Court of Justice of the European Union: decisions against Ireland and Romania in the context of the fight against money laundering

Romania and Ireland are ordered to pay the Commission, respectively, a lump sum in the amount of 3,000,000 euros and 2,000,000 euros.

These two Member States have not fully transposed the Directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing within the time limit set.

Directive 2015 / 8491️⃣ aims to prevent the use of the European Union's financial system for the purposes of money laundering and terrorist financing. Member States had to transpose this directive into their national law by 26 June 2017 at the latest and inform the European Commission of the measures adopted in this regard.

On 27 August 2018, the Commission brought two infringement actions before the Court, considering that Romania, on the one hand, and Ireland, on the other hand, had not, within the time limit set for them in the respective reasoned opinions, fully transposed Directive 2015/849 nor communicated the corresponding national transposition measures. In addition, it asked, on the basis of Article 260 (3) TFEU2️⃣, to condemn Romania and Ireland,
on the one hand, to the payment of a daily penalty, from the delivery of the judgment for having failed in the obligation to communicate the transposition measures of this same directive and, on the other hand, to the payment of a lump sum.

Subsequently, the Commission informed the Court that it was partially withdrawing its action in that it no longer requested the imposition of a daily fine, this request having become devoid of purpose after the full transposition of Directive 2015 / 849 in Romanian and Irish law.

In this context, Romania and Ireland contested the application of the sanctions regime provided for in Article 260 (3) TFEU. Those two Member States also maintained that the Commission's request to impose the payment of a lump sum is not only unjustified, but also disproportionate in the light of the facts of the case and the objective of this type of financial penalty. They criticized the Commission for not having given detailed reasons and on a case-by-case basis for its decision to request the imposition of such a sanction in the present case.

By two judgments delivered in the Grand Chamber on July 16, 2020, the Court upheld the actions brought by the Commission. Thus, it found, first, that, on expiry of the time limit set for them in the reasoned opinion, Romania and Ireland had neither adopted the national measures transposing Directive 2015 / 849 nor communicated to the Commission such measures and that they therefore failed to fulfill their obligations under that directive.

Secondly, the Court held that Article 260 (3) TFEU is intended to apply in the present cases 3️⃣. Indeed, the Court recalled that the obligation to communicate
transposition measures, within the meaning of that provision, relate to the obligation of the Member States to transmit sufficiently clear and precise information concerning the measures to transpose a directive. Compliance with that obligation meant in the present cases for the Member States to indicate, for each provision of that directive, the national provision or provisions ensuring its transposition. Noting that the Commission had established the failure of Romania and Ireland to communicate the measures transposing Directive 2015/849 within the time limit set by the reasoned opinion, the Court ruled, first, that the failure thus found falls within the of the scope of this provision.

Secondly, the Court recalled that it is not for the Commission to give reasons on a case-by-case basis for its decision to seek a financial penalty under Article 260 (3) TFEU. Indeed, it considered that the conditions of application of this provision could not be more restrictive than those providing for the implementation of Article 258 TFEU, insofar as Article 260, paragraph 3, TFEU only constitutes 'an ancillary form of infringement proceedings, the implementation of which falls within the discretionary power of the Commission, over which the Court cannot exercise judicial control. This lack of reasons does not affect the procedural guarantees of the Member State in question, in so far as the Court, when imposing such a sanction, is subject to an obligation to state reasons.

Nevertheless, the Court clarified that the Commission remains required to give reasons for the nature and the amount of the financial penalty requested, taking into account in this regard the guidelines which it adopted, since, in the context of a procedure initiated in application of Article 260, paragraph 3, TFEU, the Court has only a limited discretion. Indeed, in the event of a finding of a breach by the latter, the Commission's proposals bind the Court as to the nature of the financial penalty that it can impose and as to the maximum amount of the penalty that it can impose.

Thirdly, as regards the imposition of a lump sum in the present cases, the Court recalled that the objective pursued by the introduction of the mechanism contained in Article 260 (3) TFEU is not only to encourage the Member States to put an end, as soon as possible, to an infringement which, in the absence of such a measure, would tend to persist, but also to streamline and speed up the procedure for the imposition of financial penalties for breaches of the obligation to notify a national measure transposing a directive adopted in accordance with the legislative procedure. Thus, it held that a request from the Commission, as in the present case, which requested the imposition of a lump sum cannot be rejected as being disproportionate on the sole ground that it relates to a breach which, while having lasted over time, ended when the Court examines the facts, insofar as the order to pay a lump sum is based on the assessment of the consequences of failure to perform the Member State concerned on private and public interests, in particular where the breach has persisted for a long period.

Fourth, with regard to the calculation of the lump sum which it is appropriate to impose in the present cases, the Court recalled that, in the exercise of its discretion in the matter as framed by Commission proposals, it is up to it to fix the amount of the lump sum to the payment of which a Member State may be ordered under Article 260 (3) TFEU in such a way that it is on the one hand, adapted to the circumstances and, on the other hand, proportionate to the offense committed. Among the relevant factors in that regard are elements such as the seriousness of the breach found, the period during which it persisted and the capacity to pay of the Member State in question.

1 - As regards the gravity of the infringement, the Court held that while Romania and Ireland put an end to the infringement alleged during the proceedings, the fact remains that this infringement existed the expiry of the time limit set in the respective reasoned opinions, so that the effectiveness of Union law has not been ensured at all times.

2nd - Concerning the assessment of the duration of the infringement, the Court recalled that it must, in principle, be considered to occur on the date on which the Court assesses the facts, namely on the date of closure of the procedure. As regards the start of the period which should be taken into account in determining the amount of the lump sum to be imposed pursuant to Article 260 (3) TFEU, the date to be used for the assessment of the duration of the failure is not that of the expiry of the time limit set in the reasoned opinion (used to determine the daily fine to be imposed), but the date on which the time limit for transposition provided for by the directive in question expires. This provision is intended to encourage Member States to transpose directives within the deadlines set by the Union legislature and to ensure the full effectiveness of Union legislation. Any other solution would, moreover, call into question the usefulness of the provisions of the directives fixing the date on which the transposition measures thereof must enter into force and to grant an additional period of transposition, the duration of which would vary, moreover, according to the speed with which the Commission initiates the pre-litigation procedure, without, however, taking into account the length of that period when assessing the duration of the infringement in question. Accordingly, the Court concluded that the breach by Romania and Ireland continued for a little over two years.

3rd - Concerning the payment capacity of the Member State in question, the Court recalled that it is necessary to take into account the recent evolution of the gross domestic product (GDP) of this Member State, as it occurs at the date of the examination of the facts by the Court.

Consequently, taking into account all the circumstances of the present cases and having regard to the discretion conferred on the Court by Article 260 (3) TFEU, the Court ordered Romania and Ireland to pay the Commission respectively a lump sum of 3,000,000 euros and 2,000,000 euros.

REMINDER

An action for failure to fulfill obligations, directed against a Member State which has failed to fulfill its obligations under Union law, may be brought by the Commission or by another Member State. If the breach is found by the Court of Justice, the Member State concerned must comply with the judgment as soon as possible.
When the Commission considers that the Member State has not complied with the judgment, it may lodge a new appeal requesting financial penalties. However, if the measures transposing a directive are not communicated to the Commission, on its proposal, penalties may be imposed by the Court of Justice, at the stage of the first judgment.

1️⃣ Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) no 648/2012 of the European Parliament and of the Council and repealing Directive 2005/60 / EC of the European Parliament and of the Council and Commission Directive 2006/70 / EC (OJ 2015, L 141, p. 73).

2️⃣ Article 260, paragraph 3, TFEU allows the Court to impose on the Member State concerned a financial penalty (lump sum or daily penalty) in the event of non-compliance with the 'obligation to communicate transposition measures of a Union directive ”to the Commission.

3️⃣ The Court applied this provision of the FEU Treaty for the first time in its judgment of 8 July 2019, Commission / Belgium (Article 260, paragraph 3, TFEU - Broadband networks), C-543/17; see also PC No. 88/19.

Virginie Gastine Menou
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