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When Market Abuse Rules Violate Human Rights: Grande Stevens v. Italy and the Different Approaches to Double Jeopardy in Europe and the US

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Abstract

The 2014 decision of the European Court of Human Rights in the case Grande Stevens and Others v. Italy raises numerous complex issues concerning the regulation of market abuse in Italy and Europe, as well as in other systems. The broad questions that the Strasbourg Court addresses, specifically concerning the nature of administrative sanctions and civil penalties, due process in administrative sanctioning procedures, and double jeopardy issues when both criminal and civil sanctions can be imposed, not only are extremely practically relevant for the current and future regulation of insider trading and market manipulation, but also open a more theoretical discussion on the relationships between the only apparently unrelated fields of human rights and enforcement in financial markets. This article offers an analysis of the decision, also in the light of future developments due to the recent reform of European law on market abuse, and compares this landmark European decision with corresponding US case law.

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Notes

  1. Grande Stevens and others v. Italy (App No. 18640/10, 18647/10, 18663/10, 18668/10) (2014) ECHR 4 March 2014, the French text is available on the website of the Court: http://www.echr.coe.int/Pages/home.aspx?p=home; the decision has been mentioned on the Harvard Law School Forum on Corporate Governance, by G. Rossi and M. Ventoruzzo: http://blogs.law.harvard.edu/corpgov/. In Italian newspapers, the decision was briefly discussed by Castellaneta (2014), at p. 21; by Clarich (2014), at p. 21; and more recently by Rossi (2014), at p. 1. The President of Consob, the Italian Securities and Exchange Commission, explicitly referred to this case in his annual address to the financial markets, ‘Discorso del Presidente al mercato finanziario’, Speech, 5 May 2014, at p. 17, available at: http://www.consob.it.

  2. The facts are primarily taken from the decision of the Turin Tribunal, 21 December 2010.

  3. On the precise moment at which material corporate information should be disclosed under Italian law, see the concise but clear discussion in Montalenti (2011), at p. 22.

  4. The description of the procedural history is primarily taken from the decision of the ECHR itself.

  5. For an overview of the European regulatory framework, see Avgouleas (2005), in particular Chapter 6, for a historical perspective. A discussion of the Italian system at the time of the events can be found in Annunziata (2006), at p. 3 ff.; Ferrarini (2004); Comporti (2005); Saponaro (2004). The first attempts to regulate the matter at European level are discussed in Hopt (1990).

  6. The author specifically thanks Renzo Ristuccia for suggesting this argument.

  7. For a comparative analysis of insider trading regulation in Europe and the US, see Ventoruzzo (2014).

  8. Italian contributions on these provisions abound. Some of the most relevant issues for the Grande Stevens decision are discussed, in Italian, in Consulich (2011), Crespi (2010), Lunghini (2005), Miedico (2007), Mucciarelli (2005), idem (2006), idem (2012), Paliero (2005). Seminara (2006), Vizzardi (2006).

  9. Alessandri (2010), at p. 683 (trans).

  10. A critical examination of this procedure is offered in Troise Mangoni (2012), at p. 120; see also Rordorf (2005).

  11. On this reform, it is interesting to read some of the responses to the public consultation, available at: http://www.consob.it. In particular, see the responses by Assonime; L. Enriques and M. Gargantini; and W. Troise Mangoni.

  12. An analytical discussion of this issue can be read in M. Allena, Art. 6 CEDU. Procedimento e processo amministrativo (Napoli, ESI 2012), where an extensive bibliography can also be found.

  13. See Engel and Others v. The Netherlands (App no 5100/71, 5101/71, 5102/71) (1976) ECHR, where the court states that ‘Si les États contractant pouvaient à leur guise qualifier une infraction de disciplinaire plutôt que de pénale … le jeu des clauses fondamentales des articles 6 et 7 se trouverait subordonné à leur volonté souveraine. Une latitude aussi étendue risquerait de conduire à des résultats incompatibles avec le but et l’objet de la Convention’ [‘If the contracting states could freely qualify a violation as civil or criminal … the effect of the fundamental principles established by Articles 6 and 7 [of the Convention] would be subordinated to the sovereign will of the states. Such a broad latitude would risk outcomes that are incompatible with the goal and the object of the Convention’].

  14. See Waters and Hopper (2001).

  15. In this perspective, two very interesting cases are Ziliberger v. Moldova (App no 61821/00) (2005) ECHR and Varuzza v. Italy (App no 35260/97) (1999) ECHR.

  16. Cour de Cassation, Chambre commerciale, April 9 1996, Haddad v. Agent judiciaire du Trésor, Recueil Dalloz (1998) p. 65.

  17. Grande Stevens and others (2014) ECHR, 22.

  18. Article 6 of the Convention states: ‘In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law’.

  19. Grande Stevens and others (2014) ECHR, 31.

  20. On the Menarini decision, see Siragusa and Rizza (2013). It should be pointed out that in the Menarini case, Judge Pinto de Albuquerque, one of the two judges who also signed a concurring opinion in Grande Stevens, argued in a minority opinion that adjudication by administrative judges would not have satisfied the right to a fair trial.

  21. Grande Stevens and others (2014) ECHR, 36.

  22. Grande Stevens and others (2014) ECHR, 63.

  23. Consiglio di Stato (ordinanza), No. 04491/2014 and 07566/2014, 2 October 2014.

  24. ‘No one shall be liable to be tried or punished again in criminal proceedings under the jurisdiction of the same State for an offence for which he has already been finally acquitted or convicted in accordance with the law and penal procedure of that State’.

  25. Grande Stevens and others (2014) ECHR, 49.

  26. Grande Stevens and others (2014) ECHR, 50 ff.

  27. Case C-45/08. For a different perspective on double jeopardy issues in a tax law case, see, however, the Åkerberg Fransson decision (Case C-617/20 of 26 February 2013).

  28. For a first overview of the new rules, see Ventoruzzo (2014).

  29. For an interesting discussion of the many issues raised by the accession, see Tulkens (2012), available at: http://www.ejtn.eu. In the text of her lecture, Mrs Tulkens, a former Judge and Vice-President of the European Court of Human Rights, very effectively illustrates this complex development and its legal implications.

  30. A very interesting question that I had the opportunity to discuss at the conference in Vienna mentioned in the first footnote is whether the double jeopardy principle applies not only within a single state, but also among different states: for example, if someone has been prosecuted and/or sanctioned in Germany, can this circumstance prevent prosecution and/or sanctioning in France? The European Convention on Human Rights, and more precisely Article 4 of Protocol 7, seems to contain a command that is only addressed at a single state and only concerns double jeopardy within one national jurisdiction; Article 54 of the Schengen Convention, however, with respect to criminal prosecutions, clearly has a broader scope and explicitly applies to prosecutions in different states.

  31. An excellent overview of the Fifth Amendment, in a historical perspective, can be found in Rudstein (2005).

  32. See Blumberg (1984), at p. 157, concluding that ‘[t]he double jeopardy clause will protect an insider from the combination of an SEC treble penalty action and a criminal prosecution’; and – for a different opinion – Silver 1984, at pp. 1012–1017, where it is argued that ITSA sanctions are civil and not criminal and cannot violate the prohibition of double jeopardy.

  33. 490 U.S. 435 (1989).

  34. 522 U.S. 93 (1997).

  35. For a discussion of the correlation between the ‘political ideology’ of Supreme Court justices and their voting patterns in financial regulation cases, see Fedderke and Ventoruzzo (2015).

  36. For a brief but effective discussion of Halper and its possible consequences, see Novak (1991).

  37. On this case, see Casenote (1998) A second look at double jeopardy: Hudson v. United States. Am J Criminal Law 25:631; Note (1998) The Supreme Court’s decision in Hudson v. United States: one step up and two steps back for multiple punishment protection under the double jeopardy clause. Wake Forest Law Rev 33:432.

  38. For applications of Hudson to bans on trading, revocations of registrations and similar measures, considered remedial and not punitive, and therefore not protected by the double jeopardy clause, see, for example, Ryan v. CFTC, 145 F.3d 910, 916-917 (7th Cir. 1998), and United States v. Merriam, 108 F.3d 1162 (9th Cir.), cert. denied, 522 U.S. 818 (1997).

  39. On punitive damages generally, see Polinsky and Shavell (1998), discussing punitive damages from a law and economics perspective; and Sebok (2003), for a historical perspective.

  40. Fed. Sec. L. Rep. P 22785.45 (C.C.H.), 2009 WL 2116535.

  41. For a brief overview of Sect. 16(b), see Ventoruzzo (2014).

  42. 490 U.S. 435 (1989), at 451. It should be mentioned that courts exclude double jeopardy protections both in litigation between private parties and in state actions that are civil in nature. If, however, we can accept that it can be questioned when a state action is actually ‘civil’ in nature, going beyond the formal language of statutes, it does not seem much of a stretch to also argue that private actions that have a uniquely or predominantly punitive goal might lead to a duplication of punishment.

  43. This idea is of course not entirely new. In fact, the question of constitutional limitations on punitive damages based on the Eighth or Fourteenth Amendment has been discussed by several American writers. See, for example, Massey (1987); Wheeler (1983); Volz and Fayz (1992). Less has been written, to the best of my knowledge, specifically on the issue of double jeopardy when both a criminal sanction and punitive damages are imposed. As mentioned in the text, courts tend to dismiss double jeopardy concerns; however, the argument is commonly based on the alleged ‘civil’ nature of punitive damages, without much discussion. See Kemp (1994); and Stein (1997–2008), §4:12. A discussion of the implications of Hudson for civil monetary penalties can be read in Sardegna (1998); and Note (1999) Double jeopardy and the civil monetary penalties dilemma: is Hudson the cure for health care fraud and abuse? Adm Law Rev 51:283.

  44. See supra n. 23 and corresponding text.

  45. The problem of coordination between prosecutors, securities agencies and court proceedings is also noted, with respect to the consequences of the Grande Stevens decision in France, by Bonneau (2014).

  46. Two interesting articles on this problem were published in The Economist in August 2014: ‘Corporate Justice’, The Economist, 30 August – 5 September 2014, p. 9, and ‘Criminalizing the American Company’, ibid., p. 21.

  47. The Italian Constitutional Court held, in one instance, that the European Convention on Human Rights binds (obviously) Italy, but that its provisions are not directly applicable (Corte cost., 24 October 2007, No. 348). According to more recent decisions, however, the Lisbon Treaty, which entered into force on 1 December 2009, has made Articles 6 and 13 of the Convention directly applicable (Cons. Stato, 2 March 2010, No. 1220).

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Acknowledgments

For discussions of the topic of this work and comments I wish to thank Alberto Alessandri, Miriam Allena, Stephen M. Bainbridge, Thierry Bonneau, Alessandro Chieffi, Susan Emmenegger, Ignacio Farrando, Kit Kinports, Rainer Kulms, Melissa Miedico, Paolo Montalenti, Francesco Mucciarelli, Peter Mülbert, Renzo Ristuccia, Marco Saverio Spolidoro, Mario Stella Richter Jr, Wladimiro Troise Mangoni, Guido Rossi, Wolfgang Schön, Vasilios Tountopoulos and William K. Wang. For comments and observations I would also like to thank participants in a workshop at Notre Dame Law School, held on 10 October 2014 and sponsored by the Notre Dame Journal of International and Comparative Law and by the Helen Kellogg Institute for International Studies, and particularly Felicia P. Caponigri for organising the workshop; and participants in the European Forum of Securities Regulation, held at the Vienna University of Business and Economics on 5 December 2014. Excellent research assistance was provided by Elizabeth Robinson.

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  1. Ordinario di Diritto commerciale, Dipartimento di Studi Giuridici “Angelo Sraffa”, Università Bocconi Palazzo Grafton, Stanza 8-E2-1, Via Roentgen, 1, 20136, Milan, Italy

    Marco Ventoruzzo

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Ventoruzzo, M. When Market Abuse Rules Violate Human Rights: Grande Stevens v. Italy and the Different Approaches to Double Jeopardy in Europe and the US. Eur Bus Org Law Rev 16, 145–165 (2015). https://doi.org/10.1007/s40804-015-0002-2

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