In the much-awaited Judgment No. 63, filed on March 21, 2019 and published on March 27, 2019 on Issue No. 13 of the Italian Official Gazette, the Italian Constitutional Court found that the principle of retroactive application of the most favorable law applies to the administrative penalties set forth under Legislative Decree No. 58 of February 24, 1998 against market abuse, thereby upholding the views expressed by the Milan Court of Appeals in its Order No. 87 of March 19, 2017.
In sum, the Court found that:
- Administrative penalties against market abuse set forth under the Italian Securities Act have a “punitive nature;”
- As such, these penalties must comply with the safeguards “that the Constitution and international human rights law,” including the European Convention for the Protection of Human Rights and Fundamental Freedoms (“ECHR”), “provide for criminal matters,” including the principle of retroactive application of the most favorable law;
- More in general, the entire “body” of safeguards and principles applicable to “criminal matters” pursuant to the ECHR applies to administrative penalties having “a ‘punitive’ nature and purpose” according to the criteria set out by the European Court of Human Rights (“ECtHR”);
- As a result, Art. 6(2) of Legislative Decree No. 72 of May 25, 2015 (“Decree”) violates the Constitution insofar as it bars the retroactive application of the amendments introduced by Art. 6(3) of the Decree (i.e., the inapplicability of the fivefold increase of penalties under Art. 39(3) of Law No. 262 of December 28, 2005) to administrative sanctions against market abuses under Articles 187-bis and 187-ter of the Italian Securities Act.
In addition to the critical topic specifically addressed by the Court, the Judgment is remarkable for the abovementioned, broadly-worded principles included in its reasoning, which suggest that the Italian Constitutional Court’s stance to the relationships between Supervisory Authorities and supervised subjects may become more libertarian in the future.
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