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Cause and Effect in European Politics and Law

CJEU Makes the Differences between the CVM and the General Rule of Law Framework More Visible

Adelina Marini, LL.M, February 1, 2024

2023 could have been a very good year for the Cooperation and Verification Mechanism (CVM), as the CJEU added two new valuable judgments to the growing line of CVM-cases, were it not for the decision of the Commission to repeal Decisions 2006/928/EC and 2006/929/EC (the CVM Decisions) and thus solve, in a detrimental to the rule of law way, the legal vacuum it created by neither repealing those decisions nor doing its job under the CVM by reporting twice on whether Bulgaria and Romania fulfilled the benchmarks and by enforcing EU law in cases of non-compliance. Work on this article began in the summer, before the surprising decision of the Commission of 15 September 2023 and, therefore, would not focus on the decision itself. The Commission’s decision would be a subject of an upcoming text. Instead, this article focuses only on the 2023 additions to the CVM line of cases, originating, again, from Romania.

The two judgments, C-817/21 R.I. and C-107/23 (PPU) Lin, emphasise, once again, the differences between the CVM and the Rule of Law Mechanism. They also show the range of issues raised by Romanian courts in their fight against attempts of capture, such as reforms of the judiciary and the establishment of disciplinary chambers, primacy of EU law over national Constitutions, protection of the EU financial interests, etc. The two latest judgments are interesting also in showing both the strengths and the limits of the CVM. 

In an attempt not to miss all the important issues the two cases raise and what they mean for the CVM, this case note is structured as follows. First, a brief introduction of the facts of the two cases and their relationship to the CVM. Second, a detailed analysis of each case separately. This article will conclude by drawing some important lessons from all the CVM-judgments so far. 

Case facts

Case C-817/21 R.I. concerns the independence of the Judicial Inspectorate in Romania when disciplinary proceedings are at stake, which reminds very much of the Polish Disciplinary Chamber judgments. As a party to criminal proceedings in Romania, R.I. lodged several disciplinary complaints with the Judicial Inspectorate against the judges and prosecutors assigned to her cases. It is important to note that R.I. was also a party to one of the cases in the AFJR joined cases, the first ever CVM case-law of the CJEU, which suggests some continuity in this line of cases and reveals also the systemic character of the issues within the Romanian judiciary. 

The Judicial Inspectorate decided to take no action upon those complaints. R.I. appealed before the Bucharest Court of Appeal, which rejected the Judicial Inspectorate’s decisions. This judgment was subsequently confirmed by the High Court of Cassation and Justice. However, the Judicial Inspectorate adopted a new decision which, again, ended with the same result: no further action on R.I.’s complaints. This decision was also appealed in the Bucharest Court of Appeal, the referring court.

The Bucharest Court of Appeal referred a single question, which asks whether the national legislation establishing the Judicial Inspectorate and the appointment of the Chief Inspector and his powers to appoint his deputy, the selection of staff members and their career assessments violates Article 2 TEU, Article 19(1)(2) TEU and Decision 2006/928/EC (the CVM Decision). This is a very clear CVM-case, which stems from the judicial reforms carried out in Romania a few years ago, but it is also very similar to the Disciplinary Chamber cases from Poland, which makes the comparison between the CVM-line of cases and the rule-of-law cases worthwhile. The contribution of Advocate General Collins is of particular value in this case as it points, for the first time, to the role of the Commission in enforcing not only the CVM Decision but also in using other enforcement instruments, such as infringement proceedings. 

The second, C-107/23 (PPU) Lin, is a Grand Chamber judgment of a very broad and different nature. It originates in a VAT fraud committed in 2010, limitation periods (the lex mitior principle in particular) which may lead to a considerable number of fraud to remain unpunished, Constitutional Court decisions, and the issue of disapplying them. The case swings between the Tarricco-line of cases and another CVM-judgment, Euro Box Promotion. This uncertainty as to which line of cases C-107/23 belongs to is the subject of a significant disagreement between Advocate General Campos Sanchez-Bordona and the Grand Chamber.

The applicants in the main proceedings were convicted for VAT fraud committed in 2010. They were sent to serve prison sentences. In their appeal, the applicants rely on two Constitutional Court decisions that found Article 155(1) of the 2009 Criminal Code, which concerns interruption of limitation periods for criminal liability, to be unconstitutional. The problem in the main proceedings is rooted in the fact that the national legislature did not take any action to comply with the decisions of the Constitutional Court, leaving a legal vacuum and a situation of impunity. 

The decisions of the Constitutional Court are considered to be a ‘more lenient law’ in the context of the lex mitior principle which, if applied, would mean to set the applicants free and not liable for fraud against the EU financial interests. This raises the question whether the Romanian Constitutional Court decisions must be disapplied in order to comply with EU law in order to protect the EU financial interests, which is the Euro Box Promotion-logic, or to follow the Tarricco-logic, which is to respect the Constitutional Court decisions and comply with fundamental rights, including by way of the Charter of Fundamental Rights of the European Union (the Charter).

In this case, the referring court asks for an interpretation of Article 2 TEU, Article 19(1)(2) TEU, Article 4(3) TEU in conjunction with Article 325(1) TFEU, Article 2(1) of the PFI Convention, Articles 1 and 12 of the PFI Directive and Directive 2006/112/EC, and applying Decision 2006/928. It is clear from the reference that the referring court is using the CVM Decision as a last resort in order to secure the application of Article 49(1) Charter ‘as regards the commitment to ensure the efficiency of the Romanian judicial system, with reference to the last sentence of Article 49(1) of the [Charter]’ (para 40(2), the lex mitior principle).

Therefore, this case is not a typical CVM-case. However, it is worth classifying it in this line of cases because it shows the potential national courts see in the CVM to enable them to capture crimes which, otherwise, they fear, would remain unpunished because of the whole state of the rule of law in Romania. 

Analysis

Case C-817/21 R.I. is essentially about whether the AFJR judgment can be applied mutatis mutandis to the facts, involving, instead of judges, judicial inspectors. The Court follows here its AFJR-logic in considering the referred question in the legal framework of both Article 19(1)(2) TEU and Decision 2006/928, which suggests that the two legal provisions merge in situations that concern the independence of the judiciary. With this approach, the Court went against the proposal of Advocate General Bobek to consider the AFJR cases in the framework, predominantly, of Decision 2006/928 and to not rely on Article 19(1)(2) exclusively (point 212 of AG Bobek’s Opinion). 

Even though AG Bobek makes some really good arguments in defence of his proposal, the Court’s approach makes legal sense because both legal provisions have an inherent link with Article 2 TEU. Article 19(1)(2), on the one hand, gives concrete expression of the values enshrined in Article 2 TEU, more specifically to the rule of law value (Portuguese Judges, para 32), and, on the other, ‘the CVM was established by Decision 2006/928 in order to ensure that the value of the rule of law is complied with in Romania’ (para 161 of the AFJR judgment). Moreover, Article 2 TEU is ‘a condition for the enjoyment of all the rights deriving from the application of the Treaties to that Member State’ (Ibid., para 162), which is the accession condition. Therefore, Articles 2 and 19(1)(2) TEU are, in fact, encoded in the CVM decision. 

Last but not least, the Court’s approach to involve both Article 19(1)(2) TEU and Decision 2006/928 serves a longer term purpose for when the CVM would no longer be there (the decision of the Commission to repeal the CVM Decisions was adopted after this judgment). 

On the substance of the judgment, C-817/21 R.I. is one of those cases where the Court takes the leading role and provides the referring court with instructions as to how to assess the legislation in question. It could be said that this case is a typical representative of the Court’s case-law that empowers national courts/judges. By providing clear instructions to the national courts, the CJEU empowers them to challenge the very legislation that erodes judicial independence and accountability which, for its part, is the essence of Decision 2006/928 by way of Recital 6 and Benchmark 1 that concern the ‘accountability and efficiency of the judicial system and law enforcement bodies and, more specifically, of the Supreme Council of the Judiciary’ (the Superior Council of Magistracy, as it is named in the Decision).

The instructions cover two aspects: the substance of the legislation that created the disciplinary regime (paras 59-66) and the national legal and factual context, which is subject to three main factors: the powers of the Chief Inspector (paras 67-68), the specific rules for appointment (para 69), and the actual practice of the exercise of powers by the Chief Inspector (para 70). 

Regarding the analysis of the legislation itself, the Court has found sufficient indicators that the disciplinary regime ‘is capable of preventing, in practice, disciplinary proceedings from being brought effectively against the Chief Inspector’ (para 63). The CJEU leaves it to the referring court to verify whether the Chief Inspector can be subject to ‘genuine and effective control’. If it finds that this is not the case, the Court is of the view that such legislation opens ways for political control over judicial activity (para 66).

In the analysis of the national legal and factual context, the instructions of the CJEU to the national court are to check whether the powers of the Chief Inspector are such as to reduce the guarantees of independence and impartiality of Romanian judges (para 68); whether there is a close link with the executive or the legislature (the Court here does not shy away from sharing its own view that this appears to be the case, para 69); and to check the actual practice of the exercise of the Chief Inspector’s powers. Here, the Court relies on the Commission CVM reports for 2019 and 2021 (para 71), not on the basis of the materials available to it, which is an important indicator of the powers of the CVM in the hands not only of national actors but also of the Court of Justice itself to be able to use supranational sources of information about national issues. 

The Court concludes that the analysis of the national legal and factual context tends to ‘corroborate, rather than invalidate, a possible finding that the legislation at issue in the main proceedings is not designed in such a way that there can be no reasonable doubt, in the minds of individuals, that the powers and functions of the Judicial Inspectorate will not be used as an instrument to exert pressure on, or political control over, judicial activity’ (para 72). 

It is here that the case-law on the Polish judiciary and Romania’s rule of law issues come very close together, with the Court citing some of its first Polish cases (A.B. and Others and the Disciplinary regime for judges and the A.K and Others, Independence of the Disciplinary Chamber of the Supreme Court). In these cases, the Court, again, provides detailed instructions to the referring court how to assess the situation by taking into account the national context (paras 130-135, A.K. and Others). 

The difference, however, is that, in those Polish cases, the Court relies on the materials provided by the referring court and the national legislation as such for the lack of a detailed report by the Commission as in the Romanian cases. Another difference is that, in the Romanian cases, the Court leaves the national court with the possibility only to ‘verify’ the CJEU findings, whereas, in the Polish cases, the referring court has a much bigger task to ‘ascertain’ or ‘were it to conclude’.

One conclusion that could potentially be drawn from this difference is that, in the absence of a CVM, it becomes very important how the referring courts frame their questions and what materials they provide to the Court. Another potential conclusion is that, with these CVM cases, the Court is stepping in for the Commission, which has refused to do its job to monitor and report accordingly under the CVM, and also to enforce by using all instruments available, including triggering the rule of law conditionality in cases of non-compliance, or starting infringement proceedings. 

Even though this is not specifically articulated in the judgment, AG Collins is very clear in his Opinion on the case by saying that, even though the Commission expressed concerns with regard to the powers of the Chief Inspector, it did not initiate infringement proceedings. AG Collins also notes that Romania failed to follow up on the Commission’s recommendations (point 36), thus emphasising that the CVM is a two-way street.

The second CVM case, C-107/23 Lin, concerns tax evasion, the establishment of an organised crime group, limitation periods for criminal liability based on two Constitutional Court decisions, primacy of EU law and disapplication of national law, avoiding criminal responsibility by way of Constitutional Court decisions. As a starting point, AG Sanchez-Bordona does not consider this to be a case of a primacy of EU law conflict as such but, rather, as a national issue of non-application of Constitutional Court decisions. He frames this case as a competition between EU financial interests and fundamental rights (points 149-150). It can also be framed as a competition between Taricco  and the Euro Box Promotion CVM-case.  

Case C-107/23 Lin is very interesting not only because of the broad range of legal issues involved but also because of the divergence in reasoning between AG Campos Sanchez-Bordona and the Grand Chamber. Not only do they differ regarding which case-law side in the above-mentioned competition to be taken – Taricco or Euro Box Promotion – but also whether the CVM is relevant to provide guidance for the referring court. 

AG Sanchez-Bordona is willing to accept the referring court’s concerns that, in Romania, there is a risk of impunity for offences of serious fraud affecting the EU’s financial interests and for high-level corruption offences, which is reflected also in the Commission’s 2022 CVM report. However, he recommends the referring court to establish, on the basis of the Constitutional Court practice, whether there is a systemic risk of impunity. If there is, then Romania would fail on its obligation to meet the benchmarks in Decision 2006/928 (points 82-83 of his Opinion), thus putting the CVM at the centre. 

The Court, on the contrary, considers the CVM irrelevant because the crimes at issue, tax evasion, do not constitute corruption (para 65 of the judgment). Yet, the Court cites the Commission 2022 CVM report as showing that there is a risk of impunity, because of the expiration of limitation periods, and concludes that this risk is incompatible with Article 325(1) TFEU and Article 2(1) of the PFI Convention. 

The limitation periods are at the centre of this case and therefore of the conflict which case-law should apply – Taricco or Euro Box Promotion. In order to better understand the conflict, it would be helpful to briefly recall what these two cases were about. Taricco is one of the seminal cases in constitutional law as it is a hallmark of the dialogue between a Constitutional Court and the CJEU, portrayed in the literature in opposition to the often belligerent stance of the German Constitutional Court, the Bundesverfassungsgericht.  

In Italy, at the time, similarly as in Romania, the limitation periods would often expire faster than judicial proceedings, which, again, leaves a systemic risk of impunity. The referring court then asked the CJEU whether it should disapply national legislation that allowed for such impunity to persist. The Court recommended disapplication if the law reducing limitation periods would lead to impunity in a considerable number of cases (paras 47-49). Moreover, the Court said that there were no exceptions to the application of Article 325(1) TFEU. The Court also said that fundamental rights must be observed but was convinced that disapplication of the legislation reducing limitation periods would not infringe those rights (para 55). 

The Italian Constitutional Court disagreed, after the case was subsequently referred to it, and sent another preliminary ruling request where it raised concerns that the retroactivity that would follow from disapplication would indeed infringe fundamental rights. The reason being that, in Italian law, limitation periods are part of substantive, not of procedural law. This is the case in Romania as well. The CJEU accepted the reasoning of Corte Costituzionale and revised its judgment in what is known as the Taricco II judgment, specifying that if disapplication would lead to uncertainty in the legal system, there is no obligation to disapply (para 59), even if this would lead to non-compliance with EU law (para 61). Thus, fundamental rights won over EU’s financial interests. 

Euro Box Promotion is the second CVM case, after the AFJR joined cases, which involves a conflict between EU law and the Romanian Constitutional Court. The issues in the main proceedings concern high-level corruption related to VAT fraud and mismanagement of EU funds. The problem emerged after decisions of the Romanian Constitutional Court, which found a legal conflict with the amendments of the already quite familiar, in the CVM-cases, Law 304/2004. The decisions of the Constitutional Court requested new proceedings to be commenced which meant, in practice, releasing the convicted officials. And since Constitutional Court decisions are legally binding, the referring court was wondering whether it can disapply them in order to comply with EU law.

Even though similar issues are at hand, in this case, the CVM proved to be the main factor to enable the Court to circumvent its reasoning in Taricco II . According to the Court, since in the Euro Box Promotion cases high-level corruption was involved, they fell directly into the scope of Decision 2006/928/EC. There is a risk, the Court said, that the national rules on limitation periods would prevent the effective punishment of ‘a quite specific category of persons’, meaning high-level officials (para 200). Moreover, the Court said that even though temporal limits applied to such a category of persons, if the Constitutional Court decisions were applied, they would prolong the judicial proceedings beyond the limitation periods, thus creating systemic impunity for this category of persons. 

As if with the objective to disperse any thoughts that this means that the same rules do not apply to ‘a specific category of persons’, the Court specifically said that Euro Box Promotion differed from Taricco II in that the latter involved Article 49 of the Charter, whereas, in the former, the first sentence of the second paragraph of Article 47 of the Charter applied, which does not prevent the disapplication of Constitutional case-law (para 209). 

Another major difference, emphasised by AG Sanchez-Bordona, is that in Euro Box Promotion the Court did not find an infringement of Article 47 Charter by the Romanian practice of composing specialised corruption panels, which the Constitutional Court found unconstitutional. This means that, according to the Court, more issues were involved in the Euro Box Promotion situation that needed to be taken into account. In the present case, C-107/23 Lin, the Court is consistent with this reasoning. 

There is a third difference that seems important in this comparison. In the Taricco judgment, the CJEU entered into a dialogue with the Corte Costituzionale, whereas, in the Euro Box Promotion, it did not. It is unknown whether this played a role in the Court’s reasoning but if it did and the outcome were the same nonetheless, it would have raised the question of whether it matters for the court if a Constitutional Court can be considered independent or not in the context of the Polish Tribunal situation. 

As mentioned earlier, the lex mitior principle is at the centre of C-107/23 Lin as a result of a legal chaos created by the failure of the national legislature to act after the Romanian Constitutional Court declared unconstitutional, twice, provisions of the Romanian Criminal Code. And, since this principle has not yet been defined in terms of scope and the variety of approaches among the Member States is huge, Advocate General Campos Sanchez-Bordona recommends the Court to use this law-making opportunity and to declare that the lex mitior must be applied to situations when the interruption of limitation periods for criminal liability are substantive in nature, and not procedural; amendments to criminal law provoked by a Constitutional Court ruling of unconstitutionality to be considered as succession of criminal laws over time; lastly, the principle to be applied to both final judgments and ongoing criminal proceedings (point 128). 

This would potentially resolve the obvious uncertainty as to which case-law to be applied in similar cases – Taricco or Euro Box Promotion. As AG Campos Sanchez-Bordona admits, this is a hard choice because the two cases created precedents which ‘are not easily reconciled’ (point 139). Despite this difficulty, the AG leans toward the Taricco-line because, in his opinion, the risk of systemic impunity of offences against the EU’s financial interest cannot take precedence over a fundamental right (point 145 of his Opinion). 

Furthermore, the AG considers the national Romanian standard, developed by the Romanian Constitutional Court, higher, as in the Taricco II case, and not as in the Euro Box Promotion (point 148). He is determined that fundamental rights cannot be less important than the Union’s financial interests, especially when there are other mechanisms to use to defend those interests, such as infringement proceedings (points 150-151). 

The Grand Chamber took a different view. First, it did not follow the AG’s recommendation to develop a golden standard and, in this way, to reconcile Taricco with Euro Box Promotion. Instead, the Court stuck closely to the matter at hand, obviously preferring to consider every case separately. In this particular case, this may be a better approach because, as the CVM case-law and the more general rule of law case-law have shown so far, there are always little details that may be left unheeded if a golden standard is applied without taking into account the specifics.  

This is exactly the approach of the Grand Chamber in C-107/23 Lin. The Court is very meticulous in its reasoning on whether the Romanian Constitutional Court’s decisions must be disapplied in order to comply with EU law, confirming the Taricco judgments in full but in principle. As in Euro Box Promotion, there is a detail that made a difference which, according to the Court, makes it worth abandoning the Taricco line. 

That detail seems to be judgment No 67/2022 of the Romanian High Court of Cassation and Justice, published on 28 November 2022, which was specifically mentioned by the referring court and paints a very different legal picture. First, that high court goes fully anti-Taricco by declaring that, according to Romanian law, even though the rules regarding interruption of limitation periods are part of substantive criminal law, they cannot be applied retroactively. This, however, is without prejudice to the lex mitior principle (most lenient law), which is enshrined in Article 15(2) of the Romanian Constitution. 

The High Court of Cassation and Justice also declared that a final conviction can be subject to the lex mitior principle but not in a situation where the limitation period was the subject of an appeal already examined. This is precisely the appeal judgment that the appellants in the main proceedings want to be set aside. Moreover, the High Court of Cassation and Justice is concerned that if the Constitutional Court’s decisions were applied retroactively, as the most lenient law, they would affect also procedural acts from before the date those decisions were published, which is 25 June 2018, and thus would exacerbate the situation with impunity of crimes affecting the EU’s financial interests.

The CJEU agreed (para 121). It explained that there is a difference between the national standard of protection regarding the foreseeability of criminal law and the national standard regarding the lex mitior principle. The latter ‘permits, at least in certain cases, the neutralisation of the interrupting effect of procedural acts which took place even before 25 June 2018 but after the entry into force of the Criminal Code on 1 February 2014’ (para 122). Therefore, the Court concluded, applying the Constitutional Court’s decisions to acts before 25 June 2018 ‘must be regarded as being liable to compromise the primacy, unity and effectiveness of EU law, within the meaning of the case-law referred to in paragraph 110 above’ (para 123).

In sum, the Court opted for a case-by-case approach, instead of developing a golden standard, in situations that involve limitation periods in a highly volatile legal situation, such as that in Romania in order to be able to see through all the specificities and details that may make a difference in the final outcome. In this, it followed its Euro Box Promotion-logic. Such logic is particularly important in countries with rule of law deficiencies, where it is not easy to navigate between seemingly general legal issues and issues that may be the result of the rule of law erosion efforts in that country. 

These two latest judgments add to a very specific line of cases, in which the Court of Justice has managed to show that the CVM is a powerful instrument for the protection of the rule of law in a Member State that joined the EU with systemic deficiencies. This happened against the backdrop of a prevailing perception, in the past decade, of the CVM as a useless, toothless, bureaucratic exercise that only burdened the Commission and failed to address the constantly growing demands of civil society, media, opposition, and massive civil protests for the Commission to be more strict and non-political in enforcing the CVM benchmarks.

Proving all critics wrong, in all these cases, the Court of Justice played a vital role in helping national courts stand against the capturing efforts of an illiberal regime at a time when the Commission had given up on its duty to guard the Treaties. The CVM not only helped national actors in Romania, but also the Court of Justice to frame with more accuracy, under EU law, issues related to rule of law systemic deficiencies which, otherwise (without a CVM), require the Court to take an activist stance. As C-817/21 R.I. shows, the Court took advantage by way of giving specific instructions to the referring court how to assess the problem at hand, leaving it only to 'verify' the CJEU's findings. In this way, the Court of Justice 'takes the blame' instead of a national court that is threatened by disciplinary measures either for referring questions or for disapplying national law. In C-107/23 Lin, the Court did not need the CVM to guide the referring court but the CVM reports proved useful for its reasoning. 

The European Commission's decision to abolish the CVM altogether is a hard blow to courts in the two CVM-Member States. For them remains the more difficult path, followed by courts in Poland, to protect judicial independence through operationalization of the Article 2 TEU values. Not only the courts, but also individuals are deprived of a tool to defend themselves against an illiberal regime. The good news is that civil society in Romania will not give up without a fight and is bringing the European Commission to court with an action for annulment. This will be the subject of an upcoming article. 

 

Case law

Case C‑817/21, R.I. [2023] ECLI:EU:C:2023:391

Case C-817/21, Opinion, R.I. v Inspecţia Judiciară and N.L. [2023], ECLI:EU:C:2023:55

Case C-107/23 PPU - Lin [2023] ECLI:EU:C:2023:606

Opinion of Advocate General Campos Sánchez-Bordona delivered on 29 June 2023 ECLI:EU:C:2023:532

Joined Cases C‑83/19, C‑127/19, C‑195/19, C‑291/19, C‑355/19 and C‑397/19, Asociaţia ‘Forumul Judecătorilor din România’ [2021], ECLI:EU:C:2021:393

Joined Cases C-357/19, C-379/19, C-547/19, C-811/19 and C-840/19, Euro Box Promotion and Others [2021], ECLI:EU:C:2021:1034

Case C‑64/16, Associação Sindical dos Juízes Portugueses [2018] ECLI:EU:C:2018:117

Case C‑824/18, A.B. and Others [2021] ECLI:EU:C:2021:153

Joined Cases C-585/18, C-624/18 and C-625/18,A. K. and Others v Sąd Najwyższy, CP v Sąd Najwyższy and DO v Sąd Najwyższy [2019] ECLI:EU:C:2019:982

Case C-105/14, Criminal proceedings against Ivo Taricco and Others [2015] ECLI:EU:C:2015:555

Case C‑42/17, M.A.S., M.B. [2017] ECLI:EU:C:2017:936