Documents considered by the Committee on 25 April 2017 Contents

1Proceeds of crime: mutual recognition of freezing and confiscation orders

Committee’s assessment

Legally and politically important

Committee’s decision

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

Document details

Proposal for a Regulation on the mutual recognition of freezing and confiscation orders

Legal base

Article 82(1)(a) TFEU, ordinary legislative procedure, QMV

Department

Home Office

Document Number

(38429), 15816/16 + ADD 1, COM(16) 819

Summary and Committee’s conclusions

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Regulation would replace two EU Framework Decisions adopted in 2003 and 2006 which the Commission considers to be “out of date” and unworkable in practice.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.1 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.2 In deciding whether or not to opt into 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 into the EU Confiscation Directive (adopted in 2014) on the grounds that “the UK, not Europe, should decide on UK criminal law”.3 An important factor in deciding not to opt into that 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.

1.3When we last considered the proposed Regulation at our meeting on 8 March, we concluded 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 proposal. 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.

1.4We noted that, in a different context, the Government had expressed concern that the use of a directly applicable Regulation (rather than a standard-setting Directive which has to be implemented in national law) raised “profound implications for national sovereignty”.4 As the Minister had 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, we asked him, first, whether he agreed that it was the content, rather than the form, of the legislative proposal that determined the extent of any implications for national sovereignty. Second, we asked whether he considered that any of the provisions in the proposed Regulation presented a threat to national sovereignty.

1.5The Minister confirmed 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 said that the Government was considering “how this would impact the terrorist financing provisions under TACT”. We asked him to elaborate on his concerns.

1.6The Minister anticipated that negotiations on the proposed Regulation could “take to the end of the year, or perhaps longer”, meaning that the proposal might take effect before the UK leaves the EU, albeit for a relatively short period. We suggested that there could be no reason for the Government to opt in unless it envisaged maintaining cooperation in this and other areas of mutual recognition beyond Brexit. We had previously invited the Minister to clarify the Government’s position on UK participation in the proposed Regulation and other EU criminal law mutual recognition instruments which currently apply to the UK once the UK leaves. Noting his failure to do so, we observed: “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”.

1.7We made clear that we would expect him to do so during the opt-in debate we had recommended on the proposed Regulation.

1.8In his latest letter, the Minister explains that the three month deadline for the UK to opt into the proposed Regulation at the negotiating stage (thereby securing a vote on the final outcome of negotiations) is 12 June. He continues:

“Given the General Election purdah and forthcoming dissolution of Parliament, it is unlikely that the debate your Committee requested on this opt-in decision will take place before 12 June. I would therefore like to take this opportunity to inform you that the Government is considering opting into this measure.”

1.9The Minister says that the proposed Regulation is “highly unlikely to take effect” before the UK leaves the EU but that opting in would “signal our commitment to cooperate in this important area”, although it is “too early to speculate what form that cooperation may take”. He anticipates that UK participation in the proposed Regulation “will bring operational benefits to the UK through strengthening the ability for our operational agencies to have our asset recovery orders recognised and executed, within certain deadlines”. He continues:

“The Regulation builds on the improved cooperation that our agencies are seeing as a result of the existing mutual recognition regime in the two Framework Decisions on freezing and confiscation. This Regulation goes further to improve those procedures. Tackling the threats of terrorist financing and the swift movement of illicit finance is a priority for this Government, and we need the cooperation of our European partners to ensure that these threats can be tackled effectively.”

1.10The Minister will write formally to confirm the Government’s opt-in decision once it has been taken. He says that the proposed use of a Regulation imposing “procedural requirements on the recognition and execution of freezing and confiscation orders” would not “produce a risk to the UK’s sovereignty in this area” and that the Government has “no overarching concerns” about the impact that opting in would have on the operation of the terrorist financing provisions in the Terrorism Act 2000.

1.11This is a highly significant opt-in decision. The operational benefits to which the Minister alludes—principally, the ability of the UK’s law enforcement authorities to ensure that orders given in criminal proceedings are recognised and enforced within specified deadlines, and are not pushed to the back of the queue—are common to most EU criminal law mutual recognition measures. We cannot imagine that the Government’s opt-in decision will be taken entirely in isolation, without regard to other similar mutual recognition instruments in which the UK currently participates.

1.12When we first considered the proposed Regulation in February, we noted that it 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. We said that the Government had 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. The Minister of State at the Department for Exiting the European Union (Mr David Jones) had, however, told the House in January that “cooperation with the EU in the fight against crime and terrorism will be one of the Government’s principal priorities when negotiations begin”.5 The Minister for Policing and the Fire Service (Brandon Lewis) had also made clear that the Government was “committed to strong cooperation on security, law enforcement and criminal justice now and when we leave”, that it would “work with our European partners to find solutions that promote security across Europe and beyond” and that it would be seeking to develop “a unique and bespoke position” for the UK.6

1.13In light of these comments, we asked the Minister in February to tell us whether the EU mutual recognition instruments in which the UK currently participates, as well as those it opts into before it leaves the EU, were to be included in the bespoke solution the UK would be 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.

1.14Our questions taken on an even greater urgency now that the Government has indicated its intention to opt into the proposed Regulation and that Article 50 exit negotiations are soon to commence. We expect the Minister to provide a response before those negotiations begin. We deeply regret that the House will be unable to debate the Government’s opt-in decision before a final decision is taken and have decided to keep open the option of a debate once the European Scrutiny Committee is reconstituted. Meanwhile, the proposed Regulation remains under scrutiny. We draw this chapter to the attention of the Home Affairs Committee and the Committee on Exiting the European Union.

Full details of the documents

Proposal for a Regulation on the mutual recognition of freezing and confiscation orders: (38429), 15816/16 + ADD 1, COM(16) 819.

Background

1.15Our earlier Reports listed at the end of this chapter describe the content of the proposed Regulation and the Government’s position. They also provide a comprehensive overview of the 2014 Directive on the freezing and confiscation of the proceeds of crime and the reasons given by the then Coalition Government for not opting in.

The Minister’s letter of 21 April 2017

1.16The Minister differentiates the choice of instrument in this case—a directly applicable Regulation, rather than a standard-setting Directive which has to be implemented in national law—from other recent examples in which the Government has suggested that there would “profound implications for national sovereignty”:

“We recognise that the use of a Regulation by the Commission in this area is unusual, particularly in the area of mutual recognition in criminal justice. We have carefully considered the risks of this approach, and, given that the Regulation seeks to impose procedural requirements on the recognition and execution of freezing and confiscation orders, we do not consider that its terms produce a risk to the UK’s sovereignty in this area. We will continue to negotiate on the specific text on the Articles to ensure the best outcome for the UK.”

1.17The Minister says that the Government no longer has any “overarching concerns” about the impact of the proposed Regulation on the operation of terrorist forfeiture orders made under the Terrorism Act 2000 (TACT):

“We have carefully considered the Regulation’s provisions with regards to the provisions allowing terrorist property to be frozen under TACT. The Regulation will apply to the TACT provisions in the same way as they do to the recovery provisions in the Proceeds of Crime Act. We are continuing to assess the changes that may be necessary to our domestic legislation and procedures should the UK decide to opt in. However we have no overarching concerns about the impact that the opt-in decision would have on the operation of the terrorist financing provisions.”

1.18The Minister now indicates that the Regulation is “highly unlikely to take effect in the UK until the UK has left the EU” but adds:

“Should we decide to opt into the Regulation, this would signal our commitment to cooperate in this important area. We will work with our European partners to agree how we work together after we leave the EU but it is too early to speculate what form that cooperation may take.”

1.19He informs us that 12 June is “the last date for informing the Presidency of our opt in decision”:

“Given the General Election purdah and forthcoming dissolution of Parliament, it is unlikely that the debate your Committee requested on this opt-in decision will take place before 12 June. I would therefore like to take this opportunity to inform you that the Government is considering opting into this measure.

“The proposed Regulation will bring operational benefits to the UK through strengthening the ability for our operational agencies to have our asset recovery orders recognised and executed, within certain deadlines. The Regulation builds on the improved cooperation that our agencies are seeing as a result of the existing mutual recognition regime in the two Framework Decisions on freezing and confiscation. This Regulation goes further to improve those procedures. Tackling the threats of terrorist financing and the swift movement of illicit finance is a priority for this Government, and we need the cooperation of our European partners to ensure that these threats can be tackled effectively.”

1.20The Minister concludes: “A formal decision will be taken ahead of the 12 June deadline. The Government will write again to confirm the opt-in decision”.

Previous Committee Reports

Thirty-fourth Report HC 71-xxxii (2016–17), chapter 1 (8 March 2017) and Thirtieth Report HC 71-xxviii (2016–17), chapter 2 (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), chapter 21 (25 November 2015); 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 2012); Twelfth Report HC 86-xii (2012–13), chapter 5 (12 September 2012); Sixth Report HC 86-vi (2012–13), chapter 4 (27 June 2012); and Sixty-third Report HC 428-lvii (2010–12), chapter 1 (18 April 2012).


1 Council Framework Decision 2003/577/JHA and Council Framework Decision 2006/783/JHA. The 2003 Framework Decision has been partially superseded by Directive 2014/41/EU on the European Investigation Order which establishes procedures for the freezing and transfer of evidence. The UK opted into the Directive and has to implement its provisions by 22 May 2017.

2 See para 58 of the Minister’s Explanatory Memorandum of 12 January 2017.

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), chapter 1 (14 September 2016).

5 See Hansard, HC Deb, 18 January 2017, col 1023.

6 See Hansard, HC Deb, 18 January 2017, cols 955 and 960.




27 April 2017