Note: 
This summary constitutes no part of the Judgment but is prepared by the Clerk's Office of the Constitutional Court only for the readers' reference.
Original paragraph numbers that the summarized texts correspond to are put into lenticular brackets after each paragraph.

Headnotes

In this Judgment, the Taiwan Constitutional Court (TCC) upheld the constitutionality of Article 2, Paragraph 2 of the Criminal Code. The said provision was amended in 2015 and shall apply to the confiscation of proceeds of crimes at the time of Judgment, which provoked doubts on whether the amended text bears retroactive effects to crimes that happened before the promulgation of the amendment. The TCC ruled that since the disputed provision is a non-penal measure to rectify the unlawful property allocation caused by the crime, it does not violate the principle of nulla poena sine lege, the principle of lex retro non agit (principle of non-retroactivity), and the principle of legitimate expectation (Vertrauensschutz) enshrined in the Constitution. 
 

Background of the Case
 

Before the enforcement of the New Confiscation Scheme, due to the insufficient regulation on confiscation of criminal proceeds in Article 38, Paragraph 1, Subparagraph 3 and Paragraph 3 of the Criminal Code (2014), and the restriction on the scope of it to “substantial objects acquired directly from the crime” set by the Judicial Yuan Letter Yuan-2140 of February 28, 1941, the offender and mala fides third party may keep their proceeds of crime in the form of converted value or considerations if the pertaining civil responsibilities were not pursued. The insufficiency in the aforementioned provisions made it unable to deter crimes, therefore the legislator passed the New Confiscation Scheme through amendments on the Criminal Code in 2015, in pursuance of upholding the fairness and inviolability of the legitimate legal order, strengthening the people's trust in the rule of law, and ensuring the public interest of society working accordingly to the legitimate order. 【72】

Seven petitions (consist of five constitutional complaints lodged by persons based on their final court decisions, two lodged by courts) were lodged on this issue. The petitioners mostly argued that Article 2, Paragraph 2 of the Criminal Code made Chapter 5-1 of the Criminal Code (promulgated on December 30, 2015; enter into force on July 1, 2016) applied retroactively to the conducts happened before the law entered into force, therefore violated the principle of nulla poena sine lege, the principle of lex retro non agit (principle of non-retroactivity), and the principle of legitimate expectation (Vertrauensschutz), consequently infringed the people's right to property protected by the Constitution. 【1-8】
 

Summary of the Judgment 

Holding (only the part of the ratio decidendi)
The provision of Article 2, Paragraph 2 of the Criminal Code (hereinafter, “the said provision”), “For confiscation […], the law in force at the time of judgment shall apply"^[1], when applying to confiscation stipulated in Article 38-1, Paragraph 1 and 2 of the Criminal Code^[2], is not in conflict with the principle of nulla poena sine lege, the principle of lex retro non agit (principle of non-retroactivity), and the principle of legitimate expectation, therefore not in violation with the Constitution.【First Part of the Holding】

Reasoning

1. The provision regarding confiscation of proceeds of crimes in the said provision does not concern the principle of nulla poena sine lege. 【41】

(1) The constitutional principle of nulla poena sine lege applies to the penalties which are imposed by the state. These penalties are to condemn those who are responsible for committing a criminal offense. Therefore, the abovementioned concept of penalty has to be put into consideration when determining whether certain disadvantage measure bears penal characteristics. 【43】

(2) It is within the legislator's discretion to decide on the legal measure against offences in the form of state intervention in people's freedom and property. However, to determine whether the said measure is penal or penalty-like, one shall not refer solely to the fact that the measure is stipulated in the criminal code, neither shall one focus solely on the property or economical disadvantages the measure imposes, nor shall one be constrained by the legal definition or penal wordings set out by the legislator; but one shall rather observe comprehensively on the nature, purpose, and effect of the measure, to decide whether it is equivalent to a penalty or is penalty-like. If the measure is not, then it does not concern the principle of nulla poena sine lege. 【44】

(3) Viewing the New Confiscation Scheme comprehensively, confiscation of proceeds of crime (hereinafter, "the said measure") is not penal, therefore, can be distinguished from penalty. 【45】

A. First, in terms of the said measure's nature, once an act fulfills the constituent elements (Tatbestand) and criminal illegality (Rechtswirdrigkeit) of a crime, regardless of the offender's culpability (Schuld), the proceeds derived from such crime shall be confiscated to restore the proprietary status quo ante before the crime was committed. That is to say, confiscating the proceeds of a crime is not out of the nature of condemning the crime committed by the offender or a third party. In other words, the said measure can be distinguished from a penalty, which is stipulated to punish those who fulfill all three requirements of constituent elements, criminal illegality, and culpability of a crime. 【46】

B. Second, in terms of the subject of the said measure, Article 38-1, Paragraphs 1 and 2 of the Criminal Code stipulates that, other than the offender, a mala fides third party who obtains proceeds of crime, is also subject to confiscation. This is to prevent the offender or the mala fides third party from reinvesting proceeds of crime into other illegal activities. This purpose does not have a penal nature, therefore can be distinguished from a penalty. 【47】

C. Third, in terms of the object of the said measure, Article 38-1, Paragraph 4 of the Criminal Code stipulates that the proceeds of crime which the state may confiscate include "any property derived from or obtained directly or indirectly, through the commission of an offence"^[3]. In other words, a certain amount of the said measure can be deduced by law; and the state can only impose confiscation upon the offender and the mala fides third party within this designated amount. This amount does not regard the severity of the crime, nor is it determined by the degree of culpability of the offender (e.g. out of intention or negligence). But on the contrary, the sentencing of penalty is strictly constrained by the principle of nulla poena sine culpa (i.e the principle of culpability). When it comes to the sentencing of penalty, the severity of the crime committed and the culpability of the offender shall be put into consideration, whether it regards the sentencing of imprisonment or monetary penalty. 【48】

D. Fourth, under the New Confiscation Scheme, conviction is not required when it comes to confiscation from a defendant who is ruled "not guilty", confiscation from a third party, or independent confiscation pronounced on objects^[4]. On the contrary, a conviction is required when it comes to carrying out the penalty on the offender. 【52】

E. Fifth, in terms of the execution of the said measure, confiscation of proceeds of crime can be distinguished from monetary penalty. Article 38-1, Paragraph 3 of the Criminal Code^[5] stipulates that, if confiscating the entire or partial proceeds of crime has failed or is inappropriate, the value thereof shall be collected from the offender. That is to say, "compulsory collection" is the sole substitutive means for confiscation in the Criminal Code. In contrast, those who cannot make full payment of the fine may commute it into labor service or social work under Article 42, Paragraphs 1^[6] and 2^[7], and Article 42-1, Paragraph 1 of the Criminal Code^[8]. 【53】

F. Sixth, in terms of the subsidiarity of the said measure, in accordance with Article 38-1, Paragraph 5 of the Criminal Code^[9], Article 38-3, Paragraph 2 of the Criminal Code^[10], and Article 473, Paragraph 1 of the Code of Criminal Procedure^[11], if the proceeds of crime are returned to the victim legally, the proprietary status quo ante disrupted by the unlawful conduct will thereby be restored, the state shall not confiscate or collect from the offender or third party who have acquired the proceeds. The victim can also file a motion to have the prosecutor return the confiscated items. 【54】

G. For the abovementioned reasons, the nature of the said measure can be distinguished distinctively from that of the criminal penalty. 【55】

(4) The legislative purpose of the New Confiscation Scheme is to restore the proprietary status quo ante, rather than depriving existing properties. When the legislators amended the said provision, they expressed explicitly in their ratio legis that they drafted the provision based on the long-standing universal legal principle of "Crime doesn't pay (Verbrechen dürfen sich nicht lohnen!)". The legislators also expressed in the ratio legis that, to stick to the legal nature of confiscation, which is independent of the legal effects of penalty or rehabilitative measures, they referred to foreign legislative materials, notably, Chapter 5 of the United Nations Convention against Corruption (UNCAC)^[12], Chapter 3, Section 1 and 7 of the German Criminal Code [Strafgesetzbuch (StGB)] (2013), and Chapter 10 of the Final Draft for the Revision of Penal Code of Japan [Kaisei keihō sōan] (1974), so that "confiscation is stipulated independently in Chapter 5-1 of the Criminal Code, which is an affirmation that it does not bear the nature of penalty." From this perspective, the legislator amended the said provision to restore the proprietary status quo ante, rather than rectifying crimes and deterring recidivism. 【56-58】

(5) Although the Criminal Code adopts the Relative Gross Principle in determining the range of the proceeds of crime, one can hardly deem that confiscation has the nature of a penalty or is penalty-like. 【59】

A. The calculation of the range of criminal proceeds, based on whether to deduct the cost or not, can be divided into two methods: the Net Principle (Nettoprinzip) and the Gross Principle (Bruttoprinzip). The latter can be divided into the Definite Gross Principle (harte Bruttoprinzip) and the Relative Gross Principle, based on whether to deduct the expenses that are not related directly to the criminal offence from the gross proceeds of a crime. 【61】

B. Consistent judicial practices in Taiwan is to adopt the Relative Gross Principle, which means that if the transaction of the expense deliberately incurred to commit a criminal offence is illegal in itself (e.g. the expenses to purchase narcotics), it shall be deemed un-neutral and tainted with unlawfulness, consequently not deductible from the gross proceeds of the crime (e.g. the gross amount of selling narcotics). On the contrary, if the transaction itself is not prohibited by law (e.g. the expenses to perform the contract after winning the bid of said contract illegally), then the costs of the transaction are neutral and consequently deductible from the gross proceeds of the crime, whereas the unlawfulness only extends to the profit brought by the crime. 【62】

C. Furthermore, when drafting the New Confiscation Scheme, the legislators referred to the provisions and purposes of unjust enrichment in the Civil Code. Under Article 182 of the Civil Code^[13], the recipient of unjust enrichment shall bear a different amount of risk and diverse range in returning the interests or values, determined by whether the recipient knew of the absence of legal ground at the time of reception or not. 【63】

D. Per the aforementioned criterion, the legislator weighed the nature of criminal law, and applied the juridical logic of risk allocation to the confiscation of proceeds of crime, thus burdening the offender and mala fides third party with the risk of losing their unlawful expenses to confiscation. Not to mention that the law does not even protect parties to recover their expenses in legal transactions, hence a fortiori the state shall not allow the parties to deduct their unlawful expenses from the proceeds of crime. Since the nature of the said provision is to restore the proprietary status quo ante, the offender or the mala fides third party is not in a more disadvantageous position than they previously were. For this reason, the practice of adopting the Relative Gross Principle in calculating the proceeds of crime cannot be deemed as containing punitive nature. 【64】

(6) In conclusion, reviewing the nature, purpose, and effect of confiscation of criminal proceeds comprehensively, it does not have the exact nature of a penalty. Hence, the said provision stipulating that the law in force at the time of judgment shall apply in confiscation does not violate the principle of nulla poena sine lege enshrined in the Constitution. 【65-66】

2. The said provision is a law with false-retroactivity effect (unechte Rückwirkung), which does not constitute the violation of the principle of lex retro non agit (principle of non-retroactivity) and the principle of legitimate expectation. 【67】

(1) Applying new law on existing constituent elements or legal relations that started before the new law is not retroactive application, nor does it concern the principle of Lex retro non agit (principle of non-retroactivity).【68】

(2) Although the said provision led to the application of Article 38-1 of the Criminal Code to criminal proceeds that had happened before the enforcement of the said provision, it is in fact an application to a continuous state of unlawful proprietary status caused by the crime. For this reason, the said provision is a law with only false-retroactivity effect and does not violate the principle of lex retro non agit (principle of non-retroactivity).【69】

(3) Human life has continuity to it. Therefore, although specific new laws do not have a retroactive effect, their effect on the order of life surrounding the previous laws is still unavoidable. Hence, in the case of false-retroactive legal changes, protection of the people's legitimate and reasonable expectations must be put into consideration following the constitutional principle of legitimate expectation.【70】

(4) When a conduct fulfills the constituent element and illegality of a crime, it is prohibited ab initio by the legal order. Any proceeds deriving from it are thus tainted with the unlawfulness, and this unlawfulness shall not be any different just because the said provision was not erected at the time. Although the said provision did affect the offender and the mala fides third party's order of life based on the previous laws, the proceeds of crime were obtained by them through unlawful conduct that disrupted the status quo. Therefore, their rights on the proceeds of crime are grossly unlawful and defective ab initio. For this reason, the expectation of them to keep the proceeds of crime permanently shall not deserve protection. 【71】

(5) In conclusion, the said provision, when applying to confiscation stipulated in Article 38-1, Paragraphs 1 and 2 of the Criminal Code, does not violate the principle of lex retro non agit (principle of non-retroactivity) and the principle of legitimate expectation. 【73】

[1] Article 2, Paragraph 2 of the Criminal Code: “For confiscation and rehabilitative measures that does not involve restriction of personal freedom, the law in force at the time of judgment shall apply.” The official English version of this clause need adjustment to accurately convey the legal issue pertaining to this Judgment. The translated version in this Judgment is provided by the translator of this summary.

[2]Article 38-1, Paragraph 1 of the Criminal Code: “Proceeds of the crime that belong to the offender shall be confiscated. If there are special provisions, these special provisions shall be followed.”
 Article 38-1, Paragraph 2 of the Criminal Code: “Proceeds of the crime obtained by natural persons, legal persons or an unincorporated body other than the offender under one of the following conditions shall be confiscated:
      1. Knowingly obtain the illegal proceeds from the offender.
      2. Obtain the illegal proceeds from the offender for free or at a cost that is considerably not reciprocal.
      3. The party is benefited from illegal act committed by the offender for the said party.”

[3] Article 38-1, Paragraph 4: “The proceeds of crime specified in paragraph 1 and 2 means any property derived from or obtained directly or indirectly, through the commission of an offence.”

[4] Please refer to Article 155, 309 and Article 299, Paragraph 1 of the Code of Criminal Procedure. 

[5] Article 38-1, Paragraph 3 of the Criminal Code: “If the entire or partial confiscation mentioned in the preceding two subparagraphs as above was failed or not appropriate, the value thereof shall be collected from the offender.”

[6] Article 42, Paragraph 1 of the Criminal Code: 
“A fine must be paid in full within two months after judgment has been finalized. If full payment is not made within the two-month period, a compulsory execution shall be ordered. If the offender cannot afford the payment, the fine shall be commuted to labor service. If his economic or credit condition does not allow him to pay within the prescribed two months, he may be allowed to pay by installments within a year after the expiration of the prescribed period. When one installment is delayed or not paid in full, the convicted may be forced to pay the rest amount of the fine. In this case, the fine may be commuted to labor service.”

[7] Article 42, Paragraph 2 of the Criminal Code:
“If the afore-mentioned compulsory execution is taken in accordance with the provisions of the preceding paragraph and it is found that the convicted has no property for execution, the fine may directly be commuted to labor service.”

[8] Article 42-1, Paragraph1 of the Criminal Code:
“Commuting fine to labor may be commuted to social work at the rate of six -hours social work for a day, except one of the following circumstances：
     1. The period of commuting fines to labor is more than one year.
     2. The punishment to be executed is an imprisonment for more than six months with fines.
     3. The execution of social work is manifestly difficult because of health reasons.”

[9] Article 38-1, Paragraph 5 of the Criminal Code: “The proceeds of crime having been legally returned to the victim shall not be confiscated or collected.”

[10] Article 38-3, Paragraph 2 of the Criminal Code: “The third party’s ownership of the thing or the proceeds or a claim of an obligation acquired by a crime specified in the preceding paragraph shall remain unchanged.”

[11] Article 473, Paragraph1 of the Code of Criminal Procedure: “If the rights holders file a motion to have confiscated items or force-collected property returned, or if persons, who are allowed to exercise the right to a claim as a result of the defendant's crime, have obtained the civil compulsory execution and file a motion to be paid, within a year after the judgment is finalized, the prosecutor shall return such items/property or pay such claims, with the exceptions of: items/property that should be destroyed or abandoned; if the items/property are sold, the price of the sale shall be returned.”

[12] Please refer to Article 54, Paragraph 1, Subparagraph (c) of the United Nations Convention against Corruption (UNCAC). It should be reminded the use of “confiscation” defined in Article 2, Subparagraph (g) of the UNCAC, covers a wider scope than Taiwan’s New Confiscation Scheme. 【Citation 4 of the Judgment】

[13]Article 182 of the Civil Code:
“The recipient, who did not know of the absence of the legal ground and the interests have no longer existed, is released from the obligation to return the interests or reimburse the value.
If the recipient knew of the absence of the legal ground at the time of the receipt, or if he was subsequently aware of it, he shall be bound to return the interests acquired at the time of the receipt or such interests still existing at the time when he was aware of the absence of the legal ground plus the interest and to make compensation for the injury, if any.”