doing so to contribute to the proper functioning of public life. In the present case, the Court found that the obligations put in place by the provisions of the Transparency Law limited that right, inasmuch as they rendered significantly more difficult the action and the operation of the associations which are subject to them.

As regards the right to respect for private and family life (Article 7), the Court referred to the interpretation given by the ECHR, according to which this right compels public authorities to refrain from any unjustified interference in the private and family life of persons and in the relations between them. On the right to protection of personal data (Article 8(1)), the Court noted that it precludes information in relation to identified or identifiable natural persons from being disseminated to third parties, whether that be public authorities or the general public, unless that dissemination takes place in the context of fair processing that meets the requirements of Article 8(2). The Court observed that, in the present case, the obligations of declaration and of publication provided for by the Transparency Law constituted a limitation of both of these interconnected rights, especially since Hungary had not submitted that the provisions laying down those obligations met the requirements of fair processing.

Addressing, lastly, the issue of the potential justification of the limitations to fundamental rights, the Court observed that the provisions of the Transparency Law could not be justified by any of the objectives of general interest – that is, the objectives of transparency and the safeguarding of public policy and public security – which Hungary relied upon.

In the light of these considerations, the Court concluded that, by adopting the provisions of the Transparency Law which impose obligations of registration, declaration and publication on civil society organisations directly or indirectly receiving support from abroad exceeding a certain threshold and which provide for the possibility of applying penalties to organisations that do not comply with those obligations, Hungary has introduced discriminatory and unjustified restrictions in breach of its obligations under Article 63 TFEU and Articles 7, 8 and 12 of the Charter.

[1]Law No LXXVI of 2017 on the Transparency of Organisations which receive Support from Abroad

Kategória: European UnionCivil Society OrganisationsBrexit Eng: Fogyasztóvédelem: Consumer Protection: 16th Anniversary: 
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As Old as the Use of Money? – Thoughts about the Regulation of Counterfeiting Currency in the Light of the International and EU Expectations

3 hónap ago

It is doubtless that counterfeiting is historically coeval with the existence of money, as Karl Binding, a German legal scholar stated at the beginning of the 20th century, that: „invention of the money leads to the invention of counterfeiting.” (Binding, 1904, 306.) To the commission of a crime like this, mostly competent specialists, technicians and experts of computer systems are needed (Nagy & Tóth, 2015, 165.). But the build-up network cannot be neglected beside the suitable technical infrastructure, since organised criminal networks diffuse counterfeit currency in the whole world and we can say that, by now – apart from unique cases – it is a global and organised crime (Musacchio, 2016, 15.).

The Origins of Counterfeiting Currency

Counterfeiting represents a considerable criminal weight, since the right to coinage and to issue money has always belonged to the privileges of the state. Its risky nature lies in the fact that it harms interests of economy, the legitimate amount of money in circulation, and affects the trust and confidence towards state-issued money as well. Moreover, a big amount or value of counterfeit currency may have even more serious consequences: these may jeopardize the balance of the finances in the traffic and the stocks fund (Belovics & Molnár & Sinku, 2019, 545.).

The crime of counterfeiting currency has a long history, counterfeit money has appeared before the coinage of money, which can be proved by the legal sources and the archeological findings (Tóth, 2016, 137.). Ancient civilisations already punished the crime like fraud, and later on, it was regulated separately, individually. The seeds of counterfeiting in criminal law can already be discovered in the ancient Greek and Roman law. Among the ancient Greeks, it was Solon and in Rome, Marius Graditianus was the first who made a law against counterfeiters. The latter also established investigation offices which controlled the genuineness of the money (Tóth, 2017a, 44.). Under the reign of Constantine appeared the concept that the counterfeiter with his or her conduct breaches the monarch and with this he or she commits treason, disloyalty.

The concept remained for centuries in the European countries in the Middle Ages. Due to this, the customary law (e.g. the Sachson Spiegel) and the written law (e.g. the Consitutio Criminal Carolina) said it shall be punishable by cruel sanctions (Tóth, 2015a, 656.). In the 18th century, as the ideas of the Enlightenment took hold, this concept started to change and counterfeiting currency was reclassified gradually as a crime against property. Cesare Beccaria was the first who denied the public law characteristics of the crime. (Angyal, 1940, 33.). The punishments became more humane and the main sanction was imprisonment.

The Brief Legal History of Counterfeiting Currency in Hungary

From the Beginning of the Evolution to the ‘Code Csemegi’

At the beginning of the legal development in Hungary, counterfeiting currency was punishable by the customary law and no regulations on the subject of counterfeiting can be found from the time of our first kings. The first written source is linked to the age of the reign of Andrew (András) III in the 13th century. Later it appeared in more acts like in the reign of Charles Robert (Károly Róbert) and in the acts of Matthias (Mátyás) I, in the age of the reign of which, counterfeiting was expressis verbis stated that, as a disloyalty crime, just as in other countries in the Middle Ages, the punishment was death for the perpetrators (Tóth, 2014a, 179.)

The Tripartitum – which never came into effect as an Act but as a customary law compilation, the courts applied it through almost three centuries and was published in 1517 (Lábady, 2002, 81.) – defined the legal practice, which, for centuries regarded counterfeiting as treason (Tóth, 2002, 322.). The 16th century could be described as the ‘Golden Age’ of the counterfeit currency makers, as the chaotic period definitely facilitated their activities (Tóth, 2018, 32.). The Act IX of 1723 – which also maintained the public law nature of the crime and it did not comply with the expectations of its age – also mentioned counterfeiters and put extremely strict sanctions into action against the perpetrators including forfeiture of property and capital punishment, if the counterfeiting was committed in excess of 50 Forints (Angyal, 1940, 10.).

Even the proposals for creating a Hungarian Criminal Code around the turn of the 19th century dealt with the crime of counterfeiting currency in detail (see Szabó, 2018, 150.). According to the most progressive attempt in 1843 – which shared the fate of the previous ones and never came into effect – counterfeiting currency was a crime against property and not against the monarch and sanctioned it with 12 years imprisonment (it should be noted that the proposal had no capital punishment at all). In addition, it declared the counterfeiting of banknotes (paper money) as forgery of administrative and public documents (Tóth, 2002, 372.).

From the ‘Code Csemegi’ to the Former Criminal Code – Among Emerging International Expectations

Our first Criminal Code, Act V of 1878 – which is also called the ‘Code Csemegi’ after its author, the famous Hungarian lawyer – regulated the legal definition of counterfeiting currency in altogether ten sections in its Chapter IX as a crime against public trust (Gula, 2017, 92.) (although, during the preparation of the Code, the legislators still thought it necessary to mention the royal criminal nature of the crime as well, Goricsán, 2011, 233.) The Code punished ‘actual counterfeiting’, along with the issue of counterfeit money and its acquisition with the same intentions (in other words, the ‘turnover of counterfeit money’), as well as fraudulent usage of counterfeit money and issue of counterfeit money (Finkey, 1914, 752.) and abolished the death penalty against counterfeiters. Act XXXVI of 1908 (the ‘first Criminal law Novelle’) amended the Code and particularly the categories of counterfeiting currency with the addition of the crime and act of unauthorised issue of banknotes (Tóth, 2014b, 258.). Act V of 1961 on the Criminal Code classified counterfeiting currency as a crime against the national economy and regulated it with the crime of stamp forgery.

The legislations formed in the field of counterfeiting currency, following the Geneva Conventionadopted in 1929 and entered into force in Hungary with the Act XI of 1933 – amended with provisions of international nature, regarded that foreign currency shall be subject to the same protection as the domestic currency (Gula, 2017, 92.). It should be recalled that in Europe, the interest in the transnational counterfeiting of currency was only really perceived as a problem after a couple of major counterfeiting cases in the period between 1920 and 1930 (Manas, 2017, 8.). France, for example, became the victim of large-scale counterfeiting of French francs in Hungary, which had already been the scene of counterfeiting Yugoslavian and Czechoslovakian currency, but the scandal involving the French francs was a major one, due to high-level political participation in the counterfeiting case and the ensuing lenient treatment of the perpetrators (Papp, 2013, chapitre ’Quand le « bloc chrétien » hongrois voulait ruiner le franc’, pp. 91–102.). Despite arrests made in the Netherlands and court cases conducted in Hungary, the outcome gave rise to considerable dissatisfaction, the sanctions were considered too light and a number of high-ranking civil servants and politicians were not prosecuted.

This resulted in actions by several countries to regulate the problem in the framework of the League of Nations, the predecessor of the United Nations, as it was a known fact that the counterfeiting of foreign currency was not a punishable offense in every country. In the eyes of those taking the initiative, by taking the matter to the League of Nations, the counterfeiting currency would be elevated to the level of a crime against the international legal order. The League of Nations produced an excellent comparative law report, which took into account criminal law, criminal procedural and international criminal law, and elaborated a draft Convention. In conclusion, the result was limited to the approval and ratification of the International Convention for the Suppression of Counterfeiting Currency (signed in Geneva on April 20, 1929), which can be regarded as a balance between the necessity to internationalise the crime of counterfeiting currency and the political duty to respect the legislative autonomy of the sovereign states (Vervaele, 2002, 155–156.). Even today, the Convention is the most important multilateral international convention regarding the suppression of counterfeiting money and contains a lot of provisions regarding cooperation in criminal matters. It is the basis of the European Union’s legal sources and it prescribes for the signing states that the foreign currencies shall not be discriminated by the aspect of criminal law protection (Tóth, 2018, 112–113.)

The Former Criminal Code – by Virtue of the Beginning of the EU Expectations

Act IV of 1978 on the Criminal Code further simplified the regulation and regulated counterfeiting currency in the chapter under the title “Criminal Offences Against the Economy” (Goricsán, 2010, 35.). The criminal law concept of money was defined in a separate legislative decree (Law Decree V of 1979). In accordance with the provisions of the relevant 2000/383/IB Council Framework Decision – in which the EU prescribed for the first time legal harmony obligations to the Member States to effectively protect the euro currency which was introduced in 2002 (Klimek, 2012, 12.) – Act CXXI of 2001 amended the legal definition of counterfeiting currency in the Criminal Code (Section 304) and extended the scope of criminal conducts with importing, exporting counterfeit or falsified currency or transporting those in transit through the territory of Hungary.

The legislator created the legal definition of aiding in counterfeiting operations (Section 304/A) as well, which punished production, obtainment, keeping, transfer, distribution or trading of any material, means, equipment or computer programme necessary for counterfeiting currency. In addition, in the legislation regulating money, the legislator changed the provisions specifying the concept of money, thereby granting the Euro protection equivalent to that of the domestic currency (See Act CCXXIII of 2012).

The Effective Criminal Code

Act C of 2012 on the Criminal Code brought about new features also in the regulation of the legal provision of counterfeiting currency. One of these changes is that the legislator created a new, separate chapter under the title “Criminal Offences Relating to Counterfeiting Currencies and Philatelic Forgeries”, with the following criminal offences: counterfeiting currency, aiding in counterfeiting operations, forgery of stamps and other criminal offences related to cash-substitute payment instruments – which used to be regulated among the “Criminal Offences against the Economy” in the former Criminal Code. It should be noted that, according to some authors, even though the Economic Crimes chapter does not exist in the effective Criminal Code, from a criminological aspect, counterfeiting currency is still considered as an economic crime. (Tóth, 2018, 124.)

Another substantial change is that – with reference to the Framework Decision – the new Criminal Code rejected to regulate the case in which the object of counterfeiting is coinage or the quantity or value involved is trivial or even less substantial as privileged, as it has been regulated by the previous legislation (former CC Section 304 (3)). Similarly, the new Criminal Code abolished the individual legal definition of disbursement of counterfeit currency (former CC Section 306), as well as increased the sentence of both the preparation and the qualified case.

Examining the legislation, it is worth to point out the individual legal definition of aiding in counterfeiting operations, which was created explicitly for legal harmonisation reasons, and which gave rise to numerous critiques. According to several opinions, the creation of the sui generis delictum was not necessarily required, since the application of the Hungarian provisions related to preparation, which being specified in the general part would have complied with the EU requirements as well (Gula, 2004, 108–142). This opinion is also supported by the fact that, concerning Article 3 of the Geneva Convention, the aforementioned Framework Decision did little else than taking over the conducts of typically preparatory nature and simultaneously amended it with a reference to the technical achievements of our era (Jacsó, 2008, 489.).

The distinction of aiding in counterfeiting operations from the preparation for counterfeiting currency is also problematic (Molnár, 2014, 772.); the intent of the perpetrator cannot be directed at committing counterfeiting currency since in that case preparation for counterfeiting currency would be established. Moreover, since its introduction, the practice has also proven that the legal definition of aiding in counterfeiting operations was unrealistic; the number of registered cases per year ranges between zero and two – since the entry into force of the new Criminal Code, the authorities registered 2 cases in 2013, 1 case each in 2017 and 2019 and none in the other years – and the currently effective 2014/62/EU Directive – which replaced the earlier Council Framework decision and established minimum regulations regarding criminal law for the Member States (see Tóth, 2015b, 324–332) – also no longer makes the creation or sustaining of legal definition necessary (Gula, 2016, 173.).

In summation, it can be established that although the legislation of counterfeiting currency complies with the international and the EU legal sources and proves to be relatively time-resistant, fine-tunings by the legislator would have a favourable effect on enhancing the protection of the legal subject (Tóth, 2017, 549.).

 

For a list of references, click HERE.

Author: dr. Petra Ágnes Kanyuk

Ph.D. Student at the Géza Marton Doctoral School of Legal Studies of the University of Debrecen, Department of Criminal Law and Criminology

The study was prepared with the professional support by the Research Scholarship for Ph.D. Students No. ÚNKP-19-3, granted by the Ministry for Innovation and Technology in the framework of the New National Excellence Programme.

Sources for the images used:

Book cover of: Szombathy, Viktor (1969). A pénzhamisító. Budapest: Móra Ferenc Könyvkiadó

https://www.professionalsecurity.co.uk/news/government/euro-counterfeits/ [accessed April 18, 2020]

  Kategória: PolicingBrexit Eng: Fogyasztóvédelem: Consumer Protection: 16th Anniversary: 
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ECJ: the Commission failed to provide proper reasons for suspension injunctions against Hungary

3 hónap 1 hét ago

The European Court of Justice, acting on an appeal brought by Hungary and supported by Poland, published its judgment in Case C‑456/18 P Hungary v European Commission on 4 June, thus bringing an end to a five-year legal dispute involving Hungary, the Commission and the General Court. According to the judgment, the Commission failed to provide proper reasons as to why it regarded as necessary to order that Hungary suspend the application of the progressive tax rates of the health contribution to be paid by tobacco manufacturers and the food chain inspection fee imposed on certain food business operators until the conclusion of the Commission’s investigation. The Court of Justice has also set aside the judgment of the General Court at first instance which held up the suspension injunctions set by the Commission.

The dispute concerns the proceedings of the Commission against Hungary, started in early 2015 due to a pair of new tax measures introduced by the Hungarian legislature shortly beforehand. One of these measures was the health contribution imposed on tobacco manufacturers, which levied progressive tax rates on the turnover from the production or trading of tobacco products within Hungary, while also providing tax reductions to the businesses willing to realize investments in certain tangible assets. The other procedure concerned the food chain inspection fee, which was not a completely novel measure, but while it originally applied a uniform 0.1% tax rate to the turnover of food chain operators, it was also made progressive in the case of shops selling everyday consumer goods starting from 2015.

The Commission initiated a formal investigation procedure in both cases, claiming that the progressive rate of both the food chain inspection fee and the health contribution (and the reduction of the latter in the event of investment) resulted in undertakings in comparable situations being treated differently and could therefore be regarded as establishing State aid incompatible with the internal market. At the same time, the Commission issued a suspension injunction, requiring Hungary to suspend the implementation of both tax measures at issue until the end of the investigation. Hungary brought an action before the General Court against these suspension injunctions which joined the cases due to their similarity. The General Court reached a decision on 25 April 2018 in which it dismissed Hungary’s actions. The General Court held that the Commission has provided a sufficient statement of reasons for its contested decisions in which it clearly explained why it was necessary to adopt the suspension injunctions in the present case.

Hungary appealed this decision before the Court, alleging that the General Court committed errors of law regarding the discretion available to the Commission when it adopts suspension injunctions and its obligation to state reasons for those injunctions. In the interpretation of the General Court, the information provided by the Commission’s decisions made it clear that Hungary had the intention not to suspend the measures at issue during the investigation procedure. On the other hand, Hungary held that the reasons stated for the suspension injunction were insufficient.

In its decision, the Court reviewed the three reasons that the General Court considered sufficient to make it clear why Hungary was not going to comply with the obligation to suspend the implementation of the measures under investigation. First, the General Court claimed that it was clear from the decisions at issue that the Hungarian authorities had argued that the national measures at issue did not constitute State aid. On this point, the Court – following the opinion of the Advocate General in the case – noted that a Member State is perfectly entitled to defend itself by asserting that the measure in question does not constitute aid. Consequently, it cannot be deduced from this defence that there is an increased risk that the Member State will not suspend the measures at issue during the investigation procedure.

Second, the General Court referred to the fact that the Hungarian authorities did not respond to the Commission’s request to submit comments on the planned suspension injunctions. Regarding this argument, the Court opined that while the Commission must permit the Member State concerned to submit its comments on a suspension injunction to be adopted, on the other hand, this provision does not in any way oblige the Member State to actually submit any comments. Consequently, the fact that Hungary did not make any comments concerning the possible adoption of a suspension injunction was not sufficient to justify the Commission’s fear that it would implement the measures at issue.

Third, the General Court referred to the fact that, a few months before the adoption of the injunctions at issue, the Commission initiated a formal investigation procedure in respect of similar Hungarian tax measures, and those measures had not been suspended by the Hungarian authorities. The Court pointed out that, contrary to the General Court’s claim, this fact is not part of the context in which the injunctions at issue were adopted. Furthermore, if that previous conduct on Hungary’s part was a decisive indication for the Commission, it should have mentioned it in the decisions at issue, which was not the case.

Based on these arguments, the Court reached the conclusion that the General Court was wrong in holding that the Hungarian authorities were able to understand why the Commission decided, in the decisions at issue, to have recourse to the suspension injunctions. Furthermore, the Court found that not only could these factors not amount to a sufficient statement of reasons for the decisions of the Commission, but they were also not included in those decisions, which the Commission itself acknowledged. Therefore, the General Court added grounds to those set out by the Commission and thus exceeded the limits of its powers.

On these grounds, the Court set aside the judgment of the General Court and, considering the state of the proceedings, gave final judgment in the matter. As the Commission has itself acknowledged that the decisions at issue did not provide explanations of the reasons why it took the view that Hungary would not suspend the measures at issue despite initiation of the formal investigation procedure, the Court concluded that the suspension injunctions at issue are vitiated by an insufficient statement of reasons.  As such, the Court annulled the suspension injunctions without having to examine the other pleas in Hungary’s application.

Finally, to put this decision in context, it is crucial to mention that the Commission’s formal investigation procedures in question have been concluded on 4 July 2016 with the final decisions of the Commission (Decisions No. 2016/1846 and No. 2016/1848) reaching the conclusion that the national tax measures at issue did indeed constitute state aid that was unlawful and incompatible with the internal market. Given that these decisions were not disputed by either Hungary or a third party, they have since become final and binding.

Kategória: State SubsidiesEuropean UnionBrexit Eng: Fogyasztóvédelem: Consumer Protection: 16th Anniversary: 
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