5 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 1 August 2012
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| Previous Committee Report | 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 | No date set
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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
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."
Conclusion
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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