Legally and politically important
Not cleared from scrutiny; further information requested; opt-in decision recommended for debate in European Committee B (decision reported on 1 February 2017); drawn to the attention of the Home Affairs Committee and the Committee on Exiting the European Union
Proposal for a Regulation on the mutual recognition of freezing and confiscation orders
Article 82(1) (a) TFEU, ordinary legislative procedure, QMV
(38429), 15816/16 + ADD 1, COM(16) 819
1.1The proposed Regulation is intended to improve the cross-border enforcement of court orders authorising the freezing and confiscation of the proceeds of crime. It forms part of a wider package of measures to disrupt and cut off funding for organised crime and terrorism which often has a transnational dimension. The proposed Regulation would replace two EU Framework Decisions adopted in 2003 and 2006 which the Commission considers to be “out of date” and unworkable in practice. The UK participates in both Framework Decisions. The proposed Regulation is subject to the UK’s Title V (justice and home affairs) opt-in, meaning that it will only apply to the UK if the Government decides to opt in.
1.2The Security Minister (Mr Ben Wallace) told us that the changes proposed by the Commission were “broadly in line with existing UK legislation and policy on asset recovery” but identified some areas of divergence with domestic law. In deciding whether or not to opt in to the proposed Regulation, he explained that the Government would take into account the outcome of the referendum, the extent of any changes that would be needed to UK law and the previous Coalition Government’s decision not to opt in to the EU Confiscation Directive (adopted in 2014) on the grounds that “the UK, not Europe, should decide on UK criminal law”. An important factor in deciding not to opt in to the Directive was the risk that UK participation in an EU criminal law measure might provide a basis for asserting that more stringent criminal law standards and safeguards should apply to non-conviction based confiscation orders which, in the UK, are governed by civil procedures under Part V of the Proceeds of Crime Act (POCA) 2002.
1.3In his latest letter, the Minister responds to questions raised in our earlier Report (listed at the end of this chapter) on the proposed Regulation. We requested further information on the degree of connection between the proposed Regulation and the EU Confiscation Directive, as well as the implications of the UK’s opt-in decision for domestic criminal (and civil) asset recovery laws and the anticipated timescale for negotiations, given that it seemed the new rules could take effect before the UK leaves the EU. We also asked whether the Government supported the use of a directly applicable Regulation and sought further information on the mechanism for enforcing terrorist property forfeiture orders made under the Terrorism Act 2000. We invited the Minister to clarify the Government’s position on UK participation in this and other EU criminal law mutual recognition instruments (such as the European Arrest Warrant and the European Investigation Order) once the UK leaves the EU.
1.4We conclude from the information provided by the Minister that the UK’s non-participation in the EU Confiscation Directive would not present any practical or legal impediment to opting into the proposed Regulation. Nor would a decision to opt in place at risk the UK’s civil asset recovery regime under Part V of the Proceeds of Crime Act (POCA) 2002.
1.5In a different context, the Government has expressed concern that the use of a directly applicable Regulation, rather than a standard-setting Directive which has to be implemented in national law, raises “profound implications for national sovereignty”. The Minister has not raised similar concerns in relation to this proposal, even though a Regulation has not previously been used to implement mutual recognition arrangements in the criminal law field. He indicates only that the Government intends to explore the issue further during negotiations. This suggests that it is the content, rather than the form, of the legislative proposal that will determine the extent of any implications for national sovereignty. Does the Minister agree, and does he consider that any of the provisions in the Commission proposal present a threat to national sovereignty?
1.6The Minister confirms that terrorist property forfeiture orders made under the Terrorism Act 2000 (“TACT”) would fall within the scope of the proposed Regulation if the UK were to opt in and says that the Government is considering “how this would impact the terrorist financing provisions under TACT”. We ask the Minister to elaborate on his concerns.
1.7The Minister anticipates that negotiations on the proposed Regulation “may take to the end of the year, or perhaps longer”. This means that the proposal could take effect before the UK leaves the EU, albeit for a relatively short period. We can see no reason for the Government to opt in unless it envisages maintaining cooperation in this and other areas of mutual recognition beyond Brexit. Given the imminence of Article 50 exit negotiations, it is highly regrettable that the Minister is unwilling to offer any view on the relative importance of a range of EU mutual recognition instruments in tackling serious transnational crime. We expect him to do so during the opt-in debate we have recommended on the proposed Regulation.
1.8The proposed Regulation remains under scrutiny. We ask the Minister to inform us at the earliest opportunity of the three month deadline for opting in to the proposal and expect the opt-in debate we have recommended to be scheduled in good time. We also ask him to provide progress reports on negotiations. We draw this chapter to the attention of the Home Affairs Committee and the Committee on Exiting the European Union.
1.9The Minister is unable to confirm the three month deadline for opting in to the proposed Regulation at the negotiating stage as “the last language version of the proposed Regulation has yet to be published”, but undertakes to inform us once the date is known.
1.10We asked the Minister whether the UK’s non-participation in the 2014 Confiscation Directive would in any way impede its participation in the proposed Regulation. He responds:
“The 2014 Directive set minimum standards for freezing and confiscation, which applied to matters such as the freezing and confiscation of the instrumentalities of crime, and so called ‘extended’ and ‘third party’ confiscation. The proposed Regulation builds on the measures set out in the 2014 Directive, which most Member States will follow. However, its purpose is to set requirements in relation to the mutual recognition of confiscation and freezing orders, and it does not seek to harmonise the underlying rules applicable to when confiscation and freezing orders can be issued.
“In order to comply with the Regulation, the UK must be capable of recognising freezing and confiscation orders which are made by other Member States. It is not stated explicitly at any part of the proposal that the Regulation has the effect of imposing a domestic confiscation regime upon Member States; instead, the 2014 Directive is recognised as having that effect.”
1.11We also asked whether the previous Coalition Government’s concern that participation in the 2014 Confiscation Directive might place at risk the UK’s civil asset recovery regime under Part V of the Proceeds of Crime Act 2002 was relevant to the proposed Regulation. The Minister believes not:
“The preamble to the draft Regulation states explicitly at paragraph (13) that ‘This Regulation should not apply to freezing and confiscation orders issued within the framework of civil or administrative proceedings’. For this reason, and taken in conjunction with the conclusions in the paragraph above, we consider that the Regulation does not purport to extend a requirement to mutually recognise civil recovery orders and nor does it raise the possibility that our domestic civil recovery provisions would need to be re-framed as criminal measures in order to comply—this is on the basis that the Regulation does not affect domestic confiscation rules.”
1.12We invited the Minister to comment on the use (for the first time) of a directly applicable Regulation to implement mutual recognition arrangements in the criminal law field. He observes:
“The European Commission has made it clear that they consider a Regulation is the most appropriate instrument to use in this area, primarily because of the inconsistent application of the existing Framework Decisions. We will explore those issues further during negotiation, and will revert back to the Committee on those outcomes.”
1.13The Minister’s Explanatory Memorandum stated that “UK legislation does not currently provide for the mutual recognition of terrorist property forfeiture orders” made under the Terrorism Act 2000. We asked the Minister to explain why this was the case and whether and how terrorist property concealed in another Member State could be recovered under existing UK law. We also asked him to confirm that terrorist property forfeiture orders would fall within the scope of the proposed Regulation if the UK were to opt in and to indicate whether this would present any difficulties for the UK. The Minister responds:
“There is provision in UK law for the recognition and enforcement of external orders which are the equivalent to terrorist property forfeiture orders made under the Terrorism Act 2000 (TACT forfeiture orders). TACT forfeiture orders come within the definition of ‘confiscation order’ in both the 2003 and 2006 Framework Decisions. S.I. 2014/3141 provides for the recognition and enforcement of ‘overseas confiscation orders’ which are defined in Regulation 13(2) as:
‘an order made by an appropriate court or authority in a member State for the confiscation of property which is in England and Wales, or is the property of a resident of England and Wales, and which the appropriate court or authority considers—
(a) was used or intended to be used for the purposes of criminal conduct, or
(b) is the proceeds of criminal conduct.’
“This means that there is a mechanism for recognising and enforcing in the UK external orders which are the equivalent of TACT forfeiture orders. Our analysis of the proposed Regulation indicates that TACT forfeiture orders would fall within scope if the UK were to opt in. We are currently considering how this would impact the terrorist financing provisions under TACT.”
1.14The Minister’s Explanatory Memorandum raised the possibility that the UK could be ejected from the existing EU regime for mutual recognition of freezing and confiscation orders if the Government were to decide not to opt in to the proposed Regulation. We asked him to elaborate on his concerns in light of:
1.15The Minister responds:
“The European Commission’s explanatory memorandum makes clear that under Article 39 (replacement) of the proposed EU Regulation, should the UK decide not to opt in to the proposed EU Regulation, the 2003 and 2006 Framework Decisions will continue to apply instead. In view of that and following a careful consideration of the content of the measures, we do not consider that the UK’s non-participation could lead to a finding of inoperability under Article 4a(2) of Protocol 21 to the Treaties.
“This is because the draft proposal only sets requirements in relation to the mutual recognition of confiscation and freezing orders, and does not seek to harmonise the underlying rules applicable to when confiscation and freezing orders can be issued. There is no reason that the procedures under the Framework Decisions could not continue to operate as the explanatory memorandum makes clear.”
1.16We requested a clearer indication of the likely timescale for negotiating and adopting the proposed Regulation, given that it appeared to be supported by the Council and the European Parliament and asked how likely it was that the Regulation would take effect before the UK leaves the EU. The Minister responds:
“We do not at this point have a firm view from the Commission as to the expected date when the proposed Regulation will apply. The draft Regulation sets an expectation that it could apply 6 months after adoption. We anticipate that negotiations may take to the end of the year, or perhaps longer. We will provide further updates to the Committee as negotiations progress.”
1.17Finally, we noted that the proposed Regulation would supplement a number of other EU criminal law mutual recognition instruments—notably the European Arrest Warrant, the European Investigation Order, the European Supervision Order and the European Protection Order—as well as others concerning financial penalties and the transfer of prisoners in which the UK currently participates. The Government has so far given very little indication of its approach to mutual recognition measures in negotiating the terms of the UK’s exit from the EU, but has made clear that it is “committed to strong cooperation on security, law enforcement and criminal justice now and when we leave” and is seeking to develop “a unique and bespoke position” for the UK.
1.18We asked the Minister whether the EU mutual recognition instruments in which the UK currently participates, or opts in to before it leaves the EU, were to be included in the bespoke solution the Government was seeking. We also asked him to identity the most important instruments for the UK from a law enforcement and criminal justice perspective and to indicate whether he considered that mutual recognition could operate without some degree of oversight by the European Court of Justice. The Minister responds:
“This negotiation process is part of the ‘business as usual’ activities that are ongoing whilst the UK remains a Member State of the EU.
“The UK’s relationship with the EU will change as a result of leaving the EU but the Government is clear that cooperation on security and law enforcement will continue. The precise nature of our participation in the practical cooperation mechanisms in place to support cooperation will be subject to negotiation with our European partners. It would not be appropriate to set out our approach on individual measures at this stage.”
Thirtieth Report HC 71-xxviii (2016–17), (25 November 2015); Twenty-eighth Report HC 83-xxv (2013–14), (18 December 2013); Twenty-second Report HC 86-xxii (2012–13), (5 December 2012); Twelfth Report HC 86-xii (2012–13), (12 September 2012); Sixth Report HC 86-vi (2012–13), (27 June 2012); and Sixty-third Report HC 428-lvii (2010–12), (18 April 2012).(1 February 2017). See also see our earlier Reports on Directive 2014/42/EU on the freezing and confiscation of instrumentalities and proceeds of crime in the EU: Tenth Report HC 342-x (2015–16),
1 and The 2003 Framework Decision has been partially superseded by on the European Investigation Order which establishes procedures for the freezing and transfer of evidence. The UK opted in to the Directive and has to implement its provisions by 22 May 2017.
2 See para 58 of the Minister’s Explanatory Memorandum.
3 See para 61 of the Minister’s Explanatory Memorandum.
4 See, for example, the Government’s position on the EU asylum reform package: Twelfth Report HC 71-x (2016–17), (14 September 2016).
5 See para 49 of the Minister’s Explanatory Memorandum.
6 See para 62 of the Minister’s Explanatory Memorandum.
7 See p.19 of the Commission’s explanatory memorandum accompanying the proposed Regulation.
8 See , HC Deb, 18 January 2017, col 955 and , HC Deb, 18 January 2017, col 960.
10 March 2017