7 Fraud and other illegal activities
| (27810)
12854/06
COM(06) 473
| Amended draft Regulation on mutual administrative assistance for the protection of the financial interests of the Community against fraud and any other illegal activities
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| Legal base | Article 280 EC; co-decision; QMV
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| Department | HM Treasury |
| Basis of consideration | Minister's letter of 29 November 2006
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| Previous Committee Report | HC 41-i (2006-07), para 6 (22 November 2006)
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| To be discussed in Council | Not known
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| Committee's assessment | Legally and politically important
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| Committee's decision | Not cleared, further information awaited
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Background
7.1 Article 280 EC requires the Community and the Member States
to counter fraud and any other illegal activities affecting the
financial interests of the Community through measures adopted
under that Article. Present legislation does not give a legal
basis for the Commission to play an active role in protecting
the financial interests of the Community through supporting and
coordinating Member States' activities, particularly in the fields
of VAT fraud and money laundering. The Commission believes that
co-operation and the exchange of information concerning fraudulent
activities in a single market of 25 Member States will become
increasingly difficult, and that there is a need for it to take
a more active role in supporting and co-ordinating Member States'
activities. So in July 2004 the Commission presented a draft Regulation,
which was designed to give it such a role. The Commission stressed
that the Regulation would not give it or OLAF any additional investigative
powers. It said the proposal would provide "the basis and
tools for multidisciplinary co-operation between the relevant
competent authorities of different Member States and between them
and the Commission".
7.2 The previous Committee considered this document on a number
of occasions. During this consideration the Government was able
to satisfy our predecessors as to concerns about taxpayer confidentiality
and, saving one instance, about unnecessary or inappropriate provisions
in the draft Regulation. This instance related to the previous
Committee's concern about the lawfulness of Article 15 of the
draft Regulation and about the related Recital 9. Article 15,
which was entitled "Use as evidence", provided that
"findings, certificates, information, documents, certified
true copies and any intelligence communicated to a competent authority
[in the course of providing assistance] shall constitute admissible
evidence in administrative or judicial proceedings in any Member
State, in the same way as if they had been obtained in the Member
State where the proceedings take place". This appeared to
our predecessors to impose a uniform rule of admissibility of
evidence, including in criminal proceedings, and we asked the
Government to what extent this was consistent with Article 280(4)
EC, which prevents the adoption of measures which "concern
the application of national criminal law or the national administration
of justice". The Government was unable to persuade the previous
Committee of the validity of the provisions of Article 15 and
was asked to reconsider that question, since our predecessors
maintained their view that these provisions plainly disregarded
the limits imposed by Article 280(4) EC.[14]
7.3 In November 2006 we considered the present document, an amended
draft Regulation replacing the original proposal (which we cleared
as it was redundant). The Commission presented this revised proposal
in the light of amendments made by the European Parliament and
suggestions made by Member States. Recital 9 and Article 15 of
the original proposal, which concerned our predecessors, although
renumbered — Recital 11 and Article 14 — remain unamended
in the revised proposal. The Government argued again in support
of these provisions but we, like our predecessors, were unconvinced.
We remained strongly of the view that Recital 11 and Article 14
breach the prohibition in Article 280(4) EC and are ultra vires.
So we decided to take evidence from the Economic Secretary to
the Treasury (Ed Balls) on this issue.[15]
The Minister's letter
7.4 The Minister writes now to say that:
- he has noted the strength of our opinion about Article 14
of the amended draft Regulation;
- the Government has tried to suggest that the Article does
not provide for automatic admissibility of evidence and therefore
does not concern the national administration of justice, but acknowledges
that the matter is not free from doubt;
- the Government intends, therefore, to raise the issue in the
Council discussions on the revised proposal, to state that the
Government is unable to approve Article 14 in its present form
and to ask the Council's Legal Service to consider whether it
is ultra vires.
7.5 The Minister suggests that, depending on how things turn out,
it may be that we will not think it appropriate to take oral evidence.
Conclusion
7.6 We are pleased that the Government has decided to take
this approach in relation to Article 14. In the light of this
we do not think it necessary to take evidence from the Minister
at this stage. When we know the outcome to the Government's stance
in the Council on this matter we will decide whether an evidence
session remains necessary at all.
7.7 We take this opportunity to remind the Minister that we
wish to hear in due course also about any satisfaction the Government
has been able to obtain on:
- the extent of flexibility
for Member States in response to the Regulation's requirements;
- any real necessity for further
measures on money laundering; and
- the affect of the proposal
on co-operation in the field of VAT.
7.8 Meanwhile the document remains uncleared.
14 (25996) 12993/04; see HC 42- xxxiii (2003-04), para
8 (20 October 2004), HC 42-xxxvii (2003-04), para 8 (17 November
2004), HC 38- iii (2004-05), para 7 (12 January 2005) and HC 38-xi
(2004-05), para 5 (15 March 2005). Back
15
See headnote. Back
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