9. CRIMINAL-LAW PROTECTION OF THE COMMUNITY'S
FINANCIAL INTERESTS
(a)
(23943)
11322/01
COM(01) 272
(b)
(23917)
13396/02
COM(02) 577
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Draft Directive on the criminal-law protection of the Community's financial interests.
Amended draft Directive on the criminal-law protection of the Community's financial interests.
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| Legal base: | Article 280 EC; co-decision; qualified majority voting
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| Document originated: | (a) 23 May 2001
(b) 16 October 2002
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| Deposited in Parliament: | (a) 6 November 2002
(b) 26 October 2002
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| Department: | Home Office
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| Basis of consideration: | EM of 19 November 2002
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| Previous Committee Report: | None; but see (22999) — : HC 152-xix (2001-02), paragraph 5 (13 February 2002)
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| To be discussed in Council: | No date set
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| Committee's assessment: | Legally and politically important
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| Committee's decision: | Not cleared; further information requested
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Background
9.1 There has been concern about the protection of the
Community's financial interests for some time. However, ratification
of the 1995 Convention on the Protection of the Community's Financial
Interests and its 1996 protocols has been slow in several Member
States. A protocol of 1997 has still not been ratified by all
the Member States, which has prompted the Commission to propose
the present measure as a way of giving the existing legal arrangements
more teeth. The Directive is proposed to take effect under Article
280 of the EC Treaty and seeks to align Member States' substantive
criminal law regarding conduct which affects the Community's financial
interests. It would ensure that fraud, corruption and money-laundering
which damaged the Community's financial interests constituted
criminal offences.
The documents
9.2 Document (a) contains the proposed Directive on the
criminal-law protection of the Community's financial interests
(PFI). Document (b) sets out the Commission's opinion on the European
Parliament's amendments to the proposal.
9.3 The articles of the proposed PFI Directive are based
without exception on provisions from the Convention on the Protection
of the Community's Financial Interests and its first two protocols
of 1996. These entered into force in October 2002 following approval
in their entirety by all Member States, including the United Kingdom.
9.4 On its first reading of the proposed Directive the
European Parliament proposed 20 amendments. The Commission says
it will accept only four of these in full and one in part. However,
the Council has not yet considered the Directive, or the European
Parliament's amendments.
The Government's view
9.5 In his Explanatory Memorandum of 19 November 2002
the Parliamentary Under-Secretary of State at the Home Office
(Mr Bob Ainsworth) explains the Government's reservations about
the proposed measure. First, he questions the proposed legal basis
for the instrument, stating that Article 280(4) EC does not provide
an acceptable legal base for the proposal.
9.6 Secondly, the Minister expresses reservations about
the need for consolidating the existing PFI instruments into a
First Pillar measure:
"The United Kingdom ratified the PFI Convention and its protocols
in September 1999. A number of Member States have been extremely
slow in completing the ratification process, but all have now
ratified and the Convention entered into force on 17 October 2002.
There is therefore no practical need for the proposed Directive."
9.7 Finally, the Minister raises the issue of Community
competence to adopt this measure:
"There is also an issue surrounding the division of competence
between the first and third Pillars. The Commission has been seeking
to establish the Communities' right to require Member States to
adopt criminal sanctions to enforce Communities' legislation.
However, Member States, including the UK, have argued that matters
relating to the criminal law are a matter for Member States' competence
and that if such matters are to be dealt with at an EU level this
should be by means of third pillar measures."
9.8 The Minister concludes by noting that the Directive
has not been discussed at a Justice and Home Affairs Council or
in working groups, and that, due to the entry into force of the
PFI Convention, it is highly unlikely to be adopted by Member
States.
Conclusion
9.9 We agree with the Minister that there is no need
to consolidate the existing Convention on the Protection of the
Community's Financial Interests and its protocols into a First
Pillar instrument under Article 280 of the EC Treaty. In particular,
we share the Minister's view that that this Article is not an
appropriate legal basis for adoption of the proposed measure.
9.10 We likewise share the Minister's reservations
over competence. Matters relating to criminal law fall within
the competence of Member States and may be dealt with at European
level only by means of Third Pillar instruments.
9.11 We hold both documents under scrutiny until the
proposed measure has been either abandoned or replaced by a substantially
revised proposal. In the meantime we ask the Minister whether
he can give us an unequivocal assurance that the Government will
oppose the present proposal either in its original or amended
form.
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