Documents considered by the Committee on 13 December 2017 Contents

12Proceeds of crime: mutual recognition of freezing and confiscation

Committee’s assessment

Legally and politically important

Committee’s decision

Not cleared from scrutiny; further information requested; 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

12.1The Commission estimates that only a very small proportion of the proceeds of crime generated within the European Union—around 1% of criminal profits—is confiscated. The proposed Regulation is intended to improve the cross-border enforcement of court orders authorising the freezing and confiscation of the proceeds of crime and is 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 It would replace two EU Framework Decisions adopted in 2003 and 2006 which the Commission considers to be “out of date” and unworkable in practice.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.130 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.

12.2The Security Minister (Mr Ben Wallace) informed our predecessors in April that the Government was “considering opting into this measure”, even though the proposed Regulation was “highly unlikely to take effect in the UK until the UK has left the EU”. He considered that opting in would “signal our commitment to cooperate in this area” and said that a formal decision would be taken before the three-month deadline for opting in at the negotiating stage expired on 12 June.131 He wrote again in July to confirm that the Government had decided to opt in:

“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.”132

12.3The Minister added that the Government was “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”. We invited him to share the findings with Parliament and to indicate:

12.4Asked whether the UK could continue to operate a system of mutual recognition with EU partners in the criminal law field after leaving the EU without also accepting some degree of oversight by the Court of Justice (CJEU), the Minister commented:

“The UK’s relationship with the Court of Justice 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.”134

12.5The Government’s future partnership paper, Enforcement and dispute resolution, envisages 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”.135 We noted that this contrasted 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”.136 We asked the Minister to explain the significance of the addition of “direct” in describing the potential future role of the Court in the UK. We also asked him to explain which of the dispute resolution models described in the Government’s future partnership paper would be best suited to an agreement concerning the UK’s future participation in EU criminal law mutual recognition instruments.

12.6In his latest letter dated 4 December the Minister provides a brief update on the progress of negotiations and informs us that the Presidency intends to reach a general approach on the proposed Regulation at the Justice and Home Affairs Council on 7/8 December. He says that the UK “continues to engage positively” in the negotiations and invites us either to clear the proposal from scrutiny or grant a scrutiny waiver to enable the Government to vote in favour of the general approach. On our wider questions, he draws attention to the Government’s future partnership paper on Security, law enforcement and criminal justice and comments:

“The details of our future relationship with the EU will be defined in negotiations and agreeing an effective way to work with our EU partners to recognise and execute orders to freeze and confiscate criminal assets will form an important part of those negotiations.”

12.7The Minister cannot reasonably expect this Committee to perform its scrutiny functions effectively by requesting a scrutiny waiver (even less, clearance from scrutiny) a mere three days ahead of the Justice and Home Affairs Council which will be invited to agree a general approach. We ask him to report back to us after the Council meeting explaining:

12.8We would also like to hear whether the Council has supported the Commission’s choice of legal instrument—a directly applicable Regulation—or decided that a Directive would be more appropriate to implement mutual recognition arrangements in the criminal law field.

12.9We note that there have been changes to the scope of the proposed Regulation to include “preventive type freezing orders which do not necessarily fall from criminal proceedings”. We ask the Minister to explain how “a clear link to criminal activities” would be established in such cases and whether he is confident that the change to the scope of the proposed Regulation would have no adverse impact on the continued use of civil procedures under Part V of the Proceeds of Crime Act (POCA) 2002 to enforce non-conviction based confiscation orders in the UK.

12.10We do not consider that the Minister has provided an adequate response to the issues raised in our earlier Report and ask him to do so. For convenience, these were:

12.11Pending further information, the proposed Regulation remains under scrutiny. We ask the Minister to provide 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.

Background

12.12The Committee’s earlier Reports listed at the end of this chapter describe the content of the proposed Regulation and the Government’s position. They also provide an overview of an earlier EU criminal law measure—the 2014 Directive on the freezing and confiscation of the proceeds of crime—in which the UK does not participate. The main concern expressed by the then Coalition Government was that the Directive included within its scope non-conviction based confiscation which, in the UK, is governed by civil procedures under Part V of the Proceeds of Crime Act (POCA) 2002. The Government decided not to opt in to avert the risk that its participation might provide a basis for asserting that more stringent criminal law standards and safeguards should apply to Part V of the Act.

The Minister’s letter of 4 December 2017

12.13The Minister begins with an update on the progress of negotiations within the Council:

“The scope of the measure has been widened to encompass preventive type freezing orders which do not necessarily fall from criminal proceedings, such as those found in Italian law. These types of orders were not originally within scope. However Member States, including the UK, were supportive of their inclusion, providing such proceedings have a clear link to criminal activities, and that procedural safeguards apply.”

12.14We had previously commented on the Commission’s choice of a directly applicable Regulation to implement mutual recognition arrangements in the criminal law field—the first time a Regulation has been used for this purpose—rather than a Directive which gives Member States greater freedom to determine how common procedures should be implemented in their domestic laws. The Government had made clear that it was “neutral” on the choice of instrument, even though in a different context it has suggested that Regulations raised “profound implications for national sovereignty”.137 The Minister tells us that “the choice of legal form of the instrument between a Directive or a Regulation is still to be determined” and that the Government “is content with both options”.

12.15The Minister explains that the Presidency intends to seek agreement to a general approach at the Justice and Home Affairs Council on 7/8 December. He invites us to clear the proposed Regulation from scrutiny or to grant a scrutiny waiver so that the Government can vote in favour of the general approach.

12.16Turning to the questions raised in our earlier Report agreed on 13 November, the Minister responds:

“As you will be aware, the Government has recently published the future partnership paper Security, law enforcement and criminal justice, which sets out the Government’s plan to seek a new relationship post exit from the EU, and which provides for practical operational cooperation on law enforcement measures. The details of our future relationship with the EU will be defined in negotiations and agreeing an effective way to work with our EU partners to recognise and execute orders to freeze and confiscate criminal assets will form an important part of those negotiations.”

Previous Committee Reports

First Report HC 301–i (2017–19), chapter 24 (13 November 2017), 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).


130 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 had to implement its provisions by 22 May 2017.

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

132 See the Minister’s letter of 19 July 2017 to the Chair of the European Scrutiny Committee.

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

134 See the Minister’s letter of 19 July 2017 to the Chair of the European Scrutiny Committee.

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

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

137 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). See also the Written Ministerial Statement on the outcome of the July Justice and Home Affairs Council.




15 December 2017