6Proceeds of crime: mutual recognition of freezing and confiscation orders
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Committee’s assessment |
Legally and politically important |
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Not cleared from scrutiny, but scrutiny waiver granted; drawn to the attention of the Home Affairs Committee, the Justice Committee and the Committee on Exiting the European Union |
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Document details |
Proposal for a Regulation on the mutual recognition of freezing and confiscation orders |
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Legal base |
Article 82(1)(a) TFEU, ordinary legislative procedure, QMV |
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Department |
Home Office |
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Document Number |
(38429), 15816/16 + ADD 1, COM(16) 819 |
Summary and Committee’s conclusions
6.1The Commission estimates that only around 1% of the proceeds of crime generated within the European Union are 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 ensure that an order to freeze or confiscate the proceeds of crime made by a court in one Member State would be recognised and enforced in another Member State as if it were a domestic order. EU mutual recognition measures usually take the form of a Directive, meaning that it is for each Member State to determine how the objectives should be implemented in national law.55 This is the first time the Commission has proposed a directly applicable Regulation to give effect to mutual recognition arrangements in the criminal law field.
6.2The proposed Regulation would replace two EU Framework Decisions (adopted in 2003 and 2006) in which the UK currently participates and is subject to the UK’s Title V (justice and home affairs) opt-in, meaning that it will only apply if the UK opts in.56 The Minister for Security and Economic Crime (Mr Ben Wallace) wrote in April 2017 to inform our predecessor Committee that the Government was minded to opt in, even though he recognised that the proposed Regulation was “highly unlikely to take effect” until the UK left the EU. He nonetheless considered that UK participation would “signal our commitment to cooperate in this important area” and would bring “operational benefits through strengthening the ability for our operational agencies to have our asset recovery orders recognised and executed within certain deadlines”.57 The Minister wrote to confirm the Government’s opt-in decision in July 2017.58
6.3The Justice and Home Affairs Council agreed a general approach in December 2017. The UK abstained as the proposed Regulation had not been cleared from scrutiny. In his letter of 29 January 2018, the Minister responds to concerns we raised about the scope of the proposed Regulation and the risk that the inclusion of “preventive type” non-conviction based freezing or confiscation orders might have an adverse impact on the continued use of civil procedures to enforce non-conviction based confiscation orders under Part V of the Proceeds of Crime Act (POCA) 2002.59 The Minister explains that the type of preventive order envisaged is “unique” to Italy and is designed to tackle the proceeds of Mafia-related crime:
“These types of orders are not made following a conviction in an Italian court. The order is aimed at preventing the re-use of criminal property that has been proved to have derived from some offences committed in the past, in order to finance new offences or legal business.”
6.4He adds that the effect of the preventive order is to “prevent future money laundering”. It can only be made “on the basis of proven facts, and clear evidence that a criminal activity has been committed in the past and that the property has been derived from such criminal activity”. The Government supports the inclusion of this type of order within the proposed Regulation, subject to “clear procedural safeguards” and “effective judicial protection”, as it will “permit freezing and confiscation in as wide a set of cases as possible”. As the Council general approach expressly excludes the recognition and enforcement of orders made in proceedings in civil or administrative matters, the Minister assures us that the UK system of non-conviction based recovery through the civil courts will not be affected by the proposed Regulation.
6.5Responding to our request for further information on the Government’s plans for future cooperation with the EU in the field of criminal justice and law enforcement cooperation post-exit, the Minister refers us to the future partnership paper on Security, law enforcement and criminal justice published last September.60 The paper sets out the Government’s aspiration for “an overarching agreement” that will facilitate “data-driven law enforcement, practical assistance to operations and cooperation through EU agencies”. He also refers us to the Government’s future partnership paper on Enforcement and Dispute Resolution which includes precedents illustrating the range of “ways in which the parties to international agreements including the EU have [sought and] obtained assurances that obligations […] will be enforced, that divergence can be avoided where necessary and that disputes can be resolved”. He does not, however, indicate which of these precedents would be appropriate for a post-exit agreement including provision for UK participation in EU criminal law mutual recognition instruments, stating only that this will depend on “the substance and context of each agreement” and that the UK will not be constrained by precedent.
6.6In a further letter of 4 May 2018, the Minister indicates that trilogue negotiations are progressing well but adds that the European Parliament is pressing for the insertion of additional language in the main provisions of the proposed Regulation which would allow a Member State to refuse to recognise or execute a freezing or confiscation order on human rights grounds.61 Most Member States (including the UK) are opposed, since “all EU legislation has to comply with fundamental rights and […] to include such a clause in the operative text would undermine mutual trust between Member States”.
6.7In his latest update of 14 June, the Minister says that the European Parliament has not accepted a compromise text put forward by the Presidency but adds that negotiations are continuing with a view to reaching a political agreement at a forthcoming Council meeting before the end of June.62 He invites us to clear the proposed Regulation from scrutiny.
Our Conclusions
6.8We infer from the Minister’s request for scrutiny clearance that the Government wishes to vote for the adoption of the proposed Regulation. We do not consider that we have sufficient information at this stage to clear the proposed Regulation, given that the outcome of trilogue negotiations remains uncertain, but we are willing to grant a scrutiny waiver so that the Government can support a compromise text if it is brought to the Council for political agreement later this month (before the end of the Bulgarian Presidency).
6.9The European Parliament’s insistence on the insertion of a specific provision allowing a competent Member State authority to refuse to recognise or execute a freezing or confiscation order where there is a substantial risk of human rights violations appears to be the main obstacle to agreement. We do not share the Minister’s view that the inclusion of an operative clause to this effect in the proposed Regulation would undermine mutual trust between Member States. The Council’s objection tends to suggest the opposite—that mutual trust may be in short supply—and is difficult to reconcile with its acceptance of a similar provision in another important mutual recognition measure, the European Investigation Order. Given this precedent, we consider that it should be possible to reach a compromise and ask the Minister to report back to us on the outcome agreed.
6.10We also ask the Minister to report back to us on:
- the agreed time limits for recognising and executing freezing and confiscation orders;
- the date on which the Regulation will become operational in the UK;
- whether prior changes will need to be made to domestic law; and
- how the application of the Regulation in the UK will be affected by the UK’s exit from the EU (both during and after the expiry of the transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement).
6.11Finally, we ask the Minister to confirm that the Government intends this Regulation and other EU mutual recognition criminal justice and law enforcement measures to be included in the new internal security treaty it is seeking to negotiate with the EU and to provide an update on the progress made in negotiations.
6.12We draw this chapter to the attention of the Home Affairs Committee, Justice Committee and 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
6.13Our earlier Reports listed at the end of this chapter provide a detailed overview of the proposed Regulation and the Government’s position.
6.14The Commission considers that the existing EU regime for freezing and confiscating the proceeds of crime is “out of date” and unworkable in practice, containing loopholes that criminals can exploit. It anticipates that the proposed Regulation would improve cross-border enforcement by:
- establishing a comprehensive framework covering both the freezing and confiscation of proceeds of crime based on directly applicable rules (reducing the risk of incorrect or late implementation by Member States);
- providing for the mutual recognition of all types of freezing and confiscation orders covered by the 2014 EU Confiscation Directive as well as other non-conviction based confiscation orders issued as part of criminal proceedings;63
- setting clear deadlines for recognising and executing freezing and confiscation orders issued by another Member State;
- simplifying the mutual recognition procedure by establishing a standard form for freezing orders and a standard certificate for confiscation orders;
- improving communication between the national authorities responsible for issuing and executing freezing and confiscation orders; and
- giving priority to the right of a victim of crime to compensation and restitution.
Previous Committee Reports
Fifth Report HC 301–v (2017–19), chapter 12 (13 December 2017), First Report HC 302–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).
55 Or Framework Decisions, rather than Directives, if the EU measures pre-date the Lisbon Treaty.
56 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.
57 See the letter of 21 April 2017 from the Minister for Security and Economic Crime (Mr Ben Wallace) to the Chair of the European Scrutiny Committee.
60 This paper has since been supplemented by the Government’s Framework for the UK/EU Security Partnership and a Technical Note on security, law enforcement and criminal justice, both published in May 2018.
61 The language proposed would mirror Article 11(1) of the Directive establishing a European Investigation Order (EIO) in criminal matters which provides that a Member State may refuse to execute an EIO where “there are substantial grounds to believe that the execution of the investigative measure indicated in the EIO would be incompatible with the executing State’s obligations in accordance with Article 6 TEU and the Charter”.
62 The compromise text proposed by the Presidency would allow a Member State to refuse to recognise and/or execute a freezing or confiscation order “in exceptional circumstances”, if there are “substantial grounds to believe, on the basis of specific and objective evidence, that the execution of the order would, in the particular circumstances of the case, entail a manifest breach of the right to an effective remedy, the right to a fair trial, or the right of defence, as set out in the Charter”.
63 The UK does not participate in the EU Confiscation Directive.
Published: 26 June 2018