concerning
Annex: Reasoned Opinion
Draft Reasoned Opinion of the House of Commons~
Submitted to the Presidents of the European Parliament,
the Council and the Commission, pursuant to Article 6 of Protocol
(No 2) on the Application of the Principles of Subsidiarity and
Proportionality.
a Draft Regulation
of the Council on the establishment of the European Public Prosecutor's
Office (EPPO)[47]
TREATY FRAMEWORK FOR APPRAISING COMPLIANCE WITH SUBSIDIARITY
1. In previous Reasoned Opinions, the House of Commons
has set out what it considers to be the correct context in which
national parliaments should assess a proposal's compliance with
subsidiarity. The House of Commons continues to rely on that
context without restating it.
PROPOSED LEGISLATION
PURPOSE
2. The general or main objective of the proposed
Regulation, as summarised by the Commission in its impact assessment,
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 (known as PIF offences
taken from the French acronym for "protecting financial
interests");[48]
· 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.[49]
3. It aims to achieve these objectives through the
main action of establishing a European Public Prosecutor's Office
(EPPO) to be structured on a "decentralised" model[50]
comprising a small central team of 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.[51]
OPERATION
4. The draft Regulation is based on Article 86 TFEU
which creates a competence for the EU[52]
"in order to combat crimes affecting the financial interests
of the Union" to "establish a European Public Prosecutor's
Office from Eurojust".
5. In summary, the draft Regulation proposes that
the EPPO (through its EDPs) would:
· have
exclusive competence to investigate and prosecute PIF offences
within the territory of the Member States which will be considered
to be a "single legal area" for this purpose;[53]
· be
able to direct the competent investigative
and prosecution authorities within the participating Member States
through the EDP network for PIF offences;[54]
· use,
through EDPs and subject to certain conditions,[55]
an extensive list of investigative measures ;[56]
· be
able to obtain any relevant information from national authorities
(criminal investigation or law enforcement databases[57]
) or from Eurojust and Europol;[58]
and
· have
the same powers as national public prosecutors in national courts[59]
and be able to choose
which participating Member States' national court would take the
case.[60]
SUBSIDIARITY
6. In its explanatory memorandum, the Commission
asserts the proposal's compliance with subsidiarity as follows
(a similar approach being taken in Recital 5 of the draft Regulation):
"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."[61]
7. However, in its impact assessment, the Commission
advances seven main reasons to justify EU action (addressed in
more detail in later paragraphs):
· additional
measures are required to tackle fraud against the EU budget;[62]
· the
current fragmented, national-level enforcement system is deficient;
· EU
fraud is not a priority at national level and is not prosecuted
satisfactorily by Member States, including OLAF-referred cases
(conviction rates being uneven across Member States and ranging
from approximately 20% to 90%);[63]
· increased
prosecution of EU fraud cannot be achieved by reforming existing
EU Agencies nor by strengthening current EU measures and initiatives;[64]
· the
draft PIF Directive will only partially address EU budget fraud;[65]
· a
coherent, EU-level prosecution regime will produce an equivalent
level of national and cross-border enforcement and deterrence
across the EU;[66] and
· a
high level of protection of suspects' rights will be thus be ensured.
ASPECTS OF THE REGULATION WHICH DO NOT COMPLY WITH
THE PRINCIPLE OF SUBSIDIARITY
I) FAILURE TO COMPLY WITH ESSENTIAL PROCEDURAL REQUIREMENTS
8. By virtue of Article 5 of Protocol (No 2) "any
draft legislative act should contain a detailed statement making
it possible to appraise compliance with the principles of subsidiarity
and proportionality". The requirement for the detailed statement
to be within the draft legislative act implies that it should
be contained in the Commission's explanatory memorandum, which
forms part of the draft legislative act and which, importantly,
is translated into all official languages of the EU. The fact
that it is translated into all official languages of the EU allows
the detailed statement to be appraised for compliance with subsidiarity
(and proportionality) in all the national parliaments of Member
States of the EU, in conformity with Article 5 of Protocol (No
2). This is to be contrasted with the Commission's impact assessment,
which is not contained within a draft legislative act, and which
is not translated into all the official languages of the EU.
9. The presumption in the Treaty on European Union[67]
is that decisions should be taken as closely as possible to the
EU citizen. A departure from this presumption should not be taken
for granted but justified with sufficient detail and clarity that
EU citizens and their elected representatives can understand the
qualitative and quantitative reasons leading to a conclusion that
"a Union objective can be better achieved at union level",
as required by Article 5 of Protocol (No 2). The onus rests on
the EU institution which proposes the legislation to satisfy these
requirements.
10. For the reasons given below, we do not consider
that the Commission has provided sufficient qualitative and quantitative
substantiation in the explanatory memorandum of the necessity
for action at EU level. This omission, the House of Commons submits,
is a failure on behalf of the Commission to comply with essential
procedural requirements in Article 5 of Protocol (No 2).
11. The first limb of the subsidiarity test provides
that the EU may only act "if and insofar 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".[68] The
House considers that the Commission's subsidiarity analysis does
not consider whether the stated objectives are necessary, only
that they can better be achieved at EU level, which makes them
necessary: "[t]here is a need for the Union to act because
the foreseen action has an intrinsic Union dimension" (see
paragraph 6 above). By conflating the first and second limbs of
the subsidiarity test, this statement is entirely self-serving.
The analysis is not remedied simply by stating that the prosecution
of offences by Member States "is not satisfactory".
II) FAILURE TO COMPLY WITH THE PRINCIPLE OF SUBSIDIARITY
12. Turning to the impact assessment, the Commission
says that action at national, Member State level is not sufficient
because:
· there
are deficiencies in the current national-level enforcement system
(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;[69]
and
· obstacles
to successful national level action include divergent legislation,
the complexity of cases, lack of sufficient national resources
and the frequent need to gather evidence outside of the national
territory.[70]
13. The Commission also says that national-level
action would still not be sufficient if it is combined with strengthened
existing EU-level measures and mechanisms, because:
· there
is limited scope to achieve the objectives of the proposal through
reforming those EU Agencies: neither Eurojust[71]
nor Europol[72] 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;[73]
· 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;[74]
and
· other
existing measures and initiatives taken by the Commission (such
as the anti-fraud strategy)[75]
are not sufficient to deal with the problems identified with investigations
and prosecutions.[76]
14. The House of Commons considers that, in its analysis
in the impact assessment, the Commission has not satisfied the
first limb of the subsidiary test because:
· it
has not adequately considered the option of strengthening existing
or alternative mechanisms (including preventive measures at the
point of application for EU funds) which could be enforced at
national level and EU level but assumes that the establishment
of a supranational prosecution and investigative agency is the
only way that EU budget fraud can be addressed. Its impact assessment
sets out four options for consideration (no action, only non-regulatory
action at EU level, strengthening the powers of Eurojust and setting
up an EPPO) but only the option forming the current proposal is
substantially examined;
· it has
been too precipitate in not waiting to assess the impact of the
draft PIF Directive in facilitating national and cross-border
investigation and prosecution of EU budget fraud;[77]
and
· the
Commission uses questionable data and flawed assumptions in its
impact assessment (including, but not limited, to the use of unreliable
convictions data,[78]
the assumption that the EPPO option is the only way of reducing
fraud and not examining preventive measures, the use of the data
of non-participating States, use of problematic costing based
on EPPO being funded out of existing resources).
15. Furthermore, the Commission's assertion in relation
to the first limb of the subsidiarity test, does not consider
the sufficiency of action "at regional or local level",
particularly important where devolved administrations may have
discrete criminal justice systems. The House draws the Commission's
attention to Annex 1 to this Reasoned Opinion, the 13th Report
of the Justice Committee of the Scottish Parliament. That Committee
concluded that it does not consider that the establishment of
the EPPO is either necessary in order to achieve the stated objective
of tackling EU fraud or that action at EU level would bring greater
benefits than Member States could achieve collectively. It is
concerned that Commission has not sufficiently explored whether
action short of a supranational agency would be capable of delivering
effective protection against EU financial fraud. On 5 September
the Scottish Parliament agreed, as recommended by the Justice
Committee, to the motion that the draft Regulation "does
not comply with the principle of subsidiarity, as set out in Article
5 of the Treaty on the European Union".
16. The second limb of the subsidiarity test requires
evidence that the objective of the draft Regulation would be better
achieved, by reason of its scale or effects, by action at EU level.
According to the Commission, the benefits of EU-level action
are that:
· a
coherent, EU-level prosecution regime will be able to tackle the
cross-border elements involved in EU fraud cases, produce a consistent,
efficient, equivalent level of enforcement throughout the EU,
ensure cooperation and coordination between Member States and
ensure that every suspected offence against the EU's financial
interest is systematically pursued, thus improving deterrence;[79]
and
· an
EU-level approach will 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.
17. The House of Commons is not convinced by the
Commission's assertion of these benefits of EU-level action. This
is because:
· the
qualitative and quantitative indicators used are open to the same
criticism referred to in paragraph 14 above; and
· 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; and
· the
claim that a high level of protection of suspects' rights will
be achieved is unjustified:
o 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' rights, would agree with that claim;
o pressures
on EDPs to prioritise EU fraud cases and secure 100% conviction
rates will introduce 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;
o rights
of EU citizens who are victims of other crimes might be adversely
affected by the prioritisation of national resources for EU fraud
prosecutions;
o the
lack of detail on arrangements for judicial review undermines
the proposal's compliance with the Rule of Law; and
o
"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.
18. The House of Commons is also concerned about
the potential disadvantages of EU-level action. Not only are there
potential disadvantages for non-participating States resulting
from the reduced competence of Eurojust and OLAF in relation to
PIF offences and the lack of focus on preventive measures, but
also for participating States in the dilution of national responsibility
for prosecuting those offences and a loss of autonomy in prioritising
prosecution activity within their own criminal justice systems.
CONCLUSION
19. For these reasons the House of Commons considers
this proposal does not comply with the principle of subsidiarity.
ANNEX: EXTRACT FROM THE 13TH
REPORT OF THE JUSTICE COMMITTEE OF THE SCOTTISH PARLIAMENT (2013,
SESSION 4)[80]
REPORT ON THE EUROPEAN COMMISSION PROPOSAL FOR A
COUNCIL REGULATION ON THE ESTABLISHMENT OF THE EUROPEAN PUBLIC
PROSECUTOR'S OFFICE (COM (13) 534 FINAL
" Conclusion: The Committee does not consider
that the establishment of the EPPO is necessary in order to achieve
the stated objective of tackling EU fraud or that action at EU
level would bring greater benefits than Member States could achieve
collectively. Furthermore, we have concerns that the Commission
has not explored sufficiently whether action short of a supranational
agency would be capable of delivering effective protection against
EU financial fraud.
"The Committee therefore agrees that the European
Commission Proposal for a Council Regulation on the establishment
of the European Public Prosecutor's Office (COM(2013) 534 final)
does not comply with the principle of subsidiarity, as set out
in Article 5 of the Treaty on European Union.
"Recommendation: The Committee recommends that
the Parliament agrees that the European Commission Proposal for
a Council Regulation on the establishment of the European Public
Prosecutor's Office (COM(2013) 534 final) does not comply with
the principle of subsidiarity, as set out in Article 5 of the
Treaty on European Union."
47 COM(13) 534. Back
48
These offences will be defined by reference to the yet to be agreed
draft Directive on the fight against fraud to the Union's financial
interests by means of criminal law (12683/12) COM (12)(363).
This draft Directive is commonly known as the draft PIF Directive. Back
49
See p.28 of the impact assessment. Back
50
Recital 13 and Article 3 of the draft Regulation. Back
51
Article 6(1) and (4) of the draft Regulation. Back
52
Article 86(1) TFEU. Back
53
Articles 11(4) and 25(1) of the draft Regulation. Back
54
Article 6(4) of the draft Regulation. Back
55
Such as prior judicial authorisation or the pre-requisite of "reasonable
grounds"; see Article 26(3) of the draft Regulation. Back
56
Article 26 of the draft Regulation. Back
57
Article 20 of the draft Regulation. Back
58
Article 21 of the draft Regulation. Back
59
Article27(1) of the draft Regulation. Back
60
Article 27(4) of the draft Regulation. Back
61
Para 3.2, p. 4 of the explanatory memorandum. Back
62
See p.7 of the impact assessment. There was an average of 500/£425
million of suspected fraud in each of the last three years and
undetected fraud of up to 3/£2.55 billion a year. Back
63
Conviction rates for Member States in relation to cases referred
to them by OLAF, 2006-11 are provided at p.18 of the impact assessment.
The Commission concedes that 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
64
Commission's impact assessment, pp.26 and 27. Back
65
Commission's impact assessment, p.27. Back
66
P.26 of the impact assessment. Back
67
Article 5. Back
68
See Article 5(3) TEU. Back
69
See p.27 of the impact assessment. Back
70
See note above. Back
71
See limits of Article 85 TFEU. Back
72
See limits of Article 88 TFEU. Back
73
Commission's impact assessment, p.26. Back
74
Commission's impact assessment, p.27. Back
75
Also, the 1995 Convention on the protection of the EU's financial
interests, Regulation 1073/1999 on investigations conducted by
OLAF, and Regulation 2185/1996 concerning on-the-spot checks and
inspection). Back
76
Commission's impact assessment, p.27. Back
77
Ongoing uncertainty about the UK's participation in that measure
does 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. Back
78
See note 17. The Commission concedes that 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
79
P.26 of the impact assessment. Back
80
The full text of the report can be found at http://www.scottish.parliament.uk/S4_JusticeCommittee/Reports/jur-13-13w.pdf. Back
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