OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 14 October 2004 ( )

Joined Cases C-387/02, C-391/02 and C-403/02

Silvio Berlusconi and Others

(References for preliminary rulings from the Tribunale di Milano and the Corte di Appello di Lecce)

(Company law – First, Fourth and Seventh Directives – Annual accounts and consolidated accounts – Principle of public and accurate information – Appropriate penalties for false statements – Limits on the application of directives in criminal proceedings – Principle of the retroactive application of a more lenient criminal provision)





Table of contents





I – Introduction

II – Legislative framework

A – Community law

1. Overview

2. The relevant provisions of the First Directive

3. The relevant provisions of the Fourth Directive

4. Provisions of the Seventh Directive

B – National law

1. Previous legislation

2. New legislation

3. General provisions of criminal law

III – Facts, main proceedings and questions referred

A – General

B – Case C-387/02, Silvio Berlusconi

C – Case C-391/02 Sergio Adelchi

D – Case C-403/02 Marcello Dell’Utri and Others.

E – Procedure before the Court

IV – Legal assessment

A – Admissibility of the reference for a preliminary ruling

1. Description of the relevant facts

2. Description of the relevant legislation

3. Relevance to the decision

4. Interim conclusion

B – Substantive assessment of the questions referred

1. The scope ratione materiae of Article 6 of the First Directive

2. Appropriateness of penalties for the publication of false company documents

a) Effectiveness, proportionality and dissuasiveness of penalties

b) Tolerance limits

c) Limitation periods applicable to criminal prosecution

d) Graduated system of penalties and requirements in respect of criminal complaints

e) Combined effect of provisions of civil, criminal and administrative law

C – Effects on the criminal proceedings pending before the referring courts of an infringement of the directives by the national legislation

1. The obligation on national courts to give effect to the provisions of Community law

2. The limits on the application of directives in criminal proceedings.

a) Principles developed in case-law

b) Discussion of those principles in relation to this case

3. Retroactive application of a more lenient criminal provision

4. Interim conclusion

V – Conclusion





I – Introduction

1. Two Italian courts, the Tribunale di Milano (District Court, Milan) and the Corte di Appello di Lecce (Court of Appeal, Lecce) (hereinafter also called ‘the referring courts’) have pending before them a number of criminal cases in which the respective defendants are charged with having published false company documents (in Italian, false comunicazioni sociali), a practice usually referred to colloquially as ‘falsifying accounts’.

2. After the acts in question had been committed and the prosecutions relating to them had been initiated, the Italian legislature relaxed the relevant criminal provisions and made prosecution more difficult than under the previous legislation. Against the background of that legislative amendment, the referring courts wish, in essence, to ascertain the meaning of ‘appropriate penalties’ in relation to the publication of false company documents. They also ask whether, for the purposes of the relevant company law directives, the publication of false company documents is to be treated in the same way as their non-publication.

3. In the event that legislation such as the amendment to Italian law is regarded as being contrary to the relevant company law directives, it must also be clarified whether, in criminal proceedings, a more lenient subsequent criminal provision may, despite being contrary to Community law, be applied retroactively for the benefit of a defendant.

II – Legislative framework

A – Community law

1. Overview

4. Article 44(1) EC contains a legal basis for the adoption of directives to attain freedom of establishment. Under paragraph 2(g) of Article 44 EC, it is the duty of the Council and the Commission

‘[to] coordinat[e] to the necessary extent the safeguards which, for the protection of the interests of members and others are required by Member States of companies or firms within the meaning of the second paragraph of Article 48 with a view to making such safeguards equivalent throughout the Community’.

5. The Community has adopted several company law directives. Of particular relevance to this case are:

– First Council Directive 68/151/EEC of 9 March 1968 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards equivalent throughout the Community ( ) (hereinafter, ‘the First Directive’ or ‘Directive 68/151’); and

– Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies ( ) (hereinafter, ‘the Fourth Directive’ or ‘Directive 78/660’),

which, in the case of Italy, are applicable to the following capital companies: società per azioni (public companies limited by shares, abbreviated to SpA), società in accomandita per azioni (partnerships limited by shares) and società a responsabilità limitata (private companies limited by shares, abbreviated to Srl). ( )

6. Regard must also be had to Seventh Council Directive 83/349/EEC of 13 June 1983 based on Article 54(3)(g) of the Treaty on consolidated accounts ( ) (hereinafter, ‘the Seventh Directive’ or ‘Directive 83/349’). ( )

2. The relevant provisions of the First Directive

7. Article 2(1)(f) of the First Directive requires Member States to take the measures necessary to ensure that the compulsory disclosure of documents by companies extends at least to the balance sheet and the profit and loss account for each financial year. The provision also announces that, within two years of the adoption of the First Directive, the Council is to adopt a further directive to coordinate the contents of balance sheets and profit and loss accounts.

8. Article 3(1) to (3) of the First Directive provides as follows:

‘1. In each Member State a file shall be opened in a central register, commercial register or companies register, for each of the companies registered therein.

2. All documents and particulars which must be disclosed in pursuance of Article 2 shall be kept in the file or entered in the register; the subject matter of the entries in the register must in every case appear in the file.

3. A copy of the whole or any part of the documents or particulars referred to in Article 2 must be obtainable by application in writing at a price not exceeding the administrative cost thereof …’.

9. Under the first indent of Article 6 of the First Directive, Member States are to provide for ‘appropriate penalties in case of failure to disclose the balance sheet and profit and loss account as required by Article 2(1)(f)’.

3. The relevant provisions of the Fourth Directive

10. Article 2 of the Fourth Directive provides inter alia:

‘1. The annual accounts shall comprise the balance sheet, the profit and loss account and the notes on the accounts. These documents shall constitute a composite whole.

2. They shall be drawn up clearly and in accordance with the provisions of this Directive.

3. The annual accounts shall give a true and fair view of the company’s assets, liabilities, financial position and profit or loss.

4. Where the application of the provisions of this Directive would not be sufficient to give a true and fair view within the meaning of paragraph 3, additional information must be given.

5. Where in exceptional cases the application of a provision of this Directive is incompatible with the obligation laid down in paragraph 3, that provision must be departed from in order to give a true and fair view within the meaning of paragraph 3.’

11. The first subparagraph of Article 47(1) of the Fourth Directive provides as follows:

‘The annual accounts, duly approved, and the annual report, together with the opinion submitted by the person responsible for auditing the accounts, shall be published as laid down by the laws of each Member State in accordance with Article 3 of Directive 68/151/EEC.’

12. Article 47(1a) of the Fourth Directive ( ) reads inter alia as follows:

‘The Member State [of the entity concerned] may exempt that entity from publishing its accounts in accordance with Article 3 of Directive 68/151/EEC, provided that those accounts are available to the public at its head office, where … .

Copies of the accounts must be obtainable upon request. The price of such a copy may not exceed its administrative cost. Appropriate sanctions must be provided for failure to comply with the publication obligation imposed in this paragraph.’

13. Under Article 51(1) of the Fourth Directive, companies are required to have their annual accounts audited by one or more persons approved to carry out audits of annual accounts under national law.

4. Provisions of the Seventh Directive

14. Article 16 of the Seventh Directive contains, in respect of the consolidated accounts of groups of undertakings, provisions which are in essence the same as those contained in Article 2 of the Fourth Directive; consolidated accounts must, in particular, give a true and fair view of the assets, liabilities, financial position and profit or loss of the undertakings included therein taken as a whole. Article 37 of the Seventh Directive corresponds to Article 51 of the Fourth Directive and provides for the compulsory auditing of consolidated accounts. Article 38(1) of the Seventh Directive makes the same reference to Article 3 of the First Directive in connection with the publication of consolidated accounts as the Fourth Directive (Article 47(1)(1)) does in connection with annual accounts. Moreover, Article 38(6) of the Seventh Directive requires Member States to provide for appropriate sanctions for failure to comply with that publication obligation.

B – National law

15. The provisions of Italian law which are of interest here were fundamentally amended by Decreto Legislativo ( ) No 61 of the President of the Republic of 11 April 2002, which entered into force on 16 April 2002 (hereinafter, ‘Legislative Decree No 61/02’). ( ) I shall therefore describe below, first, the previous legislation and, then, the new legislation in force at present.

1. Previous legislation

16. Under the previous legislation, the publication of false company documents was punishable in Italy under Article 2621 of the Codice civile ( ) (hereinafter, ‘the old Article 2621 of the Italian Civil Code’). That provision was worded as follows:

‘Unless the act constitutes a more serious offence, the following persons shall be liable to imprisonment for a term of one to five years and a fine of LIT 2 million to 20 million:

(1) organisers, founding members, administrators, directors, auditors and receivers who, in reports, balance sheets or other company documents, fraudulently make untrue statements of substantive fact as to the constitution or economic position of the company or conceal in full or in part facts relating thereto; …’.

17. In this earlier version, Article 2621 of the Italian Civil Code provided for an indictable offence (delitto) which could be prosecuted ex officio and was subject to a limitation period of 10 years. If interrupted, that period could be extended by another five years. ( )

18. The Italian courts took the view that Article 2621 of the Civil Code served to protect not only the specific interests of members and creditors of companies but also the general interest inherent in regulating the way in which commercial companies operate. The protective function of that provision extended to any activity intended to alter the objective position of a company. ( )

19. Under the previous legislation, the fact that the publication of false company documents within the meaning of the old Article 2621 had occasioned loss on an appreciable scale to the company was regarded as an aggravating factor. In those circumstances, the penalty increased by up to one half, pursuant to Article 2640 of the Italian Civil Code (hereinafter, ‘the old Article 2640 of the Italian Civil Code’).

2. New legislation

20. Pursuant to Legislative Decree No 61/02, the old Article 2621 (among others) of the Italian Civil Code was replaced by the following provisions:

‘Article 2621 (False information on a company)

Save as otherwise provided in Article 2622, managers, directors, auditors and receivers who, with the intention of deceiving members or the public and with the aim of securing for themselves or others an unjust profit, make statements of substantive fact which are untrue in the company’s balance sheets, report or other company documents provided for by law which are intended for members or for the public, even if such facts are the subject of valuations, or who omit information, the communication of which is prescribed by law, concerning the economic position, assets, liabilities or financial position of the company or the group to which that company belongs, in a manner which is capable of giving those to whom that information is addressed a false impression of that position, shall be liable to imprisonment for a term of up to one year and six months.

The same criminal liability shall also extend to cases where the information concerns assets held or administered by the company on behalf of third parties.

Criminal liability shall be excluded in any event where the false statements or omissions do not distort to an appreciable extent the representation of the assets, liabilities, economic position or financial position of the company or the group to which that company belongs. Criminal liability shall also be excluded where the false statements or omissions distort the pre-tax financial results for the year by no more than 5% or distort the net assets by no more than 1%.

Such acts shall not be punishable in any circumstances where they are the result of estimates which, viewed individually, do not differ from the true values by more than 10%.

Article 2622 (False information on a company detrimental to members or creditors)

Managers, directors, auditors and receivers who, with the intention of deceiving members or the public and with the aim of securing for themselves or others an unjust profit, make statements of substantive fact which are untrue in the company’s balance sheets, report or other company documents provided for by law which are intended for members or for the public, even if such facts are the subject of valuations, or who omit information, the communication of which is prescribed by law, concerning the economic position, assets, liabilities or financial position of the company or the group to which that company belongs, in a manner which is capable of giving those to whom that information is addressed a false impression of that position and thereby occasion financial loss to members or creditors, shall, on complaint by the injured party, be liable to imprisonment for a term of between six months and three years.

Proceedings shall likewise be initiated on complaint where the act constitutes a separate, more serious offence detrimental to the assets of persons other than members or creditors, unless it has been committed to the detriment of the State, other public institutions or the European Communities.

In the case of companies subject to the provisions of Part IV, Title III, Section II of Legislative Decree No 58 of 24 February 1998, the penalty for the acts provided for in the first paragraph shall be one to four years’ imprisonment and a prosecution in respect of the offence may be brought ex officio.

Criminal liability for the acts provided for in the first and third paragraphs of this article shall extend to cases where the information concerns assets held or administered by the company on behalf of third parties.

Criminal liability for the acts provided for in the first and third paragraphs shall be excluded where the false statements or omissions do not distort to an appreciable extent the representation of the economic position, assets, liabilities or financial position of the company or the group to which that company belongs. Criminal liability shall in any event be excluded where the false statements or omissions distort the pre-tax financial results for the year by no more than 5% or distort the net assets by no more than 1%.

Such acts shall not be punishable in any circumstances where they are the result of estimates which, viewed individually, do not differ from the true values by more than 10%.’

21. The new Article 2621 can be regarded as a residual provision in relation to the new Article 2622 of the Italian Civil Code. ( ) Because of the lighter penalty which the new Article 2621 prescribes by comparison with the previous legislation, the conduct for which it provides now constitutes only a summary offence (contravvenzione). The correspondingly shorter limitation period applicable to that offence is now three years. If that period is interrupted, limitation becomes effective at the latest after four years and six months in total.

22. As regards the newly-introduced requirement of a complaint, laid down in the first paragraph of the new Article 2622 of the Italian Civil Code, Article 5 of Legislative Decree No 61/02 lays down a transitional rule to the effect that the period for lodging complaints in respect of acts committed before the entry into force of Legislative Decree No 61/02 is to run from the date of its entry into force.

23. Article 2630 of the Italian Civil Code, as amended by Legislative Decree No 61/02 (hereinafter, ‘the new Article 2630 of the Italian Civil Code’) provides for fines of from EUR 206 to EUR 2 065 for failure to submit company documents prescribed by law within the time-limit. The fine increases by a third where balance sheets are not submitted at all.

24. Mention must also be made of a new provision laying down administrative fines for companies, which was likewise introduced by Legislative Decree No 61/02. However, it was incorporated not into the Italian Civil Code but as Article 25b into Legislative Decree No 231 of 8 June 2001( ) (hereinafter, ‘Legislative Decree No 231/01’) and governs the ‘administrative liability of companies’ ( ) as follows:

‘1. For company law offences governed by the Civil Code, where they have been committed in the interests of the company by managers, directors or receivers, or by persons under their supervision if the act would not have occurred had the former exercised supervision in accordance with the obligations attaching to their position, the following fines shall apply:

(a) for the summary offence of publishing false company documents, provided for in Article 2621 of the Civil Code, a fine in the amount of 100 to 150 units;

(b) for the summary offence of publishing false company documents to the detriment of members or creditors, provided for in the first paragraph of Article 2622 of the Civil Code, a fine in the amount of 150 to 330 units;

(c) for the summary offence of publishing false company documents to the detriment of members or creditors, provided for in the third paragraph of Article 2622 of the Civil Code, a fine in the amount of 200 to 400 units;

…

3. If the entity has derived an appreciable profit from the commission of the offences referred to in paragraph 1, the fine shall be increased by a third.’

3. General provisions of criminal law

25. The principle of legality in relation to crime and punishment is laid down in the second paragraph of Article 25 of the Italian Constitution and in the second paragraph of Article 2 of the Codice penale. ( )

26. In the event of a discrepancy between the criminal provision applicable at the material time and a subsequent criminal provision, the third paragraph of Article 2 of the Italian Criminal Code provides that the applicable legislation must always be that whose provisions are more favourable to the defendant, unless a final judgment has already been given in the case.

27. As for the legislation governing limitation periods applicable to criminal prosecution, Italian law provides in particular as follows. Under Article 157 of the Italian Criminal Code, limitation extinguishes the offence inter alia after the following periods:

– ten years, in the case of an indictable offence for which the law prescribes a term of imprisonment of no less than five years;

– five years, in the case of an indictable offence for which the law prescribes a term of imprisonment of less than five years or a fine;

– three years, in the case of a summary offence for which the law prescribes a term of imprisonment;

The third paragraph of Article 160 of the Italian Criminal Code provides that, if the limitation period is interrupted, time starts to run again from the day of the interruption. If there is more than one interruption, time runs from the last such interruption. However, the periods laid down in Article 157 must not under any circumstances be extended by more than half.

III – Facts, main proceedings and questions referred

A – General

28. The defendants in the three sets of proceedings are in each case charged with having published false company documents, all the acts in question having been committed, and the criminal proceedings relating to them having been initiated, prior to the entry into force of Legislative Decree No 61/02, that is to say, at a time when the old Article 2621 of the Italian Civil Code was still in force.

29. In each case, Legislative Decree No 61/02 entered into force during the criminal proceedings. The defendants are therefore now seeking application of the new Articles 2621 and 2622 of the Italian Civil Code, which, according to the information from the referring courts, would have the effect of exempting them from punishment.

30. The referring courts’ questions relate essentially to the following aspects of the new legislation:

31. In both the new Article 2621 and the new Article 2622 of the Italian Civil Code, the penalty for publishing false company documents has been significantly reduced by comparison with the previous legislation. With regard to the new Article 2621 of the Italian Civil Code, for example, the Tribunale di Milano states, in Case C-403/02, that ‘summary offences are punishable by sentences which are derisory in quantitative terms’, and that the penalties provided for are ‘almost always less than two years’ imprisonment and therefore fall within the scope of suspended sentences’.

32. A comparison of the new Article 2621 and the new Article 2622 of the Italian Civil Code shows that the new statutory rules differentiate according to whether or not the publication of false company documents occasions loss to members or creditors. Only where such loss does occur is the act still classified as an indictable offence (new Article 2622 of the Italian Civil Code), it being otherwise classified merely as a summary offence (new Article 2621 of the Italian Civil Code).

33. The classification of an act as an indictable or a summary offence not only results in a different penalty but also has other far-reaching practical consequences. Thus, for example, the punishment of ancillary offences such as money laundering or the receipt of stolen goods presupposes that the principal offence with which the ancillary offences are connected (the connecting factor) is indictable; if, however, it is only summary, like that created by the new Article 2621 of the Italian Civil Code, such ancillary offences cannot be established.

34. Moreover, the two new criminal provisions at issue require, as a subjective element additional to the intention to deceive, an intention to secure some form of enrichment.

35. Under both the new Article 2621 and the new Article 2622 of the Italian Civil Code, criminal liability is excluded where the act does not distort to an appreciable extent the representation of the profit or loss, assets, liabilities and financial position of the company or group. This follows from the tolerance limits laid down in the third and fourth paragraphs of the new Article 2621 and in the fifth and sixth paragraphs of the new Article 2622 of the Italian Civil Code.

36. The limitation period for criminal prosecution under the new Article 2621 is significantly shorter than under the previous legislation. Since that period starts to run as soon as the offence has been committed, the – often complicated and protracted – preliminary investigation and the judicial proceedings, which regularly involve three tiers of judicial bodies, usually cannot be completed before limitation becomes effective.

37. Criminal prosecution under the new Article 2622 of the Civil Code is conditional upon the lodging of a complaint by the injured party, unless the undertaking in question is listed on the stock exchange or commission of the offence is detrimental to the State, other public bodies or the European Communities. ( )

38. The Public Prosecutors acting in the main proceedings consider that, in view of its characteristics as described above, the new legislation now in force is contrary to the Italian Constitution and Community law.

B – Case C-387/02, Silvio Berlusconi

39. The defendant, Silvio Berlusconi, is charged, as chairman and majority shareholder of Fininvest SpA and other undertakings belonging to the same group, with having published false company documents for the years 1986 to 1989. According to the bill of indictment, the conduct giving rise to the offence was aimed at concealing financial transactions and at accumulating liquid reserves ( ) not disclosed in the company accounts in order then to use them for secret and illegal purposes. The charge in respect of this conduct was brought under the old Article 2621 of the Italian Civil Code. ( )

40. In the defendant’s submission, following the entry into force of Legislative Decree No 61/02, only the new Article 2621 of the Italian Civil Code is now applicable. This means, however, that prosecution of the offence is already time-barred. Indeed the time bar came into operation long before the criminal proceedings were initiated. Application of the new Article 2622 of the Italian Civil Code is precluded because a valid complaint was not lodged and, at the material time, the undertakings concerned were not listed on the stock exchange, with the result that an ex officio prosecution is likewise ruled out.

41. By order of 26 October 2002, the Tribunale di Milano, before the First Criminal Division of which Mr Berlusconi and others are being tried, stayed proceedings and referred to the Court for a preliminary ruling three questions which can be summarised as follows: ( )

(1) Does Article 6 of Directive 68/151 concern not only cases of failure to publish the balance sheet and profit and loss account, but also cases where those documents are published but their contents are false, given that the harm to the interests of members and third parties is clearly greater in the latter case? Is the directive intended in that respect to lay down a minimum level of protection at Community level leaving it to the Member States to put in place means of protection against the submitting of false balance sheets or the publishing of false company accounts?

(2) Do the criteria of effectiveness, proportionality and dissuasiveness, which the penalties to be adopted by the Member States must satisfy in order to be regarded as ‘appropriate’, refer to the nature or type of penalty considered in the abstract, or rather to its application in practice having regard to the structural characteristics of the legal system within which it takes effect?

(3) Are the principles set out in Directives 78/660, 83/349 and 90/605, upon which national measures relating to the drafting and contents of annual accounts and annual reports, in particular, of capital companies, must be based, to be interpreted as precluding a Member State from setting minimum thresholds below which inaccurate statements in annual accounts and annual reports relating to companies limited by shares, partnerships limited by shares and limited liability companies are not punishable?

C – Case C-391/02 Sergio Adelchi

42. On 9 January 2001, the Tribunale di Lecce found the defendant, Sergio Adelchi, guilty at first instance under the old Article 2621 of the Italian Civil Code of having published, in the years 1992 and 1993, false company documents relating to the companies La Nuova Adelchi Srl and Calzaturificio Adelchi Srl. Mr Adelchi was the sole director of those companies. The balance sheets relating to them were indisputably false because false invoices had been issued and fictitious imports and exports in excess of the Community customs limits had been declared. Those practices had the effect of distorting the costs and sales figures of both companies.

43. The defendant lodged an appeal against the judgment of the trial court before the Corte di Appello di Lecce (Court of Appeal, Lecce). In his submission, following the entry into force of Legislative Decree No 61/02, the legislation applicable, if any, is now the new Article 2621 of the Italian Civil Code. In this regard, the defendant contends that limitation has become effective and, moreover, that the profit or loss, assets, liabilities and financial position of the companies of which he is director were not distorted to an appreciable extent. ( ) Application of the new Article 2622 of the Italian Civil Code is precluded from the outset, since a valid complaint was not lodged and, moreover, the undertakings concerned are not listed on the stock exchange, with the result that an ex officio prosecution is likewise ruled out.

44. By order of 7 October 2002, the Corte di Appello di Lecce, Criminal Division, stayed the proceedings before it and referred the following questions to the Court for a preliminary ruling:

‘(1) With reference to the duty of each Member State to adopt “appropriate penalties” for the infringements established by Directives 65/151 and 78/660, must the directives themselves and in particular the combined provisions of Article 44(2)(g) EC, Articles 2(1)(f) and 6 of Directive 68/151 and Article 2(2), (3) and (4) of Directive 78/660, as consolidated by Directives 83/349 and 90/605, be interpreted as meaning that that legislation precludes a law of a Member State which, in amending the system of penalties already in force in respect of company law offences concerning the infringement of the obligations imposed in order to safeguard the principle of public and accurate information on companies, lays down a system of sanctions which in the specific instance is not informed by the criteria of effectiveness, proportionality and dissuasiveness of the sanctions imposed in order to ensure that that principle is upheld?

(2) Must those directives and, in particular, Article 44(2)(g) EC, Articles 2(1)(f) and 6 of Directive 68/151 and Article 2(2), (3) and (4) of Directive 78/660, as consolidated by Directives 83/349 and 90/605, be interpreted as meaning that that legislation precludes a law of a Member State which does not make it a punishable offence for companies to infringe obligations concerning disclosure and the provision of accurate information on certain company documents (including the balance sheet and the profit and loss account) where the disclosure of false company accounts or the failure to provide information result in a distortion of the financial results for a given period, or a distortion in the net assets, which does not exceed a certain percentage threshold?

(3) Must those directives and, in particular, Article 44(2)(g) EC, Articles 2(1)(f) and 6 of Directive 68/151 and Article 2(2), (3) and (4) of Directive 78/660, as consolidated by Directives 83/349 and 90/605, be interpreted as meaning that that legislation precludes a law of a Member State which does not make it a punishable offence for companies to infringe obligations concerning disclosure and the provision of accurate information where statements are made which, although aimed at deceiving members or the public with a view to securing an unjust profit, are the consequence of estimated valuations which, taken individually, depart from actual values to an extent not greater than a certain threshold?

(4) Irrespective of progressive limits or thresholds, must those directives and, in particular, Article 44(2)(g) EC, Articles 2(1)(f) and 6 of Directive 68/151 and Article 2(2), (3) and (4) of Directive 78/660, as consolidated by Directives 83/349 and 90/605, be interpreted as meaning that that legislation precludes a law of a Member State which does not make it a punishable offence for companies to infringe obligations concerning disclosure and the provision of accurate information where the false statements or the fraudulent omissions and, thus, the disclosures and statements which do not give a true and fair view of the company’s assets and liabilities and financial position do not distort “to an appreciable extent” the company’s assets, liabilities and financial position (even though it is for the national legislature to define the concept of “appreciable distortion”)?

(5) Must those directives and, in particular, Article 44(2)(g) EC, Articles 2(1)(f) and 6 of Directive 68/151 and Article 2(2), (3) and (4) of Directive 78/660, as consolidated by Directives 83/349 and 90/605, be interpreted as meaning that that legislation precludes a law of a Member State which, in response to an infringement by companies of those obligations concerning disclosure and the provision of accurate information imposed on them in order to safeguard “the interests of both members and third parties”, allows only members and creditors to seek imposition of a penalty, thereby excluding third parties from any general and effective protection?

(6) Must those directives and, in particular, Article 44(2)(g) EC, Articles 2(1)(f) and 6 of Directive 68/151 and Article 2(2), (3) and (4) of Directive 78/660, as consolidated by Directives 83/349 and 90/605, be interpreted as meaning that that legislation precludes a law of a Member State which, in response to the infringement by companies of those obligations concerning disclosure and the provision of accurate information imposed on them in order to safeguard ‘the interests of both members and third parties’, provides for prosecution machinery and a system of sanctions which are markedly differentiated, whereby the possibility of the imposition of a punishment upon complaint being made, together with more serious and effective penalties, is reserved solely for infringements occasioning loss to members and creditors?’

D – Case C-403/02 Marcello Dell’Utri and Others

45. The defendants Marcello Dell’Utri, Romano Luzi and Romano Comincioli are charged, inter alia, with having falsified balance sheets in the period up to 1993. ( ) At the time of their commission, those acts were punishable offences under the old Article 2621 and the old Article 2640 of the Italian Civil Code. Since the entry into force of Legislative Decree No 61/02, they have fallen within the scope of the new Article 2622 of the Italian Civil Code.

46. By order of 29 October 2002, the Tribunale di Milano, Fourth Criminal Division, stayed proceedings and referred the following questions to the Court for a preliminary ruling:

‘(1) May Article 6 of Directive 68/151 be understood as requiring Member States to establish appropriate penalties not only for non-disclosure by commercial companies of balance sheets and profit and loss accounts but also for false disclosure of such documents, of other company documents addressed to members or to the public, or of any information on a company’s assets and liabilities, and economic and financial situation which the company is required to provide in relation to itself or to the group of which it forms part?

(2) Must the concept of the ‘appropriateness’ of the penalty, for the purposes of Article 5 of the EEC Treaty, be understood in terms to be specifically assessed within the legislative scope (both criminal and procedural) of the Member States as requiring a penalty which is ‘efficacious, effective and genuinely dissuasive’?

(3) Do the combined provisions of new Articles 2621 and 2622 of the Civil Code, as amended by Legislative Decree No 61 of 11 April 2002, satisfy those criteria: in particular can Article 2621 of the Civil Code, which summarily punishes by a term of imprisonment of one year and six months offences in connection with non-disclosure of balance sheets not occasioning financial loss or occasioning loss but in respect of which no prosecution may be brought under Article 2622 of the Civil Code owing to the absence of a complaint, be described as ‘effectively dissuasive’ and ‘genuinely appropriate’? Finally, is it appropriate, in terms not least of the specific protection of the collective interest in the ‘transparency’ of the corporate market, and the possibility that that interest may assume a Community dimension, to provide in respect of offences under Article 2622(1) of the Civil Code (those committed in regard to companies not listed on the stock exchange) that proceedings may only be brought upon a complaint by members of the company concerned or its creditors?’

E – Procedure before the Court

47. By order of 20 January 2003, the President of the Court of Justice joined the three cases, C-387/02, C-391/02 and C-403/02, for the purposes of the written and oral procedures and the judgment.

48. The defendants Berlusconi and Dell’Utri, the Procura Generale ( ) attached to the Corte di Appello di Lecce, the Italian Government and the Commission have submitted written observations to the Court. At the hearing on 13 July 2004, agents representing the defendants Berlusconi, Adelchi and Dell’Utri, the Procura della Repubblica ( ) attached to the Tribunale ordinario di Milano, the Principal Public Prosecutor’s Office attached to the Corte di Appello di Lecce, the Italian Government and the Commission presented oral argument to the Court.

IV – Legal assessment

A – Admissibility of the reference for a preliminary ruling

49. The defendants Berlusconi and Dell’Utri and the Italian Government express doubts as to the admissibility of the references for a preliminary ruling.

1. Description of the relevant facts

50. The defendant Dell’Utri takes the view first of all that the reference for a preliminary ruling in Case C-403/02 does not contain any description of the relevant facts in the main proceedings and is therefore inadmissible.

51. I do not share that concern. It is true that the Tribunale di Milano has confined itself to informing the Court in very few words that the persons being tried before it are charged, inter alia, with the falsification of balance sheets in the period up to 1993, that that act was originally a punishable offence under the old Article 2621 and the old Article 2640 of the Italian Civil Code, and that it now falls under the new Article 2622 of the Italian Civil Code. However, those details are sufficient for an understanding of the questions referred to the Court.

52. It is of course not the task of the Court in the context of a reference for a preliminary ruling to comment on how Italian national criminal law is to be interpreted and applied in this particular instance. More specifically, it will not give a ruling on the substantive question whether or not the defendant has committed the offence of falsifying balance sheets. For that reason, it is not crucial for the Court to be told in detail which acts the defendant is alleged to have committed. Rather, it is sufficient for it to be aware that certain acts – described in no greater detail than that – have led to the bringing of a charge of falsification of balance sheets and that that charge is currently the subject of criminal proceedings.

53. Moreover, the two key questions which the Court has to address in this case, namely whether, for the purposes of the relevant company law directives, ( ) the publication of false company documents is to be treated in the same way as the non-publication of such accounts, and what ‘appropriate penalties’ means in relation to the publication of false company documents, can usefully be answered on the basis of the summary information which has been submitted.

2. Description of the relevant legislation

54. The defendants Berlusconi and Dell’Utri also take the view that the orders for reference in Cases C-387/02 and C-403/02 give only an abridged account of the relevant national legislation, referring as they do all but exclusively to the old Article 2621, the new Article 2621 and the new Article 2622 of the Italian Civil Code, without presenting an overall picture of the Italian provisions applicable to the publication of false company documents and those adopted in implementation of the company law directives.

55. I do not share this concern either. The purpose of the requirement of a sufficient description of the law involved in the case is, first, to enable the Court to arrive at an interpretation of Community law which may be of use to the national court and, second, to give the governments of the Member States and other interested parties the opportunity to submit observations pursuant to Article 23 of the Statute of the Court of Justice. ( ) The question whether or not the information contained in an order for reference is sufficient must be examined in the light of that objective.

56. In both the references for a preliminary ruling at issue the essential elements of the old and the new Italian legislation are described and compared. In particular, the referring courts have described to a sufficient extent the provisions which they have been called upon to apply in the criminal proceedings pending before them. This case is therefore in no way comparable with those proceedings in which the Court has declared the questions referred to be inadmissible because of a serious failure to give an indication of the facts and law involved. ( )

57. It is true to say that the orders for reference do not also consider all the other provisions adopted in Italy in transposition of the company law directives. Nor, as the Commission observes, do they, for example, contain any reference to the possibility of annulling company resolutions, ( ) or to the civil liability of company directors in the event of falsification of balance sheets. However, the lack of such additional information does not in any way make the orders for reference misleading or unusable. Supplementary information of this kind is not essential as a basis for the answers to be given to the questions referred or for the interested parties’ pleadings. Indeed, a party which considers it useful can – as in this case – introduce such information into the preliminary ruling proceedings by submitting observations under Article 23 of the Statute of the Court of Justice.

3. Relevance to the decision

58. Finally, the defendants Berlusconi and Dell’Utri and the Italian Government also consider the reference for a preliminary ruling to be inadmissible on the ground that the questions raised are irrelevant to the main proceedings in each case. In view of the principle of legality in relation to crime and punishment (nullum crimen, nulla poena sine lege) and the principle of the retroactive application of more lenient criminal provisions, it is established from the outset that the charges must in any event be heard under the new legislation, that is to say, the new Article 2621 and the new Article 2622 of the Italian Civil Code, as amended by Legislative Decree No 61/02. The provision in force at the material time, the old Article 2621 of the Italian Civil Code, cannot be applied under any circumstances. Neither a preliminary ruling by the Court of Justice nor the application for review as to constitutionality made by the referring courts to the Corte Costituzionale (Italian Constitutional Court) ( ) can do anything to change this. There is therefore no need to examine the compatibility of the new legislation with Community law.

59. That view is unconvincing for the following reasons:

60. The questions referred in all three cases relate to specific criminal proceedings. It is crucial to the continuation of those criminal proceedings to ascertain whether provisions of national law such as those introduced by the Italian legislature by means of Legislative Decree No 61/02 infringe the company law directives or are compatible with them. That question would be irrelevant to the continuation of the main proceedings only if it were in fact established from the outset that provisions such as the new Article 2621 and the new Article 2622 of the Italian Civil Code are applicable, as more lenient criminal provisions, in any event, that is to say, even if they are contrary to Community law. That is not the case, however. On the contrary, it is by no means axiomatic that more lenient criminal provisions should be applicable retroactively despite the fact that they are contrary to Community law. Indeed, it is at least equally conceivable that new criminal legislation should, in so far as it infringes the provisions of Community law, be set aside, and the previous legislation in force at the material time applied instead. ( ) The Court has not as yet addressed this issue in any depth.

61. Moreover, contrary to the view expressed by the defendants, the question whether the answers given by the Court may subsequently be used in proceedings before the Italian Constitutional Court has no bearing on the admissibility of the questions referred. The relevance of the questions referred is to be assessed by reference not to any subsequent proceedings before the Italian Constitutional Court but to the criminal proceedings currently pending before the national courts. Those courts have an obligation under Community law to set aside of their own motion any provision of national law which infringes Community law. The prior completion of proceedings before the Italian Constitutional Court is unnecessary for this purpose. ( )

62. Even if it were assumed that the referring courts had raised their questions exclusively with a view to the preparation of subsequent proceedings for judicial review as to constitutionality before the Italian Constitutional Court, the task of determining whether their questions are necessary would have to be left first of all to those three national courts, in accordance with settled case-law. For, according to that case-law, it is solely for the national court before which a dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Where the questions referred concern the interpretation of Community law, the Court is therefore bound in principle to give a ruling. It can refuse to give a preliminary ruling on a question submitted by a national court only where it is quite obvious that the ruling sought by that court on the interpretation or validity of a provision of Community law bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. ( )

63. In this case, it is by no means obvious that the questions referred bear no relation to the actual facts or purpose of what may be preparatory proceedings for an application to the Italian Constitutional Court, or that they relate to a hypothetical problem. It is true that the Italian Constitutional Court recently declared inadmissible applications for judicial review as to constitutionality brought by three Italian courts in connection with the new Article 2621 and the new Article 2622 of the Italian Civil Code. ( ) On the same day, however, in other proceedings for judicial review as to constitutionality, it expressly deferred its examination of those aspects of Community law which may have a bearing in particular on the first paragraph of Article 117 of the Italian Constitution ( ) until the Court gives a preliminary ruling in these proceedings. Indeed, in so doing, it made direct reference to Joined Cases C-387/02, C-391/02 and C-403/02, pending before the Court of Justice. ( ) Against that background also, therefore, it is not possible to contend that the questions referred to the Court for a preliminary ruling lack relevance.

4. Interim conclusion

64. For the reasons given I consider the three references for a preliminary ruling to be admissible. ( )

B – Substantive assessment of the questions referred

65. For reasons of clarity, it is appropriate to group the various questions raised by the referring courts according to their substance and to classify them under two major subject headings: on the one hand, the question of the scope ratione materiae of the first indent of Article 6 of the First Directive, and, on the other hand, the question of the appropriateness of penalties for the publication of false company information in annual accounts.

66. In the case of consolidated accounts, the same issues of interpretation arise in connection with Article 38(6) of the Seventh Directive; to that extent, the following comments apply mutatis mutandis.

1. The scope ratione materiae of Article 6 of the First Directive

67. First, the referring courts all seek, in essence, to ascertain whether the first indent of Article 6 of the First Directive requires Member States to provide for appropriate penalties only in cases where annual accounts ( ) are not disclosed at all, or whether it also applies to cases where substantively false annual accounts are published. ( )

68. According to its wording, the first indent of Article 6 of the First Directive places an obligation on Member States to provide for appropriate penalties in case of failure to disclose documents as required by Article 2(1)(f) of that directive. ( )

69. Unlike the Commission and the two Public Prosecutors, the defendants Berlusconi and Dell’Utri, in common with the Italian Government, proceed on the assumption that, in view of the above wording, the obligation to provide for appropriate penalties entails only a minimum degree of harmonisation and does not extend to the disclosure of false annual accounts. In their submission, the First Directive provides only for ‘formal disclosure’. The substance of such disclosure is not defined until the Fourth Directive. However, that directive does not actually contain a separate provision on penalties comparable to Article 6 of the First Directive.

70. It must be pointed out first of all in this regard that the wording of Article 6 of the First Directive is by no means so clear-cut. It can quite easily also be interpreted as meaning that penalties are to be provided for not only in the event of failure to disclose per se but also in the event of failure to disclose in the manner prescribed, that is to say, in the event of failure to disclose substantively accurate annual accounts for the purposes of Article 2 and the first subparagraph of Article 47(1) of the Fourth Directive in conjunction with Article 3 of the First Directive.

71. None the less, even from the narrow perspective favoured by the defendants and the Italian Government, the following must be taken into account: it is settled case-law that, in interpreting a provision of Community law, it is necessary to consider not only its wording but also the context in which it occurs and the objects of the rules of which it forms part. ( ) An examination of the legislative context and objects of the first Directive shows the following.

72. On the one hand, protection of the interests of third parties is a particularly important factor in any directive. This is expressly emphasised by the Treaty itself in the mandate it gives to the Community legislature (Article 44(2)(g) EC). Moreover, the importance of protecting third parties is given prominent expression in the second and fourth recitals in the preamble to the First Directive, as well as in the first recital in the preamble to the Fourth Directive and the first recital in the preamble to the Seventh Directive. The disclosure obligation laid down in those directives is intended to enable third parties to obtain information on the essential documents of a company, such as, for example, its annual accounts.

73. On the other hand, Article 2(3) of the Fourth Directive and the fourth recital in the preamble to that directive lay down the fundamental principle that the annual accounts must give a true and fair view of the company’s assets, liabilities, financial position and profit or loss. ( ) That principle has a role to play not only within the Fourth Directive but also in the interpretation and application of the First Directive. For, since the Fourth Directive fills the lacunae left by the First Directive in relation to the substance of annual accounts, ( ) and both directives refer to each other, in one case expressly, ( ) for that purpose, they must be read and interpreted in conjunction with each other.

74. Consequently, when it comes to interpreting and applying Article 6 of the First Directive, particular consideration must be given both to the protection of the interests of third parties and to the principle of the need to give a true representation of the company’s assets, liabilities, financial position and profit or loss. Not only present but future business partners, in particular potential creditors and investors from other Member States, must be able at any time to obtain a reliable picture of an undertaking in order better to be able to assess the risks involved in entering into a business relationship with it and the funds it has at its disposal. Being external to the company, they are by definition in greater need of protection than, say, its principal members, who have disproportionately greater knowledge of the assets, liabilities, financial position and profit or loss of the undertaking concerned and are involved in, or can at least obtain information on, the decisions it takes. ( ) The fact that all third parties are able to consult companies’ annual accounts wins the trust of potential business partners and therefore ultimately stimulates business activity – at both the domestic and cross-border level – on the internal market. ( )

75. The need for protection is particularly great in a situation where annual accounts are disclosed but present a false picture of the company’s assets, liabilities, financial position and profit or loss. Whereas, in a situation where a company’s annual accounts are not disclosed, a third party is forewarned and certainly cannot place his trust initially in a given representation of the assets, liabilities, financial position and profit or loss of the company concerned, he is likely to find it extremely difficult, if not impossible, without an in-depth knowledge of the undertaking, to identify errors in annual accounts which have been disclosed. The view taken by the Italian Government, to the effect that anyone can check the probity of annual accounts which have been disclosed, is therefore unconvincing. On the contrary, third parties will as a rule place their trust in the probity of the statements made in annual accounts which have been disclosed. It is therefore all the more important to protect that trust – and, ultimately, the trust of the public and the markets. ( )

76. It is therefore clear from the legislative context of Article 6 of the First Directive and from the meaning and purpose of that provision that Member States have an obligation to provide for appropriate penalties not only in the event of failure to disclose annual accounts but also and in particular in the event of disclosure of substantively false annual accounts.

77. It is not possible to raise, as against that conclusion, the objection that the wording of the Fourth Directive does not contain separate obligations requiring Member States to provide for penalties. ( ) For, in view of the aforementioned relationship between the First and the Fourth Directives, it makes absolutely no difference whether the Fourth Directive itself contains a provision comparable to Article 6 of the First Directive. It is precisely because the Fourth Directive adds to the substance of the First Directive and the first subparagraph of Article 47(1) of the Fourth Directive expressly refers to the provisions on disclosure contained in the First Directive, that a separate provision on penalties in the Fourth Directive was not absolutely necessary. Conversely (and logically), where it does not refer to the provisions on disclosure in the First Directive (see Article 47(1a) of the Fourth Directive), ( ) the Fourth Directive does impose a separate obligation on Member States to provide for appropriate penalties. All of which points to the conclusion that, through the First and Fourth Directives, the Community legislature sought to require Member States to provide for a system of penalties free from lacunae, and that, because of the reference in the Fourth Directive to the First Directive, the penalties provided for in Article 6 of the latter were intended, under normal circumstances, to apply automatically alongside the relevant provisions of the former; only the lacunae, in relation to which no reference is made to the First Directive, are filled by means of a separate obligation to provide for penalties in the Fourth Directive (see the last sentence of Article 47(1a) of the Fourth Directive).

78. The view taken by the defendant Dell’Utri, to the effect that the Member States are under an obligation to provide penalties for the publication of substantively false annual accounts only in the exceptional circumstances expressly referred to in the Fourth Directive, is unconvincing in my view. After all, since the derogating provisions in the Fourth Directive, in particular Article 47(1a), relate primarily to smaller undertakings, the absurd consequence of such a view would be that smaller undertakings would have to be dealt with more severely than larger undertakings in the event of publication of false company documents.

79. Even the judgment in Rabobank, ( ) cited by the defendant Berlusconi, does not lead to a different conclusion. That judgment is concerned not with the disclosure provisions of the First Directive but with the powers of representation enjoyed by the organs of capital companies. It does not support the conclusion that all the provisions of the First Directive must be interpreted as restrictively and literally as possible. There too, the Court’s approach is one of systematic interpretation, inasmuch as it takes into account in its findings the Commission’s proposal for a Fifth Directive on company law. ( ) In terms of approach, therefore, the Court proceeds in much the same way in Rabobank as I suggested above when referring to the legislative connection between the First and the Fourth Directives.

80. Moreover, even if the interpretation of Article 6 of the First Directive proposed here were not adopted, Member States would still be required, by virtue of their duty of loyalty under Community law, to ensure effective punishment for the disclosure of substantively false annual accounts. For, where Community legislation does not provide any penalty for an infringement or refers for that purpose to national laws, regulations and administrative provisions, Article 10 EC requires the Member States to take all measures necessary to guarantee the application and effectiveness of Community law. ( )

81. In summary, therefore, it is appropriate to find that:

The first indent of Article 6 of the First Directive, in conjunction with Article 2(3) and the first subparagraph of Article 47(1) of the Fourth Directive and Article 10 EC, requires Member States to provide for appropriate penalties not only in the event that annual accounts are not disclosed at all but also in the event that substantively false annual accounts are disclosed. Article 38(6) of the Seventh Directive, which applies to consolidated accounts, must be interpreted mutatis mutandis.

2. Appropriateness of penalties for the publication of false company documents

82. The referring courts also seek in essence to ascertain what the term ‘appropriate penalties’ means in relation to the publication of false company documents. On the one hand, they ask in very general terms about the criteria for assessing the appropriateness of penalties; ( ) on the other hand, their questions are concerned in particular with provisions such as those contained in Italian Legislative Decree No 61/02, which introduce a graduated system of penalties, ( ) affect the time-limits applicable to prosecution, ( ) introduce the requirement of a criminal complaint ( ) and lay down tolerance limits below which the publication of false company documents is exempt from punishment. ( )

83. The defendants and the Italian Government proceed on the assumption that provisions such as those introduced by Legislative Decree No 61/02 are in conformity with Community law. The Commission and the two Public Prosecutors taking part in the proceedings before the Court take the opposite view.

84. It is true that the Court itself may not, under Article 234 EC, give a ruling on the compatibility of provisions of domestic law with Community law or on the interpretation of provisions of national law. Nor, for that reason, can it comment on the level of the penalty in the new Article 2621 of the Italian Civil Code. ( ) It does, however, have jurisdiction to supply the national courts with an interpretation of Community law on all such points as may enable those courts to determine the issue of the compatibility of national law with Community law for the purposes of the cases before them. ( )

a) Effectiveness, proportionality and dissuasiveness of penalties

85. The first indent of Article 6 of the First Directive requires Member States only to provide appropriate penalties for infringement of the aforementioned disclosure obligation. It thus leaves to the national authorities the choice of form and methods, in accordance with the third paragraph of Article 249 EC, and therefore extends not inconsiderable discretion to them.

86. However, that discretion is not unlimited. For, in accordance with the case-law cited above, where Community legislation does not specifically provide any penalty for an infringement or refers for that purpose to national laws, regulations and administrative provisions, Article 10 EC requires the Member States to take all measures necessary to guarantee the full effectiveness of Community law. While the choice of penalties remains within the discretion of the Member States, they must ensure in particular that infringements of Community law are penalised under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance and which, in any event, make the penalty effective, proportionate and dissuasive. ( )

87. There is no evidence in this case of any discrimination between situations at purely national level and those at Community level. The following observations are therefore directed exclusively towards the criteria of effectiveness, proportionality and dissuasiveness; in this case, they form the yardstick for determining whether provisions such as those introduced by Legislative Decree No 61/02 are compatible with Article 6 of the First Directive. In the light of the respective preambles to the First and Fourth Directives, ( ) particular importance is to be attached in this context not only to the interests of company members and creditors but also to protection of the interests of other third parties and the trust they have in a true representation of the company’s assets, liabilities, financial position and profit or loss. The penalties to be provided for in national law must ensure protection in those areas also, and in those areas in particular, in an effective, proportionate and dissuasive manner.

88. Rules laying down penalties are effective where they are framed in such a way that they do not make it practically impossible or excessively difficult to impose the penalty provided for (and, therefore, to attain the objectives pursued by Community law ( )). This follows from the principle of effectiveness, ( ) which, according to case-law, is applicable wherever a situation exhibits a connection with Community law, but there are no Community rules governing that situation (the appropriate procedure, for example) and the Member States therefore apply provisions of national law. In this regard, the principle of effectiveness obtains not only where an individual asserts his rights under Community law against a Member State but also, conversely, where a Member State transposes the provisions of Community law in relation to an individual. ( )

89. A penalty is dissuasive where it prevents an individual from infringing the objectives pursued and rules laid down by Community law. ( ) What is decisive in this regard is not only the nature and level ( ) of the penalty but also the likelihood of its being imposed. Anyone who commits an infringement must fear that the penalty will in fact be imposed on him. There is an overlap here between the criterion of dissuasiveness and that of effectiveness.

90. A penalty is proportionate where it is appropriate (that is to say, in particular, effective and dissuasive) for attaining the legitimate objectives pursued by it, and also necessary. Where there is a choice between several (equally) appropriate penalties, recourse must be had to the least onerous. Moreover, the effects of the penalty on the person concerned must be proportionate to the aims pursued. ( )

91. The question whether a provision of national law contains a penalty which is effective, proportionate and dissuasive within the meaning defined above must be analysed by reference to the role of that provision in the legislation as a whole, including the progress and special features of the procedure before the various national authorities, in each case in which that question arises. ( )

92. In summary, it is therefore appropriate to find that:

Penalties are appropriate within the meaning of Article 6 of the First Directive where they are effective, proportionate and dissuasive. In this regard, particular importance is to be attached not only to the interests of company members and creditors but also to the interests of other third parties and the protection of their trust in a true representation of the company’s assets, liabilities, financial position and profit or loss. The question whether a provision of national law contains an effective, proportionate and dissuasive penalty must be examined by reference to the role of that provision in the legislation as a whole, including the progress and special features of the procedure before the various national authorities, in each case in which that question arises.

b) Tolerance limits

93. Under both the first sentence of the third paragraph of the new Article 2621 and the first sentence of the fifth paragraph of the new Article 2622 of the Italian Civil Code, criminal liability for the publication of false company documents is excluded where the act does not distort to an appreciable extent the representation of the assets, liabilities and financial position of the company or group. Moreover, both provisions contain tolerance limits expressed as percentages (see the second sentence of the third paragraph, and the fourth paragraph, of the new Article 2621 and the second sentence of the fifth paragraph, and the sixth paragraph, of the new Article 2622 of the Italian Civil Code). Since those provisions are the same in both articles, it is appropriate to discuss them first.

94. Regard must be had in the assessment of these provisions to the scheme of the Fourth Directive. Thus, Article 2(3) of the Fourth Directive requires that the annual accounts should give a true and fair view of the company’s assets, liabilities, financial position and profit or loss. That principle is of central importance in the context of the provisions of the directive concerning annual accounts. ( ) This is illustrated in particular by Article 2(4) and (5) of the Fourth Directive. Thus, where there is any doubt, other provisions of the Fourth Directive must actually be departed from in order to ensure that the annual accounts give a true and fair view (the first sentence of Article 2(5)), and there may even be a need, for that purpose, to go beyond the requirements laid down in the Fourth Directive. ( )

95. As I have already said, those provisions are intended to protect the trust which both members and third parties have in the substantive probity of annual accounts.

96. Two conclusions can, in principle, be drawn from this. In accordance with the principle of effective penalties, errors in annual accounts or in consolidated accounts which are capable of undermining trust in the probity of the representation of a company’s assets, liabilities, financial position and profit or loss cannot be tolerated. If they were, the objective pursued by the directive would be frustrated. On the other hand, errors in annual accounts which are not capable of betraying that trust may be subject to lighter penalties or to no penalty at all.

97. Provisions which leave sufficient scope for account to be taken of individual circumstances may, if interpreted and applied in a manner consistent with the directive, satisfy those principles. However, the purely quantitative effects of an error, as referred to by the second sentence of the third paragraph, and the fourth paragraph, of the new Article 2621, and the second sentence of the fifth paragraph, and the sixth paragraph, of the new Article 2622 of the Italian Civil Code, can only be an initial factor in the assessment of whether that error is capable of undermining trust in the probity of the representation of a company’s assets, liabilities, financial position and profit or loss.

98. It is true that the interests of members and third parties, and the protection of the trust they have in the probity of annual accounts, are not normally jeopardised provided that any accounting errors do not distort to an appreciable extent the representation, in terms of figures alone, of the profit or loss, assets, liabilities and financial position of the company or group. However, in order to prevent any impropriety and to provide an incentive to ensure that the utmost care is taken in the preparation of annual accounts, the question whether an error is an inaccuracy of no consequence or, on the other hand, an unacceptable distortion must always be assessed on a case-by-case basis. Otherwise, there would be a considerable danger that the tolerance limits granted by the legislature might result in widespread and intentionally included inaccuracies in annual accounts. Such a development could inflict permanent damage on the trust which third parties in particular, and, therefore, the business community as a whole, have in the probity of annual accounts.

99. More specifically, there can also be no tolerance where, as is presupposed in the new Articles 2621 and 2622 of the Italian Civil Code, false information is included in annual accounts and then disclosed deliberately and with the intention to deceive or secure enrichment, however negligible the effects of the distortion may be in purely quantitative terms. The principle of the need to present a true picture of a company’s assets, liabilities, financial position and profit or loss is intended, as I have said before, to protect the interests of third parties and the trust which the business community places in the probity of annual accounts. Making it permissible to include false statements in annual accounts deliberately and with the intention to deceive or secure enrichment would undermine that trust on a lasting basis and would thus run counter to the objective pursued by the company law directives.

100. Against that background, tolerance limits and grounds for exemption from criminal penalty such as those provided for in the third and fourth paragraphs of the new Article 2621 and the fifth and sixth paragraphs of the new Article 2622 of the Italian Civil Code do not seem capable of satisfying the requirements of Community law relating to effective (and dissuasive) penalties.

101. I would point out purely incidentally that quantitative tolerance limits are also considered inappropriate in the United States of America, for example in the administrative practice of the Securities and Exchange Commission, at least in so far as such limits serve to substantiate an irrebuttable presumption and there is no possibility of a comprehensive assessment of all the circumstances of the particular case. ( )

102. Moreover, this view cannot be countered with the argument that ‘de minimis’ rules are generally recognised in Community law. ( ) Certain tolerance thresholds do exist in Community competition law. However, such thresholds are applicable only in cases where it is guaranteed that the meaning, purpose and practical effectiveness of the competition rules will not be adversely affected.

103. Thus, for example, in the field of State aid, Article 3 of the relevant group exemption regulation ( ) requires that certain checks be carried out in order to ensure that the grant of de minimis aid does not affect trade between Member States or distort competition. ( ) If a comparison of this case with those de minimis rules leads to any conclusion at all, it is that tolerance limits are permissible only where they do not have the effect of undermining the spirit and purpose of the relevant legal provisions, that is to say, in the case of annual accounts, to protect the trust which third parties and the public have in company documents.

104. A comparison with the de minimis rules applicable in the context of Article 81 EC is no less instructive. For, in that context, particularly onerous restrictions, such as price fixing or the conclusion of market-sharing agreements (‘hardcore’ restrictions) are automatically excluded from the scope of the de minimis rules; they therefore remain wholly within the scope of European antitrust law. ( ) If this consideration too is applied to the sphere of false company documents, the most that can be concluded is that, for particularly onerous breaches of the trust which third parties and the public have in the probity of a company’s documents, in particular the making of false statements in annual accounts deliberately and with the intention to deceive or secure enrichment, there can be no tolerance, even if the false statements do not distort to an appreciable extent the representation, in terms of figures alone, of the profit or loss, assets, liabilities and financial position of a company or group.

105. In summary, it is therefore appropriate to find that:

The first indent of Article 6 of the First Directive, in conjunction with Article 2(3) and Article 47(1)(1) of the Fourth Directive, does not preclude national legislation under which criminal liability for the publication of false company documents is excluded where the act in question does not distort to an appreciable extent the representation of the profit or loss, assets, liabilities and financial position of the company of group, unless the act was carried out deliberately and with the intention to deceive or secure enrichment.

However, those provisions do preclude national legislation under which criminal liability for the publication of false company documents is always excluded where the false statements or omissions result in a distortion which does not differ from the correct value by more than a certain percentage, and which makes no provision for an examination of all the circumstances of each individual case.

Article 38(6), in conjunction with Article 38(1) and Article 16(3), of the Seventh Directive, must be interpreted mutatis mutandis.

c) Limitation periods applicable to criminal prosecution

106. Legislative Decree No 61/02 has substantially shortened the relevant limitation periods. This particularly affects prosecutions under the new Article 2621 of the Italian Civil Code. For the summary offence created under that article, which is the general offence in relation to the publication of false company documents, the limitation period is now three years; if that period is interrupted, limitation becomes effective at the latest after four years and six months in total. ( )

107. There is in principle no reason why Member States should not subject to limitation penalties which they are required to introduce under Community law. Such limitation periods serve to ensure legal certainty and the principle of legal certainty is also recognised at Community level as a general principle of law. ( ) It follows that Community law likewise applies similar limitation periods, for example in the context of its provisions on the protection of the financial interests of the Communities ( ) and in the field of competition policy. ( )

108. Moreover, as the existence of such limitation periods shows, Community law does not by any means require that a penalty must actually be imposed in every single case. It must be ensured, however, that the limitation rules applicable do not have the general effect of undermining the effectiveness and dissuasiveness of the penalties provided for. ( ) Consequently, the publication of false company documents must not be subject to penalties in theory alone. The system of penalties must rather be framed in such a way as to ensure that anyone who submits false annual accounts does in fact fear that penalties will be imposed on him. ( )

109. The question whether provisions on limitation such as those applicable to the new Article 2621 and the new Article 2622 of the Italian Civil Code satisfy the aforementioned conditions relating to effective and dissuasive penalties must be assessed by reference, first, to the nature and seriousness of the offences concerned and, secondly, to the scheme of the rules on limitation periods laid down in national law. ( ) Consideration must be given in this regard not only to the length of the limitation period but also, for example, to the point from which that period starts to run, any events suspending or interrupting it and the effects of such suspension or interruption. It is also important not to leave out of account how much time the preparation and conduct of judicial proceedings normally take, having regard to the complexity of the facts and the structure of the justice system in terms of personnel and procedure. On the other hand, it should be borne in mind that the first sentence of Article 6(1) of the Convention for the Protection of Human Rights and Fundamental Freedoms ( ) and the first sentence of the second paragraph of Article 47 of the Charter of Fundamental Rights of the European Union ( ) protect everyone, in particular the defendant in a criminal trial, from excessively long legal proceedings; in the assessment of the length of such proceedings, regard must none the less also be had to the circumstances and complexity of each particular case. ( )

110. If, following an assessment in the light of all those criteria, it is found that the effect of rules on limitation periods is that the penalty provided for is, in reality, likely to be imposed in fact only rarely, if at all, that penalty cannot be said to be effective and dissuasive.

111. According to information from all the referring courts, the – often expensive and protracted – preliminary investigation and judicial proceedings, which regularly involve three tiers of judicial bodies, usually cannot be completed before limitation becomes effective, in particular in the case of summary offences under the new Article 2621 of the Italian Civil Code. In that light, there are serious doubts whether a provision such as the new Article 2621 of the Italian Civil Code can be regarded as an effective and dissuasive penalty for the purposes of the first indent of Article 6 of the First Directive.

112. In summary, it is therefore appropriate to find that:

The first indent of Article 6 of the First Directive, in conjunction with Article 2(3) and Article 47(1)(1) of the Fourth Directive, precludes rules on limitation periods under which the penalties provided for are likely to be imposed in fact only rarely, if at all. Article 38(6), in conjunction with Article 38(1) and Article 16(3), of the Seventh Directive, must be interpreted mutatis mutandis.

d) Graduated system of penalties and requirements in respect of criminal complaints

113. It is true that the offence provided for in the new Article 2622 of the Italian Civil Code attracts a substantially heavier penalty than that under the new Article 2621 and is subject to longer limitation periods. However, it can as a rule be prosecuted only on complaint by the injured member or creditor. It cannot therefore be prosecuted ex officio or on complaint by third parties other than the injured member or creditor.

114. Member States are of course at liberty to introduce a graduated system of penalties and, for example, to provide harsher penalties for cases where the publication of false company documents occasions financial loss above and beyond the non-material damage usually arising as a result of a betrayal of the trust in the probity of annual accounts. It is in fact consistent with the principle of the proportionality of penalties to introduce qualifying criminal provisions which prescribe heavier penalties in the event of the accrual of financial loss than are applicable under the general provision, and under which prosecution may correspondingly depend on the lodging of a complaint by the injured party.

115. In themselves, however, provisions which carry a requirement to lodge a complaint are not capable of fulfilling the obligation under Community law to provide for appropriate penalties, as imposed on Member States under Article 6 of the First Directive. Because of its rules restricting prosecutions to those brought on complaint by injured members or creditors, a provision such as the new Article 2622 of the Italian Civil Code cannot effectively protect the interests of all third parties, but only, at best, those of certain third parties. However, as the Court held in the judgment in Daihatsu Deutschland, Article 6 of the First Directive precludes the legislation of a Member State from restricting to members or creditors of the company, the central works council or the company’s works council the right to apply for imposition of the penalty provided for. ( ) For the reasons given above, ( ) the findings reached in the judgment in Daihatsu Deutschland are by no means confined to cases of non-disclosure of annual accounts; indeed, contrary to the view expressed by the defendants Berlusconi and Dell’Utri, they are particularly applicable to cases involving the disclosure of false annual accounts.

116. Qualifying criminal provisions such as the new Article 2622 of the Italian Civil Code can therefore, at most, only supplement a system of effective, proportionate and dissuasive penalties which is already in place under national law. Being confined to protecting the interests of company members and creditors, they are not, however, capable of making good any deficiencies in the protection afforded to the interests of (other) third parties, be it in relation to possible financial loss or simply the non-material damage which can arise where the public’s trust in the probity of annual accounts is betrayed.

117. Consequently, if the referring courts come to the conclusion that the general provision in the new Article 2621 of the Italian Civil Code does not constitute an effective and dissuasive penalty, say because of the tolerance limits or the rules on limitation applicable to it, ( ) a provision such as the new Article 2622 of the Italian Civil Code, requiring as it does that prosecutions be restricted to those brought on complaint by company members and creditors, will not be capable of remedying that failing.

118. Furthermore, the fact that ex officio prosecution does at least remain possible in exceptional circumstances under the second and third paragraphs of the new Article 2622 of the Italian Civil Code can have no bearing on the overall assessment of that provision. It goes without saying that an assessment of the effectiveness and dissuasiveness of penalties must take into account not only any false company documents published by the few undertakings which are listed on the stock exchange and offences which are detrimental to the State or to the European Communities. Account must rather be taken of all cases of false company documentation, not least those which relate to undertakings not listed on the stock exchange and which are detrimental to the public.

119. In summary, it is therefore appropriate to find that:

The first indent of Article 6 of the First Directive, in conjunction with Article 2(3) and Article 47(1)(1) of the Fourth Directive, does not preclude national legislation under which penalties to protect the financial interests of certain persons can as a rule be imposed only on complaint by the injured party. This presupposes, however, that there is also general legislation providing for effective, proportionate and dissuasive penalties to protect the interests of third parties which are applicable independently of any financial loss and which can be imposed ex officio.

e) Combined effect of provisions of civil, criminal and administrative law

120. The defendants Berlusconi, Adelchi and Dell’Utri, as well as the Italian Government, submit that, in the assessment of the new Italian rules on penalties for the publication of false company documents, account should also be taken of non-criminal, that is to say, civil and administrative, legislation. The Commission’s observations too can, in principle at least, be interpreted to the same effect. In this regard, reference is made, for example, to the following provisions:

– the civil liability of those responsible for the publication of false company documents; ( )

– the possibility of challenging the company resolution adopting a (false) balance sheet; ( )

– the possibility of imposing on the company itself certain administrative penalties (fines) for false company documents published in its own interests; ( )

– the possibility of imposing administrative fines for failure to submit balance sheets or for failure to submit them within the prescribed time; ( )

– the provisions governing the audit of annual and consolidated accounts by persons specifically authorised to do so who are subject to special liability. ( )

121. As I have already said, ( ) Article 6 of the First Directive grants Member States a not inconsiderable margin of discretion in the formulation of their national systems of penalties. Consequently, it does not by any means follow from Article 6 of the First Directive that only criminal penalties are to be imposed. ( ) Indeed, from the point of view of Community law, there is no reason in principle why a combination of provisions from criminal, civil and administrative law should not be used. The guiding principle in assessing the combined effect of such provisions must rather be the effectiveness, proportionality and dissuasiveness of penalties.

122. It is for the referring courts to assess the overall effect of the system of penalties provided for by the Italian legislature and to measure that system against the criteria of effectiveness, proportionality and dissuasiveness. ( ) In this regard, the Court can only provide guidance on the interpretation of Community law which will enable the national courts to make such an assessment of national law.

123. In this connection, it must be pointed out first of all that penalties which can be imposed only on complaint by certain persons, in particular company members and creditors, are by definition incapable of making good any deficiencies in the protection afforded to the interests of third parties. ( ) Nor can protection of the interests of third parties be dependent on the occurrence of some form of loss to those third parties. Protection is to be afforded not only to the financial interests of third parties but also, and in particular, to their non-material interests in the provision of accurate information on the company’s assets, liabilities, financial position and profit or loss, and, therefore, to the business community’s trust in the probity of annual accounts. If that protection is not guaranteed, the penalties automatically cease to be effective.

124. Even the fact that third parties can in some circumstances obtain civil remedies such as the annulment of company resolutions adopting annual accounts ( ) is not in itself sufficient to make a penalty effective. The effectiveness and, above all, the dissuasiveness of penalties presupposes, as I have already said, that anyone who submits false annual accounts must fear that penalties will in fact be imposed on him. Consequently, consideration must also be given at least to whether third parties would actually be likely ( ) to pursue a remedy such as an action for annulment before the competent national courts in the first place, and what their prospects of succeeding would be if they did so.

125. In so far as the new Article 2621 and the new Article 2622 of the Italian Civil Code are referred to, in relation to the offences which they create, in other provisions, it must be noted, for the purposes of assessing the latter, that any inadequacies in the provisions creating the offences, such as the tolerance limits, may also have an impact on the ancillary provisions and, therefore, impair their effectiveness and dissuasiveness. This is true, for example, of a provision such as Article 2641 of the Italian Civil Code, ( ) which provides for the forfeiture of unlawfully acquired capital gains and confiscation of the means of acquiring them. It is also true of administrative penalties such as those introduced in Article 25b of Legislative Decree No 231/01; they too make reference to the offences provided for in the new Article 2621 and the new Article 2622 of the Italian Civil Code.

126. It must be noted, moreover, that Article 25b of Legislative Decree No 231/01 applies only to acts which have been committed in the interests of the company and that the company can, under certain conditions, exonerate itself. ( ) Provisions the scope of which is restricted in this way may well represent a meaningful supplement to the penalty system as a whole but they are not capable of making good any deficiencies in the protection afforded to the interests of third parties. Protection of the interest which third parties have in the provision of accurate information on the assets, liabilities, financial position and profit or loss of the company concerned must also be effectively guaranteed in cases where someone has made false statements in annual accounts for his own personal benefit and not necessarily in the interests of the company or to the detriment of others.

127. What is more, in the case of provisions such as Article 25b of Legislative Decree No 231/01, the level of the penalties provided for must likewise be subject to an examination as to its dissuasive effect. If it is found that the amounts of the fines prescribed are so small as not to be commensurate with the seriousness of the contested infringements of the relevant financial reporting legislation or with the size of the undertakings concerned, such provisions cannot be described as being dissuasive. They would then, for that reason also, be incapable of making good any deficiencies in criminal penalties such as those laid down in the new Articles 2621 and 2622 of the Italian Civil Code.

128. With respect to provisions such as the new Article 2630 of the Italian Civil Code, it need only be pointed out, as I have already stated, ( ) that Article 6 of the First Directive requires that appropriate penalties be provided for not only in the event of non-disclosure of annual accounts but also in the event of disclosure of false annual accounts.

129. The auditing of financial statements by accountants ( ) undoubtedly represents a central component of the legislation intended to ensure the substantive probity of company documents. However, auditing is a preventive form of scrutiny. By contrast, the very wording (‘appropriate penalties’) ( ) of Article 6 of the First Directive requires Member States to provide – at least – for an appropriate punitive procedure. Moreover, the same conclusion also follows from the legislative context of the Fourth and Seventh Directives, as well as from the meaning and purpose of the provisions on the auditing of accounts. The preventive activity carried out by auditors is not by any means intended to replace, or make good the deficiencies of, punitive measures provided for by Member States. It is intended rather to be a second, independent leg in a system aimed at guaranteeing the substantive probity of annual and consolidated accounts. The Community legislature requires Member States to ensure that they have both an effective preventive system of scrutiny and an effective punitive system of scrutiny.

130. In the context of criminal law, it should be observed finally that certain provisions make the imposition of a penalty conditional on the establishment of an indictable offence (delitto), ( ) which means that, as far as those provisions are concerned, a summary offence (contravvenzione) is automatically precluded from being a connecting factor for the imposition of penalties.

C – Effects on the criminal proceedings pending before the referring courts of an infringement of the directives by the national legislation

131. In order to provide the referring courts with an answer which will be of use to them in disposing of the criminal proceedings pending before them, we must also consider what effect the interpretation of the company law directives which I have proposed would have in national judicial proceedings. ( ) In this connection, it is necessary, on the one hand, to look at the general and universally-recognised obligation incumbent on national courts to give effect to the provisions of Community law, and, on the other hand, to consider the limits of applying directives in criminal proceedings and, finally, the principle of the retroactive application of a more lenient criminal provision.

1. The obligation on national courts to give effect to the provisions of Community law

132. In at least two of the disputes in the main proceedings, the competent Public Prosecutors have claimed before the respective national courts that the legislative amendments introduced by Legislative Decree No 61/02 are unconstitutional. ( ) All three national courts are considering referring Legislative Decree No 61/02 to the Italian Constitutional Court for an examination as to its constitutionality. In its order for reference, the Tribunale di Milano states that ‘the final determination of the case depends on a decision on the constitutionality or otherwise of the relevant national rules, which [is] a matter for the Corte Costituzionale’.

133. In this regard, the following should be noted: it goes without saying that it does not fall within the jurisdiction of the Court of Justice to comment on the interpretation of the constitution of a Member State or to examine the compatibility of a national legislative measure with that constitution. It is the task of the Court, however, through its case-law, to ensure the uniform and effective implementation of Community law in all the Member States. To that end, the Court has jurisdiction to provide the referring courts with the legal guidance necessary to enable them to interpret Community law.

134. According to the settled and well-established case-law of the Court, national courts have an obligation to apply Community law and to set aside any provision of national law which may conflict with it. This is the logical consequence of the precedence of Community law. ( ) In the judgment in Simmenthal, the Court held in this regard that a national court must give effect to Community law and must accordingly ‘… set aside any provision of national law which may conflict with it, whether prior or subsequent to the Community rule …’. ( )

135. What is more, a national court is required to ensure that full effect is given to Community law, ‘if necessary refusing of its own motion to apply any conflicting provision of national legislation, even if adopted subsequently, and it is not necessary for the court to request or await the prior setting aside of such provision by legislative or other constitutional means’. ( )

136. The referring courts therefore have an obligation under Community law, and in particular under Article 10 EC and the third paragraph of Article 249 EC, to give effect to the provisions of the company law directives in the criminal proceedings pending before them, there being no need for that purpose for a prior ruling by the Corte Costituzionale on whether or not Legislative Decree No 61/02 is unconstitutional.

137. All of this does not mean of course that a national legislative measure such as Legislative Decree No 61/02 cannot in addition also be subjected to constitutional review, in accordance with the relevant provisions of national law, in order to determine generally whether it is constitutional and valid.

138. However, irrespective of whether such constitutional review takes place and whether Legislative Decree No 61/02 is compatible or incompatible with the Italian Constitution, the referring courts have an obligation in this particular case, that is to say, in the criminal proceedings pending before them, to set aside that legislative decree here and now, in so far as the new provisions it contains are contrary to Community law. The answer which the Court gives to the questions raised by the referring courts will be binding on all the national courts involved in the main proceedings. ( ) It should be noted in this regard that the interpretation which the Court of Justice gives clarifies the meaning and scope of the provisions of the company law directives as they must be or ought to have been understood and applied from the time of their coming into force. ( )

2. The limits on the application of directives in criminal proceedings

139. The defendants Berlusconi, Adelchi and Dell’Utri, and the Italian Government, refer to the principle of legality in relation to crime and punishment. In their submission, that principle means that the defendants cannot be subjected, by virtue of the application of the company law directives, to criminal prosecution or to any penalties additional to or heavier than those provided for in the new Articles 2621 and 2622 of the Italian Civil Code. The Public Prosecutor attached to the Tribunale di Milano who is acting in the proceedin