The Criminal Chamber of the French Court of Cassation reaffirms the longstanding principle of independence between administrative and criminal proceedings, holding that failure to inform the taxpayer of the right to be assisted by counsel and the absence of an oral and adversarial discussion with the tax auditor are the only defects affecting tax administrative operations conducted prior to the initiation of criminal proceedings that may be reviewed by the criminal courts.
- Crim., 15 January 2025, FS-B, No. 22-85.638
Although governed by a principle of independence and pursuing different purposes, tax and criminal proceedings frequently involve a partially or wholly common set of facts, thereby exposing the taxpayer/litigant to a risk of conflicting decisions. The gradual development of tax criminal law has therefore required both the French Council of State (Conseil d’État) and the Court of Cassation to define the respective scope of review of the tax courts and the criminal courts. Where tax and criminal proceedings follow or overlap with one another, it is particularly important to identify clearly which court has jurisdiction to review the procedural regularity of administrative operations carried out by the tax authorities before criminal proceedings are initiated, as well as the consequences for the criminal proceedings of any irregularities identified.
To what extent may the criminal courts examine the regularity of administrative operations conducted by the tax authorities before criminal proceedings are initiated, and which defects may result in the criminal proceedings being set aside? The judgment under review, published in the Court of Cassation’s Bulletin, answers these questions by reaffirming a longstanding solution restricting judicial review to issues concerning the taxpayer’s right to be informed of the possibility of being assisted by counsel and the right to an oral and adversarial discussion with the tax auditor.
In the present case, a company engaged in the brewery/restaurant and events business underwent a tax audit covering the three financial years ended between 2012 and 2014, following an unannounced inspection conducted on 2 April 2015. In 2017, upon completion of its investigations, the competent Departmental Directorate of Public Finances filed a criminal complaint against the company and its manager, who was also its sole shareholder.
The individual manager was summoned before the Criminal Court on charges of omitting entries from accounting records and tax fraud. Somewhat surprisingly, the decision does not indicate what became of the company itself, even though the complaint concerned the tax compliance of its business activities.
Before the Criminal Court, the manager raised several pleas of nullity, based in particular on:
- the lack of precision of the summons requiring him to appear before the Criminal Court;
- insufficient information concerning the elements necessary to ascertain the nature of the computer processing contemplated by the tax authorities during the audit operations preceding the criminal proceedings, in breach of Article L. 47 A of the French Tax Procedure Code (Livre des procédures fiscales);
- deprivation of the right of choice provided for by Article L. 47 A, II, of the French Tax Procedure Code: by way of reminder, where a tax audit concerns accounts maintained using computerised systems, these provisions require tax officials to specify in writing the nature of the computer processing they intend to carry out and grant the taxpayer a choice between several methods of audit;
- failure to comply with Article L. 121-1 of the French Code governing Relations between the Public and the Administration (Code des relations entre le public et l’administration), concerning the obligation to provide for an adversarial procedure before any adverse individual administrative decision is taken;
- the irregular retention of data by the tax authorities.
By judgment of 20 May 2021, the Criminal Court upheld the plea of nullity raised by the defendant on the second of these grounds. Consequently, it declared both the tax authorities’ complaint and the entirety of the criminal proceedings null and void, leaving the Public Prosecutor to pursue such other remedies as might be available.
On appeal by the Public Prosecutor and the tax authorities, acting as civil claimant, the Grenoble Court of Appeal sentenced the manager to six months’ imprisonment, suspended, and ruled on the claims brought by the tax authorities.
In dismissing the pleas of nullity, the Court of Appeal first held that a number of them were inadmissible and rejected the plea that had resulted in the proceedings being set aside at first instance, on the ground that “the only irregularities affecting administrative operations conducted prior to the initiation of criminal proceedings for tax fraud that are capable of resulting in the proceedings being set aside by the ordinary courts arise from a breach of Article L. 47 of the French Tax Procedure Code.”
Dismissing the manager’s appeal, the Criminal Chamber confirmed the limited scope of review exercised by the ordinary courts over administrative operations carried out by the tax authorities before criminal proceedings are initiated. It held that “failure to inform the taxpayer of his right to be assisted by counsel and the absence of an oral and adversarial discussion with the tax auditor are the only irregularities affecting administrative operations conducted prior to the initiation of criminal proceedings for tax fraud that are capable of resulting in the proceedings being set aside by the ordinary courts.
It follows that compliance with the requirements of Article L. 47 A of the French Tax Procedure Code and Article L. 121-1 of the Code governing Relations between the Public and the Administration does not fall within the limited scope of review exercised by the criminal courts.”
The Court of Cassation nevertheless reiterated certain rules governing the raising of pleas of nullity before the criminal courts, which are not the subject of this commentary.
Against the background of the principle of independence between administrative and criminal proceedings reaffirmed by the Criminal Chamber, this judgment provides an opportunity to examine the scope of the criminal courts’ powers to review administrative operations conducted by the tax authorities.
Preliminary observations on the principle of independence between administrative and criminal proceedings
Investigations conducted by the tax authorities in the course of tax audits or tax investigations may reveal facts capable of giving rise both to administrative proceedings and, in parallel, to criminal proceedings initiated in accordance with Article L. 228 of the French Tax Procedure Code.
The coexistence of these proceedings is primarily justified by their different purposes. In the former case, the administrative courts are responsible for ensuring compliance with the applicable rules so that tax liabilities are correctly assessed and effectively collected. In the latter, the criminal courts are tasked with determining whether the defendant has committed a criminal offence and, where appropriate, imposing a proportionate penalty.
It is nevertheless very common for the facts brought before the criminal courts to have been identified and reported by tax officials exercising their statutory audit and investigative powers. It is therefore not unreasonable to consider that the criminal courts, within the scope of their jurisdiction, might review whether the actions taken by those officials complied with the rules applicable to them, just as criminal courts are required to do when the evidence submitted for their consideration results from criminal police investigations.
The longstanding principle of independence and autonomy between administrative and criminal proceedings, however, precludes such an approach. Although frequently asked to rule on pleas of nullity based on breaches of the rules governing investigations carried out by tax officials, the Criminal Chamber has never permitted extensive review by the criminal courts. As a matter of principle, a taxpayer/litigant may not rely before a criminal court on irregularities committed by the tax authorities (for an early decision to this effect, see Crim., 6 June 1977, No. 76-92.108; see also Crim., 1 October 1984, No. 83-94.693).
The Criminal Chamber nevertheless opened a first exception to this principle in 1978 in the well-known Venutolo judgment. It recognised that a taxpayer could rely on a breach of Article 1649 septies of the French General Tax Code, subsequently transferred to Article L. 47 of the French Tax Procedure Code, which requires the tax authorities to inform the taxpayer, in the notice of audit, of the possibility of being assisted by counsel of his or her choice (Crim., 4 December 1978, No. 77-93.42; see also Crim., 1 October 1984, No. 83-94.693, cited above).
In 1992, the Court of Cassation also recognised that a taxpayer could rely on the absence of an oral and adversarial discussion during the audit, such a breach rendering both the administrative proceedings and the subsequent criminal proceedings null and void (Crim., 23 November 1992, No. 90-86.657, RSC 1993, p. 788, observations G. Giudicelli-Delage).
Since then, the Court of Cassation has regarded these two irregularities as the only ones capable of infringing the rights of the defence and, consequently, of falling within the criminal courts’ scope of review.
The following, for example, are not regarded as irregularities capable of justifying the setting aside of criminal proceedings: a breach of professional secrecy by tax officials (Crim., 25 January 2017, No. 16-90.028); failure to comply with the rules governing the authority of tax officials (Crim., 4 June 1998, No. 97-80.620, RTD com. 1999, p. 522, observations B. Bouloc); failure to include the tax collection notice in the criminal case file in the context of an automatic referral under Article L. 228 of the French Tax Procedure Code (Crim., 13 September 2023, No. 22-82.288, Dalloz actualité, 6 October 2023, observations N. Monnerie; AJ pénal 2023, p. 467 and observations; see also A. Rousseau and G. Pellegrin, “Droit pénal fiscal – Chronique de droit pénal fiscal”, RD fisc., 14 December 2023, No. 50); or failure to provide the Charter of Rights and Obligations of Audited Taxpayers, a safeguard also required by Article L. 47 of the French Tax Procedure Code (Crim., 19 January 2000, No. 98-87.886).
Finally, it should be noted that a de facto manager of a company may not rely on either the failure to inform the taxpayer of the right to be assisted by counsel or the absence of an oral and adversarial discussion (Crim., 6 October 2010, No. 09-87.879). On this latter point, the explanation may be chronological, since it appears necessary for the individual’s status as a de facto manager first to be established by the criminal court before that individual can actually be recognised as liable for the tax.
Reaffirming a restrictive approach to criminal-court review of the regularity of administrative operations conducted by the tax authorities before criminal proceedings are initiated
The judgment under review once again reaffirms these principles. Faced with pleas of nullity based on potential irregularities committed during administrative operations conducted by tax officials, the Criminal Chamber held that “failure to inform the taxpayer of his right to be assisted by counsel and the absence of an oral and adversarial discussion with the tax auditor are the only irregularities affecting administrative operations conducted prior to the initiation of criminal proceedings for tax fraud that are capable of resulting in the proceedings being set aside by the ordinary courts. It follows that compliance with the requirements of Article L. 47 A of the French Tax Procedure Code and Article L. 121-1 of the Code governing Relations between the Public and the Administration does not fall within the limited scope of review exercised by the criminal courts.”
In doing so, the Criminal Chamber adopted a more restrictive position than the Grenoble Court of Appeal, which had merely stated that “the only irregularities affecting administrative operations conducted prior to the initiation of criminal proceedings for tax fraud that are capable of resulting in the proceedings being set aside by the ordinary courts arise from a breach of Article L. 47 of the French Tax Procedure Code.” As worded, that formulation did not exclude the possibility of taking into account irregularities relating to the provision of the Charter of Rights and Obligations of Audited Taxpayers, which is also required under the same article.
The approach adopted by the Criminal Chamber therefore perpetuates well-established case law that leaves the administrative courts with full responsibility for judicial review of the regularity of operations conducted by the tax authorities before criminal proceedings are initiated.
This strict conception of the principle of independence between administrative and criminal proceedings nevertheless appears to us to raise serious difficulties to the detriment of defendants prosecuted for tax offences before the criminal courts.
First, from the perspective of the right to an effective remedy, the criminal court may rely on that principle to reject a defendant’s application for a stay of proceedings intended to enable him or her to challenge a tax investigation measure before the administrative courts. Such a situation would deprive the defendant of any effective remedy within the criminal proceedings for challenging the regularity of acts and evidence that may subsequently be relied upon against him or her. Nor could this situation be remedied by a subsequent review of the criminal conviction, since the administrative court’s decision is not regarded as a “new fact” capable of triggering Article 622 of the French Code of Criminal Procedure and thereby “preventing a final conviction handed down by the criminal court on the basis of Article 1741 of the French General Tax Code” (Crim., 4 June 1970, No. 69-93.414).
Second, the issue also arises from the perspective of preserving the proper role of the ordinary courts. Following a preliminary investigation conducted in such circumstances, the regularity of key evidence contained in the criminal case file may, at no stage of the criminal proceedings, have been examined by an ordinary court.
Given the potential violations of the rights of persons subject to tax audits during administrative operations conducted before any criminal proceedings are opened – rights which, in our view, should be regarded as the seeds of the rights of the defence that will subsequently crystallise during the ensuing criminal proceedings – the Criminal Chamber may have missed an opportunity to adopt a position offering greater protection for those rights.
In our view, this strict and distinctive conception of the principle of independence operates to the detriment of the rights of the defence and, consequently, of the proper administration of justice. This position may even raise questions concerning the very nature of criminal law, since it also distinguishes French law from many foreign jurisdictions in which criminal law is regarded as a branch of public law.
By Ghislain de Foucher and Chloé Méléard, Members of the Paris Bar