Increased risks of extradition for managers of companies involved in cartels: The Pisciotti Judgement

Introduction

In the United States and a growing number of other countries, such as Great Britain, Denmark and Brazil, participation in a cartel constitutes a criminal offense pun¬ishable by imprisonment for the managers of the companies involved, in contrast to the situation in Portugal and in most of the Member States of the European Union, where cartels are typically administrative offences (although in Portugal managers may also be found individually liable and are subject to fines of up to 10% of their annual remuneration).

European (and Portuguese) managers are not exempt from risk, however: involvement in a cartel that also produces effects in a country where it is a crime, such as the United States, may entail the risk of extradition to that country (even if the unlawful conduct, such as meetings or other contacts, occurred outside that country, since in competition law jurisdiction is generally established through the “effects theory”).

Further to the recent Pisciotti judgment of the Court of Justice (1), the risk of extradition has increased for European citizens traveling in other Member States of the European Union with extradition agreements in force with third countries, in particular with the United States.

The Pisciotti case

The US authorities began criminal proceedings in 2007 against Romano Pisciotti, an Italian national, for his participation in the marine hoses international cartel. An arrest warrant as issued in 2010 by a US court against Mr Pisciotti, who became wanted by the Interpol. In 2013, when travelling from Nigeria to Italy, he was detained by German federal police agents when his flight stopped in Frankfurt. On the basis of the EU-USA agreement on extradition, Pisciotti was extradited to the United States in 2014 (having been the first European citizen to be extradited to the US for breaches of competition law), where he later pleaded guilty and was sentenced to a term of imprisonment of two years and a fine.

After his release in 2015, Pisciotti brought an action for damages in the German courts against Germany on the grounds that it had breached EU law, and in particular the general principle of non-discrimination, by refusing to allow Pisciotti to benefit from the prohibition of extradition provided for in the German constitution for all German nationals. In the context of these proceedings, and facing doubts as to the interpretation of Union law, the Landgericht Berlin referred a request for a preliminary ruling to the Court of Justice.

The judgment of the Court of Justice

In its judgment of 10 April, the Court stated (contrary to the German Government’s argument) that Mr Pisciotti’s situation falls within the scope of European Union law, since he is a citizen European Union who, by stopping in Germany on its return journey from Nigeria, exercised his freedom of movement within the Union, established in Article 21 Treaty on the Functioning of the European Union (TFEU) and, in addition, the request for extradition was made under the Agreement between the EU and the United States on extradition. The fact that he was arrested when he was only in transit in Germany was not found relevant.

Secondly, with regard to the interpretation of the principle of non-discrimination laid down in Article 18 TFEU, the Court of Justice pointed out that the EU-USA extradition agreement allows, in principle, a Member State to reserve, on the basis of provisions of a bilateral agreement (such as the said extradition agreement) or in rules of their constitutional law, special treatment of their nationals, preventing their extradition.

The Court acknowledged that in this case Pisciotti had been placed in a situation of unequal treatment vis-a-vis a German national (who would not have been extradited under the provisions of the German constitution), which had resulted in a restriction on his freedom of movement.

However, according to settled case-law, restrictions on the fundamental freedoms guaranteed by the Treaty can be justified on grounds of legitimate interest, provided that they are proportionate to the objective pursued. According to the Court of Justice, the objective of avoiding the risk of impunity for persons who have committed an offense, which is part of the prevention and combating of crimes, has a legitimate character which can, in principle, justify such a restriction. In addition, the principle of proportionality is respected if the State assessing the request for extradition (in this case Germany) has previously given the competent authorities of the Member State of which the citizen is a national (in this case Italy) the possibility to request their surrender in the context of a European arrest warrant, and the latter Member State has not taken any action to that effect.

In the present case, the Italian consular authorities were informed of Pisciotti’s situation before the extradition request was granted, but the Italian judicial authorities did not issue a European arrest warrant against him (probably because in Italy competition law infractions are typically punishable through administrative penalties, as is the case in Portugal). The Court therefore concluded that Article 18 TFEU should be interpreted as not objecting to the extradition of Mr Pisciotti to the United States.

Comment

The Pisciotti judgment applies only to the action for damages brought against Mr Pisciotti by Germany pending before the German courts.

However, the view taken by the Court (which decided in the Grand Chamber, reserved for the most complex and relevant cases) is of great importance, since it not only makes clear that Union law applies to a request for extradition to a third country where the citizen concerned exercises his freedom of movement, but also that the authorities of the Member States should exchange information with each other within the framework of the European arrest warrant, which takes precedence over the request of a third State.

In practice, the judgment reinforces the investigative powers of the United States authorities for breaches of US competition law committed by European citizens, who are subject to the risk of extradition on their travels through other Member States, provided that under the national law of those States the conduct in question is regarded as a criminal offense.

What if it were in Portugal?
Filipa Marques Júnior, Nuno Igreja Matos

As for the consequences of the Pisciotti judgment on the Portuguese legal framework, it should be noted that the Portuguese legislation and its solutions do not significantly differ from the German framework. In fact, we can also find in the Portuguese Constitution a provision concerning a fundamental right of the national citizens to not be subject to extradition (article 33(1)); besides, Portugal is also a part of a bilateral extradition convention with the United States, which complements the EU-USA extradition agreement; and, as a EU Member State, the European arrest warrant legislation is also applicable under Portuguese law.

In this context, the Court of Justice’s decision also produces effects when applying Portuguese law, with two major consequences.

First, Portugal has a duty, when presented with an extradition request by a third State regarding a citizen from another European Member State, to inform the said Member State, in order to allow for the hypothetical presentation of an European arrest warrant. Only by complying with this duty — according to the Pisciotti decision — will the Portuguese State be recognizing and enforcing the right to freedom of movement within the European Union, allowing for the requested citizen to also have the possibility to benefit, in his State, from an eventual extradition prohibition regarding national citizens.

Second, and following the Pisciotti decision, once that information is provided to the requested citizen’s State, and if the authority of that State decides not to present an extradition request, then the requested State (Portugal) may accept the third State’s extradition request without infringing the principle of non-discrimination of Article 18 TFEU.

Still concerning Portuguese law, it is important to point out that the extradition of a citizen to a third State (a non-EU State) will always depend on the existence of a provision that punishes the facts with imprisonment in both the requesting and requested States. Therefore, since the participation in a cartel is only considered, under Portuguese law, an administrative offence punishable with a fine, an extradition request based exclusively on such behaviour would not be accepted by the Portuguese authorities.

In light of the above, in its Pisciotti decision the Court of Justice takes a stand that, whilst safeguarding the right to freedom of movement as one of the main principles of EU Law – namely when such right is exercised by a EU citizen in a different Member State –, also values the unwanted risk of creating an area of criminal impunity and the need to promote cooperation with third States by allowing Member States to extradite a EU citizen from a different Member State when this nationality State does not present a request for the delivery of its citizen.

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(1) Judgment of 10 April 2018, Romano Pisciotti c. Bundesrepublik Deutschland, C-191/16, EU:C:2018:222.