5Article 157 of the Codice penale (Criminal Code), as amended by Legge n. 251 (Law No 251) of 5 December 2005 (GURI No 285, 7 December 2005), (‘the Criminal Code’) provides:

7In accordance with the second paragraph of Article 161 of the Criminal Code:

8Under Article 2 of Decreto legislativo n. 74, nuova disciplina dei reati in materia di imposte sui redditi e sul valore aggiunto (Legislative Decree No 74 on new rules on offences relating to income tax and value added tax) of 10 March 2000 (GURI No 76, 31 March 2000, ‘Decree No 74/2000’), the submission of a fraudulent VAT declaration mentioning invoices or other documents relating to non-existent transactions is punishable by a term of imprisonment from one year and six months to six years.

9The Court held in the Taricco judgment that the last paragraph of Article 160 in conjunction with Article 161 of the Criminal Code (‘the provisions of the Criminal Code at issue’), in so far as they provide that the interruption of criminal proceedings concerning serious fraud in relation to VAT has the effect of extending the limitation period by only a quarter of its initial duration, are liable to have an adverse effect on the fulfilment of the Member States’ obligations under Article 325(1) and (2) TFEU if those national rules prevent the imposition of effective and dissuasive penalties in a significant number of cases of serious fraud affecting the financial interests of the European Union, or provide for longer limitation periods in respect of cases of fraud affecting the financial interests of the Member State concerned than in respect of those affecting the financial interests of the European Union. The Court further held that the national court must give full effect to Article 325(1) and (2) TFEU, if need be by disapplying the provisions of national law the effect of which would be to prevent the Member State concerned from fulfilling its obligations under those provisions of the FEU Treaty.

13The Corte costituzionale (Constitutional Court) expresses doubts as to whether that approach is compatible with the overriding principles of the Italian constitutional order and with observance of the inalienable rights of the individual. In particular, according to that court, that approach is liable to interfere with the principle that offences and penalties must be defined by law, which requires that rules of criminal law are precisely determined and cannot be retroactive.

14The Corte costituzionale (Constitutional Court) explains that in the Italian legal system the rules on limitation in criminal matters are substantive in character, and consequently fall within the scope of the principle of legality referred to in Article 25 of the Italian Constitution. Those rules must therefore be established by provisions that are precise and are in force at the time when the offence in question was committed.

22The preliminary ruling procedure provided for in Article 267 TFEU sets up a dialogue between one court and another, specifically between the Court of Justice and the courts and tribunals of the Member States, with the object of securing uniform interpretation of EU law and ensuring its consistency, its full effect and its autonomy (see, to that effect, Opinion 2/13 (Accession of the EU to the ECHR), of 18 December 2014, EU:C:2014:2454 , paragraph 176 ).

23The procedure provided for by Article 267 TFEU thus functions as an instrument of cooperation between the Court of Justice and national courts and tribunals, by means of which the former provides the latter with the points of interpretation of EU law which they need in order to decide the disputes before them (see, to that effect, judgment of 5 July 2016, Ognyanov, C‑614/14 , EU:C:2016:514 , paragraph 16 ).

24It should be noted here that the Court, when answering questions referred for a preliminary ruling, must take account, under the division of jurisdiction between the EU judicature and the national courts and tribunals, of the factual and legislative context of the questions as described in the order for reference (judgment of 26 October 2017, Argenta Spaarbank, C‑39/16 , EU:C:2017:813 , paragraph 38 ).

28It is therefore for the Court, in the light of the questions raised by the referring court with regard to that principle, which were not drawn to its attention in the case in which the Taricco judgment was given, to clarify the interpretation of Article 325(1) and (2) TFEU in that judgment.

30It must be recalled that Article 325(1) and (2) TFEU requires the Member States to counter illegal activities affecting the financial interests of the Union through effective and deterrent measures, and to take the same measures to counter fraud affecting the financial interests of the Union as they take to combat fraud affecting their own financial interests.

31Since the European Union’s own resources, by virtue of Council Decision 2014/335/EU, Euratom of 26 May 2014 on the system of own resources of the European Union ( OJ 2014 L 168, p. 105 ), include revenue from the application of a uniform rate to the harmonised VAT assessment bases determined in accordance with EU rules, there is a direct link between the collection of VAT revenue in compliance with the EU law applicable and the availability to the EU budget of the corresponding VAT resources, since any lacuna in the collection of the first potentially causes a reduction in the second (see, to that effect, judgment of 26 February 2013, Åkerberg Fransson, C‑617/10 , EU:C:2013:105 , paragraph 26 , and the Taricco judgment, paragraph 38).

32It is for the Member States to ensure effective collection of the Union’s own resources (see, to that effect, judgment of 7 April 2016, Degano Trasporti, C‑546/14 , EU:C:2016:206 , paragraph 21 ). On that basis, they are obliged to collect sums corresponding to the own resources which, because of fraud, have been withheld from the EU budget.

33To ensure that all VAT revenue is collected, and thereby that the financial interests of the EU are protected, the Member States are free to choose the applicable penalties, which may take the form of administrative penalties, criminal penalties or a combination of the two (see, to that effect, judgment of 26 February 2013, Åkerberg Fransson, C‑617/10 , EU:C:2013:105 , paragraph 34 , and the Taricco judgment, paragraph 39).

34It should be observed, however, first, that criminal penalties may be essential to combat certain cases of serious VAT fraud in an effective and deterrent manner (see, to that effect, the Taricco judgment, paragraph 39).

35Thus the Member States, if they are not to disregard their obligations under Article 325(1) and (2) TFEU, must ensure that, in cases of serious fraud affecting the EU’s financial interests in relation to VAT, criminal penalties that are effective and deterrent are adopted (see, to that effect, the Taricco judgment, paragraphs 42 and 43).

36Consequently, it must be considered that Member States are in breach of their obligations under Article 325(1) and (2) TFEU if the criminal penalties adopted to punish serious VAT fraud do not enable the collection in full of VAT to be guaranteed effectively. The Member States must also ensure that the limitation rules laid down by national law allow effective punishment of infringements linked to such fraud.

38As regards the consequences of the possible incompatibility of national legislation with Article 325(1) and (2) TFEU, it follows from the Court’s case-law that that article imposes on the Member States precise obligations as to the result to be achieved, which are not subject to any condition regarding the application of the rules which they lay down (see, to that effect, the Taricco judgment, paragraph 51).

39It is therefore for the competent national courts to give full effect to the obligations under Article 325(1) and (2) TFEU and to disapply national provisions, including rules on limitation, which, in connection with proceedings concerning serious VAT infringements, prevent the application of effective and deterrent penalties to counter fraud affecting the financial interests of the Union (see, to that effect, the Taricco judgment, paragraphs 49 and 58).

41It is primarily for the national legislature to lay down rules on limitation that enable compliance with the obligations under Article 325 TFEU, in the light of the considerations set out by the Court in paragraph 58 of the Taricco judgment. It is that legislature’s task to ensure that the national rules on limitation in criminal matters do not lead to impunity in a significant number of cases of serious VAT fraud, or are more severe for accused persons in cases of fraud affecting the financial interests of the Member State concerned than in those affecting the financial interests of the European Union.

43That being so, it should be added that the protection of the financial interests of the Union by the enactment of criminal penalties falls within the shared competence of the Union and the Member States within the meaning of Article 4(2) TFEU.

44In the present case, at the material time for the main proceedings, the limitation rules applicable to criminal proceedings relating to VAT had not been harmonised by the EU legislature, and harmonisation has since taken place only to a partial extent by the adoption of Directive (EU) 2017/1371 of the European Parliament and of the Council of 5 July 2017 on the fight against fraud to the Union's financial interests by means of criminal law ( OJ 2017 L 198, p. 29 ).

45The Italian Republic was thus, at that time, free to provide that in its legal system those rules, like the rules on the definition of offences and the determination of penalties, form part of substantive criminal law, and are thereby, like those rules, subject to the principle that offences and penalties must be defined by law.

46The competent national courts, for their part, when they have to decide in proceedings before them to disapply the provision of the Criminal Code at issue, are required to ensure that the fundamental rights of persons accused of committing criminal offences are observed (see, to that effect, judgment in Taricco , paragraph 53).

47In that respect, the national authorities and courts remain free to apply national standards of protection of fundamental rights, provided that the level of protection provided for by the Charter, as interpreted by the Court, and the primacy, unity and effectiveness of EU law are not thereby compromised (judgment of 26 February 2013, Åkerberg Fransson, C‑617/10 , EU:C:2013:105 , paragraph 29 and the case-law cited).

48In particular, where the imposition of criminal penalties is concerned, the competent national courts must ensure that the rights of defendants flowing from the principle that offences and penalties must be defined by law are guaranteed.

49According to the referring court, those rights would not be observed if the provisions of the Criminal Code at issue were disapplied in the proceedings pending before it, in so far as, first, the persons concerned could not reasonably foresee before the delivery of the Taricco judgment that that Article 325 TFEU requires the national court to disapply those provisions in the circumstances set out in that judgment.

50Second, according to the referring court, the national court would not be able to define the particular circumstances in which it would have to disapply those provisions, namely where they prevent the imposition of effective and deterrent penalties in a significant number of cases of serious fraud, without exceeding the limits imposed on its discretion by the principle that offences and penalties must be defined by law.

51In this respect, the importance given, both in the EU legal order and in national legal systems, to the principle that offences and penalties must be defined by law, as to its requirements concerning the foreseeability, precision and non-retroactivity of the criminal law applicable, must be recalled.

52That principle, as enshrined in Article 49 of the Charter, must be observed by the Member States when they implement EU law, in accordance with Article 51(1) of the Charter, which is the case where, in the context of their obligations under Article 325 TFEU, they provide for the application of criminal penalties for infringements relating to VAT. The obligation to ensure the effective collection of the Union’s resources cannot therefore run counter to that principle (see, by analogy, judgment of 29 March 2012, Belvedere Costruzioni, C‑500/10 , EU:C:2012:186 , paragraph 23 ).

53Moreover, the principle that offences and penalties must be defined by law forms part of the constitutional traditions common to the Member States (see, with reference to the principle of non-retroactivity of the criminal law, judgments of 13 November 1990, Fedesa and Others, C‑331/88 , EU:C:1990:391 , paragraph 42 , and of 7 January 2004, X, C‑60/02 , EU:C:2004:10 , paragraph 63 ) and has been enshrined in various international treaties, in particular in Article 7(1) of the ECHR (see, to that effect, judgment of 3 May 2007, Advocaten voor de Wereld, C‑303/05 , EU:C:2007:261 , paragraph 49 ).

54It may be seen from the Explanations relating to the Charter of Fundamental Rights ( OJ 2007 C 303, p. 17 ) that, in accordance with Article 52(3) of the Charter, the right guaranteed in Article 49 has the same meaning and scope as the right guaranteed by the ECHR.

55As to the requirements that follow from the principle that offences and penalties must be defined by law, it must be observed, in the first place, that the European Court of Human Rights has held in relation to Article 7(1) of the ECHR that, under that principle, provisions of criminal law must comply with certain requirements of accessibility and foreseeability, as regards both the definition of the offence and the determination of the penalty (see ECtHR, 15 November 1996, Cantoni v. France , CE:ECHR:1996:1115JUD001786291, § 29; ECtHR, 7 February 2002, E.K. v. Turkey , CE:ECHR:2002:0207JUD002849695, § 51; ECtHR, 29 March 2006, Achour v. France , CE:ECHR:2006:0329JUD006733501, § 41; and ECtHR, 20 September 2011, OAO Neftyanaya Kompaniya Yukos v. Russia , CE:ECHR:2011:0920JUD001490204, §§ 567 to 570).

56In the second place, the requirement that the applicable law must be precise, which is inherent in that principle, means that the law must clearly define offences and the penalties which they attract. That condition is met where the individual is in a position, on the basis of the wording of the relevant provision and if necessary with the help of the interpretation made by the courts, to know which acts or omissions will make him criminally liable (see, to that effect, judgment of 28 March 2017, Rosneft, C‑72/15 , EU:C:2017:236 , paragraph 162 ).

57In the third place, the principle of non-retroactivity of the criminal law means in particular that a court cannot, in the course of criminal proceedings, impose a criminal penalty for conduct which is not prohibited by a national rule adopted before the commission of the alleged offence or aggravate the rules on criminal liability of those against whom such proceedings are brought (see, by analogy, judgment of 8 November 2016, Ognyanov, C‑554/14 , EU:C:2016:835 , paragraphs 62 to 64 and the case-law cited).

58As noted in paragraph 45 above, the requirements of foreseeability, precision and non-retroactivity inherent in the principle that offences and penalties must be defined by law apply also, in the Italian legal system, to the limitation rules for criminal offences relating to VAT.

59It follows, first, that it is for the national court to ascertain whether the finding, required by paragraph 58 of the Taricco judgment, that the provisions of the Criminal Code at issue prevent the imposition of effective and deterrent criminal penalties in a significant number of cases of serious fraud affecting the financial interests of the Union leads to a situation of uncertainty in the Italian legal system as regards the determination of the applicable limitation rules, which would be in breach of the principle that the applicable law must be precise. If that is indeed the case, the national court is not obliged to disapply the provisions of the Criminal Code at issue.

60Second, the requirements mentioned in paragraph 58 above preclude the national court, in proceedings concerning persons accused of committing VAT infringements before the delivery of the Taricco judgment, from disapplying the provisions of the Criminal Code at issue. The Court has already pointed out in paragraph 53 of that judgment that, if those provisions were disapplied, penalties might be imposed on those persons which, in all likelihood, would not have been imposed if those provisions had been applied. Those persons could thus be made subject, retroactively, to conditions of criminal liability that were stricter than those in force at the time the infringement was committed.

61If the national court were thus to come to the view that the obligation to disapply the provisions of the Criminal Code at issue conflicts with the principle that offences and penalties must be defined by law, it would not be obliged to comply with that obligation, even if compliance with the obligation allowed a national situation incompatible with EU law to be remedied (see, by analogy, judgment of 10 July 2014, Impresa Pizzarotti, C‑213/13 , EU:C:2014:2067 , paragraphs 58 and 59 ). It will then be for the national legislature to take the necessary measures, as stated in paragraphs 41 and 42 above.

62Having regard to the above considerations, the answer to Questions 1 and 2 is that Article 325(1) and (2) TFEU must be interpreted as requiring the national court, in criminal proceedings for infringements relating to VAT, to disapply national provisions on limitation, forming part of national substantive law, which prevent the application of effective and deterrent criminal penalties in a significant number of cases of serious fraud affecting the financial interests of the Union, or which lay down shorter limitation periods for cases of serious fraud affecting those interests than for those affecting the financial interests of the Member State concerned, unless that disapplication entails a breach of the principle that offences and penalties must be defined by law because of the lack of precision of the applicable law or because of the retroactive application of legislation imposing conditions of criminal liability stricter than those in force at the time the infringement was committed.