1 European Public Prosecutor's
Office
(a)
(35214)
12551/13
COM(13) 532
(b)
(35217)
12558/13
COM(13) 534
ADDs 1-2
|
Commission Communication on better protection of the Union's financial interests: Setting up the European Public Prosecutor's Office and reforming Eurojust
Draft Regulation on the establishment of the European Public Prosecutor's Office (EPPO)
Commission Staff Working Documents:
Impact Assessment (IA) and Executive Summary of the IA
|
Legal base | (a)
(b) Article 86 TFEU; consent; unanimity
|
Documents originated
Deposited in Parliament
Department
| Both 17 July 2013
Both 22 July 2013
Home Office
|
Basis of consideration | EM of 7 August 2013
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Previous Committee Report | None; but see (34091) 12683/12: HC 86-xii (2012-13) chapter 10 (12 September 2013); (32831) 11055/11: HC 428-xxxviii (2010-12) chapter 1 (19 October 2011) and HC 428-xxxi (2010-12) chapter 1 (29 June 2011); (22999) : HC 152-xxxiv(2001-02) chapter 14 (26 June 2002) and HC 152-xix (2001-02) chapter 5 (13 February 2002)
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Discussion in Council | October JHA Council
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Committee's assessment | Legally and politically important
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Committee's decision | (a) Not cleared; further information requested; relevant to the opt-in debate on document (b) and the Draft Regulation on Eurojust[1]
(b)Not cleared; recommended for debate on the Floor of the House on the opt-in together with the Draft Regulation on Eurojust; also recommended for a Floor of the House debate on the Reasoned Opinion before 28 October; further information requested
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Background
1.1 We have not previously scrutinised either document (a), the
Commission Communication on setting up the European Public Prosecutor's
Office (EPPO) or document (b), the draft Regulation to establish
the EPPO. Currently, prosecuting offences against the EU budget
is within the exclusive competence of Member States and there
is no existing EU authority for EU-level action. Against the background
of levels of suspected fraud against the EU budget estimated by
the Commission at around 500/£425
million in each of the three last years, both documents are aimed
at achieving EU-level investigation and prosecution of crimes
affecting the financial interests of the EU. They are part of
a wider package of related measures, including the draft Directive
on the fight against fraud to the Union's financial interests
by means of criminal law (known as the PIF Directive PIF
is the French acronym for protection of financial interests)[2]
which we addressed in our last Report to the House. Document (b)
is accompanied by the Commission's impact assessment and an executive
summary of the assessment.
1.2 In short, document (b) provides that the EPPO
would be responsible for investigating, prosecuting and bringing
to judgment the perpetrators of, and accomplices in, offences
against the Union's financial interests. It would exercise the
functions of prosecutor in the competent courts of the participating
Member States in relation to offences against the EU's financial
interests. It also sets out the general rules applicable to the
EPPO, the conditions governing the performance of its functions,
the rules of procedure applicable to its activities, as well as
those governing the admissibility of evidence, and provides for
judicial review of procedural measures taken by it in the performance
of its functions. Document (a) provides the policy justification
for document (b).
1.3 There is considerable history to the idea of
an EPPO. In 2002 our predecessors scrutinised a
2001 Green Paper[3] in
which the idea of establishing an EPPO was first proposed by the
Commission. However, the idea had been widely
discussed before then, particularly at the Intergovernmental Conference
for the Nice Treaty[4]
where the Commission presented an outline proposal, drawing on
the work of Corpus Juris,[5]
but it was not taken up by the European Council due to lack of
Member State support. During the Convention that produced the
Draft Constitutional Treaty in 2003-04, the proposal was revived
and included in the draft Treaty as Article III-175.[6]
It finally gained legislative footing in the Lisbon Treaty, now
Article 86 of the Treaty on the Functioning of the Union (TFEU).
The prospect of a specialist EU prosecution authority was raised
again as part of a range of initiatives considered by the Commission
in the 2011 Communication which we scrutinised.[7]
1.4 In their Reports on the Green Paper,[8]
our predecessors said that an EPPO was unnecessary, particularly
given the existence of Eurojust. They identified a number of concerns
of principle, such as the combination of prosecution and investigative
functions, the power of the EPPO to commit a person for trial
and determine the location of the trial, the creation of differing
standards of criminal responsibility for fraud depending on whether
it related to fraud on the Community's financial interests or
not, the lack of democratic accountability for the prosecution
function, breach of the subsidiarity principle and dilution of
Member State responsibility for prosecution of fraud. We echoed
the concerns of our predecessors when, in recommending the 2011
Communication for debate in European Committee,[9]
we cautioned against the "inappropriate and unacceptable"
use of national criminal justice systems in acting against crimes
against EU finances.[10]
1.5 The EPPO proposal has been published alongside
a separate legislative proposal to reform the EU Agency Eurojust[11]
and a Communication on the reform of the European Anti-Fraud Office
(OLAF);[12] these are
the subject of separate Explanatory Memoranda and are examined
in chapters 2 and 3 of this Report.
1.6 From a UK perspective, an important aspect of
the background to the EPPO proposal is that the Coalition Agreement
confirms that the Government will not participate in this proposal.
In "The Coalition: our programme for Government", the
Government states in the chapter on Europe:
"We will approach forthcoming legislation
in the area of criminal justice on a case-by-case basis, with
a view to maximising our country's security, protecting Britain's
civil liberties and preserving the integrity of our criminal justice
system. Britain will not participate in the establishment of any
European Public Prosecutor."[13]
1.7 Denmark[14]
will also not be participating in the measure and Ireland has
yet to make its own JHA Title V opt-in decision. In this Report
we therefore include, in our scrutiny, whether the interests of
non-participating Member States are met by the proposal.
Legal Background
Legal base
1.8 The Union and Member States have a duty under
Article 325 TFEU to "counter fraud and other illegal activities
affecting the financial interests of the Union" and "
to afford effective protection to those interests".[15]
However, the legal base for the establishment of an EPPO is Article
86 TFEU.
1.9 Article 86 provides:
"1. In order to combat crimes affecting
the financial interests of the Union, the Council, by means of
regulations adopted in accordance with a special legislative procedure,
may establish a European Public Prosecutor's Office from Eurojust.
The Council shall act unanimously after obtaining the consent
of the European Parliament."
1.10 Article 86(1) also makes available an accelerated
version of the enhanced co-operation procedure. In the absence
of unanimity, nine Member States or more can request that the
draft Regulation be referred to the European Council, which either
comes to a consensus on the text, or after four months, is deemed
to have granted authorisation to the nine to proceed with enhanced
co-operation, so dispensing with the Council authorisation required
under the normal enhanced co-operation procedure. The normal procedure
set out in Article 20(2) of the Treaty on the European Union (TEU)
and Article 329(1) TFEU then applies and the participating Member
States need to agree unanimously to the proposal.
1.11 Article 86(2) then sets out the scope of the
EPPO's role: "investigating, prosecuting and bringing to
judgment, where appropriate in liaison with Europol, the perpetrators
of, and accomplices in, offences against the Union's financial
interests" including exercising "the functions of prosecutor
in the competent courts of the Member States in relation to such
offences." Article 86(3) states that the Regulation establishing
the EPPO shall also determine general rules applicable to the
EPPO relating to the "performance of its functions, the rules
of procedure applicable to its activities, as well as those governing
the admissibility of evidence, and the rules applicable to the
judicial review of procedural measures taken by it in the performance
of its functions."
1.12 Finally, Article 86(4) provides for the possible
extension of the scope of EPPO's powers to include "serious
crime having a cross-border dimension" but this can only
be done by the unanimous vote of the European Council and with
the consent of the European Parliament.
OPT-IN
1.13 As the draft Regulation's legal base falls within
Title V of Part Three of the TFEU, the UK's opt-in applies in
accordance with Protocol 21 to the Treaties.[16]
The UK may choose, within three months of the proposal being presented
to the Council (and in this case, the opt-in deadline is 20 November
2013), whether it wishes to participate in the measure. There
is also provision in the Protocol for post-adoption opt-in. More
importantly, given the UK's stated non-participation in the draft
Regulation, Article 2 to the Protocol provides that even then:
"no such provision, measure or decision shall in any way
affect the competences, rights and obligations of those States..."
(i.e. the UK and Ireland).
1.14 The enhanced Parliamentary scrutiny of opt-in
decisions,[17] announced
by Baroness Ashton in 2008, provides that the Government must
indicate in an Explanatory Memorandum (within 10 days of the proposal's
publication) its preliminary view on whether it will opt in.
It should not reach a final view on the matter for eight weeks
(the deadline here is 16 October) and should take account of any
views expressed in that time by the Committee. Additionally, in
2011, the Minister for Europe (Mr David Lidington), committed,
in the case of particularly strong Parliamentary interest in an
opt-in decision, to offer a debate and vote in both Houses, on
Government time, on the Government's recommended approach on the
opt-in (known as Lidington debates).[18]
EUROPEAN UNION ACT 2011
1.15 The EPPO Regulation is "double-locked"
in the European Union Act 2011 (the EU Act 2011) in that it is
subject to two control mechanisms it has to be approved
both by referendum and by Act of Parliament according to section
6(3) of the Act.[19]
These requirements would be re-triggered should the provision
in Article 86(4) TFEU for extension of the EPPO's powers to include
"serious crimes with a cross border dimension" ever
be exercised.
THE SUBSIDIARITY PROTOCOL
1.16 The Subsidiarity Protocol applies to the draft
EPPO Regulation.[20]
Given the exclusion of the month of August from the calculation
of the eight week period within which national parliaments may
submit a Reasoned Opinion under Article 6, a Reasoned Opinion
on the proposal would have to be submitted by the House of Commons
before 28 October.
1.17 In order to satisfy the subsidiarity principle
set out in Article 5(3) TEU, the Commission must first demonstrate
that the objectives of the EPPO proposal cannot be sufficiently
achieved at Member State level (the first limb of the test) and
then, that the objectives of the proposal can be better achieved
at EU-level by reason of their scale and effects (the second limb
and so-called "EU added-value" test).[21]
1.18 Additionally, Article 5 of the Subsidiarity
Protocol[22] requires
that the EPPO proposal must be accompanied by a detailed statement
on its compliance with subsidiarity (and proportionality) principles
and also assessing its financial impact. The reasons for concluding
that the objectives of the EPPO proposal can be better achieved
at EU level must also be "substantiated by qualitative and,
wherever possible, quantitative indicators".
1.19 The EPPO proposal must also comply with the
principle of proportionality which requires, in Article 5(4) TEU,
the "content and form of Union action" to "not
exceed what is necessary to achieve the objectives of the Treaties",
but there is no scope for national parliaments to issue a Reasoned
Opinion for breach of proportionality.
The current documents
Objectives of the EPPO proposal
1.20 The objectives of establishing an EPPO are summarised
by the Commission in its impact assessment. The general or main
objective is to "contribute to the strengthening of the protection
of the Union's financial interests and further development of
an area of justice.."; and the other objectives are to:
· establish
a coherent European system for investigation and prosecution of
offences affecting EU financial interests;
· ensure a more
efficient and effective investigation and prosecution of those
offences;
· deter the
commission of such offences;
· increase the
number of prosecutions leading to more convictions and recovery
of fraudulently obtained Union funds; and
· ensure close
cooperation and effective information exchange between the European
and national competent authorities.[23]
REASONS FOR EU ACTION AND COMPLIANCE WITH SUBSIDIAIRTY
1.21 In its Communication and impact assessment the
Commission says that the EPPO, as a new supra-national EU criminal
justice body with investigative and prosecution powers, is needed
because:
· additional
measures are required to tackle fraud against the EU budget in
the current financial crisis, having identified an average of
500/£425
million of suspected fraud in each of the last three years and
that undetected fraud could be significantly higher (up to 3/£2.55
billion a year);[24]
· there are deficiencies
in the current national-level enforcement system[25]
(even though supported by the work, at the cross-border/EU level,
of relevant EU Agencies OLAF, Eurojust and Europol) which
is fragmented due to the divergence of Member States' criminal
justice systems and priorities;
· despite Member
States being under wide legal obligations to tackle fraud against
the EU budget under existing EU measures and Article 325 TFEU,
they are not able satisfactorily to identify, investigate and
prosecute EU fraud and a large number of cases forwarded by OLAF
to national authorities do not result in any kind of enforcement
or prosecution action;[26]
· EU fraud is
not a priority at national level and the outcomes of relevant
prosecutions, such as conviction rates, are uneven across Member
States[27] (varying across
the EU from approximately 20% to 90%);[28]
· there is limited
scope to achieve the objectives of the proposal through reforming
those EU Agencies: neither Eurojust[29]
nor Europol[30] can be
given the power to conduct investigations, Eurojust cannot be
given the power to prosecute cases before the national courts
and OLAF does not have any competences with respect to criminal
investigations nor can it ensure follow-up to its investigations;[31]
· other current
measures and initiatives taken by the Commission are not sufficient
to deal with the problems identified with investigations and prosecutions;[32]
· a coherent,
EU-level prosecution regime is justified and necessary considering
the cross-border elements involved in EU fraud cases, to produce
a consistent, efficient, equivalent level of enforcement throughout
the EU, to ensure cooperation and coordination between Member
States and to systemically pursue every suspected offence against
the EU's financial interest, to improve deterrence;[33]
· an EU-level
approach will also ensure a high level of respect and protection
of the rights of individuals and companies during investigations
and prosecutions of EU fraud, in accordance with the Rule of Law;
and
· whilst the
legal fragmentation of national criminal law will be partially
addressed through the draft PIF Directive by harmonising criminal
offences and sanctions, that proposal cannot address problems
with EU-wide investigations and prosecutions.
1.22 The Commission says in its impact assessment
that these reasons demonstrate a "clear need for EU action"
to protect the EU's financial interests. This meets the "traditional
subsidiarity test" which "requires a demonstration that
the proposed measure's objective may be better achieved at Union
level than at the level of individual Member States". They
demonstrate:
"how the main objective, i.e. effectively
protecting the Union's financial interests and "countering
fraud and other illegal activities" affecting such interests,
has been met thus far, particularly taking into account the results
of efforts by Member States and the reasons for any shortcomings."
[34]
1.23 In other words, the Commission believes that
reasons for action listed in paragraph 1.21 demonstrate that not
only will the establishment of the EPPO: "enhance criminal
prosecutions related to EU fraud and other illegal activities
affecting the Union's financial interests by introducing a direct
European enforcement regime, to be implemented and coordinated
by a European prosecution office" but also that "criminal
prosecutions conducted by national authorities do not and cannot
achieve the results expected from such a Union-level enforcement
regime."
1.24 However, in its explanatory memorandum prefacing
the draft Regulation, the Commission asserts the proposal's compliance
with subsidiarity by reference to a different main objective:
"There is a need for the Union to act because
the foreseen action has an intrinsic Union dimension. It implies
Union-level steering and coordination of investigations and prosecutions
of criminal offences affecting its own financial interests, the
protection of which is required both from the Union and the Member
States by Articles 310(6) and 325 TFEU. In accordance with the
subsidiarity principle, this objective can only be achieved at
Union level by reason of its scale and effects. As stated above,
the present situation, in which the prosecution of offences against
the Union's financial interests is exclusively in the hands of
the authorities of the Member States is not satisfactory and does
not sufficiently achieve the objective of fighting effectively
against offences affecting the Union budget." [35]
1.25 The subsidiarity justification provided at
Recital 5 of the draft Regulation refers to the same objective:
"(5) Since the objectives of this Regulation,
namely the setting up of the European Public Prosecutor's Office,
cannot be achieved by the Member States given the fragmentation
of national prosecutions in the area of offences committed against
the Union's financial interests and can therefore, by reason of
the fact that the European Public Prosecutor's Office is to have
exclusive competence to prosecute such offences, be better achieved
at Union level, the Union may adopt measures, in accordance with
the principle of subsidiarity as set out in Article 5 of the Treaty
on European Union."
Overview of document (b)
Structure and operation of the EPPO
1.26 The draft Regulation provides for the EPPO
to be structured on a "decentralised" model (Recital
13 and Article 3) with the following features:
· a
small central team of the EPPO would be created (comprising the
European Public Prosecutor (EPP) and four deputies), that would
then work through a system of European Delegated Prosecutors (EDPs)
in each participating Member State (Article 6 (1) and (4));
· the central
EPPO team would be able to direct the competent investigative
and prosecution authorities within the participating Member States
through the EDP network for the offences within its competence
(Article 6(4));
· EDPs would
be "double-hatted" and be able to act under the auspices
of both the EPPO for offences within the EPPO's competence and
have national level roles (Article 6(6));
· the EPPO would
be integrated into the national criminal justice systems of the
participating Member States through the EDPs the
Commission views the EDPs as the best way to deliver the "assimilation
principle'' i.e. that acts of the EPPO are considered to be national
acts of investigation which respect national laws (Recital 16);
· when the EDP
acts within the EPPO mandate, the draft Regulation provides that
they shall be fully independent from the national prosecution
bodies so that they cannot act as EDPs and as national prosecutors
at the same time (Article 6(5)); and
· where there
are conflicting EPPO and national assignments, the draft Regulation
requires EDPs to give priority to their EPPO functions (Article
6(6)).
APPOINTMENTS AND DISMISSALS
1.27 Articles 8 and 9 provide that the EPP and the
four Deputies will be appointed:
· by
the Council, acting by simple majority, with the consent of the
European Parliament for a term of eight years, which will not
be renewable;
· from persons
whose independence is beyond doubt and who possess the qualifications
required for appointment to high judicial office and relevant
prosecutorial experience, based on an open call for candidates;
· from a shortlist[36]
drawn up by the Commission on the opinion of a panel, composed
of seven persons chosen from among former members of the Court
of Justice (ECJ), members of national supreme courts, national
public prosecution services and/or lawyers of recognised competence,
one of whom shall be proposed by the European Parliament, as well
as the President of Eurojust as an observer; and
· subject to
the power of the ECJ, on application by the European Parliament,
the Council, or the Commission, to dismiss them.
1.28 The EDPs follow a different system in certain
respects as set out in Article 10:
· each
Member State shall forward a list of at least three candidates
to the EPP;
· the candidate
selected, whose independence must be beyond doubt, must also demonstrate
the qualifications required for appointment to high judicial office
and relevant prosecutorial experience;
· Member States
will then appoint the selected EDP as a prosecutor under national
law, if at the time of his/her appointment as an EDP, he/she did
not have this status already;
· the appointment
is for a renewable term of five years; and
· EDPs may be
dismissed by the EPP but shall not be dismissed as national prosecutors
by the competent national authorities without the consent of the
EPPO.
LEGAL STATUS, JURISDICTION AND COMPETENCE
1.29 The draft Regulation states that "for the
purposes of investigations and prosecutions conducted by the European
Public Prosecutor, the territory of the Union's Member States
shall be considered a single legal area in which the European
Public Prosecutor's Office may exercise its competence'' (Article
25(1)).
1.30 The Commission proposes that:
· the
EPPO would have exclusive competence to investigate and prosecute
"criminal offences affecting the financial interests of the
Union" which are known as "PIF offences"[37]
(Article 11(4));
· these offences
will be defined by reference to the yet to be agreed proposal
for the PIF Directive[38]
(Article 12);
· the EPPO's
investigations and prosecutions are only governed by national
law (where the prosecution is conducted) to the extent they are
not covered by the Regulation and where covered by both, the Regulation
will prevail (Article 11(3));
· national authorities
in participating Member States, EDPs and all institutions, bodies,
office and agencies would be obliged to report all suspicions
regarding PIF offences to the EPPO (as it would have exclusive
competence) (Article 15 (1) and (2));
· the EPPO may
collect or receive information from any person on conduct which
might constitute a PIF offence (Article 15(3)); and
· where a PIF
offence is inextricably linked with others and joint investigation
and prosecution are in the interests of a good administration
of justice, the EPPO would also be competent for the related offences
as well as the PIF offence, but only if the PIF offences are 'preponderant'
and the other offences are based on identical facts. If not, the
EPP may decide that a participating Member State will be deemed
competent (Article 13).
INVESTIGATIVE POWERS
1.31 In respect of participating Member States, the
draft Regulation grants the EPPO the use of a wide range of investigative
powers and measures. It states that:
· Member
States shall ensure that an extensive list of investigative measures
are available for use by the EPPO, such as search and seizure
powers, obtaining data, sealing premises, freezing property and
evidence, interception, surveillance, monitoring financial transactions
and summonsing witnesses (Article 26);
· such measures
will be subject to conditions (such as obtaining prior judicial
authorisation or the pre-requisite of "reasonable grounds"
(Article 26(3)) provided for both in the EPPO Regulation itself
and national law i.e. within the same legal frameworks
that are currently available for domestic law enforcers and prosecutors
(Article 26(3) and(4));
· the EPPO would
be able to obtain any relevant information from national criminal
investigation or law enforcement databases and registers of public
authorities in participating Member States and access this information
through the EDPs too (Article 20);
· the EPPO would
be able to obtain any relevant information from Eurojust and Europol
and the institutions, bodies, offices and agencies of the Union
and Member State authorities shall provide the necessary assistance
and information to the EPPO upon its request (Article 21); and
· national authorities
would be required to take any actions necessary and comply with
the instruction of the EPP, its deputies and EDPs, and execute
the investigative measures assigned to them by the EDP (Article
18(1)).[39]
PROSECUTION POWERS
1.32 The Commission proposes that the EPPO should:
· have
the same powers as national public prosecutors in national courts
in participating Member States, including evidence gathering,
deciding whether to charge the individual and taking the plea
(Article27(1));
· choose which
participating Member States' national court would take the case,
based on a number of factors outlined in the Regulation, such
as where the crime was committed and the habitual residence of
suspects, witnesses and victims (Article 27(4));
· have dismissal
decision powers (Article 28), including the right to dismiss through
transaction (Article 29) i.e. the EPPO may decide to dismiss the
case if the suspected person pays a lump-sum fine and compensation
to the Union through the EPPO (not the Member State). If the national
court's final ruling is confiscation, the monetary value of those
confiscated assets will also go to the Union's budget (Article
31); and
· have the power
to request the lifting of immunity, whether at national or at
Union-level (in accordance with applicable rules) in order to
kick-start stalled investigations (Article 19).
PROCEDURAL SAFEGUARDS
1.33 The EPPO's use of investigative powers in the
Member States would have to respect the EU Charter of Fundamental
Rights including the right to a fair trial and the rights of defence.
The draft Regulation:
· provides
that any suspect and accused person involved in the proceedings
of the EPPO's office should have, as a minimum, certain rights,
in accordance with national law (Article 32);
· makes references
to EU Directives on the right to interpretation and translation;
the right to information and access to case materials; and access
to a lawyer (Article 32(2)(a)-(c)); and
· defines other
rights which have not yet been regulated by the EU: the right
to remain silent; the right to be presumed innocent; the right
to legal aid; and the right to present evidence (Article 32(2)(d)-(f)
and Articles 33, 34 and 35).
JUDICIAL REVIEW
1.34 The EPPO's decisions would be subject to judicial
review in national courts (Article 36). The Commission says that
this treatment of the EPPO as a national authority for these purposes
will ensure the application of the "assimilation principle''.
There will only be recourse to the ECJ on questions of interpretation
from national courts,[40]
dismissal of the EPP and EDP (Articles 8.4 and 9.4) and jurisdiction
on disputes over compensation for damages (Article 69). No judicial
review would be possible on any EPPO decision to dismiss a case
through transaction (Article 29(4)).
DATA PROTECTION
1.35 The EPPO would need to process information from
a wide variety of sources and create a Case Management System
(drawing on Eurojust's IT infrastructure) which would partly contain
personal data. With respect to the need to safeguard that data,
the draft Regulation (Chapter VI) provides that:
· the
EPPO should appoint a Data Protection Officer (DPO) to ensure
that a written record of the transfer of personal data is kept,
to cooperate with EPPO staff responsible for procedures, training
and advice on data processing and to prepare annual reports (Article
41);
· the European
Data Protection Supervisor (EDPS) would also work in close cooperation
with the national data protection authorities as regards the processing
of data by the EPPO (Article 45);
· data subjects
would have the right to access and rectify personal data and
also to lodge a complaint with the EDPS (Articles 42, 43 and 46);
· the EPPO would
be liable for any unauthorised or incorrect processing (Article
47);
· the EPPO will
be able to directly exchange:
all
non-personal data with EU bodies or agencies, the competent authorities
of third countries, international organisations or Interpol in
the performance of its tasks (Article 56(2));
but personal data only with Eurojust,
Europol, Union bodies or agencies (Article 60) unless certain
conditions are met by third countries, international organisations
or Interpol (Article 61(1) and (2));
·
the EPPO may also receive and process personal data from all these
entities in the performance of its tasks (Article 56(3)); and
· Regulation
45/2001 on data protection by EU institutions will apply to the
EPPO (Article 37(5)), though the Commission intends the proposal
to also be compliant with current data protection proposals (Recital
43).
CO-OPERATION WITH EUROJUST, OLAF AND OTHER AGENCIES
AND ORGANISATIONS
1.36 Article 86(1) TFEU describes the EPPO being
established "from" Eurojust. The Commission considers
that this means that "operational, administrative and management
links" (Article 57(1)) between them are needed as follows:
· the
ability of the EPPO to request Eurojust or its competent national
members to participate in the coordination of, or to use powers
attributed to them by EU legislation or national law for, specific
acts of investigation that that may fall outside the EPPO's scope
of competence and/or to support the transmission of EPPO decisions
or requests for Mutual Legal Assistance (Article 57(2)(b),(d)
and (f));
· a role for
Eurojust in "facilitating agreement" between the EPPO
and participating Member States over competence on ancillary offences
i.e. those connected to PIF offences (Article 57(2)(c));
· use by the
EPPO of elements of Eurojust infrastructure, such as its technical
support in preparing EPPO budgets, human resources and IT system
(Article 57(6));
· exchanging
information, including personal data between the two bodies (Article
56(2)(a);
· automatic cross-checking
of data held by Eurojust and the EPPO on a shared Eurojust Information
Technology (IT) platform known as the Case Management System (Article
56(3)); and
· developing
a special relationship with Europol, with a focus on the exchange
of information including personal data (specifically Article 58(2)),
cooperating with the Commission and OLAF on the wider fight against
fraud, and entering into cooperative relations with other EU institutions,
bodies, offices and agencies (Article 58).
THIRD PARTY CO-OPERATION
1.37 The draft Regulation proposes that:
·
participating Member States would be required to recognise the
EPPO as a competent authority for the purpose of implementing
international agreements on legal assistance in criminal matters
and extradition (Article 59(4)) and where necessary alter those
international agreements to ensure the EPPO can rely on such agreements
if the EPPO is currently excluded (Article 59(4)); and
· the EPPO may
also establish agreements in its own right with competent authorities
of third countries and international organisations (Article 59(3)).
ACCOUNTABILITY
1.38 It is proposed that the EPPO should have general
accountability to the EU Institutions, produce annual reports
(both for the institutions and national parliaments, Article 70)
and other documents (annual and multiannual programmes, an anti-fraud
strategy, conflicts of interest rules, staffing rules, and rules
governing handling of compensation and fines monies), be audited
by the Court of Auditors (ECA) (Article 66) and susceptible to
actions for damages (for non-contractual liability, Article 69)
before the ECJ. An annual appearance of the EPP before the European
Parliament is also envisaged and national parliaments may also
invite the EPP or EDPs to "participate in an exchange of
views in relation to the general activities of the EPPO"
(Article 70).
The Government's view
1.39 In an Explanatory Memorandum of 7 August, the
Minister of State for Immigration at the Home Office (Mark Harper)
says that the Government does not support the proposal:
"Whilst the Government considers the protection
of the EU's financial interests to be important, we do not believe
that the creation of a supra-national prosecutor in the form of
an EPPO is either necessary or proportionate."
1.40 He makes a general point about the approach
of the draft Regulation. Referring to the non-participation of
the UK and Denmark in the measure, he says that despite this the
EPPO proposal is drafted (and its benefits assessed) by the Commission
in a way that ignores this:
"There is only one passing reference to
Member States that are not participating in the EPPO, in Article
57(2)(f), which concerns the relationship between Eurojust and
the EPPO."
1.41 The lack of provision for non-participating
States, is, says the Minister, "a critical issue for the
UK". He says that the Government will seek clarity in negotiations
on the lack of provision for non-participating Member and "protect
our position in line with our rights under Protocol 21 where we
do not opt in to a JHA measure". The points to be raised
in negotiation are set out in paragraph 2.52 below.
LEGAL BASE
1.42 The Minister says that given Article 86 TFEU
limits the EPPO's remit to crimes against the EU's financial interests:
"The Government will also want to question
whether it is within the Commission's competence to propose that
the EPPO can request Eurojust or its national members to use its
powers to investigate acts that fall outside the EPPO's
scope of competence (Article 57(2) of the EPPO draft Regulation)".
1.43 The Minister also questions the EU's competence
under Article 86 to regulate the criminal procedural rights of
individuals as that competence only resides in Article 82(2) TFEU
and is subject to the ordinary legislative procedure.[41]
He wants to know how such regulation "would impact on any
future criminal procedural rights measures which the Commission
might bring forward under Article 82(2)".
SUBSIDIARITY
1.44 With reference to the Commission's subsidiarity
argument in its explanatory memorandum (paragraph 1.24),[42]
the Minister is clear that the draft Regulation does not comply
with the principle of subsidiarity. He says that:
"We do not believe that the principle of
subsidiarity has been met. The Commission has jumped from the
options of taking no action or taking no new regulatory actions
to variations on the creation of an EPPO. The Commission does
not in our view provide robust evidence to justify the creation
of a new supra-national agency with extensive and harmonised powers,
acting through one new single legal territory across the whole
Union and all Member States.
"The Commission has based this proposal
on the premise that Member States do not have the will or the
capacity to act to protect the Union's budget, and that a 100%
prosecution rate is the most effective deterrent where the EPPO's
decision to prosecute takes priority over national cases. We
take the view that prevention at source within Member States is
as valid a deterrent within the enforcement cycle and a more cost
effective one. The Commission does not explore or assess alternative
approaches to deliver a strengthened system to prevent EU fraud
at source at national level. These might include further simplification
of rules that govern the different sectors of the EU budget to
make it easier to apply and difficult to defraud, for Member
States to take full responsibility for funds that they administer,
or effective enforcement by the Commission to force Member States
to improve their management and control systems."
1.45 Turning to the Commission's claim that EU-level
action is justified from a financial point of view, the Minister
adds:
"The Impact Assessment has consistently
included OLAF figures, which include data and information from
Denmark and the UK. In our view, the Commission's assessment,
calculations of risk and therefore its projection of the scale
of the problem do not appear to take account of the fact that
at least Denmark and the UK will not participate.
"The Commission also includes VAT fraud
and customs duties (including subsidised tobacco and cigarette
smuggling) in its list of Union finances and as a component of
EU fraud. It identifies these as the main risk for offences which
fall within the EPPO's remit based on PIF offences and also as
the significant proportion of total EU fraud. The Commission's
assessments and examples therefore include these revenue incomes
and actual and projected figures for such offences. However, Member
States, including the UK, have consistently asserted during the
negotiation of the PIF Directive that VAT fraud (and potentially
customs duties) is within national competence and are not EU fraud.
If excluded as PIF offences, noting that the negotiation on the
PIF Directive has yet to be concluded to confirm this exclusion,
then the Commission's justification for an EPPO response is fundamentally
flawed."
OPT-IN AND COALITION AGREEMENT
1.46 The Minister notes the three month deadline
for opting in but says: "In practice, however, the Government
has confirmed in the Coalition Agreement that it will not opt
in." He says that the Government has offered a Lidington
debate on the "parallel opt-in decision triggered by the
new Eurojust proposal" which it would expect "to include
reference to the EPPO proposal".
EU ACT 2011
1.47 Noting the requirements that we have outlined
in paragraph 1.15 above, the Minister says that should the EU
Act requirements be satisfied by any future Government "this
would also require profound changes to UK law".
MAIN POLICY IMPLICATIONS
The Commission's approach
1.48 The Minister says that the Government does not
agree with the Commission's approach because:
· the
creation of an EPPO is not the appropriate response to tackling
EU fraud;
· for participating
Member States, the proposal will transfer responsibility for tackling
fraud against the EU budget away from national-level decision
making to a supra-national authority, whose EDPs have to prioritise
EU fraud above other crime at a national level;
· it is a flawed
approach for Member States not to be able to determine their national
priorities, and consequent use of resources, in tackling crime;
· the EPPO would
disrupt the current system for tackling fraud against the EU budget
at a time where the Commission has reported two consecutive years
of decrease in fraudulent and other irregularities affecting the
EU budget and their estimated financial impact;[43]
· the proposed
EPPO system would result in a duplication of established national
level efforts (including specific bodies) to protect Member State
and EU financial interests, including organised crime;
· the best way
to tackle fraud is through prevention (as reflected by the UK's
own "zero tolerance" approach to all fraud which it
takes "extremely seriously" and which results in low
levels of fraud), using robust management controls and payment
systems and requiring all agencies with responsibility for distributing
EU funds to have processes in place to monitor and report fraud;
and
· it would cause
a shift from prevention to reaction (after crimes have been committed)
as it would make each Member State less responsible for anti-fraud
work at national level (as it would remove competence for PIF
offences from them), "slowing down progress whilst creating
limited value".
Preferred approach of improving existing mechanisms
1.49 The Minister says, that instead, the EU's current
focus should be:
"on effective implementation of the existing
mechanisms to bring procedures to combat such crimes fully into
use; not on the creation of an additional EU body. From both a
UK and an EU-wide perspective, the Government believes that the
creation of an EPPO is unnecessary and flawed."
1.50 So, in view of this, the Minister says that
the Government dismisses "wholesale disruptive reform"
and the Commission's "criminal justice response" in
favour of an approach based on improving existing mechanisms.
It says that:
· even
in the case of a major EU fraud, existing bodies, such as OLAF,
should gather and supply evidence to Member States' national authorities
within existing and strengthened mechanisms;
· there
should be renewed focus on improving the efficiency of OLAF's
key role and successes in preventing fraud, including its increasing
engagement with Member States;[44]
and
· overall,
there should be improved:
oversight
by the Commission of EU implementation and data-gathering procedures;
engagement with Member States alongside
OLAF to prevent fraud;
commitment to simplify EU funding systems
and regulations making "...fraud harder to commit in the
first place".
Future extension of EPPO proposal to other serious
cross-border crimes
1.51 Although the Commission has not sought to apply
the EPPO's competence to other serious cross border crimes under
the terms of Article 86(4) TFEU (requiring unanimity in the European
Council), the Government notes that Article 74 of the proposal
allows the Commission to report on the feasibility and advisability
of extending the competence of the EPPO to other criminal offences
and to submit legislative proposals on this matter. The Minister
says that Government would not support such a proposal.
Areas of negotiating concern, including relationships
with Eurojust, OLAF and Europol
1.52 The UK will seek more provision for non-participating
Member States in the Regulation as well as other matters during
its negotiation. The Government's list of concerns includes:
· ensuring
respect under the Treaties for non-participating Member States'
legal systems, including the protections in Protocol 21 where
the UK has not opted in;
· how the Commission
views the EPPO interacting with non-participating Member States;
· how authorities
in non-participating Member States will interact with authorities
from participating Member States where the EDPs are acting under
the auspices of the EPPO;
· ensuring a
clear distinction between the EPPO role and the national role;
· the implications
for existing and future cross-border investigations which include
the UK, especially where they involve interception capabilities;
· the loss of
Member State autonomy to choose how to use their own resources
to tackle serious crime;
· the full implications
of the creation of an EPPO on other EU Agencies, such as OLAF,
Eurojust and Europol, including the effect of Article 57(2) in
respect of Member States participating in Eurojust, but not in
the EPPO;
· the legal
and operational implications of the Commission's proposal for
the EPPO to have "ancillary competence" for offences
beyond ''PIF offences'';
· the scope of
jurisdiction in respect of citizens and businesses of non-participating
Member States based in the territory of a participating Member
State;
· the full implications
for data protection of the EPPO proposal, especially concerning
data exchange between the EPPO and other EU Agencies and third
countries and draft data protection proposals currently under
negotiation;
· the power
of the EPPO to determine the location of a prosecution (based
on criteria), which may raise concerns about so called forum shopping
i.e. selecting a court system that is likely to be most favourable
to a conviction;
· the Commission's
use of term "single legal territory'' in relation to the
EPPO's powers to operate with sole competence for "PIF offences''
given that this is "a new term which raises serious concerns
for the future direction of criminal law at EU level" which
the Government intends to challenge;
· the EU's purported
competence to propose criminal procedural rights regulations under
Article 86;
· whether the
proposed EPPO model does indeed deliver the assimilation principle;
· the European
Ombudsman being the only recourse for a participating Member State
to challenge an EPPO decision to drop a case because the suspect
has paid monies to the EPPO and Union;
· the implications
for the UK and international relations of the Commission proposals
around the EPPO negotiating Third Country Agreements and making
use of the existing bilateral agreements of participating Member
States;
· whether the
amendment of Third Country agreements proposed by the Commission
is a compulsory unilateral amendment of all existing and relevant
criminal justice bilateral agreements as this would "set
a worrying precedent which could undermine individual Member
States' diplomatic relationships with Third Countries";
· the implications
for the interaction between EPPO and Eurojust (given the UK has
yet to make its separate opt-in decision on the proposal reforming
the latter), as the proposal gives the EPPO exclusive competence
for PIF offences and removes competence for these offences from
Eurojust;
· where competence
falls for any Member State that does not participate in the EPPO,
but does participate in Eurojust;
· the purported
competence of the EU to propose that the EPPO can request Eurojust
or its national members to use its powers to investigate acts
that fall outside the EPPO's scope of competence, (Article
57(2));
· the logistics
and the cost of the EPPO's operational relationship with Eurojust
given that expenditure resulting from implementation of any enhanced
cooperation, should this arise, should be borne by participating
States (Article 332 TFEU);
· the impact
on OLAF and its operation, resources and its recently reformed
legal framework since the Government believes OLAF's responsibilities
would be scaled back significantly and the Commission envisages
a transfer of staff from OLAF to the EPPO;
· allowing the
EPPO to access Europol information on request "may risk the
integrity of Europol's operations and could deter Member States'
law enforcement bodies from sharing data openly"; and
· ensuring that
the accountability mechanisms of the EPPO are suitably robust.
FINANCIAL IMPLICATIONS, INCLUDING CRITICISM OF COMMISSION'S
IMPACT ASSESSMENT
Impact assessment
1.53 The Minister says that weaknesses of the Commission's
impact assessment include:
· its
poor evidence base because it relies on data which:
simply
stems from cases referred to OLAF and does not take into account
other work at the national level, including the degree of prevention
at source;
is mostly incomplete and much of the
work is assumption driven: such as benefits for options 4c (decentralised,
£2,720 million) and 4d (centralised £2,465 million)
which are just assumed to be greater and "unsurprisingly
they come out as the most effective solutions" and as confirmed
by the Cost Benefit Analysis in Annex 4 which states that "key
parts of the analysis are based on assumptions";
relates to the UK and Denmark "which
is misleading since neither country will participate in the EPPO";
· assuming
that the creation of the EPPO is the only effective way to resolve
this problem and ignoring the options of "enhanced incentives
or other options for reform in any detail or in a rigorous manner"
and, significantly, "meaningful reform of the current national
based system";
· assessing
all Member States' current performance and the effectiveness of
the options against a target of securing convictions in 100% of
cases, since "the application of the principle of legality
would be necessary to guarantee this (whereby some Member States
are obliged to prosecute certain conduct rather than exercising
discretion in the public interest), and the right to a fair trial
means that it is for the courts at national level and not the
EPPO to decide such matters based on the evidence provided to
those courts";
· ignoring the
fact that difficulties (which would hamper decision-making) arising
from differences in approach, language, culture would subsist
even if investigation and prosecution were directed at the supra-national
level;
· ignoring common
law approaches in national law when considering the central approach
(option 4d);
· failing to
take into account: the complexity, size and length of cases, the
proportionality of effort, existing international co-operation,
the risk of delay, differing legal frameworks, the experience
of the prosecuting authority, sentence (as a deterrent effect),
the probability of being caught, resources and preventative measures;
· problematic
costing, since the impact assessment:
asserts that the creation of the EPPO will come out of existing
resources and it is difficult to believe that such a disruptive
change could be cost neutral;
many of the costs in Annex 4 are left
out as is it is not possible to calculate them;
Annex 4 is also not as transparent as
it should be with calculations of the majority of estimates not
provided; and
· conflation
of convictions and confiscation returns, despite the diversity
of Member State systems meaning that no universal assumption can
be made that that every conviction will mean a confiscation and
recovery of funds to the centre.
Financial implications
1.54 The Government rejects the Commission's assertion
that the central EPPO will not generate substantial new costs
and that "the overall costs of law enforcement will be more
balanced as a result of efficiency gains" as it has doubts
about its accuracy and validity and "the inability to include
figures for OLAF in the Estimated Financial Impact sections is
worrying".
1.55 The Minister continues:
"We expect the EPP and Deputy EPP posts
to be drawn from the central EU budget (unless the enhanced co-operation
procedure is activated), but we will also expect a recharge for
non-participating Member States for these costs. The Regulation
also proposes that whenever the national prosecutor is acting
as an EDP, the relevant expenditure shall be regarded as a Union
budget cost. It is not clear how this "double-hat'' funding
will be administered. We do not support the relevant EPPO portion
of their work being reimbursed from the central EU budget. The
EPPO will also rely on the available resources in the participating
Member States already dealing with "PIF offences'', which
also involve organised crime offences outside of the remit of
the EPPO. This will further draw on national budgets of the participating
Member States. The Government would also expect there to be a
recharge to non-participating Member States for costs incurred
by other Agencies, such as Eurojust, OLAF and Europol, in providing
services to the EPPO."
FUNDAMENTAL RIGHTS
1.56 The Minister refers to Article 52 of the Charter
of Fundamental Rights which requires any interference with Charter
rights to be justified: it must be provided for by law, respect
the essence of the right in question and be necessary and proportionate.
He says that the Government takes the view that document (b) engages
the following Charter rights: Article 7 (respect for private and
family life), Article 8 (protection of personal data), Article
17 (right to property), Article 41 (right to good administration),
Article 42 (right to access to documents), Article 47 (right to
an effective remedy and to a fair trial), Article 48 (presumption
of innocence and right of defence) and Article 50 (right not to
be tried or punished twice in criminal proceedings for the same
criminal offence).
Data protection
1.57 The Minister says that there are some legal
obligations in the measure which reflect a "more liberal
regime" of data exchange and could collectively mean that
the essence of Articles 7 and 8 of the Charter are not respected.
He refers to the following Articles in the Regulation which we
have already mentioned in our overview of the draft proposal:
Articles 15(1), (2) and (3), Article 20, Article 21 and Articles
57(2) (a), 58(2), 60 and 61. Nevertheless, the Minister concludes
that, overall, the proposal complies with Article 52 of the Charter
with respect to data protection because:
·
Recital 17 and Article 11(1) of the measure state that the activities
of the EPPO should in all instances be carried out in full respect
of Charter rights;
· the proposal
is intended to fit into existing (and future) data protection
laws; and
· the purpose
of the EPPO's data exchange and processing powers appear to be
related entirely to the EPPO's general functions.
Suspects' rights
1.58 The extensive investigative powers of the EPPO
could affect suspects' private and personal property rights under
Articles 7 and 17 of the Charter and the right to a fair trial,
the rights of the defence, the presumption of innocence and the
principle of ne bis in idem as enshrined in Articles 47,
48 and 50 of the Charter. The Minister says:
"There will need to be further clarification
as to why the EPPO requires such extensive investigatory powers
and the impact that use of such powers will have on the Charter
rights of affected individuals. It is questionable whether it
is necessary and proportionate to grant the EPPO access to sensitive
and draconian investigative powers, such as interception and surveillance,
if the EPPO can just order law enforcement agencies to undertake
investigative measures by simply relying on their own existing
domestic powers (see Article 18(1) of the EPPO proposal)."
1.59 But overall, the Minister concludes that "although
such investigatory powers may not be necessary or proportionate,
it is likely that they will at least respect the essence of the
particular rights in question" because the proposed Regulation
makes clear that:
· the
EPPO's investigative powers are only exercised in participating
Member States within the same legal frameworks that are currently
available for domestic law enforcers and prosecutors;[45]
· it is required
to respect, in particular, the right to a fair trial, the rights
of the defence, the presumption of innocence and the right not
to be tried or punished twice in criminal proceedings for the
same offence, as enshrined in Articles 47, 48 and 50 of the Charter;
and
· it sets out
an extensive set of minimum rights and states that the EPPO is
obliged to comply with the rights of the suspect person enshrined
in the Charter, including the right to a fair trial and the rights
of the defence.
1.60 The Minister also highlights the risk that the
EPPO's proposed power to open a prosecution in a location of his
choice could interfere with Articles 7, 17, 47, 48 and 50 of the
Charter as the Member State chosen could have "a lower standard
of criminal proceedings than another Member State". However,
he notes that:
·
all other mutual recognition instruments are based on the concept
of mutual trust of the criminal justice systems in other Member
States;
· the EPPO is
obliged to consider a number of factors before making a choice
about jurisdiction and any such decision must be made taking into
account the proper administration of justice; and
· it is possible
that the EPPO proposal may in fact increase protections enshrined
in Article 50 (the right not to be tried or punished twice in
criminal proceedings for the same offence) since the proposal
should mean that a reduction in the risk of multiple-country prosecutions
in the case of cross-border fraud.
Effective remedies and good administration
1.61 The proposal may interfere with Article 41 (right
to good administration) and Article 47 (right to an effective
remedy and to a fair trial) of the Charter, especially the latter
as, the Minister says, there "is a lack of detail on how
the judicial review procedures would operate in practice".
VIEW OF DEVOLVED ADMINISTRATIONS AND OVERSEAS TERRITORIES
1.62 The Minister says that upon consultation of
the devolved administrations:
· Scotland
has noted the Government's position but has made no further comment
at this time;[46] and
· Northern Ireland
confirms that their prosecutorial and investigative functions
are separate and that prosecutors in Northern Ireland do not have
powers in relation to search, seizure, interception, surveillance,
monitoring financial transactions or covert video surveillance.
1.63 Gibraltar has noted the Government's intention
not to participate in the draft Regulation and says that the proposal's
current wording conflicts with its written Constitution and usurps
the role, functions and authority of the Attorney General and
his Chambers (Gibraltar's public prosecutor service) and the Royal
Gibraltar Police (Gibraltar's Police Authority).
CONSULTATION
1.64 The Minister says that the Crown Prosecution
Service, the Serious Fraud Office, the Attorney General's Office,
Serious Organised Crime Agency/National Crime Agency, the College
of Policing, the Ministry of Justice, Her Majesty's Treasury,
Her Majesty's Revenue & Customs, the Metropolitan Police,
the Scottish Government, the Crown Office and Procurator Fiscal
Service, and the Public Prosecution Service for Northern Ireland
have been consulted on the proposal.
TIMETABLE
1.65 The proposal is expected to be presented at
the October Justice and Home Affairs Council, with negotiations
continuing into 2014. Only if and when Member States make clear
that there is no unanimity of those participating would the Commission
look to move to enhanced co-operation.
Conclusion
OPT-IN DEBATE
1.66 We recognise, like the Minister, that the
Government's long-established intention of not participating in
any proposal to establish an EPPO does not alleviate the need
for active participation in the negotiations to ensure that the
UK's "competences, rights and obligations" are not affected
(Article 2 of JHA Protocol 21). We therefore welcome the Minister's
comprehensive list of matters to be raised in negotiations which
we set out at paragraph 1.52 of this Report chapter.
1.67 We note the Minister's suggestion of "includ[ing]
reference to" the EPPO proposal in the Lidington debate the
Government offered on the Eurojust proposal. As the Lidington
commitments on Parliamentary scrutiny of JHA opt-in decisions
allow for enhanced scrutiny of "the Government's recommended
approach on the opt-in", we think that this encompasses the
implications of the UK's non-participation in a measure, irrespective
of how long non-participation has been a matter of fixed Government
policy. Arguably, decisions of long-standing policy require greater
parliamentary scrutiny given the passage of time and circumstance,
in this case, since the policy's genesis in the 2010 Coalition
Agreement. We therefore recommend that the opt-in decision be
fully debated on the floor of the House and note that in the Written
Ministerial Statement of 5 September the Government has offered
a specific opt-in debate on the proposal. Although it is not our
practice to agree to combine opt-in debates on separate documents,
we consider that the obvious overlap between the EPPO and Eurojust
proposals justifies their joint debate in this instance. We make
this suggestion on the understanding that there will be opportunity
for further debate on the EPPO proposal on the floor of the House
on the question of whether the House should issue a Reasoned Opinion.
COMPLIANCE WITH SUBSIDIARITY
1.68 W hilst we appreciate that the UK has
a significant interest in preventing criminal activity against
the EU's financial resources, we agree with the Minister that
the EPPO proposal breaches the subsidiarity principle and that
a national-level approach, supported by existing EU mechanisms,
would be more appropriate. In the attached Reasoned Opinion, we
raise the following concerns:
1.69 the Commission must first establish that
the objectives of the proposal cannot be sufficiently achieved
by Member States at national level (first limb of the subsidiarity
test). In the explanatory memorandum, the Commission's subsidiarity
analysis does not consider whether the stated objectives are necessary,
only that they can better be achieved at EU level. In doing so
it ignores the first limb of the subsidiarity test;
1.70 the Commission has not adequately considered
the option of strengthening existing or alternative mechanisms
which could be enforced at national and EU level (see the Government's
view at paragraph 1.50 of this Report chapter);
· most
significantly, the Commission has been too precipitate in not
waiting to assess what impact the harmonisation of criminal offences
and sanctions set out in the draft PIF Directive (on which a general
approach has been recently agreed) will have on facilitating Member
State investigation and prosecution of EU budget fraud, especially
in cases involving cross-border activity. Ongoing uncertainty
about the UK's participation in that measure should not undermine
the validity of that argument, given that the Commission is quite
prepared to advance the subsidiarity credentials of the current
proposal which can only ever have partial Member State participation;
and
· the evidential
basis of the "detailed statement" required by the Subsidiarity
Protocol is undermined by the use of questionable data and flawed
assumptions as comprehensively explained by the Government in
paragraph 1.53 of this Report chapter.
1.71 The second limb of the subsidiarity test
requires the Commission to demonstrate that the objectives of
the proposal can be better achieved at EU-level by reason of their
scale and effects and the Subsidiarity Protocol requires this
to be "substantiated by qualitative and, wherever possible,
quantitative indicators". We find the following problems
with the Commission's assertions of "EU-added value":
· the
qualitative and quantitative indicators used are open to the same
criticism referred to in paragraph 1.68 above;
· an EU-level
prosecution regime, in which there will be only partial participation
and no "single legal area" across the EU, will not achieve
an equivalent level of enforcement throughout the EU;
· the supposed
benefit of a "high level of respect and protection of the
rights of individual and companies during investigations and prosecutions
of EU fraud, in accordance with the Rule of Law" is unjustified,
paradoxical and dismissive of existing protections for suspects
in national criminal justice systems:
it
is questionable whether participating Member States, in which
investigative and prosecutorial functions have been separated
precisely to prevent abuse of power and to enhance protection
of suspects' right, would agree with that claim;
pressures on European Delegated Prosecutors
to prioritise EU fraud cases and secure 100% conviction rates
will entail a mandatory model of prosecution decision-making
(alien to the UK and other Member States who employ a discretionary
model) which may undermine suspects' rights;
rights of EU citizens who are victims
of other crimes might be adversely affected by the prioritised
use of national resources for EU fraud prosecutions;
the lack of detail on arrangements
for judicial review undermines the compliance of the proposal
with the Rule of Law; and
"equality before the law",
another Rule of Law concept, will not be achieved in the two-tier
criminal justice systems which will inevitably result from the
proposal where suspects of prioritised, target-driven prosecutions
of EU offences may run a greater risk of conviction than other
suspects.
FURTHER POINTS OF CONCERN
1.72 We ask the Minister to keep us informed of
progress on any of the issues to be raised by the UK in negotiations.
We also request the Minister to respond to the following questions
before the holding of either the Reasoned Opinion or opt-in debates:
a) We agree with the Minister's questioning
of the use of the Article 86 TFEU legal base to legislate for
criminal procedural rights which fall within Article 82(2) TFEU
and to enable the EPPO to request Eurojust to investigate offences
outside its remit. How does the Minister intend to proceed with
this significant legal issue and would the Government be prepared
to make a challenge to the ECJ in the absence of a successful
resolution of this point?
b) The Minister may be aware of our continuing
concern about EU competence in respect of international agreements
and we are particularly troubled by the prospect of EPPO powers
in relation to Third Country Agreements (see paragraphs 1.38 and
1.52 of this Report chapter). Is the Minister looking to negotiate
the removal of these provisions from the proposal?
c) We support the Minister on the stance he
is taking to ensure that non-participating Member States and their
taxpayers do not subsidise the EPPO. What does the Minister propose
to do if a successful outcome is not achieved?
d) We note our predecessors' comments on the
2011 Green Paper about lack of democratic accountability for the
EPPO functions. Even given the non-participation of the UK, does
the Minister think the EPPO proposal (Article 70) goes far enough
in recognising the need for accountability of the EPPO to national
parliaments, particularly considering the Commission's decision
that for some purposes the EPPO is to be regarded as a "national
authority"?
e) We note that the conviction rate of 23.1%
for EU fraud cases referred to the UK by OLAF between 2006-11
is low compared with many other Member States. Can the Minister
explain why this is and what action is being taken to address
any shortcomings.
1.73 To summarise our Conclusions, we recommend
that:
a) the consequences of the Government's opt-in
decision be debated on the floor of the House, together with the
Eurojust proposal;
b) given the importance of the matters covered
in them, that the debate should be for three hours;
c) the House sends the attached Reasoned Opinion
to the Presidents of the EU institutions before 28 October 2013,
following a debate on the Floor of the House;
d) the Minister responds to the questions
in paragraph 1.70 above before either debate is held; and
e) the documents remain under scrutiny in
the meantime.
1 (35216) 12566/13: Draft Regulation on the European
Union Agency for Criminal Justice Cooperation (Eurojust), see
chapter 3 of this Report. Back
2
(34091) 12683/12: HC 86-xii (2012 -13) chapter 10 (12 September
2013). Back
3
See headnote: (22999) -: HC 152-xxxiv(2001-2) chapter 14 (26
June 2002), HC 152-xix (2001-2) chapter 5 (13 February 2002).
Green paper on criminal-law protection of the financial interests
of the Community and the establishment of a European Prosecutor
COM(2001) 715 final: http://eur-lex.europa.eu/LexUriServ/site/en/com/2001/com2001_0715en01.pdf. Back
4
Commission Communication: additional Commission contribution to
the Intergovernmental Conference on institutional reforms. The
criminal protection of the Community's financial interests: a
European Prosecutor, COM(2000) 608 (see also COM(2000) 34): http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2000:0608:FIN:EN:PDF. Back
5
Corpus Juris is a research
report prepared by a group of academic lawyers from different
Member States and published in 1997. See the Ninth Report of the
House of Lords Select Committee on European Communities: Prosecuting
fraud on the Communities' finances - the Corpus Juris (1998-1999),
HL 62: http://www.publications.parliament.uk/pa/ld199899/ldselect/ldeucom/62/6201.htm. Back
6
Draft Treaty establishing a Constitution for Europe, CONV 850/03M,
18 July 2003: http://european-convention.eu.int/docs/treaty/cv00850.en03.pdf. Back
7
See headnote: (32831) 11055/11: HC 428-xxxviii (2010-12) chapter
1 (19 October 2011), HC 428-xxxi (2010-12) chapter 1 (29 June
2011). "Communication on the protection of financial interests
of the EU by criminal law and by administrative investigations:
An integrated policy to safeguard taxpayers' money". Back
8
See headnote: (22999) -: HC 152-xix (2001-2) chapter 5 (13 February
2002). Back
9
http://www.publications.parliament.uk/pa/cm201012/cmgeneral/euro/111025/111025s01.htm Back
10
See note 2. Back
11
See note 1. Back
12
(35215) 12554/13: Commission Communication on improving OLAF's
governance and reinforcing procedural safeguards in investigations:
A step-by-step approach to accompany the establishment of the
European Public Prosecutor's Office, see chapter 2 of this Report. Back
13
"The Coalition: our programme", published 20 May 2010,
Chapter 13, "Europe", p.19.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/78977/coalition_programme_for_
government.pdf. Back
14
See Recital 48 to document (a). Back
15
The Commission refers to the case of Commission v Hellenic
Republic Case 68/88 [1989] ECR 2965 as an example of where
Article 325 obligations were enforced against a Member State for
failing to take action to protect the EU's financial interests:
"By failing to institute criminal or disciplinary proceedings
against the persons who took part in and helped conceal the transactions
which made it possible to evade the above mentioned agricultural
levies the Hellenic Republic has failed to fulfil its obligations
under Article 5 of the EEC Treaty".
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:61988CJ0068:EN:PDF. Back
16
Protocol (No. 21): On the position of the United Kingdom and Ireland
in respect of the area of freedom, security and justice: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:115:0001:01:en:HTML. Back
17
http://www.publications.parliament.uk/pa/ld200910/ldselect/ldeucom/6/605.htm
and https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/206474/Final_opt-in_webpage_update.pdf. Back
18
http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm110120/wmstext/110120m0001.htm#110
12057000015. Back
19
Section 6(3) states:"A Minister of the Crown may not give
a notification under Article 4 of Protocol(No. 21) on the position
of the United Kingdom and Ireland in respect of the area of freedom,
security and justice annexed to TEU and TFEU which relates to
participation by the United Kingdom in a European Public Prosecutor's
Office or an extension of the powers of that Office unless-
(a) the notification has been approved
by Act of Parliament, and
(b) the referendum condition is met".
See http://www.legislation.gov.uk/ukpga/2011/12/section/6. Back
20
See Article 3 for the definition of a "draft legislative
act" within the meaning of Protocol No 2 to the Treaties
on the application of the principles of subsidiarity and proportionality
http://eur-lex.europa.eu/en/treaties/dat/12007L/htm/C2007306EN.01015001.htm. Back
21
Article 5(3) TEU: "the Union shall act only if and in so
far as the objectives of the proposed action cannot be sufficiently
achieved by the Member States, either at central level or at regional
and local level, but can rather, by reason of the scale or effects
of the proposed action, be better achieved at Union level". Back
22
Article 5 of Protocol No 2: "Draft legislative acts shall
be justified with regard to the principles of subsidiarity and
proportionality. Any draft legislative act should contain a detailed
statement making it possible to appraise compliance with the principles
of subsidiarity and proportionality. This statement should contain
some assessment of the proposal's financial impact and, in the
case of a directive, of its implications for the rules to be put
in place by Member States, including, where necessary, the regional
legislation. The reasons for concluding that a Union objective
can be better achieved at Union level shall be substantiated by
qualitative and, wherever possible, quantitative indicators.
Draft legislative acts shall take account of the need for any
burden, whether financial or administrative, falling upon the
Union, national governments, regional or local authorities, economic
operators and citizens, to be minimised and commensurate with
the objective to be achieved". Back
23
See p.28 of the impact assessment. Back
24
See p.7 of the impact assessment. Back
25
See p.3 of the Communication, Heading 2: "The current system
does not protect the Union's financial interests sufficiently". Back
26
See note 25, specifically para 2. The main reasons given are
that Member States "are hampered by divergent legislation
and uneven enforcement efforts ... the complexity of cases, the
lack of sufficient national resources and the frequent need to
gather evidence outside of the national territory". Back
27
See note 25, but p.4, para 2. Back
28
Conviction rates for Member States in relation to cases referred
to them by OLAF, 2006-11 are provided at page 18 of the impact
assessment. The UK's percentage is one of the lowest: 23.1% but
the statistics are a crude measure which the Commission concedes.
It states that to properly assess the performance of the judicial
systems of the Member States would require an in-depth study ...
including the legal procedural framework applicable in each Member
State and of the crime situation on the ground. Nevertheless
the Commission still concludes that the operation of the EPPO
would "...achieve a higher degree of prosecution in such
cases". Back
29
See limits of Article 85 TFEU. Back
30
See limits of Article 88 TFEU. Back
31
Commission's impact assessment, p.26. Back
32
Commission's impact assessment, p.27. Back
33
See both p.6 of the Communication and p.26 of the impact assessment. Back
34
Quotations from p.26 of the impact assessment. Back
35
Para 3.2, p.4 of the explanatory memorandum. Back
36
Additionally, in the case of the Deputies, the shortlist must
take into account demographic balance and the geographical range
of the Member States. Back
37
See note 2 for reference to "PIF". Back
38
See note 2. Back
39
Article 18 (1) states: "The designated European Delegated
Prosecutor may either undertake the investigation measures on
his/her own or instruct the competent law enforcement authorities
in the Member State where he/she is located". Back
40
See para 3.3.5, p.7 of the explanatory memorandum. Back
41
Note Article 82(2) also stipulates the use of Directives. Back
42
See note 35: Para 3.2, p.4 of the explanatory memorandum. Back
43
See the 2010 and 2011 Annual Reports on Protection of the European
Union's financial interests - Fight against fraud: http://ec.europa.eu/anti_fraud/documents/reports-commission/2010_en.pdf
and http://ec.europa.eu/anti_fraud/documents/reports-commission/2011/report_en.pdf. Back
44
See 2012 OLAF report: http://ec.europa.eu/anti_fraud/documents/reports-olaf/2012/olaf_report_2012_en.pdf Back
45
See Article 26(3) and (4) above. Back
46
Since the Minister's Explanatory Memorandum, the Scottish Parliament
has agreed to a motion that the EPPO proposal does not comply
with the principle of subsidiarity. The conclusions of the 13th
Report (2013, Session 4) of the Justice Committee of the Scottish
Parliament Report on the European Commission Proposal for a
Council Regulation on the establishment of the European Public
Prosecutor's Office (COM (2013)) 534 final) are attached to
the draft Reasoned Opinion (at Annex 1 of this Report). Back
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