9 Freezing and confiscation of proceeds
of crime
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7641/12
+ 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
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| Legal base | Articles 82(2) and 83(1) TFEU; co-decision; QMV
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| Department | Home Office
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| Basis of consideration | Minister's letter of 28 November 2012
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| Previous Committee Reports | HC 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)
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| Discussion in Council | 6-7 December 2012
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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 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.
Conclusion
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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