The Criminal Foreign Exchange Regime and the most favorable law principle

On April 11, 2006 the Argentine Supreme Court (the “Supreme Court”) rendered a decision with respect to the application of the most favorable law principle to open ended criminal laws (leyes penales en blanco)[1]. In the “Cristalux” case, the Supreme Court changed its previous standings, stating that with respect to open ended criminal laws, and particularly the criminal foreign exchange regime, the most favorable law principle (a principle that has constitutional rank) should be applied retroactively.  This notwithstanding, a vote of the majority of the Judges of the Supreme Court limited the application of such principle, stating that the application of the aforementioned principle has to be subject to a reasonability test.

In this particular case, the Court of Appeals had found against the defendant and its directors because of their infringement of Article 1, Sections e) and f) of Law No 19,359 (“Criminal Foreign Exchange Law”). The defendant at the time did not fulfill its obligations to sell in the Argentine foreign exchange market the proceeds of exports denominated in foreign currency received in connection with an export made on March 28, 1991 (Decree No 2581/64 and implementing regulations). The Court of Appeals found the former president, vice-president, and treasurer to be jointly and severally liable, and imposed, among other penalties, (i) a fine equal to once the amount of the transaction (US$ 42,088.39), (ii) a prohibition to trade in the exchange market for a period of two years, and (iii) a prohibition to participate in import transactions.

The Court of Appeals reversed the decision taken by the judges in the first instance, which had acquitted the defendant applying the principle of retroactivity of the most favorable criminal law. The judge based its decision on the “Argenflora” precedent (1997), whose reasoning was also upheld in “Ayerza” in 1998 (although with the dissident vote of some of its members) and indicated that the most favorable criminal law principle did not apply to the case since a new piece of legislation providing for a lesser penalty or sanction had not been passed. The Court also indicated that, even though Decree No 530/91 abrogated the obligation of entering into the foreign exchange market and selling the proceeds of exports denominated in foreign currency, the actual criminal conduct survived beyond the factual circumstances of the case.

It is important to note that, in the case of the Criminal Foreign Exchange Law, in contrast to Criminal Law, where the most favorable law is always applicable, it is expressly stated that the most favorable law is not applicable to those infringements that are penalized with fines.

In the “Cristalux” ruling, the Supreme Court reversed the previous doctrine upheld by the tribunal in the “Argenflora” and “Ayerza” cases, by adopting the position of the minority dissidence of the latter case.

First, the Supreme Court recognized the constitutional rank of the most favorable criminal law principle, and its application to open ended criminal laws, in general, and particularly to the Criminal Exchange Regime. Notwithstanding, even while upholding the application of that principle, the Supreme Court differed with respect to its scope. 

The majority vote (supported by Justices Petracchi, Highton de Nolasco, Maqueda, Zaffaroni and Lorenzetti) based its decision on the position adopted by Judge Petracchi in the “Ayerza“ case. They understood that the most favorable criminal law principle should only be applied in a reasonable fashion analyzing if the main objective of the legal standard; namely the protection of the regulation that was infringed, should remain unchanged. That is why they considered it would not be appropriate to apply the principle when the new legislation is not intended to allow more freedom to act but to vary the existing way of doing something. In both the “Ayerza” and “Cristalux” cases, the change in the legal status quo generated more freedom, since Decree No 530/91 abrogated the restrictions imposed by Decree No 2581/81. Therefore, this increase in the freedom of action rendered applicable the most favorable criminal law principle to this case.

On the other hand, the minority vote (supported by Justices Fayt and Argibay), followed the dissident votes of Justices Boggiano, Fayt and Bossert in the “Ayerza” case, construing the principle in a broader way. This dissidence expressed in general terms and without limitation that it is not possible to consider an open ended criminal law to be completed without its complementary regulation, since such regulation is an essential part of the law without which it shall become inapplicable. Therefore, the defendant should benefit from any change of the general legislation that turns the open ended criminal law into a more favorable law. 

[1] Under Argentine law these “leyes penales en blanco” or open ended criminal laws are criminal law regulations that need to be supplemented by reference to other pieces of legislation to which the relevant criminal provision refers to and that determine the actual scope of the illegal conduct. An example of an open ended criminal law is found in the criminal foreign exchange regime under which the general conduct is sanctioned (e.g., any act or omission that infringes the foreign exchange regulations) the actual provision needs to be completed with other decrees and regulations issued by the Central Bank of Argentina.