{"id":1678,"date":"2005-07-01T08:59:37","date_gmt":"2005-07-01T12:59:37","guid":{"rendered":"http:\/\/www.journals.law.harvard.edu\/ilj\/site\/?p=1678"},"modified":"2011-03-20T11:10:45","modified_gmt":"2011-03-20T15:10:45","slug":"issue_46-2_gelter_siems","status":"publish","type":"post","link":"https:\/\/journals.law.harvard.edu\/ilj\/2005\/07\/issue_46-2_gelter_siems\/","title":{"rendered":"Judicial Federalism in the ECJ’s “Berlusconi” Case"},"content":{"rendered":"

Abstract:<\/span><\/p>\n

In recent years, the general public in many countries has become increasingly aware of issues concerning business accounting and financial reporting. Americans hardly need to be reminded of the Enron debacle, where members of the company\u2019s senior management engaged in fraudulent off-balance sheet transactions to disguise the true state of the company\u2019s financial condition, a scheme that auditors failed to uncover until the company\u2019s implosion. This and other major corporate governance cases involving questionable or fraudulent accounting practices led to the Sarbanes-Oxley Act of 2002. This law was an unprecedented Congressional intervention into corporate governance, an arena that had previously been left largely to Securities and Exchange Commission (\u201cSEC\u201d) rules and professional self-regulation (e.g., auditor independence requirements), or to state corporate law (e.g., requirements for board committees and their composition).<\/em><\/p>\n

Accounting scandals are not, however, a phenomenon limited to the United States. As a result of similar events in some European states, accounting reform has recently appeared on their policy agendas as well. Italy is notable in this regard, due in large part to its home-grown Parmalat scandal\u2014until now Europe\u2019s most expensive financial scandal. At the end of 2003, a \u20ac 14.8 billion gap that had been disguised by the establishment of an offshore subsidiary was discovered in the firm\u2019s accounts.\u00a0 Surprisingly\u2014at least at first glance\u2014at a time when other countries were strengthening their stance toward accounting fraud, Italy eased the grip of its criminal law on accounting fraud in a 2002 legislative decree amending the Italian Civil Code.\u00a0 The Italian courts have submitted this amendment to the scrutiny of the European Court of Justice (\u201cECJ\u201d) for a preliminary ruling.<\/em><\/p>\n

The objective of this note is to analyze the importance of three joint cases\u2014one of them against the Italian Prime Minister Silvio Berlusconi\u2014where the amendment of Italian law is now at issue, and to situate them within the bigger picture of the current state of corporate governance and financial reporting. Part I explains the legal context of these cases and outlines the opinion submitted by the Advocate General Juliane Kokott. Part II analyzes the three most important parts of the Advocate General\u2019s opinion in detail: the application of E.U. law on the nondisclosure of accounts to the publication of false accounts, the need for effective enforcement, and the effect of the principle nulla poena sine lege\u2014that there must be neither crime nor punishment without law. The Advocate General recommends that Italy\u2019s judges should ignore the new Italian law, which takes a lax view of accounting fraud. On the one hand, this is surprising, as E.U. directives on corporate law and accounting do not address the issue at all. On the other hand, this strict approach to financial reporting is in line with increasing efforts toward stronger involvement of the E.U. \u201cfederal\u201d level in corporate governance in general, in consideration of recent U.S. corporate governance developments as well as the economic underpinnings of accurate accounting. Part III then addresses the issue of how the Berlusconi case may contribute to an increased effectiveness of E.U. efforts to strengthen and harmonize corporate law.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

In recent years, the general public in many countries has become increasingly aware of issues concerning business accounting and financial reporting. The objective of this note is to analyze the importance of three joint cases and to situate them within the bigger picture of the current state of corporate governance and financial reporting.<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"_FSMCFIC_featured_image_caption":"","_FSMCFIC_featured_image_nocaption":"","_FSMCFIC_featured_image_hide":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_post_was_ever_published":false},"categories":[123],"tags":[40,37],"class_list":["post-1678","post","type-post","status-publish","format-standard","hentry","category-print-archives","tag-adr","tag-americas"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/peZu3S-r4","jetpack_likes_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/journals.law.harvard.edu\/ilj\/wp-json\/wp\/v2\/posts\/1678","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/journals.law.harvard.edu\/ilj\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/journals.law.harvard.edu\/ilj\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/journals.law.harvard.edu\/ilj\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/journals.law.harvard.edu\/ilj\/wp-json\/wp\/v2\/comments?post=1678"}],"version-history":[{"count":0,"href":"https:\/\/journals.law.harvard.edu\/ilj\/wp-json\/wp\/v2\/posts\/1678\/revisions"}],"wp:attachment":[{"href":"https:\/\/journals.law.harvard.edu\/ilj\/wp-json\/wp\/v2\/media?parent=1678"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/journals.law.harvard.edu\/ilj\/wp-json\/wp\/v2\/categories?post=1678"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/journals.law.harvard.edu\/ilj\/wp-json\/wp\/v2\/tags?post=1678"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}