The European Public Prosecutor's Office |
12558/13: Proposal for a Regulation
on the establishment of the European Public Prosecutor's Office
1. We recommend that the House of Lords should
issue the reasoned opinion set out below that the proposed Regulation
on the establishment of the European Public Prosecutor's Office
(EPPO) does not comply with the principle of subsidiarity; and
should send it to the Presidents of the European Parliament, the
Council and the Commission, in accordance with the provisions
of the EU Treaties.
2. This report does not complete scrutiny of
this proposal, which will be subject to further detailed examination.
3. This report was prepared by the Justice, Institutions
and Consumer Protection Sub-Committee of the EU Select Committee.
Its members are listed in the Appendix.
The Commission's Proposal
4. The Commission's proposal would establish
the EPPO with a separate legal identity as a body of the Union
with its own supporting staff. It would have exclusive power to
investigate and prosecute criminal offences affecting the financial
interests of the Union and closely related offences.
5. The body's office holders would comprise the
European Public Prosecutor (EPP), four deputies and at least one
European Delegated Prosecutor (EDP) operating in each participating
Member State. An EDP could also exercise the functions of a national
prosecutor, though the function of an independent EDP would have
6. The EPPO would be independent. It would be
accountable through an obligation to provide an annual report
of its general activities to the European Parliament, the Council
and the Commission. There would be an obligation for the EPPO
to act impartially and proportionately, to investigate "without
undue delay", and to prosecute "speedily".
7. In order to carry out its investigative function
the proposal would give the EPPO the power to access national
databases and information held by Europol (the EU's law enforcement
agency) and Eurojust (the EU's judicial co-operation unit). It
would have a wide range of investigative powers in respect of
potential offences, subject to obtaining a warrant from a national
judge in respect of intrusive procedures or when national law
so requires. There would be a duty upon Member States' authorities
to provide any necessary assistance and information at the request
of the European Public Prosecutor.
8. The proposal would confer upon the EPPO the
powers of a national prosecutor. It would have power to decide
the jurisdiction in which an EU fraud offence should be prosecuted
and whether or not to prosecute, including whether to accept compensation
and a lump sum fine in place of prosecution.
9. The proposal would prescribe the rules for
the admissibility of evidence in cases prosecuted by the EPPO,
and give suspects under investigation the minimum rights established
by EU Directives and the relevant national law. It would also
confer the following additional rights which have not so far been
addressed by EU Directives, to be exercised in accordance with
· A right to silence.
· A presumption of innocence.
· A right to legal aid.
· A right to provide evidence and to request
the EPPO to pursue a specific line of inquiry.
10. The EPPO would be given powers to co-operate
with EU, international and third country bodies. In addition the
proposal requires that the EPPO fosters a particularly close relationship
with Eurojust. It would be subject to judicial review before national
courts as if it were a national authority. Finally, the proposal
sets out the mode of appointment of the EPPO office holders, the
data protection regime to which the EPPO is subject, and financial
and staff provisions.
11. As the Committee highlighted in its report
The Fight Against Fraud on the EU's Finances
it is difficult to estimate the extent of fraud committed against
the EU budget. That report suggested that the figure could be
5 billion per year or more. For the purposes of its Impact
Assessment the Commission has conservatively assumed that about
3 billion per year could be at risk through fraud.
These are significant amounts, and both Member States and the
EU as a whole have a strong interest in reducing the level EU
fraud. This reasoned opinion does not question this objective,
but, rather, the Commission's choice as to how it is to be achieved.
12. In broad terms, the Commission's proposed
response to this level of fraud is to establish the European Public
Prosecutor's Office (EPPO) as an EU body with exclusive power
to investigate and prosecute a broad range of criminal offences
affecting the financial interests of the Union
and inextricably linked offences,
able to call upon the resources of national authorities.
13. This would create a very significant and
disruptive incursion into the sensitive criminal law systems of
the Member States. The House of Lords considers that such action
at EU level would breach the principle of subsidiarity in that
it is unnecessary, excessive and insufficiently justified by the
Commission. It considers
that the objective of countering fraud affecting the financial
interests of the Union can best be achieved by action by the Member
States within the existing framework for co-ordination and co-operation.
This framework is capable, if necessary, of being strengthened
to meet this objective effectively.
14. In reaching this conclusion the House of
Lords takes into account the following considerations:
· The proposal would create two separate
systems for combating fraud, with the EPPO having exclusive power
to investigate and prosecute EU fraud. This would create duplication
and a "fault line" between this and the national systems
for investigating and prosecuting other frauds. It would also
risk discouraging Member States from fighting EU fraud when Article
325 TFEU clearly places responsibility for this on both the Union
and the Member States.
· The most effective means to counter fraud
is to prevent it happening in the first place. The Commission
does not adequately explore or assess alternatives to criminal
law enforcement, such as simplification of the rules that govern
the different sectors of the EU budget in order to make fraud
more difficult, improving its own oversight of the EU budget,
and facilitating or (if necessary) requiring Member States to
improve their management or control systems.
· The Commission has not sufficiently taken
into account the option of maximising the benefits of the existing
framework for investigating and prosecuting EU fraud, particularly
as there has not been time to put in place and evaluate measures
to improve that framework. In 2008 Eurojust was strengthened by
a Decision which included a requirement for an independent evaluation
of its effectiveness and efficiency to be commissioned by June
11 September this year a regulation was adopted which is intended
to increase the efficiency of investigations by the European Anti-Fraud
Office (OLAF) and reinforce its cooperation with Member States.
There is at present under negotiation a proposal for a Directive
on the fight against fraud on the EU's financial interests by
means of criminal law, which would set out a framework for Member
States' criminal law in respect of EU fraud.
· The current proposal concerning Eurojust
also includes provisions which are intended to strengthen its
The opportunity should be given for these measures to take effect,
particularly given that a trend may be emerging of reduction in
· The Commission's rationale for the proposal
does not take sufficiently into account the fact that at least
two Member States will not be participating in the EPPO. Denmark
is automatically excluded by virtue of Protocol 22, whilst the
UK Government have made it clear that they will not be opting
in to the proposal under the terms of Protocol 21. It is clear,
therefore, the creation of the EPPO as proposed could not fully
address the problem, acknowledged by the Commission, of the fragmentation
of national law enforcement efforts.
· The EPPO proposal would adversely impact
upon the work of OLAF and Eurojust without there being any guarantee
that the untried additional entity would provide adequate replacement.
The Commission's Impact Assessment envisages that a substantial
part of OLAF's staff and resources would need to be transferred
to the EPPO. It also acknowledges that Eurojust's role would no
longer include the co-ordination of cross-border investigations
in the area of EU fraud,
thus generating the complication of additional co-ordination between
the EPPO and Eurojust. However, both Eurojust and OLAF are capable
of operating effectively under the present framework. The House
of Lords has recently concluded that the steadily increasing use
made of Eurojust by UK law enforcement authorities was a measure
of its value. OLAF's
effectiveness was found to be constrained,
but by matters which can be corrected without recourse to the
EPPO. A reduced function for OLAF and Eurojust would have a particularly
adverse effect on those Member States which will not be participating
in the EPPO proposal.
· The Commission, in its Impact Assessment,
exaggerates the potential impact of their proposal by using in
their analysis figures from OLAF, which include information from
Denmark and the UK, when both countries are definite non-participants
in the EPPO. To the same effect, the Commission treats VAT fraud
as a fraud affecting the financial interests of the Union (and
thus within the exclusive competence of the EPPO) when the UK,
along with other Member States, do not consider that it is.
· The Commission's estimates of the costs
and benefits of its proposal in its Impact Assessment lack credibility.
The Commission assumes that there will be no significant change
in the human resources available to tackle crimes affecting the
EU's financial interests, when its own assessment that current
arrangements are ineffective indicates that this is not likely
to be the case. It estimates start up costs chargeable against
the EU budget at 2.5 million and annual running costs at
27.9 million reduced to 6.1 million after taking account
of savings in respect of OLAF and Eurojust. This appears too low
for an organisation which is expected to be responsible for a
caseload of 2500 complex fraud cases per year and 1667 prosecutions.
As far as the call on national budgets is concerned, the Commission
questionably assumes that the number of national staff working
on EU fraud offences is currently up to the level needed to handle
the anticipated caseload of the EPPO. The benefits are also based
on questionable assumptions, including an increase rate of convictions
of almost 25%, and a rate of recovery of the sums defrauded of
15%, which is the highest of the current national estimates. Both
these assumptions appear too high given that the EPPO's powers
to investigate and prosecute largely replicate those already available
to national authorities and the prosecutions by the EPPO will
still take place before national courts and be conducted largely
by EDP's who are drawn from national prosecutors.
· By giving the EPPO power to direct national
investigation and prosecution authorities, it would be able to
override the priorities set by Member States concerning the finite
national resources allocated to criminal law enforcement, including
in respect of fraud.
· The proposal would introduce autonomous
rules in respect of the admissibility of evidence for EU fraud
offences. This would introduce unnecessary additional complication
and expense in the operation of national criminal law systems.
15. The Commission's subsidiarity justification,
as found in Section 3.2 of its Explanatory Memorandum, is that
the proposal has an "intrinsic Union dimension"; that
"it implies Union-level steering and co-ordination of investigations
and prosecutions of criminal offences affecting its own financial
interests, the protection of which is required from both the Union
and the Member States"; and that "the present situation,
in which the prosecution of offences against the Union's financial
interests is exclusively in the hands of the authorities of the
Member States is not satisfactory."
Recital (5) of the proposal asserts that the objectives
of the proposal cannot be achieved due to the fragmentation of
national prosecutions in the area of EU fraud. In its Impact Assessment
the Commission elaborates that action by national judicial authorities
is often ineffective, prosecution rates are low and the results
obtained in the different Member States are unequal.
Furthermore, the Commission argues, the existing powers
of OLAF and Eurojust are unsatisfactory and the restrictions found
in the TFEU prevent these organisations being given the necessary
16. The House of Lords does not accept that any
"intrinsic Union dimension" obviates the need for the
proposal to be properly justified in terms of subsidiarity, nor
that there must be Union level steering and co-ordination of investigation
and prosecution of criminal offences simply because they affect
the financial interests of the Union. Article 325 TFEU makes it
clear that combating such fraud is the responsibility of both
the Union and Member States and requires Member States to take
the same measures to counter it as they take to counter fraud
affecting their own financial interests.
17. As indicated above, the House of Lords does
not accept the Commission's optimistic assessment of the improved
rates of prosecution and recovery to be gained by the establishment
of the EPPO and considers that EU fraud could be effectively countered
though the existing framework based on the criminal law systems
of the Member States and co-ordination between them and the EU
institutions, strengthened if necessary.
- Strengthening the existing framework for addressing
EU fraud would address any ineffectiveness on the part of Eurojust
and OLAF. It would also address the issue of the fragmentation
of national prosecutions without creating extra fragmentation
of a different sortbetween separate frameworks for investigating
and prosecuting EU fraud in each Member State, and between the
different systems operated by Member States that participate in
the proposal and those which do not.
1 12th Report, Session 2012-13, HL Paper 158. Back
SWD(2013) 275, section 1. Back
These offences would be defined by reference to a Directive, currently
under negotiation, on the fight against fraud on the EU's financial
interests by means of criminal law. They would include aiding,
abetting, incitement and attempt to commit EU fraud. There would
be corporate liability for prosecution. Back
The EPPO would have competence if the EU fraud offences were preponderant
and the linked offences were founded on the same facts. Back
The Scottish Parliament has notified the House of Lords that it
too considers that the proposal breaches the principle of subsidiarity. Back
Council Decision 2009/406 on the strengthening of Eurojust and
amending Decision 2002/187 setting up Eurojust with a view to
reinforcing the fight against serious crime. Back
Regulation 883/2013 concerning investigations conducted by the
European Anti-Fraud Office (OLAF) and repealing Regulation (EC)
No 1073/1999 and (EURATOM) No 1074/1999. Back
COM (2012) 363. Back
COM(2013) 535. This proposal has been presented as part of the
package introducing the EPPO. Back
COM(2012) 548, Annual Report from the Commission Protection
of the European Union's financial interests-Fight against Fraud
Chart 1 indicates that that the number of irregularities reported
by Member States as fraudulent and the sums involved were lower
in 2011 and 2012 than they were at their high point in 2010. Back
SWD(2013) 274, section 7. Back
European Union Committee, EU police and criminal justice measures:
The UK's 2014 opt-out decision (13th Report, Session 2012-13,
HL Paper 159), paragraph 245. Back
European Union Committee, The Fight Against Fraud on the EU's
Finances (12th Report, Session 2012-13, HL Paper 158), chapter
5. The constraints are: budgetary considerations; a breakdown
in relations with its Supervisory Committee; lack of Member State
follow-up to information it provides; and a lack of co-ordination
with Europol and Eurojust. A requirement for Member States to
report to OLAF the action they had taken in response to cases
referred to them was envisaged as a solution to the lack of Member
State follow-up. Back
The Council has adopted a general approach to the Commission's
proposal for a Directive on the fight against fraud on the EU's
financial interests by means of criminal law in which the definition
of the EU's financial interests, which is used to define the scope
of the EPPO's powers, specifically excludes VAT revenue. Back
These are set out in Section 7 and Annex 4 of the Commission's
Impact assessment, SWD(2013) 274. Back
COM(2013) 534. Back
SWD(2013) 275, section 4.2. Back
OLAF is restricted to administrative (not criminal) investigations
and Eurojust cannot conduct investigations or prosecute offences. Back