51 Convention on the protection of the
European Communities' financial interests
| (26103)
14071/04
COM(04) 709
+ ADD 1
| Report from the Commission on the implementation by Member States of the Convention on the Protection of the European Communities' financial interests and its protocols
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| Legal base | — |
| Department | HM Treasury |
| Basis of consideration | Minister's letter of 5 April 2005
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| Previous Committee Report | HC 38-v (2004-05), para 4 (26 January 2005)
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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 | Cleared
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Background
51.1 The Convention on the protection of the European Communities'
financial interests was adopted by the Member States in 1995.[186]
The Convention sets out principles for cooperation between Member
States and provides for rules of jurisdiction for protecting EC
financial interests. A First Protocol to the Convention was adopted
in 1996,[187] with
a Second Protocol adopted in 1997.[188]
A Protocol conferring an interpretative jurisdiction on the European
Court of Justice (ECJ) was adopted in 1996.[189]
The Convention, its First Protocol and the protocol conferring
an interpretative jurisdiction on the ECJ have entered into force,
but the Second Protocol awaits ratification by Italy, Luxembourg
and Austria.
51.2 The Commission has noted that the Council has not adopted
a common position on a draft Directive on the criminal-law protection
of the Communities financial interests,[190]
which it proposed under Article 280 EC.[191]
Since this proposal has not been adopted, the Commission has
issued a report on the implementation of the Convention by the
Member States in order to "check whether the objective of
effective and equivalent protection of the EC's financial interests
has already been attained in all Member States". The Commission
argues that identifying what it regards as "persistent shortcomings"
by Member States in this regard should help to advance the process
of adopting its proposal for a Directive.
51.3 When the previous Committee examined the Commission's
report on 26 January 2005, it considered that the report was
more concerned with arguing a case for further harmonisation than
with identifying problems which had any real and substantial effect
on the management of the Community's finances. It also considered
that the report's treatment of the law of the United Kingdom was
in places superficial and inaccurate. The Committee found it
disturbing that the Commission should regard requiring dishonesty
as an ingredient of a criminal offence as a matter for criticism,
and it drew attention to the Commission's incomplete analysis
of United Kingdom law relating to corruption and its likely effect
on office-holders and staff of the EC institutions.
51.4 The Committee noted that the Government was
also concerned that the report did not reflect accurately the
UK's situation, that the Government had written to the Commission
to express its concerns and that the Government considered that
the adoption of a Directive as proposed by the Commission was
unnecessary as the Directive would replicate the provisions of
the Convention.
51.5 The Committee asked the Minister to inform it
of the points the Government had made to the Commission about
its report, and if the Minister agreed that greater priority should
be given to the general administrative and accountability problems
highlighted year after year in reports of the Court of Auditors
on the administration of the Community's finances than to harmonising
the detailed provisions of the criminal law of Member States on
fraud and corruption.
The Minister's reply
51.6 The then Financial Secretary to the Treasury
(Mr Stephen Timms) replied to the previous Committee on 5 April
2005. The Minister stated that he shared the previous Committee's
disappointment with the accuracy and scope of the Commission's
report, and he enclosed a copy of the detailed comments which
the Government has sent to the Commission. This shows that the
report suffers from a number of inaccuracies and misunderstandings
of English and Scots law which have affected the conclusions reached.
51.7 One instance is the criticism in the Commission
report that the laws of the United Kingdom relating to fraudulent
conduct required the additional "subjective elements"
of deception and dishonesty (with the implication that the protection
of EC financial interests was for that reason inadequate). In
reply, the Government points out that, whilst the offence of theft
does not require deception, "dishonesty is, and should remain,
an essential requirement of both fraud and theft, if the law is
not to criminalise a variety of innocent behaviours". In
another instance, the Commission report regrets the absence of
a specific reference to EC officials in the domestic law on corruption.
The Government reply refers the Commission to the Prevention of
Corruption Act 1906, as amended by the Anti-terrorism, Crime and
Security Act 2001, which applies to any agent, including any person
employed by or acting for another. It is also expressly provided
that it is immaterial if the agent's functions have no connection
with the UK. The Government's reply does not consider that the
absence of a specific reference to EC officials is regrettable,
and points out that such specific references create problems by
raising questions as to whether particular types of official are
covered.
51.8 The Minister agrees with the previous Committee
that, whilst it is important to have effective legislation in
place in the Member States, it is equally if not more important
to take action to improve administrative and financial management
of EC funds and revenue, both in the Commission and in Member
States. The Minister comments further:
"The tenth successive failure to gain a positive
statement of assurance for the majority of the budget is extremely
detrimental to public confidence and improvements are essential."
Conclusion
51.9 We are grateful to the Minister for his reply
and we agree with the points he has made.
51.10 The inaccuracies and erroneous judgements
made in the Commission's analysis of the laws of the United Kingdom
do not give grounds for confidence in the accuracy of the review
made of the laws of other Member States in the Commission's report.
Rather than arguing the case for the adoption of an unnecessary
Directive, we consider that the resources given to the Commission
might better have been used to secure improved administrative
and financial management of EC funds.
51.11 We have no further question to put to the
Minister and we clear the document.
186 OJ No. C 316 of 27.11.95, p.49. Back
187
Protocol to the Convention on the protection of the European Communities'
financial interests, OJ No. C 313 of 23.10.96, p.2. Back
188
Second Protocol to the Convention on the protection of the European
Communities' financial interests, OJ No. C 221 of 19.7.97, p.12. Back
189
Protocol on the interpretation, by way of preliminary rulings,
by the Court of Justice of the European Communities of the Convention
on the protection of the European Communities' financial interests,
OJ No. C 151 of 20.5.97, p.2. Back
190
OJ No. C 240 E of 28.8.01, p.125. Back
191
Note, however, that Article 280(4)EC provides that measures under
Article 280EC "shall not concern the application of national
criminal law or the national administration of justice". Back
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