12Proceeds of crime: mutual recognition of freezing and confiscation orders
|
Committee’s assessment |
Legally and politically important |
|
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 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.
12.2The 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.79 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”.80 The Minister wrote to confirm the Government’s opt-in decision in July 2017.81
12.3The 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 subsequent correspondence, the Minister reported that good progress had been made in trilogue negotiations with the European Parliament, but that an impasse had been reached on the inclusion of a specific provision allowing a Member State to refuse to recognise or execute a freezing or confiscation order on human rights grounds. We granted a scrutiny waiver on 20 June 2018 in anticipation of a compromise text being brought to the Council for agreement before the end of the Bulgarian Presidency.
12.4In his latest letter of 4 July 2018, the Minister informs us that a compromise text has been agreed which was endorsed by COREPER on 20 June and should be formally adopted by the Council after the summer recess.82 The Government is content with the outcome as “the text does not give rise to any new legal obligations on the UK given the overriding obligation to act in accordance with the [EU] Charter’s provisions in any event”.
12.5The Minister also responds to questions we raised in our Report agreed on 20 June concerning:
- 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).
12.6On time limits, the Minister explains that decisions on the recognition and execution of freezing orders must be taken “without delay” and given the same priority as a similar domestic case. In urgent cases, there is a 48-hour deadline to recognise the freezing order and a further 48 hours in which to execute it. Decisions on the recognition and execution of confiscation orders must also be taken “without delay” (and no later than 45 days from receipt of the order) and be given the same priority as a comparable domestic confiscation order.
12.7The Regulation will become operational in the UK 24 months after it enters into force. If, as the Minister anticipates, the Regulation is formally adopted and enters into force in late summer or early autumn, this means it would most likely take effect and apply in the UK towards the end of the transition/implementation period envisaged in the draft EU/UK Withdrawal Agreement. UK asset recovery orders would therefore continue to be recognised and enforced in other EU Member States until the transition/implementation period ends on 31 December 2020. The Minister confirms that changes to domestic law will be necessary to ensure that it is compatible with the Regulation. This is also likely to be the case in the event of a “no deal” exit (and therefore no transition/implementation period) to the extent needed to address any deficiencies in retained EU law incorporated by the European Union (Withdrawal) Act 2018.
12.8The Minister reiterates the Government’s goal of securing “a comprehensive new treaty on internal security cooperation” to take effect immediately after the end of the transition/implementation period. The treaty should preserve “mutually important operational capabilities whilst allowing the UK and EU to continue to work together to combat fast evolving security threats”.
Our Conclusions
12.9We welcome the compromise reached with the European Parliament 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.
12.10We note that the Regulation is likely to be “binding upon and in the UK” before exit day and to take effect during the post-exit transition/implementation envisaged in the draft EU/UK Withdrawal Agreement. This would mean that UK freezing and confiscation orders would continue to be recognised and enforced in other Member States under simplified EU procedures until 31 December 2020.83 The position from 2021 remains uncertain. To avoid an operational gap, it will be necessary not only to negotiate an “ambitious and comprehensive” treaty on internal security with the EU, but for that treaty to be ratified and take effect immediately after the end of the transition/implementation period. We ask the Minister to report back to us on the progress being made in discussions with the EU on a post-exit EU/UK internal security treaty. Meanwhile, we are content to clear the proposed Regulation from scrutiny ahead of its formal adoption later this year. We 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
12.11Our earlier Reports listed at the end of this chapter provide a detailed overview of the proposed Regulation and the Government’s position.
12.12The 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;84
- 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
Thirty-second Report HC 301–xxxi (2017–19), chapter 6 (20 June 2018), 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).
79 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.
80 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.
82 The agreed text provides that a national authority may decide not to recognise and execute an 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 a relevant fundamental right as set out in the Charter, in particular the right to an effective remedy, the right to a fair trial or the right of defence”.
83 See Article 122 of the draft EU/UK Withdrawal Agreement.
84 The UK does not participate in the EU Confiscation Directive.
Published: 17 July 2018