Documents considered by the Committee on 25 November 2015 - European Scrutiny Contents


21 Freezing and confiscation of proceeds of crime

Committee's assessment Legally and politically important
Committee's decisionCleared from scrutiny; further information requested
Document detailsProposal for a Directive on the freezing and confiscation of proceeds of crime in the European Union
Legal baseArticles 82(2) and 83(1) TFEU; ordinary legislative procedure; QMV
DepartmentHome Office
Document Numbers(33758), 7641/12 + ADDs 1-2, COM(12) 85

Summary and Committee's conclusions

21.1 The Directive, which was formally adopted in April 2014, establishes minimum rules on the freezing and confiscation of proceeds of crime.[77] It covers both property used to commit a crime ("instrumentalities") and any economic benefit ("proceeds") derived from the commission of a crime. A "Lidington" opt-in debate[78] took place on the floor of the House in June 2012. Despite welcoming the aims of the proposed Directive and indicating that it was broadly in line with existing UK legislation and practice, the previous Government expressed concern that it might undermine the UK's domestic civil asset recovery regime. This was because the proposal — 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 motion agreed to by the House endorsed the Government's decision not to opt into the draft Directive. The Government indicated, however, that it would play an active role in negotiations with a view to considering opting into the Directive after its adoption.

21.2 The Directive remains under scrutiny pending further information from the Government on the possibility of a post-adoption opt-in. A number of factors appear to be material. These are:

·  the degree of risk posed by the Directive to the UK's domestic civil asset recovery regime under Part V of the Proceeds of Crime Act 2002;

·  the consequences of the UK's "block opt-out" decision in December 2014, which mean that the UK is no longer bound by eight of the 11 EU police and criminal justice measures which are referenced in the Directive; and

·  the extent to which the Directive may advance or set back the objective of establishing effective mutual recognition arrangements for conviction and non-conviction based confiscation orders, in both the civil and criminal contexts, stated to be a priority by the previous Government.

21.3 Our earlier Reports provide a detailed overview of the proposed Directive and the previous Government's position. The former Minister for Modern Slavery and Organised Crime (Karen Bradley) wrote to our predecessors shortly before the Dissolution of Parliament at the end of March, explaining that the Government was still weighing the factors for and against opting into the Directive. The Minister for Policing, Crime, Criminal Justice and Victims (Mike Penning) now writes to confirm that the Government has decided not to opt into the Directive and explains why.

21.4 We set out in this chapter the factors which the Government considers to be material in reaching its decision not to opt into the Directive following its adoption in April 2014. We are now content to clear the Directive from scrutiny.

21.5 In doing so, we recall that the previous Government attached priority to establishing effective mutual recognition arrangements for conviction and non-conviction based confiscation orders, in both the civil and criminal contexts. We ask the Minister whether this remains a priority for the Government and, if so, to tell us what progress it has made in securing this objective.

Full details of the documents: Proposal for a Directive on the freezing and confiscation of proceeds of crime in the European Union: (33758), 7641/12 + ADDs 1-2, COM(12) 85.

Background and previous scrutiny

21.6 The Directive was formally adopted in April 2014 and had to be implemented by 4 October 2015. It does not apply to the UK and Denmark. A recital to the Directive makes clear that, if the UK were to opt into the measure following its adoption, it would be bound "only in respect of the offences covered by the instruments by which it is bound". The UK is bound by three EU criminal law instruments listed in the Directive: two Directives adopted in 2011 on trafficking in human beings and on child sexual exploitation, and one adopted in 2013 on attacks against information systems. The UK is not bound by the remaining eight EU criminal law measures which deal with corruption, fraud and counterfeiting, money laundering, terrorism, drug trafficking, and organised crime.[79]

The first letter of 24 March 2015

21.7 The first letter, from the former Minister for Modern Slavery and Organised Crime (Karen Bradley), arrived too late to be considered by our predecessors before the Dissolution of Parliament ahead of the May general election. We do not consider it further as its content is substantially reproduced in the later letter from the Minister for Policing, Crime, Criminal Justice and Victims.

The second letter of 17 November 2015

21.8 The Minister (Mike Penning) apologises for the delay in providing an update, noting that the Government's consideration of the final text of the Directive has also taken into account the UK's block opt-out decision (finalised in December 2014). He reiterates the earlier Coalition Government's concerns with the text proposed by the Commission in 2012, notably:

·  whether some of the provisions exceeded the powers conferred on the EU by the Treaty Articles cited as the legal bases for the proposal;

·  whether the proposal would interfere with the UK's Proceeds of Crime Act 2002; and

·  whether UK participation in the proposal would "pre-empt" the UK's right to decide which EU police and criminal justice measures it would seek to rejoin, as part of the 2014 block opt-out process, by requiring the UK to give full effect to the obligations contained in the pre-Lisbon (Third Pillar) criminal law measures referred to in the proposal.

21.9 These concerns informed the Coalition Government's decision not to opt into the proposed Directive during the initial three-month period after its publication by the Commission, but to play a full part in negotiations and seek to influence the outcome in a way that might enable the UK to opt in.

21.10 The Minister highlights a particular concern regarding the inclusion in an EU criminal law measure of provisions on non-conviction based confiscation of criminal assets on the grounds that this might potentially undermine the operation of the UK's civil recovery regime under Part V of the Proceeds of Crime Act (POCA). He explains:

    "Civil recovery proceedings in the UK are based on the civil law standard of proof. This makes it easier to recover assets than it would be if prosecutors had to demonstrate to the criminal standard that the property is the proceeds of crime. It was felt that the use of the criminal legal base for the Directive could strengthen a legal challenge against the UK civil recovery regime i.e. that civil recovery proceedings are effectively criminal proceedings and so the burden of proof in such cases should be the criminal standard."

21.11 The Minister indicates that this risk has been mitigated in the final text of the Directive:

    "Following negotiations, the explicit references to non-conviction based confiscation powers have been removed. Article 5 now covers only enhanced confiscation, where assets may be confiscated from an individual who has been convicted of an offence, but the assets may not be the proceeds of that particular offence. However Article 4.2 requires Member States to be able to confiscate assets where criminal proceedings have been commenced, but due to the defendant absconding or being ill, it is not possible to secure confiscation through a trial. In the case of absconders, s.28 of POCA allows for a confiscation order to be made against the defendant, notwithstanding his absconding, so the UK is able to comply without the need to rely on civil recovery. If the defendant becomes too ill for a trial to continue, in certain circumstances it is likely that civil recovery would be the only way that assets could be recovered. The UK would therefore need to comply with a criminal law measure through the use of civil law. This could increase the risk of a successful legal challenge to these civil powers."

21.12 The Minister highlights a further concern regarding the inclusion of "instrumentalities of crime" within the scope of the Directive:

    "The Directive also requires Member States to have the ability to seize the instrumentalities of crime; that is, property used or intended to be used to commit a criminal offence. UK legislation does allow for the seizure of instrumentalities in relation to particular offences, but it does not do so on a general basis. The UK can also confiscate instrumentalities seized by the police during investigations on a general basis, through section 143 of the Powers of the Criminal Courts Sentencing Act 2000. Therefore, the UK does not meet the requirements of the Directive in this area, and so if we were to opt in to the Directive, we would either need to make general provision for the confiscation of instrumentalities in domestic legislation, or bear a (relatively small) risk of infraction proceedings for incorrectly implementing the Directive in domestic law."

21.13 Finally, the Minister notes that, under Article 3 of the Directive, the criminal offences that can be subject to confiscation orders are defined by reference to three Directives in which the UK participates, and a further eight EU police and criminal justice measures that were subject to the UK's block opt-out and the which the UK has not sought to re-join.[80]

21.14 He continues:

    "The UK would not be bound by the measures it has opted out of if we were to opt into this Directive post-adoption. However, a post-adoption opt-in to the Directive would bind the UK to the offences and sanctions listed in pre-Lisbon measures we did not opt back into. We would be bound to ensure that the offences (and associated sanctions) have been implemented into UK law. Being bound, via the backdoor, to offences in the instruments we opted out of, is undesirable given the position taken at the time of the 2014 (Protocol 36) decision, which was to opt out of minimum standards measures on the basis that the UK, not Europe, should decide on UK criminal law. The effect of opting in would be to extend the jurisdiction of the European Court of Justice over a large area of UK legislation based on EU instruments from which we have opted out."

21.15 The Minister concludes:

    "The United Kingdom has strong powers to tackle criminal finances, through the Proceeds of Crime Act. POCA allows the UK to confiscate assets from those convicted of a crime, and provides for non-conviction based civil recovery of the proceeds of crime. The UK already meets or exceeds almost all of the minimum standards on money laundering. We can, using existing legislation, already support other Member States in this area whether they adopt the Directive or not.

    "For the reasons outlined above, I have therefore determined that we should not opt into this Directive post-adoption."

Previous Committee Reports

Twenty-eighth Report HC 83-xxv (2013-14), chapter 13 (18 December 2013); Twenty-second Report HC 86-xxii (2012-13), chapter 9 (5 December 2013); Twelfth Report HC 86-xii (2012-13), chapter 5 (12 September 2012); Sixth Report HC 86-vi (2012-13), chapter 4 (27 June 2012); Sixty-third Report HC 428-lvii (2010-12), chapter 1 (18 April 2012).


77   Directive on the freezing and confiscation of instrumentalities and proceeds of crime. Back

78   So-called as the then Minister for Europe (Mr David Lidington) gave an undertaking to the House in January 2011 to allow Government time for opt-in decisions attracting "particularly strong Parliamentary interest" to be debated on the floor of the House before the expiry of the three-month opt-in deadline. Back

79   See Article 3 of the Directive. Back

80   The Minister's letter indicates that there are nine, rather than eight, measures which the UK has not rejoined - however, one of the nine measures (Directive 2013/40/EU on attacks against information systems) ceased to be subject to the UK's block opt-out following the Government's decision to opt into it, reducing the number of measures subject to the Confiscation Directive in which the UK does not participate from nine to eight. Back


 
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Prepared 4 December 2015