As Old as the Use of Money? – Thoughts about the Regulation of Counterfeiting Currency in the Light of the International and EU Expectations

1 hét 6 nap 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

2 hét 4 nap 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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A ‘Paradigm Shift’ in the Criminal Law System – The Evolution of the Mediation in Criminal Matters in Hungary, by Virtue of the EU Expectations

1 hónap 2 hét ago

The idea of restorative justice has been much talked about in the last decades. Distinguishing between a retributive and a restorative model, it has sometimes been argued that the idea of restorative justice stands for a 'paradigm shift' in the criminal law system (Meier, 1998, 125.). Mediation has become an integral part of many European criminal justice systems: although there were many unsolved problems at the beginning. As it was pointed out in the Handbook of Criminology, these problems covered a wide variety of details, ranging from the unclear role of reparation and compensation within the context of the criminal justice system to the consequences of the idea of restorative justice for the mass of ‘victimless’ crimes (Zedner, 1994, 1239.). However, the lack of a conclusive concept of restorative justice could have been left unnoticed, as a considerable progress of the idea of restorative justice could be observed in many European legislations during the last decades.

The Origins of Restorative Justice in Hungary

In Hungary, the use of mediation in criminal matters was introduced late even by European standards, as it had been debated for over a decade (it should be mentioned that mediation is not limited to criminal cases in Hungary; in family law and other civil law procedures, mediation was made available earlier than in criminal law, see Barabás, 2015, 387.). The main discussion was about the nature of European Continental law, which provided a very strict frame. One argument of those opposing mediation was that it does not fit in the Continental/civil legal system built on the principle of legality, especially since the sentence may be reduced or replaced if the parties consent. There was a strong reluctance from the side of state authorities to give up their monopoly position in dealing with crime. Nils Christie’s statement – that the state appropriates the conflict and takes the power of decision-making away from the victim in the victim’s own case – proved to be truer (Christie, 1977, 1–15.). Even professionals advocating mediation debated among themselves whether mediation should be used within or outside the criminal procedure. It was also discussed whether or not the victim or the state had the right to renounce their prerogative to demand punishment if reparation was provided (Barabás, 2015, 387–388.).

The related disputes and preliminary needs assessments were still in full swing when due to our EU membership it became ‘mandatory’ to introduce mediation. The relevant 2001/220/JHA Framework Decision – was replaced by the currently effective 2012/29/EU Directive – obliged the Member States to create the opportunity of reaching an agreement between the perpetrator and the victim, and the consideration of such agreement in the criminal proceedings, therefore the legislator was forced to leap into action and fulfil our EU obligation (Görgényi, 2017, 137.). According to the provisions of art. 1. letter E) of the Decision, ‘mediation in criminal cases’ shall mean the seeking, before or during the criminal proceedings, of a solution negotiated between the victim and the perpetrator of the offence with the mediation of a competent person. It should be noted that in one of his co-reports Mihály Tóth added that the Framework Decision prescribed the obligation to introduce not specifically mediation but allowing the cooperation of the defendant and the victim, in order to facilitate the rehabilitation of the victim of the criminal offence, which process has already been ongoing for a time in the Hungarian criminal procedure (see Tóth, 2015, 82–87.).

The Initial Legal Framework

After tremendous preparatory work and professional negotiations, for some, it may have been a dream come true that as of the 1st January 2007 – we slightly missed the deadline prescribed for the implementation of the Framework Decision with this date, however, the non-compliance had remained without legal consequence – mediation in criminal cases became applicable in Hungary as well (see Pápai-Tarr, 2007, 381–409.). The task of implementation of victim-offender mediation has been allocated to the Office of Justice, which is a background institution of the Ministry of Justice and is responsible for the nationwide operation of the Probation Service, the Victim Support Service, and the Legal Aid Service. Thus the mediation process is one of the means of restorative justice, which tries to manage the criminal offences as a unique conflict. The main purpose of this concept is the restoration of the original condition which prevailed before the criminal offence was committed, and its focus is a diversion from the judicial course, as well as the thought of settling the conflict through communication (Belovics & Tóth, 2019, 279.; Act CXXIII of 2006 on Mediation in Criminal Matters, Section 2). Since it is a legal instrument of dual nature (Polt, 2013, 203.), in order to establish the application of mediation, the legal instrument of active repentance was inserted in the former Criminal Code (Act IV of 1978, Section 36) as a new ground for exemption from criminal liability, the application of which constituted the condition of mediation (Görgényi, 2006, 72.).

The Evolution of the Regulation – Towards the Extension of the Application of Mediation

Over the roughly ten last years the regulation has changed in the spirit of flexibility, the legislator intends to help the evolution of the developing opportunity in an ever-extending scope (Barabás, 2017, 77.). According to the currently effective Criminal Code (Act C of 2012), the scope of applicability of active repentance was widened, however, this scope still includes only certain groups of criminal offences of minor or medium severity: a criminal offence against life, physical integrity or health, against personal freedom, against human dignity and fundamental rights, any traffic offence, offences against property or intellectual property rights. So it is not possible to use victim–offender mediation (VOM) in a case of robbery, and also not in sexual abuse cases. It should be noted that it is not an obstacle to the active repentance if, in addition to the criminal offence listed, another criminal offence not included in the list is also committed as a cumulative offence, provided that the former is the determinate of the criminal offences (CC Section 29 (3)). The Criminal Code specifies those reasons of substantive nature (such as committing the criminal offence in the framework of a criminal organisation or committing a criminal offence resulting in death, see CC Section 29 (1) – (2)), in which cases active repentance is not allowed.

In case the perpetrator has admitted his guilt before being indicted and has provided restitution by way of the means and to the extent accepted by the injured party within the framework of a mediation process, or previously if approved in the agreement reached in course of the mediation process, then that shall be considered as active repentance under substantive criminal law, the consequence of which – depending on the ‘type’ of the criminal offence (criminal offences may be classified as felonies and misdemeanors, see CC Section 5) and the upper threshold of the sentence of imprisonment which is carried by the felony – is the termination of the procedure or the unlimited reduction of the penalty. It should be noted that if the perpetrator is a juvenile, the five-year sentence is the uniformly applicable maximum possible upper threshold (CC Section 107).

Per the provisions of the former Criminal Procedure Code (Act XIX of 1998, Section 221/A), the mediation was a substantive and procedural law process that was conducted simultaneously with the criminal proceedings, explicitly welded together with the enforcement of active repentance (Bodor & Csák & Máziné Szepesi et al., 2012). If the statutory criteria were fulfilled, then the prosecutor could suspend the criminal procedure for up to six months, in order to arrange the agreement. However, if for any reason the issue of whether mediation could be conducted was raised only later – during the trial phase – then mediation was possible in that phase of the procedure as well. There was also the opportunity to – in the framework of the mediation process – incorporate any amends which the perpetrator had made and the injured party had accepted before the mediation process in the settlement agreement subsequently.

On the one hand, the new Criminal Procedure Code (Act XC of 2017) allows the conducting of the mediation process in case of other groups of criminal offences compared to the ones so far, as well as in case of more serious criminal offences, too (CPC Sections 412 – 415). On the other hand, in the future the applicability of the process will be separated from the substantive criminal law criteria of active repentance, therefore mediation is applicable not only in connection with grounds for exemption from criminal liability or grounds allowing another advantage in case of active repentance but regardless of such grounds as well, as far as the objectives of the mediation process can be achieved. The special criteria – including the voluntary basis on both sides – and the course of the process has basically not changed.

A Rapidly Growing Field of Practice

All these easings are moving in the direction which has been desired by the relevant legal literature for a long time, as a result of which the will of the injured party and the perpetrator may become decisive regarding the matter of mediation in the future (Barabás, 2017, 82.). Although the area of application expanded – since its introduction in 2007 (the annual number of cases was 2,451 then), the legal instrument has been increasing continuously since 2013, by 162.2% in total (Pápai-Tarr, 2007, 400.) – the criminal offence composition of the cases referred to mediation process has not changed significantly over the years; nearly half of the cases are made up of criminal offences against property (a larger number of thefts, vandalism, fraud, and embezzlement), a third of the cases are traffic crime (primarily causing road accident negligently), while the fifth of the cases are made up of criminal offences against persons (primarily battery and harassment).

It should be noted that, as opposed to this, in France, criminal offences against persons constitute approximately 50% of the cases referred to mediation, however, domestic and neighbour conflicts are significant as well (Pápai-Tarr, 2007, 401.). The imbalance of the distribution of cases within the country implies that the cases have a better chance of being referred to mediation in the capital. Unfortunately, this solution is applied in cases of juveniles rarely – in 10-11% of all cases – in which cases mediation seems to be especially effective according to the results (Barabás, 2017, 79.).

Owing to the practice being regarded positively, the legislative intent to expand the application of mediation beyond the criminal procedure as well is evident, namely, in recent years mediation became applicable in course of minor offence procedures (Act II of 2012 on Minor Offences, Offence Procedures and the Registration System of Offence, which was amended by the provisions of Act CLXXXVI of 2013 Section 67/A-D) and criminal enforcement, regarding the procedure commenced due to breach of discipline among convicts (Act CCXL of 2013 on the Enforcement of Punishments, Measures, Certain Coercive Measures and Detention for Contraventions, Section 171 (1)) as well (Barabás, 2011, 98–114.).

Lastly, we should look at the two most noteworthy projects among the numerous significant initiatives which were made to extend the application of mediation and were parts of the cooperation between the National Institute of Criminology (’OKRI’) and the Foresee Research Group. The EU-funded MEREPS project, implemented between 2009 and 2012 through the partnership of four countries (Belgium, Germany, Hungary and the UK) focused on how mediation and other restorative practices could be applied in prison settings, with special regard to offenders who committed serious crimes and the victims of such crimes. The methods of restorative justice were tested in practice in a prison environment in the form of a pilot project.

The EU-funded Peacemaking Circles pilot project took place between September 2011 and August 2013, through the partnership of three countries (Belgium, Germany, and Hungary). In Hungary, four counties were involved. As opposed to mediation, reconciliation circles involve a larger group in the discussion of the conflict. Beyond victims and offenders, circles engage the community affected by the conflict (family, friends, colleagues, schoolmates, the residential environment, the neighbourhood, and, in the case of a crime against community property, the community itself). However, reconciliation circles also attempt to involve the officials in the criminal procedure, i.e. judges, prosecutors, police officers and the representatives of other supporting professions. Although neither of these pilots resulted in the extension of the statutory regulations, their novel approach and successes have contributed to the recognition of the usefulness of restorative methods (Barabás, 2015, 392–393.).

 

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.

  Kategória: RehabilitationBrexit Eng: Fogyasztóvédelem: Consumer Protection: 16th Anniversary: 
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A Challenge for the EU’s Average Consumer Concept

1 hónap 3 hét ago

Introduction

To a certain degree, owing to the informational asymmetry, the difference in negotiating power and the relative lack of transparency that is often inherent to the private law relationships between individual consumers and the businesses selling goods and services, and due to the ever-present risk of falling victim to unfair commercial practices, all consumers can be considered vulnerable or disadvantaged when it comes to business-to-consumer transactions. This is especially the case in those consumer markets that involve particularly complex transactions, such as the financial products and services market: as the European Commission noted in a 2010 paper, consumers are often ill-prepared to make sound decisions about retail financial products not only due to asymmetric information or limited financial literacy, but also due in part to instincts that drive consumers towards choices that might be inconsistent with their long-term preferences.[1] The European Union, while acknowledging the pitfalls of these particularly problematic consumer markets, seems mostly unwilling to deviate from its inflexible standard of consumer behavior, based on the ideal of a rational market participant. In the light of these issues, this article will focus on the concept of the ‘average consumer’ and its interpretation by the European Court of Justice (ECJ), particularly in cases concerning problematic markets, while the only major exception – the narrow scope of consumers acknowledged as ‘particularly vulnerable’ – will be discussed in greater detail in a future article.

The Notion of the ‘Average’ Consumer

When interpreting the legal term ‘consumer’, defined by the Directives 93/13/EEC (Unfair Contract Terms Directive)[2] and 2008/48/EC (Consumer Credit Directive)[3] as “a natural person who, in transactions covered by the Directives, is acting for purposes which are outside his trade, business or profession”, the Court of Justice had to determine the extent of protection that should be afforded to everyone falling under the scope of the term. The question of how the Court should approach the notion of the ‘average consumer’ was answered in Case C-210/96 Gut Springenheide,[4] where the German court asked the ECJ whether, when assessing if statements designed to promote sales are likely to mislead the purchaser, it would base its assessment on an objectified concept of a purchaser, or whether it would consider the actual expectations of the consumers to whom the statements are addressed; and, in the case of the latter, whether it would use the test of the ‘informed average consumer’ or that of the ‘casual consumer’. In its answer, the Court pointed out that there had been several earlier cases[5] – dating back to the late 1980s – in which the Court had to decide whether a description, trademark or promotional text can be considered misleading; and that in these cases, the Court – without specifically referring to it as a test – consistently based its decisions on the presumed expectations of an average consumer who is reasonably well-informed and reasonably observant and circumspect.[6] Out of these pre-Gut Springenheide cases, Case C-470/93 Mars is of particular interest, as paragraph 24 of the Court’s Mars decision marks the first explicit reference to the category of “reasonably circumspect consumers”.[7]

Following the landmark decision in Gut Springenheide, the case-law of the ECJ continued to utilize the ‘Gut Springenheide formula’ when interpreting the behavior of the average consumer: references to the formula in cases such as C-342/97 Lloyd, C-465/98 Darbo and C-239/02 Douwe Egberts show that a clear legal precedent has been established.[8] This consumer benchmark has also made its way into EU consumer protection legislation with the Unfair Commercial Practices Directive (Directive 2005/29/EC),[9] which explicitly refers to the economic behavior of the average consumer of a certain product in its definition of an ‘unfair commercial practice’ (Article 2). Recital 18 of the Preamble clarifies that the Directive “takes as a benchmark the average consumer, who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors, as interpreted by the Court of Justice”.

This interpretation of the average consumer – which remains the predominant approach of both EU consumer protection legislation and ECJ case law in assessing consumer behavior to this day – is based on the traditional information paradigm which assumes that by increasing the amount of available information and by ensuring complete transparency, consumers will find it easier to make rational decisions, and as such, any ‘weakness’ of the consumer can be eliminated solely through the provision of information.[10] This standard has been criticized by academia and civil society as unrealistically demanding, overly simplified, and generally, a legal fiction far removed from the actual behavior of the individual consumer, both in terms of informedness and reasonability. An actual consumer – whether or not they are considered ‘vulnerable’ – cannot always be expected to be able and willing to thoroughly assess the wealth of information available to them before making a consumer decision; nor can they be expected to make perfectly rational choices that are unclouded by emotions and social influences.[11]

The use of this high standard falls in line with the idea that the EU consumer protection regime is generally ruled by economic, and not social, considerations and, as Norbert Reich writes, “that consumer protection understood as a form of social protection is generally the responsibility of Member States”.[12] In this economy-focused approach, the freedom of the internal market – and particularly, a right to free choice in business-to-consumer contracts – is seen as key to the uninterrupted functioning of market integration, and thus, the EU appears generally wary of restricting the freedom of contract in the name of consumer protection. The information and transparency requirements imposed on the seller by the traditional information paradigm constitute only a minimum deviation from complete contractual freedom, as they do not encroach on the substance of the contract.[13]

Examining the legislation further, we can point out that the EU’s interpretation of the information paradigm does allow for some leeway. Not only does the Consumer Credit Directive (2004/48/EC) require creditors to provide consumers with extensive information, but they are also required to make this information accessible in a standardized form.[14] The Unfair Commercial Practices Directive (2005/29/EC) takes this one step further: its wording shows an attempt at reconciling the two objectives of internal market freedom and adequate consumer protection while also moving from the minimum harmonization approach of previous Directives to one of total harmonization. According to Recital 24 of the Preamble, the objectives of the Directive are “to eliminate the barriers to the functioning of the internal market represented by national laws on unfair commercial practices and to provide a high common level of consumer protection”. This approach restricts the discretion of Member States with regard to the social elements of consumer protection while maintaining their responsibility.[15]

Conclusions

When it comes to business-to-consumer transactions in problematic markets such as the financial services market, consumers are in a particularly difficult position, left at the mercy of a commercial party with considerably stronger bargaining power. The shortcomings of the traditional information paradigm become particularly evident in cases where the sheer amount and complexity of available information paradoxically makes it more difficult for the non-specialist consumer to make informed decisions.

Any deviation from the current European consumer protection regime built on the ideas of the reasonably circumspect consumer and access justice could, however, potentially upset the delicate balance between consumer protection objectives and those of eliminating the barriers to the functioning of the internal market. Understandably, the European Union shows reluctance to raise its standard of consumer protection; however, developments such as the more protective approach taken with regards to services of general economic interest show that there is hope for systemic change.

 

Author: Daniel Szilágyi, PhD student, University of Debrecen, Faculty of Law

 

[1] European Commission (2010). Consumer Decision-Making in Retail Investment Services: A Behavioural Economic Perspective. https://ec.europa.eu/info/sites/info/files/retail_investment_services_2010_en.pdf [accessed April 15, 2020]

[2] Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts. OJ L 95, 21.4.1993, p. 29–34. https://eur-lex.europa.eu/eli/dir/1993/13/oj [accessed April 15, 2020]

[3] Directive 2008/48/EC of the European Parliament and the Council of 23 April 2008 on credit agreements for consumers. OJ L 133, 22.5.2008, p. 66–92. https://eur-lex.europa.eu/eli/dir/2008/48/oj [accessed April 15, 2020]

[4] C-210/96 Gut Springenheide GmbH, Rudolf Tusky v. Oberkreisdirektor des Kreises Steinfurt – Amt für Lebensmittelüberwachung. ECLI:EU:C:1998:369.

[5] The Court mentions, in particular, Cases C-362/88 GB-INNO-BM. ECLI:EU:C:1990:102; C-238/89 Pall. ECLI:EU:C:1990:47; C-126/91 Yves Rocher. ECLI:EU:C:1993:191; C-315/92 Verband Sozialer Wettbewerb. ECLI:EU:C:1994:34; C-456/93 Langguth. ECLI:EU:C:1995:206, and C-470/93 Mars. ECLI:EU:C:1995:224.

[6] Waddington, Lisa (2013). Reflections on the Protection of ’Vulnerable’ Consumers Under EU Law. Maastricht Faculty of Law Working Paper, No. 2. pp. 1–42.

[7] C-470/93 Verein gegen Unwesen in Handel und Gewerbe Köln e.V. v Mars GmbH. ECLI:EU:C:1995:224.

[8] Incardona, Rosella & Poncibo, Cristina (2007). The average consumer, the unfair commercial practices directive and the cognitive revolution. Journal of Consumer Policy, No. 1. pp. 21–38.

[9] Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market. OJ L 149, 11.6.2005, p. 22–39. https://eur-lex.europa.eu/eli/dir/2005/29/oj [accessed April 15, 2020]

[10] Domurath, Irina (2018). The Case for Vulnerability as the Normative Standard in European Consumer Credit and Mortgage Law – An Inquiry into the Paradigms of Consumer Law. Centre for the Study of European Contract Law Working Paper Series, No. 3. 124–137.

[11] Incardona & Poncibo (2007). pp. 31–36.

[12] Reich, Norbert (2018). Vulnerable Consumers in EU Law. In, Leczykiewicz, Dorota & Weatherill, Stephen (Eds.), The Images of the Consumer in EU Law: Legislation, Free Movement and Competition Law. Oxford: Hart Publishing, pp. 139–158.

[13] Domurath (2018). p. 126.

[14] Domurath (2018). p. 127.

[15] Reich (2018). pp. 146–147.

Kategória: European UnionBrexit Eng: Fogyasztóvédelem: Consumer Protection: 16th Anniversary: 
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Memories of the ‘Class of 2004’ – A Foretaste of Some Thoughts on the Occasion of the 16th Anniversary of Hungary’s Accession to the EU

2 hónap ago

Hungary became part of the European Union (EU) during the 2004 ’big bang’ enlargement (Matthews-Ferrero, 2019.) together with nine other, predominantly Central and Eastern European countries. The accession of new Member States brought crucial legal, economic, and social changes in the acceding countries, including Hungary. EU accession triggered remarkable interactions between EU law and the domestic law of the acceding countries (Szabados, 2018, 41.).

The Largest Round of Enlargement in the EU’s History

As well as Hungary, the other countries joining the EU on 1 May 2004 were Cyprus, the Czech Republic, Estonia, Poland, Latvia, Lithuania, Malta, Slovakia, and Slovenia, making this EU enlargement the largest round of enlargement to date. The establishment and tightening up of institutional relations with the EU – the “eastern enlargement project” – started in the period before this date: it is well-known that, following the change of regime in the Eastern European region in the early 1990s and after the end of the Cold War, all countries applied for membership of the EU almost immediately. European economic integration was already visible in the way the internal market was functioning in the EU Member States, in Western European countries; economic development and the emergence of social welfare were also desirable goals for the countries in question.

Already at that time, the accession procedure had a well-established legislative and policy background. In this framework, the EU established the system of relations between the Communities and Central and Eastern European countries, including Hungary, by providing trade policy preferences, developing guidelines for political dialogue, and harmonising domestic laws and regulations with EU law. The moves towards accession were supported by a broad-based EU financing programme. The EU gave up using safeguarding measures in trade against the former socialist countries and offered asymmetric preferences to them, in other words, the Community had broken down the customs barriers to candidate countries. The ‘second-generation’ association agreements, also called new-type association agreements, provided the legal basis for the Eastern enlargement, and contained only a very few country-specific features in various documents of an identical structure.

It is important to point out that the Copenhagen criteria were formulated in this period – they were established by the Copenhagen European Council in 1993 and strengthened by the Madrid European Council in 1995 – and in addition to setting economic, social and political prerequisites for the countries aspiring to join the EU, they also marked directions for the entire EU’s development. They have remained validly applicable to any country wishing to accede to the EU ever since (Marktler, 2006, 343.). The Treaty on European Union sets out the conditions (Article 49) and principles (Article 6(1)) to which any country wishing to become an EU member must conform. Certain criteria must be met for admission. They are:

  • stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;
  • a functioning market economy and the ability to cope with competitive pressure and market forces within the EU;
  • ability to take on the obligations of membership, including the capacity to effectively implement the rules, standards, and policies that make up the body of EU law (the ’acquis’), and adherence to the aims of political, economic and monetary union.

For EU accession negotiations to be launched, a country must satisfy the first criterion.

The countries which joined the EU at the same time started the accession procedure and negotiations on different dates and with different prospects. Following the transformation of the political system, Hungary and Poland were the closest to accession. After Czechoslovakia was split up, the Czech Republic and Slovakia also submitted their formal applications for accession. The parties had to negotiate 31 accession chapters, and the discussions were bilateral (Pintér, 2018, 167.). The association agreements were concluded within a few years, but accession negotiations were delayed – they were started in 1998 between Hungary, several Central and Eastern European countries (not all that acceded in 2004), and the EU and completed in 2002. The Treaty of Accession was finally signed in Athens on 16 April 2003. It is also noted that during the enlargement, the candidate countries were initially divided into two groups, however, a decision was made in 2004 to include eight former socialist countries (Poland, Czech Republic, Slovakia, Hungary, Slovenia, Latvia, Lithuania, and Estonia), and two island countries, Cyprus and Malta, in the EU. Bulgaria and Romania, treated as candidate countries for a time in the procedure, could only join the EU in 2007.

The Hungarian Perspective

From the Hungarian point of view, the agreement with the EU was the part of a general policy of opening up to Western structures. The country had been admitted to the International Monetary Fund and the World Bank in 1982, and in the late 1980s, the last government of the old regime also established contacts with the European Parliament and applied for membership of the Council of Europe (Lengyel, 1994, 354.). In the course of the accession negotiations, Hungary certainly had to fulfil a large number of criteria included in accession chapters; and the political deals and legislative harmonisation laid the basis for Hungary to be able to succeed as an EU Member State. Hungary’s path to membership in the European Union was characterized by the fact that the most important goals to be achieved and tasks to be accomplished predominantly included the establishment of political sovereignty, the economic policy interventions and the institutional system of a market economy (Butler, 2007, 1115.).

Before Hungary acceded to the EU, the representatives of the entire legal profession were excited about the EU accession and what legal challenges it could bring. They were full of anticipation about the time when EU law would wash over the national legal and judicial system. Some looked forward to the process with interest, some with aversion (Kovács, 2019, 7.). There is a wide range of approaches to integration, of course: in addition to the legislative, political, and social dimensions, economic integration is also a legitimate, scientifically used and discussed concept. Its membership has had a positive impact on the Hungarian economy and provided several competitive advantages for foreign companies setting up a permanent presence in the country.

Looking Back, Looking Forward – Six Trends, with Particular Regard to Hungary

The following figures highlight the central improvements among the new Member States between 2000 and 2018. To include a forward-looking element, the charts contain whenever possible the candidate countries from South-East Europe.

1. Income convergence to the European average

On average, GDP per capita (at purchasing power parity) in the new Member States has risen 250% since 2000, compared to ‘just’ 50% for the EU as a whole. This trend is visible across the board, GDP per capita in all the new Member States has converged towards the EU average at a fast pace and is now above 70% in all the countries that joined in 2004. The candidate countries are also catching up but the gap remains significant. In the case of Hungary, the GDP per capita of just over 10 thousand euros in 2004 jumped to around 22 thousand euros by 2018, which rivals the Latvian and Polish data and is slightly above the Romanian and Bulgarian data.

2. Participation rates eclipse the EU average

Employment levels have risen sharply in both the old and new Member States in recent decades. Activity rates are now over 70% in all the new Member States and some boast levels significantly above the EU average. One of the biggest and most welcome improvements in Hungary was the rate in question, i.e. the labour market activity rate of the 20-64 age group (employed or declared unemployed compared to the total population), as we can see: in 2000 the rate was 65% – and it was the lowest of all Member States – but it jumped to 77% last year.

3. Convergence in educational attainment

The share of those with tertiary education or with advanced vocational training in the new Member States has increased, particularly in those that were the furthest behind at the turn of the century. Most new Member States are now close to the EU average. In Hungary, the level of progress is also significant, as the Hungarian figure rose from less than 15% to 25% from 2000 to 2018.

4. Research, Development, and Innovation

The ratio of R&D and innovation expenditures to GDP has risen in most new Member States, supported by EU funding schemes such as Horizon and COSME. It increased significantly from 2000 to 2017 (from around 0.8% to around 1.4%), placing Hungary in third place among the dozen countries examined, followed by Estonians.

5. Digital connectivity

Households in the region are more connected than ever. Internet connectivity rates have risen sharply in the new Member States since they joined the EU and are now close to the EU average in most cases in no case less than 80%. By 2018, Hungary managed to achieve the EU and essentially the same regional average (81%) among households in terms of broadband internet coverage. Since in the meantime broadband coverage reached the entire country, this ratio is expected to increase further.

6. Openness to trade and integration into European supply chains

With new trade opportunities arising from single market access and EU trade agreements with third countries, the new Member States have become more globally integrated, as exemplified by their increased trade openness. We often hear that Hungary’s economy is small and open, and the figure below shows this well; since the annual exports and imports together reach almost 180% of GDP, the second-highest rate among the countries examined after Slovakia. In the case of Hungary, this indicator was already extremely high in 2000, specifically, it was the highest of all the examined countries (about 137%), so the further increase in the proportion was not as large as in several countries in the region. Interestingly, the Romanian figure is ‘only’ 85%, which is broadly in line with the EU average.

Closing Remarks

Sixteen years ago, when Hungary became a member of the EU, the majority of Hungarian legal professionals had not yet to realise the impact this fact would have on the domestic legislation and justice as well (Czine, 2014, 20.). The importance that all legal professionals have proper knowledge in this special area of the interaction between domestic law and the EU law as well cannot be stressed enough in the stream of the current situation (Karsai, 2004, 90.), especially in the light of the fact that the EU is proceeding towards the realisation of the single area of justice (Polt, 2019, 14.), and the endeavours of the EU appear in the deepening of legal harmonisation and the uniformisation of substantive and procedural law instruments as well.

We have to acknowledge that the national law cannot be exempted either from the influence of the EU law. The issues under examination are present simultaneously on the theoretical and/or practical level, thereby vesting a serious task on the EU and the Member States, therefore on all the bodies concerned of our country (Polt, 2019b, 332.).

It would be an impossible mission to summarise the legislation changes owed to Hungary’s accession to the EU in one single study. For this very reason, the following studies will be a ‘bouquet’ of some outstanding sections of the Hungarian achievements, which may highlight the essence of the process and support the constant change of the field in question.

 

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.

    Kategória: European UnionBrexit Eng: Fogyasztóvédelem: Consumer Protection: 16th Anniversary: 
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