This document is an excerpt from the EUR-Lex website
Document 52012SC0195
COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT (Part I) Accompanying the document Proposal for a Directive of the European Parliament and of the Council on the protection of the financial interests of the European Union by criminal law
COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT (Part I) Accompanying the document Proposal for a Directive of the European Parliament and of the Council on the protection of the financial interests of the European Union by criminal law
COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT (Part I) Accompanying the document Proposal for a Directive of the European Parliament and of the Council on the protection of the financial interests of the European Union by criminal law
/* /2012/0195 final */
COMMISSION STAFF WORKING PAPER IMPACT ASSESSMENT (Part I) Accompanying the document Proposal for a Directive of the European Parliament and of the Council on the protection of the financial interests of the European Union by criminal law /* /2012/0195 final */
TABLE OF CONTENTS 1........... Introduction................................................................................................................... 4 2........... Procedural issues and
consultation of interested parties.................................................... 4 2.1........ Policy context................................................................................................................. 4 2.2 Chronology of the Impact Assessment
Report......................................................................... 6 2.2.1. ... Consultation of stakeholders........................................................................................... 6 2.2.2. ... Studies and publications.................................................................................................. 7 2.2.3..... Internal consultation........................................................................................................ 8 3........... Problem definition........................................................................................................... 8 3.1 The scale of the problem......................................................................................................... 9 3.2........ The substance of the problem
being addressed by this initiative...................................... 10 3.3 Underlying causes of the problem being
addressed................................................................. 14 3.4 How would the problem evolve in the
base-line scenario?...................................................... 25 3.5 Does the EU have the power to act?..................................................................................... 26 3.5.1 .... The legal basis.............................................................................................................. 26 3.5.2..... Subsidiarity: Why the EU is better
placed to take action than Member States................. 27 4........... Objectives.................................................................................................................... 28 5........... Policy options and their impact...................................................................................... 29 5.3........ Description and impact analysis
of policy options........................................................... 30 5.3.1 .... Policy option 1: Retention of the
status quo (base-line scenario)..................................... 30 5.3.2 .... Policy option 2: Soft law to
raise awareness................................................................. 31 5.3.3 .... Policy option 3: A legislative
measure converting the PIF Convention into an instrument under the new Treaty
rules, while improving consistency of the provisions contained therein............................. 31 5.3.4 .... Policy option 4: A legislative
measure requiring clarification, appropriate expansion of the scope and
strengthening of the sanction levels of national criminal provisions for the
protection of EU financial interests 33 5.3.5 .... Policy option 5: A legislative
measure on exhaustive and directly applicable EU criminal law for the
protection of its financial interests....................................................................................................... 38 6........... Comparative assessment of policy
options..................................................................... 41 7........... The preferred option..................................................................................................... 42 8........... monitoring and evaluation.............................................................................................. 44 ANNEX I: Glossary and parameters of the
protection of EU financial interests by criminal law...... 45 ANNEX II: Current LevelS of Sanctions in
Member States and conditions for their harmonisation 48 1........... How do sanction levels vary?........................................................................................ 48 2........... What are conditions and
limitations for enacting criminal law at EU level?....................... 48 ANNEX III: Overview of existing EU
legislation :........................................................... 49 ANNEX IV : statistics on case activity........................................................................................ 51 ANNEX V: Consultation table.................................................................................................... 53 COMMISSION
STAFF WORKING PAPER IMPACT ASSESSMENT
(Part I) Accompanying the document Proposal for a Directive of the
European Parliament and of the Council on the fight against fraud to the
Union's financial interests by means of criminal law 1. Introduction This Impact Assessment Report is for a
measure on the protection of EU financial interests which would improve
implementation of existing rules, or set additional criminal law rules on, illegal
activities such as fraud, corruption, money laundering and further related
offences, to the extent relevant for EU public money. This measure aims at
setting a common and proportionate level of protection by deterrence. This will
not only strengthen the effectiveness of EU budgetary and financing rules, but
it will also ultimately benefit the overall credibility of EU finance in times
of austerity, and of criminal justice, by setting a level playing field for the
protection of taxpayers' money throughout the EU. This report commits only the
services involved in its preparation and does not prejudge the form of any decision
to be taken by the Commission. What is the scope of the analysis? This Impact Assessment Report is based on an analysis of illegal
activities affecting EU public money, i.e. money spent or not collected in
spite of legal obligations to the contrary, and the criminal law frameworks
aiming to sanction such activities. This includes, but is not limited to,
activities amounting to intentional fraud, corruption and money laundering,
which are the criminal offences currently legally defined by the EU in this
policy area. Some illegal activities affecting EU public money are not now
covered by any criminal offence definition. 2. Procedural
issues and consultation of interested parties 2.1. Policy
context Since 1999, the European Anti-Fraud Office
(OLAF) has been equipped with a mandate on illegal activities affecting EU
financial interests limited to administrative investigations.[1] A body of administrative law
for the fight against illegal activities at the expense of EU public money has
developed consequently. It is based on Regulation (EC, Euratom) No 2988/95,
which sets out administrative rules for dealing with illegal activities at the
expense of EU public money[2]
throughout the policy field. It is flanked by sectoral administrative rules[3]. The administrative component of protection
EU financial interests was complemented by a criminal law dimension. In 1995-1997,
the Council adopted the Convention for the protection of the financial
interests of the European Communities and accompanying protocols (hereinafter
collectively referred to as the "PIF Convention").[4] The PIF Convention was
subsequently ratified by, and entered into force with respect to, almost all
Member States,[5]
so that it may legitimately be termed as an acquis of the criminal law
protection of EU financial interests.[6]
This framework was complemented by general EU
measures for the fight against certain illegal activities particularly harmful
to the licit economy, such as money laundering[7]
and corruption[8],
albeit not specific to the protection of EU financial interests, nor to
criminal law. In 2001 the Commission submitted a proposal
for a Directive on the criminal-law protection of the Community's financial
interests[9],
which aimed to bring into the ambit of the then "first pillar" law
some core provisions of the PIF Convention. This proposal was not actively pursued
by the Council because it believed that the European Community at the time
lacked competence. The new step in this policy area comes in a context of
austerity, where a structured response to losses of taxpayer money is
particularly urgent: In May 2011, the Commission issued a Communication on the
protection of financial interests of the European Union by criminal law and by
administrative investigations[10]
accompanied by a Staff Working Document[11].
These documents insist on the patchwork of provisions which has developed
across the EU, and set out that, given the obligation to act for the effective
protection of EU financial interests as set out in the Lisbon Treaty, the
Commission would consider criminal law as one of the elements to improve this
state of play. The Communication "Towards a European criminal policy"
pointed out the specificities of criminal law measures in general, and how
these can be taken into account in legislative work.[12] The Commission's annual
"fight against fraud" reports, the latest of which covers 2010[13], contain factual information
in this field, which regularly triggers Resolutions of the European Parliament calling
for more effective anti-fraud polices, in particular regarding the criminal
offence of fraud understood as a purposeful wrongdoing.[14] Given the current times of
difficult economic propects, the Commission is emphasising the protection of EU
financial interests as one of the strategic policies to ensure sound public
finances and thus that taxpayer money allocated to the EU is not wasted, but
spent as appropriately and efficiently as possible.[15] The Commission took into account the
previously performed analysis in the context of the 2001 Commission proposal
for a Directive on the criminal-law protection of the Communities' financial
interests[16]
as well as the Parliament's opinion in first reading on the 2001 proposal[17], following
the report of the budgetary control committee[18],
which lead to the submission of an amended Commission proposal.[19] 2.2
Chronology of the Impact Assessment Report 2.2.1.
Consultation of stakeholders The Commission has
conducted specialist stakeholder consultations: Academic experts were consulted
in a dedicated meeting organised by the Commission services in Brussels on 25
October 2011. Member State experts were convened by the Commission services for
a consultative meeting in Brussels on 6 December 2011, which was also attended
by the secretariat of the EP's LIBE committee. Views of Member States'
prosecution services were gathered through questionnaires and discussion at the
Forum of the Prosecutors-General convened by Eurojust in The Hague on 23 June
2011 and again on 16 December 2011. The Commission also invited representatives
of the Taxpayers' Association of Europe, who in the meeting held on 25 January
2012 expressed strong support for the Commission's objective and approach, and
also gave concrete examples of recurrent cases of misallocation of public money
now not covered by criminal law. Academic experts
confirmed certain deficiencies of the existing legal framework for the
protection of EU financial interests (provisions concerning abuse of public
procurement procedures, lacking provisions on third-country jurisdiction, time limitation,
etc.) whilst underscoring the importance of the principle whereby criminal law
should only be used as a last resort, with due attention for the principles of
subsidiarity and proportionality.[20]
Member
State experts were generally supportive of the objective pursued by the
Commission, i.e. safeguarding taxpayers' money. Only two Member States argued
that prior implementation of the Eurojust Decision[21] and the Framework Decision of
settlement of conflicts of jurisdiction[22]
would be preferable, and this Report will explain why this suggestion is not
retained in the policy options. A number of Member States confirmed that a wide
definition of "official" was useful and pointed to the relevance of confiscation
as a sanction. Both remarks, on substance, were taken into account in options
no. 4 and 5 below, and this Impact Assessment Report accordingly introduced an
element of conflict avoidance into options 4 and 5.[23] As regards practitioners,
there was a widely shared perception that clear criminal law providing a level
playing field was a relevant element, and that it should be complemented by
measures in the procedural field to respond to the deficiencies they identified
in this context.[24]
The latter point is reflected in the Commission's work programme whereby there
will be a separate initiative on procedural measures for the protection of EU
financial interests in 2013. 2.2.2.
Studies and publications The Commission
contracted out a study to gather evidence in the context of the Commission's
preparations towards an impact assessment, the final report of which was
delivered on 23 December 2011. Further circumstantial evidence was provided by
the preliminary report of the "Euroneeds study" performed by the
Max-Planck-Institute for international criminal law in Freiburg upon request of
the Commission.[25]
This study provides in particular empirical analysis of the practices of investigating
and prosecuting authorities in the Member States when dealing with cases
related to the protection of EU financial interests and serious cross-border
offences. Also the work
performed with Commission support in the context of the study on a "Corpus
Juris introducing penal provisions for the purpose of the financial interests
of the European Union" (1997)[26]
was taken into account, albeit with due caution in the light of the Treaty
changes having taken place meanwhile and empirical developments since. The
Corpus Juris study team of experts had elaborated a set of thirty-five penal
rules designed to ensure a fair, simple and efficient system of protection of
the EU financial interests. These rules follow guiding principles as built up
in the case-law of the EU Court of Justice and the European Court of Human
Rights. The follow-up project to the "Corpus Juris" study (2000)[27] offers further indication on
the main systemic criminal law challenges of the protection of EU financial
interests by criminal law. This study provides comparative criminal law
research, and assessments of the feasibility of EU legislation such as the
Corpus Juris in this context. It also contains national reports covering the
fifteen Member States of the time and transversal reports on the main issues on
the cooperation among the Member States and the EU. The Commission
further took into account a study on "How does organised crime misuse EU
funds?" conducted in 2011 on behalf of the European Parliament[28], which contains useful insight
into typical cases of organised crime affecting EU financial interests. 2.2.3. Internal
consultation An Interservice Steering Group was created,
inviting representatives from DG Justice, OLAF, the Secretariat-General, the
Legal Service and all operational or otherwise affected services (i.e., DG
AGRI, DG BUDG, DG CLIMA, DG COMM, DG COMP, DG DEVCO, DG DIGIT, DG EAC,
ECHO, EEAS, DG ECFIN, DG ELARG, DG EMPL, DG ENER, DG ENTR, DG ENV, ESTAT,
DG HR, DG HOME, IAS, DG INFSO, JRC, DG MARE, DG MARKT, DG MOVE, DG REGIO,
DG RTD, DG SANCO, DG TAXUD, DG TRADE). ISSG meetings were held on 18 January
2012, 8 February 2012 and 29 March 2012. At the meetings and in direct communication
with individual DGs who expressed particular interests, comprehensive feedback
was received which has been taken into account throughout this report. The Commission's Impact
Assessment Board convened on 14 March 2012 to discuss this initiative and
subsequently issued comments on a previous draft of this Report, in particular
on the scale of the problem, on proportionality and on the integration of
stakeholder consultation results, which were taken into account in this Report.
As a result, this Report now contains a clearer explanation of certain
assumptions underlying the assessment of financial impacts, an additional
analysis of the evolution of irregularities which have affected EU financial
interests over time, a more detailed approach to the fundamental rights aspects
involved in the various policy options, a more comprehensive justification of
the legal basis and of compliance with the principle of subsidiarity, a
clarification on the reasons for the choice of particular sanction levels in
certain policy options, a taking into account of the possible differences
between national and EU financial interests protection in the proportionality
analysis of the policy option concerned and, in Annex, a full list of the implementation
issues found by the Commission regarding the PIF Convention in all Member
States. 3. Problem
definition The EU loses money to illegal activities, both on revenue and expenditure side, and thus is less credible in its budgetary restraint efforts, despite the criminal law provisions set out previously in the PIF Convention. These factors are linked to an insufficient deterrent effect of existing provisions protecting the EU financial interests, to enforcement gaps of existing prohibitions relating to EU money, and to low recovery rates of defrauded money. The underlying causes are insufficient outreach of criminal law provisions, an incomplete set of offence definitions, unfair divergence of sanctions among Member States, and excessive impediments to the application of criminal law for the protection of EU financial interests. The financial interests
of the European Union are negatively affected if money due to the EU is not
collected for it, or if money or assets of the EU are misallocated in breach of
legal rules. Too often, and despite previous efforts to curb the phenomenon,
this is indeed taking place, due to illegal activities which are serious and
frequent enough to warrant a resolute response. 3.1
The scale of the problem According to the statistics collected by
OLAF on the basis of reports from Member States, from EU expenditures
(EAGF, EAFRD, ERDF, ESF and the Cohesion Fund) and revenues (TOR)
implemented or collected by Member States alone, a total of 13,631 cases of illegal
activities involving EU funds (so-called "irregularities") took
place in 2010. These cases caused a cumulated damage to EU public money of approximately
€ 2.07 billion[29].
The number of reported cases and amounts involved has increased since 2008,
with the average value of each case almost doubling over that period from € 87,934
in 2008 to € 152,112 in 2010. Within the amount of the illegal
activities in 2010 suspicion of fraud amounted to € 617 million of EU public
money potentially lost to crime. Basis for the estimates of losses incurred: The limitations of available data mean that it is not
possible to report actual figures for the total number and value of financial
crimes. Instead, indicative estimates are derived based on a combination of
published in the OLAF annual report on fraud, unpublished case data from OLAF,
national legal research undertaken by the study team and responses from
stakeholder consultations. Caution should therefore be used in interpreting
these indicative estimates. They provide a reasonable but only indicative
estimation of the volume of financial crimes involving EU funds. A substantial
share, though not all of these losses can be stopped or recovered by additional
criminal law measures. EU
money is lost for a variety of reasons. Some of these cannot be addressed by
this initiative, but will be by future initiatives. This is the case in
particular for questions relating to cooperation between national authorities
involved and OLAF[30].
Some of these reasons are also beyond EU remit, such as human resources issues
in the judiciary. Among the reasons which are
addressed by this initiative, some are fully addressed, and some can only be
partially so: The initiative addresses the currently
insufficient scope and incomplete set of criminal law offences concerning fraud
and related crimes, which reduce deterrence and recovery levels. The initiative
can only partially address the lack of mutual trust between judiciaries,
which has a bearing on cooperation and thus on enforcement. Further issues
partially addressed are the low detection and low follow-up levels (i.e., the
phenomenon whereby cases on the protection of EU financial interests appear to
be not sufficiently vigourously pursued by some judicial authorities[31]), which negatively impact on
deterrence, enforcement and recovery levels. Here criminal law set out at EU
level can be an essential contribution in that it helps to reduce disparities
across the normative landscape of the EU, and thus encourages judiciaries of
the Member States to cooperate better. These problems will be comprehensively
addressed if this initiative is viewed together with separate Commission
initiatives, which add further angles of attack, such as in particular the one
on procedural law foreseen in 2013.[32] Basis for estimates of the amount of losses which could be
avoided by criminal law: An empirical demonstration of exactly how much EU public
money could be recovered, or losses of it be avoided, by criminal law measures
is not possible due to the absence of, and methodological challenges in
generating, empirical data on the preventive effect and thus financial impact
of any given criminal law provision.[33]
Criminal law does not save nor recover money as such, but it exerts influence
on individuals who might otherwise or do commit illegal acts, and it gives
tools to investigators in order to enforce recovery which would otherwise
remain theoretical. The causal link between criminal law and avoidance of
losses is therefore dependent on human beings acting in accordance with it,
which makes empirical demonstration difficult. However, a reasoned and robust estimate
is possible. Such an estimate can be based on acriminological analysis, which also
looks into behavioural effects of legal norms. It
appears reasonable to assume that not all the losses of EU funds to illegal
activities (i.e. around € 2 billion reported for 2010) can be avoided or
recovered by criminal law. But given that current criminal law does not cover
all relevant illegal conducts, and that the economic operators have a
reputation to lose when subject to the stigmatising role and criminal law, it
is consistent with behavioural science that additional criminal law rules which
make such illegal conducts more often a crime with serious consequences, that a
relevant reduction can be achieved. under a very cautious and conservative
assessment, it does indeed appear reasonable to consider, in the light of criminological
research on economic and financial crime, that at least half the total
misallocations of funds are based on inappropriate conduct of persons involved
(as opposed to mere mistakes), and that a substantial share of at least half to
two thirds of that amount (i.e. 25 to 33% of the total amount) is amenable to
being prevented or recovered by criminal law legislation threatening shame,
disruption and allowing better investigation and enforcement. As a result, the
scale of the problem being addressed by this initiative on criminal law can
be of a volume of € 500 million per year, which amounts a one-quarter to
one-third of the funds lost to irregularities overall.[34] These figures remain estimates
which should not be interpreted as forecasting a definite reduction of losses,
in particular since the overall amount of irregularities is subject to strong
variations over the years, although the general long-term tendency is a growing
number of irregularities.[35]
3.2 The
substance of the problem being addressed by this initiative As this Impact
Assessment Report will explain in more detail below, the protection of EU
financial interests is generally not strong enough. As shown by the evolution
of irregularities over time[36],
potential and actual perpetrators too often find the risk of being caught,
seriously effectively sanctioned and their illegal proceeds recovered as too low
to act as an effective deterrent. The deterrent effect is even lower in some
Member States than in others which is inappropriate for EU public money which should
be protected equivalently everywhere in the EU (Article 325(4) TFEU). To the extent criminal
law can address these reasons, earlier legislative efforts at EU level, and the
Treaty obligation of Member States to fight illegal activities affecting EU
financial interests by measures which shall act as a deterrent (Article 325(1)
TFEU), have proven insufficient in this regard. They do not create sufficient
basis to sanction equivalently, so that mutual trust remains low, which reduces
cooperation between Member States. The PIF Convention,
which mainly aims to criminalise fraud affecting EU public money, and its
protocols on corruption and money laundering, are the only criminal law
instruments at EU level in this area so far. Although they contain solid definitions
of the particular offences they cover (fraud, corruption, money laundering), they
have not sufficiently contributed to curbing the money loss described above.
Whilst most Member
States now did ratify the PIF Convention, transposition measures of the
Convention have remained incomplete in most of the Member States, as the Second
Implementation Report of 2008 shows.[37]
Moreover, even if they were
fully implemented, the PIF Convention and its protocols only cover a limited
sub-section of illegal conduct at the expense of EU financial interests (fraud,
corruption, money laundering, which have been transposed with the same scope
and definition in the present initiative) and miss out on many relevant phenomena
(such as fraud at the expense of the EU committed by non-nationals in third
countries, corrupt practices of service providers to EU institutions, collusive
practices between tenderers, specific serious offences often committed by
negligence, inadequate time-limitation rules etc.) which have been encountered
regularly in practical experience, as will be further explained below. The problem can be
broken down into the following specific aspects, which relate to the various
deficiencies in the means of protecting EU public money. 3.2.1 Insufficient deterrence In Article 325(1) TFEU, the Treaty calls
for measures for the protection of EU financial interests "which shall act
as a deterrent", while the Court has traditionally used the synonym term
of "dissuasive"[38].
This means that the EU and its Member States are under an obligation to create
strong disincentives against any illegal conduct affecting EU public money. How can potential perpetrators be convinced not to cause
illegal damage to EU financial interests? A hands-on explanation of deterrence: Given that security policies cannot and, for reasons of
fundamental rights, must not lead to total control of all potential
perpetrators, thus forcibly preventing crime from taking place, public policies
seek to influence conduct in a way which results in voluntary refraining from
the commission of illegal acts. This is the task of "deterrence". While criminology has cast doubt on the deterring potential
of the threat of punishment alone, modern science[39] does indicate that the "fear
of being caught", "certainty of sentencing" and/or "be
shamed" by thorough criminal investigations, proceedings, trial,
conviction and/or a criminal record, as well as the risk of being
"disrupted" in the course of their illegal business, can have an
effect on potential perpetrators' decision as to whether to cross the Rubicon into
intentional illegality, particularly regarding individuals enjoying a
relatively good reputation or social status. Deterrence against intentional acts requires (i) legal
provisions containing appropriate legal definitions of illegal conduct and
associated sanction levels, (ii) at least vague notions of the existence of
such provisions on the part of the person to be deterred and (iii) an expected
practice of actual enforcement of these provisions by the authorities. The level of fraud (i.e. an intentional
illegal conduct) at the expense of EU money, over the last years, has at least
remained stable. In the period from 2009 to 2010[40], fraud increased by 220%. This
increase is partially due to a cyclical effect and the figures for 2010-2011 consequently
show a slight decrease. However, these figures also show that deterrence against
illegal activities affecting the EU's financial interests is clearly
insufficient. This holds true also for members of civil services in Europe,
including some EU officials, who have been shown to be involved in illegal
schemes at the expense of taxpayers' money, despite their high moral and
statutory obligations.[41] 3.2.2 Insufficient enforcement:
deficiencies in investigation and follow-up of offences (a) Insufficient investigation remit The apparent "zero fraud" outcome
again reported 2010 in the management of EU funds by a number of Member States[42] raises serious doubts about
the detection capacities regarding criminal activities affecting EU financial
interests, as the European Parliament has noted already regarding earlier
reports.[43]
Insufficient investigation remit (i.e. the range of cases to which criminal
investigation powers apply) contributes to this outcome in the field of EU
financial interests because criminal investigators can only work where criminal
law applies.[44] (b) Insufficient follow-up possibilities The table in Annex III (extracted from the OLAF
operational report 2011) indicates strongly varying, and on average remarkably
modest, outcomes of judicial proceedings involving offences affecting EU
financial interests in the Member States. An average of 43.9% of cases
transmitted by OLAF were dismissed across all Member States. Up to 50%
acquittals (from all judicial actions) can be noted in OLAF actions transferred
to Member States, with an average acquittal rate of 14% throughout the EU.
Whilst dismissal or acquittal can be legitimate, it is striking that for cases
with similarly well-established evidence made available by OLAF to the
respective national judicial authorities, such widely differring, and in
general quite lenient outcomes can occur. This in turn would point to a substantial
number of cases warranting criminal sanctioning, which lead to no sanctioning
at all, in particular due to deficiencies in criminal laws. Among an
empirically meaningful group of interviewees from police and judicial services
across the EU, there is a perceived tendency to put complex cases involving
cross-border cooperation "on the bottom of the pile",[45] and financial interests cases
are regarded as particularly complex: 34% of interviewed practitioners reported
that such cases fail because of legal issues in a European context.[46] This is confirmed by actual
dismissal rates for purely legal reasons (as opposed to lack of evidence or
innocence of a suspect).[47] 3.2.3 Insufficient recovery Recovery of EU funds is one of the
measures to be taken when those funds are illegally spent. Based on a
conviction for criminal behaviour, the chances of a successful financial
recovery are much better. The European Commission publishes information
reported by Member States on the results of the actions by national authorities
to recover amounts unduly paid to beneficiaries[48]. The data provide an
indication of the recovery of EU funds lost to illegal activities. Recovery rates increased slightly between
2009 and 2010 on the expenditure side, to 40% in the agriculture sector, and to
70% in cohesion policy funds implemented by Member States.[49] On the revenue side, the recovery rate for Traditional Own Resources increased slightly to 46 % in 2010 which might further increase
due to recovery being still ongoing.[50] However, these recovery levels
are still too low taking into account the long-standing existence of
administrative regimes to prevent losses and recover amounts subject to
irregularities, as contained in particular in Regulation (EC, Euratom) No 1605/2002
on the Financial Regulation applicable to the general budget of the European
Communities,[51]
Commission Regulation (EC) 1848/2006 concerning irregularities and the recovery
of sums wrongly paid in connection with the financing of the common
agricultural policy and[52]
Council Regulation (EC) No 1083/2006 laying down general provisions for the
European Regional Development Fund, the European Social Fund and the Cohesion
Fund.[53]
An empirical demonstration of exactly how
much EU public money could be recovered, or losses of it be avoided, by
criminal law measures is not possible due to the absence of, and methodological
challenges in generating, empirical data on the preventive effect and thus
financial impact of any given criminal law provision.[54] Criminal law does not save nor recover money as such, but it exerts
influence on individuals who might otherwise or do commit illegal acts, and it
gives tools to investigators in order to enforce recovery which would otherwise
remain theoretical. The causal link between criminal law and avoidance of
losses is therefore dependent on human beings acting in accordance with it,
which makes empirical demonstration difficult. However, a reasoned and robust
estimate is theoretically possible and has been made in section 3.3 below. Such
an estimate can be based on a criminological analysis, which also looks into
behavioural effects of legal norms. 3.3
Underlying causes of the problem being addressed There is clear
indication that malfunctions of the sanctioning system are involved in the weak
deterrence, enforcement and recovery record. Consultation of practitioners indicates
that the above issues are caused by (i) insufficient criminal law coverage and
sanctioning levels for typical illegal conduct, as well as (ii) lacking level
playing field. From a criminal law perspective, the shortcomings
of the sanctioning system mentioned by practitioners translate into insufficient
outreach (i.e., criminal law coverage of each offence), an incomplete
set of offence definitions (i.e., criminal law coverage by extra offences),
unfair types and levels of sanctions and excessive impediments to application (i.e.,
too low or too different sanctions across the EU). Issues which make criminal law ineffective: (1) Insufficient outreach regarding perpetrator and place of
commission (2) Incomplete set of criminal offence definitions covering
the various illegal conducts concerned (3) Inadequate sanction types and levels achieving
foreseeable and sufficiently significant, though not excessive, consequences. (4) Excessive impediments to application regarding time-limitation
and way of commission As regards the protection of EU financial
interests, all of these weaknesses can be found in the current criminal law
frameworks of the Member States[55],
which are insufficiently strengthened by the PIF Convention. 3.3.1 Cause A: Insufficient
outreach of criminal offences Due to certain gaps existing in the
current criminal law framework of some Member States, the punishment of
perpetrators cannot take place everywhere in the EU. (a) Who is liable? There are important differences in the current
choices by Member States of who is made subject to criminal liability for
offences relating to the protection of EU financial interests across the EU. As
a result, some Member States have an excessively narrow scope of protection
which does not deter all those potentially involved, and which creates
enforcement gaps by reducing investigation and follow-up remit. The lack of
level playing field leads to a slowing down of judicial cooperation and thus
stalling investigations, which in turn reduces the likelihood of investigations
and prosecution being pressed forward until judgment. Thus for instance the
creation of a series of legal persons located in various countries, which
contribute to money laundering and which under current circumstances can
channel assets away from the EU public purse, and hide from investigators the
beneficial owner of a corrupt practice or a fraudulent misallocation of
taxpayers' money, can lead to very complex investigations which require mutual
legal assistance.[56]
Given however diverging rules on, for instance, the liability of financial
decisionmakers or legal persons, the authority of a Member State which can
prosecute under its national law in such a case would not obtain assistance for
obtaining evidence from a Member State which cannot. In the consultative
meeting with Member States, one Member State who does apply criminal liability
to legal persons also pointed to the advantage of the easier recovery for
victims of this approach. (i) Only certain "officials"
covered by anti-corruption provisions A key issue in this context is the definition of official, which is
the basis for liability involving corrupt practices. For instance, certain Member
States’ legislation does not provide for the punishment of all corrupt elected office
holders (Austria, where members of the national parliament cannot be held
liable). Moreover, some Member States, by choosing a narrow concept of
"official" linked to status rules rather than to activity (Bulgaria),
also refrained from covering service providers linked to public institutions by
service contract for the purpose of corruption offences. In further Member
States the full assimilation of EU and national officials is doubtful (Belgium, Cyprus, Denmark, Greece,
France, Italy, Luxembourg, Austria and Portugal).[57] This makes it more
challenging for investigative authorities to apply the law because there needs
to be extra investigation (including possibly witness hearings, search and
seizure measures) on the precise set of the suspect's obligations, and of the
fact that he knew about these obligations at the time of commission, or may
even exempt certain categories of public servants entirely from criminal
liability. This aspect was confirmed in a consultative meeting with Member
States, where a number of experts (without objection of others present) praised
the benefits of a "functional" definition of officials, as opposed to
one which is rigid and statute-bound. Case example: OLAF dealt with a case concerning an EU official responsible
for the management of certain funds within the Human Resources and Security DG.
Based on the evidence that the EU official was responsible for falsifying
documents and the misappropriation of EU funds, OLAF transmitted the case to
the competent judicial authorities. The Supreme Court held that the
relevant norm criminalising the misappropriation of funds was not applicable to
officials of international organisations as they were not encompassed by the
concept of "public official". These deficiencies result in a lack of
deterrence for perpetrators falling outside the scope of the existing
definitions of "officials", assuming that there is a minimum level of
knowledge of the criminal law framework. Thereby they create losses of an
estimated order of magnitude of € 12.5 million per year for the EU budget (considering
the number of Member States concerned by this gap, relying on expert judgment
about the importance of this gap and considering the extent of losses in
individual Member States, see also assumptions and breakdown in Annex V[58]). (ii) Restricted
liability of managers and organisations The rules on when managers and their
organisations can be held liable for the involvement of their organisation in
crime differ widely across the EU. As regards managers, some Member States
apply restrictive definitions which require that they hold a certain formal
level of power in the organisation (e.g. Portugal), or only hold them
criminally liable when they know and support the concrete criminal conduct of
their subordinates (e.g. Germany) which unduly restricts liability to those
holding official powers (e.g. sub-delegated authorising officers, CFOs), when
in fact the deliberate illegality can just as well, if not easier, be committed
at the preparatory stage (e.g. by members of an evaluation committee,
assistants of the board etc., who do not hold powers with effect outside the
organisation). This appears as a problem given that in
the area of financial crime it is reasonable to assume, on the basis of
circumstantial empirical evidence, that financial decisionmakers who are
potentially liable very carefully inform themselves about the criminal law
framework so as to avoid slipping into illegality (increase in demand on
preventive criminal law advice from lawyers in corporate crime matters, which
now represents up to 70% of the specialised lawyers' business).[59] As a result there may be a
less careful approach of decisionmakers when handling EU money, and thus a lack
of deterrence. When, in addition, problems in finding
and admitting evidence prevent sanctioning of the actual perpetrator within the
organisation, this can imply total impunity and therefore absence of
enforcement and ensuing recovery problems. This leads to estimated losses of € 12.5
million for the EU budget annually (see breakdown in Annex V[60]). As regards legal persons, Member States
do not provide for the same way of organising liability of legal persons (i.e.
companies, associations etc.). Some do in administrative proceedings only
(Bulgaria, Germany, Latvia), the others also in criminal proceedings. As a
result, investigation powers (such as search and seizure, access to bank
accounts etc.) vary, and are sometime insufficient, when targeting legal
persons. This is problematic in the field of financial crime at the expense of
EU financial interests, where numerous, and in particular the most serious
cases, involve multiple shell companies aiming to hide the real beneficiaries
of illegal activities.[61]
In the consultative meeting with Member States, an expert from a country which
does apply criminal liability to legal persons also indicated that this helped
to obtain recovery allowing the victims to be compensated (which remained
without objection from others present). This happens not only
because legal persons have usually more financial means (assets, cash money)
than natural persons, but also because the rules on the liability of legal
persons offer an easier legal base for the victim to claim the compensation. Functioning of organised
criminal schemes involving shell companies: (i) Companies used to commit
offences: In order to elude value-added
tax (VAT) payments and/or illegally obtain VAT reimbursements, multiple companies
are set up by organised criminal groups in different Member States. One common
scheme is for such companies to sell VAT-free across internal borders, then the
receiving company sells on within their Member State charging VAT, and disappears
again before the tax administration can recover the VAT as it should (so-called
"missing trader schemes").[62]
This indirectly affects EU financial interests because Member State
contributions to the EU budget are calculated on the basis of their VAT intake.
Similar schemes can arise to elude customs, which directly affect EU financial
interests through traditional own resources. → Here the companies are themselves perpetrators. The
unavailability of criminal proceedings directed against legal persons is
therefore reducing deterrence and enforcement levels. (ii) Companies used to conceal proceeds of crime: Chains of multiple companies set up in various jurisdictions
are frequent actors in transactions aiming to conceal illegal origin and
whereabouts of proceeds stemming from criminal activities.[63] → Here the companies are used to hide the proceeds of crime.
The unavailability of criminal proceedings directed against legal persons is
therefore reducing enforcement and recovery levels. Losses (or lower recovery) that result from
the lack of investigative powers against legal persons in some Member States are
estimated at approximately € 140 million per year (see assumptions and
breakdown in Annex V[64]). (b) Where does liability arise? Some Member States lack the necessary
jurisdictional rules to prosecute crimes committed abroad, unless one of their
nationals was the perpetrator or the victim (e.g. Netherlands), or a particular
type of offence is concerned (e.g. Cyprus, UK). EU financial interests
therefore can be difficult to prosecute from within these EU Member States when
cross-border cases or acts in third countries are at hand. Case example: In a case concerning an international consulting company,
also involved in other cases opened by OLAF, which was set up to advise in
European projects, OLAF found evidence that a third country official provided
privileged information regarding tender procedures to the consulting company
and received favours amounting to € 100,000 for doing so. With this background
the company was able to provide privileged information to its clients, who then
won contracts worth € 4 million and financed with EU public money. Whereas it is possible to prosecute the consulting company
for active corruption in the Member State of its establishment, this was not
the case for the prosecution of the third country official for passive
corruption, because the EU Member State's judiciary did not have jurisdiction
over this case. As a result, the EU could only incompletely follow up on crimes
committed at the expense of its budget. It
is not possible at present to establish clearly the loss of the EU budget, as
the trial in the Member State is still ongoing; however, without the corrupted
act the EU could have probably saved the difference between the normal value of
the contract and the value inflated because of the illicit intervention. As a result, deterrence on perpetrators
acting from outside the EU, who do not have EU citizenship, is nearly totally
absent. Even within the EU, deterrence can be negatively affected because
various judiciaries can foreseeably get entangled in competence discussions. In
such situations, criminal law provisions remain lettres mortes and entail
lack of enforcement. Recovery in criminal proceedings, too, is impossible if
jurisdiction is missing. Practitioners highlighted this aspect as one of the
relevant stumbling blocks to effective prosecution of crime affecting EU public
money. This leads to losses for the EU budget that can be estimated at
approximately € 17.3 million annually (see assumptions and breakdown in Annex V[65]). 3.3.2 Cause B: Incomplete
set of criminalised conducts The PIF Convention and its Protocols provide
solid definitions of fraud, corruption and money laundering, albeit sometimes
insufficiently transposed into national law, there are none at EU level for the
other relevant related offences. The following account distinguishes the
implementation-related issues (a) from those issues where even full
implementation of the PIF Convention could not address the problem (b). (a) Insufficient implementation of
existing definitions Even with regard to offences which are
adequately defined in EU legislation, the implementing national definitions of
offences which can affect the EU’s financial interests are dissimilar
throughout the EU. The Commission’s report on the implementation of the PIF
Convention highlighted this by pointing out the incomplete transposition of the
PIF Convention within the EU[66](e.g.
lacking coverage of all types of expenditure by the fraud offence in Italy, too
demanding intent requirements for fraud in Belgium).[67] This is due partially to
lacking awareness, practitioners' guidance and partially to lacking clarity of
the PIF Convention, and its status as "third pillar" instrument predating
the Lisbon Treaty which reduces EU influence on Member States transposition. As
a consequence, interpretative issues leading to stalemate situations have
arisen in OLAF investigations, whenever the definitions contained in national
penal codes did not comply with the former. Case example: The definition of documentary fraud adopted in a certain
Member State is too narrow when compared to the definition contained in the PIF
Convention. In a particular case concerning a tender procedure for
services to be charged several million € in this Member State, a consortium of
companies submitted documents containing false information with regard to their
technical expertise and past professional achievements. On the one hand, the documents at stake could not be
considered as official documents, which means they are out of scope of
"documentary fraud" in the sense of the relevant national provisions,
as the documents were not drawn up by an official working for a legal entity
and the cosortium; on the other hand, the offence of forgery of a private
document did not apply either, as such a document would have to have been used
"in order to prove the existence or non-existence, or termination or
amendment of a certain right or obligation or some legal relation", which
was not the case. Moreover, prosecution for fraud was not possible given that
the definition contained in the penal code of this Member State requires the
misleading of a particular individual, which did not seem to have been the
case. The
amount that the EU will lose due to this specific case,at this stage cannot be
determined precisely These cases mainly create an enforcement
issue, which in turn reduces deterrence, thus leading to an estimated € 31
million of losses for the EU budget annually (see assumptions and breakdown in Annex
V[68]). (b) Insufficient number of offences at
all defined at EU level The PIF Convention does not define the
following illegal conducts which reflect conduct recurrently observed in
practice, and which seriously damages or threatens to damage EU financial
interests: embezzlement/ misappropriation, breach of professional secrecy,
obstructing public tender procedures, conflict of interest and abuse of power.
The lack of uniform definitions can lead to some Member States imposing
stricter regimes than others in order to protect the EU’s financial interests,
and in some even to a total lack of protection. Practitioners thus have pointed
to the insuffiency of existing criminal offence definitions as one of the
issues of the current framework. For all offence types referred to below,
an indicative description of the conduct concerned may be found in Annex I. (i) Embezzlement/misappropriation This offence criminalises theft-like conduct
of staff entrusted with handling public money, who then channel funds away from
its intended purposes. Such conduct, although substantially fraudulent, is not
necessarily covered by the technical definition of fraud (according to which
someone has to be misled), nor by the corruption definition (where an advantage
must have been received from an outsider), nor the money laundering offence
(where money has to have an illegal source). However, the behaviour that is
sanctioned under this offence is very close to fraud, equally reprehensible,
and equally harmful to the EU budget. Previous specialist academic work
therefore has considered this offence as relevant[69], and its assumed relevance is
consistent with current experience of OLAF where certain elements of fraud or
corruption were missing in some serious cases. Only Cyprus, France, Ireland,
Latvia and Poland currently include both definitions in their national
legislation, though France, Latvia and Poland include the offence of
misappropriation within their national legal system. In some Member States restrictions
apply, as reference is made to an object, money or property which has been
‘entrusted’ to that person. This leads to unclear levels of protection for EU
money which reduces the deterrent effect and enforcement potential of such
provisions. In these Member States, perpetrators from among EU staff, or
otherwise working for or on behalf of the institutions, can get away with only
disciplinary consequences (limited to their professional life), or none at all
(when they are contractors without statutory link allowing disciplinary action,
or when disciplinary action is no longer possible or effective after long
criminal proceedings having led nowhere). Case example: A public administrator has the availability of a credit card
linked to a bank account where also EU funds are deposited to fund public
projects. He uses repeatedly this credit card for personal purchases, as he
believes that nobody will ever check the amount of the EU funded part of the account.
Losses for the EU budget can be estimated at
approximately € 15.1 million annually (see assumptions and breakdown in Annex V[70]). (ii) Breach of Professional Secrecy This offence criminalises the unlawful
disclosure of certain sensitive information by public servants. In all the
Member States breach of professional secrecy constitutes a criminal offence,
but the following deficiencies were identified in some Member States, if
applied to EU financial interests. In some Member States, the scope of the
offence appears to be restricted by the information to which it relates. Rather
than covering secrets generally, the offence relates to data (Romania) or
information which the person is duty-bound by law or other statutory instrument
or by order or provision issued under a law or statutory instrument to keep
secret, as in the case of the Swedish provision. This means that in cases
relating disclosure of information harming EU financial interests, the national
concept of secrecy is applied even though financial management rules of the EU
are concerned. This creates deterrence and enforcement
gaps, because the national concepts of secrecy are narrower than the EU Staff
Regulations' general duty of non-disclosure (Article 17 of the EU Staff
Regulations). This is relevant because in cases where concrete advantages
received by corrupt officials may not be proven, whilst traces of illegal
communication with their counterparts can be traced. For instance, a (proven)
email of an EU official with illegally outbound information to a tenderer in
return for an (unproven) cash payment could not lead to punishment. Previous
specialist academic work therefore has considered this offence as relevant[71]. An estimated € 6.3 million of losses results
annually for the EU budget (see assumptions and breakdown in Annex V[72]). (iii) Abusing
public tender procedures The criminal offence of abusing public
tender procedures is only covered, to some extent, in 14 Member States. The 13
Member States that do not at all define this offence are: Bulgaria, Finland,
Greece, Hungary, Ireland, Latvia, Lithuania, Malta, the Netherlands, Portugal,
Slovenia, Sweden and the UK. General offences do not usually apply because some
elements conditioning their application are not met, e.g. fraudulent
misrepresentation or a certain proven amount of damage to the EU budget. While there is a body of EU
(administrative) competition law prohibiting such conduct when it amounts to a
cartel (Article 101 TFEU, Regulation (EC) No 1/2003), this only applies to
collusive practices impacting cross-border trade and distorting competition as
such. However, below the threshold of cases
relevant from a competition perspective, collusive practices can nonetheless damage
EU financial interests considerably, when one considers the inefficient
allocation of resources linked to tendering procedures skewed by illegal
interaction between tenderers. The European Parliament has particularly
highlighted illegal practices in the area of public procurement as a growing
concern from the perspective of EU financial interests in its 2011 resolution
on the fight against fraud.[73]
Academic experts also recommend such an offence definition.[74] The non-existence of this
offence type as a matter of criminal law thus leads to a lack of deterrent
effect and enforcement capabilities in the Member States concerned. This entails
an estimated € 40 million of losses for the EU budget annually (see assumptions
and breakdown in Annex V[75]). Case examples: Case A): Mr. A, a private consultant, bribes some officials in
charge of a procurement procedure in order to know the criteria for
adjudicating the tender. Subsequently, he gets in touch with company B, which
is not involved in the previous bribery, "selling" the information. At
that point, the company B submits its offer which is the best and is awarded
the tender. Company B cannot be charged with fraud, as company B neither submitted
any "false, incorrect or incomplete statement or document"( the
documents are formally and substantially genuine), nor provided any information
in violation of an obligation (as there is no obligation to declare that the
information was illegally obtained). The case rather concerns the provision of true
information but with the aim of circumventing or skewing the selection criteria. . Case B): In a procurement or grant procedure an interested person ,
participating with one of its companies, “convinces” another bidder to withdraw
his offer, so that the tender is awarded to the company owned by the interested
person. In addition to the charge of “extortion” the conduct does
not amount to “fraud Even in this case, it cannot be said that the offer of the
winning company is "false, incorrect or incomplete". The offer itself
is genuine and the information it contains is true. But it is a case of
complicity in obstruction of public procurement, to withdraw information or to
provide information (the information of the withdrawal) with the aim of
circumventing the tender procedure. (iv) Favouritism/abuse of power The offence of favouritism or abuse of
power was not found at all in the legislation of 20 Member States. This is
problematic because general offences do not usually apply to such conduct,
given that certain elements conditioning their application are missing, e.g.
receiving an advantage in return for a "favour" (which prevents
punishment for corruption), or a certain proven amount of damage to the EU
budget (which prevents punishment for fraud). The recommendation of academic
experts thus is to have such an offence[76],
and this is supported by some case experience of OLAF. Indeed, some deterrence
gaps and enforcement difficulties appear for the Member States in question (Estonia,
Greece, Hungary and the UK). Case example: This case concerned an international consulting company, also
involved in other cases opened by OLAF, which was set up to advise in European
projects. It turned out in the course of this particular investigation that an
EU Delegation official who was in charge of the implementation of EU funded
projects transmitted privileged information regarding tender procedures to the
consulting company. With this background the company was able to give unfair
advantage to its clients, who won contracts worth € 4 million financed with EU
public money, thanks to information which was not available to other tenderers.
It was not possible to prosecute the EU Delegation official
as the offence of favouritism did not exist in the Member State which had
jurisdiction to prosecute him. Therefore only disciplinary proceedings, with
less severe consequences, could be initiated. The absence of applicable
criminal offence definitions also resulted in the absence of recovery by
seizure or confiscation. As
a result of this case, the EU is likely to loose a certain amount, although it
is impossible at this stage to quantify this loss. Unavailability of a specific offence of
favouritism or abuse power leads to losses for the EU that are estimated at
about € 40.5 million annually (see assumptions and breakdown in Annex V[77]). 3.3.3 Cause C: Unfair types and
levels of sanctioning Though consistency and fairness should be
guaranteed in the application of criminal sanctions and penalties relating to
fraud (see Article 325 TFEU and Article 49 of the EU Charter of Fundamental
Rights), imposed penalties for fraud of the same seriousness, against the same
EU public money are currently not equivalent across the EU and range from small
fines to long prison sentences (see list in Annex V). Member States apply
different sanctions and penalties, some of which cannot be considered
proportionate nor dissuasive. This is both an issue of insufficient
implementation of the PIF Convention (with regard to the deterrent effect of
sanctions for fraud, corruption and money laundering), and a weakness of the
Convention itself (with regard to the precise sanction levels, and offences
other than fraud, corruption and money laundering). For instance in Belgium,
the sanction levels were therefore very lenient (which touches upon Article 2(1)
of the PIF Convention).[78]
In addition to the resulting arbitrariness of sanctioning, depending on where
in the EU a perpetrator happens to be prosecuted for having illegally dealt
with EU money, the lack of level playing field also reduces mutual trust of
judicial authorities who need to cooperate to solve cross-border cases relating
to EU financial interests. National legal research has highlighted the
low and, additionally, strongly diverging criminal sanctions and penalties
which exist in the Member States. As confirmed by a number of prosecutors, the
penalties in some jurisdictions are regarded as insufficient to act as an
effective deterrent against the loss of EU funds as would be required by
Article 325(1) of the Treaty. This holds true when the sanction levels are so
low that they do not create any disruption of (illegal) activities any more.
This is the case in particular for the absence of minimum imprisonment ranges
(such as in the Czech Republic for corruption, or in Hungary for breach of
professional secrecy, or in Bulgaria for favouritism). In general, any
sentencing range which would frequently results in sentences easy to served
during leave or holidays and which does not entail a risk of extradition or
surrender under the European Arrest Warrant[79]
system, can be regarded as ineffective from a deterrence point of view, because
they do not imply the required stigmatising or disrupting effect. Maximum
sentences of only a few months (such as in Austria) are unsatisfactory for the
same reasons, given that courts, for reasons of proportionality, rarely hand
down judgments applying the maximum sentence. These issues are compounded by a
lower level of mutual trust between the judiciaries, given the disparate levels
of sanctioning, which reduces the impetus to seek or grant judicial
cooperation, and thus creates enforcement and recovery issues. This aspect is compounded by issues
arising from discrepancies in sanction levels.[80]
These discrepancies can be expected to benefit particularly strongly the most
serious offenders, i.e. transnational organised crime groups involved in
offences at the expense of EU financial interests, which include multiple
corporate structures and intermediaries benefiting from professional legal
advice or expertise. These types of criminal groups are indeed reported to be
strongly involved in fraudulent conduct at the expense of taxpayer money, through
various schemes requiring cross-border corporate mobility and tax law
expertise.[81] Case example: OLAF investigated several cases of large-scale fraud
involving textiles imported from China. The fraud scheme
involved the importation of textiles from China, firstly, by understating the
value of the products in order to evade customs duties of approximately € 300
million, and, secondly, the fraudsters also illegally evaded the payment of
value-added tax (VAT). The goods were subsequently cleared in the Member State
of arrival without paying the VAT and were then transported into another Member
State of destination, where the VAT would have had to be paid by the recipient.
However, in this scheme the majority of recipients were either non-existent or
disappeared from the scene after a short period in operation. The
cases showed that the fraudsters later avoided – after some successful
prosecutions for fraud – some Member States and continued their textile fraud
schemes in other Member States with more lenient sanctions. This mirrors the
lack of equivalence in the criminal law rules across the EU. As
a result the EU is likely to have lost a significant amount of money, although
it is impossible at this stage to identify a precise amount, as many criminal
proceedings are still ongoing. This issue (insufficient
and differring sanction types and levels taken together) leads to an estimated €
49.7 million of losses for the EU budget annually (see assumptions and
breakdown in Annex V[82]). 3.3.4 Cause
D: Excessive impediments to application of criminal law Criminal cases relating to EU financial
interests are often taking a long time to investigate and prosecute. They are
also too often abandoned altogether at an early, although the evidence would
not warrant so. This phenomenon cannot be stopped entirely, but, weighing the
seriousness of the conduct at stake, excessive hurdles to application may be
noted. (i) Inadequate prescription rules The rules on prescription govern the
maximum time period within which a particular offence can be prosecuted and
punished. The prescription rules applying to EU financial interest cases in the
Member States differ strongly, both as regards the length of the limitation
period after which an offence cannot be prosecuted anymore (e.g. 1 year for
misappropriation in Austria, 12 years for the same offence in the Netherlands),
and the question of whether the period is prolonged once investigative measures
are taken or trial begins (e.g. in Italy there is no such prolongation during
trial). As was highlighted by prosecutors, this is not adequate to the
structure of investigations in cases affecting EU financial interests, which
are similar in complexity and duration regardless of the concrete offence, and
involve additional similar delays across the board due to (i) reporting periods
for financial programmes of at least one year and (ii) often OLAF
investigations of 2-3 years before criminal justice becomes active. Therefore
time-limitation periods below an initial 5 years (such as in Austria, 1 year
for misappropriation, and France, 3 years) do not realistically permit detection
in time. Also, a lack of prolongation of time prescription periods once
criminal proceedings begin (allowing at least a doubling of the initial
prescription period to 10 years) prevents sustainable prosecution of the
criminal offences in this context. Case example: OLAF investigated several cases involving allegations of
serious fraud in the framework of the European Agricultural Guidance and
Guarantee Fund, with various companies who fraudulently applied to, and
received financing from, the EC for agricultural projects between 1992 and 1997.
Thorough criminal proceedings took place in Member State A, whereby all the
defendants were charged in 2005, 8 years after the last acts occurred, with
aggravated fraud amounting to € 3.1 million. Yet all the defendants had to be acquitted
due to a new prescription law which was passed while the proceedings were
ongoing, and which shortened the the length of prescription time from 10 to 6
years maximum without prolongation once criminal proceedings begin, thus suddenly
making the ongoing case time-barred. Convictions to imprisonment for fraud took place in the same
case in another Member State which did not have the same restrictive statute of
limitations. As
a result the EU lost a significant amount of money, probably some hundreds of
thousands of euro. However, due to the specificity of the case, it is difficult
to identiy a precise amount. Excessively short, or unprolongable,
time-limitation periods necessarily result in a serious loss of deterrent
effect vis-à-vis perpetrators aware of judicial practice (in particular
organised groups involved in complex customs fraud or money laundering
schemes), as well as enforcement gaps and negative impact on recovery which,
given it often would be a consequence of conviction, cannot occur. An estimated
€ 6.2 million of unnecessary losses arise for the EU budget annually from this
aspect (see assumptions and breakdown in Annex V[83]). (ii) Inadequate limitation to liability for
intentional conduct Some of the Member States' laws regarding most
serious conducts affecting EU financial interests only require punishment of
intentional conduct, despite the possibility for, and adequacy to demand from,
the actors involved also to avoid certain kinds of unintentional infringements.
In other fields of law which equally feature the possibility and adequacy of
requiring careful conduct, unintentional acts are often criminalised, such as
regarding physical injury[84],
traffic offences[85]
or, on the basis of EU law, protection of the environment by criminal law[86]. For the protection of EU
financial interests, this problem arises in case of money laundering as regards
the illegal origin of funds (which is already criminalised in some Member
States, e.g. in Germany and, concerning regulated sectors, in the United
Kingdom). In such circumstances, persons involved can be legitimately and
realistically required to check where large amounts of money that they process come
from, or to refuse them if the source is unknown or unconvincing. This is
already the state of EU administrative law under the second money laundering
directive[87],
which is currently insufficiently mirrored in criminal law. "Deterrence" against unintentional acts? As to unintentional illegal acts, legislation providing for sanctions
in case of negligence may have a "warning sign effect" which would
increase awareness of risks of illegality in decisive moments of a given
activity, thus reducing the likelihood of the undesired illegal outcome
materialising. One may therefore speak of a deterrent effect in the sense of a
"warning". The current lack of criminal punishment for
conduct involving the acceptance and processing of funds, the illegal origin of
which is negligently not known, encourages reckless attitude in matters
involving EU money, and thus a lack of deterrent effect (in the sense of an
absence of warning effect). It also reduces detection of crime and thus
enforcement levels of existing offence types. This deficiency leads to an
estimated € 125 million of losses for the EU budget annually (see assumptions
and breakdown in Annex V[88]). (iii) Complexity and inconsistency risks of
existing rules A substantial share of prosecutors
interviewed in a recent study (34%) point to problems of interpretation arising
in the application of existing provisions for the protection of EU financial
interests,[89]
which are complex across the EU. This results in difficulties of judicial
cooperation, slowness of the proceedings and unfairness in the outcomes. These phenomenona
can reasonably be linked back to weak and unclear drafting of the PIF Convention,
as well as of the divergencies in Member State provisions outside the current
scope of the PIF Convention, and the ensuing risks of inconsistency as
foreshadowed by a pending case at the Court of Justice[90]. These weaknesses due to inconsistency risks
contribute to a lack of deterrent effect among perpetrators who are aware of
judicial practice, and they reduce recovery levels since the judicary becomes
foreseeably entangled in interpretation problems. They can be estimated to
impact EU financial interests by € 18.6 million (see assumptions and breakdown
in Annex V[91]). 3.4
How would the problem evolve in the base-line scenario? Under the current framework continued, one
might expect an improvement in the implementation status of the PIF Convention.
The last Member State not yet to have ratified the Convention –the Czech
Republic– has engaged in internal procedures to do so. Moreover, one could hope
in the long run to improve the implementation status of the Convention by
tackling certain identified weaknesses of the transposition measures of the
Member States, in the normal course of Commission business as guardian of the
Treaties. It might also be possible in the base-line
scenario to seek, together with the Member States, a better implementation of certain
other existing EU instruments mentioned by a small number of Member States in
stakeholder consultations, i.e. the amendments to the Council Decision setting
up Eurojust[92]
(which generate more information at Eurojust's disposal and sets up its
on-call response capabilities) and the Framework Decision on the prevention and
settlement of conflicts of exercise of jurisdiction in criminal proceedings[93] (which
sets out procedures for cases dealt with by more than one Member State).
However, such improvements would not impact on the problems described in this
Report, in particular not the problem of deterrence due to insufficient
criminal offence definitions and the lack of enforcement in certain cases by any
of the Member States because of missing jurisdiction: The base-line scenario would not in any way
enlarge protection to the identified areas subject to particularly damaging
and/or serious illegal activities at the expense of EU money, which are not
covered by the PIF Convention. It thus would not allow tackling the low number
of investigations and proceedings now engaged in the field of EU financial
interests' protection. This scenario would
also fail to solve the lack of a level playing field regarding protection of EU
money across the Member States within the areas now already covered by the PIF Convention,
to the extent this uneven playing field mirrors weaknesses of the Convention
itself in terms of lacking precision of definitions and unambitious minimum
sanction types and levels. As a result, the deterrent effect against the
offence types currently contained in the PIF Convention would remain as
relatively low as it is. There would also be a persisting incentive for
potential perpetrators to move to more lenient jurisdictions within the EU to
exercise their intentional illegal activities. Finally, this scenario
would not address the issues of clarity as they now exist with the PIF Convention
and its transposing measures in the Member States. This in turn would mean that
the problems of overly long and too often unnecessarily dismissed cases would
not be reduced. 3.5
Does the EU have the power to act? 3.5.1
The legal basis The EU's competence to enact "the
necessary measures in the fields of prevention of and fight against fraud
affecting the financial interests of the Union with a view to affording
effective and equivalent protection in the Member States and in all the Union's
institutions, bodies, offices and agencies" which "act as a
deterrent" is set out in Article 325 of the Treaty on the Functioning of
the European Union.[94]
Contrary to the pre-Lisbon Treaty version
of the provision[95],
Article 325(4) of the Treaty on the Functioning of the European Union now does
not exclude measures impacting on "the application of national criminal
law". Against this backdrop, recent legal writing concurs that criminal
law measures are covered by Article 325.[96] The fight against illegal activities
affecting the financial interests of the Union is a specific priority policy as
the provision's prominent positioning in the Treaty indicates. It is specific
because nowhere else in the Treaty the term "deterrent" appears. It
is a priority because it benefits from a special chapter dedicated to
"combatting fraud" in the title on "financial provisions".
This peculiarity is further strengthened by Article 310(6) TFEU which already in
the very first article of the Title on financial provisions underscores the need
to fight illegal activities affecting EU financial interests ("shall
counter"). The purpose of Article 325 is to protect the
single interest which this priority policy is about, i.e. EU public money,
wherever it should be collected or spent. The protection of EU public money is a
solidarity interest at EU level which is different than the sum of the Member
States' national financial interests. For these reasons, the Treaty confers upon
the Union strong powers to adopt "measures" which "act as a
deterrent" and "afford effective" (Article 325(1)) and
"equivalent protection" (Article 325(4)).[97] Deterrent,
effective and equivalent protection comprises by nature, and historically (see
PIF Convention of 1995), a criminal law dimension, since criminal law is needed
as a basis to create a risk for potential perpetrators to be caught under
emberassing circumstances, and thus a disincentive to commit the illegal act in
the first place (see above, box on deterrence research in section 3.2.1).
Therefore Article 325 includes the power to enact criminal law provisions in
the context of the protection of EU financial interests against all angles of
illegal attacks which can be envisaged. EU financial interests are not defined by
the Treaty itself, but it is clear from the wider wording than the "budget",
which is used elsewhere in the Treaty (e.g. Article 310(1) second subparagraph)
that all funds managed by or on behalf of the Union are covered[98]. 3.5.2 Subsidiarity:
Why the EU is better placed to take action than Member States It is considered that there is a need for
EU action based on the following factors: The EU financial interests relate to assets
and liabilities managed by or on behalf of the European Union. Thus, the EU
financial interests are by nature, and from the start, placed at EU level. As
such, they are even more "EU-centred" than a field subject to
harmonisation of rules in the Member States. They are more comparable in form
and substance to rules on the EU institutions', bodies', offices' and agencies'
self-protection, such as in terms of physical or IT-security. As a result, they
cannot reasonably be dealt with by the Member States alone. It goes in line
with this assessment that the Treaty itself presumes in Articles 310(6) and
325(1) and (4) TFEU the necessity of EU legislative action for setting out
equivalent and deterrent measures to protect EU financial interests against illegal
activities. The EU is best placed to protect its
financial interests, taking into account the specific EU rules which apply in
this field. These include the budgetary rules of the Financial Regulation, the
general rules on the protection of financial interests by administrative law,
and sectoral rules on the protection of financial interests in the various
policy areas which can be affected. This applies also to the extent that criminal
law provisions for the protection of EU financial interests might be
rendered more similar. Only the EU is in a position to develop binding
approximation legislation with effect throughout the Member States, and thus to
create a legal framework which would contribute to overcoming the weaknesses of
the current situation, including in particular the lack of equivalence which is
inconsistent with the Treaty objectives set out in Article 325(4) TFEU. The particular added value of EU provisions
on criminal law in this area could reside in the novelty of defining relevant additional
offences and sanction types and levels, which would apply similarly throughout the
Member States, thus completing and learning the lessons from the experience
with the PIF Convention whilst contributing to a more level playing field. 4. Objectives Objectives: General: || To prevent and reduce loss of money for the EU To increase credibility of EU budgetary responsibility Specific: || To appropriately increase deterrence of prohibitions relating to the EU financial interests, in compliance with the EU Charter of Fundamental Rights To better enforce the prohibitions of certain conducts illegally affecting EU public money by improving investigation results, including identification of suspects and detection of beneficiaries of illegal transactions, in compliance with the EU Charter of Fundamental Rights To adequately improve levels recovery of EU public money subject to illegal acts, in compliance with the EU Charter of Fundamental Rights To ensure equivalence and fairness of provisions protecting EU financial interests across the EU To contribute to increasing mutual trust between the Member States' judiciaries To increase awareness of the rules governing the protection of EU financial interests among investigators and potential perpetrators Operational: || A measure to protect EU financial interests should include the following elements: It should provide sufficiently wide scope to cover the groups of perpetrators which most seriously and/or frequently damage EU public money It should adequately enlarge the number of offences so as to cover the most seriously damaging and/or frequent types of conduct affecting EU pubmic money It should provide for sanction types and levels sufficient to ensure fairness in the protection of EU public money everywhere in the EU, whilst ensuring proportionality It should contain clear and appropriate flanking rules to facilitate enforcement 5. Policy
options and their impact 5.1 Overview of broad policy
options We have considered 5
options: · Option 1: Retention of the status quo (base-line scenario) · Option 2: Soft law to raise awareness of relevant provisions among
potential perpetrators and practitioners, and facilitate their understanding
and application including by an exchange of best practices and information; · Option 3: A legislative measure converting the PIF Convention and
its protocols into an instrument under the new Treaty rules, while improving
consistency of the provisions contained therein; · Option 4: A legislative measure requiring clarification, appropriate
expansion of the scope and strengthening of the sanction levels of national criminal
provisions for the protection of EU financial interests; · Option 5: A legislative measure on exhaustive and directly
applicable criminal law. In accordance with the Communication from the Commission on the
Strategy for the effective implementation of the Charter of Fundamental Rights
by the European Union[99], this Impact Assessment Report also examines the impact on the
Fundamental Rights of the options proposed, in particular in the light of the
'fundamental rights check list' presented in the Communication. As will be described for each option individually, the policy
options all affect fundamental rights as set out in the Charter, although not
in an unjustifiable manner. Mainly the right to liberty (Article 6), the
freedom to choose an occupation (Article 15), the right to conduct a business
(Article 16), the right to property (Article 17), principles of legality and
proportionality of criminal offences (Article 49), the right not to be tried
and punished twice (Article 50) are concerned by criminal law measures for the
protection of EU financial interests. It should be noted from the outset,
however, that these provisions neither protect a "right to illegal
business" nor prohibit proportionate criminal sanctions, even involving
deprivation of liberty and confiscation, from being taken, as long as the
criminal liability for illegal conduct is clear, known in advance and not
applied twice. 5.2 Discarded options (a) These options do not consider a
"roll-back" option repealing the criminal law measures of the PIF
Conventon, given the unanimous position of all Member States and stakeholders
that criminal law is a vital component to the fight against fraud and other
illegal activities affecting public money, as well as the available figures and
reasoned estimates which point to better protection by criminal law. Given
moreover that the EU is prevented from prohibiting Member States to criminalise
certain conduct (Article 67(1) TFEU), Member States would almost certainly
continue to apply their criminal law as it now stands. The
"roll-back" option therefore would not have any impact other than
reducing the number of legislative measures at EU level. (b) The addition of negligence as a type of
conduct triggering criminal liability by default was discarded as
disproportionate. The deterrent effect of negligent criminal liability being
limited to a "warning signal" as described in section 3.2.1 above, the
substantial enlargement of the scope of criminal sanctions to unintentional
conduct for all offences appeared too far-reaching to be warranted by the
expected benefit in effectiveness of the legal framework. Thus the
indiscriminate application of negligence to all offence types, with the same
sanction levels as for intentional conduct was considered contrary to Article 49(3)
of the EU Charter of Fundamental Rights and had to be discarded. Instead the
analysis of the Impact Assessment Report is focused on a case-by-case approach
to negligence, in the context of one specific offence type, with regard to its way
of commission and to the particular threat to financial interests such an
offence causes. 5.3 Description
and impact analysis of policy options 5.3.1 Policy
option 1: Retention of the status quo (base-line scenario) Content: No
action would be taken at EU level other than that foreseen by the existing
framework, i.e. normal continuation of implementation efforts of the PIF
Convention. Expected Impact Effectiveness in meeting objectives || None to very low. Only slight implementation improvements until 1 December 2014, within existing, limited scope of PIF Convention. But none of causes A (insufficient outreach), B (incomplete set of offences), C (sanctions) or D (application) would be tackled directly. Thus deterrence and recovery issues would likely remain unaltered. Implementation of the Convention could however improve as of 1 December 2014, when the transitional period of the Lisbon Treaty expires, thus allowing stronger follow-up by the Commission upon transposition deficiencies, which would in turn improve enforcement levels in the Member States. Impact on fundamental rights || Not more than now (rights to liberty and family life regarding the existing criminal offences leading to imprisonment, freedom to choose an occuption and to conduct a business regarding the consequences of conviction for fraud, corruption or money laundering, right to property, legality and proportionality of criminal offences, right not to be tried twice regarding the application of the fraud, corruption and money laundering offences)). Financial and economic impact || None. Intrusiveness in domestic justice systems || None. Proportionality || N/A 5.3.2 Policy
option 2: Soft law to raise awareness Content: Raising
awareness among generalist professionals of criminal law for relevant provisions,
as well as among potential perpetrators, and facilitating their understanding
and application by increased and specific training of national investigators
and prosecutors, including training of trainers by EU staff, an exchange of
best practices and case information, and the preparation with the help of the
Commission of practitioners' guidelines compiling the best practices collected
from Member States regarding the transposition of the provisions of EU law. Expected Impact Effectiveness in meeting objectives || Low, as it would only contribute to better application of EU provisions within their existing narrow scope. Only cause D (application) would be approached to some extent, while causes A (insufficient outreach), B (incomplete set of offences) and C (sanctions) would remain untouched. Thus deterrence, enforcement and recovery issues would likely be almost unaltered, save for some limited collateral improvements of enforcement and recovery levels by higher efficiency within the existing framework. Impact on fundamental rights || Low to medium (rights to liberty and family life regarding the existing criminal offences leading to imprisonment, freedom to choose an occuption and to conduct a business regarding the consequences of conviction for fraud, corruption or money laundering, right to property, legality and proportionality of criminal offences, right not to be tried twice regarding the application of the fraud, corruption and money laundering offences)), including in addition to the current state-of-play an impact on data protection as regards improvements of information exchange on PIF cases, which would however be justifiable with appropriate safeguards, including purpose limitation. Financial and economic impact || € 37.2 million gains at EU level; € 3.08 million extra costs at EU level (due to meeting organisation, travel expenses, working time of officials etc.) for Commission; positive net result for Member States with a view to efficiency gains (better use of prosecutors' time).[100] Intrusiveness in domestic justice systems || Minimal. Proportionality || Given the lack of binding measures, the proportionality requirement is unproblematically complied with. 5.3.3 Policy
option 3: A legislative measure converting the PIF Convention into an instrument
under the new Treaty rules, while improving consistency of the provisions
contained therein Content: Integrating
provisions of the PIF Convention and its protocols within the new Treaty
framework, while improving consistency of the provisions on fraud, corruption
and money laundering contained therein (this means in particular applying the
same minimum sanction levels and jurisdiction clauses to all these offences,
and bringing their implementation status in the Member States within the normal
ambit of ECJ review powers). The improved consistency can be expected to slightly
enlarge the scope of application of some provisions in the Member States and to
facilitate application of transposing rules of the Member States, and to create
a more level playing field across the Member States. This in turn would improve
mutual trust and facilitate judicial cooperation, which positively impacts on
detection and follow-up of offences, and thus on enforcement and recovery
levels. Expected Impact Effectiveness in meeting objectives || Slightly higher effectiveness for enforcement than the base-line scenario only regarding better implementation tools before the transitional rules of the Treaty expire on 1 December 2014; modest effectiveness regarding better deterrence and recovery because streamlining definitions and integrating the text into the Lisbon Treaty framework would facilitate application by the prosecution services. Only causes A (insufficient outreach) and D (application) would be tackled directly, while causes B (incomplete set of offences) and C (sanctions) would not be touched upon except to a limited extent for fraud, corruption and money laundering. Thus deterrence levels would likely improve only very slightly, while enforcement and recovery levels could improve somewhat more. Impact on fundamental rights || Not more than now (rights to liberty and family life regarding the existing criminal offences leading to imprisonment, freedom to choose an occuption and to conduct a business regarding the consequences of conviction for fraud, corruption or money laundering, right to property, legality and proportionality of criminal offences, right not to be tried twice regarding the application of the fraud, corruption and money laundering offences), except to the extent that streamlining definitions would marginally broaden their scope. Financial and economic impact[101] || A positive impact on EU budget of an estimated € 17.2 million as a result of better enforcement and recovery in return for an estimated zero regular cost (cost of judicial workload at Member States level, minus efficiency gains).[102] Intrusiveness in domestic justice systems || None. Proportionality || Given the weighing between: -the minimal additional intrusiveness compared to the existing framework (only in the area of the streamlined definitions, and regarding the possibility of ensuring implementation more effectively), and -the great structural relevance for the integrity, spending capacity and reputation of the Union, as well as the obligation of sound financial management on behalf of the taxpayer, the measure would not be excessive compared to the objective pursued, but insufficiently effective. 5.3.4 Policy
option 4: A legislative measure requiring clarification, appropriate
expansion of the scope and strengthening of the sanction levels of national
criminal provisions for the protection of EU financial interests The content of this
option, to the extent it exceeds the existing criminal law rules, is inspired
by practitioners' suggestions, Member States' contributions, comparative law
research and academic contributions.[103]
Triangulating these sources has led to overlapping references to the elements
set out in more detail hereinafter. Content: Legislative instrument requiring
clarification, appropriate expansion of the scope, introduction of specific new
offence types and strengthening sanction types and levels of national criminal
provisions for the protection of EU financial interests. More particularly,
this would involve the following individual measures, which reflect the
problems of lack of deterrence, lack of enforcement and lack of actual recovery
of lost amounts: (a) Broader scope of offences This option would clarify the range of
people (including legal persons, decision-makers and all public servants, as
opposed to only officials) and situations (also abroad by means of a
jurisdictional clause) to which the offences apply. More particularly,
decision-makers within an organisation managing EU money could cause the legal
person’s liability for their role or lack of preventive action within criminal
proceedings. This option would guarantee sufficient liability of legal persons
regardless of whether this is done administratively or under criminal law, and
encourage Member States to make legal persons liable in criminal proceedings. (b) New offence definitions In addition, the option would proceed to
require Member States to add to their criminal law arsenal a precise definition
of the recurring fraud-related offence types of misappropriation and abuse of
public procurement procedures[104]
to the extent involving EU money. In the definitions which will be proposed,
inadequate restrictions currently applying in national laws would be overcome,
to the extent relevant for the protection of EU financial interests. This
concerns for instance the restrictive condition now applicable in some Member
States whereby for the misappropriation offence to apply property has to be
"entrusted" to a person, (c) Appropriate sanction types and levels Further elements of this option which
would set minimum sanction types (imprisonment ) and levels in line with best
practices in Member States (at least a minimum of 6
months and at least a maximum of 5 years imprisonment and
confiscation of assets in serious intentional cases involving minimum damage
consistent with other EU instruments and the seriousness of each of the
offences: fraud, , misappropriation, abuse of public procurement prodecures at
least € 100,000, corruption and money laundering at least € 30,000 ). Also
appropriate accompanying measures (as e.g. confiscation) would be provided for
under this option. How does the Commission identify sanction levels which can be regarded
as deterring? -Comparative analysis of existing Member State provisions (see Annex
V), which yields the the range of possible sanction types and levels, in the
light of the shared constitutional and judicial traditions; -From among those, best practices of Member States are identified on
the basis of expert and practitioner contributions (e.g. satisfaction of
practitioners in France and Germany with sanction ranges available there,
dissatisfaction of practitioners with certain sanction ranges elsewhere); -The outcome is then adapted, where necessary, by reference to
recent OLAF experience, academic work or specific horizontal EU policy
considerations (e.g. minimum sanctions required for extradition or surrender, minimum
thresholds set in anti-money laundering legislation). -Here, a 6 months minimum sanction level was identified as the
lowest (and thus most proportionate) possible figure which still allows a
practical prospect of permitting surrender among EU Member States under the
European Arrest Warrant.[105]
Under this instrument, only penalties higher than 4 months can trigger
surrender, which –taking into account mandatory sentencing reductions available
in some Member States depending on circumstances[106]– leads to a normal minimum
level of 6 months for the system to work in all cases of convictions for cases
pertaining to the protection of EU financial interests. A level of 6 months is
also the lowest realistic penalty to still exert a deterring effect in the
sense of stigmatising and disrupting effect, because –taking into account early
releases from prison after a part of the sentenced time is served– any lower
figure might allow perpetrators to serve their sentence almost in the normal
course of their annual working/holiday cycle. (d) Flanking measures to avoid
application impediments Application of the rules would be
adequately facilitated by providing prescription rules consistent with
complexity and average duration of investigations in cases relating to EU
public money, by introducing a standard prescription period of 5 years combined
with a rule applying which can prolong the prescription period to a maximum of
10 years once investigations have begun. This is in line with best practices in
Member States. Moreover, a specific rule ensuring compatibility with
administrative sanction regimes (to avoid impunity arising from procedural
delays and contradictions) would complement this policy option, thus addressing
complexity and preventing inconsistencies, including a specific rule for the
abuse of public procurement procedures ensuring consistency with the leniency
policy of administrative anti-trust policies under Article 101 TFEU.. Expected Impact Effectiveness in meeting objectives || Medium to high effectiveness in reducing losses of EU money and restoring credibility of budgetary restraint efforts, without however taking all theoretically possible criminal law measures nor fully harmonising the sanction types and levels. All causes A-D are addressed by this option, thus considerably impacting on deterrence, enforcement capabilities and recovery levels: -Wider definitions of existing offences would overcome the limitations of scope which have lead to relevant gaps (cases relating to non-statutory servants as opposed to officials, to EU officials as opposed to national officials, where no prosecution has been possible at all). This would improve equivalence of the sanctioning playing field across the EU as well as mutual trust between the judiciaries and thus facilitate enforcement and recovery in cross-border cases; -Defining new relevant fraud-related offences concerning the losses of EU financial resources as criminal will mean allowing prosecutors to investigate and bring to court serious illegal acts affecting EU financial interests which so far were not amenable to criminal sanctioning in all Member States at all or in the same way: deterrence from such acts is likely to be very high. It integrates that expected comparative effect of criminal law vs administrative sanctions (fines etc.), whereby in financial crime as here criminal provisions can have a higher likelihood of creating such deterrent effects, because of (i) a widely shared sense in society that it has strong detrimental effects on reputation, in particular for the typically socially previously well placed offenders in the field of financial crime, to be tried or convicted for a criminal offence ("stigmatising effect"), (ii) the harsh sanctions potentially resulting from such conduct ("higher disruption risk") and (iii) the stricter investigative procedure, allowing in particular to better trace illegal transactions ("higher detection risk"); -The streamlining and lifting sanction types and levels to a minimum level consistent with effective enforcement (extradition, actual prison terms to be served) would create strong disincentives among potential corporate-level offenders and thus deterrent effects, where now an unenforceable criminal offence definition cannot (because the sanction levels are too low to actually yield sentencing to imprisonment, or to entail extradition or surrender). It also improves equivalence of the sanctioning playing field across the EU and thus mutual trust between the judiciaries, which facilitates enforcement and recovery in cross-border cases; -Flanking measures allowing to effectively apply the criminal offence definitions (in particular where crimes now cannot be prosecuted for adequate periods of time before lapsing) improve enforcement and recovery levels, because they allow prosecuting even complex cases entirely, and they prevent inconsistencies which would otherwise jeopardise legal proceedings. Moreover, the minimum approximation of Member States provisions across all offence types relevant for the protection of EU financial interests will increase mutual trust between judiciaries, which will in turn have positive impacts on conduct of transnational proceedings. The new common definitions of criminal offences and the harmonised system of sanctions as laid down in the legislative proposal will contribute to minimising the concerns of the practioners in handling cross-border cases. In the Communication on the Protection of the EU financial interests by criminal law and administrative investigations of 26.5.2011 (COM(2011)293 final), the Commission reported that a survey showed that nearly 60% of judges and prosecutors in the MS consider the transnationality of a case as a problem due to the difficulties in the relationships with the authorities of other MS; this explaines why these cases are not prioritiesed. A better level of harmonisation in the criminal offences and sanctions will help to dissolve these concerns and will facilitate prioritisation of the cases. Impact on fundamental rights || Medium impact on fundamental rights (rights to liberty and family life by possible imprisonment of convicted perpetrators, freedom to choose an occupation and to conduct a business by possible disqualifications of convicted perpetrators, right to property by possible shutting down of illegal businesses, criminal fines upon conviction and confiscation, legality and proportionality of criminal offences because new offence definitions are set out, right not to be tried twice because of interplay with administrative sanction regimes). These measures serve to meet objectives of general interest recognised by the Union (see Article 52 para. 1 of the Charter), and in particular to provide effective and deterring measures for the protection of EU financial interests. In the context of increasing amounts of irregularities and fraud suspicion and in light of the ineffectiveness of the current measures under the PIF Convention (as laid out in the Problem Definition), the measures do not go beyond what is necessary to achieve this objective. All provisions on criminalisations and sanctions will be drafted in a clear and predictable manner, ensuring legal certainty. Explicit safeguards would be laid down in the EU legislative instrument itself, specifying the right to an effective remedy and to a fair trial, including the rights of the defence, ensuring an equivalent level of effective judicial protection by national courts. Financial and economic impact[107] || A level of financial benefit (avoided or recovered losses) can be estimated to be an annual € 470.7 million[108] at EU level. Economic benefits include the indirect impact on licit economy, through better availability of EU funds which would otherwise have been defrauded. The regular organisational and administrative cost of this option (in particular work surplus for national investigators, prosecutors and judges by reference to Council of Europe cost-per-case figures) can be assessed to be of € 29.2 million at Member State level[109]. One-off cost at Member States level would be an estimated € 18.2 million for legislative implementation.[110] Intrusiveness in domestic justice systems || Relatively modest, as Member States could implement in keeping with their national legal traditions and even go beyond the definitions, sanction types and levels of the instrument. The option does not intrude into the procedural criminal law of the Member States, nor is it requiring changes to principles of national criminal laws. Rather, it would give additional tools to prosecutors to act under their normal national procedure. More particularly: the broadened scope, new offence types and sanction types and levels would require adaptations of the criminal codes of most Member States, but without creating systemic upheaval because the instrument would leave leeway for implementation and more severe approaches. A precise list of the Member States where each of the indidual measures of this option would require legislative change, and to what extent, is contained in the Annexes to this Report.[111] As the criminal offence of abuse of power is found only in a limited number of Member States, the harmonisation of this offence would be slightly more intrusive as it would compel a number of Member States to introduce a criminal offence unknown to their respective national systems. As far as the offences of breach of professional secrecy, liability of financial decision makers and abuse of office are concerned, their harmonisation could be considered slightly more intrusive as these offences are not typically linked to fraudulent behaviour. The jurisdiction clause would require adaptation of most Member States' criminal law frameworks (except those already applying the principle of universal jurisdiction for cases related to financial interests), but only with effect limited to offences for the protection of EU financial interests, which are specific enough to warrant such an exception. The requirement of legal persons' sanctioning in criminal proceedings would only require changes in Bulgaria, Germany and Latvia, but it would largely respect those Member States' choice concerning the choice of liability given that it would not challenge the "principle of guilt"[112](because the nature of the sanction could be non-criminal, even if handed down by a criminal court after prosecutorial investigation). It is modeled on the framework as currently applied in Italy. Member States which already apply liability of legal persons in criminal proceedings have confirmed its usefulness (in particular France). The envisaged rule on consistency with administrative sanctions is directly inspired by Member State input (Austria). The fact that such an instrument would remain limited to EU financial interests, thus in theory allowing Member States different rules for national financial interests, does not force a discriminatory approach among Member States. They remain free to adapt also their national financial interests to this level of protection, or to protect EU financial interests at a higher level with a view to the possible differences in the seriousness of conduct in individual cases, to the extent their national consitutional rules allow so. Proportionality || Given the weighing between: -the adequate increased coverage by criminal offence definitions, and the adequate, credible minimum sanction levels, without excessive extension to unintentional conduct or to conduct of persons not directly responsible or involved in management of EU public money, and -the great structural relevance for the integrity, spending capacity and reputation of the Union, as well as the obligation of sound financial management on behalf of the taxpayer, and the benefits of increased clarity in the legal framework, the measure would be proportionate to the objective pursued. This holds true with respect to the changes required in any of the Member States, none of which would have to modify the basic tenets of their criminal law systems. 5.3.5 Policy
option 5: A legislative measure on exhaustive and directly applicable EU
criminal law for the protection of its financial interests Content: Legislative
instrument providing directly applicable EU criminal law provisions identical
to those of policy option 4, but additionally with exhaustive sanction frames,
i.e. including "maximum-maximum sanction levels", based on best
practices of Member States, taking into account both seriousness of the conduct
and proportionality (a minimum of 6 months and a maximum of 5 years
imprisonment for cases of fraud, abuse of office,
misappropriation, abuse of public procurement prodecures and breach of
professional secrecy worth at least € 50,000, for corruption of at least € 25,000,
or for money laundering as of € 15,000). Expected Impact Effectiveness in meeting objectives || A single criminal law framework for the protection of EU financial interests, with wide yet precise definitions and sufficiently deterring sanctions types and levels would apply. All causes A-D are overcome by this option, thus very considerably impacting on deterrence, enforcement capabilities and recovery levels. The expected beneficial financial impact is similar to the preceeding option because it also contains sufficiently broad and new offence definitions, deterrent sanction types and levels and reduces impediments to application (deterrence, enforcement and recovery levels). Impact on fundamental rights || Relatively high (rights to liberty, family life, freedom to choose an occuption and to conduct a business, right to property as for the previous option; legality and proportionality of criminal offences, right not to be tried twice with particularly direct relevance for the drafting of EU legislation), in that EU legislation as such would be grounds for criminal prosecution and conviction, thus making the drafting of criminal law legislation at EU level particularly sensitive, in keeping with the principle of legality, and the principle of certainty derived from it, ("found guilty of a criminal offence under Regulation (EU) No xyz…"). Whilst such an approach would appear justifiable in the light of the objective pursued, and given the knowledge of actors involved about the EU source or destination of the funds they are damaging or threatening, it is a far-reaching measure that raises questions as to its proportionality in terms of fundamental rights impact. Financial and economic impact || Considering the uncertainty surrounding the assessments, the estimate of the positive financial impact of € 477.5 million at EU level is considered the same as for option 4. Regular organisational and administrative cost of € 29.2 million at Member State level is also to the same as option 4.[113] Intrusiveness in domestic justice systems || Substantial impact in that national criminal justice systems would have to apply directly EU criminal law, with its potentially diverging systemic approach and terminology. Member States have pointed out that any solution should respect their legal traditions and criminal law system. A directly applicable set of criminal law rules, which the judge would have to apply instead of the national criminal code, would create substantial interference with these traditions and systems because they cannot possibly correspond to all the Member States' national approaches. It would likely also face consistutional challenges in some Member States, as the national legislator cannot co-decide on the exact structure content of directly applicable criminal law provisions.[114] Proportionality || Given the great structural relevance for the integrity, spending capacity and reputation of the Union, as well as the obligation of sound financial management on behalf of the taxpayer, the proportionality requirement would still be complied with under the condition that -the drafting would provide sufficient clarity and have the same legal effect in all language versions, which entails a particular effort of legal-linguistic checks, and -the scope of application cautiously limits the scope of the instrument to financial interests of the EU in a narrow sense, so as to minimise the impact on national legal systems. However, an important proportionality challenge – though not outright disproportion – arises in that the estimated beneficial impact of option no. 5 is only slightly greater than for option no. 4, whilst the interference with national legal systems is considerably higher. The following box provides a comparison
of the substantial differences between Policy Options 4 and 5. → The main difference between option 4 and option 5 lies in the varying leeway for Member States, who under option 4 may largely maintain for PIF offences their normal criminal law system and drafting approach and surpass the severity of the EU text, whilst option 5 is characterised by exhaustive rigidity of the EU rules, which would have to be applied as such by the Member States' prosecutors and criminal courts Policy Option 4 || Policy Option 5 · Directive || · Regulation · would ensure widened protection, whilst allowing Member States to go further || · would provide a single, immovable set of rules on the criminal law protection of EU financial interests · would provide minimum definitions of offences, on which Member States can expand, for instance by adding serious cases or liability for negligent conduct || · would impose exhaustive definitions of the offence types covered · would contain minimum rules on sanction types and levels || · would lay down rigid sanction types and levels · would contain ancillary provisions to be transposed by the Member States in keeping with their legal traditions || · would contain an exhaustive and isolated set of ancillary provisions, in some cases possibly different from national criminal legislation traditions, and to be found elsewhere than in the national criminal code · Member States' prosecutors and courts would apply the national transposing measures in the national criminal legislation || · Member States' authorities would apply the provisions of the Regulation directly 6. Comparative
assessment of policy options The
table below sets out a comparison of the relative rating of the 5 policy
options as described in part 5.3 against the specific and operational
objectives as defined in part 4. The policy options are classified according to
their potential to meet the objectives defined in part 4, with three checkmarks
(PPP) indicating highest relative potential. Ratings for expected
effectiveness in achieving the objectives are given equal weight in the final
sum. The
rating takes into account, in particular, the expected beneficial effects of
each of them on the level of deterrence against illegal activities affecting EU
financial interests. . Objectives/costs || Policy option 1: Status quo || Policy option 2: || Policy option 3: || Policy option 4: || Policy option 5: Impact on fundamental rights || Low || Low to medium[115] || Medium || Medium to high || High Financial and Economic impact per year[116] (see tables in Annex V for full explanation) || For the EU: 0 || For the EU: + € 37.2 million € - € 3.08 million || For the EU: + € 17.2 million || For the EU: +€ 470.7 million || For the EU: +€ 477.5 million ( considered not significantly different from option 4) For Member States: 0 || For Member States: +€ 4.4 million || For Member States: -€ 2.6 million || For Member States[117]: -€ 29.2 million || For Member States[118]: -€ 29.2 million Intrusiveness in domestic justice systems || 0 || Low || Low || Medium || High Options
4 and 5 are both effective in achieving all the general and specific
objectives. In terms of efficiency, however, option 4 offers the more balanced
relation between intrusiveness, on one hand, and effectiveness, on the other
hand. Therefore, option 4 is the preferred option. 7. The
preferred option Summary of the preferred policy option || The preferred policy option would involve a combination of the following elements: || This would address the following causes of section 3.3 above: || This would help to achieve the following objectives of section 4 above: · Approximating criminal laws of the Member States while allowing them substantial leeway to adapt the provisions to their national criminal law framework || Cause A-D || Equivalence and fairness of sanctioning, mutual trust among the Member States Broader scope of offences || || · Up-to-date, clear definition of EU financial interests || Cause A || Enforcement, awareness · Functional scope of corruption offence || Cause A || Enforcement, recovery · Apply liability to legal persons for offences affecting EU financial interests || Cause A || Enforcement, recovery New offence definitions || || · Add the offence of “misappropriation” || Cause B || Deterrence, enforcement, recovery · Add the offence of "abuse of public procurement procedures" || Cause B || Deterrence, enforcement, recovery Appropriate sanctions || || · Foresee specific minimum sanction types and levels for the criminal offences defines || Cause C || Deterrence, recovery Flanking rules adequately facilitating application || || · Minimum time-limitation and suspension rules || Cause D || Deterrence, enforcement · Extend geographical scope of jurisdiction of EU judiciaries to all offences affecting EU financial interests || Cause D || Enforcement, recovery · Include a rule ensuring compatibility with administrative sanctioning system || Cause D || Compliance with Fundamental Rights Policy option no. 4 could be combined with
elements of the soft law approach set out in policy option no. 2, with which it
is both compatible and mutually reinforcing. This is not a necessity in order
to address the problems set out in section 3 above, but a possibility in due
course to increase effectiveness of the legislative means. Policy option no. 4
also leaves room for a complementary initiative in procedural law, as announced
in the Commission's Work Programme[119],
which will be facilitated by a level playing field in criminal law. 8. monitoring
and evaluation Potential risks to implementation by Member
States in keeping with the transposition period will be identified in an
Implementation Plan accompanying a proposal for the Directive which sets out
relevant measures by the Commission aimed at countering these risks. Providing for a robust monitoring and
evaluation mechanism is crucial to ensure that the rights envisaged in the
Directive are complied with in practice as well as in legislation. The
Directive will stipulate that Member States should report on the effective
implementation. Data provided by the Member States under their existing
reporting obligations to OLAF (Article 325(5) TFEU), Eurostat, Eurobarometer
and the Council of Europe will enable the formation of a useful baseline for
monitoring the situation, including the ex post assessment of the
initiative's effectiveness when compared to earlier reporting outcomes. Besides
quantitative data provided by Member States, other possible sources of
qualitative information on compliance will be gathered from the Justice Forum, OLAF
and Eurojust. Moreover, the Commission envisages carrying
out a specific empirical study with emphasis on data collection one to three
years into the implementation of the proposal. In order to gain in-depth
quantitative and qualitative insights into the effectiveness of the proposal,
this study will analyse the following indicators: 1. Number of cases, and amounts involved (as compared to
total amounts involved), where one a criminal investigation and/or proceeding
was commenced under the heading of a provision within the scope of the
Directive; 2. Number of cases, and amounts involved (as compared to
total amounts involved), where a criminal proceeding under the heading of a
provision within the scope of the Directive was dismissed before trial stage,
and reason for such dismissal; 3. Number of cases, and amounts involved (as compared to
total amounts involved), where a criminal proceeding under the heading of a
provision within the scope of the Directive was brought to court by the
competent authority; 4. Number of cases, and amounts involved (as compared to
total amounts involved), where a criminal proceeding under the heading of a
provision within the scope of the Directive was dismissed by the court without
judgment; 5. Number of cases, and amounts involved (as compared to
total amounts involved), where a criminal proceeding under the heading of a
provision within the scope of the Directive led to a judgment, and outcome and,
if applicable, sanction type and level of such judgment. The data would enable the Commission to
evaluate the actual compliance in Member States not only with this legislation,
but also with the underlying Treaty obligations (effective, proportionate and
dissuasive measures for the protection of EU financial interests, which are
equivalent across the EU, as well as respect for the rights, freedoms and
principles enshrined in the EU Charter of Fundamental Rights). ANNEX I: Glossary
and parameters of the protection of EU financial interests by criminal law ·
What are the EU financial interests? The EU financial interests are not defined in
the Treaty. Existing legislative practice cover both the general budget of the
EU and the special budgets managed by the EU, namely: –
revenues (e.g. agricultural levies, sugar contributions, customs
duties); –
expenditures (e.g. subsidies, aid, direct
payment); –
assets (movables, immovables, EIB bonds). These interests can be affected either by
reducing or losing assets or revenue accruing from resources, or by an
unjustified item of expenditure. ·
What are the working definitions for the
offence types mentioned in the report –
In relation to expenditure, fraud
consists of any intentional act or omission relating to: ·
the use or presentation of false, incorrect or
incomplete statements or documents, which has as its effect the
misappropriation or wrongful retention of funds from the general budget of the
European Communities or budgets managed by, or on behalf of, the Union; ·
non-disclosure of information in violation of a
specific obligation, with the same effect; and ·
the misapplication of such funds for purposes
other than those for which they were originally granted. –
In relation to revenue, fraud consists of
any intentional act or omission relating to: ▪
the use or presentation of false, incorrect or
incomplete statements or documents, which has as its effect the illegal
diminution of the resources of the general budget of the European Communities
or budgets managed by, or on behalf of, the Union; ▪
non-disclosure of information in violation of a
specific obligation, with the same effect; and ▪
misapplication of a legally obtained benefit,
with the same effect. –
Money laundering
means the following conduct: ·
the conversion or transfer of property, knowing
that such property is derived from criminal activity or from an act of
participation in such activity, for the purpose of concealing or disguising the
illicit origin of the property or of assisting any person who is involved in
the commission of such activity to evade the legal consequences of his action; ·
the concealment or disguise of the true nature,
source, location, disposition, movement, rights with respect to, or ownership
of property, knowing that such property is derived from criminal activity or
from an act of participation in such activity; ·
the acquisition, possession or use of property,
knowing, at the time of receipt, that such property was derived from criminal
activity or from an act of participation in such activity; and ·
participation in, association to commit,
attempts to commit and aiding, abetting, facilitating and counselling the
commission of any of the actions mentioned in the foregoing paragraphs. –
Passive corruption consists of “the deliberate action of an official, who, directly or
through an intermediary, requests or receives advantages of any kind
whatsoever, for himself or for a third party, or accepts a promise of such an
advantage, to act or refrain from acting in accordance with his duty or in the
exercise of his functions in breach of his official duties in a way which
damages or is likely to damage the Union financial interests”. –
Active corruption
consists of “the deliberate action of whosoever promises or gives, directly or
through an intermediary, an advantage of any kind whatsoever to an official for
himself or for a third party for him to act or refrain from acting in
accordance with his duty or in the exercise of his functions in breach of his
official duties in a way which damages or is likely to damage the Union'
financial interests shall constitute active corruption.” –
Embezzlement is
the stealing or inappropriate channelling of money/assets. For the purposes of
this report, it is assumed to include the following elements: ·
involves property belonging to another; ·
entrusted to them due to position or otherwise
(i.e. not just restricted to public officials); and ·
converted to their own use or otherwise
embezzled/misappropriated. –
Favouritism/abuse
of power relates to the procurement of contracts to family members,
friends, business partners, political contacts etc. in the light of business
proceedings. It is assumed to include: ·
use of a certain position held; ·
person secures benefit for themself or another
through this position held; and ·
failure to disclose favouritism. –
Abuse of public procurement procedures relates to collusion in national tender procedures involving EU
money. It is assumed to include the following: ·
where a person acts contrary to procurement
rules; ·
tries to influence/create unjustified
preferential conditions /negotiate more favourable condition; and ·
gains unlawful benefit or causes detriment to
others. ·
How can the phenomenon be measured? The main
empirical data available for the protection of EU financial interests stem from
reporting obligations of the Member States. All these figures can only serve as
a first indication of the real scale of the phenomenon, since they are based on
a self-auditing process and are likely in any event to miss a substantial
number of illegal activities which were not detected. –
Irregularities is
a category referring to cases of EU money spent or not collected in breach of
financing rules. It should be noted that these cases include mistakes,
without criminal or legitimately criminalisable character. Therefore, this
figure gives a first indication of the scale of the problem, but does not
explain it exhaustively. However, the persistently high and even increasing
figure, despite simplification of financing procedures, would point to a
relatively substantial, yet difficult to quantify, share of illegal activities
with intentional or negligent element. –
Suspicion of fraud, i.e. one of the relevant types of intentional criminal conduct[120].
This figure is equally subject to caution, as it depends on the qualification
of certain events as fraudulent conduct by the Member States, and it only
covers occurrences exceeding 10,000 €. In the context of the previous
Commission report on the fight against fraud for 2009[121], the European
Parliament expressed surprise at some Member States reporting zero fraud having
been committed at the expense of certain EU funds in their respective
jurisdictions[122].
Moreover, it should be noted that the limitation of the reported figures to
"fraud" (as opposed to other criminal activities affecting EU
financial interests) leads to a further restriction of the reporting, which in
some cases may limit the perception compared to the real scale of the problem.
One may therefore assume that the scale of the criminal illegality is indeed
even higher than the figures relating to fraud as reported to the Commission by
the Member States. –
Recovery rates as
compared to the irregularities reported record the money returned to the EU,
which was misspent intentionally or unintentionally. With the exception of the
agricultural sector, these rates do not distinguish whether the money was
recovered ultimately from the perpetrator or only from the Member State in
charge of correct management of EU funds. ANNEX II: Current LevelS of Sanctions in Member States and
conditions for their harmonisation 1. How
do sanction levels vary? Fraud: the
sanctions vary from a maximum of 6 months imprisonment in Austria to a maximum
of 12 years imprisonment in Romania. Corruption:
even leaving aside extreme cases among Member States in order to make the
sample empirically more meaninful, no minimum term at all and a maximum
imprisonment term of 2 years exists applies for bribery in the Czech Republic,
while in in Luxembourg the term of imprisonment for corruption ranges from
between 5 to 10 years. Money laundering: the lowest
maximum term of imprisonment imposed is that set in Finland of two years, while
in Austria the term of imprisonment can be up to 20 years. Misappropriation: where the offence exists, and again leaving out extremes, range
from a maximum imprisonment term of 2 years in Lithuania to imprisonment of up
to 10 years plus a fine in France. Concerning those Member States who
criminalise the obstruction of public tender procedures, the sanctions
also vary from a mere administrative fine in Bulgaria to a maximum of 5 years
in a number of Member States including Germany, Luxembourg, Slovakia and Spain.
2. What
are conditions and limitations for enacting criminal law at EU level? Even if and to the extent the Treaty permits in
principle EU legislation on criminal law to be adopted, some additional
conditions must be satisfied for this very specific area of law. Criminal investigations and sanctions may have
a significant impact on citizens' rights and include a stigmatising effect.
Therefore, criminal law must always remain a measure of last resort (ultima
ratio). This is reflected in the general principle of proportionality (as
embodied in the Treaty on European Union). As a result, the legislator needs to
analyse whether measures other than criminal law measures, e.g. sanction
regimes of administrative or civil nature, could not sufficiently ensure the
policy implementation and whether criminal law could address the problems more
effectively. Moreover, any EU legislation on criminal law
must observe the EU Charter of Fundamental Rights, which contains a specific
Title on Justice (Title VI), and refrain from requiring or encouraging Member
States to enact transposing law which would itself be inconsistent with those
Fundamental Rights. Those Fundamental Rights are namely the right to an
effective remedy, the right to fair trial, the presumption of innocence, the
respect for the rights of the defence, the principles of legality and
proportionality regarding each specific criminal offence and penalty, and the guarantee
against double jeopardy. ANNEX III:
Overview of existing EU legislation ·
Criminal law ▪
Convention of 26 July 1995 on the Protection of
the European Communities’ financial interests ▪
First Protocol of 27 September 1996 to the
Convention on the protection of the European Communities’ financial interests
on corruption ▪
Second Protocol of 19 June 1997 to the
Convention on the protection of the European Communities’ financial interests
on money laundering ·
Administrative law -
horizontal ▪
Council Regulation (EC, Euratom) No 2988/95 on
the protection of the European Communities’ financial interests ▪
Council Regulation (EC) No 1073/1999 and
(Euratom) No 1074/1999 concerning investigations conducted by OLAF – outlining
the Objectives and tasks of the Office, laying down definitions and procedures
for Administrative, External and Internal investigations, setting the
organisational structure of the Office and its financing; and ▪
Interinstitutional Agreement of 25 May 1999
between the European Parliament, the Council of the European Union and the
Commission of the European Communities concerning internal investigations by
OLAF - the object of the Agreement is to guarantee that internal investigations
can be carried out under equivalent conditions in the three institutions and in
all the other Community bodies, offices and agencies. ▪
Legislation laying down a bases for on-the-spot
checks and inspections: (1)
Regulation 2185/96 concerning on-the-spot checks
and inspections carried out by the Commission in order to protect the European
Communities’ financial interests ▪
Legislation
relating to the notification of irregularities and the recovery of sums wrongly
paid: (1)
Regulation 1848/2006 concerning irregularities
and the recovery of sums wrongly paid in connection with the financing of the
common agricultural policy[123]–
applies to expenditure under the EAGF and the EAFRD. -
sectoral ▪
Regulation
1150/2000 amended by Regulation 2028/2004 on the system of the Communities’ own
resources ▪
Regulation
515/97 modified by Regulation 766/2008 on mutual assistance between the
administrative authorities of the Member States and cooperation between the
latter and the Commission to ensure the correct application of the law on
customs and agricultural matters ▪
Regulation
1290/2005 on the financing of the Common Agricultural Policy ▪
Regulation
1083/2006 laying down general provisions for the European Regional Development
Fund, the European Social Fund and the Cohesion Fund ▪
Regulation
1605/2002 on the Financial Regulation applicable to the general budget of the
European Communities ▪
Council
Regulation (EEC) No 2913/92 on a Community Customs Code ANNEX IV :
statistics on case activity Outcome of criminal proceedings in cases
transmitted by OLAF to national authorities All actions following submission by OLAF || Actions with judicial decisions following submission by OLAF Member State || Actions transferred to Member State || Actions pending judicial decision || Actions with judicial decision || Dismissed before trial (Mandatory) || Mandatory as % of results || Dismissed before trial (Discretionary) || Discretionary as % of results || Acquittal || Acquittals as % of results || Convictions || Convictions as % of results 1 || 10 || 8 || 2 || 0 || 0.0% || 0 || 0.0% || 0 || 0.0% || 2 || 100.0% 2 || 21 || 1 || 20 || 1 || 5.0% || 1 || 5.0% || 2 || 10.0% || 16 || 80.0% 3 || 17 || 3 || 14 || 3 || 21.4% || 0 || 0.0% || 0 || 0.0% || 11 || 78.6% 4 || 22 || 1 || 21 || 3 || 14.3% || 3 || 14.3% || 2 || 9.5% || 13 || 61.9% 5 || 98 || 27 || 71 || 16 || 22.5% || 7 || 9.9% || 6 || 8.5% || 42 || 59.2% 6 || 113 || 40 || 73 || 10 || 13.7% || 3 || 4.1% || 17 || 23.3% || 43 || 58.9% 7 || 296 || 125 || 171 || 32 || 18.7% || 11 || 6.4% || 30 || 17.5% || 98 || 57.3% 8 || 34 || 6 || 28 || 6 || 21.4% || 1 || 3.6% || 5 || 17.9% || 16 || 57.1% 9 || 392 || 37 || 355 || 98 || 27.6% || 54 || 15.2% || 17 || 4.8% || 186 || 52.4% 10 || 4 || 2 || 2 || 1 || 50.0% || 0 || 0.0% || 0 || 0.0% || 1 || 50.0% 11 || 8 || 6 || 2 || 0 || 0.0% || 1 || 50.0% || 0 || 0.0% || 1 || 50.0% 12 || 44 || 16 || 28 || 12 || 42.9% || 2 || 7.1% || 1 || 3.6% || 13 || 46.4% 13 || 83 || 25 || 58 || 20 || 34.5% || 12 || 20.7% || 1 || 1.7% || 25 || 43.1% 14 || 32 || 11 || 21 || 10 || 47.6% || 1 || 4.8% || 2 || 9.5% || 8 || 38.1% 15 || 157 || 54 || 103 || 15 || 14.6% || 17 || 16.5% || 32 || 31.1% || 39 || 37.9% 16 || 27 || 13 || 14 || 6 || 42.9% || 2 || 14.3% || 1 || 7.1% || 5 || 35.7% 17 || 4 || 0 || 4 || 2 || 50.0% || 1 || 25.0% || 0 || 0.0% || 1 || 25.0% 18 || 8 || 4 || 4 || 1 || 25.0% || 0 || 0.0% || 2 || 50.0% || 1 || 25.0% 19 || 392 || 185 || 207 || 105 || 50.7% || 11 || 5.3% || 49 || 23.7% || 42 || 20.3% 20 || 256 || 107 || 149 || 72 || 48.3% || 43 || 28.9% || 4 || 2.7% || 30 || 20.1% 21 || 16 || 1 || 15 || 6 || 40.0% || 2 || 13.3% || 4 || 26.7% || 3 || 20.0% 22 || 174 || 75 || 99 || 39 || 39.4% || 6 || 6.1% || 40 || 40.4% || 14 || 14.1% 23 || 7 || 4 || 3 || 3 || 100.0% || 0 || 0.0% || 0 || 0.0% || 0 || 0.0% 24 || 12 || 3 || 9 || 8 || 88.9% || 0 || 0.0% || 1 || 11.1% || 0 || 0.0% 25 || 0 || 0 || 0 || 0 || NA || 0 || NA || 0 || NA || 0 || NA 26 || 5 || 5 || 0 || 0 || NA || 0 || NA || 0 || NA || 0 || NA 27 || 0 || 0 || 0 || 0 || NA || 0 || NA || 0 || NA || 0 || NA Total || 2232 || 759 || 1473 || 469 || 31.8% || 178 || 12.1% || 216 || 14.7% || 610 || 41.4% Source: anonymised OLAF case data ANNEX V: Consultation
table 1. The Commission has
conducted specialist stakeholder consultations: ·
Academic experts were consulted in a dedicated
meeting organised by the Commission services in Brussels on 25 October 2011. ·
Member State experts were convened by the
Commission services for a consultative meeting in Brussels on 6 December 2011,
which was also attended by the secretariat of the EP's LIBE committee. ·
The views of Member States' practitioners in
prosecution services were taken into account through questionnaires and
discussions at the Forum of the Prosecutors-General convened by Eurojust in The
Hague on 23 June 2011 and again on 16 December 2011. ·
Representatives of the Taxpayers' Association of
Europe were invited to the Commission on 25 January 2012. 2. The views of other
services were sought through meetings of an inter-service steering group held
on 18 January 2012 and 8 Feburary 2012. Summary report on
the meeting with academic experts on the protection of
EU financial interests by criminal law Brussels, 25 October
2011, 9:30-17:00 4
academic experts from European universities were present to discuss with
Commission representatives (DG Justice and OLAF)
1. General principles of EU legislation
as applied to the protection of EU financial interests by criminal law Professors posed the question why financial
interests were chosen as a first topic to form EU criminal law provisions on
it. Commission explained it is the result of political priority and
unsatisfactory situation of spending EU money but that they are at the same
time looking also on the other areas. Criminal law is an area where diversity
within Europe is great. Therefore, academics were dealing with the question
whether there is a need to harmonise sanctions on EU level, seeing that
administrative sanctions already exist. Study on criminal law provisions in 27
MSs in relation to offences has shown a lack of equivalence in sanctions and
statutes of limitation. The main problem lies in unsatisfactory
enforcement of criminal law on the national level. Prosecutors in MSs tend
to consider cases based on PIF Convention as less important since they are too
complicated to solve. It means we already have sufficient implementation in
MSs, but very low enforcement so the EU could take only enforcement in its
hands. It means that adoption of the new legislation cannot solve situation if
MSs will not enforce. It can only simplify prosecution in the MSs. Further discussion was focused on the
general principles of subsidiarity and proportionality. As regards the
principle of subsidiarity, legal basis is there but it does not mean that this
principle is justified. Evidence that needs for criminal law provision
in the field of EU financial interests exist is necessary. There are also big
differences in the competences given in the Treaty. Art. 83 TFEU [definition
of criminal offences and sanctions in the areas of particularly serious crime
with a cross-border dimension] is very general since aims and competences are
not specified, while Art. 325 TFEU [countering fraud and any other illegal
activities affecting the financial interests of the Union] can play a very
prominent role. Criminal law based on Art. 325 could actually have a status of
supranational criminal law. This Article is also more static which gives
another reason to find a good justification for reformation of this provision. The question is also how to deal with proportionality
and possible interaction of the EU criminal law with administrative sanctions
also sourcing from EU law, seeing that we have ne bis in idem principle
in Art. 50 of the EU Charter of Fundamental Rights. OLAF is in favour of system
implied under administrative procedure, but they see the need for certain
criminal sanctions as well. In some MSs is allowed to have both types
of procedures at the same time but that is not possible on the EU level.
Therefore, we would need clear provisions on that, a way to impose different
types of sanctions together as well as to make clear division of competences
between the EU and MSs. Moreover, there could be a coordinator on a
national level who would give competence to certain national authority in each
case. The European Public Prosecutor's Office could be an advantage in this
field as well. 2. Particular offences and their scope In practice, the
question of "prosecutability" arises due to limitations of jurisdiction
for offences committed with foreign elements, time-limitation and
difficulties to trace the beneficial owner of assets held or acquired by
a legal person. The problems are that certain offences expire before fraud is
detected and that MSs almost never deal with extra-territorial cases even
though they have jurisdiction. Moreover, they talked about a proposal for
allocation of jurisdiction to avoid negative and positive conflicts of
jurisdiction (maybe as a centralised "competence of last resort" in a
court of one particular Member State). Professors also agreed that to compel
MSs by a Directive to set out their transposition measures in a separate
body of law would be difficult to reconcile with a Directive as legislative
instrument. Participants also discussed rules on
criminal liability of legal persons but again the problem is that some of
the MSs exclude prosecution of legal entities. Also issue of criminal liability
for negligence was mentioned but the questions are whether that would
increase effectiveness and how to actually connect negligence with fraud. The problem
is also to prove that EU financial interests were really affected and whether
effect on financial interests covers also substantiated risks, which
participants agreed it does – if one takes into account on the sanctions side
the lower threshold to commit such offences. Summary of views of
Member States experts on the protection of
EU financial interests by criminal law as expressed in the consultative meeting
in Brussels, 6 December 2011 and/or subsequently in writing Views taken into account are those expressed by
Member State experts present at the meeting of 6 December (all except UK, NL,
CY, EL, ES, FI, LT, SI), and those received in writing thereafter (AT, DE, FI, FR,
LV) 1) General
remarks ·
On the scope of the problem: -Important objective to protect taxpayer money, the
problems are common to cross-border financial crime (IE, SE), EU financial
interests crime has risen lately (LV) -Implementation of existing, and coherence with preventive
and procedural measures should be ensured (AT, FI, LV, CZ) -national legal traditions should be taken into account
when legislating on criminal law (FI) -Admissibility of evidence and recovery should be
improved (SK) ·
On national state-of-play: -PIF Convention about to be ratified (CZ) -PIF Convention just ratified (MT) -Implementation issues solved (IE) 2) On Offence types -MSs presented their legal framework (HU, FR, SK, AT,
MT, DE, BE, SE) -Functional definition of public servant advantageous (as
opposed to one depending on status as official) (AT, DE, FR, SK) -Embezzlement and abuse of office most relevant offences
in practice, because they do not require evidence of an advantage for the
public servant (as would corruption) (AT) 3) On sanction levels -Judicial leeway must be maintained (BE) -Confiscation and recovery very important and currently
not sufficient (AT, BE, SK) 4) On general rules -Extension of jurisdiction to third countries possible (AT,
BE, SE), but dependence on judicial cooperation (AT, SE) -Time-limitation: MSs explained their framework (BE, SK,
SE), and highlighted the existence of too short time-limitation periods in some
countries (DE) and the importance of interrupting of the period of
time-limitation in case of investigative measures (AT) -Liability of legal persons in criminal proceedings: FR
pointed out that its main reason was to recover amounts for victims more
easily, in particular in negligence cases, and that when cumulated with
sanctions of physical persons did not lead to a lowering of the latter's
sanction level. 5) On interplay administrative and criminal
sanctions -Any EU criminal law instrument would have to be
compatible with EU rules of administrative law which could be considered
"sanctions", and Article 6 of Regulation 2988/95 could serve as a
source of inspiration in this regard. In particular, the ne bis in idem
rule and the privilege of non-self incrimination would have to be safeguarded
(AT, FI). Summary
of contributions on the protection of EU financial interests by criminal law from
Prosecutors-General To
the consultative meeting of 16 December 2011
Eurojust, The Hague (N.B.: this is an excerpt concerning
only the substantive criminal law aspect of discussions) Problems faced by the national judicial
authorities: the Forum expressed concerns in
relation to the many challenges encountered both at EU and national levels.
Major challenges for criminal investigations and prosecutions in the fight
against crime affecting the EU financial interests are: the increasing complexity of investigations; the problem of disparities
in the statute of limitations affecting cross-border cooperation; the lack of
common definitions of crimes in this area, and different levels of sanctions;
the difficulties arising in the use of evidence collected by means of
administrative investigations; and difficulties linked to jurisdiction. Possible legal measures to facilitate
investigations and prosecutions: the need for
modernising legal provisions and procedures to enhance effectiveness of
prosecutions and investigations was emphasized. A majority of the Forum Members
also expressed the need for further approximation of crime definitions (for
instance swindling, fraud, VAT fraud, misappropriation,
illegitimate obtaining of funds, and corruption) and penalties as well as of
some procedural rules (e.g. status of witnesses, length of replies to letters of request). Furthermore, due to their
specificities and complexity, certain types of crimes such as manipulation of
the market, price inflation and conflicts of interest would justify the adoption
of specific legislative measures at EU level. Report on the consultative
meeting with the Taxpayers'
Association of Europe (TAE) on the protection
of EU financial interests by criminal law Brussels, 25 January
2012 Summary: TAE very positive about initiative and suggesting to go further Detail: ·
The TAE was most concerned about the complex
financial system of the EU and argued that in particular agricultural and
structural funds needed to be simplified ·
The TAE believes that the institutional set-up
is insufficient: Court of Auditors and OLAF produce good quality reports, but
weaknesses regarding follow-up by EU and Member States ·
According to the TAE, prosecutors are not always
able or willing to investigate these cases, EPPO is therefore highly desirable ·
According to the TAE, blacklisting of fraudulent
subsidy applicants and tenderers is desirable (publication of names should be
condition for subsidy or contract) ·
According to the TAE, there is lacking
competition in public procurement procedures On criminal law in particular, the TAE made the
following remarks: ·
The principle of strengthening the criminal law
framework for the protection of taxpayer money is the right approach ·
The broadening of the scope of existing offences
would be useful ·
New offence types of misappropriation, abuse of
office, abuse of public procurement procedures and breach of professional
secrecy are all viewed as very helpful additions, but TAE underscored their
even wider suggestion of criminalising "waste of public money" by
office holders. ·
Decisionmakers having misappropriated public
money should be liable to reimburse lost amounts [1] Regulation (EC) No 1073/1999 of the European
Parliament and of the Council (OJ L 136, 31.5.1999, p. 1) and Council
Regulation (Euratom) No 1047/1999 of 25 May 1999 (OJ L 136, 31.5.1999, p. 8)
concerning the investigations carried out by the European Anti-Fraud Office
(OLAF). [2] OJ L 312, 23.12.1995, p. 1. [3] E.g., for the field of agriculture, Regulation (EC)
No 73/2009 for direct support schemes for farmers, OJ L 30, 31.1.2009, p. 16;
see Annex II for a complete list of relevant administrative legislation. [4] Convention of 26 July 1995 (OJ C 316, 27.11.1995, p.
49) (fraud); First Protocol (OJ C 313,
23.10.1996, p. 2) and Convention of 26 May 1997 (OJ C 195, 25.6.1997)
(corruption); Protocol of 29
November 1996 (OJ C 151, 20.5.1997, p. 2) (court
interpretation); Second Protocol of 19 June 1997 (OJ C 221, 19.7.1997, p. 12)
(money laundering). [5] See Second Commission Report on the Implementation of
the Convention for the Protection of the European Communities' financial
interests and its protocols, 14.2.2008, COM(2008)77 final, at section 4.1,
http://ec.europa.eu/dgs/olaf/legal/doc/2008_77_en.pdf
. Further Member States have since ratified the Convention and its protocols.
Only the Czech Republic has not ratified yet, but has commenced the internal
process of doing so. [6] Thus the Convention and its protocols were part of
the 2005 accession treaty's list of conventions of which the new Member States
would become parties, see point 3 of Annex I to the Accession Treaty of
Bulgaria and Romania of 25 April 2005, OJ L 157, 25.6.2005, p. 46. [7] Directive 91/308/EEC, later repealed and replaced by
Directive 2005/60/EC of 26 October 2005 on the prevention of the use of the
financial system for the purpose of money laundering and terrorist financing,
OJ L 309, 25.11.2005, p. 15. [8] Commission Decision of 6.6.2011 establishing an EU
anti-corruption reporting mechanism, C(2011) 3673 final. [9] 23.5.2001, COM(2001)272 final, as amended on
16.10.2002, COM(2002)577 final. [10] 26.5.2011, COM(2011)293 final. [11] 26.5.2011, SEC(2011)621 final. [12] 20.9.2011, COM(2011)573 final. [13] 29.9.2011, COM(2011)595 final, and accompanying Staff
Working Documents SEC(2011)1107, 1108 and 1109 final. [14] See
e.g. the latest resolution on the protection of the Communities' financial
interests – fight against fraud of 6 April 2011, 2010/2247(INI), in particular recital
2 thereof, http://www.europarl.europa.eu/oeil/FindByProcnum.do?lang=en&procnum=INI/2010/2247. [15] See the Commission President's speech at the European
Parliament presenting the Commission Work Programme for 2012, Strasbourg, 15
November 2011, http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/11/755.
[16] COM(2001)272 final. [17] Opinion
of 29 November 2001, OJ C 153 E, 27.6.2002. [18] Report in file 2001/0115(COD) of 8 November 2001. [19] COM(2002)577 final. [20] See summary Annex IV. [21] Council Decision 2009/426/JHA of 16 December 2008
amending Council Decision 2002/187/JHA. [22] Framework Decision 2009/948/JHA of 30 November 2009. [23] See summary Annex IV. [24] Contributions of practitioners to the Forum of
Prosecutors-General of 16 December 2011, see summary Annex IV. [25] M. Wade, Evaluating the needs for and the needs of a
European Criminal Justice System, Freiburg 2011, http://www.mpicc.de/shared/data/pdf/euroneeds_report_jan_2011.pdf. [26] M. Delmas Marty (ed.), Corpus Juris, Paris 1997. [27]
M. Delmas-Marty/J.A.E. Vervaele, La mise en oeuvre du corpus
juris dans les Etats membres, Antwerp 2000. [28]
http://www.europarl.europa.eu/document/activities/cont/201106/20110616ATT21560/20110616ATT21560EN.pdf [29] This figure cumulates revenue (€ 393 million) and
expenditure-related (€ 1,807 million) irregularities reported, see table 1,
page 10, of COM(2011)595 final. It should be noted that this figure is without
prejudice to later recovery by the EU from national budgets (by deduction from
EU payments to that Member State). However, the taxpayer who contributed to
both national and EU budgets remains damaged. [30] See Commission Work Programme 2012 (SEC(2011)777 final,
"forthcoming initiatives 2013", Annex 2/2, p. 30. [31] See Annex III. [32] Ibid. [33] Eisenberg, Kriminologie, 5th edition
2000 § 41 at no. 6. [34] It is assumed that changes in substantive criminal law
could potentially result in around one-quarter to one-third of the funds lost to
irregularities being avoided or recovered (approximately €500 million). In the
absence of any data, statistics, evidence or research studies to support an
alternative estimate, this assumption was ‘tested’ at an expert workshop.
These figures were then applied to each Member State’s share of losses and it
was assumed that no less than 0.3 per cent and no more than 0.6 per cent of total
EU money handled by each Member State (that is, the total EU expenditure and
revenues) could be protected from financial crimes via changes in substantive
criminal law in any single Member State. [35] See Annex VIII. [36] See Annex VIII. [37] COM(2008)77 final and Staff Working Document annexed to
the Report, SEC(2008)188. [38] See, e.g., the landmark Judgment of 21 September 1989
in case C-68/88, ECR [1989] 2965, at para 24. [39] See e.g. A. Ashworth in: M. Maguire, R. Morgan
and R. Reiner (eds.), The Oxford handbook of criminology, Third Edition
2002 at p. 1079; R. Gassin, Criminologie, 6th edition 2007 at
p. 633-4; U. Eisenberg, Kriminologie, 5th edition 2000 § 41
at no. 4 et seq.; Tröndle/Fischer, Strafgesetzbuch, 53rd
edition 2006 § 46 at no. 2; [40] Table 1, page 10 of COM(2011)595 final. [41] See,
e.g., Article 11 of the EU Staff Regulations: "An official shall carry out
his duties and conduct himself solely with the interests of the Communities in
mind; he shall neither seek nor take instructions from any government,
authority, organisation or person outside his institution. He shall carry out
the duties assigned to him objectively, impartially and in keeping with his
duty of loyalty to the Communities"; or Article 11a(1) thereof: "An
official shall not, in the performance of his duties and save as hereinafter
provided, deal with a matter in which, directly or indirectly, he has any
personal interest such as to impair his independence, and, in particular, family
and financial interests.", OJ L 56, 4.3.1968, Special Edition 1968, p. 1,
as last amended by OJ L 124, 27.4.2004, p. 1. [42] 5 Member States report zero fraud affecting EU funds on
the expenditure side 2006-2010, SEC(2011)1108 at p. 48. [43] Resolution of 6 April 2011 on the protection of the
Communities' financial interests, 2010/2247(INI), Point 34. [44] See a contrario the Member State contributions
praising as best practice broad definitions of "official", Annex IV. [45] Euroneeds study, preliminary report, January 2011, p. 33. [46] Euroneeds study, preliminary report, January 2011, p. 19. [47] See Annex III, column on percentage of mandatory (i.e.
legally required) dismissals before trial. [48] Commission Staff Working
Document, Statistical Evaluation of Irregularities - Own Resources,
Agriculture, Cohesion Policy, Pre-Accession Funds and Direct Expenditure -Year
2010, SEC(2011)1108. [49] Extrapolation from COM(2011)595 final, table 1, page
10. [50] Ibid. [51] OJ
L 248, 16.9.2002, p. 1, as last amended by Regulation (EU, Euratom) No
1081/2010, OJ L 311, 26.11.2010, p. 9. [52] OJ L 355, 15.12.2006, p. 56. [53] OJ L 210,
31.7.2006, p. 25, as last amended by Regulation (EU) No 1311/2011, OJ L 337, 20.12.2011, p. 5. [54] Eisenberg, Kriminologie, 5th edition
2000 § 41 at no. 6. [55] See table 3.2 in Annex V for full detail of the
relevant criminal law provisions of the Member States. [56] See mutatis mutandis the schemes exposed by
Europol in its Organised Crime Threat Assessment (OCTA) 2011, in particular on
VAT carousel fraud. [57] See the compilation of problems in Member State
transposition in the Annex to the Second Implementation Report of the
Convention for the protection the Communities' financial interests,
SEC(2008)188, p. 35. [58] There table 8.5, element no. 8, and annexes 7-8. [59] Kaspar in: Bannenberg / Jehle (eds.), Wirtschaftskriminalität,
Mönchengladbach 2010, p. 142. [60] There table 8.5, element no. 9, and annexes 7-8. [61] European Parliament (ed.), Policy Department D study "How
does organised crime misuse EU funds?", 2011, p. 47. [62] See e.g. Eurojust newsletter no. 4 (2011), p. 4. [63] See e.g. European Parliament (ed.), "How does
organised crime misues EU funds?" (2011), pp. 46-47. [64] There table 8.5 and annexes 7-8. [65] There table 8.5, elements no. 10 and 15, and annexes
7-8. [66] See Second Report on the implementation of the
Convention on the protection of the Communities' financial interests,
COM(2008)77 final. [67] Ibid. See also full list of issues in the
implementation measures of Member States suggested by the Staff Working
Document accompanying the Report, SEC(2008)188, which can be found in Annex
herewith. [68] There table 8.5, elements no. 1, 2, 3, 4 and 5, and
annexes 7-8. [69] See Corpus Juris study 2000, article 6. [70] There table 8.5, element no. 16, and annexes 7-8. [71] See Corpus Juris study 2000, article 8. [72] There table 8.5, element no. 18, and annexes 7-8. [73] Resolution of 6 April 2011, 2010/2247(INI). [74] See Corpus Juris study 2000, article 2. [75] There table 8.5, element no. 19, and annexes 7-8. [76] See Corpus Juris study 2000, article 7. [77] There table 8.5, element no. 17, and annexes 7-8. [78] COM(2008)77 final, p. 3. [79] Framework Decision 2002/585/JHA, Article 2(1). [80] See Annex I for a list of the strongest divergences of applicable
sanction levels among the Member States for the relevant offences. [81] EU Organised Crime Threat Assessment, Europol 2011, pp.
22-25. [82] There table 8.5, elements no. 21-23, and annexes 7-8. [83] There table 8.5, element no. 13, and annexes 7-8. [84] E.g. negligent homicide under art. 221-6 et seq.
of the French code pénal. [85] E.g. §§ 315b, 315c, 316 of the German criminal code on
offences endangering public road traffic. [86] Article 3 of Directive 2008/99/EC on the protection of
the environment through criminal law; Article 4 of Directive 2005/35/EC on
ship-source pollution as amended by Directive 2009/123/EC. [87] Directive 2005/60/EC. [88] There table 8.5, element no. 20, and annexes 7-8. [89] Euroneeds Study, preliminary report, January 2011, p. 19. [90] C-489/10, Bonda, conclusions of Advocate-General
Kokott delivered on 15 December 2011 at para 19. [91] There table 8.5, elements no. 6, 7 and 12, and annexes
7-8. [92] Council Decision 2009/426/JHA of 16 December 2008
amending Council Decision 2002/187/JHA. [93] Framework Decision 2009/948/JHA of 30 November 2009. [94] As opposed to the general criminal law provisions in
the Treaty in article 83 TFEU, Article 325 TFEU does not result in a géométrie
variable of application in the Member States, because the opt out protocols
relating to some Member States do not apply in the Title which contains article
325 TFEU. [95] The old Article 280(4) of the
Treaty establishing the European Community read as follows, with the part in bold now having disappeared from its successor
provision, Article 325(4) TFEU "4. The European Parliament and the
Council, acting in accordance with the ordinary legislative procedure referred
to in Article 251, after consulting the Court of Auditors, shall adopt the
necessary measures in the fields of the prevention of and fight against fraud
affecting the financial interests of the Community Union with a view to
affording effective and equivalent protection in the Member States and in all
the Union's institutions, bodies, offices and agencies. These measures shall
not concern the application of national criminal law or the national
administration of justice." [96] Heintschel von Heinegg in: Vedder/Heintschel
von Heinegg, Europäisches Unionsrecht, Baden-Baden 2012, Art. 325 at para
6; Satzger in: Streinz, EU-Recht, Kommentar, Second Edition,
Munich 2012, Art. 325 at para 21; Waldhoff in: Calliess/Ruffert,
EUV/AEUV, Munich 2011, Art. 325 at para 18. [97] Commission v ECB, Case C-11/00, [2003] ECR I-7147 at paras 100-102; Commission v EIB, Case
C-15/00, [2003] ECR I-7281 at paras 131-133. [98] See also as a reference the definition in Article 1(2)
of Regulation (EC, Euratom) No 2988/95. [99] http://ec.europa.eu/justice/news/intro/doc/com_2010_573_4_en.pdf [100] Annex V at table 8.5, elements 1-6. [101] The cost of any legislative option includes the
following: -developing
legislation – this relates to the cost of lawyers for drafting new legislation
/ changing existing legislation; -administrative
costs at an EU and national level – this includes the costs of informing, providing
guidance to and training practitioners, the costs associated with monitoring
and recording and the costs of transmitting information; -compliance
costs at an EU and national level – this includes costs at an EU level to
implement the policy options, and costs at national level to implement the
policy options (for example, the costs of an increased long-term workload in
relation to investigations and prosecutions of financial crimes); and -other costs
– these relate largely to the administration of justice. [102] Annex V at table 8.5, elements 7, 10 and 12, and annexes
7-8. [103] See in particular Annex IV, the Corpus Juris
study referred to above, annex no. 5 to the study in Annex V and the study of
the European Parliament, "How does organised crime misuse EU funds?"
(2011). [104] See Annex I for indicative explanation of the conduct
concerned. [105] Framework Decision 2002/584/JHA, Art. 2(1). [106] E.g. §49(1) no. 2 of the German criminal code. [107] Given that by nature, complete data on illegal
activities are unavailable, it should be noted that these figures are
indicative and based on certain assumptions confirmed as reasonable by experts,
such as the ratio of criminal activity within the irregularities reported by
Member States which permitted to calculated a total possible positive impact
for EU public money. On this basis, and in the light of the relative importance
of each of the elements of the option for the work of practitioners, the
individual figures for expected avoidance of losses were developed. Further explanation
and breakdown can be found in Annex V at table 8.5, all elements except no.
1-6, 14 and 21 and annex 7-8 thereto. As regards the distribution of costs
between various Member States, it should be assumed that these are spread
unequally, depending on the number of changes which would have to be introduced
in their respective national laws. This is distinguished in annex 7 to Annex IV
per Member States by three degrees of cost impact (C1-C3). It should further be
noted that compliance costs of companies and invididuals are assumed to be nil,
because criminal law provisions only add sanctioning and investigation powers
to existing prohibitions. [108] This estimate reflects the beneficial impact of the
option taken in isolation (i.e. without soft law elements of option 2 which
could be cumulated with option 4). [109] See Annex V, p. 128. [110] See table 8.5 in, and annexes 7-8 to, Annex V. [111] Annex 7 of the study contained in Annex V to this
Report, column "degree of change introduced by policy proposal". [112] Under this principle only human beings are able to
commit "guilty acts" as required for criminal liability to
arise. [113] See Annex IV at table 8.5, all elements except no. 1-6 and 14, and
annexes 7-8. [114] See in particular Judgment of the German Constitutional Court
on the compliance of the Lisbon Treaty with the German constitution, 2 BvE
2/08, 30 June 2009, para 249. [115] Since a Recommendation is non binding, it is difficult
to foresee the impact of such an instrument (even one
containing very prescriptive norms) on fundamental rights, as this impact would
depend on the extent to which any given Member State would implement the
provisions of the Recommendation, which is very difficult to predict with any
degree of precision. [116] Without one-off costs. [117] This does not take into account potential indirect
benefits on reduced loss of national public money, in particular in mixed
financing schemes (EU & national money) which would benefit as a whole from
the deterrent effect of the EU legislation, even if it only applies to the EU
part of the financing. [118] Idem. [119] SEC(2011)777 final, "forthcoming initiatives
2013", Annex 2/2, p. 30. [120] Reporting obligations of Member States only apply to
this type of criminal conduct. Therefore losses of EU public money due to criminal
activities can be assumed to be higher, albeit to a non-measurable extent. [121] COM(2010)382 final. [122] Resolution of 6 April 2011 on the protection of the
Communities' financial interests, 2010/2247(INI), Point 34. [123] Available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2006:355:0056:01:EN:HTML
ANNEX VI: Study by
external contractor to gather information and data contributing to the
preparation of an Impact Assessment Report ANNEX VII: Staff Working Document
SEC(2008)188 annexed to the Second Implementation Report on the Convention for
the protection of the Communities' financial interests COM(2008)77........................................... ANNEX VI: Study by external contractor to
gather information and data contributing to the preparation of an Impact
Assessment Report (N.B.: The impact assessment report builds
on an external study "on the legal framework for the protection of EU
financial interests by criminal law" (RS 2011/07, finalized by the
consultant GHK on 4 May 2012). The study is public and can be accessed from the
European Commission (DG Justice, Directorate B).) ANNEX VII: Staff
Working Document SEC(2008)188 annexed to the Second Implementation Report on
the Convention for the protection of the Communities' financial interests
COM(2008)77 (N.B.: This Annex is integrated as
an embedded pdf file. Please double-click on the image below to open when
working on screen, or print the pdf file once opened by double-clicking for
working off-screen) ANNEX VIII: Staff
Working Document SEC(2011)621 accompanying the Communication on the protection
of EU financial interests by criminal law and by administrative investigations
COM(2011)293 ANNEX IX: Evolution of irregularities
affecting EU financial interests over time, as reported by Member States to
OLAF ANNEX VIII: Staff Working Document
SEC(2011)621 accompanying the Communication on the protection of EU financial
interests by criminal law and by administrative investigations COM(2011)293 (N.B.: This Annex is integrated as
an embedded pdf file. Please double-click on the image below to open when
working on screen, or print the pdf file once opened by double-clicking for
working off-screen) ANNEX IX:
Evolution of irregularities affecting EU financial interests over time, as
reported by Member States to OLAF Source: Annual Commission fight against
fraud reports Note: Figures add the amounts reported by
MSs for all areas of the budget, and in particular revenue and expenditure
related irregularities. The figures distinguish suspicion of fraud and other
irregularities when the underlying report does so, otherwise figures include
both fraud suspicion and other irregularities.