Documents considered by the Committee on 12 September 2012 - European Scrutiny Committee Contents

5 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 1 August 2012
Previous Committee ReportHC 86-vi (2012-13), chapter 4 (27 June 2012);

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

Discussion in CouncilNo date set
Committee's assessmentLegally and politically important
Committee's decisionNot cleared; further information requested

Background and previous scrutiny

5.1 The draft Directive forms part of a broader framework of domestic, EU and international laws which are intended to strengthen international cooperation in the investigation and confiscation of criminal assets. The Commission believes that these laws have done little to reduce the substantial differences in Member States' national systems for the confiscation of assets. It therefore advocates an increased level of harmonisation at EU level based on a set of minimum rules covering different types of confiscation: value-based confiscation; extended confiscation; non-conviction based confiscation; and third party confiscation. According to the Commission, a minimum level of harmonisation is needed to facilitate mutual trust and effective cross-border cooperation, making it easier for freezing and confiscation orders issued in one Member State to be enforced against criminal assets located in another Member State.

5.2 Our Sixty-Third Report of 18 April 2012 describes the content and background to the draft Directive as well as the Government's initial assessment. The Government suggested that the draft Directive was likely to attract "particularly strong Parliamentary interest" - the criterion used in the Minister for Europe (David Lidington's) Written Ministerial Statement of 20 January 2011 to determine which EU measures subject to the UK's Title V opt-in should be debated on the Floor of the House on the basis of a motion setting out the Government's recommended approach on the opt-in (so-called "Lidington debates"). The debate took place on 12 June, three days before the 15 June deadline for notifying the Council Presidency of the Government's opt-in decision. Shortly before the debate, the Parliamentary Under Secretary for Crime and Security (James Brokenshire) wrote to inform us that the Government's recommended approach was not to opt in, but to play an active role in negotiations with a view to considering a post-adoption opt-in. The reasons underpinning the Government's approach are set out in our Sixth Report of 27 June 2012.

5.3 We noted that the Government's principal objection to the Commission's proposal appeared to be based on the inclusion, within an EU criminal law measure, of 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 which might, therefore, provide a basis for asserting that more stringent criminal law standards and safeguards (under Article 6(2) and (3) of the ECHR) should be imported into the UK's domestic civil recovery regime. We asked the Government to provide further information on the following issues:

  • the nature of the risk which the draft Directive would present to the UK's domestic civil recovery regime and the extent of any changes that would need to be made to Part V of POCA;
  • how the draft Directive might weaken the UK's domestic regime on extended powers of confiscation;
  • the impact that a decision to opt into the Directive post-adoption would have on the UK's "block opt-out decision" (to be taken no later than end of May 2014);
  • the impact that a decision to not opt into the Directive at a later stage would have for UK cooperation with international partners in overseas asset recovery;
  • how the Government intends to realise its goal of establishing effective mutual recognition arrangements on both criminal and civil law confiscation, and whether it accepts that some common rules or standards are a necessary prerequisite for mutual recognition; and
  • how the Government intends to address shortcomings in the process for holding Lidington debates.

The Minister's letter of 1 August 2012

5.4 The then Minister for Crime Prevention and Anti-Social Behaviour Reduction (Lord Henley), writing in his capacity as duty Minister at the Home Office, responds to the issues we raised in our Sixth Report of 27 June 2012.

Lidington opt-in debates

5.5 The Minister expresses regret that the first two Lidington opt-in debates (on the draft Directive on Confiscation and on a draft Regulation on data processing in the framework of police and judicial cooperation in criminal matters) have been "unsatisfactory." He continues:

"We are keen to learn lessons from this experience to ensure the process works more effectively in future. In particular, I accept that we must ensure your Committee is informed of the Government position at an earlier stage to inform these debates. I know that officials from the Home Office, Ministry of Justice and Foreign and Commonwealth Office recently met with Clerks to your Committee to discuss the issue, and the Parliamentary Under Secretary for Crime and Security has subsequently raised the matter with the Europe Minister."

Risks to the UK's domestic civil recovery regime

5.6 The Minister indicates that any risk of legal challenge to the UK's domestic civil recovery regime would arise "in light of the criminal law context into which the Directive would appear to place non-conviction based confiscation through its use of a criminal law legal base." He says that, during negotiations, the Government will consider how this risk could be mitigated.

5.7 The Minister confirms the Government's view that POCA already covers the types of confiscation provided for in Articles 5 and 6 of the draft Directive on non-conviction based confiscation and confiscation from a third party, and that no further changes to the Act would be needed to implement these Articles. However, he reiterates the Government's concern that the use of Part V of POCA to implement Article 5 would create the risk of fresh legal challenges because the Directive has a criminal law legal base. He continues:

"Part 5 of POCA has already been challenged on the grounds that it is really criminal in character and therefore the criminal standard of proof should be applied, along with the procedural protections of Articles 6(2) and 6(3) ECHR. Thus far, the Government has successfully opposed those challenges in the courts. Implementing Article 5, in its current form, through Part 5 of POCA could raise questions as to whether there would be an increased risk of the Government not being successful in its defence of the civil nature of Part 5 of POCA in the future."

Extended powers of confiscation

5.8 The Minister notes that, unlike POCA, Article 4(2) of the draft Directive contains two exclusions which limit the scope of the powers concerning extended confiscation. He adds:

"Therefore, we would need to be clear that Article 4(2) was a minimum standard which the UK could go beyond, for example by not applying the exclusions, since the alternative approach could reduce the scope of extended confiscation under POCA."

Impact on the UK's 2014 "block opt-out" decision

5.9 We noted that the scope of application of the draft Directive is determined by reference to eleven EU instruments (listed in Article 2(6)), nine of which were adopted before the Lisbon Treaty entered into force and should, therefore, fall within the scope of the UK's block opt-out decision. The Government suggested that some of the obligations arising under these instruments would be imported into the draft Directive by virtue of Article 2(6). We asked which obligations would be imported and what implications this would have for the UK's 2014 block opt-out if the Government sought to opt into the Directive after its adoption. The Minister explains:

"The wording of Article 2(6) is ambiguous. It is not clear what is meant by the term 'covered by'. It is possible that such wording would imply that the UK would be required not only to maintain the criminal offences listed in the Framework Decisions listed at Article 2(6), but also some of the other obligations in those Framework Decisions. We hope to clarify this during negotiations. However, were the UK to opt in to this Directive, it would, as a minimum, have to maintain all of the offences referred to in Article 2(6) as offences in UK law for the purposes of this Directive, regardless of any opt-out decision made in relation to the measures listed in Article 2(6)."

5.10 We also asked the Minister to explain how Article 14 of the draft Directive, which replaces some Articles contained in existing pre-Lisbon EU instruments on the freezing and confiscation of proceeds of crime, without repealing the instruments themselves, would affect the UK's block opt-out decision. The Minister notes:

"Article 14 proposes that Joint Action 98/699/JHA is replaced in its entirety, whilst the two Council Framework Decisions mentioned are replaced in part for those States participating in the Directive. There is some ambiguity on what the effect of the replacement provision is in Article 14 in respect of the 2014 decision. It is not clear whether the Framework Decisions and Joint Action cited in that Article are being amended and hence removed from the 2014 Decision. This is something that can be clarified during negotiations. However, since the UK has not opted in to the Directive, we are not participating in its provisions and therefore the UK remains bound by Joint Action and Framework Decisions mentioned. They consequently remain on the list of measures subject to the decision in 2014 on whether we should accept full European Court of Justice jurisdiction for pre-Lisbon police and criminal justice measures."

Implications for broader international cooperation

5.11 The Minister notes that the Directive would only replace one EU Joint Action (98/699/JHA) and certain Articles contained in two EU Framework Decisions (2001/500/JHA and 2005/212/JHA). He continues:

"The other Framework Decisions in the area of asset freezing and confiscation will remain in place and apply to all Member States whether or not they are bound by this Directive.

"The UK's cooperation with international partners would not be adversely affected were we to remain outside the Directive since international cooperation takes place under instruments unaffected by the Directive. Mutual legal assistance in this area can take place on the basis of either the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime, or the 1959 Council of Europe Convention on Mutual Assistance in Criminal Matters, neither of which is affected by the Directive. Nor are the Framework Decisions on mutual recognition (Framework Decisions 2003/577/JHA and 2006/783/JHA) affected by the Directive."

Mutual recognition

5.12 The Minister indicates that the Government will explore options for mutual recognition as negotiations on the Directive progress and through its normal contacts with the Commission, European Parliament, and other Member States. He adds:

" As a matter of principle, we do not believe that mutual recognition requires the creation of EU minimum standards on confiscation as a prerequisite to its operation, but, as the Committee is aware, there are already some common rules within the EU with regard to freezing and confiscation of proceeds of crime. Whether or not these would need to be amended, replaced or added to is one of the issues that we will explore with our partners."


5.13 We thank the Minister for his letter and welcome his undertaking to inform us of developments as negotiations continue. As the Government has indicated that it intends to play an active part in negotiations with a view to considering a post-adoption opt-in, we ask the Minister to ensure that future progress reports clearly set out the significance which any changes may have for future UK participation in the Directive, particularly as these may have implications for the UK's 2014 block opt-out decision which we will wish to examine carefully. We also look forward to hearing what progress the Government is making in exploring with EU partners more effective arrangements for the mutual recognition of conviction and non-conviction based confiscation orders. Meanwhile, the draft Directive remains under scrutiny.

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Prepared 26 September 2012