Documents considered by the Committee on 13 November 2017 Contents

24Proceeds 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; recommendation for opt-in debate (reported on 1 February 2017) not renewed; drawn to the attention of the Home Affairs Committee, the Justice 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

24.1The Commission estimates that only a very small proportion of proceeds of crime within the EU—around 1% of criminal profits—is confiscated. International cooperation is an important element of an effective asset recovery regime, enabling investigating and prosecuting authorities to work together to trace criminal assets, prevent their dissipation, disposal or diversion into other forms of criminal activity and preserve their value until a confiscation order is obtained and the assets are recovered.

24.2Last December, the Commission proposed a Regulation to improve the cross-border enforcement of court orders authorising the freezing and confiscation of the proceeds of crime. The proposal 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. It would replace two EU Framework Decisions adopted in 2003 and 2006 which the Commission considers to be “out of date” and unworkable in practice.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.368 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.

24.3The Security Minister (Mr Ben Wallace) informed our predecessors in April that “General Election purdah and the forthcoming dissolution of Parliament” meant that the opt-in debate they had requested in February was unlikely to take place ahead of the three month opt-in deadline which would expire on 12 June. He added that the Government was “considering opting into this measure” and would take a formal decision before 12 June. He now writes to confirm that the Government has decided to opt into the proposed Regulation.

24.4Our predecessors made clear that they considered the Government’s opt-in decision to be “highly significant”. The Minister had indicated that the proposed Regulation was “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”. Whilst asserting that it was “too early to speculate what form that cooperation may take”, he anticipated that UK participation would “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 continued:

“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.”369

24.5Our predecessors observed:

“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.

“When 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’.370 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.371

“In 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.

“Our questions take 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 but intend to keep open the option of a debate once the European Scrutiny Committee is reconstituted.”

24.6In his latest letter dated 19th July, the Minister apologises for the “slow response”. He says that the Government’s decision to opt into the proposed Regulation is “consistent with the UK’s approach to participating in EU mutual recognition measures to improve practical cooperation between Member States”. His Written Ministerial Statement issued a day later, on 20 July, adds:

“The UK’s experience of the existing Framework Decisions has been positive, although numbers of mutual recognition requests are limited due to the short time (since 2014) that the Decisions have been fully transposed in UK law. Asset recovery in some EU states has traditionally been difficult through mutual legal assistance routes, which are lengthy and cumbersome.”372

24.7Looking forward to cooperation post-Brexit, the Minister explains that the Government is “examining the practical mechanisms in place now to support cooperation on law enforcement and criminal justice to help identify potential options for how we might work with our EU partners in the future”. The UK will no longer be able to participate as a Member State but will instead “need to consider how we should build a new partnership on the EU security, law enforcement and criminal justice agenda from outside the EU”. He adds:

“With regard to the oversight of the European Court of Justice (ECJ), the UK’s relationship with the ECJ will be a complex issue with impacts across all areas of our future relationship with the EU. The Department for Exiting the EU and Ministry of Justice are leading work to consider what that future relationship should be and any agreement on our future participation in law enforcement and criminal justice will be made in that context.”

24.8We share the concern expressed by our predecessors that the House was unable to debate the Government’s opt-in decision before the opt-in deadline expired on 12 June. As that deadline has passed, we see little point in renewing the opt-in debate recommendation made by our predecessors in February but intend to keep open the option of a debate before negotiations on the proposed Regulation are concluded.

24.9We ask the Minister whether the Government has concluded its examination of “the practical mechanisms in place now to support cooperation on law enforcement and criminal justice to help identify potential options for how we might work with our EU partners in the future” and to share its findings with Parliament at the earliest opportunity.

24.10Since he wrote to us, we note that the Government has published its future partnership paper, Security, law enforcement and criminal justice which cites the enforcement of penalties and confiscation of criminal proceeds as an example of cooperation delivering “mutual operational benefit” for the EU and the UK. We ask the Minister to tell us which of the mutual recognition instruments in which the UK participates are the most important from a law enforcement and criminal justice perspective and whether the Government intends them to form part of the strategic agreement it is seeking with the EU on security, law enforcement and criminal justice.373 When does he expect the contours of a new strategic agreement to be discussed with EU negotiators? Does he anticipate that transitional arrangements are likely to be necessary to bridge any gap between the UK leaving the EU and a new strategic agreement taking effect?

24.11The Minister appears to accept that some relationship with the Court of Justice post-exit will be necessary if the UK is to maintain law enforcement and criminal justice cooperation with the EU in the future. In its future partnership paper, Enforcement and dispute resolution the Government says that the UK’s exit from the European Union “will bring an end to the direct jurisdiction of the Court of Justice of the European Union”.374 This contrasts with the commitment in the earlier White Paper, The United Kingdom’s exit from, and new partnership with, the European Union to “bring an end to the jurisdiction in the UK of the Court of Justice of the European Union” so that legislatures and courts in the UK will be “the final decision makers in our country”.375 We ask the Minister to explain the significance of the addition of “direct” in describing the potential future role of the Court in the UK.

24.12The Government’s future partnership paper, Enforcement and dispute resolution sets out a number of existing models and approaches for resolving future disputes between the EU and the UK and makes clear that “the appropriate dispute resolution mechanism is dependent on the substance and context of each agreement”. In the present case, the Government has chosen to opt into a directly applicable Regulation—the first time a Regulation has been proposed in the field of mutual recognition in criminal matters—because it accepts the Commission’s view that there is a need for greater clarity and legal certainty in the application of cross-border freezing and confiscation procedures. Given that the concept of mutual recognition depends on a high level of mutual trust in the interpretation and application of common EU rules, we ask the Minister to explain which of the dispute resolution models described in the Government’s paper would be best suited to an agreement concerning the UK’s future participation in EU criminal law mutual recognition instruments.

24.13We are holding the proposed Regulation under scrutiny. We look forward to receiving a prompt response from the Minister, as well as regular reports on the progress of negotiations. We draw this chapter to the attention of the Home Affairs Committee, the Justice 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.

The Minister’s letter of 19 July 2017

24.14The Minister apologises for the “slow response” to the questions raised by our predecessors in April. He explains the reasons for the Government’s decision to opt into the proposed Regulation:

“The proposed Regulation would replace and build upon the two existing mutual recognition instruments that were fully transposed into UK law in 2014. Opting into this measure is consistent with the UK’s approach to participating in EU mutual recognition measures to improve practical cooperation between Member States and will ensure that the UK continues to benefit through strengthening the ability of our operational agencies to have our asset recovery orders recognised and executed efficiently and effectively.”

24.15Turning to the questions raised by our predecessors on the inclusion of this and other EU mutual recognition measures in any bespoke solution which the Government is seeking for the UK following its exit from the EU, the Minister responds:

“The Government is examining the practical mechanisms in place now to support cooperation on law enforcement and criminal justice to help identify potential options for how we might work with our EU partners in the future. The decision taken under Protocol (No. 36) of the Treaties in 2014 to opt in to a number of EU measures agreed prior to the Treaty of Lisbon, and subsequent opt in decisions, have given us the opportunity to consider the value of certain measures to the UK. Those decisions provide a useful reference point but the context of our future relationship, from outside the EU, is different. So unlike opt-in decisions, the question will not be whether we wish to seek to re-join certain measures as a Member State. Instead, we need to consider how we should build a new partnership on the EU security, law enforcement and criminal justice agenda from outside the EU.”

24.16Our predecessors asked whether the Government considered that mutual recognition, however organised, could operate without some degree of oversight by the European Court of Justice (ECJ). The Minister replies:

“The UK’s relationship with the ECJ will be a complex issue with impacts across all areas of our future relationship with the EU. The Department for Exiting the EU and Ministry of Justice are leading work to consider what that future relationship should be and any agreement on our future participation in a law enforcement and criminal justice will be made in that context.”

Previous Committee Reports

Fortieth Report HC 71–xxxvii (2016–17), chapter 1 (25 April 2017), 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).


368 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.

369 See the Minister’s letter of 21st April 2017 to the Chair of the European Scrutiny Committee.

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

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

372 See the Minister’s Written Ministerial Statement of 20 July 2017.

373 See the Government’s future partnership paper, Security, law enforcement and criminal justice published in September.

374 See the Government’s future partnership paper Enforcement and dispute resolution published in August.

375 See the Government’s White Paper, Cm 9417.




20 November 2017