Twenty-eighth Report of Session 2013-14 - European Scrutiny Committee Contents

13   Freezing and confiscation of proceeds of crime



+ ADDs 1-2

COM(12) 85

Draft Directive on the freezing and confiscation of proceeds of crime in the European Union

Legal baseArticles 82(2) and 83(1) TFEU; co-decision; QMV
DepartmentHome Office
Basis of considerationMinister's letter of 4 December 2013
Previous Committee ReportsHC 86-xxii (2012-13), chapter 9 (5 December 2013);

HC 86-xii (2012-13), chapter 5 (12 September 2012);

HC 86-vi (2012-13), chapter 4 (27 June 2012);

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

Discussion in CouncilAgreed at COREPER level on 3 December 2013
Committee's assessmentLegally and politically important
Committee's decisionNot cleared; further information requested

Background and previous scrutiny

13.1  The draft Directive, which would establish a set of minimum rules covering different types of confiscation (value-based confiscation, extended confiscation, non-conviction based confiscation and third party confiscation), has been considered in some detail in our earlier Reports[50] and was the subject of a "Lidington" opt-in debate in June 2012. Despite welcoming the aims of the draft Directive and indicating that it was broadly in line with existing UK legislation and practice, the Government somewhat belatedly concluded that it might undermine the UK's domestic civil asset recovery regime. This was because the draft Directive — an EU criminal law measure — included provisions on non-conviction based confiscation which are governed in the UK by civil procedures under Part V of the Proceeds of Crime Act (POCA) 2002 and might, the Government feared, provide a basis for asserting that more stringent criminal law standards and safeguards (under Article 6(2) and (3) of the ECHR) should apply to Part V of the Act. The Government therefore decided not to opt in to the draft Directive, but to play an active role in negotiations with a view to considering a post-adoption opt-in.

13.2  We have retained the draft Directive under scrutiny for two reasons. First, a decision to opt into the Directive after its adoption by the Council and the European Parliament might have some bearing on the UK's 2014 block opt-out decision, as many of the criminal offences to which the Directive would apply are set out in EU criminal law instruments adopted before the Lisbon Treaty entered into force and are thus within the scope of the UK's block opt.[51] We therefore asked the Government to ensure that its progress reports on the negotiations explained the significance which any changes to the Commission's original text might have for UK participation in the Directive. Second, the Government indicated that its priority was to establish effective mutual recognition arrangements for conviction and non-conviction based confiscation orders, in both the civil and criminal contexts. We asked the Government to inform us of the progress it is making in exploring with EU partners more effective arrangements for mutual recognition in this area.

13.3  We last reported on the draft Directive just over a year ago, when it was anticipated that the Council would agree a general approach at the December Justice and Home Affairs Council. Our Twenty-second Report of Session 2012-13, agreed on 5 December 2012, summarised the main developments in negotiations within the Council. We noted that the Government's principal concern — that the inclusion in an EU criminal law measure of provisions on non-conviction based confiscation might increase the risk of legal challenge to the UK's civil recovery procedures — remained in Article 5 of the draft Directive. However, other changes appeared to make it somewhat more, rather than less, likely that the Government might wish to consider opting in post-adoption.

13.4  We asked the Government to provide further progress reports once negotiations with the European Parliament were underway highlighting, in particular, changes likely to affect the Government's assessment of the costs or benefits of participating in the draft Directive. Finally, we reminded the Minister that we looked forward to hearing what progress the Government was making in seeking to establish more effective arrangements for the mutual recognition of confiscation orders obtained in both civil and criminal law contexts.

The Minister's letter of 4 December 2013

13.5  The Minister for Security (James Brokenshire) confirms that a general approach was agreed at the Justice and Home Affairs Council in December 2012 and that trilogue negotiations began in June 2013. His letter summarises the main elements of a provisional agreement reached by the European Parliament and Council:

"The most significant changes to the text relate to the non-conviction based (NCB) confiscation provisions. Article 5 of both the Commission text and that of the General Approach contained stand-alone NCB provisions. This Article has now been deleted. The obligation to take measures to enable the confiscation of assets from those who have fled, or are too ill to stand trial, are now included in Article 3, and, as in the General Approach, may be met through holding trials in absentia or, if that is not possible, through the use of an NCB power (Article 3(2)).

"Article 4, on extended confiscation, has also been significantly amended. The Directive now identifies those offences to which extended confiscation should at least apply. In the General Approach, extended confiscation applied to a person convicted of a 'serious criminal offence'. However, the term 'serious' was not defined and was left to Member States to define. The Parliament and the Commission found that approach unacceptable and compromise was reached with the Council on a list of 'serious' offences.

"The Parliament and the Council have also provisionally agreed a declaration calling upon the Commission to conduct a feasibility study for a separate instrument for NCB confiscation. This declaration will sit alongside the declaration agreed at the General Approach calling on the Commission to consider revising the mutual recognition arrangements in light of the changes brought about by the Directive. Given the upcoming European Parliamentary elections, and changes at the European Commission, I do not expect any proposals for an instrument on the mutual recognition of NCB orders to emerge in the short term."

13.6  The Minister expects the European Parliament formally to approve the compromise text in January 2014, followed by formal approval in the Council in February. He continues:

"As you know, the Government did not opt in to this instrument at the pre-adoption stage. Once the text has been adopted the Government will carefully consider a post-adoption opt-in. This will be subject to Parliamentary scrutiny in the normal way."


13.7  We thank the Minister for providing us with a copy of the text provisionally agreed by the Council and the European Parliament and note the Government's intention to consider opting into the Directive once it has been formally adopted by both institutions. We ask him to ensure that the final agreed text is deposited in Parliament with an Explanatory Memorandum explaining how the Directive differs from the text originally proposed by the Commission and the general approach text agreed by the Council in December 2012.

13.8  We are particularly interested to hear whether the removal of a specific provision on non-conviction based confiscation addresses the Government's concern that the Directive might taint the UK's domestic civil asset recovery regime under Part V of the Proceeds of Crime Act 2002. We also note that most of the EU criminal law instruments to which the Directive would apply are subject to the UK's 2014 block opt-out decision and the Government has already indicated that it does not intend to rejoin them. We look forward to receiving a detailed explanation of the impact that the Government's 2014 block opt-out decision will have on the scope of application of the Directive in the UK, should the Government recommend opting in. Pending deposit of the final agreed text of the Directive, the proposal remains under scrutiny.

50   See headnote. Back

51   See HC 683 (2013-14); The UK's block opt-out of pre-Lisbon criminal law and policing measuresBack

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Prepared 2 January 2014