Summary of Petitioners’ Statements
1. In 2012, the representative and employees of Petitioner One were convicted of fraud and related offenses by the Taipei District Court Criminal Judgments 103-Jin-Chung-Su-21 (2014) and 103-Chih-Yi-98 (2014), but confiscation was not ordered. Upon appeal, the Intellectual Property Court rendered Criminal Judgment 105-Hsing-Chih-Shang-Yi-38 (2016), convicting the representative and employees of fraud and related offenses for the sale of blended oil. The court applied Article 2, Paragraph 2 of the Criminal Code, as amended and promulgated on December 30, 2015, and effective as of July 1, 2016 (hereinafter “the disputed provision”), which provides: “Confiscation... shall be governed by the law in force at the time of adjudication.” Pursuant to Article 38-1, Paragraph 2, Subparagraph 3 of the same Code, the court declared the confiscation of the criminal proceeds obtained by Petitioner One. As the case was not appealable to the court of third instance, the Intellectual Property Court’s criminal judgment constitutes the final judgment (hereinafter “Final Judgment One”). Petitioner One contended, in essence, that the application of the disputed provision in Final Judgment One resulted in the retroactive application of the amended law to acts that had occurred and concluded prior to the amendment, thereby subjecting it to a confiscation order. Petitioner One argued that the disputed provision clearly violated the principle of legality, the prohibition of retroactivity, and the principle of protection of legitimate expectations, and infringed upon its property rights as protected by the Constitution.
2. Petitioner Two, in a case involving a violation of the Passport Statute, was found not guilty by the Nantou District Court Criminal Judgment 106-Su-254 (2017). Upon appeal by the prosecutor, the Taichung Branch of the Taiwan High Court (hereinafter “Taichung High Branch Court”) rendered Criminal Judgment 107-Shang-Su-1558 (2018), convicting the petitioner and applying the disputed provision, i.e., Article 2, Paragraph 2 of the Criminal Code. Pursuant to Article 38-1, Paragraph 1 of the same Code, the court declared the confiscation of the criminal proceeds. The Supreme Court, by Criminal Judgment 108-Tai-Shang-3342 (2019), denied the appeal on the grounds of a procedural defect in law, rendering the case final. Therefore, the above Taichung High Branch Court criminal judgment constitutes the final judgment (hereinafter “Final Judgment Two”). Petitioner Two contended, in essence, that the application of the disputed provision in Final Judgment Two violated the principle of legality and the prohibition of retroactivity, and infringed upon the property rights protected by the Constitution.
3. Petitioner Three, in a gambling case, was convicted of the offense of gambling by the Shilin District Court Criminal Judgment 107-Yi-343 (2018) and the Taiwan High Court Criminal Judgment 108-Shang-Yi-2147 (2019). The court applied the disputed provision, namely Article 2, Paragraph 2 of the Criminal Code, and pursuant to Article 38-1, Paragraph 1 of the same Code in force at the time of adjudication, declared the confiscation of the criminal proceeds. As the case was not appealable to the court of third instance, the Taiwan High Court criminal judgment constitutes the final judgment (hereinafter “Final Judgment Three”). Petitioner Three contended, in essence, that at the time of the offense, Article 38-1 of the Criminal Code had not yet entered into force. Therefore, the application of the disputed provision in Final Judgment Three violated the principle of legality, the prohibition of retroactivity, and the principle of protection of legitimate expectations, thereby infringing upon the property rights protected by the Constitution.
4. Petitioner Four, in cases involving violations of the Business Accounting Act and other offenses, was convicted of fraud and related offenses by the Taichung District Court Criminal Judgments 105-Su-697 (2016) and 105-Yi-805 (2016) (consolidated judgment), and subsequently by the Taichung High Branch Court Criminal Judgments 109-Shang-Su-1660 (2020) and 109-Shang-Yi-794 (2020) (also consolidated judgments). The court applied the disputed provision, namely Article 2, Paragraph 2 of the Criminal Code, and pursuant to Article 38-1, Paragraph 1 of the same Code in force at the time of adjudication, declared the confiscation of criminal proceeds. Petitioner Four appealed the Taichung High Branch Court Criminal Judgment 109-Shang-Su-1660 (2020) (the Criminal Judgment 109-Shang-Yi-794 (2020) is not the basis of the present petition for normative and judgment-based constitutional review). The Supreme Court, by Criminal Judgment 111-Tai-Shang-1336 (2022), denied the appeal on the grounds of a procedural defect in law, rendering the case final. Accordingly, the Taichung High Branch Court Criminal Judgment 109-Shang-Su-1660 (2020) constitutes the final judgment (hereinafter “Final Judgment Four”). Petitioner Four contended, in essence, that both the disputed provision and its application in Final Judgment Four violated the principle of legality, the prohibition of retroactivity, and the principle of protection of legitimate expectations, thereby infringing upon the property rights protected by the Constitution.
5. In a case involving a petition for standalone confiscation, Petitioner Five was subjected to a series of rulings: the Taipei District Court Criminal Ruling 105-Tan-Sheng-Mei-1 (2016), the Taiwan High Court Criminal Ruling 107-Kang-70 (2018), and the Supreme Court Criminal Ruling 108-Tai-Kang-458 (2019) (hereinafter Final Ruling Five-1), in which the court applied Article 38-1, Paragraph 2, Subparagraph 2, and Article 40, Paragraph 3 of the Criminal Code, both in force at the time of adjudication, and declared the confiscation of the criminal proceeds as indicated in Item 2 of the dispositive portion of Final Ruling Five-1. In a separate proceeding, the Taipei District Court Criminal Ruling 105-Tan-Sheng-Mei-1 (2016), the Taiwan High Court Criminal Ruling 108-Kang-Keng-Yi-3 (2019), and the Supreme Court Criminal Ruling 110-Tai-Kang-1386 (2021) (hereinafter Final Ruling Five-2) declared the confiscation of the criminal proceeds as indicated in Item 2 of the dispositive portion of Final Ruling Five-2. Petitioner Five contended, in essence, that the application of the disputed provision in both Final Ruling Five-1 and Final Ruling Five-2 violated the principle of legality, the prohibition of retroactivity, and the principle of protection of legitimate expectations, thereby infringing upon the property rights protected by the Constitution.
6. In the course of adjudicating a case involving forgery and related offenses (Taiwan Hualien District Court Criminal Case 111-Chien-14 (2022)), Petitioner Six contended that the disputed provision to be applied violated the principle of legality, the prohibition of retroactivity, and the principle of protection of legitimate expectations, thereby infringing upon the property rights protected by the Constitution. Accordingly, the court ruled to stay the proceedings and petitioned for normative constitutional review.
7. In the course of adjudicating a case involving a petition for standalone confiscation of seized property (Taiwan Taipei District Court Criminal Case 107-Tan-Sheng-Mei-295 (2018)), Petitioner Seven contended that the disputed provision to be applied violated the principle of legality and the prohibition of retroactivity, thereby infringing upon the property rights protected by the Constitution. Accordingly, the court ruled to stay the proceedings and petitioned for constitutional interpretation.
II. Grounds for Granting Review and the Court’s Proceedings
1. Review of Admissibility Requirements
(1) Admissible Part
A. Petitioners One to Three and Petitioner Seven
According to the Constitutional Court Procedure Act (hereinafter “the Procedure Act”), cases that were already pending but not yet concluded prior to the amended Act’s enforcement shall, unless otherwise provided, be governed by the amended provisions. However, whether a case is admissible shall be determined pursuant to the provisions in effect prior to the amendment. This is explicitly stipulated in Article 90, Paragraph 1 of the Procedure Act.
The petitions filed by Petitioners One to Three and Petitioner Seven were all pending before the Procedure Act came into force. Therefore, their admissibility shall be determined in accordance with the Council of Grand Justices Procedure Act (hereinafter “the Former Act”) that was in effect prior to the amendment. Upon review, the petitions by Petitioners One to Three meet the admissibility requirements for individual petitions for constitutional interpretation under Article 5, Paragraph 1, Subparagraph 2 of the Former Act. The petition by Petitioner Seven satisfies the requirements for judicial petitions for constitutional interpretation as set forth in J.Y. Interpretations Nos. 371, 572, and 590. Accordingly, all of these petitions are admitted for review.
In addition, the original representative of Petitioner One, Chen Yung-Ching, was replaced on August 13, 2019, by Chen Hung-Yu, who filed a statement accepting succession of the litigation. This change is in compliance with the law and is therefore approved.
B. Petitioner Four
According to Article 59, Paragraphs 1 and 2 of the Constitutional Court Procedure Act, where an individual, having exhausted all ordinary judicial remedies in accordance with the law, considers that the law or regulation applied in an unfavorable final judgment, or the judgment itself, is unconstitutional, they may petition the Constitutional Court to render a judgment declaring its unconstitutionality. Such a petition must be filed within a fixed period of six months following the service of the unfavorable final judgment.
It is found that Petitioner Four had appealed Final Judgment Four, and the Supreme Court, by Criminal Judgment 111-Tai-Shang-1336 (2022), denied the appeal on the ground of a procedural defect in law. This Supreme Court judgment was rendered on April 28, 2022, and the Constitutional Court received the petition on July 18 of the same year. Upon review, the petition for normative and judgment-based constitutional review satisfies the requirements set forth in the aforementioned provisions of the Procedure Act, and is therefore admitted for review.
C. Petitioner Five
According to Article 92, Paragraph 2 of the Constitutional Court Procedure Act, where a final judgment has been served before the amended Procedure Act came into force, the individual may petition for normative constitutional review within six months from the date of the Act’s enforcement. Whether such a case is admissible shall be determined in accordance with the provisions in effect prior to the amendment.
It is found that both Final Ruling Five-1 and Final Ruling Five-2, upon which Petitioner Five based the petition, were served prior to the enforcement of the Procedure Act. The Constitutional Court received the petition on June 7, 2022. Upon review, the petition for normative constitutional review meets the admissibility requirements under Article 5, Paragraph 1, Subparagraph 2 of the Council of Grand Justices Procedure Act, and is therefore admitted for review.
D. Petitioner Six
According to Article 55 of the Constitutional Court Procedure Act, where a court, based on its firm belief formed on reasonable grounds, considers that the law or regulation with the force of law applicable to its adjudication is in conflict with the Constitution, and the result of the judgment would be directly affected thereby, it may petition the Constitutional Court for a judgment declaring its unconstitutionality. The Constitutional Court received the petition filed by Petitioner Six on April 26, 2022. Upon review, the petition satisfies the requirements set forth in the aforementioned provision and is therefore admitted for review.
All seven petitions described above involve cases concerning the disputed provision, and since the subject of review and the legal issues are identical, the petitions shall be consolidated for joint review in accordance with the proviso of Article 24, Paragraph 1 of the Constitutional Court Procedure Act. Furthermore, all seven petitions concern the confiscation of criminal proceeds under Article 38-1, Paragraphs 1 and 2 of the Criminal Code; therefore, the Court shall review the constitutionality of the disputed provision solely to the extent it pertains to criminal proceeds as provided in the aforementioned provisions.
(2) Dismissed Part
A. Petitioners One, Three, and Five
According to Article 5, Paragraph 1, Subparagraph 2 and Paragraph 3 of the Council of Grand Justices Procedure Act, individuals, legal persons, or political parties may petition for constitutional interpretation only if their constitutionally protected rights have been unlawfully infringed upon, they have pursued legal remedies in accordance with statutory procedures, and they have raised a concrete and specific doubt as to the constitutionality of the law or regulation applied in a final judgment.
It is found that Petitioner One additionally petitioned for interpretation regarding the constitutionality of Article 376, Subparagraphs 1 and 4 of the Code of Criminal Procedure, as amended and promulgated on November 16, 2017; and Petitioner Five petitioned for normative constitutional review of Article 38-1, Paragraph 2 and Article 40, Paragraph 3 of the Criminal Code. However, they have failed to concretely specify how these provisions, as applied in Final Judgment One and Final Rulings Five-1 and Five-2, respectively, raise a doubt of unconstitutionality. Additionally, Petitioner Three petitioned for interpretation of Article 370 of the Code of Criminal Procedure, but this provision was not applied in Final Judgment Three. Furthermore, Item 1 of the dispositive portion of Final Ruling Five-2 (which concerns interest accrued on property subject to the standalone confiscation petition) was set aside and remanded to the Taiwan High Court for a new ruling. Although Petitioner Five also petitioned for normative constitutional review of that portion, it is found that judicial remedies have not yet been exhausted in accordance with statutory procedures. Accordingly, the aforementioned petitions filed by Petitioners One, Three, and Five do not conform to the requirements of the above provisions of the Former Act and are therefore dismissed.
B. Petitioner Seven
According to the reasoning in J.Y. Interpretations Nos. 371, 572, and 590, when judges of all levels of courts, during the adjudication of a case, consider that a legal provision to be applied raises a doubt of unconstitutionality, they may, upon forming a firm belief based on reasonable grounds, treat it as a preliminary question, stay the proceedings, and petition the Justices of the Judicial Yuan for an interpretation. However, such a petition is admissible only when the judge is firmly convinced of the unconstitutionality of the disputed provision, and when such unconstitutionality would clearly affect the outcome of the case. The petition must provide a detailed explanation of (1) the interpretation of the disputed legal provision, (2) the relevant constitutional norm to be reviewed, and (3) the reasoning supporting the conclusion that the disputed provision violates the Constitution. The reasoning must be objectively free from manifest error. If the petition merely raises a doubt about the constitutionality of a law or if there is a plausible constitutional interpretation of the disputed provision, it cannot be deemed to have presented concrete and objective reasoning demonstrating a firm belief in its unconstitutionality. It is found that the additional petition by Petitioner Seven for interpretation of Article 40, Paragraph 3 of the Criminal Code fails to objectively present a firm constitutional argument demonstrating a belief in its unconstitutionality and is therefore inconsistent with the standards set forth in the aforementioned Interpretations of the Judicial Yuan. Accordingly, this portion of Petitioner Seven’s petition is dismissed.【30】
(3) Separately Reviewed Portion
As for the part of Petitioner Four’s petition for normative and judgment-based constitutional review regarding the application of Article 47, Paragraph 1 of the Criminal Code in Final Judgment Four, it shall be reviewed separately, and this is hereby noted for the record.
2. Oral Argument Proceedings
An oral argument hearing was held by this Court on July 19, 2022, during which Petitioners One to Three and Petitioners Six to Seven were notified (as Petitioners Four and Five were joined only after the oral argument date had been announced, they were not notified to participate). The Ministry of Justice, as the relevant authority, was also notified, and experts and scholars were invited to appear and present their opinions. The key points of the oral statements made by the petitioners and the relevant authority are summarized as follows:
(1) Petitioners One to Three stated in summary: A. Prior to the 2015 amendment, confiscation under the Criminal Code was classified as an ancillary punishment. Although the amended law established confiscation as an independent legal effect, it adopts a gross proceeds principle—confiscating criminal proceeds without deducting costs—which is tantamount to the deprivation of third parties’ vested property rights, thereby revealing the punitive nature of the measure. It should thus be considered a criminal sanction. B. The disputed provision prevents offenders or third parties from foreseeing the punitive nature of the confiscation at the time of the act, thereby violating the principle of legality. C. Applying the law in force at the time of adjudication results in Petitioners One to Three being subjected to punishment for conduct that occurred and concluded before the disputed provision entered into force, which contravenes the prohibition of retroactivity. Moreover, the facts of this petition are distinguishable from those in J.Y. Interpretation No. 793, and the disputed provision does not fall under a constitutional exception justified by overriding public interest. Therefore, it violates the prohibition of retroactivity. D. Before being judicially determined as unlawful, an individual’s property rights are protected under the Constitution. The public has a legitimate expectation that their property is constitutionally protected, and such expectations must not be deprived. The disputed provision therefore also violates the principle of protection of legitimate expectations.
(2) Petitioners Six and Seven stated in summary: A. As articulated in J.Y. Interpretation No. 384, the principle of legality is a component of due process of law, and any conduct constituting a crime must be prescribed by law in advance. Moreover, the principle of legality is not limited to criminal offenses and punishments; since confiscation of criminal proceeds resembles a criminal sanction, it should be subject to the constraints of this principle, including the strict application of the prohibition of retroactivity. B. In Germany, although the 1992 amendment to the German Criminal Code changed the rule for confiscation of criminal gains from the net proceeds principle to the gross proceeds principle, some scholars argue that this change effectively transformed the confiscation of criminal proceeds into a penalty or quasi-penalty, thereby necessitating the application of the principle of legality. C. Taiwan’s Criminal Code adopts the gross proceeds principle for confiscation of criminal proceeds, as reflected in the legislative history. Even if the measure displays characteristics of unjust enrichment remedies or security measures, once the calculation of the confiscation amount does not deduct criminal costs, the result becomes a property-based sanction with a punitive effect, thereby bearing the characteristics of a criminal penalty. D. Further referencing the principle of clear distinction clarified in J.Y. Interpretations Nos. 799 and 812, both confiscation of criminal proceeds and criminal fines are essentially forms of deprivation of property. In practice, both are executed through civil enforcement at the direction of the prosecutor. This highlights the functional similarity between the confiscation of criminal proceeds and criminal fines. E. Given that the criminal conduct had concluded before the disputed provision entered into force, yet the confiscation effects were retroactively applied to that conduct, the disputed provision constitutes a genuinely retroactive law. Moreover, the public could not have foreseen the legislative change, nor was there a lack of legitimate expectation. In this context, no public interest sufficiently outweighs individual property interests to justify an exception to the prohibition of retroactivity. Therefore, the provision violates the principle of protection of legitimate expectations. F. Even if the new confiscation regime provides for excessive hardship relief clauses (as referenced in Article 38-2, Paragraph 2 of the Criminal Code), these provisions do not eliminate the constitutional concerns raised by the disputed provision.
(3) The Ministry of Justice, as the relevant authority, stated in summary: A. The legislature, following the example of the German Criminal Code, deleted the provision categorizing confiscation as an ancillary punishment, added Chapter V-1 to the Criminal Code, and drew upon the United Nations Convention against Corruption by introducing non-conviction-based confiscation. This reform was intended to fill gaps in the former legal framework and establish confiscation as an independent legal effect. B. The disputed provision and the new confiscation regime aim to maintain property order and do not serve to impose punitive sanctions. No one should be allowed to retain criminal proceeds. Drawing upon unjust enrichment principles from civil and public law, confiscation of criminal proceeds is a quasi-unjust enrichment remedy—not a punitive sanction imposed on the offender, but rather a means of restoring property to its pre-offense status. C. Even though the confiscation of criminal proceeds is calculated based on gross proceeds, it does not constitute a criminal punishment for the following reasons: The offender voluntarily used their own assets in the commission of the crime and ultimately lost them. Confiscation functions to prevent crime from becoming a risk-free enterprise, thereby fulfilling a preventive function. With reference to Section 817, Sentence 2 of the German Civil Code (which corresponds to Article 180, Subparagraph 4 of Taiwan’s Civil Code), the confiscation of criminal proceeds serves to correct unlawful allocation of property. This legal reasoning denies legal protection to the recipient of illicit gains. It reflects a risk allocation rule under unjust enrichment doctrine, not the imposition of new punitive effects. D. The protection of property rights should be constructed by the legislature through the enactment of relevant laws defining the legal status of various property interests. Criminal proceeds fall outside the scope of constitutional property rights protection. It is implausible to consider assets obtained through conduct that severely harms social order as forming the basis of legitimate rights. Even if criminal proceeds were considered protected property under the Constitution, their confiscation would be justified by compelling public interest, and would therefore not violate the principle of protection of legitimate expectations. E. The disputed provision does not involve a retroactive law. The disruption to property order caused by the unlawful conduct continues after the act has been committed. The application of the disputed provision is intended to eliminate such disruption, and thus constitutes a case of non-genuine retroactivity.
(4) For the remaining arguments and statements presented by the petitioners and the relevant authority, please refer to their respective written summaries of oral argument.
This Court, having carefully considered the petition documents submitted by each petitioner, the opinions of the relevant authority, the statements of the expert witnesses, and the full content of the oral arguments, hereby renders this judgment with the following grounds of reasoning:
III. Legal Grounds for the Holdings
1. The disputed provision, insofar as it pertains to the confiscation of criminal proceeds, does not implicate the principle of legality
According to the principle of legality under the Constitution, any penal provision that results in the deprivation or restriction of an individual’s life, personal liberty, or property rights must be clearly prescribed by law. The exercise of the state’s penal power must strictly adhere to this principle: punishment may only be imposed for conduct explicitly defined by law in effect at the time of the act. The principle of legality is a fundamental constitutional tenet and a cornerstone of the modern rule-of-law state. If no law has prescribed a specific type of conduct as a criminal offense, that conduct cannot constitute a crime, nor may any punishment be imposed for it.
The term “punishment” as used in the constitutional principle of legality refers generally to the imposition by the state of severe sanctions, such as deprivation of liberty or property, on individuals who have engaged in criminally unlawful and blameworthy conduct, in order to express reprobation and ensure proportionality to culpability. Therefore, to determine whether a particular state-imposed disadvantage constitutes punishment, it must be assessed against these defining elements of criminal penalties.
That is to say, while the legislature enjoys a degree of discretion in designing legal frameworks that permit state interference with individual liberty or property on the basis of unlawful conduct, the determination of whether such a measure constitutes a punishment or is similar to a punishment should not rest solely on the fact that it is codified in the Criminal Code, nor on whether it imposes property-based or economic disadvantages on individuals. Rather, a comprehensive assessment of the nature, purpose, and effects of the measure is required to determine whether it is equivalent to or resembles punishment (cf. J.Y. Interpretation Nos. 751 and 808). This assessment should not be constrained by how the legislature labels the measure or whether it uses terms traditionally associated with criminal sanctions (Note 1). If the measure’s nature, purpose, and effects are not equivalent to or similar to punishment, then the principle of legality is not implicated.
(1) Based on the overall content of the new confiscation regime, the confiscation of criminal proceeds does not constitute punishment
Regarding the nature of the confiscation of criminal proceeds: it is a legal mechanism aimed at restoring the disturbance to property order caused by unlawful conduct. To prevent offenders or non-bona fide third parties from unjustly benefiting from criminal proceeds, which would violate the principles of fairness and justice, the law allows for the confiscation of proceeds so long as they originate from unlawful conduct, regardless of culpability (Note 2). In other words, as long as the conduct satisfies the objective elements and illegality under criminal law—even if it lacks culpability—the resulting criminal proceeds shall still be subject to confiscation to restore the pre-offense lawful property status. Thus, the confiscation of criminal proceeds does not aim to censure offenders or third parties for morally blameworthy criminal behavior, which distinguishes it from criminal punishment, whose primary purpose is to sanction personal culpability for unlawful acts. Criminal sanctions require blameworthiness, whereas confiscation of criminal proceeds does not. This is the first key distinction between confiscation and punishment.
Regarding the subject of confiscation: pursuant to Article 38-1, Paragraphs 1 and 2 of the Criminal Code, confiscation may be imposed not only on the offender but also on third parties who obtained the criminal proceeds without good faith. Even though such third parties did not engage in unlawful conduct themselves, their ill-gotten gains may still be confiscated. This does not constitute a judgment of criminal liability; rather, it serves the goal of restoring lawful property order and preventing both offenders and non-bona fide third parties from reinvesting unlawful gains into other illicit activities. It is therefore not punitive in nature. This marks the second significant distinction between confiscation and punishment.
Regarding the object of confiscation: under Article 38-1, Paragraph 4 of the Criminal Code, the scope of “criminal proceeds” subject to confiscation or substitute payment includes “the gains derived from unlawful conduct, any transformed property or pecuniary benefits therefrom, and any fruits thereof.” That is, the amount of criminal proceeds is a specific, calculable sum determined by law, and the state may only confiscate up to that specific amount from the offender or the third party. This amount is unrelated to the severity of the offense or to the offender’s degree of culpability (e.g., whether the act was intentional or negligent). In contrast, when imposing a criminal sentence—whether imprisonment or a fine—the court must strictly adhere to the principle of culpability, taking into account not only the severity of the offense but also the offender’s degree of fault, in order to determine an appropriate sentence with potential aggravation or mitigation. Thus, confiscation of criminal proceeds operates under an entirely different logic and legal standard than criminal punishment. This constitutes the third major distinction between the two.
As to judicial rulings on the confiscation of criminal proceeds, procedurally speaking, confiscation may be divided into subject-based proceedings, in which the defendant is the target, and object-based proceedings, in which the object of confiscation is the target.
Regarding confiscation declared in subject-based proceedings, Article 40, Paragraph 1 of the Criminal Code provides: “Unless otherwise provided, confiscation shall be declared at the time of adjudication.” That is, regardless of whether the defendant is convicted, confiscation shall be declared at the time of judgment. The Code of Criminal Procedure also specifies different requirements for the dispositive portion and for the statement of facts and legal reasoning depending on whether the judgment is one of conviction or acquittal (cf. Articles 309 and 310-3 of the Code of Criminal Procedure). In addition, within subject-based proceedings, Part 7-2 of the Code of Criminal Procedure provides for procedures allowing third-party participation in confiscation proceedings (cf. Articles 455-12 to 455-33).
Regarding standalone confiscation in object-based proceedings, Article 40, Paragraph 3 of the Criminal Code provides: “…criminal proceeds under Article 38-1, Paragraphs 1 or 2 may be confiscated independently where, due to factual or legal reasons, prosecution or conviction of the offender is not possible.” In other words, in such cases, confiscation is not contingent on the unlawful conduct that generated the proceeds being prosecuted or resulting in a conviction. Where special factual or legal circumstances exist—such as the death of the offender, a final judgment already rendered, or a disposition of non-prosecution, dismissal, or exemption from prosecution under Article 19 of the Criminal Code, among others (Note 3)—and prosecution or conviction is thereby precluded, the criminal proceeds from the conduct may still be subject to standalone confiscation. Articles 455-34 to 455-37 of the Code of Criminal Procedure provide for corresponding special confiscation procedures.
Thus, under the new confiscation regime, confiscation declared in cases where the defendant is acquitted in subject-based proceedings, third-party participation in confiscation procedures, and standalone confiscation in object-based proceedings are not contingent on a criminal conviction (Note 4); in contrast, criminal punishment may only be imposed following conviction pursuant to law (cf. Articles 155, 299(1), and 309 of the Code of Criminal Procedure). The confiscation of criminal proceeds therefore differs from criminal punishment. This is the fourth point of distinction.
As to the execution of the confiscation of criminal proceeds, the execution of confiscation differs from the execution of criminal fines. When criminal proceeds cannot be confiscated in whole or in part, or when confiscation is not appropriate, Article 38-1, Paragraph 3 of the Criminal Code provides that only substitute payment may be pursued—that is, substitute payment is the sole alternative measure under the new confiscation regime. In contrast, Article 42, Paragraphs 1 and 2 of the Criminal Code provide: “A fine shall be fully paid within two months after the judgment becomes final. If payment is not made within that period, enforcement shall be carried out. If the person is unable to pay, the fine may be converted into labor service... The unpaid portion of the fine shall be enforced or converted into labor service.” Article 42-1, Paragraph 1 of the Criminal Code further provides: “Except under any of the following circumstances, the conversion of a fine into labor service may be replaced by community service, at the rate of six hours per day.” Thus, if a fine cannot be paid, it may be converted into labor service or community service, whereas if confiscation or substitute payment cannot be executed, the state may not use labor service or community service as a substitute. This is the fifth distinction between the confiscation of criminal proceeds and criminal punishment.
As to the subsidiary nature of confiscation of criminal proceeds, Article 38-1, Paragraph 5 of the Criminal Code provides: “Where the criminal proceeds have already been lawfully returned to the victim, confiscation or substitute payment shall not be declared.” Article 38-3, Paragraph 2 provides: “...Third parties’ rights to the confiscated object or claims arising from the offense shall not be affected.” Article 473, Paragraph 1 of the Code of Criminal Procedure provides: “Where a person entitled to the object of confiscation or a person holding a claim arising from the offense has obtained an enforceable title and files an application, the prosecutor shall return or deliver the object or property...” That is, when criminal proceeds have already been lawfully returned to the victim, the disturbance to property order caused by the unlawful conduct is considered remedied, and the state may no longer confiscate or seek substitute payment from the offender or third party. Even after criminal proceeds have been confiscated by the state, the victim may still request their return from the prosecutor. This is the sixth distinction between the confiscation of criminal proceeds and criminal punishment.
To summarize, based on the overall structure of the new confiscation regime, the nature of the confiscation of criminal proceeds is fundamentally different from that of criminal punishment. It is not a form of punishment.
(2) The legislative purpose of the new confiscation regime is to restore lawful property order, not to deprive individuals of their pre-offense lawful property【56】
It is noted that, when amending the disputed provision in 2015, the legislature explicitly stated in the legislative rationale: “This amendment to the confiscation regime draws upon foreign legislative models to better reflect the legal nature of confiscation. Confiscation is recognized as a legal effect independent from the punishments and security measures stipulated in this Code, and is therefore not a punishment (ancillary penalty).” Moreover, the legislature recognized that: “It is a longstanding and universal legal principle that ‘no one shall retain the proceeds of crime’ (Crime doesn’t pay; Verbrechen dürfen sich nicht lohnen!). Accordingly, both civil and public law domains contain unjust enrichment mechanisms (see Civil Code, Article 179 et seq.; Administrative Procedure Act, Article 127), which serve to deprive individuals of ill-gotten gains. The same rationale applies in criminal law, where the deprivation of criminal proceeds serves as a primary tool to combat illegality and prevent crime. In other words, criminal proceeds… must be confiscated to restore lawful property order.”Based on this rationale, the legislature revised the applicable law and explicitly provided that the law in force at the time of adjudication shall apply. The legislature also drew upon Chapter 5 of the United Nations Convention against Corruption, Chapters 3 and 7, Section 1 of the German Criminal Code prior to the 2017 amendments, and Chapter 10 of the Draft Amendment to the Japanese Criminal Code, and established Chapter V-1 as a distinct chapter to confirm that confiscation no longer possesses the character of punishment (Note 5).
From the above, it is clear that, when adding Chapter V-1 to the Criminal Code, the legislature not only aimed to eliminate incentives for crime, but also emphasized that the legislative objective was to restore lawful property order, rather than to deprive offenders or non-bona fide third parties of their pre-offense lawful property. Accordingly, confiscation does not bear the essential nature of punishment. The legislative amendment to the confiscation provisions was not driven by punitive purposes, and thus differs fundamentally from criminal penalties, which are imposed to punish offenders, correct their criminal behavior, and deter recidivism through severe treatment.
(3) Even if the calculation of the scope of criminal proceeds follows a relative gross proceeds principle, the confiscation of criminal proceeds still cannot be deemed to constitute punishment or a measure akin to punishment
Petitioner Six argued that the relative gross proceeds principle adopted under current law inevitably exhibits characteristics of property-based sanctions (see Petitioner Six’s Supplemental Statement of Oral Argument, p. 49).
As to the calculation of the scope of criminal proceeds, legal theory distinguishes between the net proceeds principle and the gross proceeds principle, depending on whether costs are deducted. Under the gross proceeds principle, a further distinction is drawn between the absolute gross proceeds principle and the relative gross proceeds principle, based on whether the costs in question are tainted by illegality.
According to longstanding practice in Taiwan, courts apply the relative gross proceeds principle (cf. Supreme Court Criminal Judgments 106-Tai-Shang-3464 (2017), 107-Tai-Shang-3332 (2018), and 110-Tai-Shang-1637 (2021), among others). Under this approach, whether a defendant’s expenditures associated with the unlawful conduct are to be included in the calculation of criminal proceeds depends on whether such costs constitute neutral costs not directly related to the crime. If the transaction itself is inherently unlawful under the law—for example, the sale of narcotics—then the entire gain is deemed tainted, and no deduction of associated costs is permitted (e.g., the full amount paid to procure the narcotics is not deductible). Conversely, if the transaction itself is not inherently illegal, then only the profit obtained through the unlawful conduct is considered tainted. In such cases, neutral costs—such as expenses unrelated to the unlawful element—must be deducted from the proceeds when determining the amount subject to confiscation (e.g., a contractor who unlawfully wins a bid but incurs material, labor, and other construction costs to fulfill the contract).
It is further noted that in formulating the new confiscation regime, the legislature referred to the concept of unjust enrichment under Articles 179 and following of the Civil Code, which supports the deprivation of unlawfully obtained benefits (Note 6). According to Article 182 of the Civil Code, recipients of unjust enrichment are categorized as either in good faith or in bad faith, depending on whether they knew at the time of receipt that there was no legal basis for the gain. A good-faith recipient is not liable to return or compensate for the value of the benefit if it no longer exists. In contrast, a bad-faith recipient may not claim that the benefit has been extinguished and must return the benefit received, or if the benefit no longer exists, repay its value along with interest from the time of receipt, and compensate for any resulting damage. In other words, recipients of unjust enrichment bear different degrees of liability for returning the unlawful benefit depending on their knowledge of the lack of legal basis at the time of receipt. When designing the confiscation regime, the legislature not only relied on the unjust enrichment system in civil law to restore disturbed property order through confiscation but also adopted the risk allocation principle reflected in Article 182 of the Civil Code (Note 7).
Accordingly, the legislature, having considered the characteristics of criminal law, applied the principle of risk allocation to the confiscation of criminal proceeds arising from unlawful conduct, so that malicious offenders or non-bona fide third parties bear the risk of having tainted criminal costs confiscated. Moreover, all transactions inherently carry risk—even in lawful transactions, the law does not guarantee that the parties will recover their costs. In the case of unlawful transactions, it is even less permissible for the offender to claim a right to deduct the so-called costs of committing the crime when the state confiscates proceeds from such transactions. Since confiscation is designed to restore the status quo ante, neither the offender nor the third party is placed in a worse position than before the unlawful act. Therefore, it is untenable to conclude that confiscation constitutes punishment or a measure akin to punishment merely because courts apply the relative gross proceeds principle in calculating criminal proceeds.
(4) Summary
In sum, the confiscation of criminal proceeds, when viewed in terms of its nature, purpose, and effects, does not constitute punishment or a measure akin to punishment. Although the scope of criminal proceeds subject to confiscation is calculated based on the relative gross proceeds principle, this does not justify the inference that such confiscation carries the nature of a criminal penalty or its equivalent. Therefore, the disputed provision, which expressly provides that confiscation is governed by the law in force at the time of adjudication, does not raise any issue of inconsistency with the constitutional principle of legality insofar as it pertains to the confiscation of criminal proceeds.
II. The Disputed Provision Constitutes a Quasi-Retrospective Law and Does Not Violate the Principles of Non-Retroactivity or Protection of Legitimate Expectations
The rule of law is a fundamental constitutional principle, emphasizing the protection of individual rights, the stability of the legal order, and the observance of the principle of legitimate expectations. As a general rule, newly enacted legal provisions should not apply to factual elements or legal relationships that were completed before the law came into effect; this is known as the principle of non-retroactivity. However, where new laws are applied to facts or legal relationships that arose under the old law and continue to exist after the new law takes effect, such application is not deemed retroactive, and thus does not contravene the principle of non-retroactivity (see Judicial Yuan Interpretation Nos. 620, 717, and 783).
As previously explained, the new confiscation regime is not directed at punishing the unlawful conduct itself, but rather at terminating the unlawful property status arising from that conduct. Although the criminal proceeds stem from unlawful acts, the formation of the unlawful property order occurs upon their creation and continues until the proceeds are effectively confiscated, regardless of whether or when the unlawful act ends or whether the actor is convicted. Therefore, although the disputed provision causes Article 38-1, Paragraphs 1 and 2 of the Criminal Code (regarding the confiscation of criminal proceeds) to apply to proceeds generated before the provision took effect, the state of unlawful property continues beyond the effective date, making this provision a quasi-retrospective law. It thus does not violate the principle of non-retroactivity.
Moreover, human life is continuous, and new laws, even if non-retroactive in effect, may unavoidably impact life arrangements established under prior laws. Therefore, in cases that do not involve true retroactivity, the principle of protection of legitimate expectations under the Constitution requires further evaluation of whether individuals had legitimate and reasonable expectations worthy of protection. If such expectations are deemed worthy of protection, a balancing must be conducted between the public interest and the individual's reliance interest, in line with the intent of the constitutional principle of protection of legitimate expectations (see Judicial Yuan Interpretation Nos. 574 and 717).
Upon examining the elements of offenses defined in the Criminal Code, it is evident that the legislature deems such conduct antisocial, warranting criminal punishment as a strong deterrent. Conduct that fulfills the elements of a crime and is unlawful is, from the outset, prohibited by the legal order, and any criminal proceeds derived from such conduct inherently carry the taint of illegality. This unlawful character does not vary depending on whether a confiscation provision was in force at the time of the offense. In other words, the confiscation of criminal proceeds—tainted from their origin due to the unlawful conduct—reflects a universal value that the acquisition and retention of illegitimate rights should never be protected. Therefore, although the new law may affect the lifestyle arrangements established under the old law by criminal offenders and non-innocent third parties, because such proceeds were obtained through conduct that violated the legal order, they bear serious defects from their inception. The reliance by offenders or non-innocent third parties on the continued lawful retention of these criminal proceeds is not worthy of protection (Note 8).
Moreover, before the new confiscation regime came into force, the continued acquisition of criminal proceeds by individuals stemmed from the inadequacies of the old confiscation provisions under the Criminal Code before its amendment on December 30, 2015. Specifically, under former Article 38, Paragraph 1, Subparagraph 3 (latter part) and Paragraph 3 of the Criminal Code: “Objects subject to confiscation include: … (3) Items obtained from the crime …” And “Items described in Subparagraph 3 of Paragraph 1 may be confiscated only if they belong to the offender, unless otherwise specified by law.” According to Judicial Yuan Interpretation Yuan-2140, the term “items obtained from the crime” was narrowly interpreted to mean tangible objects directly obtained from the offense. Consequently, the conversion or substitution of criminal proceeds could not be confiscated, resulting in an overly narrow scope that failed to thoroughly deprive offenders of ill-gotten gains and thus undermined efforts to deter crime (Note 9). In light of these deficiencies, the legislature amended the confiscation regime to affirm the inviolability and fairness of the legal order, strengthen public trust in the law, and ensure that society functions under a stable and lawful order—objectives of significant public interest (Note 10). Therefore, the amendment was justified, and the alleged reliance by offenders or non-innocent third parties on their ability to retain criminal proceeds under the old law is clearly not worthy of protection.
Accordingly, the contested provisions—insofar as they pertain to the confiscation of criminal proceeds under Article 38-1, Paragraphs 1 and 2 of the Criminal Code—do not violate the principle of non-retroactivity of law or the principle of legitimate expectation.
IV. Conclusion
I. Admissible Part
(1) The provision under Article 2, Paragraph 2 of the Criminal Code, as amended and promulgated on December 30, 2015, and effective from July 1, 2016, stating: “Confiscation... shall be governed by the law in force at the time of adjudication,” insofar as it pertains to the confiscation under Article 38-1, Paragraphs 1 and 2 of the same Code, does not give rise to issues of conflict with the constitutional principle of legality in criminal law, nor does it violate the principle of non-retroactivity of law or the principle of legitimate expectation. It is not in conflict with the Constitution.
(2) Since the contested provision is constitutional, the constitutional norm review petitions concerning the provision filed by Petitioners One through Five shall be denied.
(3) As for Petitioner Four's petition for a constitutional review of the adjudication in Final Judgment Four concerning the application of the contested provision, it has been examined and determined that the contested provision does not conflict with the Constitution, as discussed above. Moreover, Petitioner Four has not alleged any other unconstitutional aspect in the application of the provision in Final Judgment Four. Therefore, this part of the petition lacks merit and shall be denied.
(4) Petitioners Six and Seven, in their respective cases, requested this Court to render a judgment of unconstitutionality concerning the contested provision, based on their reasoned belief that it violates the Constitution. However, as stated in Section I of the holding, the contested provision—insofar as it pertains to Article 38-1, Paragraphs 1 and 2 of the Criminal Code—has not been found unconstitutional. Since the petitioners are not asserting their own rights to seek relief, this Court will not separately rule to deny the petition of Petitioner Six or this portion of Petitioner Seven’s petition.
II. Dismissed Part
(1) Petitioner One's constitutional norm review petition concerning Article 376, Paragraph 1, Subparagraphs 1 and 4 of the Code of Criminal Procedure prior to its amendment on November 16, 2017; Petitioner Three's petition concerning Article 370 of the Code of Criminal Procedure; and Petitioner Five's petition concerning the application of Article 38-1, Paragraph 2 and Article 40, Paragraph 3 of the Criminal Code in Final Rulings Five-One and Five-Two, and the part of the main text of Final Ruling Five-Two applying the contested provision do not meet the admissibility requirements under the former Constitutional Interpretation Procedure Act, as previously discussed, and shall be dismissed.
(2) Petitioner Seven’s separate petition for constitutional norm review of Article 40, Paragraph 3 of the Criminal Code, fails to align with the interpretive principles set forth in Judicial Yuan Interpretation Nos. 371, 572, and 590, and shall be dismissed.
III. Separate Review Part
Petitioner Four’s petition for constitutional norm and judgment review regarding the application of Article 47, Paragraph 1 of the Criminal Code in Final Judgment Four shall be reviewed separately.
Notes:
Note 1: See German Federal Constitutional Court decision, February 10, 2021, BVerfG 2 BvL 8/19, Rn. 105, 109; and European Court of Human Rights judgment, Case of Balsamo v. San Marino, October 8, 2019, application nos. 20319/17 and 21414/17, § 59.
Note 2: See Legislative Reasons for Article 38-1, Items (3)(1) and (5)(1), in the December 30, 2015 amendment to parts of the Criminal Code, Legislative Yuan Gazette, Vol. 104, No. 98, pp. 268–270.
Note 3: See Legislative Reasons for Article 40, Item (1), in the December 30, 2015 amendment to parts of the Criminal Code, Legislative Yuan Gazette, Vol. 104, No. 98, pp. 273–274.
Note 4: See Article 54, Paragraph 1, Subparagraph (c) of the United Nations Convention against Corruption. It should also be noted that the term “confiscation” in Article 2(g) of the Convention covers a broader scope than the confiscation scheme under Taiwan’s new legal regime.
Note 5: See Legislative Reasons for Article 2, Items (1)(1) and (1)(2), and Section 2 on Confiscation in Chapter 5-1, in the December 30, 2015 amendment to parts of the Criminal Code, Legislative Yuan Gazette, Vol. 104, No. 98, pp. 260–261, 265.
Note 6: See Legislative Reasons for Article 2, Items (1)(1) and (1)(2), in the December 30, 2015 amendment to parts of the Criminal Code, Legislative Yuan Gazette, Vol. 104, No. 98, pp. 260–261.
Note 7: See Note 1 above, German Federal Constitutional Court decision, Rn. 115, 117, 120.
Note 8: See Note 1 above, German Federal Constitutional Court decision, Rn. 159–161.
Note 9: See Legislative Reasons for Article 38-1, Item (5)(1), in the December 30, 2015 amendment to parts of the Criminal Code, Legislative Yuan Gazette, Vol. 104, No. 98, pp. 269–270.
Note 10: See Note 1 above, German Federal Constitutional Court decision, Rn. 151.