Case C‑603/19

Criminal proceedings

v

TG
and
UF

(Request for a preliminary ruling from the Špecializovaný trestný súd)

 Judgment of the Court (Third Chamber), 1 October 2020

(Reference for a preliminary ruling – Protection of the financial interests of the European Union – Article 325 TFEU – Criminal proceedings concerning offences relating to subsidy fraud funded in part from the budget of the European Union – National law not allowing State bodies to obtain, in criminal proceedings, the recovery of subsidies by way of compensation for damage caused by the offences)

1.        Judicial cooperation in criminal matters – Minimum standards on the rights, support and protection of victims of crime – Directive 2012/29 – Scope ratione personae – Legal persons and State bodies – Excluded

(European Parliament and Council Directive 2012/29, Arts 1(1) and 2(1))

(see paragraphs 44-46, operative part 1)

2.        European Union’s own resources – Protection of the financial interests of the European Union – Fight against fraud and other illegal activities – Obligation on Member States to put in place effective and dissuasive penalties – Offence of subsidy fraud funded in part from the budget of the European Union – Criminal proceedings not permitting the Member State to bring an action for compensation for damage caused by the offence – Admissibility in the light of Article 325 TFEU – Condition – Existence in national law of effective procedures to enable the recovery of assistance wrongly received from the budget of the European Union

(Art. 325 TFEU)

(see paragraphs 54-56, 58-62, operative part 2)

Résumé

The Úrad špeciálnej prokuratúry Generálnej prokuratúry Slovenskej republiky (Office of the Special Prosecutor in the Department of the Public Prosecutor of the Slovak Republic) brought criminal proceedings against two natural persons (‘the accused’) for acts liable to constitute subsidy fraud funded in part from the budget of the European Union. The criminal offence is alleged to have been committed in the context of two calls for tenders issued by the Slovak public authorities for the submission of applications for subsidies to support, in particular, job creation for disabled persons.

The accused set up a number of commercial companies in which they were partners and managers. Those companies obtained subsidies totalling EUR 654 588.34, including EUR 279 272.18 from the budget of the European Union. Following the payment of those subsidies, the accused transferred their shares in the companies concerned to a third party, then those companies ceased trading. When criminal proceedings were brought, the company assets were no longer on the premises of those companies, which were removed from the register of companies. During the period in which the subsidies were paid, disabled persons were employed by the companies concerned, but their work was fictitious and did not contribute to the objectives set out in the applications for subsidies.

Criminal proceedings were brought before the referring court, namely the Špecializovaný trestný súd (Special Criminal Court, Slovakia), against the accused in their capacity as partners and managers of those companies. The úrady práce, sociálnych vecí a rodiny (district offices for labour, social affairs and family), as injured parties in the main proceedings, sought damages from the accused during the investigation, in the amount of the subsidy actually paid.

However, the referring court takes the view that, in the light of the case-law of the Najvyšší súd Slovenskej republiky (Supreme Court of the Slovak Republic), which has already been applied in the criminal proceedings concerning offences affecting the financial interests of the European Union and subsidy fraud, national provisions do not allow the State, in criminal proceedings, to bring an action for compensation for damage caused to it. According to the referring court, the application of that case-law in the main proceedings could have the effect of preventing the State from bringing an action for compensation for damage caused by fraud. Use of administrative proceedings also provided for in Slovak law enables repayment of a wrongly paid subsidy to be demanded only from the beneficiary of that subsidy. As regards, in the present case, commercial companies which no longer hold any assets and which have been removed from the register of companies, such administrative proceedings cannot therefore enable the recovery of the wrongly paid subsidies.

The referring court referred several questions to the Court of Justice for a preliminary ruling concerning, in particular, Article 325 TFEU, paragraph 1 of which provides that, in order to counter illegal activities affecting the financial interests of the Union, Member States must take effective deterrent measures which are equivalent to those taken at national level to counter fraud affecting the interests of the Member State concerned. In particular, the referring court asks whether national rules of criminal procedure which do not confer on the State, in a case such as that in the main proceedings, the right to compensation as an injured party in criminal proceedings are compatible with the obligations under Article 325 TFEU.

In its judgment of 1 October 2020, the Court of Justice ruled that Article 325 TFEU does not preclude provisions of national law, as interpreted in national case-law, under which, in criminal proceedings, the State may not claim compensation for damage caused to it by fraudulent conduct on the part of the accused person resulting in the misappropriation of funds from the budget of the European Union, and under which the State does not have, in those proceedings, any other type of action available to it by which it may assert its right as against the accused person, provided that, which it is for the referring court to verify, the national legislation provides for effective proceedings for the recovery of assistance wrongly received from the budget of the European Union.

In that regard, the Court of Justice noted that, although Member States are required to take effective measures to enable the recovery of sums wrongly paid to the beneficiary of a subsidy funded in part from the budget of the European Union, Article 325 TFEU does not, however, impose on those Member States any constraint, other than that relating to the effectiveness of the measures, as regards the procedure which must enable such an outcome to be achieved. The coexistence of different legal remedies with different objectives specific to administrative law, civil law or criminal law, cannot, therefore, in itself, undermine the effectiveness of the fight against fraud affecting the financial interests of the European Union, provided that the national legislation, as a whole, enables the recovery of wrongly paid assistance from the budget of the European Union.

Thus, the non-recognition of a State’s right to compensation as an injured party in criminal proceedings is not, in itself, contrary to the obligations under Article 325 TFEU. Although criminal penalties may be essential to enable Member States to combat certain cases of serious fraud in an effective and dissuasive manner, such penalties are not intended to permit the recovery of sums paid but not due. The existence, in the national legal order, of an effective remedy for acts affecting the financial interests of the European Union, whether in the context of criminal, administrative or civil proceedings, is sufficient to satisfy the obligation of effectiveness laid down by Article 325 TFEU, provided that that remedy allows the recovery of wrongly received assistance and provided that criminal penalties make it possible to combat cases of serious fraud. The Court noted that that is the position in the present case, provided that, which it is for the referring court to verify, the State has the option, according to the applicable national law, of bringing, first, administrative proceedings enabling it to obtain the recovery of the assistance wrongly paid to the legal person and, second, civil proceedings not only to establish the civil liability of the legal person which received the wrongly paid assistance, but also to obtain, following a criminal conviction, compensation from the convicted natural person for the damage suffered.