On 7 October 2016, Legislative Decree 174 of 26 August 2016 entered into force laying down the “Code of Accounting Justice, adopted pursuant to Art. 20 of Law 124 of 7 August 2015“. This piece of legislation has re-organised and redefined the rules of procedure concerning all types of proceedings that take place before the Court of Auditors, from the most well-known proceedings relating to liability for damage to the public purse, to proceedings on pensions, and introduced new rules mainly with regard to proceedings relating to liability for damage to the public purse.
The structure of the Code
The Code is structured into 8 Parts, in particular:
Part I is dedicated to general provisions, i.e. defining the principles, the accounting jurisdiction bodies and the public prosecutor’s office, as well as jurisdiction, competence, the withdrawal and challenge of the judge, the parties and legal counsels, the statements of case and the orders that may be issued in these proceedings.
Part II contains the provisions governing the proceedings relating to liability for damage to the public purse. These proceedings are characterised by a first “pre-trial” investigation stage, performed by the public prosecutor upon receipt of a notification of damage to the public purse, and a second trial phase, which begins with the summons of the party alleged to be liable. In general, liability for damage to the public purse occurs upon fraudulent or grossly negligent conducts made in the context of a service relationship with the public administration.
Part III establishes the specific rules governing the proceedings on accounts. The purpose of such proceedings is to check the regularity of the judicial account required of treasury managers and accounting officers.
Part IV governs pension proceedings that concern both the existence of the right to a pension, and its extent.
Part V is dedicated to other proceedings (i.e. a) appeals against definitive measures of the financial administration or tax authority, in respect of the repayment of irrecoverable tax and irrecoverable amounts of other tax revenues; b) appeals against withholdings, as an interim measure, on salaries and other compensation to officials and state agents; c) other proceedings provided for by law on public accounting matters, also concerning persons or entities other than the State).
Part VI regulates appeal proceedings.
Proceedings relating to the liability of public officials
Until the entry into force of the Code, regulations governing proceedings relating to accounting liability were characterised by their fragmentation and by referring to a plurality of dated legislative sources. In particular, Royal Decree No. 1038 of 1933, Royal Decree No. 1214 of 1934 and in Law No. 19 of 1994 contained rather sketchy provisions, while a final regulation referred to the rules on civil procedure.
The Code, in addition to finally providing a complete and accurate set of rules specifically governing the proceedings at issue contains – inter alia – the significant new elements highlighted below.
I. The preliminary investigation activities of the Public Prosecutor can only start on the basis of a specific and concrete notification of an event of damage. This is defined as “substantiated information not referable to hypothetical and undifferentiated facts”
II. A precise indication of the contents of the claim that may entitle the Public Prosecutor to commence an investigation is now provided.
III. The powers of the Public Prosecutor are precisely regulated. He/she shall under a duty not only to prove the elements of liability, but also those that exclude it.
IV. The confidentiality of the preliminary inquiries shall be kept until the service of the notice of investigation to the defendant.
V. A specific provision is dedicated to hearings of the persons informed of the facts, which includes: (i) the invalidity of the hearing which takes place without the assistance of the defence counsel; (ii) a fine that may be imposed by the Public Prosecutor on those who, without a justified reason, do not appear at the hearing.
VI. Any Public Prosecutor’s investigation order must be duly motivated, and failing that, specific grounds for nullity are introduced.
VII. The defensive safeguards are increased right from the preliminary investigation phase. In particular, the so-called notice of investigation, i.e. the act by which the defendant is made aware of the fact that an inquiry for damage to the public purse has commenced, is enriched with additional information so as to allow the defendant to better understand the scope of the claim made against him/her and properly arrange the defence.
VIII. From the date of service of the notice of investigation, the defendant has at least 45 days (30 days in the previous regulations) to lodge their rebuttal arguments, any documents and ask to be heard personally by the Public Prosecutor.
IX. The personal hearing of the defendant becomes mandatory if the defendant requires it.
X. Upon the receipt of the notice of investigation, the public official has entitled to access the investigation file filed by the Public Prosecutor, as well as any documents held by public administrations which it considers relevant for the defence. In such case, the ordinary terms of access to documents shall be reduced by half and furthermore, in the case of refusal by the interested public entities, it is possible to ask the Public Prosecutor to activate its investigational powers.
XI. There is a special case of the nullity of the writ of summons if the facts and legal elements supporting the case in the summons and the essential elements of the fact that appear in the notice of investigation do not correspond, taking account of any further elements acquired as a result of the rebuttal arguments.
XII. Third parties cannot be called to the action by order of the judge (this provision was however already implemented under almost unanimous case law).
XIII. The intervention in the proceedings of the third party is only permitted in the form of a side intervention in support of the Public Prosecutor’s reasons.
XIV. Three new special procedures are now regulated:
- The fast track procedure, which however is not applicable in case of claim for fraud
- The summary judgment, which is applicable only not material events of damage and /or in case the claim does not exceed €10,000
- The procedure applicable in relation to pecuniary fines.
In conclusion, it is reasonable to say that by the new Code the defence safeguards in accounting proceedings have been strengthened and the principle of a fair trial now permeates all the various procedural institutes. An objective that has been achieved without losing sight of the public interest in the restoration of damage to the public purse.
Entry into force
Based on the Enclosure 3 to the Code:
I. Procedural terms of proceedings that have been instituted before 7 October 2016 remained governed by the previous rules.
II. The new rules governing the investigation’s powers of the Public Prosecutor (under Part II, Chapter I, Sections I, II and III of the code) apply also to the investigations commenced before 7 October 2016, without prejudice of the orders/actions issued/made before the same date.
III. All the other rules (set forth in Part II of the Code) apply also to the proceedings instituted before 7 October 2016.