European Scrutiny Committee Contents

9 Freezing and confiscation of proceeds of crime



+ ADDs 1-2

COM(12) 85

Draft Directive of the European Parliament and of the Council on the freezing and confiscation of proceeds of crime in the European Union

Legal baseArticles 82(2) and 83(1) TFEU; co-decision; QMV
DepartmentHome Office
Basis of considerationMinister's letter of 28 November 2012
Previous Committee ReportsHC 86-xii (2012-13), chapter 5 (12 September 2012)

HC 86-vi (2012-13), chapter 4 (27 June 2012)

HC 428-lvii (2010-12), chapter 1 (18 April 2012)

Discussion in Council6-7 December 2012
Committee's assessmentLegally and politically important
Committee's decisionNot cleared; further information requested

Background and previous scrutiny

9.1 The draft Directive, which would establish a set of minimum rules covering different types of confiscation (value-based confiscation, extended confiscation, non-conviction based confiscation and third party confiscation), has been considered in some detail in our earlier Reports[54] and was the subject of a "Lidington" opt-in debate on 12 June. Despite welcoming the aims of the draft Directive and indicating that it was broadly in line with existing UK legislation and practice, the Government somewhat belatedly concluded that it might undermine the UK's domestic civil asset recovery regime. This is because the draft Directive — an EU criminal law measure — includes provisions on non-conviction based confiscation which are governed in the UK by civil procedures under Part V of the Proceeds of Crime Act (POCA) 2002 and might, the Government fears, provide a basis for asserting that more stringent criminal law standards and safeguards (under Article 6(2) and (3) of the ECHR) should apply to Part V of the Act. The Government has therefore decided not to opt in to the draft Directive, but to play an active role in negotiations with a view to considering a post-adoption opt-in.

9.2 We have retained the draft Directive under scrutiny for two reasons. First, a decision to opt in to the Directive after its adoption by the Council and the European Parliament would affect the scope of the UK's 2014 block opt-out decision. We have therefore asked the Minister to ensure that his progress reports explain the significance which any changes to the Commission's original text may have for UK participation in the draft Directive. Second, the Government has indicated that its priority is to establish effective mutual recognition arrangements for both conviction and non-conviction based confiscation orders, in both the civil and criminal contexts, and that it does not consider that the creation of minimum standards at EU level is a necessary prerequisite for doing so. We have asked the Government to inform us of the progress it is making in exploring with EU partners more effective arrangements for mutual recognition in this area.

The Minister's letter of 28 November 2012

9.3 The Minister for Crime Prevention (Jeremy Browne) informs us that the Presidency is keen to reach agreement on a general approach at the Justice and Home Affairs Council on 6-7 December. He continues:

"As you will remember, the UK has not opted in to this Directive and will not, therefore, have a vote at the JHA Council. Nevertheless, given the proximity of that meeting I am keen to ensure that you are kept fully informed of our progress in the negotiations so that you have the opportunity to consider the Directive in its latest draft before the JHA Council."

9.4 The Minister summarises the main developments since negotiations began in May.

Scope of the Directive

"Member States have discussed the issue of the legal base and specifically whether or not non-conviction based confiscation (NCB) measures are permissible in a Directive on an Article 83(1) TFEU legal base and concluded that NCB confiscation is within the scope of the legal base provided that it has a clear link to criminal proceedings. On that basis, it is thought that the NCB measure at Article 5 of the Directive is within scope, but that civil forfeiture regimes which have no link with criminal proceedings are outside the scope of the Directive. The UK's civil recovery regime (found in Part 5 of the Proceeds of Crime Act 2002 (POCA)) is therefore outside the scope of the Directive. We agree with this analysis.

Obligations under Article 2(a)

"The Commission has made clear in discussions that the purpose of the list of instruments at Article 2(a) is to ensure that Member States are clear which offences were within the scope of the Directive. This position has been widely supported by Member States. We successfully inserted wording into recital 21(a) to make clear that the scope of this Directive for the UK, were we to opt in, would be limited to those criminal offences harmonised in instruments in which the UK participates. This should ensure that the UK does not find itself required to apply the Directive's obligations in regard to offences defined in instruments to which the UK is not bound, or which it might choose to opt out of in 2014.

Article 4: the double jeopardy exclusion to extended confiscation

"We have successfully negotiated the removal of the double jeopardy exclusion in Article 4(2) of the original draft. This article no longer poses a risk to our extended confiscation regime.

"The scope of Article 4 is now more restricted than the general scope of the Directive. Article 4 only applies to 'serious crimes' which are liable to give rise to an economic benefit. This development brings Article 4 more closely into line with our domestic legislation which has a restricted list of offences to which extended confiscation can apply (the 'lifestyle crimes' listed in Schedule 2 of POCA)).

Article 5: non-conviction based confiscation

"Article 5 has been the most contentious article throughout negotiations. Our concern regarding this Article is that we can only implement it through our civil recovery regime though doing so would create a risk to that regime because of the criminal law legal base of the Directive. Were the UK to opt in to the Directive and implement Article 5 using our civil recovery regime there is a real risk that, in a future legal challenge, the fact that we would be relying on civil measures to implement a criminal law instrument could be relied on to assert that civil recovery powers are in fact criminal in nature and so criminal procedural rules and protections should apply. This would risk greatly weakening our civil recovery powers and hinder our attempts to tackle organised crime. This risk is still present in the latest draft of the Directive.

"Most Member States do not have civil non-conviction based confiscation regimes and do not face the same problem with this Article as we do. In general, Member States have sought to change Article 5 so that they can comply with it without having to create new non-conviction based confiscation powers. Negotiations have reshaped the Article so that Member States can implement it by using in absentia prosecutions to achieve a conviction.

"We will continue to pursue changes to this Article to mitigate the risk it poses to our civil recovery regime.

Article 6: third party confiscation

"Article 6 has been simplified over the course of negotiations. The UK could implement the latest version of Article 6 through the 'tainted gifts' provisions in Part 2 of POCA, whereby the value of any property passed on to third parties is included in the Court's calculation of criminal benefit and in the Confiscation Order made against the convicted individual. Since we will be able to implement this Article through the criminal law part of POCA, our civil recovery regime in Part 5 would not be put at risk by this Article were we to opt in to the Directive.

Article 7: the 'administrative freezing' power

"Article 7 has become less specific in its requirements over the course of negotiations. The obligation to create a system whereby freezing orders could be issued administratively prior to a court's sanction, found in Article 7(2) of the original draft of the Directive, has been removed. In its place is an obligation for Member States to have powers that allow 'urgent action to be taken when necessary'. The Directive does not define what is meant by 'urgent action' and this gives Member States freedom to decide whether or not a court order should be required before freezing action is undertaken.

Article 8: the legal aid burden

"We have successfully negotiated out the reference to a requirement for persons subject to the measures envisaged in Article 5 to be represented by a lawyer. We had concerns that this would have implications for legal aid. Article 8(5) now refers to 'the right to access to a lawyer' rather than stating that a person 'shall be represented by a lawyer' in NCB proceedings.

"To further defend our position we have inserted wording into recital 18 to make clear that Article 8 does not create any obligations for Member States' legal aid systems.

Article 14: repeal and amendment of existing instruments

"I understand that Article 14 will have the effect of repealing Joint Action 98/699/JHA and amending Framework Decision 2001/500/JHA and Framework Decision 2005/212/JHA. Recital 7 of the Directive supports that view."

9.5 The Minister undertakes to provide further progress reports if agreement on a general approach is agreed at the December Justice and Home Affairs Council, paving the way for 'trialogue' discussions with the European Parliament and Commission.


9.6 We thank the Minister for providing an update on the progress made in negotiations in advance of the December Justice and Home Affairs Council. We note that the Government's principal concern — that the inclusion in an EU criminal law measure of provisions on non-conviction based confiscation might increase the risk of legal challenge to the UK's civil recovery procedures — remains in Article 5 of the draft Directive. However, the Minister outlines a number of other changes which would appear to make it somewhat more, rather than less, likely that the Government may wish to consider opting in post-adoption. He also confirms that a decision to opt in post adoption would materially affect the scope of the UK's 2014 block opt-out, since three measures concerning the proceeds of crime which were adopted before the Lisbon Treaty entered into force would no longer be subject to the block opt-out.

9.7 We note that negotiations within the Council have proceeded swiftly and, if a general approach is reached in December, ask the Minister to provide a copy of the agreed text. We also ask him to provide further progress reports once negotiations with the European Parliament are underway which should highlight, in particular, changes likely to affect the Government's assessment of the costs or benefits of participating in the draft Directive. Finally, we remind the Minister that we look forward to hearing what progress the Government is making in seeking to establish more effective arrangements for the mutual recognition of confiscation orders obtained in both civil and criminal law contexts. Meanwhile, the draft Directive remains under scrutiny.

54   See headnote. Back

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© Parliamentary copyright 2012
Prepared 13 December 2012