OLAF at the Crossroads: Action against EU fraud 9781472565648, 9781841137919

Citation preview

JOBNAME: Stefanou PAGE: 5 SESS: 7 OUTPUT: Tue Aug 9 13:14:31 2011

Foreword It is rare that a team of authors happens to be as fortunate as this. First, each member of the team is an expert in his or her own right, in similar, yet distinct fields. Dr Xanthaki is a renowned expert on the regulatory framework of OLAF and the other agencies in the field of EU criminal law; Dr Stefanou is an imaginative and creative political scientist with distinct insight into the institutional framework of the EU, and specifically EU criminal policies; and Dr White is a rare example of a breed of EU civil servant—one who uses her insight into the operational activities of OLAF to award praise where it is due and to identify weaknesses when they occur. Second, the team managed to complete the book on OLAF, the first of its kind, at a time when the agency is ready and willing to take its existence to a higher level. It is an established fact that OLAF plays a very significant role in the budgetary control of the EU. OLAF is a key player not only in the protection of the European Community’s financial interests, but also in ensuring that citizens are able to reap the benefits from the European Community’s economic policies. The European Parliament has been a focal actor in the scrutiny and the debate over a new reformed OLAF. In its 2008 Resolution the European Parliament introduced a number of amendments to the proposal for a new Regulation on OLAF, thus contributing towards a better governance and stronger accountability for the anti-fraud office. At the same time, the European Parliament continues to assess annually OLAF’s progress in fulfilling its tasks efficiently. Having survived such intense review at the European Parliament thus far, a review in which the authors were instrumental, OLAF seems open to criticism and eager to develop. There is little doubt that accountability, transparency and democracy in all Community institutions and services, including OLAF, is a requirement of the people of Europe. This book is the only one of its kind that addresses all issues related to OLAF in such depth and breadth that it will undoubtedly become essential reading for academics, practitioners, researchers and beyond. I am delighted to endorse this book and to recommend it highly as a superb exposé of OLAF and as an example of a most amazing combination of academic expertise with practical insight. Rodi Kratsa-Tsagaropoulou Vice President, European Parliament

v

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Prelims

/Pg. Position: 1 /

Date: 2/6

JOBNAME: Stefanou PAGE: 6 SESS: 7 OUTPUT: Tue Aug 9 13:14:31 2011

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Prelims

/Pg. Position: 2 /

Date: 2/6

JOBNAME: Stefanou PAGE: 1 SESS: 4 OUTPUT: Tue Aug 9 13:14:31 2011

Table of cases European Union Court of Justice of the European Union Case 24/62 Germany v Commission [1963] ECR 63 ......................................................... 88 Case 11/64 Weighardt v Commission CEEA [1965] ECR 285 ......................................... 94 Case 35/67 Van Eick v Commission [1968] ECR 329 ........................................................ 94 Case 5/68 Sayag v Leduc [1968] ECR 395 ....................................................................... 153 Case 32/68 Grasselli v Commission [1968] ECR 505 ........................................................ 94 Case 9/69 Sayag v Leduc [1969] ECR 329 .......................................................................... 53 Case C-4/73 J Nold v Commission [1974] ECR 491 ......................................................... 87 Case 110/75 Mills v EIB [1976] ECR 955 ..................................................................... 16, 20 Case 17/78 Deshormes v Commission [1979] ECR 189 .................................................... 94 Case 106/81 Kind v Council and Commission [1982] ECR 2885 .................................... 89 Case 322/81 Michelin v Commission [1983] ECR 346 ..................................................... 88 Case 84/82 Germany v Commission [1984] ECR 1451 ..................................................... 89 Case 46/87 and 227/88 Hoechst AG v Commission [1989] ECR 2859 .................... 89, 170 Case 346/87 Bossi v Commission [1989] ECR 303 ........................................................... 94 Case 374/87 Orkem v Commission [1989] ECR 3283 ..................................................... 93 Case 2/88 JJ Zwartveld and others, request for judicial cooperation [1990] ECR I-3365 ............................................................................................................................ 81 Case 68/88 Commission v Greece [1989] ECR 2965 ....................................................... .24 Case T-7/89 Hercules Chemicals v Commission [1991] ECR II 1711 .............................. 91 Case C-96/89 Commission v Netherlands [1991] ECRI-2461 .......................................... 99 Case C-291/89 Interhotel v Commission [1991] ECR I-2257 ........................................... 90 Case C-16/90 Nölle v Hauptzollamt Bremen-Freihafen [1991] ECR I-5163 ................... 83 Case 24/90 Automec Srl v Commision ECR [1992] II 2223 ............................................. 83 Case C-269/90 Hauptzollamt München-Mitte v Technische Universität München [1991] ECR I-5469 ....................................................................................................... 84 Case T-4/92 Latham v Commission [1994] ECR IA 23 and II 83 .................................... 94 Case C-352/92 Midwerke Köln v Wuppertal eG [1994] ECR I-3385 ............................... 24 Case T-459/93 Siemens v Commission [1995] ECRII-1675 .............................................. 89 Case T-481/93 and T-484/93 Levende Varkens v Commission ECRII-291, para 104 ..... 89 Case T-583/93 Ryan Sheridan v Commission [1994] ECR 1A 27 and II 77 .................... 94 Case T-260/94 Air Inter SA v Commission [1991] ECR II-997 ........................................ 89 Case T-293/94 Vela Palacios v CES ECR IA-305 and II-893, para 22 ............................... 94 Case T-371/94 and 394/94 British airways plc and British Midlands Airways Ltd v Commission [1998] ECR II-2495 ............................................................................... 84 Case T-391/94 Baiwir v Commission ECR IA-269 and II-787, para 34 ........................... 94 Case C-367/95P Commission v Sytraval and Brink’s France [1998] ECR I-1719 ........... 90 Case T-42/96 Eyckeler Malt AG v Commission [1998] ECRII-401 ............................ 90, 91 Case T-65/96 Kish Glass ad Co ltd v Commission [2000] ECR II-188 ............................ 89 Cases T-191/96 and T-106/97 CAS Succhi di Frutta v Commission (Frutta case) [1999] ECR II-3181 .................................................................................................................. 94 Case T-40/97 Hautem v EIB [1999] ECR IA 171 and II 897 ............................................ 94

ix

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Table_cases

/Pg. Position: 1 /

Date: 9/8

JOBNAME: Stefanou PAGE: 2 SESS: 4 OUTPUT: Tue Aug 9 13:14:31 2011

Table of cases Case T-43/98 Emesa Sugar v Council ECR II-3519 ........................................................... 89 Case T-92/98 Interporc v Commission [1999] ECR II-3521 ......................................... 111 Case T-112/98 Mannesmannröhren-Werke [2001] ECR-II 1751 ............................. 93, 170 Case C-191/98P Tzoanos v Commission [2003] ECR IA 129 ........................................... 97 Case T-198/98 Kuijer v Council [2000] ECR II 1959 ..................................................... 110 Case T-54/99 MaxMobil Telecommunication Service GmbH v Commission [2002] ECR II-313 .................................................................................................................... 84 Case T-141/99, T-150/99 and T-151/99 Vela and Tecnagrind v Commission [2002] ECR II-4547 .................................................................................................... 102 Case C-355/99 Hautala v Council [1996] ECR I-2169 ............................................ 109, 110 Case C-11/00 Commission v ECB [2003] ECR I-7147 .................................... 16, 20, 38, 96 Case C-15/00 Commission v EIB [2003] I-7281 .................................................. 16, 83, 96 Case T-17/00 Willy Rothley and others v European Parliament [2002] ECR II-579 .... 38, 96, 100 Case T-23/00 A v Commission [2000] ECR IA-263 and II-1211 ...................................... 97 Case C-63/00 Schilling and Nehring [2002] ECR I-4483 .................................................. 18 Joined Cases C-204/00 P, C-205/00 P, C-211/00 P, C-213/00 P, C-217/00 P and C-219/00 P Aalborg Portland A/S and Others v Commission of the European Communities [2004] ECR I-123 ................................................................................. 93 Case C-76/01 P Eurocoton v Council [2003] ECR I-10091 .............................................. 89 Case T-307/01 Jean Paul François v Commission [2004] ECRII 1669 ....................... 85, 98 Case C-65/02 and 73/02 ThyssenKrupp GmbH v Commission [2005] ECR I-6773 .... 93 Case T-215/02 R. Santiago Gomez Reino v Commission [2003] ECR II 1685 ................ 94 Case T- 2/03 VKI v Commission [2005] ECR II 1121 ..................................................... 110 Case T-29/03 C A de Andalucia v C Case T-84/03 Turco v Council [2004] ECR II 2923 ......................................................................................................... 91, 110 Case C-176/03 Commission v Council [2005] ECR I-7871 ............................................ 123 Case C-210/03 Swedish Match UK Ltd v. Secretary of State for Health [2004] ECR I 11893 ............................................................................................................................. 99 Case T-309/03 Camos Grau v Commission [2006] ECR II-1173, paras 48,49,59, 100,160 ................................................................................................ 84, 92, 94, 95, 119 Case T-259/03 K Nikolaou v Commission [2007] ECR II-99 ......................... 89, 91, 95, 96 Cases T-391/03 and T-70/04 Y Franchet and D Byk v Commission (I) [2006] ECR II 2023 .......................................................................................................... 90, 109 Case T-193/04 Hans Martin Tillack v Commision [2006] ECRII-3995 ........................... 91 Case C-432/04 Commission v Edith Cresson OJ [1996] C 224/6 .................................... 99 Case C-521/04 P (R) Tillack v Commission [2006] ECR II-3995 .................................... 91 Case T-4/05 Strack v Commission [2006] ECR IIA-2–361 ..................................... 114, 140 Case F-23/05 Jean-Louis Giraudy v Commission [2007] ECR IA 193 ........................... 95 Case T-48/05 Franchet and Byk v Commission [2008] ECR II 1585 .... 79, 89, 94, 95, 109, 110, 111, 115, 116 Case C-94/05 Emsland-Stärke [2006] ECR I-2619, para 50 .............................................. 30 Case C-303/05 Advocaten voor de Wereld v Leden van de Ministerraad (AvdW case) [2007] ECR I-3633 ....................................................................................................... 87 Case T-345/05 V v European Parliament [2009] 1 CMLR 15 ....................................... 100 Case C-440/05 Commission v Council [2007] ECR I-9097 ............................................ 123

x

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Table_cases

/Pg. Position: 2 /

Date: 9/8

JOBNAME: Stefanou PAGE: 3 SESS: 4 OUTPUT: Tue Aug 9 13:14:31 2011

Table of cases Joined cases T-377/00, T-379/00, T6260/01, T6272/01 P Morris Inc, R J Reynolds Inc, RJR Acquisition Corp, RJ Reynolds Tobacco Co, RJ Reynolds Tobacco International Inc v Commission [2007] ECR II-1 .......................................................................... 132 Case C-237/06 P Guido Strack v Commission ECR [2007] I-33 ................................... 24

Council of Europe—ECtHR Funke v France, Series A, no 256A (1993) 16EHRR 297, para 44 .................................... 93 Tillack v Belgium, Application No 20477/05, judgment of 27 November 2007, final 27/2/2008 .................................................................................................................... 115

United States United States v Trapilo 130F 3d 547(2d Cir) 19970 ....................................................... 131 Pasquantino v United States 125 S Ct 1766 (2005) ......................................................... 135 The European Community v. RJR Nabisco (RJ Reynolds) case 125 S Ct 1968 (2005) .......................................................................................................................... 135

xi

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Table_cases

/Pg. Position: 3 /

Date: 9/8

JOBNAME: Stefanou PAGE: 4 SESS: 4 OUTPUT: Tue Aug 9 13:14:31 2011

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Table_cases

/Pg. Position: 4 /

Date: 9/8

JOBNAME: Stefanou PAGE: 1 SESS: 6 OUTPUT: Tue Aug 9 13:14:31 2011

Introduction One can identify very few examples of agencies of such importance in the European Union that have received as little attention as OLAF by academics and professionals alike. The Anti-Fraud Office of the European Commission has been awarded the task of combating fraud against the financial interests of the Union. It suffices to consider the negative impact that cases of fraud against the Union’s budget make in national and EU publications for one to realise the importance of the task for Europhiles and Eurosceptics alike. But if one takes into account the source of the income involved as deriving ultimately from national taxpayers of the Member States, the stakes become even higher. OLAF is operating within a fluid, fragmented, and often uncertain environment of EU criminal law. So, where does OLAF stand in the context of European integration? Is the development of OLAF a solid pro-European supranational move aiming to augment the powers of the central EU institutions in the neofunctionalist vein or is it an intergovernmental afterthought aiming to appease the European public in the aftermath of the 1999 Commission crisis?1 When looking back at the historical development of EU anti-fraud bodies we broadly distinguish between two distinct periods: pre-1999 and post-1999.2 The first period starts in the mid 1970s with the Member States’ decision to grant ‘own resources’. This decision led to the establishment of the Court of Auditors and cases of fraud against the Community’s financial interests brought to light by the Court of Auditors, led to the establishment of a dedicated Unit for the Co-ordination of Fraud Prevention (UCLAF)3 in 1987. In the 1980s the Court of Auditors reported fraud cases mainly in CAP programmes (back then the CAP accounted for almost 70 per cent of the Community budget) but the need for a dedicated unit to combat CAP subsidies fraud and more generally irregularities and mismanagement of Community-funded programmes was noted by the European Parliament’s Budgetary Control Committee (COCOBU)

1 See the two working hypotheses in V Pujas, ‘The European Anti-Fraud Office (OLAF): a European policy to fight against economic and financial fraud?’, Journal of European Public Policy 10 October 2003, 778–97. 2 Simone White distinguishes several periods pre-1999 arguing that progress was uneven because of the sectoral approach that was adopted. See S White, Protection of the Financial Interests of the European Communities: The Fight against Fraud (The Hague, Kluwer Law International, 1998). 3 See COM(87) 572 and COM(87) 891.

xiii

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Introduction

/Pg. Position: 1 /

Date: 9/8

JOBNAME: Stefanou PAGE: 2 SESS: 6 OUTPUT: Tue Aug 9 13:14:31 2011

Introduction as early as 1984,4 when there were calls for ‘the constitution of a “flying squad” to carry out random on-the-spot checks in the Member States’.5 The creation of UCLAF, following a report for tougher measures to fight fraud,6 was supposed to mark a turning point in combating fraud. By the late 1980s CAP subsidies fraud was rife in some Member States and the main problem was the unwillingness of national authorities and enforcement agencies to investigate—let alone prosecute—the alleged offenders. Most national enforcement agencies were geared towards the protection of domestic financial interests and fraud which involved ‘Community funding’ was not seen as a priority. Anecdotal stories of half-built roads in Italy that were abandoned because the money to finish the programme disappeared or of Greek farmers with a couple of olive trees who claimed subsidies for thousands of trees were rife. The general picture that emerged was that in some Member States EU funding was seen as ‘fair game’ and the inability of national authorities to investigate and prosecute reinforced the misconception that fraud against the EU was somehow not a priority. Back in the 1990s, as Vervaele noted, most of the fraud occurred in the Member States themselves.7 The Member States were responsible for the collection (customs duties and a percentage of VAT and GNP) and financial management of around 80 per cent of EU revenues.8 Not that the Commission was a better manager: as Vervaele noted, around 12 per cent of EU expenditure was used by the Commission for direct subsidies and the Commission was completely ill-equipped to manage and audit its aid programmes, to the point that it had to employ external services with inadequate control mechanisms.9 It is a measure of how quickly circumstances can change within the EU that nowadays it is third countries that are emerging as the real problem. Fraud in areas such as external aid or humanitarian aid is rife and OLAF is concentrating its efforts in those directions.10

4 See EP Document 1–1346/83, January 1984. There were more such reports in the 1990s; see Report on the independence, role and status of the Unit for the Coordination of Fraud Prevention (UCLAF) (Special Report No 8/98 of the Court of Auditors concerning the Commission departments responsible for fighting fraud) (C4–0483/98) (The Bosch Report), A4–0297/98, 22 September 1998, 10. 5 Ibid. 6 Report from the Commission on Tougher Measures to Fight Against Fraud Affecting the Community Budget, COM(87) 572 final, 20 November 1987. 7 JAE Vervaele, ‘Towards an Independent European Agency to Fight Fraud and Corruption in the EU?’ (1999) 7 European Journal of Crime Criminal Law and Criminal Justice 333. 8 Ibid. 9 Ibid. 10 As OLAF’s 2009 Annual Report noted: ‘.. . areas in which Member States do not exercise specific responsibilities—‘Internal EU Policies’ and ‘External Aid’ cases—have represented a growing proportion of the new cases opened by OLAF since its creation (around or above 30% since 2005). This evolution is in line with the Office’s policy to focus on areas where the added-value of its work is the highest.’ See European Anti-Fraud Office, ‘Annual Report 2009 Ninth Activity Report for the period 1 January 2008 to 31 December 2008’, http://ec.europa.eu/anti_fraud/reports/olaf/2008/EN.pdf, 28; for a good description of problems in EU Development Assistance see G Gaskarth, B Farrugia and M Sinclair, ‘Reforming European Development Assistance Ensuring Transparency and Accountability’ (2008), http://www.taxpayersalliance.com/EUDevelopmentAid.pdf.

xiv

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Introduction

/Pg. Position: 2 /

Date: 9/8

JOBNAME: Stefanou PAGE: 3 SESS: 6 OUTPUT: Tue Aug 9 13:14:31 2011

Introduction Between 1987 and 1999 UCLAF went through various transformations as the Member States and the Commission attempted to tackle the problem of fraud. However, the main problem, which was the small number of prosecutions by national authorities, remained. Especially after the creation of the single market, one reason for the reluctance of national authorities to investigate was the difficulties these cases presented; often they involved transnational crime which, in the absence of a single judicial area, presented difficulties in the collection of evidence and, therefore, the prosecution of offenders. There were, of course, some attempts by the Member States to tackle the problem of fraud. For example the 1994 Convention on the protection of the Communities’ financial interests11 defined the Commission’s activities in the battle against fraud. But there were also some serious operational problems with UCLAF. For example, at a practical level, the competences of UCLAF were divided between DG VI (Agriculture), DG XX (Financial Control), DG XIX (Budgets) and DG XXI (Customs and Indirect Taxation). UCLAF did not have real powers of investigation and, as the Court of Auditors Reports indicated fraud continued to be a serious problem. Essentially the first period in the development of EU anti-fraud bodies was characterised by Commission attempts to convince the Member States that tackling fraud against the interests of the Community is a serious problem and one that should be tackled directly. The post-1999 period is obviously characterised by the establishment of OLAF. However, it is important at this stage to note that the prevailing conditions at the time, namely the collapse of the Santer Commission, were political. What this meant was that OLAF was not exclusively the well-thought-out EU response to the specific fraud problems identified in the first period. Rather it was the Member States’ quick response to the political problems that the EU experienced at the time. In this sense the creation of OLAF addressed three issues: — the long-identified need to tackle fraud against the EU’s financial interests; — the need to show that the specific lacuna in European law identified by the collapse of the Santer Commission was filled; and — the need for positive pro-EU PR, as the corruption issues in the Santer Commission had prompted a portion of the European media to adopt Eurosceptical arguments. The highly political overtones of the corruption accusations against the Santer Commission meant that time was not on the Member States’ side. Therefore, the final legislative framework setting up OLAF was highly influenced by the historical circumstances surrounding it. Pujas makes two hypotheses about the creation of OLAF.12 The first is that the Commission’s and the EP’s push to create an anti-fraud agency was part of a wider neofunctionalist approach aiming to

11 12

See: OJ C316 of 27 November 1995; OJ C320, 28 October 1996. See Pujas, above n 1, 783–87.

xv

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Introduction

/Pg. Position: 3 /

Date: 9/8

JOBNAME: Stefanou PAGE: 4 SESS: 6 OUTPUT: Tue Aug 9 13:14:31 2011

Introduction ‘institutionalise’ anti-EU-fraud policy as part of a wider push for the integration of the Third Pillar. She cites the Commission’s use of its role as agenda-setter and its attempt to use various windows of opportunity, such as the Corpus Juris project,13 to push forward with anti-fraud policy. In other words the supranational European institutions pushed to integrate a ‘high political’14 area in an attempt to further the course of European integration. The second, intergovernmentalist, hypothesis is that the Member States who had been resisting the attempts of supranational institutions to further European integration in the area of anti-EU-fraud policy actually utilised the Commission’s weakness in this field, especially the lack of an effective anti-corruption policy, and pushed the blame on the College of Commissioners, who eventually had to resign. The logic of this hypothesis is that the Member States dismissed the ability of the supranational institutions to fight transnational crime effectively and, therefore, by creating a dubious legal framework for OLAF15 safely kept this responsibility in the hands of their public administrations. In fact when comparing the Commission’s ‘Proposal for a Council Regulation (EC, Euratom) establishing a European Fraud Investigation’16 and the Commission Decision 1999/352/EC of 28 April 1999 establishing the European Anti-Fraud Office (OLAF) it becomes obvious that the final legal framework is a type of intergovernmental arrangement aiming to preserve the superior position of national enforcement agencies. It is interesting to note here that despite the fact that the Member States managed to thwart the attempts by supranational institutions to establish a purely European anti-fraud policy, all actors appeared to be happy in the end. In other words, after a crucial period (the resignation of the Santer Commission) the quick establishment of OLAF appeared to please all those involved. The EU appeared to move quickly to establish an anti-fraud legal framework, thus appeasing the media and the European public. OLAF was added to the Commission’s roster (despite its independence OLAF is, administratively, part of the Commission) and, therefore, the Commission augmented its powers. The Member States, through the Council, managed to defend their sovereignty since the proposal that was finally accepted had been stripped of the original proposal’s

13 See S White, ‘EC criminal law: Prospects for the Corpus Juris’ (1998) 5(3) Journal of Financial Crime 223–31; JR Spencer, ‘The Corpus Juris Project—Has it a Future’ (1999) 2 The Cambridge Yearbook of European Legal Studies 355–67. 14 In Hoffmann’s well-known distinction ‘high politics’ included issues vital to the existence of the nation-state while ‘low politics’ included less controversial, largely admin-istrative issues. Hoffmann maintained that agreement on issues of low politics was easier than agreement on matters of high politics because national governments felt less threatened and were, therefore, able to make some concessions which facilitated agreements. S Hoffmann, ‘Reflections on the Nation-State in Western Europe Today’ in L Tsoukalis (ed), The European Community Past, Present and Future (Oxford, Basil Blackwell, 1983) 21–38. 15 Eg, as the Court of Auditors’ Special Report noted, there is not even independent control concerning the legality of investigative action. See Court of Auditors’ Special Report No 1/2005 concerning the management of the European Anti-Fraud Office (OLAF) para 83. 16 COM(1998) 717 final—98/0329(CNS), 4 December 1998.

xvi

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Introduction

/Pg. Position: 4 /

Date: 9/8

JOBNAME: Stefanou PAGE: 5 SESS: 6 OUTPUT: Tue Aug 9 13:14:31 2011

Introduction communitarian orientation. From a tactical point of view this negotiating model is referred to as ‘win-win’ and naturally it was quickly accepted, not necessarily as the most ‘appropriate’ proposal but as the most popular proposal. From the point of view of policy making this is consistent with the ‘Incremental Model’ in which the best policy is the one on which all or most actors agree.17 There is a third possible hypothesis here. As mentioned earlier, the quick setting-up of OLAF seems to have been influenced by the prevailing conditions at the time. This observation seems to be perfectly in line with the concepts introduced by advocates of new institutionalism. Based on the pioneering work of March and Olsen,18 and largely based on the simple premise that institutions matter,19 the ‘institutionalists’ or ‘new institutionalists’20 attempt to draw general conclusions about the integration process by examining the role of institutions. The main areas of focus for advocates of this approach are:21 the organisational structure of the EU and the ‘autonomy’ of key institutions; the day-to-day dynamics of policy making; structures of individual policy areas; and the process of ‘institutionalisation’ and the creation of path dependencies. There are two main variants of new institutionalism: rational choice institutionalism and historical institutionalism. The latter, which is of interest to us here emphasises the fact that ‘. . . policy choices and institutional reforms tend to produce profound and unintended consequences’.22 The basic logic of neoinstitutionalism is ‘that political struggles are mediated by prevailing institutional arrangements’23 and that institutions are capable of influencing political behaviour. Within this logic, a basic tenet of new institutionalism—often applied to central EU institutions such as the Commission and the Parliament—is that institutions will attempt to take advantage of opportunities to augment their roles and strengthen their positions. The reason new institutionalist perspectives are relevant to our argument here rests with one of its main tenets: acceptance that EU institutions, such as the Commission, pursue their own agendas and policy choices, which must be studied over time in order to understand ‘path

17 CE Lindblom, ‘The Science of Muddling Through’ in RJ Stillman II, Public Administration: Concepts and Cases (Boston, Houghton Mifflin Co 2005). 18 J March and J Olsen, Rediscovering Institutions, The Organizational Basis of Politics ([New York, Free Press, 1989). 19 PA Hall and RCR Taylor, Political Science and the Three New Institutionalisms, Max-PlanckInstitut für Gesellschaftsforschung, Discussion Paper 96/6, 1996. 20 Originally called ‘institutionalism’, the terms neo-institutionalism or new-institutionalism are also acceptable—although strictly speaking advocates of different versions of this approach tend to use different terms. See B Rosamond, Theories of European Integration (London, Macmillan, 2000) 113–22. 21 See K Armstrong, ‘New Institutionalism and European Union Legal Studies’ in C Craig and P Harlow (eds), Lawmaking in the European Union (London, IALS/Kluwer, 1998) 101. 22 S Hix, The Political System of the European Union (London, Macmillan, 1999) 16. 23 S Bulmer, ‘The governance of the European Union: A new institutionalist approach’ (1994) 13 Journal of Public Policy 355. See also S Bulmer, ‘Institutions and Policy Change in the European Communities’ (1994) 72 Public Ad-ministration 423–44; S Bulmer, New Institutionalism, The Single Market and EU Governance, ARENA Working Papers, WP 97/25, 1997.

xvii

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Introduction

/Pg. Position: 5 /

Date: 9/8

JOBNAME: Stefanou PAGE: 6 SESS: 6 OUTPUT: Tue Aug 9 13:14:31 2011

Introduction dependencies’ (by path dependency new institutionalists mean that by adopting a particular preference institutions ensure that future preferences will have to operate in the context of the initial preference, even if its consequences were not understood at the time it was originally made).24 Of course, the new institutional paradigm can happily coexist with the basic integration dialectic,25 that is, neofunctionalist versus intergovernmental perspectives. After all, in terms of European integration theory, the former is one of the ‘micro-theoretical’ perspectives while the latter are two of the basic ‘macro-theoretical’ approaches to the study of the EU. In this sense we do not need to make a specific choice when it comes to examining OLAF. Clearly the wider area of judicial integration, which includes the EU’s anti-fraud policy, is subject to the basic integration dialectic with the supranational institutions pulling towards the direction of communitarian solutions while the Member States attempt to stop further encroachments on their autonomy and sovereignty. The fact that OLAF remains in the intergovernmental sphere can and does serve as a benchmark of integration (or lack of it) at least in the area of judicial integration. New institutional perspectives can offer reasonable and plausible explanations for specific developments in EU institutions. Thus, from a practical point of view the neo-functionalist versus intergovernmental argument will help us understand the general direction (hence macro-theories) of European integration while new institutionalism will help us understand the ‘nitty-gritty’ of the specific development we are examining. Our view is that while OLAF’s basic legal framework remains the same, OLAF displays all the basic characteristics of an intergovernmental victory in the integration dialectic. Despite the efforts of supranational institutions the Member States managed to stop the Commission and the EP from bringing their communitarian proposals for an anti-fraud office to fruition. It is also our view that the reasons for this intergovernmental victory rest on path dependencies set by the prevailing EU developments at the time.

24

C Stefanou, The Dynamic of the Maastricht Process (Brussels/Athens, Bruylant/Sakkoulas, 2007)

83. 25 C Stefanou and H Xanthaki, A Legal and Political Interpretation of Article 215(2) [new Article 288(2)] of the Treaty of Rome: The Individual Strikes Back (Aldershot, Ashgate, 2000) Chapter 2.

xviii

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Introduction

/Pg. Position: 6 /

Date: 9/8

JOBNAME: Stefanou PAGE: 1 SESS: 25 OUTPUT: Tue Aug 9 13:14:31 2011

1 Genesis: UCLAF and the Transition to OLAF HELEN XANTHAKI

UCLAF’S GENESIS

The first calls1 for the establishment of a team of experts burdened with carrying out on-the-spot checks in cases of suspected fraud against the financial interests of the European Communities go back to the 1980s.2 Most pronounced was the first of many calls of the Budgetary Control Committee of the European Parliament for such a unit in 1984.3 The European Parliament and the Court of Auditors identified a gap in European law and policy and calls for a ‘flying squad’, a unit of informal structure with limited operational powers, were repeated. The Commission did not react immediately to these calls, as the nature of the ‘flying squad’ as a mere body of investigators within the Community structure was rather difficult to compromise with Member States’ objections to UCLAF’s significant responsibility and powers of internal, and possibly external, checks.4 In 1987 the Commission identified the need for better coordination of its various units dealing with the combat of fraud within its structure, since all such units

1 The first calls for measures to combat fraud go as far back as 1967: 67/651/EEC, Commission Recommendation of 17 October 1967 on measures to be taken by the Member States to prevent and detect fraud in agriculture, OJ 259, 26 October 1967, 19. 2 JAE Vervaele, ‘Towards an independent European agency to fight fraud and corruption in the EU?’ (1999) 7 European Journal of Crime, Criminal Law and Criminal Justice 331–46, 336; also ‘Explanatory Statement’ in European Parliament Committee on Budgetary Control, ‘Report on the independence, role and status of the Unit for the Coordination of Fraud Prevention (UCLAF) (Special Report No 8/98 of the Court of Auditors concerning the Commission departments responsible for fighting fraud) (C4–0483/98)’, Rapporteur: Mr Herbert Bösch, A4–0297/98, 22 September 1998, DOC_EN\RR\361\361615, PE 225.069/fin, 10. 3 3 January 1984, Doc 1–1346/83; also ‘The Bosch Report’, A4–0297/98, 22 September 1998, 10; the 1995 Parliamentary Inquiry Committee on the transit system; and A4–0097/1998—resolution informing the Commission about the reasons for postponing the discharge decision on the execution of the EU general budget for the year 1997, adopted on 30 March 1998. 4 Hansard, HC Deb, Col 874, 16 October 1987.

1

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 1 /

Date: 1/6

JOBNAME: Stefanou PAGE: 2 SESS: 25 OUTPUT: Tue Aug 9 13:14:31 2011

Genesis: UCLAF and the Transition to OLAF expressed concerns on the lack of legal bases for action and the lack of dissemination of data amongst the various units.5 Thus, the need for strengthening the regulatory framework of the Commission’s activities against fraud and the need for coordination of these activities were brought to light and were presented as problems demanding urgent response.6 The Commission proceeded with the establishment of an anti-fraud coordination unit named Unité de Coordination de la Lutte Anti-Fraude, known as UCLAF, in an internal report on its anti-fraud activities,7 and UCLAF became operational in July 1988. The European Parliament took the opportunity to comment on UCLAF’s powers in its 1990 discharge. Although the Parliament expressed satisfaction at UCLAF’s continued operation as a coordination unit for anti-fraud cells in DGs VI (Agriculture), XIX (Budget), XX (Financial Control) and XXI (Customs and Indirect Taxation), the Parliament also identified the need to strengthen UCLAF as a means of increasing its effectiveness. Measures proposed by the Parliament were the establishment of flying squads, increased emphasis on risk sections via risk analysis, and the use of cost-effectiveness in the fight against fraud. But the Parliament also requested a clear clarification of UCLAF’s operational facilities. These were analysed by Mr Delors and presented to the Parliament in 1992.8 UCLAF organised, took charge of and monitored the programming and undertaking of anti-fraud activities extending beyond a single Directorate; it initiated inquiries in matters of fraud that it classified as serious; organised inquiries in cases extending beyond a single Directorate; dealt with cases extending beyond a single Directorate; and took part in anti-fraud activities of Directorates when expenditure was involved.9 In all these activities UCLAF worked in cooperation with Directorates.10 An attempt for further clarification of UCLAF’s function was made in July 1994 when UCLAF and DG XX (Financial Control) agreed on the division of their competences.11 However, the problem remained: UCLAF continued to lack the power to proceed with its tasks independently of other Directorates, even in cases that fell within its specific field of competence as cases extending beyond a single Directorate General. This changed in early 1995 when the Commission’s Secretary General announced to all services that UCLAF now had the right to initiate inquiries on its own initiative and demanded the cooperation of all services with UCLAF, to which any suspicion of fraud had to

5 Commission of the EC, ‘Report from the Commission on tougher measures to fight against fraud affecting the Community Budget’ COM (87) 572 final, 20 November 1987. 6 COM (87) PV 891. 7 Point 39, COM (87) 572 final, 20 November 1987; also COM (87) 891. 8 SEC(92)2045, 4 November 1992. 9 The Council offered its full support: Council conclusions of 11 July 1994 concerning the fight against fraud, OJ C 292, 20 October 1994, 1–2. 10 L Kuhl, ‘Stratégie antifraude de la Commission’ in G Grasso (ed), La Lotta contro la Frode agle Interessi Finanziari della Comunità Europea tra Prevenzione e Repressione: L’Esempio dei Fondi Strutturali (Milano, Giuffrè Editore, 2000), 1–11, 4. 11 SG(94)D/141.662.

2

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 2 /

Date: 1/6

JOBNAME: Stefanou PAGE: 3 SESS: 25 OUTPUT: Tue Aug 9 13:14:31 2011

UCLAF’s Genesis be transferred.12 In the same year UCLAF saw the centralisation of all operational anti-fraud activities, an increase in staff, and a second attempt of clarification of its tasks.13 What followed was a series of impressive advances to the regulatory environment of UCLAF in a period of frenzied legislative activity in the field of the protection of the interests of the European Union which had a direct effect on UCLAF’s regulatory framework and operations. First, the legal basis for UCLAF’s instrumental role in the fight against fraud was finally provided for in Article 209a TEC, which was later modified as Article 280 by the Treaty of Amsterdam14 and is now Article 325 following the coming into force of the Lisbon Treaty.15 Article 325 puts fraud into the spotlight for the first time16 on a solid basis,17 but introduces an exclusive power of initiative to Member States18 which undertake the obligation to afford equivalent treatment to cases of EU fraud with purely national cases.19 Second, the general framework of Commission activity in the area of fraud against the financial interests of the European Communities was introduced in the Convention on the protection of the European Communities’ financial interests20 and Council Regulation 2988/95.21 The Convention regulated the criminal aspect of fraud both at the EC and the national levels. The Regulation introduced a definition of irregularities, and provided for operational standards for checks, penalties and administrative penalties in case of irregularities. Third, a standardised definition of fraud and the criminalisation of fraud against EU funds were introduced by the Council Act of 26 July 1995 drawing up the Convention on the protection of the European Communities’ financial interests.22 Finally, the operational framework for UCLAF was clarified in a number of secondary instruments. It is worth noting Council Regulation 12

SG(95)D/141.038. SEC(95)249 of 10 February 1995. 14 The application of Art 209a by the Member States was questioned in Council conclusions of 11 July 1994 concerning the fight against fraud, OJ C 292, 20 October 1994, 1–2. 15 See ‘Tables of Equivalences Referred to in Article 5 of the Treaty of Lisbon’, OJ C 306/202, 17.12.2007. 16 Resolution on the preparation of the European Council meeting on 16/17 June 1997 in Amsterdam, OJ C 200, 30 June 1997, 68. 17 A Miceli, ‘Fondi strutturali e attività criminale: la cooperazione tra l’UCLAF e le forze di polizia’ in Grasso, above n 10, 31–43, 38. 18 J de Zwaan, ‘The future of the third pillar and the fight against EU fraud: evaluation of the IGC and the Treaty of Amsterdam’ in JAE Vervaele (ed), Transnational Enforcement of the Financial Interests of the European Union (Antwerp, Groningen, Oxford: Intersentia Law Publishers, 1999) 13–28, 25. 19 H de Doelder, ‘Boundaries between administrative and judicial investigation’ in JAE Vervaele, above n 18, 33–41, 36. 20 OJ C316 of 27 November 1995. 21 Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities’ financial interests, OJ L 312, 23 December 1995, 1–4. 22 OJ C 316 of 27 November 1995; also First Council Protocol of 27 September 1996 to the Convention on the protection of the European Communities’ financial interests, OJ C 313 of 23 October 1996; and Second Council Protocol of 19 June 1997 to the Convention on the protection of the European Communities’ financial interests, OJ C 221 of 19 July 1997. 13

3

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 3 /

Date: 1/6

JOBNAME: Stefanou PAGE: 4 SESS: 25 OUTPUT: Tue Aug 9 13:14:31 2011

Genesis: UCLAF and the Transition to OLAF 2185/96 on on-the-spot checks and inspections,23 which introduces the right of UCLAF to conduct administrative investigations in the Member States on its own authority and under its own responsibility. The Regulation introduced minimum horizontal stipulation in that it applied to all sectors of financial activity, provided that fraud against the financial interests of the Community was suspected; and that special provisions on specific sectors would prevail if they clashed with this broad Regulation.24 The conduct of internal investigations within the Commission was further detailed in a Commission Decision,25 which introduces the obligation on the Commission to refer to UCLAF all suspicions of fraud and demands that UCLAF inform the Commission’s senior officials and the national judicial authorities of any investigations that involve them and members of their staff. In the meantime, UCLAF was strengthened in practice. The Commission used several methods for that purpose, possibly in response to the Council’s call for UCLAF’s restructuring26 but mainly because of the European Parliament’s repeated call for transfer of staff to UCLAF at every opportunity offered and usually in annual discharges of the budget. It is worth noting that the discharge of 1992 was postponed for that very purpose. First, in 1993 UCLAF as a unit was transferred from the responsibility of the President of the Commission, as initially foreseen, to the more direct, and hence more practical, responsibility of the Commissioner responsible for the budget. In 1995 UCLAF ultimately moved under the responsibility of the Commissioner responsible for the fight against fraud and for financial control. Second, the Secretariat of the Commission stressed the availability of UCLAF as a service and the obligation of all other services to engage with UCLAF in all cases where there were suspicions of fraud against the financial interests of the Communities. Thus, the Secretariat issued a reminder to all services of their obligation to communicate all cases of suspects of fraud to UCLAF as a means of ensuring that the duty of all services to utilise UCLAF’s expertise was not ignored in practice.27 In fact, as a follow-up in 1996 the Commission’s Secretary General issued a note that papers and documents cannot be withheld from UCLAF officials. Nevertheless, a second reminder was needed in the form of a second note by the Secretary General in 1996: there for the first time individual officers were told that they had the option of by-passing their head of department and approaching UCLAF directly.28 Third, other

23 Council Regulation (EC, Euratom) 2185/96 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities, OJ L292 of 15 November 1996. 24 Vervaele, above n 2, 337. 25 Commission Communication, ‘Improving Action against Incompetence, Financial Irregularities, Fraud and Corruption’, SEC(97)2198 of 18 November 1997. 26 Council Conclusions of 11 July 1994 concerning the fight against fraud, OJ C 292, 20 October 1994, 1–2. 27 SEC(96)345. 28 SEC(96)345/2 of 14 April 1997.

4

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 4 /

Date: 1/6

JOBNAME: Stefanou PAGE: 5 SESS: 25 OUTPUT: Tue Aug 9 13:14:31 2011

UCLAF’s Weaknesses Communities’ units or institutions clarified their relationship with UCLAF and proceeded with agreements, formal or informal, for the facilitation of UCLAF’s work. Thus, on 25 July 1996 the Court of Auditors engaged with UCLAF via an informal agreement on exchange of information in the form of a letter to UCLAF by a member of the Court, Mr Weber. The Secretary General of the Commission and the Director General of the Legal Service proceeded with an agreement of rules of operation for UCLAF’s engagement with national judicial authorities on any case related to fraud against the financial interests of the Communities.29 Fourth, UCLAF was awarded the status of a task force on 1 May 1998.30 However, despite the efforts to strengthen UCLAF, or perhaps exactly because of them, the European Parliament and ultimately the Commission realised that UCLAF was not capable of dealing with fraud against the financial interests of the Communities, at least not adequately. As early as 1998 the Parliament called for the establishment of OLAF,31 a proposal adopted by the Commission within two months.32 The initial Commission proposal on OLAF was amended in 199933 and the final decision to create OLAF was taken on 28 April 1999.34

UCLAF’S WEAKNESSES

The succession of instruments regulating aspects of UCLAF’s establishment, regulatory and operational framework should not be taken to signify that UCLAF ever managed to be a strong, clearly established unit with a detailed regulation of obligations and processes. In contrast to this, UCLAF was criticised for failing to create a culture that was intolerant of fraud and irregularity, and for ineffectiveness in investigating fraud.35 In fact, it is exactly due to weaknesses in these areas that UCLAF failed in its mission and was replaced by OLAF. 29 SEC(97)1293 of 25 June 1993; also Final Report and Recommendations of the Committee of Inquiry into the Community Transit System, A4–0053/97 of 19 February 1997, ss 8.2.5 and 15.2.2 and recommendation 18. 30 Commission, Protection of the Communities’ financial interests: fight against fraud: Annual report 1997, COM (98) 276 (1998, Office for Official Publications of the EC, Brussels); Commission, Work programme 1998–1999, COM (98) 278 (1998, Office for Official Publications of the EC, Brussels). Report on the implementation of the interinstitutional agreement on budgetary discipline and improvement of the budgetary procedure (COM(98)165). 31 A4–0297/98 of 7 October 1998. 32 COM(98)717 of 4 December 1998. 33 COM(99)140 of 17 March 1999. 34 SEC(1999)802 of 28 April 1999, OJ L136 of 31.5.99. 35 House of Commons, Public Accounts, 29th Report of Session 1998–99, Financial Management and Control in the European Union, 7 July 1999, para 100; also European Parliament, ‘Resolution on the Commission’s 1996 Annual Report (COM(97)0200—C4–0230/97) and its Work Programme for 1997/98 on the protection of the Community’s financial interests and the fight against fraud (COM(97)0199—C4–0231/97), 22 October 1997, A4–0287/1997, point 4; also ‘Motion for a Resolution’ in European Parliament Committee on Budgetary Control, ‘Report on the independence, role and status of the Unit for the Coordination of Fraud Prevention (UCLAF) (Special Report No 8/98 of

5

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 5 /

Date: 1/6

JOBNAME: Stefanou PAGE: 6 SESS: 26 OUTPUT: Tue Aug 9 13:14:31 2011

Genesis: UCLAF and the Transition to OLAF At a practical level UCLAF’s weaknesses included poor definition or overcomplication of policy and organisational arrangements for all operations, both internal and external inquiries; lack of continuity of UCLAF staff, the majority of which were merely temporary agents; limited use and operability of electronic databases; and inefficient documentation and archives for UCLAF cases.36 These presented as poor coordination between Commission services in the fight against fraud;37 poor information exchange with and between Member States; poor cooperation (even rivalry38) between DG XX and UCLAF; poor coordination of inquiries into EU fraud carried out by different Member States’ national authorities.39 These resulted in ineffective prosecutions of EU fraud through low national priority for such action, and through poor communication and cooperation between judicial authorities. Consequently there was a low conviction rate.40 At the level of regulation, UCLAF suffered from gaps and contradictions related to its function; independence;41 relations with national judicial authorities; competences in the judicial sphere; intelligence and data gathering.42 Let us look at each of these weaknesses separately. First, UCLAF’s function was extremely wide, with administrative and judicial investigations, coordination of cases where different Commission units or different Member States were involved and even legislative functions on the basis of the Commission’s legislative initiative. In fact in 1996 the European Parliament described the role of UCLAF in very general terms as ‘an information-gathering unit on crime’ in the form of ‘a central bureau to exchange information in order to help national courts in

the Court of Auditors concerning the Commission departments responsible for fighting fraud) (C4–0483/98)’, Rapporteur: Mr Herbert Bösch, A4–0297/98, 22 September 1998, DOC_ EN\RR\361\361615, PE 225.069/fin, at recital A. 36 ‘Special Report No 8/98 on the Commission’s services specifically involved in the fight against fraud, notably the ‘Unité de coordination de la lutte anti-fraude’ (UCLAF) together with the Commission’s replies’, OJ C230 of 22 July 1998. 37 P van Buitenen, Blowing the Whistle: One Man’s Fight against Fraud in the European Commission (London, Politico’s Publishing, 2000) 80. 38 B Laffan, The Finances of the European Union (London, Macmillan, 1997). 39 European Parliament Committee on Budgetary Control, ‘Report on the independence, role and status of the Unit for the Coordination of Fraud Prevention (UCLAF) (Special Report No 8/98 of the Court of Auditors concerning the Commission departments responsible for fighting fraud) (C4– 0483/98)’, Rapporteur: Mr Herbert Bösch, A4–0297/98, 22 September 1998, DOC_ EN\RR\361\361615, PE 225.069/fin, p.11. 40 Committee of Independent Experts, ‘Second Report on Reform of the Commission: Analysis of current practice and proposals for tackling mismanagement, irregularities and fraud’, vol II, 10 September 1999, DOC_EN\DV\381\381230EN.doc. 41 Resolution on the Commission’s 1996 Annual Report (COM(97) 0200 C4–0230/97) and its Work Programme for 1997/98 on the protection of the Community’s financial interests and the fight against fraud, COM(97)0199, C4–0231/97, OJ C 339, 10 November 1997, 68. 42 Committee of Independent Experts, ‘Second Report on Reform of the Commission: Analysis of current practice and proposals for tackling mismanagement, irregularities and fraud’, vol II, 10 September 1999, DOC_EN\DV\381\381230EN.doc, 24–25.

6

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 6 /

Date: 1/6

JOBNAME: Stefanou PAGE: 7 SESS: 26 OUTPUT: Tue Aug 9 13:14:31 2011

UCLAF’s Weaknesses their transnational43 legal activities’.44 However, UCLAF had no role in judicial procedures and thus its function to oversee and conduct judicial investigations was seriously compromised.45 In fact, it would be fair to say that all UCLAF’s missions were of an administrative nature as the unit’s only role in judicial proceedings was to prepare the file for national judicial authorities.46 In any case, judicial investigations remained within the remit of the many national judicial authorities of the Member States, thus creating a fragmented approach to the combat of fraud.47 Moreover, although UCLAF’s role included the conduct of internal investigations, these were only provided for with reference to the Commission. All other EU institutions were out of UCLAF’s reach. As a result, both functions of the unit were seriously limited and compromised. Second, UCLAF remained within the organisational aegis of the Commission. At the institutional level, therefore, UCLAF can not realistically support its claim of independence, thus compromising its position as the controller of Commission business. UCLAF’s budget remained part of the Commission’s budget and therefore the true power of UCLAF to displease the Commission was doubtful. Moreover, UCLAF’s members of staff remained temporary employees of the Commission. This gave grounds for doubt as to the effectiveness of their work, which evidently lacked continuity: it was quite possible that a case would overrun the contract of the officer in charge, who would abandon it in the middle of an investigation. And it gave ground to concerns relating to the stealth of OLAF staff when it became necessary to turn against the Commission which would ultimately decide the continuation of their personal contracts of employment. Furthermore, accountability issues identified by the European Parliament included UCLAF’s democratic accountability and the chain of accountability of Commission staff in cases of internal investigations.48 Third, UCLAF suffered from a lack of cooperation on behalf of national judicial authorities.49 At a time where the area of freedom, security and justice 43 For a taxonomy of transnational organised crime, see F Madsen, Transnational Organised Crime (London and New York, Routledge, 2009). 44 ‘Fraud and the EU Budget’, DG Research, EP 167.114, 9. 45 Vervaele, above n 2, 338. 46 BJ Quirke, ‘A critical appraisal of the role of UCLAF’ (2007) 14 Journal of Financial Crime 460–73, 462. 47 A Doig, ‘A fragmented organisational approach to fraud in a European context’ (1995) 3 European Journal on Criminal Policy and Research 48–64; also M Mendrinou, ‘European Community fraud and the politics of institutional development’ (1994) 26 European Journal of Political Research 81–101. 48 House of Commons, Public Accounts, 29th Report of Session 1998–99, Financial Management and Control in the European Union, 7 July 1999, paragraph 100; also European Parliament, ‘Resolution on the Commission’s 1996 Annual Report (COM(97)0200—C4–0230/97) and its Work Programme for 1997/98 on the protection of the Community’s financial interests and the fight against fraud (COM(97)0199—C4–0231/97), 22 October 1997, A4–0287/1997, paragraph 14. 49 Special Report No 8/98 on the Commission’s services specifically involved in the fight against fraud, notably the ‘Unité de coordination de la lutte anti-fraude’ (UCLAF) together with the Commission’s replies (pursuant to Article 188c(4), second subparagraph, of the EC Treaty), OJ C 230, 22 July 1998, 1–44, paras 3.19–3.27.

7

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 7 /

Date: 1/6

JOBNAME: Stefanou PAGE: 8 SESS: 27 OUTPUT: Tue Aug 9 13:14:31 2011

Genesis: UCLAF and the Transition to OLAF was a mere vision of EU institutions,50 national prosecutors, police and judicial authorities viewed UCLAF investigators with amused resentment: these were EU employees without any formal powers in the Member States, and yet who still demanded to play a proactive role in national investigative operations on the basis of Article 325 of the Treaty and other—mostly unknown to national authorities—EU legislative instruments. Moreover, these officers interfered with the prioritisation of national authorities’ work as they inevitably demanded that cases affecting the financial interests of the Community were given priority, a mentality which was not matched by that of national authorities.51 Even weekly meetings between senior national officials and UCLAF staff aimed at better coordinating national operations and meetings of the Advisory Committee on the Fight Against Fraud (COCOLAF) established in 199452 were reduced to mere talking shops.53 Fourth, with reference to UCLAF’s competences in the judicial sphere, even where they were allowed to play this role as a gesture of goodwill by the national authorities, the evolution of the case at the judicial level was beyond their reach: UCLAF officers had no role in the judicial sphere and were not even notified of the outcome of the national judicial process. It is often reported that the Commission wanted to offer UCLAF prosecuting powers in investigations conducted in the Member States but the Council and the European Parliament were adamant that this could not be awarded.54 Fifth, intelligence and data gathering in the area of fraud were problematic.55 At the time, UCLAF had to rely on the embryonic data exchange instruments that were in place with EU institutions such as the Court of Auditors. Such agreements did not include all EU institutions. From the point of view of national authorities, UCLAF as part of the Commission could theoretically be viewed as a unit covered by the then inadequate international instruments of legal assistance,56 but this was at the discretion of national authorities whose willingness to involve them in their national criminal investigations was not guaranteed by any

50 On the many discrepancies in the prosecution of fraud within EU Member States, T Howse, ‘Investigation and prosecutions of fraud in the European Communities’ (1992) 18 Commonwealth Law Bulletin 1412–16. 51 Quirke, above n 46, 461; B Laffan and M Shackleton, ‘The budget’ in H Wallace and W Wallace (eds), Policy-Making in the European Union (Oxford, Oxford University Press, 1996) 71–96. 52 European Commission, Protecting the financial interest of the community: the fight against fraud: 1994. Annual Report (1995, Office for Official Publications of the European Communities, Luxembourg). 53 Quirke, above n 46, 463. 54 House of Commons, Public Accounts, 29th Report of Session 1998–99, Financial Management and Control in the European Union, 7 July 1999, para 97. 55 PC van Duyne, ‘VAT fraud and the policy of global ignorance’ (1999) 1 European Journal of Law Reform 425–44, 426. 56 For an analysis of the instruments available at the time see L Leigh and B Chase, ‘Legal instruments against EU fraud in the post-Maastricht period’ in Vervaele, above n 18, 43–52.

8

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 8 /

Date: 30/6

JOBNAME: Stefanou PAGE: 9 SESS: 27 OUTPUT: Tue Aug 9 13:14:31 2011

The Move to OLAF means. Proof of inefficiencies in data availability is that the data kept by the three out of four Commission units did not correspond to data in the Pre-IRENE database.57 Sixth, in addition to these problems, the many regulatory instruments of UCLAF and those establishing a common area of criminal justice in the EU had not been ratified and were not in force thus depriving the unit from an environment within which it could flourish, even if the gaps identified as its weaknesses were to be taken into account.58 A prime example of that is the PIF Convention.59 At the same time even the ratified instruments created an incomplete environment for UCLAF’s work, with gaps as pronounced as the lack of a common definition of fraud.60

THE MOVE TO OLAF

Amongst increasing dissatisfaction with UCLAF came a series of badly handled cases of internal checks. I refer of course to the famous Cresson scandal, which led to the resignation of the Santer Commission in 1999.61 When the allegations of a Commission official to the European Parliament were confirmed by the specially concocted Committee of Independent Experts, the Commission lost all credibility and UCLAF proved unable to deal with internal investigations effectively.62 It is difficult to trace the start of the avalanche that led to these dramatic events. Some consider the start of UCLAF’s and the Commission’s demise to be the allegations of fraud in the EU made in 1995 by the British Conservative MEP Edward McMillan-Scott.63 The beginning of it all, however, at least at an institutional level, came when the Court of Auditors refused to certify the Commission’s annual accounts. The efficiency of UCLAF as the unit responsible 57 Special Report No 8/98 on the Commission’s services specifically involved in the fight against fraud, notably the ‘Unité de coordination de la lutte anti-fraude’ (UCLAF) together with the Commission’s replies (pursuant to Article 188c(4), second subparagraph, of the EC Treaty), OJ C 230, 22 July 1998, 1–44, paras 1.5; 3.8–3.9. 58 V Pujas and M Rhodes, ‘Party finance and political scandal in Italy, Spain and France’ (1999) 22 West European Politics 41–63. 59 European Parliament, ‘Resolution on the Commission’s 1996 Annual Report (COM(97)0200— C4–0230/97) and its Work Programme for 1997/98 on the protection of the Community’s financial interests and the fight against fraud (COM(97)0199—C4–0231/97), 22 October 1997, A4–0287/1997, point 19. 60 Miceli, above n 17, 41. 61 Commission Report ‘Evaluation of the activities of the European Anti-fraud Office (OLAF)— Parliament and Council Regulation (EC) No 1073/1999 and Council Regulation (Euratom) No 1074/1999 (Article 15)’, COM(2003) 154 final. 62 V Pujas, ‘The European Anti-Fraud Office (OLAF): a European policy to fight against economic and financial fraud?’ (2003) 10 Journal of European Public Policy 778–97, 780. 63 A Tomkins, ‘Responsibility and resignation in the European Commission’ (1999) 62 Modern Law Review 744–65, 744.

9

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 9 /

Date: 30/6

JOBNAME: Stefanou PAGE: 10 SESS: 26 OUTPUT: Tue Aug 9 13:14:31 2011

Genesis: UCLAF and the Transition to OLAF for combating fraud in external investigations was placed under serious doubt in a damning and unusually harsh Report of the Court of Auditors for 1997, in which the Court found that £3 billion were ‘wasted, lost or embezzled’.64 Moreover, the efficiency of UCLAF was put into question by the very unit which, in 1998, declared that £600 million of the Commission’s humanitarian aid between 1993 and 1995 could not be accounted for. And, to top that, UCLAF declared that the reason why such a huge irregularity had not come to light before was that the Court of Auditors was not kept in the picture by the Commission.65 These events allowed the European Parliament to conclude that UCLAF had not managed to realise the zero-tolerance policy on fraud demanded by consecutive Councils: first, few cases succeeded in securing convictions; second, in internal cases the Commission referred the case to the competent judicial authorities in exceptional cases only; and third, disciplinary proceedings were rarely instigated.66 To make matters worse, at the time when the Parliament was considering the Court of Auditors’ damning report on UCLAF, an internal whistle-blower, Paul van Buitenen, revealed an attempt by Commission officials to cover up cases of corruption within the service. The most prominent of those was the employment of an octogenarian dentist by Mme Cresson.67 The Parliament demanded the resignation of the Commission with the initial support of the Conservatives, Liberals and Greens, and then with the added support of the Socialists. The participation of the Socialists in the attack against the Commission signified a turn from an attack against individual Commissioners to an attack against the corrupt Commission as a body.68 In the end the motion of censure failed, but the Commission accepted the establishment of a Committee of Independent Experts with the mandate to report on the Commission’s modus operandi with exclusive reference to allegations already made.69 The Committee’s mandate was to examine the way in which the Commission detects and deals with existing cases70 of fraud, mismanagement, favouritism and

64

M Walker, ‘Bungling and theft waste millions’, The Guardian, 18 November 1998. House of Commons Research Paper 99/32, ‘The resignation of the European Commission’, March 1999, http://www.parliament.uk/commons/li/research/rpintro.htm. 66 European Parliament Committee on Budgetary Control, ‘Report on the independence, role and status of the Unit for the Coordination of Fraud Prevention (UCLAF) (Special Report No 8/98 of the Court of Auditors concerning the Commission departments responsible for fighting fraud) (C4– 0483/98)’, Rapporteur: Mr Herbert Bösch, A4–0297/98, 22 September 1998, DOC_ EN\RR\361\361615, PE 225.069/fin, p.12. 67 The Guardian, 9, 10, 11, 12, 13, 14 and 15 January 1999. 68 The Guardian, 8 January 1999. 69 European Parliament, ‘Motions for resolutions B4–0021, 0046, 0065, 0067, 0107, 0109 and 0110/99, motions of censure against the Commission’, B4–1165/98 and 0053/99 of 14 January 1999, OJ C 104/96, 14 April 1999. 70 K Li, ‘Recommendations for the curbing of corruption, cronyism, nepotism and fraud in the European Commission’ (2000–2001) 24 Boston College International and Comparative Law Review 161–76, 168. 65

10

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 10 /

Date: 1/6

JOBNAME: Stefanou PAGE: 11 SESS: 26 OUTPUT: Tue Aug 9 13:14:31 2011

The Move to OLAF nepotism,71 including a fundamental review of Commission practices in the awarding of all financial contracts.72 The Committee interpreted this mandate to refer to an examination of Commission procedures and practices in relation to specific cases, rather than to an in-depth investigation of the merits of each case. Such an investigation would indeed imply a repetition of the examination of many of the Commission’s activities already undertaken by the competent bodies such as Parliament’s Committee on Budgetary Control, the Commission’s Financial Control departments (DG XX) and UCLAF.73 The Committee’s conclusions were so damning for the Commission that the latter resigned on the night of the Committee’s Report, on 15 March 1999. The European Parliament expressed relief at the resignation and demanded the urgent appointment of a new Commission, accountable to the Parliament, and radically reformed financial management and financial reporting procedures.74 It is worth noting that the Committee commented on UCLAF’s handling of the specific cases reviewed, and identified significant delays in the initiation of UCLAF investigations; unilateral decisions on notification of Commission services involved in investigations by UCLAF’s Director; antagonism between the unit and other Commission services, such as Ms Bonino’s private office and DG XX; refusal of data exchange from UCLAF to the Parliament’s Rapporteur; and leaks of UCLAF reports to the press. Perhaps more importantly, the Committee expressed concerns about profound discrepancies between UCLAF’s initial mandate and its role in the combat of fraud: UCLAF seems to act as an internal auditing service, whereas this was not its reason for establishment and its staff lacked the required professional skills. UCLAF’s tasks should be to consider, coordinate and supervise all internal and external cases of fraud against the financial interests of the Community. It was evident that UCLAF was not fulfilling its aim. In fact, UCLAF’s intervention sometimes slowed the procedures down, without necessarily improving the end result.75 These problems led to a call for an inter-institutional body dealing as a central unit with all cases of fraud against the financial interests of the European Community. Since an amendment to the Treaties could not be secured quickly as a means of responding immediately to the urgent need for the new unit, the proposal was to offer the new unit (OLAF) a status equivalent with that of the

71 H Bösch, ‘Report on the protection of the Communities’ financial interests and the fight against fraud—annual report 2001 (2002/2211(INI)), A5–0055/2003, 3 March 2003, 9. 72 European Parliament, Resolution of 14 January 1999 on improving the financial management of the Commission, OJ 1999 C 104/106. 73 Committee of Independent Experts, ‘First Report on Allegations regarding Fraud, Mismanagement and Nepotism in the European Commission’, 15 March 1999, http://www.europarl.europa.eu/ experts/pdf/reporten.pdf, 1.1.2, 9. 74 European Parliament, Resolution on the Resignation of the Commission, B4–0327, 0328, 0329, 0330, 0331, 0332 and 0333/99, 23 March 1999. 75 Committee of Independent Experts, ‘First Report on Allegations regarding Fraud, Mismanagement and Nepotism in the European Commission’, 1999, 9.4.18, 143.

11

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 11 /

Date: 1/6

JOBNAME: Stefanou PAGE: 12 SESS: 26 OUTPUT: Tue Aug 9 13:14:31 2011

Genesis: UCLAF and the Transition to OLAF Office of Official Publications, which belonged within the Commission structure but had independent decision-making powers.76

AN EVALUATION OF UCLAF

Pujas argues that UCLAF’s demise was predictable.77 What was reflected in the often venomous attack of the Parliament on the Commission was the tension between the two institutions. This led to a final shift of power from the latter to the former. This may well be true: after all, at a time when the Parliament was fighting for a better role in the balance of powers amongst EU institutions, its fight for the financial vindication of EU taxpayers was an excellent, and actually easily successful, forum to demonstrate the Parliament’s representation of citizens’ interests. In fact, the case of UCLAF served the Parliament in a dual manner: first, this was a concrete case for the application of pressure for more power to the Parliament as the protector and defender of citizens’ interests; second, the source of this power to be shifted to the Parliament was obviously the Commission, whose lack of accountability led to internal corruption and external inefficiency. The case of UCLAF made the point so strongly that the Parliament won in the short term and the long term. But the question is whether UCLAF could ever succeed in its mission. It would be difficult to see how this could ever have been possible. There were three dimensions to the catch-22 situation faced by UCLAF: institutional, regulatory and operational. First, the institutional environment within which UCLAF was asked to produce results was so fluid and fragmented that any attempt to function within it presented obvious difficulties. UCLAF was a centralised unit, expected to work within an embryonic policy of freedom, security and justice, whose intergovernmental characteristics could not sustain a supra-governmental unit such as UCLAF. Moreover, UCLAF was the first institution, the institutional seed, of a policy of freedom, security and justice. Leaving the regulatory vacuum aside, UCLAF was expected to work within an existing, tightly regulated institutional environment of Commission auditory services, the Court of Auditors and

76 European Parliament Committee on Budgetary Control, ‘Report on the independence, role and status of the Unit for the Coordination of Fraud Prevention (UCLAF) (Special Report No 8/98 of the Court of Auditors concerning the Commission departments responsible for fighting fraud) (C4– 0483/98)’, Rapporteur: Mr Herbert Bösch, A4–0297/98, 22 September 1998, DOC_ EN\RR\361\361615, PE 225.069/fin, p.14. 77 Pujas, above n 62, 788.

12

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 12 /

Date: 1/6

JOBNAME: Stefanou PAGE: 13 SESS: 26 OUTPUT: Tue Aug 9 13:14:31 2011

An Evaluation of UCLAF the Parliament. UCLAF had to position and distinguish itself from these wellestablished institutions with adequately set functions, while at the same time adapting to the introduction of any one of the many subsequent bodies in the area of criminal law, such as Europol.78 Second, from a regulatory point of view UCLAF was not awarded a precise mission: it was only burdened with the disproportionately general task of combating fraud against the financial interests of the European Community. But success in this task required the crucial contribution of the many actors in the field: successful legislative actions over which UCLAF had mere indirect power of legislative initiative; successful ratification of these EC legislative actions by all Member States to which UCLAF had no influence at all; strict enforcement of national implementing measures and processes which were often unknown and un-notified to UCLAF;79 and inter-institutional cooperation at the EU level at a time when the new criminal law of the EU was being formed and all institutions, agencies and bodies were fighting for a position in the puzzle. Third, the operational framework of UCLAF was incomplete, fragmented and often contradictory. With reference to internal investigations, UCLAF was expected to conduct internal checks as a means of fighting corruption and fraud within the EC. However, only the Commission was subject to UCLAF’s on-thespot checks. All other Community institutions were immune to UCLAF, thus limiting the unit’s field of operations. Moreover, UCLAF was organisationally and financially highly dependent on the Commission, the very institution that the unit was expected to control. Temporary contracts for UCLAF staff, UCLAF’s nature as a unit of the Commission, and UCLAF’s subjection to the responsibility of the Commissioner responsible for the budget were guarantees of failure to such a degree that one wonders if the political will to allow UCLAF to flourish was really there. Furthermore, UCLAF was never afforded the cooperation that its task demanded: other services of the Commission and other EC institutions antagonised the unit rather than worked with it in order to achieve their common aim to combat fraud. As a result, UCLAF’s operations of internal checks could not possibly succeed. With reference to external investigations, UCLAF faced an even more impossible task. UCLAF was a mere Commission unit and thus UCLAF officers were really seen as Commission employees without any role or power of a criminal procedural nature. Yet, what in essence were Commission administrators were asked to coordinate the work of national prosecuting and investigating officers with clearly set and respected roles and powers in national criminal processes, and to influence the development of complex, intricate and set-in-law national criminal procedures. By definition, coordination and supervision are handled by senior officers with powers at least comparable to those

78 Council Decision of 6 April 2009 establishing the European Police Office (Europol), OJ L 121/37, 15 May 2009. 79 See contra: A Klipp, ‘From state–state approach towards verticalisation?’ in Vervaele, above n 18, 95–107, 106.

13

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 13 /

Date: 1/6

JOBNAME: Stefanou PAGE: 14 SESS: 26 OUTPUT: Tue Aug 9 13:14:31 2011

Genesis: UCLAF and the Transition to OLAF coordinated and those supervised. UCLAF’s officers never stood a chance. Moreover, UCLAF’s officers were required to be aware of, understand, interpret and apply not just a single set of operational rules, but 15 such sets of national rules, one for each of the then 15 Member States. It is impossible for a single person to be aware of the national criminal laws and processes of all Member States.80 It is even more impossible to work under these rules without the open and unimpeded cooperation of the national authorities. These UCLAF lacked. If one adds to these the many weaknesses of the unit identified by the Parliament, the Court of Auditors and the Committee of Independent Experts, UCLAF has to be seen as a lost cause. But this is not the whole truth. UCLAF managed to produce some results which cannot be considered negligible. First, UCLAF managed to persuade the EC and its citizens that a problem of fraud against its financial interests existed and that it required urgent and immediate action. Second, UCLAF proved that the solution to such cases of fraud was an independent body of a super-institutional nature: this would provide this body with guarantees of independence comparable to those of prosecuting and investigating authorities at the national level. Third, UCLAF tested the waters in the area of operational activities and identified the many weaknesses of the operational framework offered to it by the Council and the Commission. Fourth, UCLAF served as an excellent case for the need to proceed with further harmonisation and regulation in the whole area of freedom, security and justice. And fifth, UCLAF served as a case for the shift of some power from the Commission to the European Parliament. It can therefore be stated that, under the circumstances, UCLAF was a relative success in the fight against fraud. Perhaps more importantly, UCLAF was an excellent champion of the policy for freedom, security and justice, and a fantastic forum for the balance of institutional power in an EC without democratic deficit.

80 BJ Quirke, ‘Fraud against European Public Funds’ (1999) 31 Crime, Law and Social Change 171–91.

14

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter01

/Pg. Position: 14 /

Date: 1/6

JOBNAME: Stefanou PAGE: 1 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

2 Mandate HELEN XANTHAKI

INTRODUCTION

UCLAF did not manage to respond to the need for effective protection of the financial interests of the EC. OLAF was born with fresh hopes and a mandate to achieve where UCLAF had failed. The question is whether the legal regulatory framework within which OLAF was placed provided this body with the clarity of regulation and effectiveness of tools required for the effectiveness of OLAF itself. It is not easy to provide an evaluation to a body that has a short history of eight years behind it. However, an analysis of its regulatory framework can contribute to the debate by assessing whether OLAF can indeed succeed in its mandate or whether, much as UCLAF, OLAF is destined to fail.

LEGAL BASIS

Articles 317 and 325 of the Treaty (Old Articles 274 and 280 EC) It would seem naïve, to say the least, to expect a clear legal basis for OLAF in an environment where the existence of a clear legal basis for EU criminal law as such is under debate. The provisions which in the past have been used as a legal basis for OLAF’s existence are EC Article 317 (ex Article 274) and EC Article 325 (ex Article 280).1 Article 317 EC refers to the budget and introduces the obligation of the Commission to implement it observing the principles of sound financial management and the obligation of Member States to cooperate with the Commission to ensure that the rules of financial management are indeed observed.

1 J Ginter, ‘Compatibility of the Estonian penal law to the need for protection of financial interests of the European Union’ (2001) 6 Juridica International 184–97, 185.

15

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 1 /

Date: 30/6

JOBNAME: Stefanou PAGE: 2 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Mandate These rules include the prevention of fraud and this is covered by EC Article 325, which assigns the task of taking measures to prevent and counter fraud against the financial interests of the Community, now the Union, to the Community and the Member States jointly. It is noteworthy that the term ‘financial interests of the Community’ in Article 325 EC is not restricted exclusively to the budget of the European Community in the strict sense but also covers the resources and expenditure of the European Investment Bank2 and the European Central Bank.3 These obligations include specific tasks for the Member States individually and in Council, and the Commission and Member States jointly. This classification of tasks reflects the relative exclusivity of legislative initiative of the Member States in the field of fraud and criminal law in general by including the Member States, individually or in Council, in all tasks set to materialise the fight against fraud. However, in placing the Commission as a joint partner to most of the tasks set for Member States, the provision constitutes an attempt on behalf of the Community legislator to offer the Commission an indirect role in the legislative process and the implementation of legislative action within the hostile—for the Commission—environment of the third pillar. One wonders whether this provision was introduced because of an alleged known reluctance of Member States to take measures against fraud which required Commission action for progress, or whether this was an attempt by the Community legislator to award a role to the Commission in the third pillar through the back door. Article 325 provides that Member States must offer the same protection to the financial interests of the Community that is awarded by their national law for the protection of the financial interests of their own state.4 They are also obliged to coordinate their action against fraud. In Council Member States are obliged to legislate for the prevention and combat of fraud against the financial interests of the Community: however, these measures may not tackle the application of national criminal law or process.5 It seems that the Community legislator attempts to provide for dual action against fraud: at the national level, it obliges Member States to take national legislative action for the prevention and combat of fraud. In fact, when national action is taken, Member States must take into account the level of protection offered by the other Member States;6 at the EC level, Member States in Council legislate against fraud on measures that do not

2 Case C–15/00 Commission of the European Communities v European Investment Bank [2003] I–7281. 3 Case 110/75 Mills v EIB [1976] ECR 955; C–11/00 Commission of the EU v ECB [2003] ECR I–7147. 4 This is known as the assimilation principle: ‘Report from the Commission—Implementation by Member States of the Convention on the Protection of the European Communities’ financial interests and its protocols’, COM(2004) 709, 3. 5 Resolution on criminal proceedings relating to the protection of the Union’s financial interests, OJ C 138, 4 May 1998, 61. 6 This is known as the principle of equivalence: ‘Report from the Commission—Implementation by Member States of the Convention on the Protection of the European Communities’ financial interests and its protocols’, COM(2004) 709, 3.

16

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 2 /

Date: 30/6

JOBNAME: Stefanou PAGE: 3 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Legal Basis affect national criminal justice and process. In other words, there is an attempt to harmonise legislation for the prevention and fight against fraud related to the financial interests of the Community via EC legislative action, while at the same time there is a legal basis of approximation of national criminal law and processes for the attainment of the same goals. In fact, the provision takes matters one step further by regulating that facilitation of approximation in law and practice must be undertaken by the Member States, jointly with the Commission, through the organisation of close and regular cooperation between competent national authorities. Moreover, the Commission in cooperation with Member States must submit an annual report on the measures against fraud to the European Parliament and the Council. The PIF Regulation The general stipulations of the Treaty were further detailed in the PIF Regulation, namely Council Regulation No 2988/95.7 The Regulation introduces a definition for irregularities for the first time in EC law: irregularity is any action or omission in breach of EC law by economic operators that affects negatively the general budget of the Communities or budgets managed by them. Such negative effects are a reduction or loss of revenue accruing from own resources collected directly on behalf of the Communities or by an unjustified item of expenditure. It is noteworthy that there is no subjective element, no mens rea, in the definition of irregularities. Moreover, there is a problem in the introduction of the offence as such. In other words, the Regulation defines what an irregularity is, but does not proceed to introduce the offence by stating that it is an offence to commit an irregularity. The reason behind this obvious drafting failure can be the lack of competence to introduce offences in the first pillar, namely via Regulations. Or simply, the definition of irregularities is so vague that it would not make sense to criminalise such broadly described behaviour. The Regulation states clearly that irregularities are breaches of EC law.8 However, the Commission extends this provision to breaches of national implementing measures of EC law on the basis of the principle of complimentarity between EC and national laws.9 It must also be noted that Member States cannot constitute economic operators for the purposes of the PIF Regulation.10 The Regulation offers a legal basis for administrative checks, legal measures and penalties introduced for the protection of the financial interests of the Communities: these can only be introduced if they meet requirements of 7 Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities’ financial interests, OJ L 312, 23 December 1995, 1–4. 8 J Lacny, ‘European Prosecutor’s Office in Draft Treaty establishing a Constitution for Europe’ [2006] Perspectives Internationales et Européennes, http://revel.unice.fr/pie/document.html?id=282. 9 European Commission, European Anti-Fraud Office (OLAF), ‘Requirement to notify irregularities: practical arrangements’, Working document, 19th meeting COCOLAF, 11 April 2002, 5. 10 Council Conclusions, Council FIN 233, No 8138/95, Section 9, Articles 1 and 7, 14 June 1995.

17

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 3 /

Date: 1/6

JOBNAME: Stefanou PAGE: 4 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Mandate effectiveness, proportionality, dissuasiveness and legality through their adoption via express EC laws. The criteria for proportionality of administrative and criminal penalties are expressly set as the nature and seriousness of the irregularity, the advantage granted or received, and the degree of responsibility. In a style reflective of the then embryonic stage of Communities’ action in the field of criminal law in its broadest sense, the Regulation attempts to establish the action requested from Member States while attempting to instigate a degree of approximation of the relevant national laws and procedures in sporadic and seemingly unrelated aspects of fraud against the financial interests of the then Communities. This fragmented approach to a concrete problem can only be seen as another confirmation to the conviction that EC law has in the past been a diplomatic law, which produces legal provisions exclusively in areas where political agreement has been secured. Thus, Article 2(4) confirms that checks, penalties and measures are governed by the national laws of the Member States: as a result, it legitimises the multitude of legal provisions of national criminal laws and processes which stipulate the concrete manner in which the protection of the financial interests of the Communities can be realised. The Regulation accepts the lack of Communities’ competence in the field of criminal law and attempts to infiltrate the accepted variation of national measures and practices through a series of specialised provisions on aspects of the relevant laws where approximation had been achieved, at least at the level of political will reflected in the inevitably vague legislative provisions of the Regulation.11 Thus, the general definition of irregularity, a success in itself, is followed by the agreed four-year period of limitation for proceedings against irregularities in Article 3, and the agreed three-year period of implementation of any administrative penalties the nature of which is addressed in Title II of the Regulation. It is obvious that these are the only two general points where national laws, interests and positions could be encapsulated in concrete provisions for the Regulation. Having established the definition of irregularities, the PIF Regulation proceeds with a list of broadly stated penalties and measures of an exclusively administrative—not criminal—nature,12 as expressly repeated in Articles 4(4) and 5 of the PIF Regulation. It is worth stating nonetheless that the measures of Article 4 are commonly implemented by Member States as criminal penalties.13 The aim of any administrative measure is to withdraw the wrongfully obtained advantage by the economic operator committing an irregularity. In contrast to

11 For an analysis of this argument in some detail see JAE Vervaele, ‘Administrative Sanctioning Powers of and in the Community: towards a system of European administrative sanctions?’ in JAE Vervaele (ed), Administrative Law Application and Enforcement of Community Law in the Netherlands (Deventer-Boston, Kluwer, 1994) 161–202. 12 Case C–63/00, Schilling and Nehring [2002] ECR I–4483, paras 26–27. 13 J Vogel, ‘Sanctioning irregularities against the EC’s interests: The impact of EC sanctions on national systems of sanctions’, International Seminar ‘Re-launching the European project: needs for protecting EC interests and new strategies for penal integration pending the European Constitution’, Catania, 24–26 May 2007, http://www.lex.unict.it/10yearsconference/vogel.pdf.

18

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 4 /

Date: 1/6

JOBNAME: Stefanou PAGE: 5 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Legal Basis the definition of irregularities which does not refer to mens rea at all, Title II draws a distinction between irregularities committed by negligence and intentional irregularities with heavier measures. Last but not least the PIF Regulation introduces the first provisions on checks to be conducted in the Member States. Most importantly, checks are regulated by the national substantive and procedural criminal provisions. However, these measures are placed under the assessment and evaluation of the Commission: in Article 4 the Commission is assigned with the task to carry checks on the conformity of administrative practices with Community rules; the existence of the necessary substantiating documents and their concordance with the Communities’ revenue and expenditure; and the circumstances in which such financial transactions are carried out and checked. In Article 9(2) the Commission is also offered a legal basis for checks and on-the-spot inspections under the conditions laid down in the sectoral rules, provided that the Member State concerned has been informed by the Commission. It is interesting to note that the Commission informs Member States of the investigations, a provision which signifies that it is the Commission—rather than the national authorities—that conducts these investigations.14 The PIF Regulation constitutes a first attempt to regulate the concrete method for the protection of the financial interests of the Community.15 There is no doubt that the Regulation constitutes a significant step towards the regulation of fraud against the budget of the Community. The definition of irregularities, the introduction of some—albeit sporadic—harmonised provisions, the listing of administrative penalties and measures, and the first provisions on checks and on-the-spot inspections constitute a first attempt for a common front against the increasing phenomenon. The problem lies with the obvious reliance of the Regulation on a variety of national provisions that are in force in parallel with these sporadic EC provisions.16 Conflicts may arise from the classification of behaviour as a criminal offence under national law and in parallel as an administrative offence under the PIF Regulation, or from the erasure of an offence under the Regulation when the national limitation period may not have expired yet.17 However, the PIF Convention cannot be viewed as a complete document. It does not introduce a criminal offence; it merely states what the objective elements of a possible administrative or criminal offence of that nature could be at the national level. It must be stated that the limited extent of clear, and therefore effective, provisions on the matter is a trade-off with the compulsory acceptance of all PIF Regulation provisions by the Member States: in order 14 K Hamdorf, ‘The role of the European Anti-fraud Office in the process of EU enlargement’ (2001) 31 Agon 8–14, 9. 15 A Posadas, ‘Combatting corruption under international law’ (2000) 10 Duke Journal of Comparative and International Law 345–414, 396. 16 C Van den Wyngaert, ‘The Protection of the Financial Interests of the EU in the Candidate States. Perspectives on the Future of Judicial Integration in Europe’ (2001) 3 ERA Forum 2–60. 17 Vogel, above n 13, para 7.

19

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 5 /

Date: 1/6

JOBNAME: Stefanou PAGE: 6 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Mandate to ensure unified and to a degree enforceable provisions for the protection of the financial interests of the Community, the Community legislator opted for a Regulation in the first, enforceable yet restricted, pillar. Conventions and their Protocols In parallel to the PIF Regulation, the Community legislator introduced the PIF Convention.18 The Convention entered into force on 17 October 2002 and has been ratified by all of the older and most of the new EU Member States,19 albeit not fully,20 at the EU or national level.21 This third pillar instrument could benefit from its criminal nature with a lack of enforceability as a trade-off. Thus, the Convention exploits the luxury of introducing the definition of fraud exclusively22 against the financial interests of the Community as a criminal, rather than an administrative, offence. Fraud affecting the European Communities’ financial interests can relate to expenditure or revenue.23 With regard to expenditure, fraud is 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 European Communities; the 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. With regard to revenue, fraud is 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 European Communities; the non-disclosure of information in violation of a specific obligation, with the same effect; and the

18 Convention drawn up on the basis of Article K.3 of the Treaty on European Union, on the protection of the European Communities’ financial interests, OJ C 316, 27 November 1995, 49–57. 19 For an account of the regime in new Member States see Van den Wyngaert, above n 16, 2–60. 20 ‘Report from the Commission—Implementation by Member States of the Convention on the Protection of the European Communities’ financial interests and its protocols’, COM(2004) 709, not published in the Official Journal; also ‘Green Paper on criminal-law protection of the financial interests of the Community and the establishment of a European Prosecutor of 11 December 2001’, COM(2001) 715 final, not published in the Official Journal; ‘Follow-up report on the Green Paper on the criminal-law protection of the financial interests of the Community and the establishment of a European Prosecutor’, COM(2003) 128 final, not published in the Official Journal. 21 The importance of spending at the national level has been noted in the ‘Opinion of the Committee on regional development for the Committee on Budgetary Control on protection of the European Communities’ financial interests and the fight against fraud’, 2004/2198 (INI), 15.3.2005, draftsman: Vladimír Železný. 22 GP Fletcher, ‘Parochial versus Universal Criminal Law’ (2005) 3 Journal of International Criminal Justice 20–34, 31. 23 Case 110/75 Mills v EIB [1976] ECR 955; C–11/00 Commission of the EU v ECB [2003] ECR I–7147.

20

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 6 /

Date: 1/6

JOBNAME: Stefanou PAGE: 7 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Legal Basis misapplication of a legally obtained benefit, with the same effect.24 In other words the basic elements of EU fraud are an intentional25 act or omission by natural or legal persons26 constituting an irregularity defined as a fraud and, therefore, punishable by Court proceedings; all other acts can therefore only be sanctioned through administrative measures such as fines and denial of further funding.27 With reference to legal persons, the offence exists if at least two complementary criteria are met, namely the offence was committed for the benefit of the legal person and the offence was committed by a natural person with a leading position within the legal person.28 It is worth noting that in 2002 the European Parliament and the Council proposed a Directive criminalising fraud, corruption and money laundering affecting the financial interests of the Community.29 Any action or omission amounting to such a criminal offence must have the effect of reducing the resources of the Community budget or retaining Community funds. Under the proposal Member States would fix the amount for serious fraud to a minimum of €50,000.30 Another proposal of the Commission demanded the establishment of the Office of the European Public Prosecutor aiming to combat fraud effectively.31 The Convention calls upon Member States to incorporate the definition of fraud against the financial interests of the Community to national implementing measures that transpose the Convention into their national laws. The Convention is careful not to introduce a criminal offence as such and therefore does not include the key term ‘it is a criminal offence’; its provisions introduce both the

24 For an analysis of fraud in the PIF Convention and EU law see H Xanthaki, ‘Fraud in the EU: Review of OLAF’s Regulatory Framework’ in I Bantekas and G Keramidas (eds), International and European Financial Criminal Law, (London, Butterworths Lexis-Nexis, 2006) 120–53, 120–21. 25 Explanatory Report on the Convention on the protection of the European Communities’ financial interests (Text approved by the Council on 26 May 1997), OJ C 191, 1–10. 26 Second Protocol, drawn up on the basis of Article K.3 of the treaty on European Union, to the Convention on the protection of the European Communities’ financial interests—Joint Declaration on Article 13(2)—Commission Declaration on Article 7, OJ C 221, 19 July 1997, 12–22. 27 Effects of European Union Accession, Part 1: Budgeting and Financial Control, OECD SIGMA Paper No 19, March 1998, Appendix 3: List of Useful Terms, http://appli1.oecd.org/olis/1997doc.nsf/ LinkTo/OCDE-GD (97) 163. 28 Explanatory Report on the Second Protocol to the Convention on the protection of the European Communities’ financial interests (text approved by the Council on 12 March 1999), OJ C 91, 31 March 1999, 8–19. 29 Proposal for a Directive of the European Parliament and of the Council on the criminal-law protection of the Community’s financial interests, OJ C 240 E, 28 August 2001; Amended proposal for a Directive of the European Parliament and of the Council on the criminal-law protection of the Community’s financial interests, COM(2002) 577 final, OJ C 71 E, 25 March 2003. 30 This is in compliance with the Explanatory Report on the Convention on the protection of the European Communities’ financial interests (text approved by the Council on 26 May 1997), OJ C 191, 1–10. 31 Communication from the Commission of 29 September 2000, Additional Commission contribution to the Intergovernmental Conference on institutional reforms, The criminal protection of the Community’s financial interests: a European Prosecutor, COM(2000) 608 final, not published in the Official Journal.

21

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 7 /

Date: 30/6

JOBNAME: Stefanou PAGE: 8 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Mandate objective and the subjective elements of the offence which will be created at the national level. Thus, the Convention clarifies that intent is necessary for the conduct of the offence of fraud: unintentional irregularities that are classified as fraud do not constitute a criminal offence and fall within the field of application of the PIF Regulation. Similarly, all international irregularities which are not included in the exhaustive list of Article 1 of the PIF Convention are administrative offences and are punishable under the provisions of the PIF Regulation. It is clear that the aim of the Community legislator was to achieve a minimum administrative penalty for all irregularities. This was ensured by use of the PIF Regulation, which of course is directly applicable in all Member States. Therefore, it applies irrespective of whether the Member State involved has proceeded to its transposition through national implementing measures. It is questionable, however, whether this goal has been achieved in view of the general drafting style of the PIF Regulation and the lack of a clear term introducing the offence: this renders the use of the Convention as a directly applicable measure rather inadequate at the national level, at least without subsequent national transposition. Nonetheless, having achieved a minimum standard of administrative regulation, at least in theory, the Community legislator proceeded with the PIF Convention which introduces with clarity and precision the objective and subjective elements of a criminal offence. The teeth of the Convention, however, can only be sharpened by national implementing measures of quality and thus effectiveness. And this has not yet been fully achieved.32 In fact although the Convention (and its first protocol) entered into force on 17 October 2002, the Czech Republic, Hungary and Malta have yet to ratify it.33 Moreover, the many declarations and exclusions of application of specific provisions from a number of Member States take the Convention a considerable step towards the protection of the financial interests of the Community, which cannot, however, be considered to have achieved its aims in full. Thus, a number of Member States are not bound by Article 7(1) of the Convention under variable conditions. Austria, Finland, Germany, Denmark, Greece, Italy, Sweden, Slovenia, and Slovakia have all passed declarations of inapplicability of this provision of the Convention, which applies the rule of ne bis in idem in the case of the prosecution of fraud against the final interests of the Community. Thus, these Member States do not have the obligation to end the prosecution of fraud against persons who have been convicted for the same offence in other Member States

32 ‘Report from the Commission—Implementation by Member States of the Convention on the Protection of the European Communities’ financial interests and its protocols’, COM(2004) 709, not published in the Official Journal; also ‘Green Paper on criminal-law protection of the financial interests of the Community and the establishment of a European Prosecutor of 11 December 2001’, COM(2001) 715 final, not published in the Official Journal; ‘Follow-up report on the Green Paper on the criminal-law protection of the financial interests of the Community and the establishment of a European Prosecutor’, COM(2003) 128 final, not published in the Official Journal. 33 S Peers, ‘The “Third Pillar acquis” after the Treaty of Lisbon enters into force’, Statewatch Analysis, 3 November 2009, 6.

22

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 8 /

Date: 30/6

JOBNAME: Stefanou PAGE: 9 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Legal Basis and whose penalty has been imposed and enforced, or is being enforced, or can no longer be enforced there. Despite the obvious legal basis for abstinence from the provision by a number of Member States which are reluctant to extend the principle of ne bis in idem even in the current single area of freedom, security and justice, the effect of these declarations to the work of OLAF can be detrimental to the agency’s success. OLAF’s ability to coordinate the fight against fraud of the financial interests of the EC and now the EU is clearly diminished by the agency’s inability to select a single forum of prosecution where all evidence and facts combined can demonstrate the true extent of fraud, especially in multinational or transnational cases. If prosecution were to remain with a single jurisdiction, then all national prosecution services involved would be happy to offer all facts, evidence and contents of files to the prosecuting state knowing that these would be useless to them, if prosecution abroad were to be successful. In contrast, the parallel prosecution of fraud in numerous jurisdictions fragments the file, evidence and facts in a manner that fragments the actual offence to the sole benefit of the fraudster. Thus, the application of Article 6 on an effective cooperation between national prosecuting authorities in cases involving more than one Member State is severely compromised. The image of fragmentation of the application of the PIF Convention and its Protocols is further accentuated by the possible diversity in the interpretation of these instruments in the Member States. Thus, according to the ECJ Protocol the majority of Member States (apart from Estonia) offer competence for the interpretation of the Convention and its First Protocol to the ECJ thus encouraging a degree of harmonisation in the interpretation and consequent national application of the provisions. However, this is not the case with the Czech Republic, Estonia, the UK, Hungary, Malta, Poland and Romania.34 The PIF Convention was subsequently supplemented by two further Protocols. The first Protocol introduces the definitions of the offences of active and passive corruption35 and urges Member States to create criminal offences in their national criminal laws with the objective and subjective elements introduced by Articles 2 and 3 of the Protocol.36 Active and passive corruption of officials

34 Protocol drawn up on the basis of Article K.3 of the Treaty on European Union, on the interpretation, by way of preliminary rulings, by the Court of Justice of the European Communities of the Convention on the protection of the European Communities’ financial interests—Declaration concerning the simultaneous adoption of the Convention on the protection of the European Communities’ financial interests and the Protocol on the interpretation by way of preliminary rulings, by the Court of Justice of the European Communities, of that Convention—Declaration made pursuant to Article 2, OJ C 151, 20 May 1997, 2–14. 35 Calls for a complete definition of corruption can be traced as far back as 1998 in the Resolution on the communication from the Commission to the Council and the European Parliament on a Union policy against corruption (COM(97)0192 C4–0273/97), OJ C 328, 26 October 1998, 46. 36 Protocol drawn up on the basis of Article K.3 of the Treaty on European Union to the Convention on the protection of the European Communities’ financial interests—Statements made by Member States on the adoption of the Act drawing up the Protocol, OJ C 313, 23 October 1996, 2–10.

23

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 9 /

Date: 30/6

JOBNAME: Stefanou PAGE: 10 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Mandate encompasses Community and national persons. However, the term ‘national official’ is applied with reference to its definition under the national law of each implementing Member State.37 Passive corruption is defined as the ‘deliberate’ acceptance of an advantage by an official to the benefit of the official or a third party. Active corruption is defined as the ‘deliberate’ promise or offer of an advantage to an official to the benefit of the official or a third party. These offences incur criminal penalties which must be effective, proportionate and dissuasive.38 The provisions of the Second Protocol are confirmed and repeated in the EU Convention on the fight against corruption.39 The PIF and the Anti-Corruption Conventions have managed to achieve criminalisation of fraud and corruption40 at least to a degree.41 Thus, in Germany compliance with the Anti-Corruption Convention is characterised as ‘formal’ and implementation of the assimilation principle is ‘not satisfactory’ in the case of bribery for licit deeds, which is punished only if committed by a German national official. And in Slovakia full compliance may depend on the courts’ interpretation of the relevant laws.42 It is also worth considering that the Czech Republic, Hungary, and Malta have yet to ratify the PIF Convention, whereas Estonia has not ratified the ECJ Protocol. The Czech Republic and Malta have not yet ratified the Anti-corruption Convention, which entered into force on 28 September 1995. However, both instruments suffer from great ambiguity, thus failing to meet their goal to standardise the definition and penalties of fraud, active and passive corruption through the principles of assimilation and equivalence, which is also introduced in Article 325 EC.43 Discrepancies refer to both the subjective and objective elements of the offences of fraud, active and passive corruption. The Commission reports a multitude of inadequacies and discrepancies in the objective elements of these crimes.44 The definition of national officials is left to

37

Case C–237/06 P Guido Strack v Commission of the European Communities ECR [2007] I–33. Within the meaning of Case 68/88 Commission v Greece [1989] ECR 2965 and Case C–352/92 Milchwerke Köln/Wuppertal eG [1994] ECR I–3385. 39 Convention drawn up on the basis of Article K.3(2)(c) of the Treaty on European Union on the fight against corruption involving officials of the European Communities or officials of Member States of the European Union, OJ C 195, 25 June 1997, 2–11. 40 L Salazar, ‘La protection des intérêts financiers de l’UE: un grand avenir derrière elle …’ [2008] Eucrim, 115–19, 116. 41 L Ferola, ‘The fight against organised crime in Europe—Building an area of freedom, security and justice in the EU’ (2002) 30 International Journal of Legal Information, 53–91, 77. 42 Commission of the European Communities, ‘Second Report from the Commission: Implementation of the Convention on the Protection of the European Communities’ financial interests and its protocols. Article 10 of the Convention’, COM(2008) 77 final, SEC(2008) 188, Brussels, 14 February 2008, 3. 43 ‘Report from the Commission—Implementation by Member States of the Convention on the Protection of the European Communities’ financial interests and its protocols’, COM(2004) 709, 4. 44 Commission of the European Communities, ‘Second Report from the Commission: Implementation of the Convention on the Protection of the European Communities’ financial interests and its protocols. Article 10 of the Convention’, COM(2008) 77 final, SEC(2008) 188, Brussels, 14 February 2008. 38

24

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 10 /

Date: 1/6

JOBNAME: Stefanou PAGE: 11 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Legal Basis the national legal orders, thus inviting discrepancies as to who can be subject to these provisions. In France, fraud in the form of non-disclosure of information in violation of a specific obligation seems to be punished only in exceptional cases. In Hungary and Estonia misapplication of funds does not cover all expenditure. In a large number of Member States criminal liability of heads of businesses under Article 3 of the PIF Convention is inadequately introduced as there is a norm of participation: this is the case in Belgium, Denmark, Germany, Ireland, France, Italy, Luxembourg, Austria, Slovenia and Sweden. The subjective elements of the offence are equally vague and incite similar problems: what constitutes a ‘deliberate’ acceptance, promise of offer? Does the conduct of such behaviour undertaken knowingly, but without intent to gain an advantage, constitute a criminal offence? It is worth noting that Belgium, Italy, Latvia, Lithuania, Luxembourg and Austria still ask for additional indications of intent not provided for in Article 1(1)(a) of the PIF Convention. Moreover, Latvian legislation requires additional indications of intent not provided for in Article 1(1)(b) of the Convention. In Luxembourg the offence of fraud requires the additional subjective element of intent, whereas in Austria the law requires proof of the additional subjective element of enrichment. Further problems occur with the national transposition of the Conventions in the field of sanctions. In Belgium the punishment for fiscal fraud affecting the financial interests of the Union are neither proportionate nor dissuasive, with no sufficient custodial sentences. In Lithuania and Slovenia revenue-related fraud offences are subject to minimum thresholds. Additional discrepancies refer to the crucial issue of competence under Article 4 of the PIF Convention and Article 6 of the First Protocol. These refer to cases of corruption, with specific reference to offences committed in whole or in part within their territory; to offences committed by own nationals or officials; or to offences related to Community officials in their own territory. Member States are split on this point as reflected in their Declarations on the First PIF Protocol. Slovakia and the UK have clearly declared that they will not apply this jurisdiction, whereas Lithuania, Luxembourg and Italy will, at least partially. Denmark, the Netherlands, Portugal, and France set a variety of conditions under which they will resume jurisdiction in such cases. The Irish jurisdiction rules on passive personality do not cover passive corruption, while the Latvian and Slovenian rules on jurisdiction over headquarters on their territories are limited to persons residing in the country itself. The Second PIF Protocol,45 which may have entered into force on 19 May 2009 but has yet to be ratified by the Czech Republic, Hungary and Malta, introduces

45 Second Protocol, drawn up on the basis of Article K.3 of the treaty on European Union, to the Convention on the protection of the European Communities’ financial interests—Joint Declaration on Article 13(2)—Commission Declaration on Article 7, OJ C 221, 19 July 1997, 12–22.

25

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 11 /

Date: 1/6

JOBNAME: Stefanou PAGE: 12 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Mandate the details of the offence of fraud when committed by legal persons.46 It took several calls of the Council and the European Parliament for ratification of the Second Protocol to finally take place.47 The very concept of liability of legal persons under Articles 3 and 4 of the Second Protocol has not been transposed in Luxembourg and Slovakia. Spain and Latvia view criminal liability of legal persons not as a stand-alone crime but in conjunction with criminal liability of natural persons. In Belgium, Denmark and the UK criminal liability for legal persons does not extend to the case where lack of supervision or control made it possible for the offence to be committed or where the offence was committed by a subordinate. Moreover, Latvia has yet to provide for seizure, confiscation or removal of instruments of fraud under Article 5 of the Second Protocol. The many reservations and declarations to the PIF Convention in combination with the many points of diversity in the implementation of their provisions lead to the inevitable conclusion that the PIF Convention creates a framework of variable national provisions in the most crucial part of the regulatory framework of OLAF’s work. The inadequacy of the PIF Convention is demonstrated by the repeated attempts of the Commission to introduce a Directive on the criminal protection of the financial interests of the EU.48 This diversity places immense pressure on the agency to be aware of the intricacies of national laws and to operate within the multitude of regulations as they stand in each operation attempted.49 The severity of the problem is such that one wonders whether OLAF actually does have a single regulatory framework to operate in. The OLAF Decision and its Supplementing Instruments Despite the fluidity and vagueness of the legislation within which OLAF has to operate in, the regulatory framework of OLAF itself is rather precise. OLAF was created via the relevant Commission Decision of 28 April 1999.50 The Decision establishes OLAF as the office set to replace UCLAF. OLAF’s mandate is complex. First, it relates to the fight against fraud, corruption and any other illicit activity adversely affecting the financial interests of the Community, and can take the form of external administrative investigations and internal

46 Explanatory Report on the Second Protocol to the Convention on the protection of the European Communities’ financial interests (text approved by the Council on 12 March 1999), OJ C 091, 31 March 1999, 8–19. 47 Justice and Home Affairs Council on 14 April 2005 (Council Doc 6902/05, 6901/2/05); European Parliament resolution on the protection of the financial interests of the Communities and the fight against fraud, OJ C 124 E, 15 May 2006, 232, para 41; Report from the Commission to the European Parliament and the Council—Protection of the Communities’ financial interests, COM(2006) 378 final. 48 COM(2001) 272 final, 23.5.2001, as amended by COM(2002) 577 final, 16.10.2002. 49 C Van den Wyngaert, above n 16, 49. 50 OJ 1999 L 136, 31 May 1999, 20–22.

26

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 12 /

Date: 1/6

JOBNAME: Stefanou PAGE: 13 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Legal Basis investigations.51 Internal investigations may also explore any other serious breaches of duty of Community and national officers which, if proven, can lead to disciplinary or criminal convictions. OLAF’s role in these investigations is the coordination of the operation52 through the organisation of the operation, the analysis of facts collected, and the provision of technical support to EU and national authorities involved in the investigation. For this purpose OLAF is in direct contact with national police and judicial authorities. Second, OLAF supports the Commission in its cooperation with national authorities in the combat of fraud. This is a crucial point in the ineffectiveness of the fight against fraud, as Member States cite several reasons to explain the insufficient use of the cooperation instruments, such as language problems, lack of human resources and limited knowledge of the cooperation procedures among staff.53 Third, OLAF is assigned with the task of defining fraud. Fourth, OLAF prepares the legislative and regulatory instruments of the Commission in the field of its competence. In fact, on the basis of this mandate OLAF has fraud-proofed legislation for the EU since 2001.54 Within this context OLAF prioritises legislative initiatives of the Commission, selects those that can be the most vulnerable and ultimately beneficial in the fight against fraud, and contributes to their drafting by deleting vulnerable provisions and adding provisions that can strengthen the protection of the financial interests of the Union.55 Moreover, a set of model agreements and grant contracts have been drafted by OLAF’s fraudproofing correspondents with some success.56 Fifth, OLAF represents the Commission in all forums related to its field of competence. However, despite OLAF’s mandate as a representative, and therefore an integral part of the Commission, its independence is clearly introduced in Article 3 of the Decision which states that OLAF’s Director may not seek or accept advice or orders from the Commission. In the performance of its mandate OLAF is supervised by a Surveillance Committee.

51 The express stipulation on internal investigations can be traced back to the Resolution on the independence, role and status of the Unit for the Coordination of Fraud Prevention (UCLAF) (Court of Auditors’ Special Report No 8/98 concerning the Commission departments responsible for fighting fraud) (C4–0483/98), OJ C 328, 26 October 1998, 95. 52 ‘Communication from the Commission to the Council and the European Parliament on the prevention of and fight against organised crime in the financial sector’, COM/2004/0262 final. 53 ‘Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee concerning the need to develop a co-ordinated strategy to improve the fight against fiscal fraud’, SEC(2006) 659, COM/2006/0254 final, 31 May 2006, para 3.1. 54 ‘Commission staff working document—accompanying document to the Communication from the Commission to the Council, the European Parliament and the European Court of Auditors— Prevention of fraud by building on operational results: a dynamic approach to fraud-proofing’, COM(2007) 806 final; SEC/2007/1676 final. 55 ‘Communication from the Commission to the Council, the European Parliament and the European Court of Auditors—Prevention of fraud by building on operational results: a dynamic approach to fraud-proofing’, SEC(2007) 1676; COM/2007/0806 final, 4. 56 ‘Guide to testing for vulnerability to fraud’, SG/C/3/ED D96 of 6 May 1996, not published in the OJ.

27

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 13 /

Date: 1/6

JOBNAME: Stefanou PAGE: 14 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Mandate The driving power behind the Office is its Director, whose task is the supervision of all investigations, the compilation of the budget for the Office, and the authorisation of any spending. The Director is nominated by the Commission in consultation with the European Parliament and the Council and in agreement with the Surveillance Committee. The Decision is supplemented by a series of instruments which provide for five main issues. As these instruments delimit and regulate the operational framework of OLAF, they will be analysed in detail in the second part of the book. However, they need to be mentioned here in order to complete the regulatory framework of the Office. First, a set of rules defines the procedures to be followed in all types of OLAF investigations.57 The Regulations introduce provisions on the opening of investigations, the process of investigations, the obligation to inform those investigated, data protection, and financing. Most importantly, these Regulations establish OLAF’s Supervisory Committee, a monitoring unit for OLAF’s independence, operational legitimacy, and operational success. Moreover, they introduce reporting obligations, both for the Supervisory Committee on at least an annual basis, but also of the Office itself on behalf of the Commission to the Council and the Parliament. Leaving the operational issues aside, from the point of view of the regulatory framework these two Regulations, which repeat each other’s provisions as they refer to EC and Euratom respectively, manage to complicate OLAF’s mandate further by introducing once again provisions on the mandate and tasks of OLAF. Unfortunately, the provisions are not verbatim those traced in the OLAF Decision, a serious drafting fault which creates questions as to the current status. Thus, Article 1(2) of the Regulations analyses the Office’s tasks but refers exclusively to the conduct of investigations. In view of the exact same date of passing of the Regulations with the Decision, one wonders which provision prevails and therefore whether all the other tasks assigned to OLAF by the Decision are deleted by a possibly superseding Regulation. Although in practice this has never prevented OLAF from pursuing the Office’s coordinating, legislative, regulatory and representative tasks, the clash in its regulatory framework remains and must be resolved in any forthcoming amendment of the Decision or the Regulations. From the point of view of legislative strategy one wonders why the Community legislator opted for the parallel introduction of one Decision with two Regulations on the same matter, when the issue could have been dealt with via a single clear document with express provisions on each of the topics concerned. The answer can be traced in the different legal basis of each of the two Regulations and the necessity of establishing the Office via the most appropriate

57 Regulation (CE) 1073/99 of the European Parliament and of the Council of 25 May 1999 concerning investigations by the European Anti-Fraud Office (OLAF), OJ 1999 L136, 31 May 1999, 1–7; and Regulation (Euratom) 1074/99 of the European Parliament and of the Council of 25 May 1999 concerning investigations by the European Anti-Fraud Office (OLAF), OJ 1999 L136, 31 May 1999, 8–14.

28

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 14 /

Date: 1/6

JOBNAME: Stefanou PAGE: 15 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Legal Basis instrument, namely the Decision. What is not easy to justify, however, is the replication of provisions on the same issue, such as the tasks of the Office, via a paraphrasing of the same provisions. It may well be that the Community legislator was unsure as to the fate of the Regulation when the Decision was drafted and therefore wanted to repeat the same provisions in the hope that at least one instrument would pass, but this should have been done with care in order to avoid differences between the instruments causing legitimate confusion to the readers and users of the instruments. Moreover, the establishment of the Supervisory Committee by the English version of the Regulations does not explain what its purpose and its distinction from the Surveillance Committee of the English version of the Decision is. Is it the same body? And, if not, why is the Supervisory Committee introduced in an instrument other than the establishing Decision of the Office? Despite the de facto conclusion that all three instruments refer to the same body now known exclusively as the Supervisory Committee, the use of a different term in the OLAF Decision may well allow for the establishment of yet another Surveillance Committee, especially in view of the fact that its tasks in the OLAF Decision are not clearly introduced and can therefore be distinguished from those of the Supervisory Committee. Second, a further set of instruments provide the horizontal bases for on-thespot checks and inspections for all sectors and for all types of investigations. These instruments supplement Regulation 2988/95, the PIF Regulation, which was analysed separately at the beginning of this chapter. Regulation 2185/9658 supplements the PIF Regulation with operational rules on checks and inspections and delimits such investigative measures to cases concerning serious and transnational irregularities, or any type of irregularity involving economic operators acting in several Member States; purely national cases affecting the financial interests of the Community, provided that the national authorities need the assistance of OLAF to secure success in the investigation and prosecution; and cases where Member States request OLAF’s assistance. Thus, such checks can be carried out at the EU level as internal investigations, or at the national level at the request or with the cooperation of national authorities. Within the process of such checks notification of the national authorities and respect of confidentiality and data protection is necessary. It is noteworthy that the Regulation perceives the possibility of checks and the on-the-spot inspections even outside the territory of the Union, an expansion of its field of application which meets with the approval, and often praise, of the European Parliament.59 It is also worth 58 Council Regulation (Euratom, CE) 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities, OJ L 292, 15 November 1996, 2–5. 59 European Parliament resolution on the protection of the financial interests of the Communities and the fight against fraud, 2004/2198(INI), OJ C 124E, 25 May 2006, 232–40, para 40; also European Parliament legislative resolution on the proposal for a Council decision on the conclusion of the Agreement between the European Community and its Member States, of the one part, and the Swiss

29

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 15 /

Date: 1/6

JOBNAME: Stefanou PAGE: 16 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Mandate noting that persons conducting such checks and inspections are referred to the Regulation as Commission inspectors: OLAF is not mentioned expressly in the Regulation.60 Third, a set of instruments regulate the sectoral legal bases concerning on-thespot checks in the fields of own resources;61 the Common Agricultural Policy, including EAGF and EAFRD;62 the Structural Funds;63 and direct expenditures.64 These are applications of Regulation 2988/95 and, when in clash, the Regulation prevails.65 Fourth, further legislation establishes the process on the notification of irregularities and recovery of sums wrongly paid.66 Fifth, the Community legislator also provides for the legal basis and process to be followed for all internal investigations via the Inter-institutional Agreement of the European Parliament, the Council and the Commission.67 The Agreement

Confederation, of the other part, to counter fraud and all other illegal activities affecting their financial interests, COM(2004) 0559 [C6–0176/2004] 2004/0187(CNS), OJ C 304E, 1 December 2005, 106. 60 The interim Council Regulation has been repealed: Council Regulation (EEC) 595/91 of 4 March 1991 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the common agricultural policy and the organisation of an information system in this field and repealing Regulation (EEC) No 283/72, OJ L 67, 14 March 1991, 11. 61 Council Regulation (EC, EURATOM) 1150/2000 of 22 May 2000 implementing Decision 94/728/EC, Euratom on the system of the Communities’ own resources, OJ L 130, 31 May 2000, 1–12. 62 Article 37 of Council Regulation (EC) 1290/2005 of 21 June 2005 on the financing of the common agricultural policy, OJ L 209, 11 August 2005, 1–25, as amended by Council Regulation (EC) 320/2006 of 20 February 2006 establishing a temporary scheme for the restructuring of the sugar industry in the Community and amending Regulation (EC) No 1290/2005 on the financing of the common agricultural policy, OJ L 58, 28 February 2006, 42–50. 63 Article 72 of Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions for the European Regional Development Fund, the European Social Fund and the Cohesion Fund, repealing Regulation (EC) 1260/1999, OJ L 210, 31 July 2006, 25–78. 64 Article 87 of the Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities, OJ L 248, 16 September 2002, 1–48. 65 Case C–94/05 Emsland-Stärke [2006] ECR I–2619, para 50. 66 Commission Regulation 1848/2006 of 14 December 2006 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the common agricultural policy and the organisation of an information system in this field and repealing Council Regulation (EEC) No 595/91, OJ L 355, 15 December 2006, 56–62; also Chapter II, Section 4 (Articles 27 to 36) of Commission Regulation 1828/2006 of 8 December 2006, OJ L 371, 27 December 2006 and corrigendum, OJ L 45, 15 February 2007 setting out rules for the implementation of Council Regulation (EC) 1083/2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and of Regulation No 1080/2006 of the European Parliament and of the Council on the European Regional Development Fund; Council Regulation (EC, Euratom) 2028/2004 of 16 November 2004 amending Regulation (EC, Euratom) 1150/2000 implementing Decision 94/728/EC, Euratom on the system of the Communities’ own resources, OJ L 130, 31 May 2000, 1. 67 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 the European Anti-fraud Office (OLAF), OJ L136, 31 May 1999, 15–19; also Decision 26/2004 of the Committee of the Regions of 10 February 2004 relating to the conditions and procedures for internal investigations in relation to the prevention of fraud, corruption and any illegal

30

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 16 /

Date: 30/6

JOBNAME: Stefanou PAGE: 17 SESS: 17 OUTPUT: Tue Aug 9 13:14:31 2011

Legal Basis begins with a promise, yet unfulfilled, that further legislation will provide for concrete rules on internal checks. What is worth mentioning is that internal investigations are delimited by purpose rather than by nature. As a result internal investigations need not refer to specific suspected offences. They fall within the field of application of the Agreement as long as they serve one of two purposes, namely either the fight against fraud, corruption and any other illegal activity affecting the financial interests of the Community; or the discovery of serious disciplinary or criminal offences by Community officials or servants committed within the course of their professional duties. The Agreement is in itself an excellent show of progress in the second aspect of OLAF’s mandate, namely the conduct of internal investigations. By reaching this Agreement all three Union institutions declare that their staff, servants and officers are subject to OLAF’s investigations. The Agreement foresees the need for declarations by other institutions which will subject their staff to the provisions of the Agreement but such declarations have not been made as yet, at least not expressly. Thus, the position of the European Central Bank, the ECJ and the Court of Auditors is not expressly stated in the Agreement. A subsequent Agreement with the ECB now68 subjects its staff to OLAF investigations.69 The Agreement is plagued by three main weaknesses. First, the Interinstitutional Agreement is of questionable legal value: it is not a binding legal document; it is a mere declaration of intent that is supposed to become legally binding through a set of future implementing instruments. In fact, even the language of the Agreement does not allow for support to the argument that in substance this is really a binding legal document. Thus, the legal basis for one of the two main tasks of OLAF hangs on the honourable disposition of those Union institutions which subject themselves to OLAF’s internal investigations. Second, the details of the operational rules applicable to internal investigations are left to the Treaties and Staff Regulations. But the Treaties are documents of a constitutional nature which do not and cannot really serve as an adequate legal basis for operational action defendable before the national and European courts. Moreover, both instruments are drafted vaguely and cannot possibly be invoked before the national courts without further implementation by concrete legislative texts introducing express rights and obligations for inspectors and the investigated. activity detrimental to the Communities’ interests, OJ L102, 7 April 2004, 84–86; Decision on the amendments to the Rules of Procedure following the Interinstitutional Agreement of 25 May 1999 on the internal investigations conducted by the European Anti-Fraud Office (OLAF), OJ C 189, 07 July 2000, 209–12. 68 ‘Decision of the European Central Bank of 3 June 2004 concerning the terms and conditions for European Anti-Fraud Office investigations of the European Central Bank, in relation to the prevention of fraud, corruption and any other illegal activities detrimental to the European Communities’ financial interests and amending the Conditions of Employment for Staff of the European Central Bank, 2004/525/EC, ECB/2004/11, OJ L 230, 30 June 2004, 56–60. 69 For an analysis of the case that led to the legislative intervention on this, see J Geobel, ‘Court of Justice oversight over the European Central Bank: delimiting the ECB’s constitutional autonomy and independence in the OLAF judgment’ (2005–2006) 29 Fordham International Law Journal, 610–54.

31

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 17 /

Date: 1/6

JOBNAME: Stefanou PAGE: 18 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Mandate Third, the success of these internal investigations is dependent upon a waiver of immunity for the investigated. But OLAF has no other role in the decisionmaking process but to offer an opinion on the matter, leaving the final decision to the institution concerned.

A FIRST EVALUATION

The task of evaluating OLAF is certainly a complex one. The book follows the three-fold assessment previously afforded to UCLAF: regulatory, operational and institutional. For the purposes of this chapter OLAF will be assessed solely on regulatory grounds. However, it is worth noting that the institutional environment which heeded to a large extent the possibility for success for UCLAF has not remained the same. The creation of the single area of freedom, security and justice, the establishment of many agencies and bodies in the field of criminal law (such as Europol, Eurojust and the European Judicial Network), and the many legislative initiatives in the third but also the first pillar have created an environment within which OLAF can function, at least prima facie. From the point of view of operations, a multitude of regulatory instruments delimit the work of OLAF filling, at least to a degree, the lacuna within which UCLAF was required to operate. However, these aspects of OLAF will be evaluated in detail in Parts 2 and 3 of this book. Part 1 remains with the regulatory evaluation. UCLAF was found to be destined to fail on the basis of a vaguely introduced but disproportionately burdensome mission, namely the fight of fraud against the financial interests of the European Community. In other words UCLAF took up the whole task without the required control over the implementation of existing relevant legislation at the EC level over the relevant future legislative initiatives, over the application of the relevant EC actions, and the necessary cooperation with national authorities. The question is whether OLAF’s mission suffers from similar problems. In order to respond to this central legitimate question, one needs to address each of these issues separately. With reference to existing legislative instruments, OLAF is obviously plagued by the lack of an adequately clear and concrete legal basis for its establishment and operations. Articles 317 and 325 EC have served well but the need for a clear legal basis for the Office, rather than the general activity and policy, remains. The Treaty of Lisbon may offer such a legal basis in Article 69E(2) (now Article 86) if OLAF is to develop or be included in the European Public Prosecutor’s Office.70 The shortcomings of the PIF Regulation have been identified already: the trade-off between the nature of the instrument as enforceable within the first 70 European Parliament resolution on the protection of the financial interests of the Communities and the fight against fraud (2004/2198(INI)), OJ C 124E, 25 May 2006, 232–40, 7.

32

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 18 /

Date: 30/6

JOBNAME: Stefanou PAGE: 19 SESS: 17 OUTPUT: Tue Aug 9 13:14:31 2011

A First Evaluation pillar with the disappointing and unimaginative substance of its purely administrative provisions71 do not allow OLAF to apply it usefully. The main contribution of the PIF Regulation to OLAF’s work is the definition of irregularities. Its other advantages may be relevant to the time of the instrument’s passing, but they no longer apply currently. The listing of administrative penalties and measures, and the Regulation’s provisions on checks and on-the-spot inspections have now been superseded by the package of PIF Conventions and their Protocols, which detail these issues adequately. The PIF packages of Conventions, including the Convention on corruption, suffer from the inherent disadvantages of third pillar measures. They are designed as vague documents that can only be applied via implementation at the national level. Moreover, they tend to include the minimum common denominator in the Member States thus promoting harmonisation to a limited degree and at a limited level. These inadequacies are further enhanced by the many declarations and reservations to the Conventions and their Protocols, thus leading to a multi-level and multi-speed chart of fragmented harmonisation on issues requiring additional concreteness and precision due to their criminal law nature. As a result, OLAF is called to conduct sensitive and delicate operations in at least 27 Member States where criminal law, criminal procedures and administrative regulations are far from common, understandable and easily applicable to the inspectors.72 Thus, the legitimacy of all aspects of OLAF’s operations, the right awarded to the investigated and the usefulness of any evidence produced before the national courts is put to extreme danger, if the OLAF inspectors have not—as is inevitably often the case—operated in the jurisdiction before. Even the parts of the framework that manage to harmonise specific points of the regulatory framework are not easily applied. Clashes in the provisions of the package create sources of ambiguity, as is the case with the definition of national officers or the meaning of the term deliberate in the PIF Convention. Sanctions and competence are issues of further discrepancy amongst the Member States. The Second PIF Protocol remains unratified. And the incomplete implementation of the instruments by the newer Member States accentuates the many problems associated with the PIF instruments, which constitute the substantive provisions within which OLAF functions and operates.

71 In fact OLAF has been criticised for the fact that it operates in a field of clear criminal competence under the form of an administrative organ: see M Kaiafa-Gbandi, ‘The development towards harmonisation within criminal law in the European Union—A citizen’s perspective’ (2001) 9 European Journal of Crime, Criminal Law and Criminal Justice 239–63, 255. 72 The national discrepancies which constitute hurdles to the fight against fraud have been identified even with reference to tax fraud: Commission staff working document—‘Progress Report on the preparation of an anti-fraud strategy at EU level’, SEC/2007/0740 final; also Report from the Commission to the Council and the European Parliament on the use of administrative cooperation arrangements in the fight against VAT fraud, COM(2004) 260 final, 16 April 2004; also see JL Lopes da Mota, ‘The Collection of Evidence by OLAF and Its Transmission to the National Judicial Authorities’ (2009) 3 Eucrim 90–93, 91.

33

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 19 /

Date: 1/6

JOBNAME: Stefanou PAGE: 20 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Mandate As for the regulatory framework of OLAF in its narrow sense, the OLAF Decision introduces a complex yet precise mandate for the Office. The mandate includes elements of all the factors whose absence from UCLAF’s mandate led to the failure of UCLAF. Thus OLAF does have control, and indeed competence, over future legislative initiatives, including the definition of fraud, and over cooperation with national authorities. Moreover, OLAF has a concrete mandate and a precise dual method with which the Office fights fraud, corruption and any other illicit activity affecting adversely the financial interests of the Community: external administrative investigations and internal investigations. So, prima facie, OLAF’s regulatory environment in the narrow sense seems ideal. Is this really the case? Analysis of the relevant instruments does not seem to support this view. The regulatory framework of the Office is plagued by the parallel application of a large number of ‘piecemeal’73 legal instruments which address details of its function and operations, often in a conflicting manner. In order to attain the rules that govern each case, OLAF inspectors have to select the appropriate instrument, to resolve any discrepancies between them, and to apply them in combination with the specific national provisions that cover the case in each national environment. The manner in which all these adversities are dealt with will be identified in the book. However, with reference to the regulatory framework of the Office there are three problems that, in view of their significance, require further analysis. First, the independence of the Office introduced in Article 3 of the Decision is put to question in view of the Office’s participation to the Commission structure and its mandate as a Commission representative in all fora falling within its competence. Second, the accountability of the Office is doubtful due to the ambiguity in the mandate of the Supervisory Committee, due to the questionable judicial supervision of investigations in European Institutions and in some Member States, and to the minimum reporting requirements of the Office mainly to the European Parliament and the Committee of Budgetary Control. Third, the protection of witnesses and the accused in investigations compromises the legitimacy of OLAF’s operations. These issues will be analysed in detail in the next chapter.

73 Commission Report—Evaluation of the activities of the European Anti-fraud Office (OLAF)— Parliament and Council Regulation (EC) No 1073/1999 and Council Regulation (Euratom) No 1074/1999 (Article 15), COM(2003) 154 final, para 8.

34

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter02

/Pg. Position: 20 /

Date: 30/6

JOBNAME: Stefanou PAGE: 1 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

3 The Regulatory Framework: The Status Quo and Recent Proposals for Reform1 HELEN XANTHAKI

INTRODUCTION

OLAF was created at a time where the lack of an express legal basis for regulation in the area of EU criminal law, under its many past disguises, led to uncoordinated and inevitably sporadic legislative attempts to expand the EU’s competences whenever and wherever there appeared a window of legislative opportunity, while at the same time reassuring Member States that the last core of their sovereignty remained intact.2 This led to vagueness and overlap in the mandate of the relevant agencies,3 thus encouraging consequent competition and friction amongst these bodies fighting for their own place in the system of EU criminal law.4 The effect of this unfortunate state of affairs, which continues to this day or at least until the Treaty of Lisbon will reveal its true effects to EU criminal law, is also reflected in the regulatory framework of the many agencies 1 This chapter is based on an independent study of OLAF’s shortcomings funded by the European Parliament in 2005; C Stefanou and H Xanthaki (2005), ‘Strengthening OLAF: towards greater effectiveness in the protection of the Communities’ financial interests: the revision of the OLAF regulation 1073/99’, Hearing on ‘The Revision of the Regulation on the European Anti-Fraud Office’, European Parliament’s Committee on Budgetary Control (COCOBU), European Parliament, presented orally to COCOBU in Room ASP 3G2 (‘Salle d’écoute’ ASP 5G3) on 12–13 July 2005 in Brussels. 2 T Fischer, ‘An American looks at the EU’ [2005] Emory International Law Review, 1490–1562, 1538; also CM Warner, ‘Creating a Common Market for Fraud in the European Union’ (2003) 8 The Independent Review 249–57, 256. 3 V Mitsilegas, EU criminal law (Oxford and Portland, Hart Publishing, 2009), 218–19. 4 Court of Auditors, ‘Special Report No 1/2005 concerning the management of the European Anti-Fraud Office (OLAF), together with the Commission’s replies (pursuant to the second subparagraph of Article 248(4) of the EC Treaty)’, 2005/C 202/01, OJ C202/1, 18 August 2005, 4; also Council of the European Union, ‘Draft Council Conclusions on the seventh Eurojust Annual Report (calendar year 2008)’, 10115/09, EUROJUST 31, COPEN 93, EJN 29, CATS 54, 25 May 2009, Brussels.

35

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 1 /

Date: 1/6

JOBNAME: Stefanou PAGE: 2 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework that act within the field. Thus, OLAF, Europol and to a lesser degree Eurojust5 are required to deliver tangible measurable results while operating in an environment plagued with institutional uncertainty where the future of the agency itself but also of its members of staff does not extend beyond the imminent future, where the shape of one’s status is always under scrutiny and question, and where even the environment of one’s operation is vague, conflicting, and lacks legal basis. One could express the legitimate view that this situation does not differ from comparable agencies and labour relationships elsewhere in the EU or in some Member States. But the problem with EU criminal law and OLAF is that ambiguity and vagueness of regulation clashes directly with the crucial need for precision and certainty: OLAF operates within the realm of criminal law (albeit in a mainly6 administrative function) and it is in criminal law that legitimacy simply shouts for certainty and precision. It is very difficult to perceive how administrative investigations of an offence can ensure legitimacy of the operation, and admissibility of the resulting pieces of evidence by a national criminal court, if there are no legal rules for the manner in which such investigations ought to be conducted. And the problem becomes even more puzzling if the decision to prosecute takes place in a jurisdiction other than that where the administrative investigation took place. There is no doubt, therefore, that OLAF is faced with an impossible task. And so the analysis of its regulatory framework must be read solely as an academic identification of the gaps in its framework attributed exclusively to the EU legislators, namely the Member States, who still fail to offer OLAF the certainty and precision that is necessary for its functioning. This analysis will concentrate on the following issues: — OLAF’s administrative and operational dependence; — OLAF’s accountability; and — OLAF’s relations with the European Parliament (EP) and the Committee on Budgetary Control. The choice of themes of analysis is not incidental.7 OLAF’s main criticism lies with its hybrid nature and the obvious clash between its operation as an independent body and its organic dependence from the Commission, the main

5 C Stefanou and H Xanthaki (2004), Oral Evidence, House of Lords, European Union Committee, 23rd Report of Session 2003–04, Judicial Cooperation in the EU: the role of Eurojust, Minutes of Evidence taken before the European Union Committee (Sub-Committee F) 16 June 2004, 97–104; also C Stefanou and H Xanthaki (2004), ‘Memorandum by Dr Constantin Stefanou and Dr Helen Xanthaki’, House of Lords, European Union Committee, 23rd Report of Session 2003–04, Judicial Cooperation in the EU: the role of Eurojust, Minutes of Evidence taken before the European Union Committee (Sub-Committee F) 16 June 2004, 92–96. 6 OLAF also carries quasi-judicial tasks at times: see S de Moor, ‘The Difficulties of Joint Investigation Teams and the Possible Role of OLAF’ (2009) 3 Eucrim, 94–98, 96. 7 Committee of Independent Experts, ‘Second Report on Reform of the Commission—Analysis of current practice and proposals for tackling mismanagement, irregularities and fraud’, Volume II, 10 September 1999, DOC_EN\DV\381\381230EN.doc, at 5.13.3.

36

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 2 /

Date: 1/6

JOBNAME: Stefanou PAGE: 3 SESS: 20 OUTPUT: Tue Aug 9 13:14:31 2011

Administrative and Operational Dependence handlers of Union funds. Accountability is an additional criticism as its lack accentuates the problem caused by OLAF’s hybrid nature. And accountability inevitably leads to a discussion on OLAF’s relationship with the EP and its COCOBU, the only bodies of elected representatives of the peoples of the Union who could and should control OLAF’s work.

OLAF’S ADMINISTRATIVE AND OPERATIONAL DEPENDENCE8

OLAF conducts administrative investigations within the Community institutions,9 bodies, offices and agencies as well as investigations of serious matters relating to the discharge of professional duties.10 Despite the lower level of financial implications of internal cases of fraud, the Commission’s zero-tolerance policy11 maintains the importance attributed by OLAF to internal investigations at equal par to that of the many external checks.12 However, one may legitimately question the wisdom of the legislator with reference to internal investigations.13 First, in parallel (or in clash?) with OLAF, EU institutions have self-regulating obligations.14 Second, the obligation of EU institutions15 and all other bodies/ offices/agencies of the Communities, including the European Investment Bank

8 The brief presentation of OLAF’s activities was first published in H Xanthaki, ‘What is EU fraud? And can OLAF really combat it?’ (2010) 17 Journal of Financial Crime 133–51. 9 The purely administrative powers of OLAF officers give rise to weaknesses of the service. L Schaerlaekens, ‘OLAF and its Cooperation with the Institutions in the new Member States’ in J Apap (ed), Justice and Home Affairs in the EU: Liberty and Security Issues after Enlargement (Cheltenham, Edward Elgar, 2004) 167–72, 167. 10 For an analysis of OLAF’s tasks see FC Haus, ‘OLAF: Neues zur Betrugsbekampfung in der EU’ (2000) 11 Europäische Zeitschrift fur Wirtschaftsrecht, 745–50. 11 European Parliament Committee on Budgetary Control, ‘Report on the protection of the Communities’ financial interests and the fight against fraud—annual report 2001 2002/2211 (INI); A5–0055/2003 final, 3.3.2003 (Rapporteur: Herbert Bösch) 7. 12 ‘Annual Report 2009: European Anti-Fraud Office Ninth Activity Report for the period 1 January 2008 to 31 December 2008’ 37. 13 V Pujas, ‘The European Anti-Fraud Office (OLAF): a European policy to fight against economic and financial fraud?’ (2003) 10 Journal of European Public Policy 778–97, 793. 14 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 the European Anti-fraud Office (OLAF) (OJ L136—31/5/1999). 15 Commission Decision 1999/396/EC of 2 June 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Community’s interests, OJ L 149, 16.06.1999; European Parliament Decision of 18 November 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Communities’ interests, Annex XI to Parliament’s Rules of Procedure, OJ L 44, 15.2.2005; Decision of the Court of Justice of 26 October 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Community’s interests, not published in the Official Journal.

37

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 3 /

Date: 30/6

JOBNAME: Stefanou PAGE: 4 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework and the European Central Bank,16 is introduced via an Interinstitutional Agreement whose legal bindingness and value, as a legislative instrument, is at least vague, if not questionable. Third, in view of the participation of the respective Heads of Service or Director Generals or the Secretary General in the process of internal investigations, it is unclear who makes all those judgement calls when deciding whether the body investigated will be informed during the process,17 if there is reasonable suspicion of irregularity, whether the body investigated will be asked to respond, what evidence is relevant, or when and how the investigation or any subsequent national judicial inquiries may be impeded by steps undertaken in the investigation. Fourth, internal investigations at the ECJ are impeded by the application of the principle of confidentiality which denies OLAF access to documents held in connection with legal proceedings that are in progress or have been terminated. Fifth, there is a reluctance by persons and institutions to accept their subjection to OLAF’s field of competence for internal investigations: MEPs were dragged to it by the ECJ,18 whereas the European Central Bank attempted to exclude itself via the establishment of its own independent anti-fraud committee acting independently of OLAF19 and compromising the Office’s work.20 Sixth, the very use of OLAF’s results are compromised by the diversity in the rules on the evidential value of its reports either as a result of the conditions in which certain statements were taken, or because the independence of an investigator could be challenged, or because the individual rights of the person under investigation had been infringed as a result of leaks.21 OLAF also conducts on-the-spot administrative checks and inspections22 at national economic operators.23 External cases are undertaken with the crucial cooperation of the competent national authorities, and of the Commission’s Advisory Committee for the Coordination of Fraud Prevention.24 Administrative checks, measures and penalties must be effective, proportionate and dissuasive.

16 OJ, L 136, 1999, 15. The model decision attached to the Agreement was transposed by the Council and the Commission on 25 May and 2 June 1999 respectively (Council Decision 1999/394/ EC, Euratom and Commission Decision 1999/396/EC, ECSC, Euratom concerning the terms and conditions for internal investigations in relation to the prevention of fraud and corruption and any illegal activity detrimental to the Communities’ interests, OJ 1999 L 149, 36 and 57 respectively. 17 Council Decision 1999/394/EC (Euratom) of 25 May 1999 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Communities’ interests, OJ L 149, 16.06.1999, 36–38. 18 Case T–17/00, Willy Rothley and Others v European Parliament [2002] ECR II–579. 19 Decision of the European Central Bank of 7 October 1999 on fraud prevention (ECB/1999/5), OJ L 291, 12.11.1999, 36–38. 20 C–11/00, Commission of the EU v ECB [2003] ECR I–7147. 21 OLAF Supervisory Committee, ‘Report September 2001—June 2002’, 18.6.2002, 26. 22 Regulation (Euratom, EC) 2185/96 concerning on-the-spot checks and inspections, OJ L 292, 15.11.1996. 23 Council Regulation (Euratom, EC) 2185/96 of 11 November 1996 concerning on-the-spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities (Official Journal L 292 of 15.11.1996). 24 94/140/EC: Commission Decision 94/140/EC of 23 February 1994 setting up an advisory committee for the coordination of fraud prevention, OJ L 61, 4.3.1994, 27.

38

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 4 /

Date: 1/6

JOBNAME: Stefanou PAGE: 5 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

Administrative and Operational Dependence They must take account of the nature and seriousness of the irregularity, the advantage granted or received and the degree of responsibility.25 Reports on external cases are used as evidence before national courts thus facilitating effectively the fight against EU fraud at the national level. Further assistance to national authorities is provided by OLAF’s Judicial Advice Unit, whose tasks include transfer of the file to the national disciplinary or judicial authorities with the jurisdiction26 to undertake action recommended in the OLAF report27 as a means of ensuring broader operational coordination.28 Apart from a preparatory investigatory role OLAF has a supervisory, persuasive role post-transfer of the file, as national authorities report to OLAF on progress in the case. The limitation period for proceedings is four years as from the time when the irregularity was committed. Intentional irregularities or those caused by negligence may lead to administrative penalties, such as payment of an administrative fine; payment of an amount greater than the amounts wrongly received or evaded, exclusion from the advantage for a period subsequent to that of the irregularity; temporary withdrawal of approval; loss of a security.29 Recovery of sums is undertaken by the Member States but the Commission may reimburse the cost of legal proceedings.30 But this rather idyllic picture seems once again to be plagued by a major regulatory weakness: in internal investigations OLAF seems, at least, to lead the operation; in external checks OLAF acts solely via the use of national authorities who are de facto leading the process.31 This creates a number of diversities and

25 Council Regulation 95/2988 (EC, Euratom) 18 December 1995 on the protection of the Communities’ financial interests, OJ L 312, 23.12.1995. 26 On forum shopping, see S Gless and HE Zeitler, ‘Fair trial rights and the European Community’s fight against fraud’ (2001) 7 European Law Journal 219–37, 225. 27 EU law does not impose an obligation upon national authorities to disclose that they have received information on suspected fraud from OLAF: Case C–61/98, De Haan Beheer BV v Inspecteur der Invoerrechten en Accijnzen te Rotterdam [1999] ECR I–5003. 28 European Commission, ‘Communication from the Commission Protecting the Communities’ financial interests, Fight against fraud, Action Plan for 2004–2005’, COM (2004) 544 final, Brussels, 9.8.2004, 3. 29 Council Regulation 95/2988 (EC, Euratom) 18 December 1995 on the protection of the Communities’ financial interests, OJ L 312, 23.12.1995. 30 Council Regulation (EEC) 595/91 of 4 March 1991 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the common agricultural policy and the organisation of an information system in this field and repealing Regulation (EEC) 283/72, OJ L 67, 14.3.1991; Commission Regulation (EC) 1681/94 of 11 July 1994 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the structural policies and the organisation of an information system in this field, OJ L 178, 12.7.1994; Commission Regulation (EC) 1831/94 of 26 July 1994 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the Cohesion Fund and the organisation of an information system in this field, OJ L 191, 27.7.1994; Council Regulation (EC, Euratom) 1150/2000 of 22 May 2000 implementing Decision 94/728/EC, Euratom on the system of the Communities’ own resources, OJ L 130, 31.5.2000. 31 European Commission, Evaluation of the Activities of the European Anti-Fraud Office (OLAF), COM(2003) 154 final, 02.04.2003, http://europa.eu.int/comm/anti_fraud/reports/commission/2003/ art15_en.pdf, 6.

39

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 5 /

Date: 1/6

JOBNAME: Stefanou PAGE: 6 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework problems. First, OLAF is subject to the labyrinth of national provisions on general (not specifically EU) fraud.32 Second, only in France and Bulgaria is EU fraud expressly placed within the competences of national auditing institutions.33 Third, few national auditing institutions assign fraud related to EU funds to specially trained, exclusively competent departments.34 Fourth, not all national audit institutions are considered to be judicial authorities: in some Member States supreme audit institutions resemble courts with reference to a collegiate structure and the frequent appointment of judges as members, but lack judicial function and full independence from Parliament; in other Member States supreme audit institutions are pure audit offices with a subordinate or at least supportive role to national Parliaments that lack the guarantees of total independence and broad investigatory powers reserved for judicial authorities;35 and transfer of the file to the prosecuting authorities is not guaranteed to the extent secured in the case of national judicial audit institutions such as those in Belgium,36 France, Greece, Italy,37 Portugal38 and Spain.39 Perhaps more importantly for the effectiveness of the fight against EU fraud, non-judicial supreme audit institutions not only enjoy complete liberty in the transfer of data because of confidentiality issues but also thanks to their exclusion from provisions on judicial cooperation in criminal matters.40 Fifth, despite OLAF’s vigorous attempt to create channels of cooperation,41 there is no uniform system for the exchange

32 European Parliament Committee on Budgetary Control, ‘Report on the Commission’s 1999 Annual Report ‘Protecting the Communities’ financial interests—the fight against fraud’ COM(2000) 718—C5–0066/2001—2001/2036 (COS), A5–0078/2001 final, 28.2.2001 (Rapporteur Herbert Bösch), 8–9. 33 In France these competences are provided for in Art 45 of Act No 96–314 of 12 April 1996; in Bulgaria, Art 5, para 2, point 4 from the Law on the Court of Auditors of 2001. 34 For example: Audit Unit VIII 4 ‘EU Affairs, International Organisation and Institutions’ of the German Federal Court of Accounts; Chamber 1 of the French Court of Audits; Section 7 ‘Specialised Audits’ of the Bulgarian Court of Audits, Art 5, para 1 and 2 from the Regulation on the structure and the organisation of the functions of the Court of Audits, http://www.bulnao.government.bg/ documents/UstroistvPravilnikSP.doc.; Audit Department II, European Affairs, Government-Wide Performance Audit Division of the Netherlands Court of Audit. 35 This is the model selected in Austria, Denmark, Finland, Ireland, the United Kingdom, Luxembourg and Sweden; for an analysis of the UK model see: www.nao.org.uk. 36 Art 180 of the Belgian Constitution (coordinated on 17 February 1994). 37 Art 103, para 3 of the Italian Constitution. 38 Art 209, point 1 of the Constitution of the Portuguese Republic. 39 Section 136 of the Spanish Constitution. 40 For example the joint audits performed by the Netherlands Court of Audit, http://www. rekenkamer.nl/cgi-bin/as.cgi/0282000/c/start/file=/9282400/modulesf/g00qge33; also Arts 43 and 51 of the Bulgarian Law on the Court of Auditors; Sections 88 and 91 of the Netherlands Act of 13 July 2002 to adopt the Act regulating the management of central government finances (Government Accounts Act), Bulletin of Acts and Decrees of the Kingdom of the Netherlands, 2002, No 413. 41 Commission Staff Working Document ‘Annex to the Report from the Commission, Protection of the European Communities’ financial interests and the fight against fraud, Annual report 2003, Follow-up to the Action Plan 2001–2003 and measures taken by the Member States, Implementation of Article 280 of the Treaty by the Member States and the Community in 2003’, COM(2004) 573 final, 30.08.2004; SEC (2004) 1058, 70–72.

40

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 6 /

Date: 1/6

JOBNAME: Stefanou PAGE: 7 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

Administrative and Operational Dependence of data and details of irregularities and cases of fraud.42 Consequently, in the majority of Member States, where national audit institutions lack judicial function the effectiveness of national mechanisms against EU fraud and where specialist anti-EU-fraud units are present in the national investigation and prosecution structures, the effectiveness of the combat against fraud is doubtful.43 Another unresolved issue is the level of communication between the relevant bodies and the need to improve the exchange of information as well as the clarity of the rules governing the operational activity of OLAF. The first issue has been already addressed with the adoption of a Code of Conduct44 drawn up between the Commission and OLAF in July 2003, which introduced measures concerning the exchange of information for Commission internal investigations. A further step in clarifying the rules on opening, closing and extending investigations carried out by OLAF is the adoption, by the Commission, of two proposals45 for amendments of the legal framework in force. The proposals aim to establish clearer rules for the exchange of information between OLAF and the institutions, bodies and Community organisations, as well as allowing OLAF to concentrate on its operational priorities and to speed up its investigations, thus strengthening its efficiency. It is believed that the proposals could reach their objectives by strengthening the procedural guarantees for persons who are the object of OLAF investigations, and strengthening the powers of the Supervisory Committee.46 It is suggested, though, that this legislative initiative is complemented by activities aiming at clearing and strengthening the link between OLAF and the EP. One possible way to do this is by providing for explicit provisions on reporting rules and mechanisms in the EP internal regulation. The fight against EU fraud is hindered by the inherent inefficiencies of national tools against international criminal phenomena and the evident lack of adequate communication between national audit authorities and OLAF.47 Judicial cooperation and the transfer of data between judicial authorities is plagued by inefficiencies,48 fragmentation,49 individuality, ambiguity, and complexity of

42 European Parliament Committee on Budgetary Control, ‘Report on the protection of the Communities’ financial interests and the fight against fraud—annual report 2001 2002/2211 (INI); A5–0055/2003 final, 3.3.2003 (Rapporteur: Herbert Bösch), 12. 43 J Peterson, ‘The European Union: pooled sovereignty, divided accountability’ [1997] Political Studies, 559–78, 578. 44 SEC(2003) 871. 45 Proposals for regulations of the European Parliament and of the Council modifying Regulations (EC) Nos 1073/1999 and 1074/1999, COM(2004) 103 and 104. 46 H Xanthaki, ‘Can OLAF really fight fraud in Europe?’ Fighting Financial Crime in Europe: Practical Aspects of European Criminal Law, University of Cambridge, 21–22 September 2009. 47 For this purpose some favour an independent horizontal structure with OLAF antennas in the candidate countries. DR Theato, MEP, Speech in OLAF seminars, Bucharest, 20.10.2003. 48 H Xanthaki, ‘National Criminal Records and Organised Crime: a Comparative Analysis’ in C Stefanou and H Xanthaki, Financial Crime in the EU: Criminal Records as Effective Tools or Missed Opportunities? (The Hague, Kluwer Law International, 2005) 15–42, 42. 49 BJ Quirke, ‘OLAF: the fight against EU fraud’ (2007) Journal of Financial Crime 178–88, 187.

41

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 7 /

Date: 1/6

JOBNAME: Stefanou PAGE: 8 SESS: 20 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework intertwined, parallel, and self-conflicting rules.50 But, even worse, cooperation outside police and judicial authorities is virgin territory for the EU.51 As a result, OLAF faces inherent difficulties in obtaining data on EU fraud from national auditing authorities, even when the latter are able and willing to share the details of the case with EU institutions.52 Lack of information on new cases of EU fraud at the national level deprives OLAF from the possibility of contributing to the investigation and prosecution files at the very early stages of national criminal proceedings (in the Continental sense). Strengthening of OLAF is, therefore, inconceivable without securing its unhindered active alert by national authorities of any type of new file opened against suspects in the beginning of investigations against them. In order for this to be achieved the ambiguous relationship between OLAF and national authorities must be delimited.53 Moreover, the use of evidence acquired by OLAF either within the Member State involved or in other Member States must be addressed. This could have been achieved through the European Evidence Warrant. As this has now been proved inadequate and the Commission seeks a new solution to transnational acquisition of admissible criminal evidence, perhaps the principle of recognition of evidence could allow OLAF to acquire, transfer and use admissible evidence even when the trial takes place in a Member State other than that where the evidence was collected, stored, and has been transferred from. Against these profound regulatory inefficiencies and gaps in EU criminal law, OLAF is called to perform in external and internal investigations in a manner that will not allow grounds for complaints of illegitimacy, inadmissibility, political nepotism and institutional or national discrimination. The main mechanism in OLAF’s defence against such common complaints is its objective decision making and operational judgement. This could only be evidenced through the Office’s ability to resist and reject any possible future attempts from external actors to influence the Office’s operational and decision-making processes. Independence is therefore the key to the perception of EU and national actors of OLAF’s success. And this is much more so with reference to internal investigations: these criminal or disciplinary investigations cannot be carried out by a

50 H Xanthaki, ‘The Present Legal framework of Mutual Legal Assistance within the EU’ (2003) Revue Hellénique de Droit International Vol 56, No 1, 53–90, 90. 51 S White, ‘Criminal Records in the EU and the Protection of the Single Market: Possible Ways Forward for Cooperation’ in C Stefanou and H Xanthaki, Financial Crime in the EU: Criminal Records as Effective Tools or Missed Opportunities? (The Hague, Kluwer Law International, 2005) 327–40, 340; also see Committee on Budgetary Control (Rapporteur: Andrea Cozzolino), ‘Draft Report on the protection of the Communities’ financial interests and the fight against fraud—Annual Report 2008’, 2009/2167(INI), 4 January 2010, paras 4–6. 52 European Parliament Resolution on the Commission Green Paper on criminal law protection of the financial interests of the Community and the establishment of a European Prosecutor, COM(2001) 715; C5–0157/2002; 2002/2065(COS). 53 D Kronin, ‘Lax monitoring leaves OLAF with a weakened credibility’, European Voice, 12–18 May 2005.

42

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 8 /

Date: 30/6

JOBNAME: Stefanou PAGE: 9 SESS: 20 OUTPUT: Tue Aug 9 13:14:31 2011

Administrative and Operational Dependence department which could be identified with the Commission54—especially since the number of internal investigations against the Commission amounts to almost two thirds of the total number of OLAF’s investigations at any given year from 1999 until 2008 inclusive.55 Awarding OLAF organic independence is not a novel thought. It lies behind the Community legislator’s choice to introduce expressly and clearly the basic guarantee of OLAF’s independence in the provision on the independence of the Director General of OLAF.56 In other words, the Community legislator felt that independence was such a crucial characteristic of effectiveness for the Office that the choice was made to introduce an express provision regulating it, rather than leave the matter of OLAF’s independent nature to the interpretation of other relevant provisions. The unfortunate choice of the policy makers of the day was that, in contrast to the initial proposal from the Commission,57 independence was not awarded to the Office as a body but to its Director. As a result, one cannot accurately speak about the independence of the body, but only about the independence of its Director. One often reads that OLAF’s independence is simply operational: but is this not the case with the Director also? After all, the Office is part of the Commission, and similarly the Director is its short-term contracted employee. In any case, the legislator did not stop there. Additional guarantees of OLAF’s independence are introduced in provisions related to the establishment and functioning of its Supervisory Committee.58 First, the establishment of a Supervisory Committee demonstrates a willingness to subject the Office and its Director to scrutiny by independent experts. Second, the mandate of the Committee is to strengthen ‘the independence of the Office in relation to any government, institution, body or agency’ and to monitor regularly ‘the Office’s investigative role’;59 and to reinforce the independence of OLAF’s Director while the latter exercises the duties and powers of the office. This is an interesting point. One can see how the expressly introduced independence of the Director can be reinforced; what one fails to see is how the Committee can strengthen the independence of the Office since the latter has not been expressly introduced. This rather puzzling provision merely demonstrates the ambiguity in the subject 54 OLAF Supervisory Committee, ‘Opinion No 2/03 accompanying the Commission’s report Evaluation of the activities of the European Anti-Fraud Office (OLAF) Regulation (EC) No 1073/1999 of the European Parliament and of the Council and Council Regulation (Euratom) No 1074/99 (Art 15), OLAF/460/03-EN Rev 1, Luxembourg, 18 June 2003, 27. 55 ‘Annual Report 2009: European Anti-Fraud Office Ninth Activity Report for the period 1 January 2008 to 31 December 2008’, 38. 56 Art 12 of Regulation (EC) No 1073/99 of the European Parliament and of the Council of 25 May 1999 concerning investigations by the European Anti-Fraud Office (OLAF), OJ 1999 L136. 57 SA Reader, ‘Moving forward, never backwards: preventing fraud in the European Union and defining European Central Bank independence’ (2003–2004) 27 Fordham International Law Journal 1509–68, 1526–27. 58 Commission Report, ‘Evaluation of the activities of the European Anti-Fraud Office (OLAF) Parliament and Council Regulation (EC) No 1073/1999 and Council Regulation (Euratom) No 1074/1999 (Article 15)’, COM(2003) 154 final, Brussels, 2 April 2003, 31. 59 Arts 11 and 12 of Regulation 1073/99.

43

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 9 /

Date: 30/6

JOBNAME: Stefanou PAGE: 10 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework of independence at the time of the passing of the relevant texts: one can legitimately use this contradiction to show that OLAF’s regulatory framework is indeed a puzzle of compromises where a prevalence of different approaches surface in various provisions of the legislative documents. A clearer choice for the legislator would have been to provide for the reinforcement of the Director’s independence and the Office’s operational independence. This reflects the prevailing view on the issue. Third, and most probably as a means of reinforcing OLAF’s independence via the independence and objectivity of the membership of the Supervisory Committee, membership of the Committee consists of five qualified, independent external persons appointed by common accord of the EP, the Council and the Commission for a three-year term, renewable once.60 The members elect a Chair by majority vote from among themselves for a one-year renewable term. The only possibility of any kind of suspension or termination of the term of individual members of the Committee foresees suspension, following a majority vote of the other members, for breaches of the ethical and confidentiality rules that govern the conduct of Committee members. There is no possibility of suspension or early termination of the term of the Committee. The provisions on membership and appointment of the Supervisory Committee attempt to enshrine the body that scrutinises the Office with guarantees of suitability and objectivity. And admittedly they succeeded in doing so. But one wonders what exactly are the qualifications required by the members and whether it would have made sense to appoint a judge as the Chair of the Committee thus offering the Committee and by extension the Office a higher degree of legitimacy via indirect judicial scrutiny of operations.61 As for the lack of a legal provision on an early termination or suspension of the Committee, one can only view this positively. The lack of possible repercussions of radical suggestions and perhaps adversary evaluations of the operations of OLAF allows the Committee to work and scrutinise without fear. Fourth, and obviously connected to this last point, is the mandate of the Committee. In performing their duties, the members of the Committee ‘neither seek nor take instructions from any government or any Community organ’. The Committee delivers opinions to the Director General, at the Director’s request or on its own initiative, concerning investigative activities of OLAF. The Committee cannot interfere with the conduct of investigations in progress. The Committee may issue opinions with respect to cases in which a European institution has failed to act on the recommendations of the Director General, or in which the work of OLAF investigators has been obstructed, delayed or prevented. The

60 Regulation 1073/99 and the Rules of Procedure of the Supervisory Committee, adopted in February 2000. 61 Committee of Independent Experts, ‘Second Report on Reform of the Commission—Analysis of current practice and proposals for tackling mismanagement, irregularities and fraud’, Volume II, 10 September 1999, DOC_EN\DV\381\381230EN.doc, 5.12.6 and 5.12.9.

44

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 10 /

Date: 1/6

JOBNAME: Stefanou PAGE: 11 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

Administrative and Operational Dependence Committee submits an annual report on the results of OLAF’s investigations and follow-up actions to the Community institutions, and publishes it in the Official Journal. Despite the great breadth of the Committee’s work, its significance is compromised by its merely advisory nature. There is no provision on anyone’s obligation to act upon the Committee’s reports, and this includes the Director General, OLAF, or other EU institutions.62 As a result, the only action that one can expect from the Committee is simply an identification and analysis of any problems in the annual report published in the Official Journal. This is a crucial gap in the regulatory framework and one that compromises the role that a Supervisory Committee with kudos and teeth could play in the scrutiny of both OLAF’s work and its interplay with EU institutions. In any attempt to strengthen OLAF, reinforcement of the results of the scrutiny of its Supervisory Committee would be necessary. Fifth, the circle of sources of the Supervisory Committee’s information seems rather narrow. The Committee receives the annual programme of the Office’s operational activities,63 while the Director General keeps members informed of the Office’s activities and investigations, their results, and any action taken. But information related to operational activities is often classified as confidential.64 Thus, OLAF’s reports are not always full. There is little justification for that. After all, the meetings of the Supervisory Committee are normally in camera, and so confidentiality should not be an issue.65 Moreover, the Committee can hear any member of OLAF staff, but only with the prior authorisation of the Director General. As a result, the breadth of the Committee’s information is rather limited. This is unjustified in view of the Committee’s obligation to confidentiality, the ethical rules governing its membership, and the level of credibility that personalities appointed as its members inevitably possess. It is rather unfortunate that the limited awareness of the Committee’s members on OLAF’s everyday activities is matched by their inability to act effectively upon any wrongdoings identified by them. Additional safeguards are introduced to enhance OLAF’s operational independence. OLAF’s investigative powers are to be exercised independently.66 This is a rather important legislative intervention and in fact one of the few provisions that have managed to keep OLAF afloat. Operational independence is a significant quality, of course. But the relevant statement can be completely toothless, if it remains as vague as a political statement or a statement of good

62 Court of Auditors, ‘Special Report No 1/2005 concerning the management of the European Anti-Fraud Office (OLAF), together with the Commission’s replies (pursuant to the second subparagraph of Article 248(4) of the EC Treaty)’, 2005/C 202/01, OJ C202/1, 18 August 2005, 14. 63 Art 11(7) of Regulation (EC) 1073/1999. 64 S White, ‘The judgment of the CFI in the case Franchet and Byk v European Commission’ (2008) Eucrim 146–47, 147. 65 Activity Report of OLAF Supervisory Committee December 2005—May 2007, 17 October 2007, 8. 66 Paragraph 4 and Art 3 of the Decision.

45

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 11 /

Date: 1/6

JOBNAME: Stefanou PAGE: 12 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework wishes. Thus, further provisions of a similar scope include guarantees for the post of the Director General of OLAF, and the monitoring powers of the Surveillance Committee.67 With regard to the management of OLAF, the Director General is independent in exercising his or her duties with respect to investigations.68 This rather vague statement is clarified by a subsequent provision stating that in the performance of the Director’s functions, the latter ‘shall neither seek nor take instructions’ from any government or institution of the EU, including the Commission itself.69 The question is what happens if the Director does seek or does take such instructions. The only possible effect would be the refusal of the appointing bodies to renew the Director’s contract, or the dismissal of the Director. But the latter can only happen if all appointing bodies and the Supervisory Committee so agree.70 Without wishing to negate the wisdom of the protected process against the Director’s unfair dismissal, the lack of other disciplinary provisions of a bad Director places the crucial attention on his or her independence as a guarantee of OLAF’s effectiveness to much scrutiny. It is evident that the provisions on the independence of the Director are inadequate as they set the general principle without offering it any teeth and any mechanisms of enforcement. Some relief comes from the Director’s entitlement to initiate investigations on his or her own discretion. But this right has often been left unused, and this caused concern clearly expressed by the EP.71 Some relief may also be drawn from the procedure for the appointment of the Director General, which is designed in a way as to ensure equal access, transparency and fairness of choice after a range of consultations with the EP and the Council.72 Of course in the past the Commission attempted to influence the process by ensuring that senior managerial posts in OLAF were scrutinised by a Commission-nominated Advisory Committee on Appointments.73 Another occasion where the Commission took over the process was after the untimely passing of OLAF’s Director in January 2010, when the Deputy Director General of OLAF was appointed by the Commission as the interim Acting Director General. At the time the European People’s Party, the Social Democrats, the Greens (Verts/ALE) and GUE/NGL issued a joint press release stating that the Commission’s unilateral decision was an infringement of Parliament’s rights as well as a breach of OLAF Regulation 1073/99. OLAF’s Supervisory Committee as 67

Arts 4 and 5. Art 12 of Regulation 1073/99 and Arts 5 and 6 of Decision 1999/352. 69 Art 3 of Decision 1999/352. 70 The Commission has to consult the Supervisory Committee under Art 5, point 2. 71 H Bösch, ‘Report on the Commission’s 1999 Annual Report ‘Protecting the Communities’ financial interests—the fight against fraud’ (COM(2000) 718—C5–0066/2001—2001/2036(COS)), 28 February 2001, 7. 72 Art 5, point 1 of Decision 1999/352. 73 H Bösch, ‘Report on the Commission’s 1999 Annual Report ‘Protecting the Communities’ financial interests—the fight against fraud’ (COM(2000) 718—C5–0066/2001—2001/2036(COS)), 28 February 2001, 8. 68

46

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 12 /

Date: 1/6

JOBNAME: Stefanou PAGE: 13 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

Administrative and Operational Dependence well as Parliament’s Legal Service supported this position. However, on the basis of an Opinion from its own Legal Service the Commission persisted with the appointment and defused any concerns on alleged illegality of the appointment, and consequently any actions taken by the Acting Director General and OLAF. It would be unfair to classify these events as another attempt by the Commission to influence the appointment process. Despite the correct view of the Parliament that the appointment cannot possibly be made unilaterally, and notwithstanding the obvious political stance made by the major political groups in the Parliament, one must accept that the appointment of the Acting Director General cannot and will not influence the appointment of the next Director General. The Commission’s decision can only be viewed as necessary in view of the continuing operational activities of the Office. This was a decision that responded to an urgent ad hoc need. The person appointed was the second-in-command in the former management of the Office, and hence the decision must be viewed as one made on the basis of strict hierarchy. The decision also served continuity. In view of these, the only complaint that one could have against the Commission is their omission to start the appointment process of the next Director General straight away. A reasonable time is needed under the circumstances but the less time is spent in the process the quicker the Office can move forward. If anything, the way in which the Commission handled the sudden absence of the Office’s leading figure demonstrates ingenuity in the handling of a gap in the regulatory framework of OLAF. And it makes once again the point for a need to finally regulate the Office in a concrete and exhaustive manner. But, in fact, the appointment procedure is so well introduced that one wonders if the legislator placed all concerns about the Director to the choice of personality. One must accept that a person who can meet the requirements set by EU law for their appointment as Director must truly be quite exceptional and above suspicion. But one must also concede that no personality can possibly make up for the many gaps in the regulatory framework of the Office. Perhaps it would be a measure of the personality chosen to make it their business to close these gaps. Moreover, at least in theory, the Director may bring an action against the Commission before the ECJ for failure of the Commission to respect the Director’s independence.74 Finally, the Director General ensures the operational and financial independence of the Office by recruiting and appointing its staff and drawing up its preliminary budget. But, how can the Director achieve this goal when all budgets are forwarded to the Commission, approved by them, and scrutinised by them? What guarantees are there that the contract of a leading OLAF investigator who has identified fraud within the Commission will continue to be approved by the institution investigated?

74

Supervisory Committee, Report September 2001—June 2002, The Hague, 18 June 2002, 14.

47

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 13 /

Date: 1/6

JOBNAME: Stefanou PAGE: 14 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework In contrast to this, at least seeming, picture of full independence, OLAF remains formally75 part of the Commission. And the Commission acts as the appointing authority for OLAF’s Director and staff. Moreover, the activities of the Office are still subject to evaluation by the Commission.76 To sum up, OLAF does enjoy operational independence.77 However, one can still argue that its complete independence is compromised.78 There is a need to explore complete administrative independence of OLAF from the Commission and indeed any other of the traditional EU institutions;79 the model of Eurojust may be selected for this purpose.80

OLAF’S ACCOUNTABILITY

As expected, the relative operational independence awarded to OLAF subjects the Office to checks of accountability, at least to the relative extent of accountability within the EU institutional structure in general.81 The requirement for accountability can be classified into two categories: administrative and judicial accountability. Administrative accountability entails reporting obligations and monitoring by the EP and the Court of Auditors. These will be analysed in the first part of this analysis. Judicial accountability relates to OLAF’s subjection to the enforcement mechanisms of European law inevitably before the ECJ. Any such mechanisms will be presented in the second part of the analysis.

75 76 77

Art 2 of Decision 1999/352. For example COM(2003) 154 final. J-P Petillon, ‘Réussites et défis de l’Office Européen de lutte antifraude’ (2008) Eucrim 154–56,

156. 78

BJ Quirke, above n 49, 187. C Stefanou and H Xanthaki (2004), Written Submission, House of Lords, European Union Committee, 24th Report of Session 2003–04, Strengthening OLAF, the European Anti-Fraud Office, Minutes of Evidence taken before the European Union Committee (Sub-Committee E) 5 May 2004, 79–82; also H Xanthaki (2005), Response of the Hellenic Republic to the European Commission’s Draft Hague Programme, Ministry of Justice of the Hellenic Republic; however, see contra Court of Auditors, ‘Special Report No 1/2005 concerning the management of the European Anti-Fraud Office (OLAF), together with the Commission’s replies (pursuant to the second subparagraph of Article 248(4) of the EC Treaty)’, 2005/C 202/01, OJ C202/1, 18 August 2005, at para II; also HM Government response to House of Lords, European Union Committee, Sub-Committee E (Law and Institutions) 24th Report of Session 2003–04 ‘Strengthening OLAF, the European Anti-Fraud Office’, HL Paper 139. 80 H Xanthaki (2005), Written Submission, House of Lords, European Union Committee, 10th Report of Session 2004–05, The Hague Programme: a five-year agenda for EU justice and home affairs, Minutes of Evidence taken before the European Union Committee (Sub-Committee E) 26 January 2005, 54–55. 81 J Peterson, ‘The European Union: pooled sovereignty, divided accountability’ (1997) XLV Political Studies 559–78, 561. 79

48

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 14 /

Date: 1/6

JOBNAME: Stefanou PAGE: 15 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Accountability Administrative Accountability: OLAF’s Reporting Requirements and Monitoring Obligations In the notorious bureaucracy of the EU it is not surprising that OLAF has a great number of reporting requirements. First, on the basis of Article 325(5) EC on the obligation of the Commission to submit an annual report to the EP and the Council on the measures taken to fulfil the requirements of the Article, OLAF, as an organic part of the Commission, produces an Annual Report on the Protection of the Financial Interests of the Communities and the Fight against Fraud. The scope of the report is to present to the EP and the Council all steps taken by the Office to protect the financial interests of the Union. Thus, this rather extensive report includes any activities, successes, and plans for the future. This is one of the most detailed reports that may serve as an in-depth analysis of the Office’s work over the past year. Thus, this annual report could form the basis of extensive scrutiny of the Office by the two major ‘external’ EU institutions. However, the report forms a mere part of the general report on the Commission’s activity, and OLAF’s work, albeit at the centre of the Commission’s relevant strategy and action, may be overshadowed by issues of general policy that inevitably demand the focus of attention of the two institutions. As a result, issues of detail related to specific cases and even rights of those involved in them tend to be lost in the general policy analysis. Moreover, issues of confidentiality prevent the report from being full and relevant to the operational details of OLAF’s work. Second, OLAF’s Director General has the duty to report regularly to the EP, the Council, the Commission and the Court of Auditors on the findings of investigations carried out by the Office.82 In fulfilment of this requirement, OLAF produces an annual report on its operational activities addressed to all EU institutions. However, even this annual report is plagued by confidentiality provisos: the report must respect the confidentiality of investigations, the legitimate rights of those involved and any national provisions applicable to judicial proceedings. As a result, the reports tend to be vague and they contain intended omissions as a means of preserving the confidential aspects of cases. This is an unfortunate state of affairs as the legitimate need for confidentiality seems, once again, to be allowed to diminish the essence of the reporting requirement itself. Although confidentiality must be preserved, one is uneasy about the possible conflict of interests of those who make the subjective call of judgement on confidentiality issues: in other words, OLAF’s staff that may possibly have an interest in keeping quiet about issues of wrongdoing are the ones who will decide if these issues are confidential and thus can remain outside the scope of scrutiny. The need for confidentiality may be undeniable but so is the need for accountability: at the end of the day, there must be a body that can have access to all details and thus may be able to scrutinise OLAF fully.

82

Art 12(3) of Regulation 1073/1999.

49

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 15 /

Date: 1/6

JOBNAME: Stefanou PAGE: 16 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework Third, OLAF’s Director must keep the Office’s Supervisory Committee regularly informed of the Office’s activities, its investigations, their results, and any action taken.83 In application of this provision OLAF produces a Monthly Report on its operational activities. The level of information offered to the Supervisory Committee is again left to the subjective call of judgement of the Office and its Directors. Once again, a possible conflict of interests cannot be excluded. Moreover, the effect that any identification of wrongdoing may have on the Office and its staff is absolutely minimal and restricted to a note on the Committee’s report. As a result, the body whose function seems to be to scrutinise OLAF the closest, remains toothless and unable to act upon any problems shared or discovered. Fourth, within the Commission’s Strategic Planning and Programming Cycle (SPP), the Director General of OLAF forwards to the Commission both an Annual Activity Report and a half-yearly review of the implementation of OLAF’s Annual Management Plan. Confidentiality crops up here also. In any case, these are reports to the mother institution and they can therefore be considered internal reports aimed at demonstrating the level of success in the performance of the unit’s duties as a means of post hoc assessment of expenditure against performance, and future estimates of spending within the cycle and beyond. These four levels of reporting obligations demonstrate the level of pressure and bureaucratic burden imposed on the Office and its Director General on a monthly, biannual and annual basis. However, the multitude of reporting obligations84 does not necessarily reflect provision of adequate information to those to whom OLAF reports and is organically accountable to. Confidentiality prevents the presentation of the full picture to all relevant bodies and the theoretical possibility of manipulation of the picture drawn by the Office in these inevitably partial reports cannot be excluded. It is rather concerning, not to mention inappropriate, that the legislator has assigned the classification of confidentiality to OLAF and its Director: those accountable seem to be able to select the scope of their own scrutiny. Moreover, reports tend to refer to the volume of operations undertaken85 rather than to the details of the operations.86 Furthermore, some of OLAF’s reports have been accused of presenting non-comparable evidence of OLAF’s activity, thus inhibiting the drawing of useful conclusions.87 Even in its latest Annual Report OLAF has presented a wonderful analysis of statistics and

83

Art 11(7) of Regulation (EC) 1073/1999. For a detailed table on this see OLAF Manual, 25 February 2005, 25. See, eg, Report of the European Anti-Fraud Office, Fifth Activity Report for the year ending June 2004, 17–19. 86 Court of Auditors, ‘Special Report No 1/2005 concerning the management of the European Anti-Fraud Office (OLAF), together with the Commission’s replies (pursuant to the second subparagraph of Article 248(4) of the EC Treaty)’, 2005/C 202/01, OJ C202/1, 18 August 2005, para VII. 87 See, eg, Comité de surveillance de l’OLAF, ‘Avis no. 1/05 sur le document de travail des services de la Commission relatif à une évaluation complémentaire des activités de l’OLAF’, Luxembourg, 22 March 2005, 3. 84 85

50

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 16 /

Date: 1/6

JOBNAME: Stefanou PAGE: 17 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Accountability trends for investigations; however, there is still no reference to details of operational and strategic actions in specific cases (even those illustrated as case studies), and therefore little possibility for any fruitful assessment on the legitimacy of actions undertaken in investigations, even closed ones.88 The second aspect of administrative accountability mechanisms relates to the monitoring role of the EP and the Court of Auditors. The administrative and operational activities of OLAF are monitored by the Budgetary Control Committee of the EP, known as COCOBU. The Committee is responsible for the consideration of fraud and irregularities in the implementation of the budget of the Union, measures aiming at preventing and prosecuting such cases, and the protection of the Union’s financial interests in general.89 The Parliament may request the Commission to give evidence with regard to the execution of expenditure or the operation of financial control systems.90 The Commission is obliged to comply. In addition, the Parliament is entitled to scrutinise the organisation of checks, the prevention, prosecution and punishment of fraud and irregularities affecting the budget of the European Union, and concerning the protection of the Community’s financial interests in general. These provisions apply to OLAF, but once again in performing these functions the Parliament must observe the independence of the Office in exercising its powers of investigation. To this end, COCOBU is responsible for matters relating to the protection of the Community’s financial interests in general. COCOBU produces draft reports and opinions on matters related to the protection of the Communities’ financial interests including, specifically, OLAF’s annual activity report. At the request of COCOBU, OLAF’s Director General attends meetings of the Committee to give oral progress reports on specific cases. These reports are given in closed sessions. The European Parliament can also submit written questions to the Commission. OLAF must prepare the replies to those questions that touch upon its areas of responsibility. The monitoring duties of the EP are extensive. The EP’s refusal to discharge the Commission seems to be the only possible consequence for any wrongdoings identified. As a result, the EP’s role in the scrutiny of OLAF is so crucial that it deserves detailed separate analysis. This will follow the presentation of judicial supervision mechanisms. The European Court of Auditors also has monitoring functions. Article 287 (old Article 248(2)) EC provides that the Court of Auditors examines whether Community revenues and expenditures have been incurred in a lawful and regular manner, and whether the financial management has been sound. The Court has been granted broad treaty-based powers to collect the information that it needs from other Community organs to perform its function of auditing the

88 ‘Annual Report 2009: European Anti-Fraud Office Ninth Activity Report for the period 1 January 2008 to 31 December 2008’, 25–33. 89 Rules of Procedure of the European Parliament—Annex VI Powers and Responsibilities of standing committees, Point V(5). 90 Art 319(2) of the EC Treaty.

51

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 17 /

Date: 1/6

JOBNAME: Stefanou PAGE: 18 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework lawfulness of Community revenues and expenditures. Article 287 of the Treaty and Articles 140 and 142 of the Financial Regulation specify the conditions under which the Court of Auditors can have access to documents and information related to the financial management of the services or bodies under its control. Both provide that the other institutions of the Community must forward to the Court the documents and information, including that stored on electronic media, necessary for the performance of its tasks. OLAF must cooperate with the Court’s requests for the information that it needs to perform its auditing functions. But the Court does not seem to have direct monitoring duties on OLAF’s activities and operations. However, the Court has the obligation to identify any cases that may not have been pursued by OLAF and any discrepancies in the way that cases have been handled, for the purposes of detailing inefficiencies in the manner in which OLAF protects the financial interests of the Union. This indirect monitoring role does not carry direct consequences for OLAF although the Court has referred to the Office in its past reports. These are also forwarded to the EP, which can use them in its evaluation of the Office as ‘important reference documents’.91 But the relationship works both ways: the EP has in the past called upon the Court of Auditors to analyse specific issues of interest in their Report so that the EP can take the matter further.92 Monitoring lies between pure administrative supervision (in the shape of reporting obligations) and judicial supervision. While in pure administrative supervision no real penalty for breaches is foreseen, in monitoring, the European Parliament and the Court of Auditors have tools to at least identify problem issues and encourage OLAF to comply with their recommendations. The EP may simply refuse to discharge the Commission. And the Court of Auditors may report the problem to the Parliament which, in turn, may refuse to discharge the Commission on that basis. Of course the decision not to discharge is not to be taken lightly, but the Parliament has shown its guts in the past with long delays and even refusal to discharge. Nonetheless, OLAF’s administrative supervision is not proportionate to the nature of the Office’s work, and the flow of information between the Commission and other EU institutions needs to be improved.93 A body investigating criminal offences and potentially endangering the reputation and liberty of a number of citizens should be scrutinised rather closely. But OLAF’s monitoring is rather limited.94 Could it be that OLAF’s judicial supervision is of such rigour that

91 S Fazakas (Chairman of the Committee on Budgetary Control in the European Parliament), ‘Opening address on the occasion of the OLAF-Seminar “Deterring Fraud by Informing the Public: Round Table on Anti-Fraud Communication”’, 24 November 2004, Brussels. 92 H Bösch, ‘Report on the protection of the financial interests of the Communities and fight against fraud (2004/2198(INI)), A6–0151/2005, 17 May 2005, 11. 93 ‘Communication from the Commission, Protecting the Communities’ financial interests— Fight against fraud—Action Plan for 2004–2005’, COM(2004) 544 final, Brussels, 9.8.2004, 5. 94 ‘Lax monitoring leaves OLAF with a “weakened credibility”’, European Voice, 12–18 May 2005, vol II, No 8.

52

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 18 /

Date: 1/6

JOBNAME: Stefanou PAGE: 19 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Accountability its administrative equivalent is irrelevant for the purposes of establishing a mechanism of adequate accountability for OLAF? Judicial Supervision Judicial supervision refers directly to supervision by a court. Before the analysis of supervision by the ECJ, however, it is worth looking at the supervision role of OLAF’s Supervisory Committee. The reason for this reference is that comparable bodies have been viewed as appeal mechanisms against decisions of the body under scrutiny, while judges may be involved in their membership. Thus, membership to Eurojust’s Joint Supervisory Body consists of judges or persons holding an office of sufficient independence.95 Moreover, Europol’s Joint Supervisory Body may hear appeals against decisions by Europol.96 And Eurojust’s Joint Supervisory Body hears appeals97 against decisions denying access to personal data,98 and against decisions in connection to data correction.99 Furthermore, decisions of Eurojust’s Joint Supervisory Body are final and binding for the agency.100 The question then is whether OLAF’s Supervisory Body represents a mechanism of at least quasi-judicial supervision. Unfortunately, for democracy and accountability, this is not the case.101 Neither the composition, nor the mandate of the Supervisory Committee involves a judicial element. Articles 11 and 12 of EP/Council Regulation (EC) 1073/99 do not require the Supervisory Committee to be composed of members—or former members—of the judiciary. Moreover, the Committee’s mandate does not involve a judicial function, namely the possibility of judicial review of OLAF’s actions, and it is limited to a pure monitoring/advisory function. Furthermore, there is no legal basis in the relevant provisions for a possible compensation or appeal against OLAF’s actions or omissions before the Supervisory Committee.102 This brief comparison of the supervisory bodies of the three main agencies in the field of EU criminal law reveals that OLAF’s body is the weakest of the three. As a result, its monitoring is also the weakest of the three. 95 Council Decision (2002/187/JHA) of 28 February 2002 setting up Eurojust with a view to reinforcing the fight against serious crime, OJEC/L63/Vol 54/March 2002. 96 Art 19(7) of the Europol Convention, OJ C 316 of 27.11.1995, Council Act of 26/07/1995. 97 Art 23(7) of Council Decision (2002/187/JHA) of 28 February 2002. 98 Art 19(8) of Council Decision (2002/187/JHA) of 28 February 2002. 99 Art 20(2) of Council Decision (2002/187/JHA) of 28 February 2002; also P Casaca, ‘Secrecy and information, a right balance to be found’, http://europa.eu.int/comm/anti_fraud/olaf-oafcn/rt/c/ casaca_fr.pdf.. 100 Art 23(8) of Council Decision (2002/187/JHA) of 28 February 2002. 101 W van Gerven, ‘Constitutional conditions for a Public Prosecutor’s Office at the European level’ (2000) 8 European Journal of Crime, Criminal Law and Criminal Justice 296–318, 302. 102 Opinion of the European Data Protection Supervisor on the Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF), OJ C 91, 26 April 2007, para II.1.d.

53

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 19 /

Date: 1/6

JOBNAME: Stefanou PAGE: 20 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework Proposals have emerged which emphasise the enhancement of OLAF’s Supervisory Committee.103 These proposals, however, do not go as far as transforming the Supervisory Committee into a body similar to either the Joint Supervisory Body of Eurojust or that of Europol. Instead, the proposals award OLAF’s Supervisory Committee a quasi-judicial function with regard to individual safeguards and fundamental freedoms.104 This responds to the European Parliament Assessment of OLAF,105 and the European Parliament resolution on the Commission’s Report on the evaluation of the activities of OLAF.106 In the latter the EP requested from the Commission concrete legislative proposals to, amongst others, allow OLAF’s Supervisory Committee to guarantee independence of OLAF’s investigative activities; to award the Committee explicit powers to ensure that the fundamental freedoms and rights of those affected by the investigations are protected; to establish a procedure that enables the parties concerned to formulate an educated stance on the facts of the case and to ensure that the conclusion of the investigation is based exclusively on conclusive evidence. The Commission’s response to this request comes with Article 11(1) of the Commission Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF)107 which provides, inter alia, that the Supervisory Committee will now regularly monitor the implementation of OLAF’s investigative function; it will ensure that individual rights are respected, and will take account of the need to safeguard the Union’s interests; and it will deliver opinions concerning procedural guarantees at the request of the person concerned, and will inform the institutions, bodies, offices or agencies concerned at their request. These proposals aim to expand the role of the Supervisory Committee. It is uncertain, however, what the status and consequences of the Supervisory Committee’s opinions would be. The Commission’s proposals do not clarify this important point. Nevertheless, opinions of OLAF’s Supervisory Committee are a measure of supervision that carries authority and therefore has an impact on OLAF’s plans for investigations. Thus, judicial supervision of OLAF can only be conceived via mechanisms heard before the ECJ. The question is whether there is provision and practical possibility for any such actions against OLAF. One possible mechanism could involve actions for annulment under Article 263 (old Article 230). These can be brought for annulment of acts of the Council, Commission, European Parliament or the European Central Bank, provided that they have binding legal effect.

103 Commission’s ‘Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF)’, COM(2004) 103 final, 2004/005 (COD). 104 ‘Communication from the Commission: Protecting the Communities’ financial interests— Fight against fraud—Action Plan for 2004–2005’, COM(2004) 544 final, 9 August 2004. 105 P5-TA(2003)0551. 106 COM2003 154–2002–2237(INI). 107 COM (2004)104 final, 2004/0038 (CNS) Brussels 10.02.2004.

54

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 20 /

Date: 1/6

JOBNAME: Stefanou PAGE: 21 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Accountability Acts for annulment can be initiated by a member state, the Council, the Commission, the European Parliament, the Court of Auditors or the ECB. They can also be initiated by EU natural or legal persons, provided that they refer to acts affecting their legitimate interests and that the legal instrument under attack is addressed to them personally or has a direct individual effect on them. Actions for annulment may be based on allegations of ultra vires, violation of essential procedural requirements, infringement of the Treaties or secondary legislation, or abuse of discretionary powers. In principle, any act by OLAF based on the instruments that regulate its functioning (such as Regulation 1073/99, Commission Decision 1999/352 and Regulation 2185/96) could be challenged and annulled under this Article. However, it is questionable whether an act of OLAF, including its conclusions in a case, could be challenged under Article 263,108 since they are of an administrative nature and therefore do not have a binding legal effect.109 Another possible mechanism could be a complaint for failure to act under Article 265 (old Article 232). These can be brought against the Commission (and other European institutions) for failure to take an action required of it by the Treaty. They can be brought by the Member States or other EU institutions or by a citizen or firm, for failure to take a decision within the prescribed time limits. This Article could theoretically be invoked against the Commission for failure to fulfil the requirements of Article 325, namely to organise close and regular cooperation with the Member States and to submit an annual report to the European Parliament and the Council. Since the Commission has delegated the powers of investigation conferred on the Commission to OLAF, an action based on Article 265 could theoretically be brought against the Commission for OLAF’s failure to execute those powers. In this respect, such an action may constitute genuine judicial supervision of OLAF’s investigative activity. However, the liability of OLAF under this class of actions is so vague and indirect that one wonders if the possibility of success is really there. It looks like Article 325 could serve as an admissible legal basis for an action against a failure to act but it would take a rather activist court with a strong political message to send. Actions for damages can be brought for non-contractual liability of the Community under Articles 340 and 268 EC. They can be brought by EU citizens, EU firms or Member States that have sustained damages as a result of a fault of staff of Community institutions. Thus, a citizen or firm could, in theory, invoke this Article for damages suffered as a result of OLAF’s improper execution of its investigation tasks, such as breaches of the presumption of innocence, obligations

108 J Wakefield, ‘Good Governance and the European Anti-Fraud Office’ (2006) 12 European Public Law 549–75, 551. 109 ‘Annual Report 2009: European Anti-Fraud Office Ninth Activity Report for the period 1 January 2008 to 31 December 2008’, 65; but see F–5/05 and F–7/05, Violetti and others v Commission of 28 April 2009; also see Order of the Court of First Instance of 18 December 2003 in T–215/02, Santiago Gomez-Reino v Commission [2003] ECR II–1685.

55

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 21 /

Date: 1/6

JOBNAME: Stefanou PAGE: 22 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework of impartiality and confidentiality, due care when transmitting information to third parties, or defence right.110 However, the conditions for admissibility of the action include a variety of restricting conditions. The requirement of a breach of a rule of law conferring rights on individuals seems to exclude all non-defence and individual rights provisions concerning OLAF. The requirement for a sufficiently serious breach remains arbitrary. And the proof of the existence of a direct causal link between OLAF’s action and the damage suffered by the individual seems to block most cases of external investigations, as OLAF acts as an intermediary for national authorities. Moreover, this type of action can only serve as a means of indirect judicial review for OLAF’s investigative activity. Despite the adverse conditions for the majority of cases against OLAF, those which bore fruit were based on Article 340. This provision seems to be the only true possibility for recourse against OLAF. But it remains restricted to damages suffered by individuals, rather than a review of OLAF’s actions or omissions. Thus, the scope of the mechanism is rather limited and relies on the ability, courage, and resources available to individual citizens. Staff members of Community organs can bring actions for matters arising from their employment relationship to the European courts under Article 270. This Article could be relied upon by any staff member, as an interested person according to Article 4 of the Commission Decision 1999/396, alleging that OLAF has improperly conducted an internal investigation against them, the conclusions of which were the basis for disciplinary proceedings. This Article therefore represents a measure of genuine judicial supervision on OLAF’s investigations which, however, is by its scope limited only to persons who are members of staff of the EU institutions. Moreover, Article 90a of the Staff Regulations provides that any person to whom those Regulations apply may submit a request to the Director General of OLAF, within the meaning of Article 90(1), to take a decision in connection with an OLAF investigation. It also provides that any person may submit a complaint within the meaning of Article 90(2) against an act adversely affecting them in connection with an OLAF investigation. This must be done in accordance with Article 90(2) of the Staff Regulations, which would require OLAF’s Director General to decide on the matter within four months from the date on which the complaint was lodged. This decision may be appealed before the European Courts. These provisions represent measures of genuine judicial supervision of OLAF’s investigations but, despite EP’s repeated calls,111 they are limited to cases involving members of staff of the EU institutions.

110 L Balogova, ‘The developments in the case law of the European courts with regard to OLAF investigations’ (2008) Eucrim 142–45, 144. 111 H Bösch, ‘Report on the Commission’s 1999 Annual Report ‘Protecting the Communities’ financial interests—the fight against fraud’ (COM(2000) 718—C5–0066/2001—2001/2036(COS)), 28 February 2001, 8.

56

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 22 /

Date: 1/6

JOBNAME: Stefanou PAGE: 23 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Accountability The European Ombudsman is authorised to receive complaints from any citizen of the Union or any natural or legal person residing or having its registered office in a Member State. Such complaints may allege instances of maladministration concerning the activities of Community institutions or bodies other than the European Courts. The Ombudsman conducts inquiries, based on such complaints or on his own initiative, following which he is to issue an opinion as to whether maladministration has occurred. Where a complaint raises the possibility that an instance of maladministration has occurred, the Ombudsman refers the matter to the institution concerned requesting its view on the matter. This must be provided within three months. The Ombudsman then issues a report, in which he may make a ‘critical remark’ if he believes that an instance of maladministration has occurred. The report is forwarded to the EP and to the institution concerned. The EP has adopted regulations and general conditions governing the performance of the Ombudsman’s duties.112 Article 3 authorises the Ombudsman to conduct all necessary enquiries in order to clarify whether maladministration has occurred. Community institutions and bodies are obliged to supply the Ombudsman with any information requested of them and to provide access to the files concerned. They may refuse only on duly substantiated grounds of confidentiality. OLAF’s investigative activity may therefore be questioned before the European Ombudsman, who may forward any complaints directly to the Office. Any opinion issued by the Ombudsman could be regarded as a form of review of OLAF’s investigation, albeit not strictly judicial. But in the assessment of the file the Ombudsman is once again vulnerable to the internal classification of relevant data as confidential. Thus, once again confidentiality seems to allow an often illegitimate113 decrease of scrutiny of the Office by the body that is most approachable by citizens. And of course there is no penalty against OLAF’s disregard of the Ombudsman’s opinions, bar the occasional regret expressed by the EP.114 The lack of independent control of the legality of investigative actions,115 the practical lack116 of direct mechanisms of judicial supervision117 and the reluctance shown so far for the use of the few existing mechanisms creates a gap 112 Decision of the European Parliament 94/262/ECSC, EC, Euratom on the regulations and general conditions governing the performance of the Ombudsman’s duties, OJ L 113, 4.5.1994, 15. 113 Decision of the European Ombudsman closing his inquiry into complaint 1748/2006/JMA against OLAF. 114 H Bösch, ‘Report on the protection of the financial interests of the Communities and fight against fraud’ (2004/2198(INI)), A6–0151/2005, 17 May 2005, 10. 115 LF Tobisson, ‘The European Court of Auditors’ Special Report on the management of OLAF’, Hearing on ‘Strengthening OLAF: The Revision of the Regulation on the European Anti-Fraud Office’, EP COCOBU, Brussels, 12 and 13 July 2005, 3. 116 Committee of Independent Experts, ‘Second Report on Reform of the Commission—Analysis of current practice and proposals for tackling mismanagement, irregularities and fraud’, vol II, 10 September 1999, DOC_EN\DV\381\381230EN.doc, 5.10.14. 117 Court of Auditors, ‘Special Report No 1/2005 concerning the management of the European Anti-Fraud Office (OLAF), together with the Commission’s replies (pursuant to the second subparagraph of Article 248(4) of the EC Treaty)’, 2005/C 202/01, OJ C202/1, 18 August 2005, 16.

57

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 23 /

Date: 1/6

JOBNAME: Stefanou PAGE: 24 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework in OLAF’s regulation. An important component for enhancing OLAF’s efficiency could be achieved through the introduction of judicial powers for OLAF’s Supervisory Committee. This would imply that the requirements for membership of the Supervisory Committee must be reviewed. The Supervisory Body of Eurojust may be considered as a model in this regard. Perhaps equally importantly, the monitoring mechanism of the EP on OLAF’s work must be strengthened enough to counterbalance the lack of other relevant means of scrutiny.

OLAF’S RELATIONS WITH THE EP AND COCOBU

In view of the toothless administrative supervision, and the impossible and often unpopular118 judicial supervision of OLAF’s work, one wonders if OLAF’s regulatory framework allows for mechanisms of its accountability at all. Is there at least one body or institution where OLAF must reveal its activities without fear, or excuses, of breaches of confidentiality, thus allowing no grounds for partiality of scrutiny? And, if there is such a body, which other could it be than the EP? The EP is the only EU institution with a mechanism in its hands that can carry consequences for OLAF, as part of the Commission, if wrongdoing is discovered: discharging the Commission may be a political tool but it can serve as a rather effective one, as the Santer Commission discovered to its detriment. Moreover, the EP is an institution with undisputed legitimacy for scrutiny: it is the only body of directly elected officials with a mandate and zeal119 to represent the interests of the citizens of the EU.120 So, one would expect OLAF to be fully accountable to the EP. Is this the case? The relationship between OLAF and COCOBU is not expressly and clearly regulated in EU law. However, useful conclusions can be drawn from the interpretation of relevant provisions dealing with the relationship between the two hosting institutions, namely OLAF’s Commission and COCOBU’s EP. The legal basis of this relationship lies with the EC Treaty itself. The nature of the relationship between the EP and the Commission is that of political oversight as a means of controlling the effectiveness, efficiency, and legitimacy of the Commission’s activities. This political oversight is strengthened by the common aim of both institutions, which can only be (in relation to OLAF of course) the protection of the financial interests of the Union, and consequently the protection of the funds offered to the EU by the citizens of the Member States via their 118 The Courts have shown that they do not want to become the vehicles of OLAF’s challenge: see J Wakefield, above n 108, 572. 119 Committee of Independent Experts, ‘Second Report on Reform of the Commission—Analysis of current practice and proposals for tackling mismanagement, irregularities and fraud’, vol II, 10 September 1999, DOC_EN\DV\381\381230EN.doc, para 5.3.2. 120 D Theato, Lecture in OAFCN training seminar for anti-fraud communicators in candidate countries, Bucharest, 19 to 22 October 2003, http://europa.eu.int/comm/anti_fraud/olaf-oafcn/ seminars/bu_en.html.

58

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 24 /

Date: 1/6

JOBNAME: Stefanou PAGE: 25 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Relations with the EP and COCOBU national governments. This unity of goal is a strong foundation for cohesion and cooperation between the Commission and the EP. But this unity of goal between these two equal institutions cannot signify a relationship of pure equality. The functions that allow the EP to perform its political oversight over the Commission entail a degree of hierarchy—if not organic, then surely functional. This is evident in both the discharge and scrutiny functions of the EP. First, under Article 319(2) of the EC Treaty the Parliament may request that the Commission give evidence with regard to the execution of expenditure to the operation of financial control systems for the purposes of giving discharge to the Commission. The provision obliges the Commission to provide the evidence requested by Parliament: here the Parliament requests, and the Commission has no option but to comply and deliver. Second, in the performance of its duty to scrutinise the Commission’s work the EP has the duty to control the organisation of checks, the prevention, prosecution and punishment of fraud and irregularities affecting the budget of the Union, and concerning the protection of the Community’s financial interests in general. In this situation again the Commission is obliged to forward to the Parliament whatever evidence or document is deemed necessary. Once again there is no discretion in compliance. In the specific case of OLAF, these provisions and obligations also apply, since OLAF is organically part of the European Commission. Thus, the EP’s role is the political oversight of OLAF’s work. But in the case of the EP’s scrutiny of OLAF’s work three qualifying factors apply. First, OLAF’s independence in exercising its powers of investigation must be respected. Second, the rights of the accused and of witnesses, including whistleblowers, must be protected.121 And third, the relevant national provisions concerning judicial proceedings must not be breached. These three factors may delimit the extent of detail in which the EP’s scrutiny can cover. The question is what these limitations mean in practice for OLAF’s reporting requirements to the EP and its COCOBU. The core of the debate is the balance between OLAF’s reporting obligations to EP’s COCOBU, as a means of allowing COCOBU to serve its role, and restrictions to data transfers from OLAF to COCOBU, as a means of securing OLAF’s operational independence and the rights of witnesses and the accused. The parameters that specify the field within which the debate can be addressed relate to the duty of confidentiality122 imposed on OLAF’s staff and to their

121 But these are not harmonised at the national level; Council of the EU, Draft Resolution of the Council on a roadmap for strengthening procedural rights of suspected or accused persons in criminal proceedings, 12531/09, DROIPEN 78, COPEN 150, Brussels, 31 July 2009; also see S Gless and HE Zeitler, ‘Fair Trial Rights and the European Community’s Fight Against Fraud’ (2001) 7 European Law Journal 219–37. 122 On the possible detrimental effects of disclosure to the press, see L Cesa, ‘Cui Prodest “OLAF without communication?”’, http://europa.eu.int/comm/anti_fraud/olaf-oafcn/rt/c/cesa_fr.pdf; but on the positive contribution of the press see contra G Pitella, http://europa.eu.int/comm/anti_fraud/olafoafcn/rt/c/pitella_fr.pdf.

59

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 25 /

Date: 1/6

JOBNAME: Stefanou PAGE: 26 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework somewhat clashing duty to offer information123 to COCOBU. In principle, under Article 339 EC, OLAF’s staff cannot disclose any information covered by their obligation of professional secrecy not only during their period of service with the Commission but also after their retirement or resignation from their posts. Moreover, under Article 17 of the Staff Regulations, OLAF’s staff must exercise greatest discretion on all facts ad information coming to their knowledge in the course of their duties:124 these cannot be forwarded or shared with any unauthorised persons. The combination of these provisions seems to prevent OLAF’s staff from disclosing any information relevant to their work to the EP and COCOBU. But, thankfully, COCOBU’s members are not unauthorised to receive such data: Article 309(2) EC authorises them to receive and use such data for the purposes of performing their duty of discharge and scrutiny. There is no doubt therefore that the duty of confidentiality should not prevent OLAF from disclosing information to COCOBU.125 But what type of information is relevant to COCOBU’s functions and is thus covered by the exception to the confidentiality rule? COCOBU needs to receive whatever information is relevant and necessary for the performance of its following obligations: first, the compilation of COCOBU’s draft reports and opinions on matters related to the protection of the Communities’ financial interests; second, the compilation of COCOBU’s report on OLAF’s annual activity report; third, for reports on specific cases: for this purpose the provision of data is undertaken via an oral report from OLAF’s Director General in closed sessions of COCOBU; fourth, for responses of COCOBU to written questions from members of the EP. The breadth and parallel specificity of data required for the performance of these four functions seem to indicate that COCOBU needs access to all types of information from OLAF, including data on current cases. But answering this delicate question requires further analysis that will distinguish between internal investigations regulated by Regulation 1073/99 and external investigations regulated by Regulation 2185/96. With reference to internal investigations, Article 8(2) of Regulation 1073/99 provides that ‘such information may not be communicated to persons other than those within the Community institution or in the Member States whose functions require them to know it nor may it be used by Community institutions for purposes other than to ensure effective protection of the Communities’ financial interests in all Member States’. The spirit of this provision is reflected in Article 2 of the sectoral rules, which provide that such information ‘may not, in particular,

123 Activities of Community institutions must take place as openly as possible: see J Wojahn and A Buttice, ‘Communicating OLAF: a major legal challenge’ (2008) Eucrim 148–53, 149. 124 On the duty of discretion for EU officials, see ‘Guide to the obligations of officials and other servants of the European Parliament Code of conduct’, PE 282.872/BUR/FIN.2, 11 March 2002, 10–11. 125 H Bösch, ‘Report on the Commission’s 1999 Annual Report ‘Protecting the Communities’ financial interests—the fight against fraud’ (COM(2000) 718—C5–0066/2001—2001/2036(COS)), 28 February 2001, 9.

60

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 26 /

Date: 1/6

JOBNAME: Stefanou PAGE: 27 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Relations with the EP and COCOBU be sent to persons other than those in the Member States or within Community institutions whose duties require that they have access to it, unless the Member State supplying it has expressly agreed’. With reference to external investigations, Article 8(1) of Regulation 1073/99 states that information obtained in the course of internal investigations is protected by ‘relevant provisions’. Although there is no indication as to which provisions are considered relevant for the purposes of this Article, it is interpreted that Regulation 2185/96 concerning on-the-spot checks and inspections is subject to Article 8(1) of Regulation 1073/99. Article 8(1) of Regulation 2185/96 repeats verbatim the provision of paragraph 2 of Article (2) of Regulation 1073/99. The interpretation of these provisions by OLAF is that they provide discretionary126 access to such data to persons whose function requires them to know.127 This interpretation seems to disregard the letter and spirit of the relevant provisions. In fact, the provision allows discretion for the transmission of such information to persons whose duties do not justify a need to know. The text states clearly that the information ‘may not’ be communicated to persons whose functions do not require them to know. Applying this discretion to those who need to know is a unilateral departure from the text of the provision and indeed a departure from the main aim of this and adjacent provisions, which is to achieve effective protection of the financial interests of the European Union. In fact, the introduction of discretion for the transmission of data to those who need to know would be in clash with Articles 11(7) and 12(3) of Regulation 1073/99 and Article 17(3) of Council Regulation 1150/2000 which introduce an unconditional obligation of frequent reports to the Parliament without any discretion on behalf of the Director of OLAF or indeed the Commission as to the disclosure of relevant information. In other words, the discretion of the Director of OLAF and OLAF staff lies with the transmission of information to persons outside COCOBU. As members of COCOBU need to be aware of the development of cases, closed and ongoing, for the effective performance of their duty of political oversight of OLAF’s work, OLAF has no discretion but to disclose all necessary information. Nevertheless, with relevance to internal investigations only Article 10(3) of Regulation 1073/99 provides that without prejudice to Articles 8 and 9 of the same Regulation OLAF ‘may’ forward to the body concerned the conformation obtained in the course of internal investigations. This Article awards a degree of discretion, within the boundaries of legitimacy and accountability, to the Director of OLAF to disclose information obtained in the course of internal investigations. Consequently, the Director of OLAF may choose whether and when to disclose to COCOBU information on internal investigations concerning

126

OLAF Manual, 25 February 2005, 111. ‘Protection of the Communities’ financial interests and the fight against fraud European Parliament resolution on the protection of the financial interests of the Communities and the fight against fraud (2004/2198(INI))’, P6_TA(2005)0218, OJ C 124 E/232, 25 May 2006, 240. 127

61

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 27 /

Date: 1/6

JOBNAME: Stefanou PAGE: 28 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework the EP. However, this discretion is not offered in cases of internal investigations concerning other bodies, offices, agencies or institutions. In such cases, Article 10(3) of the Regulation does not apply, but Article 8(2) of Regulation 1073/99 is applicable, which under its correct interpretation does not allow any discretion to disclose data to COCOBU, whose members need to know such data for the effective and efficient performance of their duties. But what is perceived to be information necessary for the performance of COCOBU’s duties? COCOBU is responsible for the ‘consideration of fraud and irregularities in the implementation of the budget of the Union, measures aiming at preventing and prosecuting such cases, and the protection of the Union’s financial interests in general’. In responding to this question one should make a clear distinction between what is perceived as necessary information for OLAF, COCOBU and for the EP as a whole. The role of the Parliament is to conduct a political oversight over OLAF. In other words Parliament has a general mandate to follow OLAF’s work and to ensure that OLAF’s work and methods in general do not compromise the standards of legitimacy and accountability demanded by European law and the people of Europe. For this general, yet crucial mandate, Parliament needs to have a good understanding of OLAF’s work and methods, albeit not necessarily on an everyday basis. If an issue of specific importance to the constituents of MEPs arises, or if MEPs are concerned about a specific file or investigation, they may always demand clarifications from OLAF, either directly or via COCOBU, through the procedure of oral or written questions. It would therefore be correct to state that the mandate of the EP does not render necessary full reports on OLAF’s everyday activities at any given time, unless otherwise requested by MEPs. This restrictive approach reflects the spirit of the provisions on confidentiality that extend knowledge on a need-to-know basis: the mandate of Parliament as a whole and the consequent duties of the Parliament as an institution would not necessarily justify the inevitable dangers of a possible compromise of OLAF’s functional and operational independence through detailed reports on OLAF’s everyday operational activities. However, this is not true with specific reference to COCOBU. COCOBU’s mandate is concrete and engulfs both the consideration of fraud and irregularities in the implementation of the budget of the Union and the protection of the Union’s financial interests, as well as the monitoring of the cost-effectiveness of Community financing. Under Annex IV of the Parliament’s Rules of Procedure, the Committee is responsible for the control of the implementation of the budget of the Union and of the European Development Fund, and the decisions on discharge to be taken by Parliament, including the internal discharge procedure and all other measures accompanying or implementing such decisions; the closure, presenting and auditing of the accounts and balance sheets of the Union, its institutions and any bodies financed by it, including the establishment of appropriations to be carried over and the settling of balances; the control of the

62

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 28 /

Date: 1/6

JOBNAME: Stefanou PAGE: 29 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Relations with the EP and COCOBU financial activities of the European Investment Bank; monitoring the costeffectiveness of the various forms of Community financing in the implementation of the Union’s policies; consideration of fraud and irregularities in the implementation of the budget of the Union, measures aiming at preventing and prosecuting such cases, and the protection of the Union’s financial interests in general; relations with the Court of Auditors, the appointment of its members and consideration of its reports; and the Financial Regulation as far as the implementation, management and control of the budget are concerned. It would be difficult to perceive that this close monitoring of OLAF’s activities on a functional and operational basis could be possible without a full picture on files and methods. In fact, in view of the length of time required for the closure of complicated investigation files, COCOBU would need to be fully informed on the progress of open investigations in order to both recommend discharge of the Commission but also to precipitate problems such as those evident in the Eurostat affair.128 In any case OLAF’s reports to the European Parliament (COCOBU) concerning its investigations under Article 11 (of the Regulation (EC) No 1073/1999) are classified as confidential documents. The COCOBU Handbook 2004 provides two distinct procedures for examination of confidential documents by the committee.129 The first procedure is provided for in Annex 3 to the Framework Agreement between the Commission and the Parliament.130 This Framework Agreement requires the Parliament to put in place a secure archive system for documents classified as confidential and a secure reading room in which they can be consulted in accordance with the rules governing their transmission. The second procedure is provided for in Annex VII to the Rules of Procedure of the European Parliament (Section A).131 Article 1 of Annex VII provides that the term ‘confidential documents’ applies to documents within the meaning Article 4 of Regulation 1049/2001.132 Any discussion concerning or involving documents 128 H Bösch, ‘ Report on the protection of the Communities’ financial interests and the fight against fraud—annual report 2001 (2002/2211(INI)), A5–0055/2003, 3 March 2003, 6. 129 COCOBU (European Parliament), Handbook 2004 for New Members of the Committee on Budgetary Control, 11–12. 130 Minutes of the EP Plenary Session sitting of 5 July 2000. 131 http://www2.europarl.eu.int/omk/sipade2?PUBREF=-//EP//TEXT+RULESEP+20040720+ANN-07+DOC+XML+V0//EN&HNAV=Y 132 The Article provides: 1. The institutions shall refuse access to a document where disclosure would undermine the protection of: (a) the public interest as regards: — public security, — defence and military matters, — international relations, — the financial, monetary or economic policy of the Community or a Member State; (b) privacy and the integrity of the individual, in particular in accordance with Community legislation regarding the protection of personal data. 2. The institutions shall refuse access to a document where disclosure would undermine the protection of:

63

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 29 /

Date: 2/6

JOBNAME: Stefanou PAGE: 30 SESS: 20 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework within the meaning of Article 4 takes place in camera and may be attended exclusively by members of the committee and by officials and experts whose presence is strictly necessary. COCOBU’s Handbook also provides that OLAF, when forwarding confidential documents, insists on the application of the second procedure, that is, based on Annex VII.133 Thus, additional safeguards of confidentiality are already in application for the protection of sensitive information. There is no doubt that the confidential information communicated by OLAF to COCOBU falls under the meaning of Article 8 of Regulation (EC) 1073/1999 and must, therefore, enjoy the protection provided by that Article. However, in the absence of specific provisions governing the choice of procedure to be followed by COCOBU in classifying confidential information received from OLAF, there seems to be no legal support for OLAF’s persistence that COCOBU classifies its report under Annex VII. OLAF’s position would be justifiable if a secure archive system and a secure reading room as required by the Framework Agreement had not yet materialised. Article 4(1) of Regulation (EC) 1073/1999 provides for a ‘decision’ to be adopted by an institution, body, office or agency of the Community laying out the procedures in accordance with which internal investigations may be carried out by OLAF. Article 4(6)(b) of the Regulation states that the decision setting out the procedures to be observed by OLAF in compliance with Article 4(1) must guarantee the rights of persons concerned in internal investigations.

— commercial interests of a natural or legal person, including intellectual property, — court proceedings and legal advice, — the purpose of inspections, investigations and audits, unless there is an overriding public interest in disclosure. 3. Access to a document, drawn up by an institution for internal use or received by an institution, which relates to a matter where the decision has not been taken by the institution, shall be refused if disclosure of the document would seriously undermine the institution’s decision-making process, unless there is an overriding public interest in disclosure. Access to a document containing opinions for internal use as part of deliberations and preliminary consultations within the institution concerned shall be refused even after the decision has been taken if disclosure of the document would seriously undermine the institution’s decision-making process, unless there is an overriding public interest in disclosure. 4. As regards third-party documents, the institution shall consult the third party with a view to assessing whether an exception in paragraph 1 or 2 is applicable, unless it is clear that the document shall or shall not be disclosed. 5. A Member State may request the institution not to disclose a document originating from that Member State without its prior agreement. 6. If only parts of the requested document are covered by any of the exceptions, the remaining parts of the document shall be released. 7. The exceptions as laid down in paragraphs 1 to 3 shall only apply for the period during which protection is justified on the basis of the content of the document. The exceptions may apply for a maximum period of 30 years. In the case of documents covered by the exceptions relating to privacy or commercial interests and in the case of sensitive documents, the exceptions may, if necessary, continue to apply after this period. 133 COCOBU (European Parliament), Handbook 2004 for New Members of the Committee on Budgetary Control, 11.

64

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 30 /

Date: 30/6

JOBNAME: Stefanou PAGE: 31 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Relations with the EP and COCOBU In accordance with this Article, a ‘Model Decision’ was annexed to the Interinstitutional Agreement of 25 May 1999 between the European Parliament, the Council of the European Union and the Commission of the European Communities134 to be adopted by an institution, body, office or agency of the Community in fulfilment of that Article. Article 4 of the ‘Model Decision’ provides to the effect that in internal investigations, where the possible implication of a member, manager, official or servant emerges, the interested party shall be informed rapidly as long as this would not be harmful to the investigation; in any event, conclusions referring by name to a member, manager, official or servant of (the institution, body, office or agency) may not be drawn once the investigation has been completed without the interested party having been enabled to express his views on all the facts which concern him; in cases necessitating the maintenance of absolute secrecy for the purpose of investigation and requiring the use of investigative procedures falling within the remit of a national judicial authority, compliance with the obligation to invite the member, manager, official or servant of (the institution, body, office or agency) to give their view may be deferred in agreement with the President or Secretary General respectively. However, the obligation of OLAF to transfer all data to COCOBU is not without exemptions. Thus, the final question arising at this point is whether OLAF’s obligation to report to COCOBU may compromise OLAF’s independence in exercising its powers of investigation; the protection of the rights of the accused and of witnesses, including whistleblowers; and the national provisions concerning judicial proceedings. Let us explore each of these three exemptions closely. With reference to a possible compromise of OLAF’s independence in exercising its powers of investigation, one must admit that there is little doubt that the prospect of allowing full access to its current files could appear prima facie to carry dangerous compromises to OLAF’s operational ability. However, it would be difficult to justify this with reference to COCOBU when this method of full reporting already applies to the Supervisory Committee of OLAF under Article 11 of Regulation 1073/99. If anything, Article 11(1) of Regulation 1073/99 considers the regular monitoring of OLAF’s investigative function by its Supervisory Committee as one which reinforces OLAF’s independence. It must be remembered at this point that the duty of OLAF’s Director under Article 11(7) of Regulation 1073/99 is not only to forward to the Supervisory Committee the annual programme of OLAF’s activities but also to keep the Committee regularly informed of activities, investigations, the results of investigations and the action taken on them. If this type of data transfer takes place between OLAF and an appointed committee of independent experts, there is no reason why this can not be repeated to the respective 134 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 the European Anti-Fraud Office (OLAF). OJEC L 136/Vol 42/1999.

65

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 31 /

Date: 1/6

JOBNAME: Stefanou PAGE: 32 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework closed committee of the only Union body whose legitimacy stems from direct elections. This transfer of data must extend not only to closed files but also to ongoing investigations so that members of COCOBU can follow progress, comment and scrutinise the methods and length of ongoing investigations thus precipitating problems and consequently enforcing OLAF’s efficiency, kudos amongst EU citizens and ultimately its independence. Nevertheless, in order to secure OLAF’s independence in exercising its powers of investigation COCOBU may not direct OLAF to specific paths of investigation. After all, COCOBU’s mandate is to inspect, not to lead. A second exemption to OLAF’s mandatory obligation to full disclosure of its files to COCOBU concerns the protection of the rights of the accused and of witnesses, including whistleblowers. The rights of the accused and of witnesses would be compromised if their identity and details of their files became widely known before the end of the investigations and the closure of the relevant file by OLAF. The question is whether disclosure to COCOBU would render this information public. It would not be easy to substantiate this argument, if one takes into account the strict confidentiality rules governing COCOBU. With regard to members of staff of the European Parliament that serve or are present in meetings of COCOBU, members of COCOBU are bound by the Code of Conduct for the European Parliament. In its Section C, the Code refers to Article 17 of the Staff Regulations and reaffirms the obligation of officials to refrain from disclosing to unauthorised persons any facts and information that came to their knowledge in the course of or in connection with the performance of their duties before the relevant document or information is made public. Even in exceptional cases where an official feels that a higher value or obligation dictates the disclosure of confidential information, the latter cannot take place without the express authorisation of the proper authority. This would be the case, for example, when disclosure is required in the course of legal proceedings other than proceedings before the ECJ or before a disciplinary board examining a case involving a member of staff of EU institutions. In other words, members of COCOBU are bound by the duty of confidentiality for all facts and data the knowledge of which was acquired during the course of COCOBU’s work. In exceptional cases where the member of the Committee feels that there is a justified need to breach this duty of confidentiality, express permission from the relevant authority must be sought. Unilateral disclosure is allowed only in legal proceedings before the ECJ or before disciplinary boards. The provision does not specify which is the relevant authority for awarding authorisation for breach of confidentiality in the case of COCOBU. It is possible to award this role to the Chairman of COCOBU or indeed the Committee itself. This would reflect practice introduced by Article 4 of Annex VII of the Parliament’s Rules of Procedure. The advantage of this scenario would be that the information would not be disclosed to anyone who does not already have knowledge of them as a means of allowing that person or body to assess the legality and legitimacy of the breach. With reference to OLAF documents, 66

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 32 /

Date: 1/6

JOBNAME: Stefanou PAGE: 33 SESS: 20 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Relations with the EP and COCOBU however, the distinct disadvantage of this would be that the decision of disclosure would remain an internal one for COCOBU and that OLAF would have no control over the matter despite the obvious dangers that disclosure would entail for investigations, especially ongoing ones. A second scenario could award the task of authorising the breach of confidentiality to the Interinstitutional Committee of Article 15(2) of Regulation 1049/2001. This scenario would present the advantage of some external involvement in the decision with the disadvantage of disclosure to persons not authorised to receive the relevant information. A third scenario could explore awarding this role to OLAF’s Supervisory Committee acting jointly with the Chairman of COCOBU. This would entail adequate degree of common participation thus strengthening the need for synergy between the two bodies in the fight against fraud. With regards to members of COCOBU who are also MEPs, members of COCOBU are bound by obligations concerning specific information that came to their knowledge during the course of their work for the Committee. Under Annex VII of the new Rules of Procedure the Chairman of the Committee assigns the examination of confidential documents to proceedings attended only by members of the Committee and by officials and experts who have been designated in advance by the chairman and whose presence is strictly necessary. The documents are numbered, they are distributed at the beginning of the meeting and they are collected again at the end. No notes of these, and certainly no photocopies, may be taken. The minutes of the meeting make no mention of the discussion of the item taken under the confidential procedure. Only the relevant decision, if any, may be recorded. Moreover, the protection of personal data of witnesses and the accused is stipulated in Regulation 45/2001, which prevents COCOBU from referring to named individuals in their reports. It must be noted that the obligation to refrain from naming individuals applies to COCOBU with reference to reports issued by them rather than reports received in confidentiality by OLAF. Under Article 4 of Annex VII confidentiality can be breached upon a motion from at least three members of the Committee and subsequent decision of COCOBU. There is little record on practice in such cases and there is certainly no publicly known practice on the criteria upon which such a decision can be taken. However, in view of the critical value of OLAF documents with specific reference to documents referring to ongoing investigations, leaving the decision on their disclosure to COCOBU exclusively does not seem to be the wisest option. The possibility of future exploitation of this window of opportunity in the provisions concerning the confidentiality of OLAF’s data can be detrimental to the trust of OLAF to COCOBU. It would be advisable to consider regulation of this problem in a manner promoting the synergy between the two bodies. The possibility of assigning this decision to OLAF’s Supervisory Committee with the participation of COCOBU meeting only when necessary would be a viable and seemingly mutually agreeable option and would put an end to this minor yet crucial window of opportunity to any future mala fide COCOBU member. 67

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 33 /

Date: 30/6

JOBNAME: Stefanou PAGE: 34 SESS: 20 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework In view of this analysis one cannot foresee how disclosing data to COCOBU may compromise the rights of witnesses and the accused. The provisions on confidentiality governing the transfer of data between COCOBU and OLAF seem to guarantee that unauthorised persons may not have access to sensitive data. In the event that such unauthorised leaks occur, penalties against the member breaching confidentiality and also the body itself are in place by the Staff Regulations, the Code of Conduct and the Rules of Procedure. Nevertheless, especially with reference to members of COCOBU who are MEPs one should note that the express stipulation on their duty of confidentiality derives from a laconic provision in the Parliament’s Rules of Procedure. This provision cannot be considered an adequate guide for MEPs whose professional expertise may well be outside the field of law. Detailed stipulation of the scope and extent of the duty of confidentiality combined with a comprehensive regulation on issues of conflict and resolution would facilitate the work of MEPs and would contribute to the further forging of trust between OLAF and COCOBU. The third exemption from OLAF’s mandatory obligation to transfer all data to COCOBU refers to disclosures which could adversely affect national provisions concerning judicial proceedings. It must be noted that in a large number of Member States national laws consider inadmissible as evidence data that has been subjected to illegal exposure from the time of collection to the hearing before the national court. This would be a problem if OLAF’s information in a file of investigation were exposed to unauthorised persons. Such conduct would tamper with the legitimacy of the information and it would endanger their utility before national courts. However, disclosure of data to authorised persons could not possibly have this adverse effect. Such a view would dictate non-transfer to any body or agency or person, including OLAF’s Supervisory Committee and national authorities that acquire data through normal mutual assistance conventions. On the basis of this analysis it becomes obvious that the relationship between COCOBU and OLAF now and in the future must be one of synergy, trust and cooperation based on current express regulations of issues related to specific points of procedure and practice. OLAF has the obligation, not the discretion, to disclose all data on all files to COCOBU (not the Parliament as a whole unless thus requested by MEPs). This data is covered by the obligation of confidentiality and no member of COCOBU may proceed to disclosure without express authorisation from the relevant authority. The authority awarding this authorisation has yet to be defined in legislation and it would be advisable to award this role to a joint OLAF/COCOBU body. The three exemptions to OLAF’s obligation to disclose to COCOBU (namely when OLAF’s obligation to report to COCOBU may compromise OLAF’s independence in exercising its powers of investigation; the protection of the rights of the accused and of witnesses, including whistleblowers; and the national provisions concerning judicial proceedings) do not normally apply in the case of transfer of data from OLAF to COCOBU. 68

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 34 /

Date: 30/6

JOBNAME: Stefanou PAGE: 35 SESS: 20 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Relations with the EP and COCOBU Nevertheless, general rules cannot be considered satisfactory for all eventualities arising from OLAF’s increasingly crucial procedural work. Perhaps the UK model, which allows the Serious Fraud Office to seek exemption from the duty to report on operational activities for specific files under progress in cases where the disclosure can compromise the progress of the file, may be utilised for future regulation of this issue. This possibility would be consistent with the application of the principle of proportionality which would justify the classification of a small number of open investigations as confidential even for COCOBU. It must be noted, however, that cases falling under this extraordinary provision are extremely limited. The legislator has already taken into account the principle of proportionality when introducing different levels of access to OLAF’s files in the first place and the legislator awarded access to all files to COCOBU. Thus, those classifying a file as confidential even for COCOBU must be able to prove that extraordinary circumstances require departure from the general rule. The question is, who could classify cases as confidential even for OLAF? For reasons that are too obvious to analyse, this task could not be awarded to either COCOBU or OLAF unilaterally. It could be possible to award this task to the committee deciding on conflicts of interest with reference to issues of confidentiality arising from cases brought before COCOBU. This could be either an Interinstitutional Committee modelled by reference to Article 15(2) of Regulation 1049/2001, or a new committee formed by OLAF’s Supervisory Committee acting jointly with the Chairman of COCOBU. This latter model presents the advantage of an adequate degree of common participation thus strengthening the need for synergy between the two bodies in the fight against fraud. Is this vision of a future relationship between OLAF and COCOBU supported by practices in the Member States? In other words, are there examples of national investigation/prosecution bodies that report to Parliamentary Committees? In the majority of Member States the body responsible for the investigation of serious fraud is part of the police as the main investigatory body under the national provisions of criminal procedure. This is the case in Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Luxembourg, Malta, Portugal, Slovakia, Slovenia and Spain. In a smaller number of countries the investigation of serious fraud is the responsibility of the national prosecution service. This is the case in the Czech Republic, Estonia and Hungary. In Austria, Portugal and Poland the relevant unit is part of the Ministry of Finance. As a result of this complete organic dependence of these units to the investigation or prosecution bodies of the Member States, they do not have reporting obligations to Parliament, at least not separate from their ‘mother’ institutions. Thus, in the Hellenic Republic the Permanent Committee of Financial Affairs, and its special Committee on the Budget of the State, discusses issues falling within the jurisdiction of the Ministries of Finances and Public Works. Under Article 101A of the Constitution of the Hellenic Republic every independent authority reports to the Parliament. Article 138A stipulates that all files are sent to the President of the Parliament who directs them to the respective Committee. Thus, in the Hellenic 69

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 35 /

Date: 30/6

JOBNAME: Stefanou PAGE: 36 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework Republic all independent authorities have to report to Parliament; however, the Police Department of Financial Crime is organically part of the Police of the Hellenic Republic, which is part of and subject to the control of the Ministry of Public Order. As a result reporting takes place through the Ministry rather than by use of Article 101A of the Constitution. In a small number of Member States one may identify a national body with functions equivalent to OLAF. These are the Italian Guardia di Finanza; the Latvian State Revenue Office; the Lithuanian Financial Crime Investigation Service; the Swedish Economic Crimes Bureau; and the Serious Fraud Office in the UK. However, even these bodies are not independent. As a result, they have no direct reporting obligations to the Parliament or its Committees. The Italian model of the Guardia di Finanza directs to public annual reports in combination with reports to the Minister of Finance. The British model of the Serious Fraud Office directs to public annual reports and frequent reports to the Attorney General. It is doubtful whether useful conclusions can be drawn from the brief description of the relationship between national equivalents of OLAF and national Parliamentary Committees. Thus, the analysis and conclusions of the matter from the point of view of EU law remains with the interpretation of existing relevant provisions at the EU level.

OLAF’S REGULATORY FRAMEWORK: A FINAL EVALUATION?

In view of lessons learnt by UCLAF one would have expected the EU legislator to arm OLAF with a complete, precise, and concrete regulatory framework promoting its position as an independent, powerful, yet democratic body of untouchables. Unfortunately, OLAF seems to have inherited, rather than avoided, some of the weaknesses of UCLAF. These are accentuated by the fluid and imperfect legal environment within which OLAF is called to function. OLAF’s nature as a hybrid, rather than an independent, body is the prime example of its existence as a result of political compromise rather than a full-hearted effort of the Community legislators to combat fraud against the financial interests of the Union. OLAF enjoys operational independence. But the regulatory framework of the Office does not really specify its mission in detail, at least not to the extent that its relationship with Eurojust and Europol can be evident. Possibilities for complete administrative independence of OLAF need to be explored: the model of Eurojust may be selected for this purpose. The present position of OLAF as a formal part of the Commission, yet independent, leads to a ‘hybrid status’ of the Office. This may result in rather loose ties between OLAF and other stakeholders and supervisory bodies and possible cases of ‘over-performing’. This is especially evident in the case of the EP, where the lack of a direct link, combined with the general and thus elusive reporting rules, creates opportunities for a rather broad 70

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 36 /

Date: 1/6

JOBNAME: Stefanou PAGE: 37 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Regulatory Framework interpretation of both the issues of independence and confidentiality. The partial reporting, and the past refusals to report, affect adversely the control functions of the EP and consequently the Office’s accountability. OLAF’s lack of direct, full accountability, with consequences in the event of wrongdoings, is rather concerning. In contrast to the state of affairs with the relevant supervisory bodies for Eurojust and Europol, the supervision exerted by OLAF’s Supervisory Committee does not constitute judicial supervision of any kind. There is no requirement for judicial membership in the composition of the Committee. And the latter does not exercise any judicial or quasi-judicial function over OLAF’s investigations. Proposals to enhance the Committee’s function and powers do not amount to attribution of full judicial supervision. Similarly, OLAF’s reporting obligations to COCOBU and the Court of Auditors is simply administrative supervision based on reporting requirements and monitoring. The ECJ is the only bearer of judicial supervision but the field of application of its enforcement mechanisms seem to be inapplicable in the case of OLAF either because of the requirement of evidence of intent or because of the nature of OLAF’s acts as administrative actions without binding legal value. However, the ECJ may judicially review actions against OLAF based on provisions of the Staff Regulations. But the procedure is only open to members of staff of the Union. The ECJ may also review OLAF’s failure to act. But this minimal possibility of judicial accountability should not take away from the crucial need to ensure that OLAF, as an organic part of the European Commission, is subject to the EP’s political oversight of its work. In order to perform its scrutiny function, the Parliament has the obligation to scrutinise the whole of OLAF’s work and activities. The problem with the exercise of this function remains the excuse of confidentiality which applies to all EU officials, obviously including OLAF’s staff. But this duty applies to disclosure to unauthorised persons, and thus cannot extend to members of COCOBU. Thus, OLAF’s staff has discretion to reveal information to persons whose function does not require them to know. Contrary to current interpretation, there is no discretion to disclose to members of COCOBU who must be given full access to all details of OLAF’s work including operational details provided that these are necessary for the performance of COCOBU’s duties. What is necessary? Simply, every detail relevant to the consideration of fraud and irregularities in the implementation of the budget of the Union, measures aiming at preventing and prosecuting such cases, and the protection of the Union’s financial interests in general. Thus, the application of discretion to provide full details applies to MEPs who are not members of COCOBU. Members of COCOBU must be offered full and complete details on any aspect of OLAF’s work including current operational activities. Is OLAF’s obligation to report fully to COCOBU affected by a possible compromise of OLAF’s independence, by the protection of the rights of the accused and of witnesses, or by national laws on judicial proceedings? The answer is no. Since the method of full reporting already applies to the Supervisory Committee of OLAF, it is difficult to support the view that the same method 71

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 37 /

Date: 1/6

JOBNAME: Stefanou PAGE: 38 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework applied to COCOBU can endanger the independence of the Office. In any case, accountability to the EP would entail a degree of control on OLAF. After all, COCOBU’s mandate is to inspect, not to lead. As for the protection of the rights of the accused and of witnesses, these would only be compromised if they could be identified while the case is ongoing. But COCOBU members are bound by strict confidentiality and therefore the theoretical possibility of disclosure cannot be used as an ante hoc justification (excuse?) of non-disclosure. If such disclosure is necessary, MEPs who are members of COCOBU would require express authorisation of the proper authority. This authority has not been specified expressly. Possibilities include the Chairman of COCOBU, COCOBU as a body, or an equivalent to the Interinstitutional Committee of Article 15(2) of Regulation 1049/2001. In any case, the regulation of the treatment of confidential documents does not compromise the rights of witnesses and the accused. Breaches of national provisions concerning judicial proceedings could be a real problem in the case of disclosure to unauthorised persons, as this would tamper with the legitimacy of the information and consequently hinder their admissibility before national courts. However, disclosure of data to authorised persons could not possibly have this adverse effect. Thus, the relationship between COCOBU and OLAF currently and in the future must be one of synergy, trust and cooperation based on current express regulations of issues related to specific points of procedure and practice. OLAF has the obligation, not the discretion, to disclose all data on all files to COCOBU (not the Parliament as a whole unless thus requested by MEPs). This data is covered by the obligation of confidentiality and no member of COCOBU may proceed to disclosure without express authorisation from the relevant authority. The authority awarding this authorisation has yet to be defined in legislation and it would be advisable to award this role to a joint OLAF/COCOBU body. The three exemptions to OLAF’s obligation to disclose to COCOBU (namely when OLAF’s obligation to report to COCOBU may compromise OLAF’s independence in exercising its powers of investigation; the protection of the rights of the accused and of witnesses, including whistleblowers; and the national provisions concerning judicial proceedings) do not normally apply in the case of transfer of data from OLAF to COCOBU. Nevertheless, the UK model, which allows the Serious Fraud Office to seek exemption from the duty to report on operational activities for specific files under progress in cases where the disclosure can compromise the progress of the file, may be utilised for future regulation of this issue. OLAF has a bright future ahead, unless the argument for the promotion of national agencies and against the strengthening of OLAF, a body plagued with problems from its very start, gains ground.135 The Lisbon Treaty, which collapsed

135 V Pujas, ‘Les difficultés de l’OLAF pour s’imposer en tant qu’acteur légitime de la protection des intérêts économiques et financiers européens’ (2006) 62 Cultures & Conflits 107–27.

72

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 38 /

Date: 1/6

JOBNAME: Stefanou PAGE: 39 SESS: 20 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Regulatory Framework the three pillars136 and opened the way for a European Public Prosecutor, may be the Office’s unique opportunity to establish itself as a chamber of the EPP.137 But what is it that OLAF has to offer the EU? What is the Office’s added value? OLAF can, and to a degree already does, play a central role in the exchange of information amongst national authorities, in the coordination of the file across the geographical and jurisdictional borders of the Member States involved, and can monitor the file as a means of ensuring that successful prosecution and ultimately conviction does occur.138 Although these functions could be served by Eurojust or Europol, current networks have not proved satisfactory.139 In any case, Eurojust lacks jurisdiction to deal with investigations in the very early stages of a case whereas Europol cannot offer much help with specialised financial offences. Perhaps more importantly, OLAF’s contribution to criminal cases of fraud against the financial interests of the EU must be recognised and formalised. In such cases OLAF represents the legitimate interests of the EU on behalf of the European taxpayer140 as the victim of fraud whose funds have been misappropriated or abused by the perpetrators of criminal activity. An analogy of the position of OLAF with the position of victims of cases at the national level would lead to OLAF’s classification as the bearer of the legitimate interest to see the perpetrators prosecuted effectively as a means of achieving conviction. Thus, OLAF’s role in cases that it investigates must be extended to the role of partie civil, namely to the role of the victim that has the right and the jurisdiction to monitor, be informed about, participate in, and facilitate the work of investigators and prosecutors, and ultimately follow the file to its final destination in criminal proceedings,141 and take part in the criminal trial in support of the national prosecutors. Awarding OLAF the role of partie civile in national criminal proceedings will finally allow the Office to inform the national investigating and

136 For an analysis of the restrictive effect of the third pillar on OLAF, see B-R Killmann, ‘The approximation of national substantive criminal law on fraud and the limits of the third pillar’ (2008) Eucrim 111–14. 137 For a brilliant analysis of the status quo post-Lisbon, see S Peers, op.cit., note 33, 1–2. 138 I Gräßle, ‘Document sur la proposition de règlement du Parlement européen et du Conseil modifiant le règlement (CE) No 1073/1999 relatif aux enquêtes effectuées par l’Office européen de lutte antifraude (OLAF). L’OLAF et sa complémentarité avec Eurojust et Europol, COCOBU, P6_TA(2008)0553, Brussels, 20 November 2008, 6; and Council’s approach to revision of the OLAF Regulations P6_TA(2008) 0632. 139 OLAF’s current network (OAFCN) may promote OLAF but does not directly facilitate the Office’s operational activities; see J Vlogaert and M Pesta, ‘OLAF: fighting fraud in Europe and beyond’ in SD Brown, Combating International Crime: the Longer arm of the law (London and New York, Routledge-Cavendish, 2009), 77–87, 86–87. 140 Committee on Budgetary Control, ‘Report on the Commission Green Paper on criminal-law protection of the financial interests of the Community and the establishment of a European Prosecutor, (COM(2001) 715—C5–0157/2002—2002/2065(COS)), Rapporteur: DR Theato, A5–0048/2003 final, 24 February 2003, 3. 141 This has been identified as a gap in OLAF’s regulatory framework: see J Espina Ramos and I Vicente Carbajosa, ‘The Future European Public Prosecutor’s Office’, proceedings of a seminar held in Madrid/Brussels, 23 October 2008 (Madrid, Imprenta Nacional del Boletin Oficial del Estado, 2009), NIPO: 054–08–003–0, Depósito Legal: M-7116–2009, 179.

73

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 39 /

Date: 30/6

JOBNAME: Stefanou PAGE: 40 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

The Regulatory Framework prosecuting authorities of crimes suspected to have been committed, to declare the legitimate interest of the EU in the file, and to appear before the court during the trial. In other words, OLAF will finally play the quasi-judicial role142 that it was set up to serve143 via direct organic participation to the compilation and development of the file while at the same time allowing the leading role to the national investigating, prosecuting, and judicial authorities. This is all the more important since more than half of the cases involving OLAF dismissed before the national courts are fruitless due to insufficient evidence.144 OLAF’s future as a civil party is not a new idea.145 However, the novelty of OLAF’s suggested new role lies in the call for legislative intervention nominating OLAF as civil party to all national criminal trials related to EU fraud, and awarding OLAF at least a minimum but expressly set and harmonised role in criminal proceedings within all Member States. Awarding this novel role to OLAF entails two problems. This would finally award legal effect to OLAF’s investigations, the lack of which is currently a problem for the Office’s effectiveness.146 First, the institution of partie politic (civil party within a criminal trial) does not exist in the criminal justice systems of all Member States. The UK would be one of the jurisdictions where the role and function are unknown.147 Second, and perhaps more importantly, the role of partie politic may prevent OLAF from taking up the role of the EPP: one body cannot serve both as the prosecutor and the civil litigant in the criminal case. But is this what OLAF will be doing? If one looks at the EPP it becomes evident that its role would be that of coordination and facilitation of criminal trials at the national level,148 rather than that of the leader of the prosecution in criminal cases before an EU criminal court to which the EPP would have had to be

142 M Wade, ‘OLAF and the push and pull factors of a European criminal justice system’ (2008) Eucrim, 128–31, 131. 143 Court of Auditors, ‘Special Report No 1/2005 concerning the management of the European Anti-Fraud Office (OLAF), together with the Commission’s replies (pursuant to the second subparagraph of Article 248(4) of the EC Treaty)’, 2005/C 202/01, OJ C202/1, 18 August 2005, 7. 144 ‘Annual Report 2009: European Anti-Fraud Office Ninth Activity Report for the period 1 January 2008 to 31 December 2008’, 35. 145 Report from the Commission to the Council and the EP: Protection of the financial interests of the Communities—fight against fraud—Commission’s annual report 2004 (SEC(2005)973), (SEC(2005)974), COM(2005)323 final, Brussels, 19 July 2005, 22. 146 I Gräßle, ‘Document de travail No 6 sur la proposition de règlement du Parlement européen et du Conseil modifiant le règlement (CE) No 1073/1999 relatif aux enquêtes effectuées par l’Office européen de lutte antifraude (OLAF). L’OLAF et sa complémentarité avec Eurojust et Europol, COCOBU, DT\731300FR.doc, PE409.433v01–00, Brussels, 26 June 2008, 2. 147 The Czech Republic, Cyprus, England and Wales do not provide for a similar function. 148 Committee of Independent Experts, ‘Second Report on Reform of the Commission—Analysis of current practice and proposals for tackling mismanagement, irregularities and fraud’, Vol II, 10 September 1999, DOC_EN\DV\381\381230EN.doc, at 5.12.11; also G Conheady, ‘Corpus Juris, the presumption of innocence and the Eurosceptic’ (2004) 7 Trinity College Law Review 163–83, 164.

74

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 40 /

Date: 1/6

JOBNAME: Stefanou PAGE: 41 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Regulatory Framework attached.149 As a result, in essence the role of the EPP is a quasi-administrative and quasi-prosecutional function. As a result, one cannot consider OLAF’s participation to the EPP as clashing with the proposal for OLAF’s new role as a civil party in the criminal trial. One must not hurry to dismiss this proposal. OLAF is in dire need for reform at the regulatory level. The Office’s independence and accountability can no longer rely on the credibility, personality, and morality of its Director General and members of staff. But the chance for reform must not be viewed as an attack against the Office. It is a challenge, and indeed one that can finally award OLAF the teeth, power, and democratic accountability that both the Office and the citizens of the EU deserve and demand.

149 W Schomburg, ‘Are we on the road to a European law-enforcement area? International cooperation in criminal matters. What place for justice?’ (2000) 8 European Journal of Crime, Criminal Law and Criminal Justice 51–60, 57.

75

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 41 /

Date: 1/6

JOBNAME: Stefanou PAGE: 42 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter03

/Pg. Position: 42 /

Date: 1/6

JOBNAME: Stefanou PAGE: 1 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

4 Operational Activities and Due Process SIMONE WHITE

INTRODUCTION

This is one of three Chapters in the book focusing on operational issues. Here we look at the operational activities of OLAF, in the sense of investigations, the information that supports them, and legal issues of procedure and due process. The next Chapter will focus on some particular issues where the current safeguards may be considered inadequate, giving rise to various proposals for change, whilst ensuring the independence of investigations. The third of these three Chapters on operational issues will move on to discuss the civil route in anti-fraud work, where OLAF has had considerable success, the policy implications of which could be further exploited. OLAF’s primary task is the protection of the financial interests of the European Union. This means investigating (or working with authorities investigating) allegations of fraud or irregularities to the detriment of the EU budget or which impact on the good reputation of EU institutions. The aim of this Chapter is to focus on legal or policy issues which either underpin or arise in the course of operational work. Following a brief description of OLAF’s ‘core activities’, issues relating to due process are examined. This Chapter concerns itself with the status quo and possible fine tuning thereof, whilst the two following Chapters will consider safeguards to persons and institutions and more radical options for operational work.

OLAF’S ‘CORE ACTIVITIES’

OLAF’s operational work can be divided into three categories: investigations, assistance and intelligence work. 77

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 1 /

Date: 30/6

JOBNAME: Stefanou PAGE: 2 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process Investigations: Internal and External OLAF carries out administrative investigations. Definitions of these activities are found in Articles 3 and 4 of Regulation 1073/991 respectively. In external investigations, OLAF carries out on-the-spot checks or inspections in the Member States and in third countries. Legal bases to carry out on-the-spot checks or inspections include Regulation 2185/96,2 Regulation 2988/95,3 sectoral legal bases4 and the cooperation agreements in force with third countries. External investigations are carried out in the following areas: customs, agriculture subsidies and financial aid paid either directly to an entity (internal policies or ‘direct expenditure’) or through a national government department. Aid may include structural funds (applicable within the EU) or any type of external aid. Only structural funds cases are geographically confined within the European Union. OLAF exercises its power to carry out inspections and checks in the Member States and, in accordance with the cooperation agreements in force, in third countries (see section to follow on external investigations). Internal investigations are carried out within the EU’s institutions, bodies, offices and agencies. OLAF investigates serious matters relating to the discharge of professional duties such as to constitute a dereliction of the obligations of officials and other servants of the Communities liable to result in disciplinary or, as the case may be, criminal proceedings, or any equivalent failure to discharge obligations on the part of members of institutions and bodies, heads of offices and agencies or members of the staff of institutions, bodies, offices or agencies not subject to the Staff Regulations. Legal instruments relevant to internal investigations also include the Protocol on Privileges and Immunities of the European Communities,5 the Staff Regulations and the procedures adopted by each institution, body, office or agency.6 Over 80 per cent of internal investigations involve the European Commission, whilst the remainder are spread amongst other European institutions, agencies and offices. According to OLAF

1 Regulation 1073/99 of the European Parliament and of the Council [1999] L 136/1 concerning investigations conducted by the European Anti-Fraud Office. 2 Council Regulation 2185/96 concerning on the spot checks and inspections carried out by the Commission in order to protect the European Communities’ financial interests against fraud and other irregularities OJ (1996) L 292/2. 3 Council Regulation 2988/95 on the Protection of the European Communities’ financial interests OJ (1995) L 312/1. 4 Sectors include agriculture, Customs, structural funds, pre-accession funds, internal policies (direct expenditure), external aids. 5 Protocol No 36 on the Privileges and Immunities of the European Communities (1965) annexed to the Treaties establishing the European Community and the European Atomic Energy Community. 6 Inter-institutional Agreement between the European Parliament, the Council of the European Union and the Commission of the European Communities concerning internal investigations by the European Anti-Fraud Office (1999) L 136/15.

78

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 2 /

Date: 1/6

JOBNAME: Stefanou PAGE: 3 SESS: 21 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s ‘Core Activities’ this concentration is due to the fact that, as the Commission manages by far the greatest part of the EC budget and accounts for most EU officials and other staff, it is more frequently targeted. Some cases, like the Eurostat case, involve both external and internal investigations.7 OLAF has adopted the practice of opening an external investigation whenever an internal investigation shows that there are external aspects and vice versa. In Franchet II,8 the Tribunal found that the administrative distinction between ‘external’ and ‘internal’ investigation could lead to confusion, especially as procedures for internal and external investigations differ somewhat. Assistance and Coordination Article 1(2) of Regulation 1073/99 requires OLAF to provide the Member States with assistance from the Commission in organising close and regular cooperation between their competent authorities, coordinating activities for the purpose of protecting the European Community’s financial interests against fraud. OLAF opens coordination cases in the Customs and agricultural areas mostly, due to the fact that such cases often have a multinational dimension. OLAF also works jointly with international organisations. In 2003, a joint OIOS9/OLAF investigation led to a former staff member of the United Nations Interim Administration in Kosovo (UNMIK) being convicted and sentenced to a prison term after committing offences to the detriment of the UNMIK budget.10 Intelligence Operational intelligence work is linked to particular cases, whilst strategic intelligence analyses trends and should make it possible to work proactively. Article 2(5)(b) of Commission Decision 1999/35211 states that OLAF is responsible for the collection and analysis of information. Regulation 1073/99 does not make explicit reference to intelligence gathering qua operational activity, but nevertheless foresees in Article 8 that information obtained in the course of internal and external investigations must be protected by relevant confidentiality and data protection rules. This is also clear in Preamble 15 of Regulation 1073/99: ‘whereas, for the sake of successful cooperation between the Office, the Member States and the relevant 7

See Case T–48/05 Franchet and Byk v Commission, [2008] ECR II-1585, paras 116–25. Ibid, paras 118 and 121. The possibility of confusion between case types was also raised in the OLAF Supervisory Committee Activity Report for 2007. 9 Office of Internal Oversight Services of the United Nations. 10 See C de Cooker, Accountability, investigation and due process in international organizations (Leiden/Boston: Martinus Nijhoff Publishers, 2005) 47–49. 11 Commission Decision establishing the European Anti-Fraud Office 1999/352 OJ L (1999) L136/20. 8

79

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 3 /

Date: 8/8

JOBNAME: Stefanou PAGE: 4 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process institutions, bodies, offices and agencies, the reciprocal exchange of information must be organised, subject to rules of confidentiality where information is subject to professional secrecy, while ensuring that it enjoys the proper data protection’. This preamble does not refer to investigations, but contains a wider reference to information. Direct references to information exchange can be found in sectoral rules, for example in Community agricultural and Customs legislation.12 One intelligence exercise consists of ‘fraud-proofing’ legislation.13 This enables OLAF to identify ‘red flags’ or fraud risk indicators and to target investigation resources upon specific areas. However, OLAF is above all a reactive investigation service and its prevention function is less well developed. In 2005, the European Court of Auditors14 recommended that OLAF should focus its activities on investigative work, to the exclusion of other tasks such as the development of the Commission’s fraud strategy or the preparation of legislative and regulatory anti-fraud measures.15 What, then, are the issues for such work? Staff and Work Methods—in Brief Since 2006, between half and two thirds of OLAF’s staff have been engaged in operational activity, depending on what categories of staff count as ‘operational’. The remainder of the staff deal with the follow-up of cases, prevention, the interface with other institutions, or with administrative, legal and management issues. OLAF’s policy has been to recruit more operational staff and to retain temporary staff with operational experience. OLAF personnel are based in Brussels, at 30, rue Joseph II. The Director General directs the conduct of investigations,16 through his directors and their heads of units. An Executive Board made up of representatives from operational units makes recommendations to the Director General concerning the conduct of cases. Throughout the active phase of a case, the investigator, supervised by a head of unit, has access to legal advice, whether it concerns national law or EU law. Legal advice is provided by dedicated units within OLAF. Case handlers carry out missions in the Member States and in third countries. A large part of EU budget expenditure fraud apparently occurs in third countries;

12 See, eg, Regulation 515/97 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 OJ (1997) L82/1; Regulation 515/91. 13 See Communication from the Commission concerning the fraud-proofing of legislation and contract management SEC (2001) 2029, 7.11.2001. 14 European Court of Auditors Special Report 1/2005 concerning the management of the European Anti-Fraud Office (OLAF), together with the Commission’s replies OJ [2005] C 202/1. 15 Like all European Commission Directorates General, OLAF comes under the authority of a Commissioner, takes part in general policy formulation, collaborative work with other institutions and within the Commission, relations with the media and carries out human resources work. 16 Article 6 of Regulation 1073/99 OJ [1999] L136/1.

80

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 4 /

Date: 30/6

JOBNAME: Stefanou PAGE: 5 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s ‘Core Activities’ similarly for Customs and agricultural fraud. Whilst on mission, OLAF investigators or intelligence specialists usually work closely with relevant national authorities (see section below concerning on-the-spot checks). Pujas observes that OLAF is highly dependent on the operational means mobilised by the Member States, strictly managed by intergovernmental rules.17 Typically, a team on mission may include investigators, lawyers and intelligence specialists, although the composition of a multidisciplinary team will vary in accordance with the case. Increasingly, missions in far-away countries have aimed to ‘bunch’ several cases in the same geographical area. OLAF already has placed officials in Romania, Bulgaria and China and may well consider more decentralisation of this type in the future. The operational personnel remain predominantly male. At the time of writing, OLAF has not met the Commission’s target for women in management. This target is 20 per cent of women in senior management posts and the Commission overall had 35 per cent of its senior management posts filled by women. In its first 10 years of existence, OLAF has had no female senior manager, whilst all secretarial staff remains female. For middle management, the Commission’s target has been 30 per cent of women. In 2007 the Commission attained 30.9 per cent of women in middle management posts. OLAF lagged behind with less than 10 per cent of women in middle management. OLAF remains in this sense something of a curiosity in comparison with EU Member States, in which some progress is being made in gender equality. Operational staff may be called to act as witnesses in national court proceedings. The European Court of Justice ruled in Zwartfeld 18 that the Protocol on Privileges and Immunities did not permit the Community institutions to neglect the duty of sincere cooperation with the national authorities, and in particular the judicial authorities, a duty referred to in Article 19 of the EC Protocol itself. This means (i) presenting to the national court the documents it requires, unless there are imperative reasons relating to the need to avoid interference with the functioning and independence of the Communities justifying its refusal to do so; and (ii) authorising officials to be examined as witnesses, in accordance with Article 19 of the Staff Regulations. Permission has to be given by the Appointing Authority according to Article 19 of the EC Staff Regulations if an official is requested to testify in court. This permission can only be refused where the interests of the European Communities so require and where such refusal would not entail criminal consequences as far as the official is concerned. OLAF has contact with national, criminal investigators and prosecutors. OLAF dedicates an operational unit to the necessary interaction with national criminal law authorities. Increasingly, OLAF’s information and/or reports get the active attention of criminal authorities, as a result of a policy to focus on cases which are more serious and therefore more likely to attract prosecution and/or recovery 17 V Pujas, ‘The European Anti-Fraud Office (OLAF): a European policy to fight against economic and financial fraud?’ (2003) 10(5) Journal of European Pubic Policy 778–97. 18 Case C–2/88, JJ Zwartfeld and others, request for judicial cooperation [1990] ECR I–3365.

81

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 5 /

Date: 30/6

JOBNAME: Stefanou PAGE: 6 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process of funds. A majority of OLAF cases now require judicial and/or financial follow-up after the OLAF investigation is completed. The European Courts of Justice decide how to pitch the level of guarantees applicable to OLAF’s administrative investigations, knowing that they may lead to a range of penalties. However, OLAF has no criminal competence. It operates in a purely administrative sphere. This means that OLAF has no power to force entry, to seize documents or to compel answers to questions. It has been suggested that a legal basis under the new treaty (such as Article 325 TFEU) might be more appropriate; this would make it possible to re-cast OLAF’s activities without excluding criminal law powers. The horizontal legal framework19 in European Community law includes Regulation 1073/9920 and Commission Decision 1999/35221 establishing OLAF, Regulation 2185/96,22 and Regulation 2988/95.23 An inter-institutional Agreement24 contains a Model Decision concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Communities’ interests. Another Commission Decision sets out the terms and conditions for internal investigations.25 Additionally, each sector (for example Structural funds, Agriculture) has its own specific legal framework. Sectoral legislation adopted prior to the creation of OLAF refers to the European Commission carrying out checks and inspections, although these powers were subsequently devolved to OLAF in 1999. Given that its legal framework is scant in some areas, OLAF often has to rely on the jurisprudence of the European Courts of Justice and has updated its operational manual accordingly at intervals. Here we discuss legal issues affecting operational work in relation to: the extent of OLAF’s powers; discretion to open an investigation; the duty of care; diligent and impartial examination; and the duration of investigations. Other aspects of procedure are dealt with later.

19 In this context, a horizontal legal framework refers to legislation concerning operational work in general, as opposed to ‘vertical’ legislation, connected to a particular budgetary sector. 20 Regulation 1073/99 of the European Parliament and of the Council [1999] L 136/1 concerning investigations conducted by the European Anti-Fraud Office. 21 Commission Decision OJ [1999] L136/20 establishing the European Anti-Fraud Office. 22 Council Regulation 2185/96 OJ [1996] L292/2 concerning on the spot checks and inspections carried out by the commission in order to protect the European Communities’ financial interests against fraud and other irregularities. 23 Council Regulation 2988/95 OJ [1995] L312/1 on the protection of the European Communities’ financial interests. 24 Inter institutional Agreement OJ [1999] L136/15 between the European Parliament, the Council of the European Union and the Commission of the European Communities concerning internal investigations by the European Anti-Fraud Office. 25 Commission Decision 1999/396 OJ [1999] L149/57 concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any illegal activity detrimental to the Communities’ interests.

82

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 6 /

Date: 30/6

JOBNAME: Stefanou PAGE: 7 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s ‘Core Activities’ Extent of OLAF’s Powers The European Court of Justice ruled that the expression ‘financial interests of the Community’ in Article 280 EC must be interpreted as encompassing not only revenue and expenditure covered by the Community budget but also, in principle, revenue and expenditure covered by the budget of other bodies, offices and agencies established by the EC Treaty.26 Notwithstanding the existence of control mechanisms specific to the various institutions, bodies, offices and agencies established by or on the basis of the Treaties, it was necessary, for the purposes of strengthening the prevention of the fight against fraud, corruption and other irregularities detrimental to the financial interests of the European Community, to set up a control mechanism that is simultaneously centralised within one particular organ, specialised and operated independently and uniformly with respect to those institutions, bodies, offices and agencies.27 In other words, OLAF looks across all the EU institutions regardless of whether they have their own investigatory capacity. Discretion/Threshold for Opening an Investigation In Automec,28 the Court ruled that in the competition field, the Commission could not be compelled to conduct an investigation and that the power to set priorities was an inherent part of the work of administrations. This principle also applies to OLAF. A decision by OLAF’s Director to open an investigation cannot be taken unless there are sufficiently serious suspicions relating to acts of fraud, corruption or other illegal activities likely to be detrimental to the financial interests of the Communities.29 Duty of Care—Diligent and Impartial Examination The European Courts of Justice have developed jurisprudence relating to the care that should be exercised when discretionary determinations are made in relation to individual cases. This jurisprudence has been applied especially in the context of competition and state aids. The principle of care establishes a duty on the administration carefully to examine the relevant factual and legal aspects of the individual case. In Nölle 30 the ECJ held that an applicant had produced sufficient facts to raise doubts as to whether the information contained in the documents in the case had been considered with the due care required. 26 27 28 29 30

Case C–15/00 European Commission v EIB, judgment of 10 July 2003, para 20. Ibid, para 166. Case 24/90 Automec SrL v Commission ECR [1992] II 2223, para 28. Case C–15/00 European Commission v EIB, judgment of 10 July 2003, para 164. Case C–16/90 Nölle v Hauptzollamt Bremen-Freihafen [1991] ECR I–5163.

83

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 7 /

Date: 30/6

JOBNAME: Stefanou PAGE: 8 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process The development of the principle of due care was further developed in Technische Universität München.31 The Court held that where the Community institutions have a power of appraisal, then respect for the rights guaranteed by the Community legal order was especially important. The rights guaranteed included the right of the person to make his or her views known, the right to have an adequately reasoned decision, and the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case. The Court found that a reliance on experts who did not possess the requisite technical knowledge in the relevant area constituted a breach of the duty of care by the Commission and annulled the contested Commission decision. Subsequent decisions, such as the British Airways case,32 further underlined the proximate connection between the duty to examine carefully and impartially all aspects of the case, and the obligation to give reasons, since the latter is a prerequisite to ensuring that the former has been properly complied with. In Max Mobil,33 the CFI conceptualised the principle of diligent and impartial treatment as part of the broader right to sound administration recognised by the Charter of Fundamental Rights of the European Union.34 Duty of Diligence In Camos Grau,35 the Court held that the requirement of impartiality, to which the institutions are subject in carrying out investigative tasks of the kind which are entrusted to OLAF, is intended to protect the persons concerned and confers on them a right as individuals to see that the corresponding guarantees are complied with, as well as to ensure that the public interest is respected.36 Conflicts of Interest The Court held in Camos Grau 37 that OLAF must conduct investigations falling within its competence in compliance with the Treaty and the general principles of Community law, in particular the requirement of impartiality found in the Staff Regulations, Article 14 of which in particular seeks to avoid a situation where there is a conflict of interest on the part of officials.38 A manifest breach of the 31 Case C–269/90 Hauptzollamt München-Mitte v Technische Universität München [1991] ECR I–5469. 32 Case T–371 and 394/94, British Airways plc and British Midlands Airways Ltd v Commission [1998] ECR II–2405, para 95. 33 Case T–54/99 Max.mobil Telecommunication Service GmbH v Commission [2002] ECR II–313. 34 OJ (2010) C 83/389 as appended to the consolidated versions of the Treaty on European Union and the Treaty on the Functioning of the European Union. 35 Case T-309/03 Camos Grau v Commission, [2006] ECR II- 1173. 36 Ibid, para 102. 37 Ibid. 38 Camos Grau, above n 35, para 105.

84

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 8 /

Date: 30/6

JOBNAME: Stefanou PAGE: 9 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s ‘Core Activities’ requirement of impartiality constitutes a fault capable of giving rise to liability on the part of the Community, since there is a direct and causal link between the wrongful behaviour and the damage claimed.39 Duration of Investigations Article 6(5) of Regulation 1073/99 requires investigations to be conducted ‘continuously’ over a period that must be proportionate to the circumstances and complexity of the case. Under Article 11(7), where an investigation has been in progress for more than nine months, the Director must inform the Supervisory Committee of the reasons why it has not been possible to bring the investigation to a conclusion. OLAF’s Annual Management Plan sets a target of 24 months for the active phase of a case, whether this is an investigation, coordination or assistance case. Statistics show that the longest cases are coordination cases, mostly relating to Customs and agricultural matters, where OLAF must wait for the Member States’ authorities to send relevant information. These cases lasted an average of 30 months in 2007, whilst external investigation cases lasted an average of 28 months and internal investigations an average of 22 months. In François,40 the Court ordered the Commission to pay damages for nonmaterial damages suffered by an official after the Commission had imposed a disciplinary measure more than eight years after the facts alleged against him took place. The Court ruled that the Commission had initiated the disciplinary proceedings in breach of the principle that a reasonable period should be observed, the disciplinary proceedings having, furthermore, continued for a period of almost three years. This caused injury to the applicant’s reputation, disrupted his private life and placed him in a state of prolonged uncertainty. Those circumstances constitute non-material damage for which compensation must be made. This gives some indication to OLAF of what the Courts may find to be an unreasonable duration for an enquiry. However, the duty of diligence cannot be interpreted to mean that an investigation must be completed within a given time period. The Court ruled in Camos Grau 41 that, although legitimate when the facts are old and liable to become subject to time limitation, the concern of OLAF to conduct its investigations

39 Agustín Carcía Ureta (2006) ‘Qui custodiat custodes?’ sobre las investigaciones de la Oficina Europea de Lucha contra la Fraude. Comentario a Camós Grau v Comisión, asunto T–309/03, Sentencia del Tribunal de Primera Instancia (Sala Cuarta ampliada) de 6 Abril de 2006, Unión Europea Aranzadi, Agosto/Septiembre 2006, 13–19. 40 Case T–307/01 Jean Paul François v Commission, judgment of the Court of First Instance of 10 June 2004. 41 Camos Grau, above n 35.

85

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 9 /

Date: 1/6

JOBNAME: Stefanou PAGE: 10 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process rapidly cannot justify a one-sided or selective inquiry into the potential responsibility of different services of the institution when it is plain, as in that case, that those services had, in different ways, a role to play in the facts of the matter which was the subject of the investigation.42

DUE PROCESS

The European Courts of Justice have developed the content of process rights on a case-by-case basis. The precepts laid down by the courts have then been taken up into sector-specific legislation and moulded in a detailed manner to fit the needs of the area.43 In some cases, the European Court of Justice has already ruled in matters of OLAF procedure. OLAF-specific jurisprudence has also increased since 2005. Groussot and Popov argued in 2010 that a codification of due process rights was not necessary and that the elaboration of a strong body of case law should suffice, as it does in the EU competition law field.44 This somewhat overlooks the extent to which process rights are already codified in the EU competition field. The same level of codification would no doubt be helpful to OLAF. OLAF can also draw from an existing body of EC jurisprudence applying to the competition, Customs, agricultural, disciplinary and administrative fields. Jurisprudence is particularly abundant in the competition field. However, it must be remembered that unlike OLAF, DG COMP45 does not only investigate but also imposes large fines and has the power to waive or diminish fines in return for information. Bearing in mind these differences, some general principles can still be distilled from the case law on competition (and other sectors) which can be extended to OLAF by analogy. Under the present constitutional arrangements, neither the European Commission nor OLAF falls under the jurisdiction of the European Court of Human Rights. This situation is, however, set to evolve with the proposed accession of the European Union to the European Convention on Human Rights. Meanwhile, rulings of the European Courts of Justice concerning the respect of fundamental rights and which apply to OLAF’s core activity have a great significance and impact. OLAF regularly updates an internal Operational Manual which contains instructions from the Director General to staff engaged in core activities. Some 42

Camos Grau, above n 35, para 130. P Craig, EU Administrative Law (Oxford, Oxford University Press, 2006) 362; see also C Harlow, ‘Codification of EC administrative procedures? Fitting the foot to the shoe or the shoe to the foot?’ (1996) 2 European Law Journal 3. 44 X Groussot and Z Popov, ‘What’s wrong with OLAF? Accountability, due process and criminal justice in European Anti-Fraud Policy’ (2010) 47 Common Market Law Review 605–43. 45 Directorate General of the European Commission for competition. 43

86

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 10 /

Date: 1/6

JOBNAME: Stefanou PAGE: 11 SESS: 23 OUTPUT: Fri Aug 12 10:52:35 2011

Due Process revised rules have also been published in the OLAF Seventh Activity report. One issue that arises in this respect is to what extent these rules are binding. Regulation 1073/99 lays down more procedural rules for internal investigations than it does for external investigations. There are two reasons for this. First, the legislator aimed to give OLAF a clear and unambiguous role with respect to internal investigations in 1999. OLAF’s predecessor, UCLAF, did carry out internal investigations, but without a clear mandate. Second, the assumption was that external investigations would be carried out in the Member States, in tandem with national authorities and in accordance with national law. It was not thought necessary, therefore, to be too explicit about procedure. Yet as time went by, it became clear that OLAF investigators needed procedural rules when carrying out external investigations (in EU Member States or in third countries), to ensure that the rights of persons were respected and that as a result the information processed by OLAF would be admissible in court. Whilst the European Court of Justice stated repeatedly that it gave attention to the European Convention on Human Rights (ECHR) and indeed treated it as an important source of inspiration for its own decisions in the field of human rights, it held in Opinion 2/9446 that the Community lacked competence under the EC Treaty to accede to the ECHR. Although the Charter of fundamental rights was not legally binding before the Treaty of Lisbon, it still had an impact on legal reasoning. In this context, a reminder of the relation between Community law and human rights (and therefore process rights) may be in order. In Nold,47 the European Court of Justice ruled that fundamental rights formed an integral part of the general principles of Community law, the observance of which it ensures. In safeguarding these rights, the Court is bound to draw inspiration from constitutional traditions common to the Member States, and it cannot therefore uphold measures which are incompatible with fundamental rights recognised and protected by the constitutions of those states. Rules common to the legal systems of the Member States are general principles of Community law and, as such, they must be observed, from which it follows that fundamental rights, guarantees which are shared by all, form part of those principles and must be protected.48 Similarly, international treaties for the protection of human rights on which the Member States have collaborated or of which they are signatories, can supply guidelines which should be followed within the principles. EC jurisprudence also points out that, in carrying out its task, the Commission must ensure that the rights of the defence are not impaired, including during

46 Opinion 2/94 of the Court of 28 March 1996 (Accession by the Community to the Convention for the Protection of Human Rights and Fundamental Freedoms OJ [1996] C 180/1. 47 Case 4/73 J Nold v Commission, judgment of 14 May 1974 [1974] ECR 491. 48 Ibid, para 13; Case C-303/5 Advocaten voor ot Wereld v Leden van de Ministera (AvdW case) [2007] ECR I-3633m para 73.

87

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 11 /

Date: 12/8

JOBNAME: Stefanou PAGE: 12 SESS: 21 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process preliminary inquiry procedures, which may be decisive in providing evidence of the unlawful nature of conduct engaged in by undertakings for which they may be liable.49 In a range of EU staff cases the ECJ has accepted arguments based on pleas such as the violation of the freedom of expression, freedom of religion, the right to private life and non-discrimination and has required EU institutions to amend several of their practices. In the competition field, the rights of the defence, including the right to a fair hearing and relating principles such as nonretroactivity of penal liability, have frequently been invoked to challenge executive and administrative action.50 The evolution of defence rights in OLAF investigations is discussed further below. Right to be Informed Regulation 1073/99 does not contain any rules concerning the notification of persons at any stage of the investigation. In the competition field, the European Courts of Justice have held it constant that notice should be given of the nature of the case and the individual should have a right to respond to it. OLAF’s policy is that in an internal investigation, an official must be informed at the initial stage in order to arrange an interview and once again at the closure of the case. However, when secrecy is required, notification of the interested party may be deferred, on the basis of a reasoned, written decision. As soon as the reasons for the deferral cease to apply, the interested party is informed of the investigation. In an external investigation, the interested party is informed, as long as this would not be harmful to the investigation.51 The duty to give reasons is relevant when informing the interested party. The obligation to give reasons will normally require specification of the Treaty article on which the measure was based, the factual background to the measures and the purposes behind it. This is exemplified in the Tariff Preferences 52 case, where the ECJ annulled parts of a Council measure because the legal basis of the measure had not been specified. The Court held that it was sufficient to set out in a concise, clear, and relevant manner the principal issues of law and fact upon which the action was based, so that the reasoning which led the institution to its decision could be understood.53

49 Case 322/81 Michelin v Commission [1983] ECR 346, para 7; 46/87 and 227/88 Hoechst AG v Commission [1989] ECR 2856, para 15. 50 P Craig and G De Búrca, EU Law, Cases and Materials 4th edn (Oxford, Oxford University Press, 2008) 391–92. 51 OLAF 7th Activity report, 82. 52 Case 24/62 Germany v Commission [1963] ECR 63. 53 Ibid.

88

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 12 /

Date: 8/8

JOBNAME: Stefanou PAGE: 13 SESS: 21 OUTPUT: Tue Aug 9 13:14:31 2011

Due Process In another case, the ECJ held the obligation to state the subject-matter and purpose of the investigation to constitute a fundamental guarantee of the right of the defence, which cannot be mitigated by such factors as the need to ensure the effectiveness of the investigation.54 In Franchet and Byk II, the Tribunal held that a breach of the obligation to give reasons did not engage the liability of the Community.55 Furthermore, in stating the reasons for its decision, the Commission is not obliged to adopt a position on all arguments relied on by the parties.56 In the competition field, the European Court of Justice stated early in its jurisprudence that the addressee must be informed of the factual and legal grounds on which a decision is based. This enables a person to decide whether to seek judicial review and facilitates the exercise of that review by the Community courts.57 It is sufficient if the motivation sets out the facts and legal considerations having decisive importance for the decision.58 OLAF does not, in principle, make decisions likely to alter the legal position of the interested party. However, as a matter of good administrative practice, OLAF motivates all its recommendations. To respect the rights of defence of undertakings concerned, the Commission has to specify the subject matter and purpose of the investigation. In the competition area, that obligation is a fundamental requirement—not merely in order to show that the investigation to be carried out on the premises of the undertakings concerned is justified, but also to enable those undertakings to assess the scope of their duty to cooperate, while at the same time safeguarding the rights of the defence. This principle extends to OLAF. The Right to be Heard The jurisprudence of the European Courts of Justice has established a right to be heard. This right cannot be excluded or restricted by any legislative provision and the provision and the principle must be protected, both where there is no specific community legislation and also where legislation exists but does not take sufficient account of the principle.59 Observance of the right to be heard can be

54 Joint cases C–46/87 and C–227/88 Hoechst AG v Commission of the European Communities [1989] ECR 2859, para 14. 55 Cases 106/81 Kind v Council and Commission [1982] ECR 2885, para 14; C–76/01 P Eurocoton v Council [2003] ECR I–10091, para 97–99; T–481/93 and T–484/93 Levende Varkens v Commission ECR II–2941, para 104; T–43/98 Emesa Sugar v Council ECR II–3519, para 63 and Case T–259/03 K Nikolaou v Commission [2007] ECR II-99, para 271. 56 Franchet and Byk v Commission, above n 7. 57 Case 84/82 Germany v Commission [1984] ECR 1451. 58 Case T–459/93 Siemens v Commission [1995] ECR II–1675. 59 Case T–260/94 Air Inter SA v Commission [1991] ECR II–997, para 60; see also case T–65/96 Kish Glass and Co Ltd v Commission (2000) ECR II–188, paras 32–34.

89

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 13 /

Date: 8/8

JOBNAME: Stefanou PAGE: 14 SESS: 22 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process raised by the Court of its own motion.60 The right to be heard before an individual measure is taken that would affect a person adversely is included within the Charter of Fundamental Rights of the European Union.61 Regulation 1073/99 explicitly provides for the right to be heard in internal investigations. In the context of shared administration with the Member States, the Court ruled in Eyckeler 62 that the rights of the defence, including the right to be heard, were fundamental wherever the contested measure could have an adverse impact on the individual. The applicant should be placed in a position wherefrom he can effectively make his views known as regards the matters taken into account by the Commission as the basis for its decision. The right to be heard will not necessarily require an oral hearing,63 so it may be exercised through an interview or in writing. OLAF’s power to carry out interviews derives from Article 2 of Regulation 1073/99. Under this article, OLAF undertakes inspections, checks and ‘other measures’. In relation to internal investigations, OLAF ‘may request oral information from members of the institutions and bodies, from managers of offices and agencies and from the staff of the institutions, bodies, offices and agencies’.64 They have a general duty to assist OLAF, laid down in the EC Staff Regulations. Access to the File An important component of the right to be heard is access to the file. The Court made it clear in Franchet and Byk I 65 that Regulation 1049/2001 did not provide for the specific aspects of the rights of the defence to be exercised through access to documents. OLAF grants no access to the investigation file. This is in line with Article 48(2) of the Charter of Fundamental Rights of the European Union, which states that respect for the rights of the defence of anyone who has been charged shall be guaranteed. The European Courts of Justice have thus held it constant that the transmission of information to a national authority with a recommendation to investigate or prosecute did not constitute a charge. By contrast, the jurisprudence of the European Court of Justice in the field of competition provides for a limited access to the file and a right of access to the file is now included in the regulations governing competition. In that context, it must be remembered that the Statement of Objection in the competition area, unlike the OLAF final report, is a document deemed to have legal effects. In

60 Case C–291/89, Interhotel v Commission [1991] ECR I–2257, para 14; Case C–367/95P Commission v Sytraval and Brink’s France [1998] ECR I–1719, para 67. 61 Art 41(2)(a): ‘The right to good administration includes the right of every person to be heard, before any individual measure which would affect him or her adversely is taken.’ 62 Case T–42/96 Eyckeler Malt AG v Commission [1998] ECR II–401. 63 Ibid. 64 Art 4(2), last subparagraph of Regulation 1073/99, OJ [1999] L136/1. 65 Cases T–391/3 and T–70/04 Y Franchet and D Byk v Commission [2006] ECR II-2023.

90

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 14 /

Date: 9/8

JOBNAME: Stefanou PAGE: 15 SESS: 21 OUTPUT: Tue Aug 9 13:14:31 2011

Due Process Eyckeler,66 the Court ruled that if the right to be heard was to be exercised effectively, there must be access to the non-confidential documentation relied on by the Commission when it made the contested decision. It was not open to the Commission to exclude documents that it did not consider relevant, since these might well be of interest to the applicant. This means a generalisation of the right of access to the file as an aspect of the right to be heard, in accord with Article 41(2)(b) of the Charter of Fundamental Rights of European Union. At the very least, the Eyckeler judgment renders it all the easier for applicants contesting decisions in other areas to argue that the right should be applicable, and places the onus on the Commission to show why this should not be so. However, in Nikolaou v Commission, where the applicant argued that OLAF should have given access to file, in accordance with competition jurisprudence on the right of access to the file, and in particular Hercules Chemicals,67 the Court ruled that this did not apply to OLAF.68 In deciding whether access to the file should be granted, the nature of the final report at the end of an investigation has a pivotal significance. With specific reference to OLAF, the Court ruled in 2004 in relation to external investigations: It is clear that reports, such as the final report, drawn up by OLAF following an external investigation and sent to the competent authorities of the Member States, in accordance with Article 9 of Regulation No 1073/1999, are only recommendations or opinions which have no binding legal effects.

The court characterised OLAF and the national authorities as being independent from each other, holding that the national authorities are ‘free to decide what action to take pursuant to a final report and are accordingly the only authorities having the power to adopt decisions capable of affecting the legal position of those persons in relation to which the report recommend that such proceedings be instigated’.69 In Tillack,70 the Court of First Instance rejected the contention that Article 10 EC could impose an obligation to take action pursuant to the OLAF report. However, some learned commentators have argued that the wide latitude ascribed by the Court to national authorities in deciding whether to act on information received by OLAF perhaps overstates the capacity for independent action actually available to them.71 The principle on the non-binding nature of OLAF reports in external investigations was later extended to internal investigations. The Court held in Camos 66

Case T–42/96 Eyckeler Malt AG v Commission [1998] ECR II–401. Case T–7/89 Hercules Chemicals v Commission, ECR II 1711, para 56. 68 Nikolaou v Commission, para 267. 69 Case T–29/03 C A de Andalucia v C; Case T-84/03 Turco v Council [2004] ECR II-2923, para 33; see also Case T–193/04 Hans Martin Tillack v Commission [2006] ECR II–3995, para 33. 70 Case C–521/04 P (R) Tillack v Commission, para 33. 71 See, eg J Wakefield, ‘Case T–193/04 Hans Martin Tillack v Commission, judgment of the Court of First Instance (Fourth Chamber) of 4 October 2006 [2006] ECR II–3995’ (2008) 45 Common Market Law Review 199–121. 67

91

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 15 /

Date: 8/8

JOBNAME: Stefanou PAGE: 16 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process Grau 72 that an OLAF report drawn on the conclusions of its external or internal investigations does not bring about a distinct change in the legal position of those persons referred to in it by name. The final nature of an OLAF report for the purpose of the procedure governing investigations which that office carries out does not thereby confer on it the nature of an act having binding effect.73 An application for annulment of an OLAF report is directed against a document which has no legal effects which are binding on and capable of affecting the interests of a person investigated and named in the document by bringing about a distinct change in his legal position. Claims for annulment of a report under Article 230 EC are accordingly inadmissible.74 While OLAF may recommend in its reports that measures be adopted having binding legal effects adversely affecting the persons concerned, the opinion it provides in that regard imposes no obligation, even of a procedural nature, on the authorities to which it is addressed.75 OLAF’s policy is that, without prejudice to the rules on transparency of the European Public Administration, in particular the right to request public disclosure of documents under Regulation 1049/200176 and the rules on the protection of personal data under Regulation 45/2001,77 throughout OLAF’s operational activities the interested party (or his legal counsel) has no specific right of direct access to the OLAF investigation file. OLAF files can, however, be accessed later and indirectly, during follow-up proceedings conducted by the Community or national authorities, through these authorities, subject to the applicable procedural rules. This can be, for example, in the context of disciplinary proceedings or sanctions before another Community body or national administrative or judicial proceedings. In disciplinary proceedings, the interested party has the right of access to ‘all documents directly related to the allegations made against him’.78 In summary, OLAF is not in a position to subject persons investigated to any formal accusation—it has no power to affect the legal position of the interested party—therefore it does not grant access to the file. The OLAF Supervisory Committee has, however, argued that, whenever a complaint might be sent to a Review Adviser (proposed in the amendment to Regulation 1073/99), the complainant would have to be granted access to the ‘entire report or to all items of

72

Camos Grau, above n 35, para 48. Camos Grau, above n 35, para 49. 74 Camos Grau, above n 35, para 59. 75 Camos Grau, above n 35, para 50. If, after receiving a final case report, national judicial authorities decide to take no further action, the same report cannot be used by the appointing authority of the EC official concerned to affect the official’s professional situation, para 53. 76 OJ L (2001) 145/43. 77 Regulation 45/2001 OJ [2001] L8/1 of the European Parliament and of the Council on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of data. 78 Arts 90–91, Art 2 of Annex IX of Staff Regulations. 73

92

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 16 /

Date: 30/6

JOBNAME: Stefanou PAGE: 17 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Due Process evidence concerning him’. They added: ‘strengthening the procedural rights of the person under investigation would also enhance the credibility of OLAF investigations and their findings’.79 Right to Silence and to Refrain from Self-incrimination OLAF does not have the power to compel economic operators to give information. In practice, investigators inform any interested party of their right not to make any declarations which might be self-incriminating.80 Generally, it is an infringement of the right to silence whenever the undertaking concerned would be compelled to provide answers which might involve an admission on its part of the existence of an infringement which it is incumbent upon the Commission to prove.81 In the competition field, it was understood that the Commission was entitled to compel an undertaking to provide all necessary information concerning such facts as may be known to it. However, the Commission may not compel an undertaking to provide it with answers which might involve an admission on its part of the existence of an infringement which it is incumbent upon the Commission to prove.82 In 1993 the ECtHR ruled in Funke 83 that there was a breach of Article 6(1) ECHR in a case where the applicant had been compelled to provide the evidence of offences he had allegedly committed. The ECtHR pointed out that the right of silence, together with the right not to incriminate, applied not only to criminal procedures, but also to administrative procedures such as Customs procedures. Van Overbeek argued in 1994 that the Funke principle would force the Commission to make more (surprise) investigations (in the competition area).84 Clearly, the jurisprudence of the European Courts of Justice can have a direct impact on everyday operational work. Review of Acts The European Courts have held it constant that judicial review was available for any measure the legal effects of which were binding on and capable of affecting the legal interests of an applicant by bringing about a distinct change in its legal

79 Opinion 2/2006 concerning the reform of Regulation 1073/99 concerning investigations conducted by the European Anti-Fraud Office (OLAF). 80 OLAF 7th Activity Report, 83. 81 Ibid; also Case T–112/98 Mannesmannröhren-Werke [2001] ECR–II 1751, paras 66 and 67. 82 Orkem, paras 34 and 35; Aalborg, paras 61 and 65; ThyssenKrupp, para 49. 83 Funke v France, Series A, No 256A (1993) 16 EHRR 297, para 44 of the judgment. 84 WBJ Van Overbeek, ‘The right to remain silent in competition investigations: the Funke decision of the Court of Human Rights makes revision of the ECJ’s case law necessary’ (1994) 15(3) European Competition Law Review 127–33.

93

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 17 /

Date: 1/6

JOBNAME: Stefanou PAGE: 18 SESS: 21 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process position.85 Furthermore, in accordance with settled case law, in order for the Communities to be rendered liable, it must be proved that (i) the alleged conduct of the institution is illegal; (ii) that the damage is genuine; and (iii) that there is a direct causal link between the breach of the conduct in question and the damage alleged.86 In the case of acts or decisions adopted by a procedure involving several stages, in particular where they are the culmination of an internal procedure, an act is, in principle, open to review only if it is a measure definitively laying down the position of the institution at the end of that procedure, and not a provisional measure intended to pave the way for the final decision. An annulment can only be sought by an official against an act capable of affecting his legal position.87 Only a measure the legal effects of which are binding on and capable of affecting the interests of an applicant by bringing about a distinct change in his legal position is an act or decision against which an action for annulment may be brought.88 Acts preparatory to a decision do not adversely affect the applicant within the meaning of Article 90(2) of the Regulations and therefore can only be contested incidentally in an appeal against measures capable of being annulled.89 Although some purely preparatory measures may adversely affect an official inasmuch as they may influence the content of a subsequent challengeable act, those measures cannot be the subject of a separate action and must be challenged in support of an action brought against that act.90 Only a measure adopted by the Secretary-General of the Commission or by the Director of OLAF, which is a decision and which entirely replaces any previous statement of position, is capable of producing legal effects such as to affect the interests of the applicant and can be the subject of an action for annulment under Article 230 EC.91 Dealing with the Media Breaches of procedure stemming from unwarranted declarations to the media by the Commission or OLAF are at present sanctioned by the European Courts of Justice by way of damages. This is because the second paragraph of Article 215 EC provides that, in the case of non-contractual liability, the Community is, in 85

Camos Grau, above n 35. Cases T–4/92 Latham v Commission (1994) ECR SC I A 23 and II 83, para 63; T–583/93 Ryan Sheridan v Commission (1994) ECR SC I A 27 and II 77, para 141; T –40/97 Hautem v EIB (1999) ECR SC I A 171 and II 897 para 83. 87 Case T–215/02 R, Santiago Gómez-Reino v Commission, Order of 17 October 2002, NYR. 88 Cases 32/68 Grasselli v Commission, ECR 505, paras 4–7; 17/78 Deshormes v Commission ECR 189, para 10; 346/87 Bossi v Commission ECR 303, para 23; T–391/94 Baiwir v Commission ECR IA–269 and II–787, para 34 and T–293/94 Vela Palacios v CES ECR IA–305 and II–893, para 22. 89 Cases 11/64 Weighardt v Commission CEEA, 11/64 ECR 365 and 346/87 Bossi v Commission ECR 303, para 23. 90 Case 35/67 Van Eick v Commission ECR 481, 500. 91 Cases T-191/96 and T-106/97 CAS Succhi di Frutta v Commission (Frutta case) [1999] ECR II-318, para 31; Cases T-391/03 and T-70/04 Y Franchet and D Byk v Commission (1) [2006] ECR II-2023, para 48. 86

94

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 18 /

Date: 8/8

JOBNAME: Stefanou PAGE: 19 SESS: 21 OUTPUT: Tue Aug 9 13:14:31 2011

Due Process accordance with the general principles common to the laws of the Member States, to make good any damage caused by its institutions or by its servants in the performance of their duties. A right to reparation is conferred where three conditions are met: the rule of law infringed must be intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the author of the act and the damage sustained by the injured parties.92 Cases have included breaches of confidentiality and data protection and breaches of the presumption of innocence. In Camos Grau, 93 the European Court of Justice held that the adverse effect on a plaintiff ’s honour was aggravated by the external publicity given to an OLAF investigation report. Although the disputed report was an internal document, intended to be communicated only to the parties referred to in Article 9 of Regulation 1073/99, it was distributed outside that restricted group and its findings were commented on in the press, the Spanish daily newspaper El Pais having reported the implication of the plaintiff by name in an article which appeared on 11 December 2002. As a result, the European Court of Justice ordered the Commission to pay €10,000 compensation and to bear the costs. In Giraudy,94 the EU Civil Service Tribunal ordered the Commission to pay Mr Giraudy €15,000 damages and two thirds of the costs following a press release issued in 2002 as a result of an OLAF enquiry which gave rise to considerable publicity unfavourable to him in the media. Mr Giraudy claimed that the Commission’s spokesman did not observe the confidential nature of the enquiry and made public statements liable to damage his reputation. Mr Giraudy was subsequently cleared at a Commission disciplinary hearing. In Franchet and Byk II, the Tribunal of First Instance found that the presumption of innocence had been breached as a result of a press communiqué concerning a speech made by the President of the Commission on 25 September 2003.95 The Commission had to pay €56,000 in compensation. However, the Court found that the information given to the COCOBU96 was of an informative nature in response to questions put by the members of this committee. The replies were not of a nature as to make the committee members believe that the applicants were guilty.97 In Nikolaou 98 the Court of First Instance ruled that OLAF was the source of part of the information divulged and on that basis, the claimant was only granted €3,000 damages and a quarter of the costs. 92

Case Camos Grau, above n 35, para 100. Case Camos Grau, above n 35 para 160. 94 Case F–23/05 Jean-Louis Giraudy v Commission [2007] ECR IA-193. 95 Case T–48/05 Franchet and Byk, para 332. 96 The European Parliament’s Budgetary Control Committee. This committee is now called CONT. 97 Case T–48/05 Franchet and Byk, para 229. 98 Case T–259/03 Kalliopi Nikolaou v Commission [2007] ECR II-99. 93

95

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 19 /

Date: 8/8

JOBNAME: Stefanou PAGE: 20 SESS: 21 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process To summarise, OLAF has to guarantee that information collected during the investigation phase is not divulged to the press. However, the Court has made clear in Franchet and Byk II that communications could be made by OLAF to a relevant committee, for example to a European Parliamentary Committee, as long as they respected the presumption of innocence. It is then up to the Committee (or the institution) in question to ensure that the presumption of innocence is respected in its contacts with the media.99 Internal Investigations Some specific issues are raised here in relation to internal investigations, which do not by any means represent a comprehensive overview of such issues. They include challenges to OLAF’s investigation powers, the relationship between disciplinary and criminal procedures, access to premises, access to staff computers, investigations of OLAF by OLAF and issues relating to personal immunities. These issues should in any case suffice to give the reader a broad understanding of internal investigations, from an operational point of view. Challenges from Other EU Institutions and Bodies OLAF’s power to carry out investigations within the institutions has been challenged. In 2000, 71 Members of the European Parliament (MEPs) applied to the Court100 to annul legislation enabling OLAF to carry out internal investigations within the European Parliament, under Article 230 EC, alleging inter alia a breach of Parliamentary immunity. The Court dismissed the action on the grounds that the contested measure was not of individual concern to the applicants within the meaning of Article 230(3) EC.101 Both the European Central Bank and the European Investment Bank challenged the power of OLAF to carry out internal investigations, but without success.102 Relationship between Disciplinary and Criminal Procedures The Staff Regulations establish that disciplinary proceedings arising out of a criminal offence must await the outcome of the criminal trial. This rule is justified, in particular, by the fact that the national criminal courts have greater 99 See para 95 of Case T–259/03 Kalliopi Nikolaou v Commission above n 98. This shows that information was obtained by the press from an MEP. 100 Case T 17/00 Willy Rothley v European Parliament ECR 2002 II–579. 101 Ibid, para 36. 102 Cases C–11/00 European Commission v European Central Bank (2003) ECR I- 7147; C 15/00 European Commission v European Investment Bank (2003) ECR I–0728.

96

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 20 /

Date: 8/8

JOBNAME: Stefanou PAGE: 21 SESS: 21 OUTPUT: Tue Aug 9 13:14:31 2011

Due Process investigative powers than the appointing authority.103 Consequently, where the same facts may constitute both a criminal offence and a breach of the official’s obligations under the Staff Regulations, the administration is bound by the findings of fact made by the criminal court in the criminal proceedings. Once that court has established the existence of the facts in the case, the administration can then undertake their legal characterisation in the light of the concept of a disciplinary offence, ascertaining in particular whether they constitute breaches of obligations under the Staff Regulations. Access to EC Premises Although EC premises are exempt from search by national authorities,104 since 1999 OLAF has had the right of immediate and unannounced access to any information held by the EC institutions, bodies, offices and agencies and to their premises. The Office may take a copy of and obtain extracts from any document or the contents of any data medium held by the institutions, bodies, offices and agencies and, if necessary, assume custody of such documents or data to ensure that there is no danger of their disappearing.105 Since 1999, therefore, OLAF carries out searches on EC premises unless, in exceptional circumstances, the Commissioners decide to lift the immunity enjoyed by Community premises so that the national police can search Commission premises: this occurred in the Cresson case (see below). Access to Staff Computers In Tzoanos,106 the Court dealt with the issue of the right of access to staff ’s computerised data. The Court held that the Commission had to right of access to an official’s computer held in his office for the purpose of fulfilling his function, even in the absence of the same official. This did not violate the rights of the defence. The Court pointed out that the provision has a twofold rationale. First, it was intended to ensure that the position of the official in question is not affected in any criminal proceedings instituted against him on the basis of facts which are also the subject matter of disciplinary proceedings within his institution.107

103 104

Case T–23/00 A v Commission [2000] ECR-SC IA–263 and II–1211, para 37. Art 1 of the Protocol no 36 on the Privileges and Immunities of the European Communities of

1965. 105 Art 4(2) first indent of Regulation 1073/99 OJ [1999] L136/1 concerning investigations conducted by the European Anti-Fraud Office (OLAF). 106 Case C-191/98P Tzoanos v Commission [2003] ECR IA-129. 107 Ibid, para 34.

97

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 21 /

Date: 8/8

JOBNAME: Stefanou PAGE: 22 SESS: 21 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process Second, suspension of the disciplinary proceedings pending the conclusion of the criminal proceedings makes it possible to take into consideration, in those disciplinary proceedings, the findings of fact made by the criminal court when its verdict has become final.108 Lifting a Personal Immunity: general The lifting of a personal immunity granted to an official by virtue of his or her employment within EC institutions, bodies, offices or agencies can be requested within the context of an OLAF internal investigation. The information obtained during OLAF internal investigations into matters liable to result in criminal proceedings must be forwarded to the judicial authorities of the Member State concerned.109 Reports drawn following an internal investigation and any related documents are sent to the institution concerned, which then decides on the action to be taken.110 Any request from a national police or judicial authority regarding a waiver of immunity from judicial proceedings of an official or servant of the Commission concerning possible cases of fraud, corruption or any other illegal activity are transmitted to the Director of OLAF for his opinion. If a request for waiver of immunity concerns a Member of the Commission, OLAF is informed.111 OLAF investigations led to 16 decisions to waive the immunity of jurisdiction by the Commission between 1 January 2002 and 31 December 2005. Those cases related to fraud, active or passive corruption, abuse of office and other offences related to financial irregularities and committed within the framework of official business.112 Lifting a Commissioner’s Personal Immunity There has only been one instance of a Commissioner’s immunity being waived. Edith Cresson, the Commissioner for Science, Research and Development, Human Resources, Education, Training and Youth during the 1994–99 term, was the main target in the allegations of misconduct that led to the downfall of the European Commission in 1999. The Commission resigned en masse rather than face censure from the European Parliament over complaints including conflicts of interest and favouritism. Edith Cresson’s immunity against prosecution was lifted in 2000, after the required unanimous assent of Commissioners. The Commission also gave the 108

Case T–307/01 François v Commission [2004] ECR II 1669, paras 59, 74 and 75. Art 10(2) of Regulation 1073/99, OJ [1999] L136/1. Art 9(4) of Regulation 1073/99, OJ [1999] L136/1. 111 Art 6 of Commission Decision 1999/396 OJ[1999] L149/57. 112 See response by Mr S Kallas to Parliamentary written question E-0066/06 by Herbert Bösch to the Commission on Officials’ immunity from legal proceedings, 18 January 2006. 109 110

98

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 22 /

Date: 8/8

JOBNAME: Stefanou PAGE: 23 SESS: 22 OUTPUT: Tue Aug 9 13:14:31 2011

Due Process Belgian authorities access to Commission premises, including OLAF’s premises. After a long investigation the Belgian authorities charged Edith Cresson with fraud, forgery and abuse of confidence. Seven officials who had worked with her were charged with similar offences as well as the more serious charge of corruption. In 2006, the European Court of Justice113 ruled that Edith Cresson had acted in breach of her obligations as a European Commissioner. Whilst a breach of the obligations arising from the office of Member of the Commission calls, in principle, for the imposition of a penalty, the Court held that, having regard to the circumstances of the case, the finding of breach constituted, of itself, an appropriate penalty. Accordingly, the Court did not impose a penalty in the form of a deprivation of her right to a pension or other benefits. In respect of Edith Cresson’s claim that, where the conduct complained of in criminal and disciplinary proceedings is the same, the findings of the criminal court are binding on the disciplinary authorities, the Court held that it is not bound by the legal characterisation of facts made in the context of the criminal proceedings and that it is for the Court, exercising its discretion to the full, to investigate whether the conduct complained of in proceedings brought under Article 213(2) EC constitutes a breach of the obligations arising from the office of Commissioner. Accordingly, the decision of the Chambre du Conseil of the Tribunal de Première Instance de Bruxelles that there was no evidence of criminal conduct on Cresson’s part could not bind the European Court of Justice. A couple of procedural points are worth mentioning. First, the initiation of administrative proceedings took place in January 2003, several years after the facts and some time after investigation reports had been filed in 1999 and 2002. The Court found that such a delay was justified and did not vitiate the legal proceedings. It pointed out that Article 213(2) EC specifies no time limit and had never been used before to initiate a procedure against a Commissioner on the ground of her conduct in office. As a result, the Commission was entitled to proceed slowly and cautiously. Moreover, Mrs Cresson had not shown that the lapse of time had affected the way she could defend herself.114 Second, she had asked for the oral procedure to be reopened after the Advocate General had delivered his opinion. The Court declined that request because it considered that Mrs Cresson did not have anything new to present or argue.115 Lifting the Personal Immunity of a Member of the European Parliament The risk cannot be excluded a priori that, in conducting an investigation, OLAF might perform an act prejudicial to the immunity enjoyed by Members of the European Parliament. However, if that were to occur, any Member of the 113 114 115

Case C–432/04 Commission of the European Communities v Edith Cresson OJ [1996] C 224/6. Case C–96/89 Commission v Netherlands [1991] ECR I–2461, para 16. Case C–210/03 Swedish Match UK Ltd v Secretary of State for Health [2004] ECR I-11893.

99

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 23 /

Date: 9/8

JOBNAME: Stefanou PAGE: 24 SESS: 22 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process Parliament faced with such an act could, if he considered it damaging to him, avail himself of the judicial protection and the legal remedies provided for by the Treaty.116 In V v European Parliament,117 an anonymous MEP sought to stay criminal proceedings in the United Kingdom and asked the Court to suspend the operation of a Resolution of the European Parliament to waive his immunity from suit. He also asked the Court for interim measures to prevent criminal proceedings being resumed pending final judgment of the Court of First Instance in the main action. In this case, the United Kingdom Attorney General had requested the European Parliament (i) to confirm that the prosecution of the applicant for the alleged offences may proceed in accordance with the Protocol of Privileges and Immunities, and in particular its Article 8; (ii) in the event that the applicant was held to enjoy privilege or immunity under the Protocol of Privileges and Immunities, which would otherwise act as a bar to his prosecution, to waive that privilege or immunity so that the applicant may be prosecuted and, if convicted, punished in the United Kingdom for those alleged offences of dishonesty.118 The European Parliament subsequently adopted a resolution waiving the immunity of the applicant and instructing the President immediately to forward this decision and the report of its committee to the appropriate authority of the United Kingdom. The prosecuting authority applied to the national court to lift the stay of the criminal proceedings against the applicant and thus permit them to be resumed: in this the British authorities acted with dispatch. The European Court of Justice ruled that the applicant had failed to demonstrate that he was at imminent risk of serious and irreparable damage. The applicant enjoyed the presumption of innocence at the stage of the proceedings. There was no adequate proof that it was sufficiently probable that he would be convicted.119 The application for interim measures was therefore dismissed. The reasons given by the European Parliament Committee on Verification of Credentials (henceforth the Committee) for waiving MEPs’ immunities have included the following: provisions of assistance to criminals to enable them to escape justice; membership of a criminal organisation and drug trafficking;120 possession at a demonstration of objects liable to cause injury to persons and property;121 car accident (flagrante delicto);122 dangerous driving;123 parking in a prohibited area;124 failure to report a road accident;125 encouragement and

116 117 118 119 120 121 122 123 124 125

Case T-17/00 Willy Rothley and Others v European Parliament [2002] ECR II–579. Case T–345/05 V v European Parliament [2009] 1 CMLR 15. Ibid, para 12. Ibid, paras 91 and 92. PE 93.291 of 28.11.84, Tortora; also PE 101.749 of 29.11.85, Tortora. PE 96.511 of 3.4.85, Klöckner and Härlin (possession of a stone and a CS gas canister). PE 327.257 of 19.6.03, Mogens NJ Camre. PE 294.952 of 18.4.01, Jeggle; PE 286.024 of 31.5.00, Kronberger. PE 106.972, Cicciomessere, Resolution of 8.9. 1986, OJ C 227, 14. PE 116.076, Braun-Moser, Resolution of 26.10.1987, OJ C 319, 9.

100

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 24 /

Date: 9/8

JOBNAME: Stefanou PAGE: 25 SESS: 19 OUTPUT: Tue Aug 9 13:14:31 2011

Due Process support for a dissolved fascist party;126 receiving stolen goods and embezzling a company’s assets;127 denying the holocaust at a press conference held to mark the launch of a book on the Member’s life and political activities;128 and aggravated fraud.129 To put this in context, a survey carried out in 2002 found that between 1971, when direct elections were introduced, and February 2001, a total of 92 requests for waiver of parliamentary immunity were considered and Parliament decided to waive immunity in 18 cases, that is, 19.5 per cent of the total.130 In cases where the Committee decided not to waive the immunity, the Committee invoked the following reasons: the MEP had not been formally charged;131 defamatory remarks were actually made in the course of political debate;132 the criminal procedure was motivated by a desire to prejudice the political activities of the MEP (fumus persecutionis);133 the acts prosecuted formed part of political activities (for example demonstrations);134 the application was insufficiently precise.135 External Investigations External investigations, like internal investigations, can take place in EU Member States and in third countries. Statistical information shows that approximately half of external investigations take place outside the EU. On-the-spot Checks In 1999 OLAF became the Directorate General responsible for carrying out on-the-spot checks under Regulation 2185/96.136 In this respect the Court ruled that the checks provided for by Regulation 2185/96 do not set aside the Community sectoral rules providing for checks. Sectoral checks ensure the sound 126

PE 100.920 of 3.1.86, Almirante. PE 338.438 of 27 November 2003, Marchiani. PE 228.174 of 23.11.98, Le Pen. 129 PE 230.290 of 3.5.99, Moniz. 130 S McGee, Rules on Parliamentary immunity in the European Parliament and the Member States of the European Union (Brussels, ECPRD, 2002) 54. 131 PE 223/843 of 10.10.97, Antonio Carlos Ribeiro Campos. 132 PE 223.842 of 10.10.97, Ribeiro Campos; PE 298.383 of 11.4.01, Voggenhuber; PE 298.384 of 17.4.01, Sichrovsky; PE 286.056 of 17.10.00, Pachebo Pereira; PE 229.513 of 22.2.99, Rosado Fernandes. 133 PE 338.439 of 27.11.03, Marchiani; PE 332.612 of 27.11.03; Cohn-Bendit (delays also relevant in this case); PE 316.214 of 20.5.03, E Korakas; PE 294.91 of 31.1.01, Ribeiro e Castro; PE 230.285 of 22.4.99, Féret. 134 Resolution of 12.5.86, OJ C 148/16, Simonis and Walter; Resolution of 18.2.91, Breyer; Resolution of 14.12.92, Roth and Telkâmpfer; PE 286.023 of 29.5.00, Brie. 135 PE 312.758 of 20.2.02, Marchiani; PE 312.757 of 20.2.02, Pasqua. 136 See L Kulh and H Spitzer (1998) Die Verordnung (Euratom, EG) Nr 2185/96 des Rates über die Kontrollenfügnis der Kommission im Bereich der Betrugsbekämpfung in Europäisches Zeitschrift für 127 128

101

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 25 /

Date: 30/6

JOBNAME: Stefanou PAGE: 26 SESS: 21 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process management and application of Community rules, whilst Regulation 2185/96 is designed as a basis for the detection of irregularities.137 OLAF carries out on-the-spot checks and inspections for the detection of transnational irregularities that may involve economic operators acting in several Member States or where, for the detection of irregularities, the situation in a Member State requires on-the-spot checks and inspections to be strengthened in a particular case in order to improve the effectiveness of the protection of financial interests and so to ensure an equivalent level of protection within the Community or at the request of the Member State concerned.138 In 2007 OLAF carried out 74 on-the-spot checks within the meaning of Regulation 2185/96. They included 25 checks relating to agriculture; 26 relating to structural policies; 21 in the internal policies (also known as ‘direct expenditures’) and external aid sector; and two in connection with internal investigations. The three main legal issues arising out of the application of Regulation 2185/96 have been: — the non-cooperation of a Member State; — the refusal of access to premises by economic operators; — the possibility of carrying such checks in third countries. Before a check, OLAF usually writes to the national authority concerned and asks for its assistance and participation in the check. Where necessary, it also asks the national authority to take ‘the appropriate precautionary measures under national law, in particular in order to safeguard evidence’.139 If the Member State refuses cooperation, a check may be carried out without the consent of the Member State concerned. However, the Member State may object that the conditions laid down in Regulation 2985/96 are not fulfilled in a given case and take action before the Court of Justice. The first paragraph of Article 5 of Regulation 2185/96 provides that on the spot checks and inspections ‘shall be carried out by the Commission on economic operators … whenever their conduct, as economic operators, may have had the effect, through incorrect application of Community law, of damaging or attempting to damage the Community budget’. Whenever an economic operator is opposed to the check, the Member State must give OLAF investigators such assistance as they need to allow them to discharge their duty, where necessary by asking the courts to grant access to the premises; so OLAF is heavily dependent on the national authority’s cooperation.

Wirtschaftrecht, Frankfurt am Rhein, Main Jahrg. 9, Nr 2.24, Jan 1998 S 37–44; S Combeaud, ‘Les opérateurs économiques face aux contrôles communautaires antifraude’ (2005) Revue du Marché Commun et de l’Union européenne 486, 177–88. 137 Case T–141/99, T–150/99 and T–151/99 Vela and Tecnagrind v Commission [2002] ECR II-4547. 138 Art 2 of Regulation 2185/96 OJ [1996] L 292/2. 139 Art 7(2) of Regulation 2185/96 OJ [1996] L 292/2.

102

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 26 /

Date: 8/8

JOBNAME: Stefanou PAGE: 27 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Conclusion The territorial scope of Regulation 2185/96 is the same as that of the EC Treaty. Nevertheless, when an agreement or convention on cooperation with a third country refers directly or indirectly to the possibility of conducting on-the-spot checks or inspections under Regulation 2185/96, and in particular where, in the presence of such an international agreement or convention, a contract with an economic operator in the third state designates the regulation as the law applicable to the contract in question, Regulation 2185/96 applies mutatis mutandis and OLAF may exercise its powers in the same way as that provided for within the European Community. This is particularly true in the case of agreements concerning assistance for potential candidate countries;140 assistance with the ‘neighbourhood’ countries;141 instruments for the promotion of human rights,142 etc. However, these instruments must explicitly authorise the Commission to carry out on-the-spot checks and inspections in accordance with Regulation 2185/96. As the wording in these agreements varies, it cannot therefore be taken as a fait accompli that wherever the European budget is disbursing aid, OLAF will be able to carry out an on-the-spot check if needed.

CONCLUSION

The OLAF legal framework can be characterised as incomplete and immature. It has not been amended since 1999 and does not include implementing legislation. Relevant jurisprudence of the European Courts of Justice has therefore not been codified and is incorporated piecemeal in an internal Manual. OLAF relies on the case law of the European Courts of Justice to pitch the level of guarantees accorded during investigations. Although the Court has sought to ensure the highest level of rights for the defence, it nevertheless found that a final report was not an act having legal effects. This recognises the autonomy of the Member States in deciding whether to take any action after OLAF has investigated. There is a need to take on board the experiences from (heavily publicised) cases such as Camos Grau, Franchet and Byk, Tillack and others. In the present constitutional constellation, neither the European Commission nor OLAF falls under the jurisdiction of the European Court of Human Rights, so the rulings of the European Courts of Justice concerning the respect of fundamental rights during OLAF’s investigative activity take on an added significance, as do the decisions of the European Ombudsman and of the European Data Protection

140 141 142

Regulation 1085/2006 OJ [2006] L 210/82. Regulation 1638/2006 OJ [2006] L 378/41. Regulation 1889/2006 [2006] L 286/1.

103

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 27 /

Date: 1/6

JOBNAME: Stefanou PAGE: 28 SESS: 20 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Activities and Due Process Supervisor. There is a need for a mechanism to take on board relevant jurisprudence and for a monitoring of the changes effected as a result of such jurisprudence.

104

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter04

/Pg. Position: 28 /

Date: 30/6

JOBNAME: Stefanou PAGE: 1 SESS: 12 OUTPUT: Tue Aug 9 13:14:31 2011

5 Operational Safeguards for Persons and Institutions SIMONE WHITE

This Chapter delves a little deeper into a range of operational issues in relation to which the legislative base has become perceived as inadequate, leading to further safeguards having been proposed. Discussion of the rights of investigated persons, of the requirement of investigated institutions to be informed, and the role of the Supervisory Committee leads on to a revisiting of the question of how best to safeguard the investigative independence of OLAF.

COMMISSION’S PROPOSED CHANGES TO THE REGULATION

The first legislative proposals to amend Regulation 1073/99 were made in 2004.1 Subsequent proposals were also made in 2006,2 20083 and 2010.4 At the time of writing, there is still no consensual text. Amending Regulation 1073/99 does feel like opening Pandora’s box and I have argued elsewhere that it may be better to adopt implementing rules, rather than to try and bloat out Regulation 1073/99 (and 1074/99) with detailed procedural rules. Whatever form they take, it is clear that the changes proposed would have a direct impact on OLAF’s core activities. This is because they focus on codifying the rights of persons, enhancing interinstitutional communication during investigations and setting up a mechanism for dealing with complaints arising during an investigation and concerning the rights of persons directly concerned by the investigation.

1

COM(2004) 103 and 104. COM(2006) 244 final. 3 Resolution, Rapporteur MEP Ingeborg Graessle, working document from the German Presidency COMBUD 88/07. 4 Reflection paper on the reform of the European Anti-Fraud Office (OLAF), SEC(2010) 859. 2

105

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 1 /

Date: 1/6

JOBNAME: Stefanou PAGE: 2 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Safeguards Codifying the Rights of Persons during Investigations The courts have developed process rights on a case-by-case basis. The case law, however, is sector-specific and it is not always possible for OLAF to rely on cases responding in a detailed manner to fit the needs of particular sectors. A partial codification of process rights was first envisaged in 2004. Opinions are still divided as to whether OLAF should have a code of procedure or whether its internal Manual should suffice. Enhancing Communication between OLAF and the Institutions during an Internal Investigation In this area, the Eurostat case has pointed to the need for change. UCLAF (OLAF’s predecessor) started receiving information from 1995 onwards concerning irregularities connected to Eurostat.5 Over several years, several cases were opened with a connection to Eurostat. In 2002 OLAF decided to re-group all such connected cases. At the time, the investigations concerned mostly alleged conflicts of interest and breaches of the Financial Regulation by high-ranking officials. OLAF sent information to the Luxembourg judicial authorities in 2002 and subsequently also to the French authorities. A number of weaknesses of procedure were highlighted by the Commission. In particular, the Commission stressed that OLAF should have communicated with the Commission hierarchy during investigations, so that the hierarchy did not find out from the media that a major investigation had been in process in their department. This is a reasonable point; however, it does not automatically follow that the Commission should have been informed at the very start of the investigation. Dorn and Levi have taken a more critical line, referring to the need to avoid ‘tipping off ’ officials that an investigation is in progress concerning them.6 Setting up a Review Mechanism to Deal with Complaints Arising from Core Activities The Commission’s proposal that a review adviser should be appointed raises a number of issues. It is not clear here whether the review adviser would have the power to declare an investigation void, or would just give a (non-binding) 5 Eurostat is the Statistical Office of the European Communities and a Directorate General of the European Commission. It produces data for the European Union and promotes the harmonisation of statistical methods across the EU Member States. 6 M Levi and N Dorn, 2004, ‘Memorandum’, in House of Lords, European Union Committee, 24th Report of Session 2003–04, Strengthening OLAF, the European Anti-Fraud Office, HL Paper 139, 21 July, London: Stationery Office, http://www.publications.parliament.uk/pa/ld200304/ldselect/ ldeucom/139/139we04.htm.

106

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 2 /

Date: 8/8

JOBNAME: Stefanou PAGE: 3 SESS: 12 OUTPUT: Tue Aug 9 13:14:31 2011

Commission’s Proposed Changes opinion to the Director General concerning the conduct of a particular investigation. Would an interested party have to ‘exhaust his home remedies’ or could he lodge a complaint with the ECJ, without first having recourse to the review adviser? The OLAF Supervisory Committee has expressed doubts as to whether the Review Adviser could ‘act in complete independence’ if he is appointed (and possibly reappointed) by the Director General and depends on him administratively, especially for performance appraisal and promotion.7 In a supplementary opinion, the Supervisory Committee expressed very strong reservations concerning the role of review adviser, which would: — add another monitoring step to those already in place despite the fact that there appears to be no evidence that those already in existence are inadequate; — complicate and prolong procedures when both the European Parliament and the Council have requested that investigations should be as short as possible; — question to what extent the mandate of the Review Adviser would dilute the OLAF Director General’s responsibility; — overlap to some extent with the role of the Supervisory Committee, create the risk of duplication and weaken in general the role of the Committee, appointed by common agreement between the European Parliament, the Council and the Commission; — give the Review Adviser the dual role of quality controller and complaints advisor where he or she would be both reporting to and monitoring OLAF’s Director General, these roles being totally contradictory. In the OLAF organisation chart, adopted by the Commission as of 1 September 2006, the role of quality control is already attributed to two advisors attached to the directors of the two directorates in charge of all investigations. Though the Commission proposal does not include any analysis of the financial impact, the Committee estimates this cost to be out of proportion with the very small number of cases up to the present day and thus incompatible with the principle of value for money. In 2008, the European Parliament offered a variant on the 2006 Commission proposal, proposing that complaints be reviewed by an ad hoc adviser, appointed by the Director General and the Supervisory Committee whenever needed. This ad hoc adviser would give an opinion within 30 days of receiving a request concerning (i) investigation priorities; (ii) the duration of investigation; (iii) the code of procedure; and (iv) the Director General’s interventions to courts. He would also assist the Director General in a conciliation procedure. The ad hoc review adviser put forward by the European Parliament appears to assist the Supervisory Committee, whilst the review adviser role put forward by

7 See Opinion 2/2006 concerning the reform of Regulation 1073/99 concerning investigations conducted by the European Anti-Fraud Office (OLAF).

107

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 3 /

Date: 1/6

JOBNAME: Stefanou PAGE: 4 SESS: 12 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Safeguards the Commission appears to focus on dispute resolution. We may recall that in Franchet and Byk II, the European Court of Justice suggested that the Supervisory Committee should have more of a supervisory role with respect to procedure. This is congruent with the critique that there only exists a post hoc control of OLAF’s procedure. In the eyes of many, the legitimacy/accountability conundrum remains.

THE RIGHT OF ACCESS TO DOCUMENTS: AN OPERATIONAL ISSUE

OLAF receives frequent requests for access to documents during investigations. No reason has to be given for such requests. The issue here has been to balance transparency with the need not to disclose ongoing investigative work, lest it should be jeopardised. In 2005, the Commission decided to amend Regulation 1049/2001. Following a Green Paper and consultation with the relevant European Parliament committees, a consolidated version of the Regulation as amended by the Commission’s proposal was made available. Three features of the amended Regulation are particularly relevant to OLAF: a new definition of document, exceptions, and the period for responding to requests. According to Art 3(a) ‘document’ means any content whatever its medium (written on paper or stored in electronic form or as a sound, visual or audiovisual recording) drafted or received by an institution and transmitted to one or more recipients or circulated within the institution or otherwise recorded; data contained in electronic storage, processing and retrieval systems are documents if they can be printed or extracted in readable form in an electronic file using the available tools for the exploitation of the system. This means that a document only exists if it has been sent to recipients or circulated within the institution and has been entered in the institution’s records. The definition of document includes data contained in electronic systems insofar as these can be extracted in readable form. The concept of ‘court proceedings’ in Article 4 becomes ‘proceedings in litigation’, thus clarifying that the exception aims at protecting proceedings of a judicial nature before an independent body with dispute settlement powers. Since the protection of ‘legal advice’ is not only related to litigation, this exception is mentioned separately for reasons of clarity. Furthermore: Documents submitted to Courts in the course of judicial proceedings would not be accessible to the public before a public hearing has taken place. Access would only be granted to the Institutions’ own submissions (Art 2(5)). Without prejudice to specific rights of access for interested parties established by EU law, documents forming part of the file of law enforcement proceedings leading to an administrative act of individual scope would not accessible to the public until such act

108

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 4 /

Date: 1/6

JOBNAME: Stefanou PAGE: 5 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

The Right of Access to Documents has become definitive. Information obtained from undertakings in the framework of such proceedings would not be accessible to the public (Art 2(6)).

The exception for ‘the purpose of inspections, investigations and audits’ remains the same. A new exception has been added, to protect procedures leading to the selection of staff or of contracting parties. The period for responding to confirmatory applications (appeals against refusals) is increased from 15 to 30 days. From the operational point of view, the proposed amendments clarify matters and are welcome. The Courts have interpreted the right of access to documents. Three areas are of concern to OLAF: first, the relationship between access to documents and the rights of the defence; second, the interpretation of Article 4 of Regulation 1049/2001, which grants the possibility of refusing access where disclosure would undermine the purpose of inspections, investigations and audits or court proceedings and legal advice; lastly, the impact of the reform to Regulation 1049/ 2001 is also discussed below. In 2007, OLAF received 80 requests for access to documents, approximately half of which were made in the context of the rights of the defence. However, in Franchet and Byk I,8 the Court held that under Article 2(1) of Regulation No 1049/2001, the beneficiaries of the right of access to documents of the institutions are ‘[a]ny citizen of the Union, and any natural or legal person residing or having its registered office in a Member State’. That provision makes it clear that the purpose of the regulation is to guarantee access for everyone to public documents and not merely access for the requesting party to documents concerning him. Consequently, the particular interest which may be asserted by a requesting party in obtaining access to a document concerning him personally cannot be taken into account. A person requesting access to documents is not required to justify his request and therefore does not have to demonstrate any interest in having access to the documents requested.9 It is settled case law that the exceptions provided for by Article 4 of Regulation No 1049/2001 regarding public access to European Parliament, Council and Commission documents must be construed and applied restrictively so as not to defeat the general principle of access to documents enshrined in that regulation. In Hautala,10 the Court held that the principle of proportionality requires that derogations remain within the limits of what is appropriate and necessary for achieving the aim in view. The examination required for the purpose of processing a request for access to documents must be specific in nature. First, the mere fact that a document concerns an interest protected by an exception cannot justify application of that exception. Second, the risk of a protected interest being

8 9 10

Case T–391/3 and T–70/04 of 6 July 2006, paras 136 and 137. Case T–48/05 Franchet and Byk v Commission, [2008] ECR II-1585, para 82. Case C–353/99 Hautala v Council 1996 ECR I–2169, para 28.

109

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 5 /

Date: 9/8

JOBNAME: Stefanou PAGE: 6 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Safeguards undermined must be reasonably foreseeable and not purely hypothetical. Consequently, the examination which the institution must undertake in order to apply an exception must be carried out in a concrete manner and must be apparent from the reasons for the decision.11 In Franchet and Byk, in the context of the Eurostat case, where OLAF contested access to documents, the Court held that OLAF did not indicate in the first contested decision whether the risks which it described actually applied to all of the information in those documents. It is apparent from the first contested decision that OLAF based its assessments on the nature of the documents requested rather than on particular information actually contained in the documents in question. This was an error in law requiring the annulment of the contested decision.12 In Turco,13 the Council refused access to the opinion of its legal advice, relying on Article 4(2) of Regulation 1049/2001. The Court of First Instance held that the exception for legal advice could in principle apply to advice given during the legislative as well as the judicial process. The exception for legal advice is one that can be overridden where disclosure would be in the public interest. The Court ruled that the applicant should present arguments for an overriding public interest that are distinct from the principles already implemented through the Regulation, such as openness, transparency and participation of the citizen in the decision-making process. The hurdle faced by an applicant in proving overriding public interest therefore appears quite high. Non-disclosure to Protect Investigations There can be an exception if disclosure would endanger the completion of an investigation.14 The third indent of Article 4(2) of Regulation No 1049/2001 regarding public access to European Parliament, Council and Commission documents must be interpreted in such a way that that provision, the aim of which is to protect ‘the purpose of inspections, investigations and audits’, applies only if disclosure of the documents in question may endanger the completion of inspections, investigations or audits. The various acts of investigation or inspection may remain covered by the exception based on the protection of inspections, investigations and audits for as long as the investigations or inspections continue, even if the particular investigation or inspection which gave rise to the report to which access is sought is completed. Nevertheless, allowing the various documents to be covered by that exception until the follow-up action to be taken has been decided would make access to 11 Case T-198/98 Kuijer v Council [2000] ECR II-1959, paras 69 and 72; Case T-2/03 VKI v Commission [2005] ECR II-1121, paras 69 and 72; see also Franchet v Byk above n 9, paras 113 and 115. 12 Case T-14/98 Hautala v Council [1999] ECR II-2489, para 31, Franchet and Byk above n 9, para 130. 13 Case T–84/03 Turco v Council, judgment of 23 November 2004. 14 Franchet and Byk above n 9.

110

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 6 /

Date: 9/8

JOBNAME: Stefanou PAGE: 7 SESS: 12 OUTPUT: Tue Aug 9 13:14:31 2011

The Right of Access to Documents those documents dependent on an uncertain, future and possibly distant event, depending on the speed and diligence of the various authorities. This does not appear to apply to OLAF’s reports sent to the national prosecution authorities. The Court of First Instance held that the words ‘documents drawn up solely for the purposes of specific court proceedings’ must be understood to mean the pleadings or other documents lodged, internal documents concerning the investigation of the case, and correspondence concerning the case between the Directorate-General concerned and the Legal Service or a lawyer’s office. The purpose of this definition of the scope of the exception is to ensure both the protection of work done within the Commission and confidentiality and the safeguarding of professional privilege for lawyers.15 In that regard, it would run counter to the obligation to construe and apply the exceptions restrictively, to find that the various documents sent by OLAF to the national authorities, pursuant to Article 10(1) and (2) of Regulation 1073/1999 concerning investigations conducted by OLAF, or to an institution, pursuant to Article 10(3) of that regulation, were drawn up solely for the purposes of court proceedings. In accordance with Article 9(2) of Regulation No 1073/1999, OLAF’s reports constitute admissible evidence in administrative or judicial proceedings of the Member State in which their use proves necessary. The action taken by the national competent authorities or the institutions in response to the reports and information forwarded by OLAF is, however, within their sole and entire responsibility. Compliance with national procedural rules is sufficiently safeguarded if the institution ensures that disclosure of the documents does not constitute an infringement of national law. Therefore, in the event of doubt, OLAF must consult the national court or authority and must refuse access only if that court has objected to disclosure of the documents. However, the CFI has held that the exception based on the protection of public interest (court proceedings) cannot enable the Commission to escape from its obligation to disclose documents which were drawn up in connection with a purely administrative matter. That principle must be respected even if the disclosure of such documents in proceedings before the Community judicature might be prejudicial to the Commission. The fact that court proceedings for annulment were initiated after an administrative procedure is immaterial.16 The expression ‘court proceedings’ has been interpreted by the CFI as meaning that the protection of the public interest precludes the disclosure of the content of documents drawn up solely for the purposes of specific court proceedings.17

15 16 17

Interporc v Commission [1999] ECR II–352 ‘Interporc II’, para 41. Franchet and Byk, paras 90 and 91. Interporc II, para 40; Franchet and Byk, para 88.

111

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 7 /

Date: 1/6

JOBNAME: Stefanou PAGE: 8 SESS: 12 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Safeguards COOPERATION WITH KEY EU BODIES: EUROPOL AND EUROJUST

In the preceding sections, we have highlighted some weaknesses or uncertainties in the legal framework. Looking now to one aspect of cooperation, it is possible to envisage further consolidation of OLAF’s position. A Cooperation Agreement between the Commission and Europol on 18 February 2003 makes provision for arrangements between Europol and the operational part of OLAF. The possibility for closer cooperation has been somewhat hampered by the fact that an exchange of personal data is still excluded from operational cooperation: Given that the Europol legal framework does not allow Europol to forward information containing personal data to OLAF, co-operation is limited to fraud prevention and other policy matters and, where considered useful, possible invitation of Europol staff to meetings on assistance cases.18

Fijnaut has highlighted the asymmetrical relationship between OLAF and Europol.19 OLAF enjoys administrative powers that it can apply independently in a quasi-criminal manner, whilst Europol, after many years of intense discussion, has scarcely assumed a supporting role when participating in criminal investigations in the Member States. This asymmetrical relationship places limits on the relations between the two forces. The modalities for cooperation with Eurojust are set out in a Memorandum of Understanding signed on 14 April 2003. It foresees the practical arrangements for cooperation and the exchange of information between Eurojust and OLAF. It provides that the two services will inform each other, without delay, of any information that concerns the other. It establishes contact points and sets out to facilitate participation of services in joint investigation teams (which may include Europol). OLAF and Eurojust are putting the MOU into practice. One of the issues to take into consideration is the protection of personal data, and the need to avoid duplication of action in individual cases. The OLAF Manual20 explains: Eurojust is composed of national members of each Member State, some of whom are acting as ‘judicial authorities’ and with whom OLAF may directly exchange information under Art. 26 (4) of the Eurojust decision. Art. 26 (3) of the Eurojust Decision, however, limits collaboration insofar as the competent national authorities do not oppose OLAF’s collaboration and that it is up to the concerned national member of Eurojust to verify this.

On 24 September 2008 a practical agreement on arrangements of cooperation between Eurojust and OLAF was signed. The Agreement states that when 18

OLAF Manual, adopted December 2009, 32. C Fijnaut (2006) ‘Europe’s Area of Freedom, Security and Justice, Police co-operation’ in N Walker (ed), Europe’s Area of Freedom, Security and Justice (Oxford, Oxford University Press, 2006) 241–83, 264s. 20 Manual, December 2009 version, 31. 19

112

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 8 /

Date: 1/6

JOBNAME: Stefanou PAGE: 9 SESS: 13 OUTPUT: Tue Aug 9 13:14:31 2011

Whistleblowing collaborating on a specific case, the parties will exchange any necessary information, including personal data. Personal data transmitted from OLAF to Eurojust will be transmitted directly to the College when the case falls within the competence of the College, or directly to the Eurojust National Member(s) concerned when the case falls within the competence of one or more of the Eurojust national members. The respective Eurojust National Member(s) concerned with a case may transmit personal data to OLAF.21 In short, the present bases for the exchange of personal, operational data between OLAF, Europol and Eurojust are in development. It had been hoped that the introduction of a single legal framework would have made cooperation between OLAF, Europol and Eurojust easier. Meanwhile, rules for the transfer of personal data between first and third pillars would go a long way to alleviating the current situation.

WHISTLEBLOWING

One important operational issue for OLAF and indeed for all investigation agencies is how to attract actionable information. Genuine whistleblowers are a useful source of information for OLAF. They can point at irregularities in grant making and contracts which can be particularly difficult to detect because they depend on connivance between an official and economic operators.22 Most of the information received on alleged irregularities in the procurement sector comes in the form of complaints from disgruntled tenderers. This information does not always contain actionable information. In 2004, the EC Staff Regulations were amended23 in order to introduce a regime for whistleblowers. Articles 22a and 22b of the EC Staff Regulations now provide that any official must inform either his immediate superior or OLAF whenever he becomes aware of facts which give rise to a ‘presumption of the possible illegal activity, including fraud or corruption, detrimental to the interests of the Communities or of a conduct relating to the discharge professional duties which may constitute a serious failure to comply with the obligations of officials of the Communities’. The information must be given in writing and without delay. This duty does not extend to documents, deeds, reports, notes or information in any form whatsoever disclosed to the official in the course of proceedings in legal cases, whether pending or closed. Provided that the official acts ‘reasonably and honestly’, he will not suffer any prejudicial effects.24

21

See http://ec.europa.eu/anti_fraud/press_room/pr/2008/10_en.html. S White, ‘Le ‘whistleblower’ dans les institutions de l’Union européenne: l’oiseau est-il apprivoisé?’ (2010) 540 Revue du Marché Commun et de l’Union Européenne 441–46. 23 Council Regulation 723/2004 L (2004) 124/1. 24 Art 22a(3) of EU Staff Regulations. 22

113

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 9 /

Date: 30/6

JOBNAME: Stefanou PAGE: 10 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Safeguards The Staff Regulations in effect create an ‘approved channel’ for a prospective whistleblower: he should report to OLAF or to his immediate superior. OLAF staff members who wish to blow the whistle can either inform the Director General of OLAF, the Secretary General of the Commission or the Chair of the Supervisory Committee. Should he wish to disclose information to the President of the Commission, to the European Court of Auditors or to the Council or to the Ombudsman, he will not suffer prejudicial effects if the following two conditions are fulfilled: (a) he honestly and reasonably believes that the information disclosed, and any allegation contained in it, are substantially true; and (b) the official has previously disclosed the same information to OLAF or to his own institution and has allowed OLAF or that institution the period of time set by the Office or that institution, given the complexity of the case, to take appropriate action. The official must be informed of that period of time within 60 days. Some progress has been made in clarifying the existing rules. The European Court of First Instance ruled on two aspects. First, the whistleblower cannot force OLAF to open an investigation on the basis of information provided.25 Second, a whistleblower continues to enjoy statutory protection even if OLAF decides to close an investigation initially opened on the basis of information provided by the whistleblower.26 This is because the decision to close an investigation in itself does not make it possible to judge whether the whistleblower reasonably and honestly believed that the information he gave OLAF was true and had acted in good faith.27 In two decisions, the European Ombudsman has clarified the whistleblower’s right to be informed about the outcome of the investigation28 and his right to be informed about the duration of the investigation.29 Yet the amendment to the Staff Regulations and subsequent clarification by the Court and the European Ombudsman has done little to increase the information received from identified whistleblowers by OLAF (in 2006 OLAF received no information from whistleblowers30)—although a steady flow of anonymous information continues to arrive. Unfortunately, as we know, anonymous information may have weak or

25 26 27 28 29 30

Case C-237/06P P Guido Strack v Commission [2007] ECR I-33, para 39. Ibid, para 44. Ibid, para 48. Decision 1625/2002/IJH against the European Anti-Fraud Office of 3.7.2003. Decision 140/2004/(BB) PB against the European Anti-Fraud Office of 6.6.2005. OLAF’s seventh Activity Report, 33.

114

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 10 /

Date: 9/8

JOBNAME: Stefanou PAGE: 11 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Independence and the Supervisory Committee no evidential value in court.31 It cannot stand on its own and has to be fully corroborated in order to lead to the opening of a case. The following section will discuss ways in which the present system could bring in more actionable information.

INDEPENDENCE AND THE SUPERVISORY COMMITTEE

A Supervisory Committee reinforces the independence of OLAF.32 A recent case held the OLAF Supervisory Committee to have a specific responsibility to ensure that OLAF respects human rights.33 The Court has successfully highlighted the need for oversight. However, it must be questioned whether the Supervisory Committee meeting at intervals can act as such a guarantor in practice, or how well such a role fits in with its primary responsibility as defined in Regulation 1073/99, which is to ensure the independence of investigations (see below). Any breach of fundamental rights is theoretically dealt with a posteriori when investigations have come to an end and a case is put before a trial court. The trial court tests the evidence and in doing so, tests the practices behind the gathering of this evidence. However, there is no possibility of using the European Court of Fundamental Rights against OLAF or the Commission. In Tillack v Belgium 34 the ECtHR considered that the searches carried out by the Belgian authorities, as a result of an OLAF recommendation, had amounted to interference with Mr Tillack’s right to freedom of expression. Thus the ECtHR ruled in relation to the national Belgian authorities, not OLAF. The purpose of the searches had been to identify journalistic sources: OLAF believed that by these means, it would be able to find out whether an OLAF official had leaked information in exchange for remuneration. The Court emphasises that a journalist’s right not to reveal his sources could not be considered a mere privilege to be granted or taken away, depending on the lawfulness or unlawfulness of their sources, but was part and parcel of the right to information, to be treated with the utmost caution—even more so in this case, where he had been under suspicion because of vague, uncorroborated rumours. The ECtHR considered that although the reasons given by the Belgian courts were relevant, they could not be considered sufficient to justify the impugned searches. Accordingly the Court found that there had been a violation of Article 10 ECHR and awarded €30,000 for costs and €10,000 compensation. It must be noted in this context that, in proceedings before the 31 See A-M Nuutila, ‘Whistle blowing, exchange of information and legal protection in Enlarging the fight against fraud in the European Union; penal and administrative sanctions, settlement, whistle blowing and Corpus Juris in the candidate countries’ (ed P Cullen ERA) (2003) 36 Bundesanzeiger 266. 32 Art 11(1) of Regulation 1073/99 OJ [1999] L136/1. 33 Franchet and Byk above n 9, paras 168–170. 34 Tillack v Belgium, Application No 20477/05, judgment of 27 November 2007, final 27/2/2008.

115

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 11 /

Date: 8/8

JOBNAME: Stefanou PAGE: 12 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Safeguards CFI and the ECJ, Mr Tillack had previously sought to annul OLAF’s transmission of allegations to the Belgian police authorities and claimed compensation but that both claims had been dismissed. Commentators argued that this raised concern about institutional accountability, appearing to give OLAF an unfettered capacity to transmit allegations—on any evidential basis—to national authorities as such transmissions have no binging legal effect.35 OLAF practices have been tested on a post hoc basis for breaches of human rights by the European Courts of Justice, on the basis of claims for damages under Article 288 EC, although this does not fall within the usual understanding of judicial supervision. As we shall see, recent cases have involved alleged breaches of confidentiality, data protection and of the presumption of innocence by OLAF. OLAF’s Supervisory Committee A Supervisory Committee of five independent members ‘reinforces OLAF’s independence by regular monitoring of the implementation of the investigative function’.36 Regulation 1073/99 lays down means by which the Supervisory Committee achieves this. At the request of the Director or on its own initiative, the Committee delivers Opinions to the Director concerning the activities of OLAF investigations, the results thereof and the action taken on them. When an investigation has been in progress for more than nine months, the Director has to inform the Committee of the reasons for which it has not yet been possible to wind up the investigation, and of the expected time for completion. A recent case has clarified that a breach of this requirement did not confer rights on an individual.37 The Director also informs the Committee of cases where the institution, body or office concerned has failed to act on the recommendation made by it. Last, the Director must inform the Committee of cases requiring information to be forwarded to the judicial authorities of a Member State. These formal requirements allow for a regular monitoring of part of OLAF’s operational activity, and a check on the management of this activity though statistical information. The Supervisory Committee is of the opinion that OLAF’s independence has never been put in jeopardy. Yet neither the regulatory framework, nor the OLAF Manual has concretely articulated the concept of independence: what could constitute a breach of independence?

35 The Protection of Journalistic sources—EC and ECHR perspectives, British Institute of International and Comparative Law, conference of 31 October 2007, http://www.biicl.org/events/ view/-/id/208. 36 Art 11(1) first paragraph of Regulation 1073/99 OJ [1999] L136/1. 37 Franchet and Byk above n 9, para 283.

116

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 12 /

Date: 8/8

JOBNAME: Stefanou PAGE: 13 SESS: 13 OUTPUT: Tue Aug 9 13:14:31 2011

Independence and the Supervisory Committee A 2006 Commission proposal to amend Regulation 1073/9938 envisages some changes in the role of the Supervisory Committee. The Committee would still reinforce the Office’s independence by regular monitoring of the implementation of the investigative function, but it would also see that the rules governing information exchanges between the Office and the institutions, bodies and agencies are complied with. The Committee would also monitor developments regarding the application of procedural guarantees and the duration of investigations, drawing on periodic statistics supplied by the Director General of the Office and the regular opinion and analysis reports drawn up in this connection by the Review Adviser39 and on the basis of close cooperation with the Director General of the Office. This appears to be quite a fundamental change of role for the Committee. The Committee already fulfils some of the functions of an advisory management committee, for example by checking the duration of investigations. But there is a question whether a Supervisory Committee originally envisaged as a guarantor of independence may be drawn away from that role, if it becomes absorbed into a management role. There may indeed be a need for a monitoring of the implementation of procedural safeguards and of information exchange; however, that is not quite the same as ensuring the independence of investigations. Articulating Independence Some authors40 have argued that OLAF should have been based outside the Commission, in order to ensure its independence and to protect its operational work from any undue interference. The notion of independence is not clearly articulated in the present legislation. There is only one preambular reference to independence in Regulation 1073/ 99: Whereas to ensure that the Office is independent in carrying out the tasks conferred on it by this Regulation, its Director must be given the power to open an investigation on his own initiative.

According to Article 12(2) of Regulation 1073/99, OLAF’s director neither seeks nor takes instructions from any government or any institution, body, office or agency in the performance of his duties with regard to the opening and carrying out of external and internal investigations or to the drafting of reports following such investigations. If the Director considers that a measure taken by the Commission calls his independence into question, he is entitled to bring an 38

See COM(2006) 244 final. This post does not exist at present (2010) and would have to be created. The Review Adviser would deal with complaints related to the conduct of investigations. 40 See, eg, B Quirke, ‘Fighting EU fraud: why do we make life difficult for ourselves?’ (2010) 17(1) Journal of Financial Crime, Special Issue on EU fraud (ed S White) 61–80. 39

117

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 13 /

Date: 30/6

JOBNAME: Stefanou PAGE: 14 SESS: 13 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Safeguards action against his institution before the Court of Justice. Thus independence is defined narrowly, in relation to the Director in personam and only with regard to investigations. A literal interpretation would be that OLAF’s operational activities other than investigations are not subject to this rule, and that these activities are therefore carried out on behalf of the Commission and subject to its general rules. A report written at the end of a coordination case, for example, might not be covered by this requirement, nor would intelligence. However, OLAF appears to have interpreted ‘investigative activity’ widely, to include all operational activities. This has never been legally tested. In particular, one (unresolved) issue in relation with independence is of knowing whether OLAF must carry out its investigations independently of any internal inquiry that the affected EC administration may carry out (it will be remembered that in the Eurostat case the Commission constituted a Task Force to work alongside OLAF personnel). In any case, it seems important that both OLAF and its Supervisory Committee should agree on a functional definition of independence. Regulation 1073/99 calls for a functional articulation of independence. OLAF must itself identify areas of risk, which may become a focus for the Supervisory Committee’s enquiries. It is usually recognised that several conditions must be met in order to guarantee the operational independence of an investigation service. In OLAF’s case, this could include the following: (i) The authority to initiate and carry out any investigation it considers necessary. As we know, the legislation stresses the Director’s independence in personam in deciding to open an investigation. All instances where issues relevant to the independence of the Director General are discussed should be recorded and shared with the Supervisory Committee, as a guarantor of independence. (ii) Autonomy in establishing an investigative work plan. In internal investigations, OLAF is required to keep the institution appraised of developments. Care must be taken, however, that this information mechanism is not used by the executive to delay, thwart or renegotiate OLAF’s investigative work plan. The creation of joint task forces with the Commission could be an issue here. (iii) The ability to identify resources needed and the authority to manage these resources. Article 13 of Regulation 1073/99 provides that the posts allocated to the Office must be listed in an annex to the Commission’s establishment plan. The budgetary process involves the European Commission and the European Parliament, both of which can be and are at the receiving end of OLAF’s investigative activity in serious cases involving officials. Care must be taken that one activity does not impact on the other.

118

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 14 /

Date: 30/6

JOBNAME: Stefanou PAGE: 15 SESS: 13 OUTPUT: Tue Aug 9 13:14:31 2011

Independence and the Supervisory Committee (iv) The right of direct and prompt access to all accounts, records, property, operations and functions within the organisation relevant to an internal investigation. This is necessary in order to ensure that OLAF can do an efficient and timely investigation. Delays in providing OLAF with the information it needs to order to carry out its independent, investigative activity can compromise investigations. (v) The right to cooperation from national authorities from the EU Member States when carrying out external investigations. OLAF depends on the collaboration of national authorities when carrying out on-the-spot checks, for example. Unfortunately there have been instances of national authorities refusing to collaborate within the framework of an external investigation. In the same vein, national authorities should perhaps have a duty to appraise OLAF of actions taken as a result of recommendations made in OLAF reports. Bearing in mind that ‘While OLAF may recommend in its reports that measures be adopted having binding legal effects adversely affecting the persons concerned, the opinion it provides in that regard imposes no obligation, even of a procedural nature, on the authorities to which it is addressed.’41 This means that the findings of OLAF which are set out in a final report do not lead automatically to the initiation of judicial or disciplinary proceedings, since the competent authorities are free to decide what action to take pursuant to a final report and are the only authorities having the power to ‘adopt decisions capable of affecting the legal position of those persons in relation to which the report recommended that such proceedings be instigated’.42 Independence, to the extent to which it exists, is compatible with zero leverage. (vi) The authorisation to encourage staff to communicate directly on a confidential basis regarding complaints/allegations of wrongdoing/irregularities and to ensure that staff should not be subject to reprisals provided there is no intention to misinform. This means that a whistleblowing policy should be in place within the institutions (and possibly in the Member States) which results in an increase of valuable information. The EU institutions should review their policy regularly to ensure that it does produce goodquality information and that it does protect genuine whistleblowers. This will be discussed in the section on whistleblowing. (vii) The right to send case reports to national or Community authorities, without those reports being delayed or amended by the executive. (viii) Qualitatively, other important aspects of independence are: the ability of staff to stand by decisions that are in the interest of the organisation, even if unpopular. This may be linked to the status of individuals undertaking operational work. The European Commission’s view is that permanent

41 42

Case T-309/03 Camos Grau v Commission, [2006] ECR II- 1173, para 50. Ibid, para 51.

119

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 15 /

Date: 30/6

JOBNAME: Stefanou PAGE: 16 SESS: 13 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Safeguards officials are in a stronger position, so it has a policy to replace temporary agents with permanent staff. However, permanent Commission staff may see their future as being within the Commission (or in other institutions and bodies they may be investigating), potentially compromising independence. (ix) The right to devise its own operational policy, albeit in cooperation with all competent bodies. There should be no political interference when devising an operational strategy. (x) The right to devise one’s own policy for communication with the media— such a policy must of course respect the fundamental rights of persons. Certain Commission press communications in the past have breached the presumption of innocence. It seems important that OLAF’s work should not be undermined by untimely communications to the media. (xi) The ability to redirect investigations concerning OLAF’s own staff. When OLAF receives information pointing at an irregularity within OLAF or an allegation against a particular OLAF official, the question is opened as to whether OLAF itself, with all the possible safeguards to ensure impartiality, should investigate. In the past, another approach has been mooted: IDOC, the Commission’s disciplinary service, could investigate OLAF, particularly when matters relate to procedures for appointing staff or unauthorised transmission of documents. The Supervisory Committee could draw guidelines indicating where referrals should be sent in different cases.

CONCLUSION

There are a great number of proposals for modernisation of the ‘OLAF Regulation’. Some of these involve fine-tuning the legal framework in ways that would make explicit the impact of case law; other proposals relate more closely to the interests of the institutions. The author has highlighted issues of principle and practice around the right of access to documents. The regulation of this transparency requirement needs to be fine-tuned in order to accommodate the specifics of investigations. Looking at OLAF’s ability to attract actionable information, the author suggests reforms to the present whistleblowing legal framework. Last but not least, the author argues that there is a need to articulate independence—and thus to be clearer about what it means in practice—in order for independence to be protected. These improvements could be initiated independently of any decision to adopt a European Public Prosecutor.

120

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter05

/Pg. Position: 16 /

Date: 30/6

JOBNAME: Stefanou PAGE: 1 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

6 Operational Effectiveness: Expanding the Civil Route SIMONE WHITE

INTRODUCTION

The aim here is to look at ways in which the protection of the financial interests could be made more effective: how to receive more and better-quality information, to have more preventative and deterrent effect, to recoup funds from fraudsters and those that facilitate their activities. Two issues are discussed—the balance of acting through criminal and civil law and cutting across that boundary and improving information flows through whistleblowing legislation. Reviewing the rather low level of criminal prosecutions by the Member States resulting from cases in which OLAF has been involved, one wonders whether there could be another approach, which could sit alongside and add value to the criminal law route. This consideration is given some urgency when one considers the low number of criminal cases in relation to the presumed or (with difficulty) estimated extent of fraud against the financial interests of the European Union. True, OLAF is not a criminal law body, but it has tended to work closely with national criminal law agencies. This tendency has been underpinned by the long-standing interest in developing EU criminal law agencies and competencies. With the Lisbon Treaty in force, is this the time for OLAF to push harder on the criminal law door? With the Holy Grail within reach, will anti-fraud work become easier? Or, alternatively, is there a danger of current difficulties being reinforced? In the following pages, the Commission’s case against the tobacco industry is described and some lessons are tentatively drawn. The case may be celebrated by a few learned commentators but its wider implications seem not to have penetrated the policy-making system. Perhaps the political ‘long march’ towards EU criminal law has distracted most policy observers from the Commission’s/ OLAF’s unexpected use of US law on Civil RICO. The middle section of this Chapter revisits this case and the wider arena of civil law, finding it a worthy companion for criminal law in relation to OLAF’s operational objective. A 121

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 1 /

Date: 30/6

JOBNAME: Stefanou PAGE: 2 SESS: 14 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness supporting issue, for both criminal and civil action, is how to attract actionable information. This Chapter suggests ways in which the flow of information from whistleblowers and their protection could be improved.

QUESTIONING THE CRIMINAL LAW PATH

Prospects for a European Public Prosecutor One reform that could potentially alter the role of OLAF and its relationship European bodies such as Eurojust and Europol is the establishment of a European Public Prosecutor (EPP), as foreseen in the Corpus Juris study1 and in a subsequent Commission Green Paper,2 and now foreseen in Article 86 TFEU.3 The adoption of an EPP could in turn lead to a closer relationship between Eurojust and OLAF; a merging of Europol and OLAF has also been mooted.4 There are in any case important issues that would need to be resolved concerning the EPP’s competence, as Suominen5 has pointed out. She outlines three possibilities: (i) competence could encompass crimes affecting the financial interests of the European Union, the starting point foreseen in Article 86(1) TFEU; (ii) it could encompass all serious cross-border criminality, as per Article 86(4) TFEU; (iii) there could be a definition of ‘European federal crimes’ which needed to be addressed at Union level. Over time, the list of crimes in framework decisions has tended to vary. Since the original proposal for the EPP has been made, a number of third pillar measures have been adopted,6 which could be seen as somewhat obviating the need to widen the powers of Eurojust, as proposed. They include the European Arrest Warrant7 and the Framework Decision on Joint Investigation Teams.8 The 1 See S White, ‘EC Criminal Law: Prospects for the Corpus Juris’ (1998) Journal of Financial Crime 223; JR Spencer, ‘The Corpus Juris Project and the fight against the budgetary fraud’ (1999) Cambridge Yearbook of European Legal Studies, 77–105; S White, Protection of the financial interests of the European Communities: the fight against Fraud and Corruption (The Hague, Kluwer, 1998). 2 COM/2001/715 Green Paper on criminal law protection of the financial interests of the Community and the establishment of a European Prosecutor; Follow-up Report on the Green Paper COM/2003/ 128; European Parliament resolution on the Commission Green Paper OJ [2004] C 62/191. 3 OJ C (2008) C 115. 4 See S White, ‘Extension of Eurojust or ‘prolongation’ of the Corpus Juris proposals?’ in G de Kerchove and A Weyembergh (eds), L’Espace Pénal Européen: enjeux et perspectives (Bruxelles, Éditions de l’Université de Bruxelles 2002) 47-–54. 5 A Suominen, ‘The past, the present and the future of Eurojust’ (2008) 15 Maastricht Journal of European and Comparative Law 217–34. 6 See, eg, Council Regulation 1338/2001 laying down measures necessary for the protection of the euro against counterfeiting OJ L [2002] 181/6; Council Framework 2001/413 combating fraud and counterfeiting on non-cash means of payment OJ L [2001] 149/1; Council Framework Decision 2001/500 on money laundering, the identification tracing freezing seizing and confiscation of instrumentalities and the proceeds of crime OJ L [2001] 182/1. 7 COM(2002) 688. 8 OJ L (2002) 162/1.

122

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 2 /

Date: 2/6

JOBNAME: Stefanou PAGE: 3 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Questioning the Criminal Law Path European Arrest Warrant has moved from having its functioning hampered by constitutional issues in some Member States9 to being used predominantly for minor offences such as shoplifting by some Member States. As soon as the European Evidence Warrant10 was adopted (and it was not yet in application in 2010 at the time of writing), doubts were voiced about its efficacy: another instrument was needed and has now been proposed by a group of Member States: a European Investigation Order. The Framework Decision on Procedural Rights in criminal proceedings,11 the Framework Decision on the principle of ne bis in idem 12 and the Framework Decision on the presumption of innocence13 are still awaiting adoption and a 2008 proposal for the establishment of a European Criminal Records System (ECRIS) is still under discussion.14 It would create a standardised European format for the transmission of information on convictions.15 Before the Treaty of Lisbon, criminal law was increasingly incorporated within the first pillar through the jurisprudence of the European Courts of Justice.16 The European Courts of Justice have extended the criminal law competence of the European Communities through two landmark judgments in Cases C–176/0317 and C–440/05.18 It has not been clear whether this could extend to the protection of the financial interests of the European Communities. Reflecting on this state of

9 Poland: decision of 27.4.2005, P1/05; Germany: decision of 18.7.2005, 2BvR 2236/04; Cyprus: decision of 7.11.2005, App 294/2005. See also ‘ECJ treats German Court’s questions on EAW with Priority’ in EUCRIM, the European Criminal Law Associations’ forum issue 3/4 of 2007, 110. J Spencer (2005) La réception du mandat d’arrêt européen au Royaume Uni, in (ed Marie-Elisabeth Cartier) Le mandat d’arrêt européen (Bruyant 2005) 186–199. 10 J Vervaele (ed), The European Evidence Warrant—transnational judicial inquiries in the EU, Antwerpen / Oxford, Intersentia, 2005); S Spencer, ‘The problem of trans-border evidence and EU initiatives to resolve them’ (2007) 9 Cambridge Yearbook of European Legal Studies 465–80; S White, Le mandat européen d’obtention de preuves et l’avenir de la protection des intérêts financiers de l’Union européenne (2009) Revue du Marché commun et de l’Union européenne No 530, 472–74. 11 COM(2004) 328. 12 COM(2005) 696. 13 COM(2006) 174. 14 COM(2008) 332; PE 409.790; PE A6–0360/2008. 15 For an evolution of European Criminal law, see V Mitsilegas, EU Criminal Law (Oxford, Hart, 2009). 16 See D Spinellis, ‘Court of Justice of the European Communities, judgment of 13 September 2005 Case C–176/03 Commission v Council) annulling the Council framework Decision 200/80/JHA of 27 January 2003 on the protection of the environment through criminal law’ (2006) 2 European Constitutional Law Review 293–302; A Dawes and O Lynney, ‘The ever-longer arm of EC law: the extension of Community competence into the field of criminal law’ (2008) 45 Common Market Law Review 131–58. 17 Case C–176/03 Commission v Council [2005] ECR I–7879. The annulled Frameworks Decision was decision 2003/80 on the protection of the environment through criminal law; see S White, ‘Harmonisation of criminal law in the first pillar’ (2006) 31 European Law Review 81–92. 18 Case C–440/05 Commission v Council (2008) 1 Common Market Law Review 22; see S Peers, ‘The European Communities’ criminal law competence: the plot thickens’ (2008) 33 European Law Review 399–410; see also N Neagu, ‘Entrapment between two pillars: the European Court of Justice Rulings in criminal law’ (2009) 15 European Law Journal 536–51; S White, ‘Case C–176/03 and options for the development of a Community criminal law (2006) 2–3 Eucrim 93–99.

123

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 3 /

Date: 30/6

JOBNAME: Stefanou PAGE: 4 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness affairs, Herlin-Karnell has argued that EU criminal law was in need of a ‘constitutional compass’.19 The Treaty of Lisbon should now provide this much awaited compass, with its single legal framework and the possibility of adopting criminal law (including procedure) on the basis of a qualified majority. The Treaty of Lisbon20 contains the possibility of the Council adopting an EPP ‘from Eurojust’21 by a unanimous vote of the 27 Member States, or as a measure of reinforced cooperation between a smaller number of Member States.22 Van den Wyngaert23 pointed out that, as the EPP would have direct operational powers throughout the European Union, it would be inappropriate to hold Member States accountable for human rights violations resulting from the direct action of the EPP on their territories. The better solution would probably be the European Union’s accession to the ECHR, which would make the EPP directly accountable in Strasbourg for acts emanating from one of its institutions (which could include OLAF/Europol). There may also be a need for a directive on the protection of human rights in transnational proceedings. There remain questions to be asked about the prominence given in policy and legal circles about European criminal law in relation to fraud. On the one hand, advocates of the EPP have explained OLAF’s modest successes to the lack of such a legal superstructure at EU level. Here the argument runs in the direction of suggesting that OLAF can do little in the absence of an EPP. This sort of institutional excuse-making misses one aspect of OLAF’s performance that has been relatively successful, as we discuss further below. Too Few Prosecutions? Member States do not have a duty to report to OLAF on the progress of cases, an issue that the proposed amendment to Regulation 1073/99 is now attempting to address. OLAF has therefore found reporting on court outcomes difficult. Nevertheless, in 2007, the following court actions were recorded, as a result of transfers of

19 E Herlin-Karnell, ‘Recent developments in the area of European criminal law’ (2007) 14(1) Maastricht Journal of European and Comparative Law. See also V Mitsilegas, ‘The competence question: the European Community and Criminal law’ in F Geyer and E Guild (eds), Security versus Justice? Police and Judicial cooperation in the European Union (Aldershot, Ashgate, 2008) 153–70. 20 See P Craig, ‘The Treaty of Lisbon: Process, architecture and substance’ (2008) 33 European Law Review, April, 137–66. 21 S White, ‘The European Prosecutor: extension of Eurojust or ‘prolongation’ of the Corpus Juris proposals?’ in G de Kerchove and A Weyembergh (eds), L’espace pénal européen: enjeux et perspectives (Bruxelles, Editions de l’Université de Bruxelles, 2002) 47–54. 22 See C Ladenburger, ‘Police and Criminal Law in the Treaty of Lisbon, a new dimension for the Community method’, (2008) 4 European Constitutional Law Review 20–40; A Suominen, ‘The past, the present and the future of Eurojust’ (2008) 15 Maastricht Journal of European and Comparative Law 217–34. 23 C van den Wyngaert, ‘Eurojust and the European Public Prosecutor in the Corpus Juris Model: Water and Fire?’ in N Walker (ed), Europe’s Area of freedom Security and Justice (Oxford, Oxford University Press, 2006) 201–40.

124

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 4 /

Date: 30/6

JOBNAME: Stefanou PAGE: 5 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Questioning the Criminal Law Path information or reports sent by OLAF to national authorities: 34 criminal investigations were opened, 14 hearings and 13 appeals were heard, 14 rulings were recorded and finally three proceedings were completed. They resulted in two suspended sentences and one sentence for damages. Between 2002 and 2007, a total of 79 court actions by national authorities have been recorded by OLAF. Bearing in mind that one case can lead to several actions, the national (criminal) judicial response does not appear to be excessive, especially when one considers that in 2006 alone the Member States reported 10,921 irregularities to OLAF. A 2008 review of the UK Serious Fraud Office argues that it should be possible to devise a strategy in order to increase the proportion of prosecutions for whitecollar crime, when this is a stated and explicit policy aim. This would involve attention to external factors such as the legal framework, policy and the support of other key agencies—all of which are admittedly outside the control of the agency. Interpreting statistics is not easy. One view that has been taken is that the reporting from the Member States needs to improve before OLAF can see what the impact of criminal law might be on the protection of the financial interests of the European Communities. To increase prosecutions, it has been argued that attention is also needed to internal factors including (i) whether investigations are focused enough; (ii) training, policy and standards; and (iii) the effectiveness of the organisation’s leadership.24 OLAF has already partly embarked on some such improvements following the 2005 European Court of Auditors’ report on OLAF’s management. A complementary view is that analysts could compare rates of prosecutions and convictions for white-collar crime in the Member States generally with rates applicable to cases related to the EU budget. It must be remembered that the Action Plan implementing the Hague Programme on strengthening freedom, security and justice in the European Union25 had included the establishment of European instruments for collecting, analysing and comparing information on crime and victimisation and their respective trends in Member States, using national statistics and other sources of information as agreed indicators. Progress could be made here. Amounts paid or recovered extra-judicially or uniquely through civil law could be recorded separately.26 If it appeared as a result of this statistical comparison that more penalties and recoveries arise from the extra judicial actions and/or the civil law, then lessons should be drawn at EU policy level.

24

J de Grazia, ‘Review of the Serious Fraud Office’, Final Report, June 2008. Action Plan of June 2005 OJ C [2005] 198/1–22; see also the proposal for a Council Framework Decision on the European Supervision Order in pre-trial procedures between the member States of the EU, http://europa.eu/rapid/pressReleasesAction.do?reference-MEMO/06/314. 26 See S White, ‘United Kingdom Report’ in European Commission (ed), ‘Settlement Study’ on the protection of the financial interests of the Community, Report to DGXX of the European Commission (Luxemburg, OOPEC, 1996). The European Commission did at that stage show an interest in 25

125

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 5 /

Date: 30/6

JOBNAME: Stefanou PAGE: 6 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness Policy making may well have over-focused on the criminal law in the recent past. Although the criminal law can have a useful moral component, the risk of getting caught and sentenced by means of criminal law for financial crime generally is quite low. The Fraud Review Team in the UK has carried out an exercise to reflect the different strategies used to counter fraud (see Table 6.1 overleaf). The choice of means (or particular mix of criminal/civil/administrative means) is left to each Member State or to each agency and no attempts have been made at EU level to find out which particular mix works best in relation to financial fraud or EU fraud. We know that there is no generally accepted concept in the EU for distinguishing criminal from administrative offences.27 It has also been argued that there has also been a blurring of the boundaries between the criminal and civil law models—civil penalties can, in some cases, have the same effect as criminal penalties.28 This tells us little about ‘what works best’ in practice. Both criminal and civil laws can now impose financial penalties. The civil law also deters by awarding more than compensatory relief: in fact the US Civil RICO allows for treble damages; so does the British civil fraud regime. The American system is not alone in imposing civil penalties of this sort. Punishment and deterrence are often assimilated.29 Coffee has argued that the principal distinction is between ‘pricing’ (civil penalties) and ‘prohibiting’ (criminal sanctions).30 Zingales mooted that although a civil fine is of a compensatory nature, criminal fines have the essential goal of achieving deterrence; whilst civil fines are typically based on the ‘but-for’ price of affected goods and services, criminal fines follow a totally different logic.31 Others have argued that the delineation between criminal and civil is not always so clear. We will see that in the cigarettes case, through the leverage of civil RICO, the European Commission managed to deter certain behaviour on a contractual basis (thus achieving through contract law what criminal law seeks to achieve).

extra-judicial settlements of cases related to the financial interest of the European Community. The report showed diversity of practice in the EU Member States and no attempt at approximation was subsequently made. 27 D Spinellis, ‘Investigation and prosecution: framework and investigations protection in Enlarging the fight against fraud in the European Union; penal and administrative sanctions, settlement, whistle blowing and Corpus Juris in the candidate countries’ (P Cullen (ed)), ERA (2003) 36 Bundesanzeiger 93. 28 JC Coffee and AA Berle, ‘Paradigms lost: the blurring of the criminal and civil law models—and what can be done about it’, Working paper No 80, Center for Law and Economic Studies, Columbia University School of Law, 1992. 29 MANN. 30 JC Coffee, ‘Does “Unlawful” mean “criminal”? Reflections on the disappearing tort/crime distinction in American law’ (1991) 71 Boston University Law Review 193; 31 N Zingales, European and American leniency programmes: two models towards convergence? (Brussels, European Policy Centre, 2008) 18. http://ssrn.com:abstract=1101803.

126

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 6 /

Date: 30/6

Columns Design XML Ltd

/

Job: Stefanou

√ √ √

√ √ √

√V

Financial Services Authority

Office of Fair Trading/Trading Standards Offices

Pensions

/

Division: Chapter06

Assets Recovery Agency

√

Cash

√

Her Majesty’s Revenue and Customs

Department of Work and Pensions

√

√

Revenues and Customs Prosecution Office

√

√

√

√

√

DEFRA

√

√

√

Cash

√

√

√

√

√

Confiscation and restraint

Dept of Health/ National Health Service

Police

√

√

√

Serious Fraud Office

√

Crown Prosecution Service

Criminal compensation

Department of Trade and Industry

Criminal prosecution

Tool/ organisation

√

√

√

√

√

√

√

√

√

Disqualification and ban

√

√

√

√

√

√

√V

Civil debt

√

√

Injunction

Table 6.1. Penalties in the United Kingdom—criminal, civil and administrative

√

√

√

√

√

√

√

Insolvency

√

√

√

√

√

√

√

√

Settlement/ undertaking

√

√

√

√

Enforcement stop orders

√

√

√

√

√

√

Caution

Tax

√

√

√

√

Admin fine

JOBNAME: Stefanou PAGE: 7 SESS: 14 OUTPUT: Tue Aug 9 13:14:31 2011

Questioning the Criminal Law Path

127

/Pg. Position: 1 /

Date: 2/6

JOBNAME: Stefanou PAGE: 8 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness Justification for Institutional Innovation: Harm to the EU Taxpayer We have seen that it is not possible, at the moment, to know whether financial crime to the detriment of the EU budget is enforced with the same vigour (or lack of vigour) as financial crime affecting the national or local budget. Estimates of the extent and impacts of irregularities and fraud on the European budget exist, but should be interpreted with considerable caution. The European Commission’s statistics are based on reports of irregularities above €10,000 by the EU Member States in the fields of own resources,32 agriculture,33 structural and cohesion funds34 and pre-accession funds.35 Commission services report cases of irregularities in direct expenditure to OLAF.36 In its statistical evaluation of irregularities for the year 2007, the Commission explained that: The distinction between irregularities and fraud is that fraud is a criminal act that can only be determined by the outcome of judicial proceedings. As such, it is only when the judicial procedure has come to an end that the actual amount of fraud can be determined. While awaiting the results, the Commission works on the basis of the information supplied by Member States concerning cases of irregularities some of which, in the opinion of the reporting Member States, give rise to suspicions of fraud.37

A recent report on the nature, extent and economic impact of fraud in the UK states that: EU documents assert that one can only error (sic) ‘fraud’ at the conclusion of the criminal court process: this would make estimating undetected fraud (or any other crime) a logical contradiction’.38

That report goes on to explore how unrecorded crime has been and can be estimated. This type of research may prove useful to OLAF in assessing the impact of fraud on the EC budget. Against the background of the EU’s 2007 budget of €115.5 billion, the total estimated financial impact of suspected frauds amounted to €1,281 million. Recoveries for the year were estimated at €203 million. Reporting behaviour of course varies from Member State to Member State, as well as the quality of administration within Member States.

32

Art 6(5) of Regulation 1150/2000 OJ L (2000) 130. Art 3(1) of Regulation 595/91 OJ L (1991) 67. The threshold for reporting irregularities in the agricultural sector was increased to €10,000 following the provisions contained in Art 6(1) of Regulation 1848/2006 OJ [2006] L 355. 34 Art 3 of Regulation 1681/94 OJ L (1994) 178/43; Art 3 of Regulation 1831/94 OJ L (1994) 130. 35 The obligation to report irregularities in this area is established in Financing Agreements signed between the acceding countries and the European Community, in accordance with Regulation 1681/1994, amended by Regulation 2035/2005. 36 Art 53(2) of Regulation 1605/2002 (‘Financial Regulation’) OJ L [2002] 248. 37 European Commission (2008) Statistical Evaluation of Irregularities, own resources, agriculture, structural measures, pre-accession funds and direct expenditure, year 2007. 38 See Report for the Association of Chief Police Officers’ Economic Portfolio by M Levi et al, The nature, Extent and Economic Impact of Fraud in the UK, 2007, 4. 33

128

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 1 /

Date: 30/6

JOBNAME: Stefanou PAGE: 9 SESS: 14 OUTPUT: Tue Aug 9 13:14:31 2011

Harnessing the Power of Civil Law The question of the financial impact of unreported irregularities and frauds might have on the EU budget is left unanswered by such estimates. The House of Lords responded to this state of affairs as follows: We are concerned that estimates of the level of fraud rely on self reporting by the Member States. We consider that the Commission should bring forward proposals for a new, more objective, method of determining the rate of fraud.

The fact remains that the difference between the background number of frauds actually occurring, and the number brought to court, must be large. There is ample justification for supplementing the criminal route by another. It would be a mistake for strategic improvements to be held back by statistical deficiencies, which inevitably will take time to rectify. We already have clear evidence of fruitful avenues for action.

HARNESSING THE POWER OF CIVIL LAW: OLAF AND BIG TOBACCO

Civil litigation against cigarette smuggling and counterfeiting has made it possible to recover EU tax and damages. We will attempt to draw from the experience of the Commission/OLAF, chronicling the legal events which led to an Agreement between the European Commission and 10 Member States and a cigarette manufacturer. The European Commission (spearheaded by OLAF) took the initiative and managed to convince Member States to join in. To put this case in the general context of cigarette smuggling and counterfeiting, it has been estimated that world-wide 30 per cent of all exported cigarettes become contraband.39 Hundreds of millions of euros are lost to the national and Community budgets each year due to the smuggling of both genuine and counterfeit cigarettes. On a single 40-foot container of smuggled cigarettes (10 million cigarettes) the average loss of customs duty, excise duty and VAT is €1.5 million. Annual losses of revenue in the European Union can be estimated, on the basis of seizures of cigarettes notified by the Member States, at about €6 billion, of which about 10 per cent would be revenue for the European Union budget. Also, it is estimated that about 65 per cent of the seized cigarettes are counterfeit. A number of factors make this revenue loss possible. First, tobacco industry complicity has been alleged. This allegation provides the basis for the legal actions taken by the European Community and others (see below). Second, weaknesses in the transit system,40 including the lack of totally secure systems for transporting cigarettes in international trade, mean that the black market has

39 L Joosens and M Raw, ‘Smuggling and cross-border shopping of tobacco in Europe’ (1995) 31 British Medical Journal 1393. 40 S White, ‘The transit system in crisis: argument for European Customs?’ Irish Journal of European Law (1996) 5(2) 226–38. The transit system is now computerised, but weaknesses remain.

129

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 2 /

Date: 2/6

JOBNAME: Stefanou PAGE: 10 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness access to large supplies of cigarettes free of all taxes and duties. Third, crossborder price differentials play a role in bootlegging. Fourth, duty-free sales create a large volume of duty-free tobacco that can be smuggled. Lack of resources, lax enforcement, sanctions that do not bite and lack of effective international cooperation compound the situation. OLAF has a dedicated Task Force to deal with cigarette fraud. This Task Force works with relevant enforcement authorities (Customs, police, and tax authorities) to detect smuggling and counterfeiting. In addition, since 1999, OLAF has taken a leading role through litigation, using powerful legal instruments such as the civil arm of the Racketeer Influenced and Corrupt Organizations Act 1970 (RICO) as amended by the PATRIOT Act 2001. The European Commission also made judicious use of the US contingency fee system. RICO and the Revenue Rule: 1999 to 2001 The chronology of events from 1999 onwards, leading inter alia to the settlement between the European Community, 10 Member States and Philip Morris in 2004 could easily constitute the building block for a legal thriller à la John Grisham. It is only possible here to give some of the highlights of this action. In 1999, Canada filed in the New York District Court against cigarette manufacturers. The Government of Canada alleged that the defendants had conspired with known distributors and smugglers to illegally smuggle their tobacco products into Canada, in breach of RICO. RICO is essentially a criminal statute, but it contains a provision known as Civil RICO, which permits persons harmed in their business or property by a RICO violation to seek civil redress.41 Civil RICO permits treble damages. The New York District Court dismissed the Canadian action in 2000, citing the Revenue Rule.42 The Revenue Rule provides that courts of one sovereign will not enforce final tax judgments or unadjudicated tax claims of other sovereigns. The reasoning in that case supported the rule that claims which required a court to adjudicate another state’s provisions for public order—of which revenue laws were one part—are better left to the executive, since any judicial inquiry would entail evaluating a foreign nation’s laws to see whether those were consonant with its own notions of what is proper. Although Judge McAvoy noted that he found the argument to be largely unpersuasive, he felt constrained to apply the rule. The Court held that nothing in RICO abrogated the Revenue Rule and the rule operated to bar those aspects of Canada’s complaint that would have required damages to be assessed by reference to lost taxes.43

41

18 USC 1964 (c) (2000). See V Black (2003) Revue Canadienne du Droit de Commerce, February 2003, 1–38. 43 Attorney General of Canada v R J Reynolds Tobacco Holdings, Inc 103F Supp 2d 134 (2000 NDNY). 42

130

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 3 /

Date: 30/6

JOBNAME: Stefanou PAGE: 11 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Harnessing the Power of Civil Law This negative outcome did not deter the European Commission, acting on the initiative of OLAF from filing an action under RICO against two cigarette manufacturers. The Community was seeking compensation for the loss resulting from alleged smuggling, consisting mainly in lost customs duties and VAT which would have been paid on legal imports, as well as injunctions aimed at having the alleged activities stopped. Canada appealed in December 2000 and the European Commission supported the appeal with an amicus curiae brief. This brief argued, inter alia, that the Revenue Rules should not have been applied by the District Court to dismiss Canada’s complaint, since Canada did not seek to enforce a foreign tax judgment: Canada’s action did not fall within the scope of the rule. The applicants maintained that RICO applied to all persons who suffer an injury to property by reason of a violation of the RICO statute, including governments. Nevertheless, the Second Circuit Court of Appeals affirmed the lower court’s dismissal. Additional arguments were invoked in favour of the Revenue Rule. The judge observed that tax laws embodied a sovereign’s political will and accordingly such laws should not be enforced extraterritorially; foreign laws would be too hard for domestic courts to enforce. In addition, although the court had ruled on Canada’s revenue laws in United States v Trapilo,44 a criminal case, the judge felt that in this case, Canada was the plaintiff and the case was one of forwarding the interest of a foreign sovereign, which may well be adverse to those of the local sovereign. Finally, the court pointed at the existence of a long history of state-to-state negotiation of treaties dealing with coordination of national tax systems. Such treaties provide for cross-border enforcement of tax claims but they do so on a reciprocal basis, with arrangements for mutual enforcement of tax claims being reached against the background of the Revenue rule’s longstanding prohibition of the enforcement of such cases at common law. In 2001, the New York Court dismissed the European Commission’s own claim, on the basis that it should not have acted alone on behalf of the EU Member States. The European Commission then set about to enlist the support of Member States and a second civil action was filed in August 2001. In that second action, the Community no longer based its claim on RICO but solely on common law doctrines alleging common law fraud, public nuisance, unjust enrichment, negligence, and negligent misrepresentation. On 25 October 2001, the action brought jointly by the European Commission and 10 Member States was dismissed, due to a lack of causal connection to the harm alleged. Sequels of the PATRIOT Act 2001 On 26 October 2001, the US passed the PATRIOT Act, following the terrorist attack on the New York twin towers on 11 September 2001. The PATRIOT Act 44

130F 3d 547 (2d Cir) 19970, cert denied 525 US 812 (1998).

131

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 4 /

Date: 30/6

JOBNAME: Stefanou PAGE: 12 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness amended RICO to better bring civil RICO actions to bear in the fight against terrorism: it made it possible to prosecute crimes and activities supporting terrorism (such as money laundering). This was thought by the European Commission to offer an alternative legal strategy to overcome the Revenue Rule. Accordingly, in 2002, the EC and the Member States filed a third action, arguing that the PATRIOT Act overruled the Revenue Act. Their ‘Proffer of Evidence’ also showed that there were links between cigarette smuggling and terrorism. Canada also filed a petition for a writ of certiorari to the US Supreme Court, asking the Court to decide on the applicability of the Revenue Rule. Meanwhile, five tobacco manufacturers made an application to the European Court of First Instance to annul the European Commission’s decision to bring legal proceedings before a court in a non-Member State, under the fourth paragraph of Article 230 EC. The European Commission was supported by the European Parliament, Spain, France, Italy, Portugal and Finland. In January 2003, the European Court of First Instance ruled the complaint by the tobacco manufacturers to be inadmissible. The Court rejected the applicants’ argument that one legal effect of the filing of the proceedings before the American court was that the Community was legally bound by the terms of the complaints lodged with the American court, because it may impose penalties on the Community, even if the action was withdrawn, if it turned out that the action was abusive, frivolous or vexatious. The European Court of First Instance held that unreasonable or vexatious conduct on the part of a plaintiff which may be the subject of penalties imposed by an American court could not be likened to the adoption of an act having binding effects by a Community Institution. Furthermore, the effects of any finding of the civil actions under United States law relied on by the applicants could not be held to have binding legal effects for the purposes of Article 230 EC, as interpreted in the case law.45 An appeal was lodged by the tobacco manufacturers with the European Court of Justice. The Agreement: gold standard Finding that they were losing ground, Philip Morris International (PMI) concluded an Anti Contraband and Anti Counterfeit Agreement with the European Community and 10 Member States on 9 July 2004.46 In this the EC and the 10 Member States agreed to drop their court case against PMI. The key features of the agreement are that Philip Morris agreed to be heavily penalised if it did not 45 Joined cases T–377/00, T–379/00, T–380/00, T–260/01, T–272/01, P Morris, Inc, R J Reynolds, Inc, RJR Acquisition Corp, RJ Reynolds Tobacco Co, RJ Reynolds Tobacco International Inc v Commission of the European Communities, supported by the European Parliament, Spain, France, Italy, Portugal, Finland, judgment of the Court of First Instance, 15 January 2003, paras 114 and 118. 46 A public copy of the Agreement and the Appendices, as well as supporting documentation such as the Press Release and Summary of the Agreement, is available on the internet on the OLAF website at: http://europa.eu.int/comm/anti_fraud/index_en.html.

132

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 5 /

Date: 30/6

JOBNAME: Stefanou PAGE: 13 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Harnessing the Power of Civil Law control the smuggling of its cigarettes. The company agreed to pay the EC $1.5 billion over a period of 12 years. The EC argued that this had only a symbolic value, as it only represented a small portion of the amount the EC has lost through smuggling. The Agreement with PMI is designed to limit future cigarette smuggling and counterfeiting and to end all litigation between the parties in this area. The Agreement states that it is in the mutual interest of all parties to eliminate illegal sales of cigarettes in the European Community (including smuggled and counterfeit products) and enhances the ability of the EU to combat such illegal trade. The Agreement came into effect six months after signing and its effects will last until the end of 2016, except for certain provisions on tracking and tracing which will continue thereafter. The Agreement will be renegotiated two or three years before it comes to an end. The Director of OLAF is the designated representative of the EC in the operation of the Agreement. The primary benefit to the EC and the Member States arising out of this Agreement is the creation of a comprehensive anti-smuggling and anti-moneylaundering system for cigarette sales by Philip Morris. It has three main features: (i) a requirement to make seizure payments of up to 500 per cent of the duties and taxes due on any authentic Philip Morris cigarettes seized in the future; (ii) compliance protocols designed to protect against smuggling and money laundering; and (iii) tracking and tracing protocols which assist European lawenforcement efforts to prevent future smuggling by allowing the tracking and tracing of Philip Morris cigarettes. These requirements are described in more detail below. They make Philip Morris into a guarantor that the smuggling of its products will cease. The unprecedented agreement by PMI to pay up to 500 per cent of the duties and taxes due on large shipments of Philip Morris cigarettes seized in the future could only be achieved by a contractual agreement of this type. In the event of any seizure of five or more master cases (that is, 50,000 cigarettes or 500 packs) of authentic Philip Morris cigarettes, Article 4 provides that PMI must provide specific information concerning the seized cigarettes such as the date and place of manufacture, country of intended destination, intervening warehousing and shipping, and the identity of the first purchaser and any known subsequent purchasers, along with providing invoices and payment records concerning those cigarettes. In addition, PMI must make a ‘supplemental payment’ to the EC and the Member State which seized the cigarettes equal to the total amount of lost duties and taxes which would have been due on those cigarettes if they had been legally distributed for retail sale in the Member State of seizure. Article 4 also establishes a ‘Baseline Amount’ based upon the average number of authentic Philip Morris cigarettes seized throughout the European Community in the years 2001 and 2002. In the event that there are seizures of authentic Philip Morris cigarettes in excess of the Baseline Amount in any given year, PMI undertakes to make an additional payment as to each cigarette seizure (of at least 133

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 6 /

Date: 30/6

JOBNAME: Stefanou PAGE: 14 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness five master cases) in an amount equal to four times the duties and taxes that would have been assessed on those cigarettes. In other words, Philip Morris must pay a total amount equal to five times (500 per cent) of the customs duties and taxes owed on those cigarettes. This guarantee of monetary payments by PMI in the event of seizures of any genuine Philip Morris products should ensure that Philip Morris will do everything in its power to prevent the smuggling of its cigarettes into the European Community. This guarantee is also available to new Member States upon accession on a phased-in basis, provided that the new Member State opts to become bound by the Agreement. The Compliance Protocols attached to the Agreement constitute a comprehensive set of rules that Philip Morris must follow whenever it sells cigarettes and receives payment for cigarettes. The aim is to significantly reduce the capability of third parties to smuggle cigarettes into the European Community. The Compliance Protocols: (i) include strict ‘know your customer’ rules (in terms of the supply chain); (ii) regulate the ways in which Philip Morris can receive payment for cigarettes (in order to fight money laundering); (iii) require Philip Morris to sell cigarettes only in volumes that are commensurate with the legitimate demand in a given market for their cigarettes; (iv) require record keeping and providing records to law enforcement personnel; and (v) compel compliance with many of these rules by Philip Morris’s customers and the customers of those customers. The manufacturer imposes these rules through its contractual, commercial relations. The Tracking and Tracing Protocols attached to the Agreement are designed to assist European law-enforcement efforts to prevent future smuggling by allowing the tracking and tracing of Philip Morris cigarettes. They include extensive obligations for Philip Morris in relation to: (i) the marking of designated master cases; (ii) the marking of cigarette cartons and packs; (iii) the establishment of a master case database and scanning information into that database; (iv) the provision of instant access for designated EC and Member State officials to information in the master case database concerning seized master cases of cigarettes; (v) protocols for the tracking of cigarettes, and other necessary requirements to allow the EC and/or the Member States to track and trace contraband cigarettes. There is no possibility to terminate the EC Compliance protocols or the Tracking and Tracing Protocols. Philip Morris is also required to conduct additional research and to apply new scanning and coding technologies as they become feasible.47 In addition to the above, under Article 3 of the Agreement, Philip Morris agrees, as a part of the Agreement, to pay $1.25 billion to the European Commission. These payments are to be in addition to the payments concerning seizures of smuggled genuine cigarettes after the Execution Date.

47

Appendix of Agreement.

134

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 7 /

Date: 30/6

JOBNAME: Stefanou PAGE: 15 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Harnessing the Power of Civil Law The Agreement includes a Release from all pending and possible future civil litigation by the EC, the participating Member States, and their subdivisions concerning past disputes related to contraband. The Agreement makes the Court of First Instance competent to resolve disputes as to the meaning of the Agreement and reiterates the power of national courts and tribunals to refer questions of Community law to the Court of Justice. The Parties have also agreed to the independent resolution of disputes relating to the interpretation and application of the ongoing rights and obligations under the Agreement by way of arbitration using the well-established rules of the United Nations Commission on International Trade Law (UNCITRAL). Minor disputes may be resolved by a single arbitrator. A panel of three arbitrators is available for major disputes, such as for issues related to payments under Article 3 and termination. It has also been agreed to use the law of New York State, the state in which the litigation was launched, as the law to be applied under both systems of arbitration. All this suggests that European law, let alone European criminal law, is not the sole custodian of the financial interests of the financial interests of the European Community. Indeed in 2004,48 a European Parliamentary Report hailed the Agreement as a ‘gold standard’ for future agreements. After the 2004 Agreement, the US Supreme Court decided in Pasquantino v United States 49 that the Revenue Rule did not bar any criminal prosecution for mail and wire fraud based on tax losses of foreign states. In the European Community case,50 the Supreme Court therefore granted certiorari, remanded the case to the Court of Appeals and ordered the Second Circuit judges to reconsider their decision in the light of the intervening ruling in Pasquantino. The Second Circuit, reassessing its earlier reasoning, held that the ratio of the European Community and Pasquantino were reconcilable and maintained its ruling. In 2006, the US won a RICO case against tobacco companies. The European Court of Justice ruled in 2006 that a decision by a United States court as to the Commission’s power to bring legal proceedings before it was not capable of binding the Community and its institutions to particular interpretation of the rules of Community law in the exercise of their internal powers. After two years of negotiation, the European Commission, together with 26 participating Member States and JTI, another major tobacco manufacturer, signed an agreement in December 2007. JTI promised to work with OLAF and the law-enforcement authorities of the Member States to help in the fight against contraband and counterfeiting of cigarettes. The agreement includes a settlement of $400 million over 15 years.

48 49 50

Rapporteur Bart Staes. 125 S Ct 1766 (2005). 125 S Ct 1968 (2005).

135

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 8 /

Date: 30/6

JOBNAME: Stefanou PAGE: 16 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness If American law provides us with one model, which in this case worked to serve the EU taxpayers’ interests, there exists another model, encouraging informants.

CIVIL RECOVERIES IN US AND UK LAW

In a CEPS51 Policy Brief, Riley52 has argued that the US Civil False Claims Act 1986 (CFCA) could provide a model for the European Community to effectively protect the largely decentralised revenue collection and expenditure of the Community budget. First, it would be likely to result in an increase in detection of fraud against the revenue and expenditure sides of the Community budget. Second, it would act as a deterrent. Potential fraudsters would be deterred by the possibility that someone close to their operations may blow the whistle. The deterrent factor would be increased by the size of the fine that could be imposed on the enterprise. The Act creates civil liability for any person who knowingly presents or causes to be presented a false or fraudulent claim for payment or approval. As a rule, anyone who defrauds the government of revenue can be held accountable under the False Claims Act. The scope of the false claim is very broad. It includes conspiracy to defraud the government by getting a false or fraudulent claim to be allowed to be paid; a reverse false claim where a person uses or causes to be used a false record or statement to conceal, avoid or decrease an obligation to pay or transit money to the government or where a person making or delivering a document certifying receipt of property used to be used by the government and intending to defraud the government or delivers the receipt without knowing that the information on the receipt is true. The burden of proof in CFCA cases is the civil evidence standard. Two major penalties are applied cumulatively: first, a penalty is imposed for each violation and second, a penalty of three times the damage sustained by the government as a result of the defendant’s conduct is added. The US tax authorities state that nearly $10 billion have been recovered between 1987 and 2005. Eighty per cent of this money was returned to the Federal Government was from whistleblower-initiated False Claims Act suits.53 Relators, sometimes called whistleblowers or qui tam plaintiffs,54 are entitled

51

Centre for European Policy Studies, Brussels. A Riley, ‘The Civil False Claims Act Using Lincoln’s Law to protect the European Community budget’, CEPS Policy Brief No 43, December 2003, website http://www.ceps.be. 53 The 1986 False Claims Act: A retrospective look at 20 years of effective fraud fighting in America, official US department of justice statistics, false claims act settlements. 54 An abbreviation from the Latin ‘qui tam pro domino rege quam pro sic ipso in hoc parte sequitur’, which means ‘who as well for the king as for himself sues in this matter’. Qui tam laws have existed for centuries, dating as far back as 13th-century England. 52

136

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 9 /

Date: 30/6

JOBNAME: Stefanou PAGE: 17 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Civil Recoveries in US and UK Law under the Act to a share of the monies recovered. The law acts as an incentive for natural persons who know of individuals or companies making false claims to come forward. There is no provision in EC law for either whistleblowers or informants to receive a part of recovered assets in connection with the protection of the protection of the financial interests of the European Community, although some European legal systems provide that private-sector whistleblowers can receive a part of recovered assets found as a result of their disclosure of financial misconduct.55 OLAF has shown in its action against cigarette smuggling and counterfeiting that it can have an impact, by spearheading legal action based on civil law and obtaining redress for the European taxpayer. This outcome should open up the way for a strategy focused on recovery or payment of unpaid tax plus damages. One aspect that civil fraud regimes and leniency programmes have in common is that they bring in actionable information in a cost-effective manner. European Examples of Civil Fraud Investigations and Recoveries Most VAT, customs duties and agricultural expenditure fraud is cross-border and therefore depends for its detection and prosecution on cooperation between Member States. Yet there exist some healthy examples of civil fraud investigations and recoveries within the European Union. Experience in some Member States already shows that it is possible to use the power of civil law and to recover taxes and/or to impose penalties where this would not have been possible otherwise. One example is the civil fraud regime in operation in the United Kingdom. A Civil Investigations of Fraud procedure is used by Her Majesty’s Revenue and Customs (HMRC). A procedure came into effect in 2005 with a Code of Practice. It covers both direct56 and indirect taxes, including VAT, Excise and Customs duties. The conditions of acceptance, for cases of suspected serious tax fraud, include a full and complete disclosure of all irregularities. HMRC retains discretion to pursue a criminal investigation where they consider it necessary and appropriate, for example when the discloser makes false statements or provides false documents with intent to deceive, in the course of a civil investigation. HMRC undertakes to keep an open mind to the possibility that there may be an innocent explanation for the suspected irregularities and undertakes to treat the

55 Ibid 267. See also S White, Procurement and organised crime, an EU wide study (IALS, Russell Press, 2000). 56 This includes Income Taxes, Corporation Tax, Capital Gains Tax and National Insurance Contributions.

137

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 10 /

Date: 30/6

JOBNAME: Stefanou PAGE: 18 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness taxpayer fairly and courteously and in accordance with the law. HMRC believes that this procedure is consistent with the right to a fair trial.57 In October 2008, the Serious Fraud Office in the United Kingdom used new civil recovery powers under the Proceeds of Crime Act 2002 in order to recover proceeds from major companies. These civil provisions do not require a specific offence to be established against any particular company or individual, merely that the property sought is the proceeds of unlawful conduct. In one case, Balfour Beatty plc accepted that unlawful conduct in the form of inaccurate accounting records—arising from certain payment irregularities—occurred within a subsidiary entity during the construction of the Bibliotheca Project in Alexandria, Egypt. The project had been undertaken by the Balfour Beatty subsidiary in a joint venture with an Egyptian company.58 The unlawful conduct related to entries in a subsidiary’s company’s records, which contravened section 221 of the Companies Act 1985. Once Balfour Beatty plc had discovered and investigated these payments, it immediately notified the SFO, which conducted an investigation. Balfour Beatty cooperated throughout the investigation. In a Consent Order before the High Court, Balfour Beatty agreed to a settlement payment of £2.25 million together with a contribution towards the costs of the Civil Recovery Order proceedings. Balfour Beatty has agreed to introduce certain compliance systems, and to submit these systems to a form of external monitoring for an agreed period. The Director of the SFO commented: This is a highly significant development in our efforts to reform British corporate behaviour. We now have a range of enforcement tools at our disposal and a major factor in determining which of those tools is deployed will be the responsibility demonstrated by the company concerned.59

Thus we see that, once one focuses upon improper payment or financial impropriety, the civil route offers a variety of means of recovery and for incentivising firms against future lapses. It can offer a quicker and more powerful solution than criminal law. Both approaches are, of course, subject to human rights guarantees. Both approaches, however, depend on good information, to which we now turn.

57 The civil fraud processes operating in both departments received considerable scrutiny in terms of human rights and, in particular, Art 6 ECHR (right to a fair trial). The views of the courts in the leading Human Rights Act (HRA) rulings of Han & Yau and Gill & Gill and advice from leading counsel have provided the background to defining the outline for a consistent approach, which incorporates important human rights safeguards within the procedures. The recent case of Khan v Commissioners of Customs and Excise (2005) has endorsed these principles, which are inherent in the new procedure. 58 News Release of 6 October 2008, Serious Fraud Office. 59 Ibid.

138

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 11 /

Date: 30/6

JOBNAME: Stefanou PAGE: 19 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Inviting More Actionable Information INVITING MORE ACTIONABLE INFORMATION

One of the keys to effectiveness is a manageable volume of good-quality incoming information. There are three main ways in which the quantity and quality of incoming information can be improved: though the protection of whistleblowers, by applying leniency schemes to those who disclose about themselves or others, and/or by paying informants. Whistleblowers Whistleblowers have a crucial role to play in the deterrence and in the detection of financial irregularities and crime. At present most of the information received on alleged irregularities in the procurement sector come in the form of complaints from disgruntled tenderers. This information does not always contain actionable information. In 2004, the EC Staff Regulations were amended60 in order to introduce a regime for whistleblowers. Articles 22a and 22b of the EC Staff Regulations now provide that any official who becomes aware of facts which give rise to a ‘presumption of the possible illegal activity, including fraud or corruption, detrimental to the interests of the Communities or of a conduct relating to the discharge professional duties which may constitute a serious failure to comply with the obligations of officials of the Communities must inform either his immediate superior or OLAF. The information must be given in writing and without delay. This duty does not extend to documents, deeds, reports, notes or information in any form whatsoever disclosed to the official in the course of proceedings in legal cases, whether pending or closed. Provided that the official acts ‘reasonably and honestly’, he will not suffer any prejudicial effects.61 The EC Staff Regulations create three legal categories of officials giving inside information. The first category of officials refers to those who contact OLAF. They are guaranteed protection against any discriminatory measure by their employer (this category is described by some commentators as ‘internal whistleblowers’). The second category concerns those who contact an external body such as the press. Article 22b of the Staff Regulations applies after a ‘good faith’ test, providing protection against any discriminatory measure by the employer (this category is described by some commentators as ‘external whistleblowers’). The third category contacts an external body such as the press without reasonable cause (he has failed the good faith test and/or failed to wait for an answer from OLAF), in which case he does not attract whistleblower status. In this case, there is no protection against measures such as removal from office. 60 61

Council Regulation 723/2004 L (2004) 124/1. Art 22a(3) of Staff Regulations.

139

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 12 /

Date: 30/6

JOBNAME: Stefanou PAGE: 20 SESS: 17 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness Some progress has been made in clarifying these rules. The European Court of First Instance has ruled on two aspects. First, the whistleblower cannot force OLAF to open an investigation, on the basis of information provided.62 Second, a whistleblower continues to enjoy statutory protection even if OLAF decides to close an investigation initially opened on the basis of information provided by the whistleblower.63 This is because the decision to close an investigation in itself does not make it possible to judge whether the whistleblower reasonably and honestly believed that the information he gave OLAF was true and had thus acted in good faith.64 In two decisions, the European Ombudsman has clarified the whistleblower’s right to be informed about the outcome of the investigation65 and his right to be informed about the duration of the investigation.66 Yet the amendment to the Staff Regulations and subsequent clarification by the Court and the European Ombudsman have done little to increase the information received from identified whistleblowers by OLAF (in 2006 OLAF received no information from whistleblowers67) although a steady flow of anonymous information continues to be received. This suggests a lack of confidence by EU officials that they would be protected in practice. Unfortunately, as we know, anonymous information may have weak or no evidential value in court.68 It cannot stand on its own and has to be fully corroborated in order to lead to the opening of a case. A UK Government Accountability Project69 has highlighted other issues in relation to the EC regulatory framework for whistleblowers: — the EU provisions do not specify what constitutes professional misconduct or the types of disclosures that are protected; — protection could be expanded to include former employees and applicants, as well as contractors (given the importance of contracting out as a source of bribery and corruption, this would seem to be an important part of the workforce to cover); — the lack of disclosure to the public represents a major loophole; — the conditional disclosure beyond OLAF ensures that the potential impact of whistleblowing will be no greater than OLAF’s good faith and performance. Another provision may be worth considering, in order to complete the legal framework concerning whistleblowers. In the United Kingdom, the 1998 Public

62

Case T–4/05 Strack v Commission, para 39. Case T–4/05 Strack v Commission, para 44. 64 Case T–4/05 Strack v Commission, para 48. 65 Decision 1625/2002/IJH against the European Anti-Fraud Office of 3.7.2003. 66 Decision 140/2004/(BB) PB against the European Anti–Fraud Office of 6.6.2005. 67 OLAF’s seventh Activity Report, 33. 68 See A-M Nuutila, ‘Whistle blowing, exchange of information and legal protection in Enlarging the fight against fraud in the European Union; penal and administrative sanctions, settlement, whistle blowing and Corpus Juris in the candidate countries’ (ed P Cullen) ERA (2003) 36 Bundesanzeiger 266. 69 See K Drew, ‘Whistleblowing and corruption an initial and comparative review’, Public Services International Research Unit (PSIRU) 2003; http://www.psiru.org. 63

140

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 13 /

Date: 8/8

JOBNAME: Stefanou PAGE: 21 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Inviting More Actionable Information Interest Disclosure Act70 provides an independent, approved channel (‘prescribed regulators’) for whistleblowers who do not want to disclose directly to their employers but wish to be protected. This has proved quite successful: PIDA applications rose from 157 in 1999/2000 to 1,356 in 2006/2007. The corresponding of applications concluded rose from 35 to 1015 in the same period. Perhaps prescribed regulators could be adopted at the level of the EU institutions and might help to attract good-quality information. Leniency Leniency is being used to attract actionable information by agencies dealing with environmental crime, defence procurement or bribery. The literature on the effects of leniency on illegal transactions shows that offering leniency to wrongdoers who spontaneously self-report generally lowers law-enforcement costs.71 Spagnolo72 showed that when undetected wrongdoers spontaneously self-report, it can in principle costlessly deter illegal relations. It also reduces the need for investigation activity. Leniency schemes work particularly well when there is ‘the involvement of more than one culpable party on the scene’73—for example in cartels,74 or in bribery and corruption.75 We have just seen that it might be possible, in the EC context, to improve the protection of whistleblowers, in order to encourage a flow of actionable information. But would it be possible to offer leniency? This is common practice amongst competition authorities at EC and national level. It has been argued that systems that reward whistleblowers with cash tend to attract false information, fabricated and reported in order to obtain cash rewards. Counterproductive effects can be avoided in leniency schemes aimed at curbing corruption by giving a reward to the party who provides the evidence required to prove the existence of corruption and to punish the other player.76 It is not suggested here that officials should receive payment for providing actionable information—EC officials have a duty to refer relevant information to OLAF. However, this could be considered in relation to informants. In the area of 70

http://www.pcaw.co.uk:law/pida.htm. P Buccirossi and G Spagnolo, ‘The Effects of leniency on illegal transactions’; version of 1 December 2001; L Kaplow and S Shavell, ‘Optimal law enforcement with self reporting behaviour’ (1994) 102(2) Journal of Political Economy 583–606. 72 G Spagnolo, ‘Optimal leniency programs’, nota di Lavoraro 42/2000, Fondazione Eni Enrico Mattei, June 2000 http://www.ssrn.com. 73 N Zingales (2008) ‘European and American leniency programmes: two models towards convergence?’ (Brussels, European Policy Centre, 2008) http://ssrn.com:abstract=1101803. 74 M Motta and M Polo, ‘Leniency programs and cartel prosecution’ (2003) 21(3) International Journal of Industrial Organization 347–79. 75 A Burlando and A Motta, ‘Self reporting reduces corruption in law enforcement’, Marco fanno Working Paper No 63, University of Padua 2007. 76 P Buccirossi and G Spagnolo, ‘Counterproductive leniency programs against corruption’, Lear Laboratory of Economics, Stockholm School of Economics and Lear, 2000. 71

141

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 14 /

Date: 30/6

JOBNAME: Stefanou PAGE: 22 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness criminal law, modest payment to informants is a familiar incentive; there seems no reason not to adopt a similar approach to civil recovery cases in respect of the EU’s financial interests.

CONCLUSION

The situation at present is one where the Member States report few prosecutions and convictions as a result of information communicated to them by OLAF. Looking to the present (2010–2014) Action Programme in the area of Freedom, Security and Justice,77 what measures could be envisaged? We have seen that the pace of mutual recognition and harmonisation in criminal law has slowed down since 2002 and the Hague Programme produced disappointing results in relation to criminal law. The Report on the implementation of the Hague Programme for 2007 states that an insufficient level of achievement was attained in some areas including the sharing of information among law-enforcement and judicial authorities, prevention and the fight against organised crime, police and customs cooperation and judicial cooperation in criminal matters.78 Court actions leading to criminal law sanctions on the basis of OLAF investigations are still scarce in the Member States. The outcome the Commission/OLAF has enjoyed against tobacco manufacturers has been as a result of (US) civil law. It is not suggested here that we should have the equivalent of the PATRIOT Act at EU level, together with a corresponding civil law package. The Act has been criticised on many counts, and not just by tobacco manufacturers. However, it should be possible to take modest steps to improve the effectiveness in relation to the protection of the financial interests of the European Union and to protect the reputation of EU institutions. There are at least three areas ripe for improvement: (i) Designing a sophisticated model for estimating the cost of fraud and corruption to the EU budget. At present all statistics come from the Member States (reported irregularities) or from the Commission. These statistics do not allow for a reliable estimation of fraud. One way forward would be for the European Commission to acquaint itself with the models used in the Member States, with a view to transposing them in relation to the EU budget. (ii) Finding ways to increase actionable, incoming information by encouraging whistleblowers and having leniency programmes or other well-regulated programmes encouraging disclosure. The whistleblower rules are part of 77 Press Release: ‘Freedom, Security and Justice: What will be the future?’ Commission launches wide-ranging public consultation to define future priorities relating to freedom, security and justice, 25.9.2008. 78 COM(373) Report on Implementation of the Hague Programme for 2007, 2.7.2008.

142

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 15 /

Date: 30/6

JOBNAME: Stefanou PAGE: 23 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Conclusion the EC Staff Regulations and can of course be further refined, so that whistleblowers may feel encouraged to come forward. Concrete suggestions have been made in this chapter. Evidence shows that Member States have a range of means at their disposal to attract good-quality, actionable information and to deal with fraud and corruption. There is little scope for cooperation between Member States and with the European Commission. Another starting point therefore might be to find out all the strategies Member States use in order to increase actionable information (including in the area of bribery), which work best and what prospects there are for cooperation with the European Commission within existing legal frameworks. (iii) The most important improvement, however, would be to make it possible for Member States and the European Commission to join forces in a civil action to recover EU budget funding. Examining the cigarette case and its outcome, one sees that the Commission was able to take an initiative in relation to EU and national taxes, and that the European Commission and some Member States were able to join forces in order to recover EU and national taxes. Some matters fell within the jurisdiction of the European Courts of Justice. Unfortunately the claim was not possible in the European Union itself. This surely needs to be rectified. But how? It does no harm to exercise the legal imagination, and so three possible scenarios come to mind. The first and more modest proposal is for a civil law directive to spell how the Member States and the European Commission could cooperate in the sphere of civil law, in order to collect or recover some of the funds due to the EU budget, which may be intermingled with funds due to the national budgets/ administrations. This would include joining forces in civil cases, the European Commission acting as a party on behalf of the European taxpayer. Several Member States could join the action in order to claim national taxes, such as VAT or excise duties or to recoup EU budget expenditure. This could be done though the civil courts of the Member States (forum conveniens). The European Court of Justice should have jurisdiction over any disputes relating to the sharing of taxes paid between the Member States and the European Commission. The new directive should make it clear that Member States and the Commission can join forces in any Member State of the European Union, with the aim of recouping unpaid tax or recovering funds due, whenever the EU budget is at stake. Our second modest proposal takes as its model the administrative enforcement system in the competition field. The EU could be given a power to operate a leniency scheme, in order to attract actionable information on EU fraud. This would be done in close cooperation with the national authorities. The scheme could be operated by the European Commission, with the help of a committee with members from Eurojust, Europol and OLAF. The European Commission would have the power to recoup funds due to the EU budget and to impose fines. 143

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 16 /

Date: 4/7

JOBNAME: Stefanou PAGE: 24 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Operational Effectiveness The European Court of Justice would have jurisdiction over disputes with the Member States. There is already a well-developed jurisprudence in the field of competition law, which could apply to leniency exercised in this context. This proposal falls short of recommending that informants should be paid, as in the US qui tam system, which is a logically separate move, equally applicable to civil, administrative and criminal law. A third proposal would be for a civil fraud (coordinating) agency to be created. It could include OLAF and Europol, responsible together for carrying out civil fraud investigations requiring the lower level of evidence characteristic of civil fraud regimes, in the area of the protection of the financial interests of the European Union. As a result of these investigations, funds would be recovered plus damages. The agency would have the discretion to turn over the evidence for criminal prosecution at any stage, particularly if the discloser were found to have supplied false information and/or forged documents. However, disclosers who came forward with information and paid the amounts due to the EU budget plus damages would not be prosecuted by means of national criminal law. The Member States would of course have to agree to desist from criminal prosecution as long as the civil fraud route was used at EU level. Eurojust might wish to assist the European Commission with coordination and decisions to refer matters to national prosecution agencies. Such a vision is by no means incompatible with the establishment of a European Public Prosecutor, and it might have the advantage of adding effectiveness to symbolism.

144

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter06

/Pg. Position: 17 /

Date: 30/6

JOBNAME: Stefanou PAGE: 1 SESS: 17 OUTPUT: Tue Aug 9 13:14:31 2011

7 OLAF’s Interinstitutional Relationships CONSTANTIN STEFANOU

INTRODUCTION

As has already been mentioned, the version of new institutionalism utilised in this Chapter is that of historical institutionalism. The main tenets of historical institutionalism are: First, historical institutionalists tend to conceptualize the relationship between institutions and individual behavior in relatively broad terms. Second, they emphasize the asymmetries of power associated with the operation and development of institutions. Third, they tend to have a view of institutional development that emphasizes path dependence and unintended consequences. Fourth, they are especially concerned to integrate institutional analysis with the contribution that other kinds of factors, such as ideas, can make to political outcomes.1

Another distinctive feature of historical institutionalism is that it sees causation as ‘path dependent’ and argues that once a path is chosen, institutions develop with often unintended consequences. In the flow of historical events ‘critical junctures’ are important branching points from where institutional development can move to a new path in the flow of historical events.2 From a macrotheoretical point of view ‘critical junctures’ would be events such as Treaty reforms; from a micro-theoretical point of view, for example looking at OLAF, critical junctures would be events such as the collapse of the Santer Commission and the change from UCLAF to OLAF. March and Olsen noted that The basic building blocks of institutions are rules, and rules are connected and sustained through identities, through senses of membership in groups and recognition of roles. Rules and repertoires of practices embody historical experience and stabilize norms, expectations and resources; they provide explanations and justifications for 1 PA Hall and RCR Taylor, ‘Political Science and the Three New Institutionalisms’, Max-PlanckInstitut für Gesellschaftsforschung, Discussion Paper 96/6, 1996, 7. 2 Ibid 10.

145

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 1 /

Date: 30/6

JOBNAME: Stefanou PAGE: 2 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships rules and standard ways of doing things. Subject to available resources and capabilities, rules regulate organizational action. That regulation, however, is shaped by constructive interpretations embedded in a history of language, experience, memory and trust.3

As Armstrong put it: ‘an institutionalist approach to the European Union takes as its starting point the complexity of the European Union’s decision-making and lawmaking processes, and the role of the institutions in seeking to simplify the complexity of this system of governance’,4 and that institutions are capable of influencing political behaviour. New-institutionalism represents an attempt to combine the postmodernist emphasis on micro- approaches with the traditional search for a grand macro-theory. This approach has the added bonus that it is by nature interdisciplinary5 and might at some distant point in the future aid the formulation of a general theory. Clearly, as a micro or sectoral approach to the study of institutions and their contribution in the development of the Community, neo-institutionalism offers distinct advantages, not least because neo-institutional perspectives have been able to propose new answers to old questions6 and in doing so they have opened up a whole new avenue for EU research. Precise enough to allow testing and flexible enough not to constrict research towards a very narrow path, the logic of new institutionalism in the context of OLAF is that institutional input and influence depended on institutional preferences, which took the form of formal inputs and informal influences; furthermore, these should be studied over time in order to understand/discover path dependencies. In practical terms this means that in order to understand the impact of the institutions we need to look at three main areas: their long-term preferences, their ability to pursue these preferences and their specific, textual impact on the development of measures to safeguard the financial interests of the Union and, of course, the development of OLAF. In the case of fraud and the financial interests of the EU there is an additional element to take into consideration: the EU’s overall strategy on judicial cooperation.

3 JG March and JP Olsen, ‘Elaborating the “New Institutionalism”’, Arena Working Paper, No 11, March 2005, 10. 4 K Armstrong, ‘New Institutionalism and European Union Legal Studies’ in C Craig and P Harlow (eds), Lawmaking in the European Union (London, IALS/Kluwer, 1998) 103. 5 For example, institutionalists take into account endogenous and exogenous forces of institutional change (including economic and legal perspectives) as well as histories of decision making. See S Bulmer, ‘The governance of the European Union: A New Institutionalist Approach’ (1994) 13 Journal of Public Policy 351–80; P Pierson, ‘The Path to European Integration: A Historical Institutional Analysis’ in W Sandholtz and A Stone Sweet (eds), European Integration and Supranational Governance (Oxford, OUP, 1998) 27–58. 6 See K Dowding, ‘Institutionalist research on the European Union: A Critical Review’ (2000) 1(1) European Union Politics 139.

146

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 2 /

Date: 8/8

JOBNAME: Stefanou PAGE: 3 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Fraud and Accountability in the EU FRAUD AND ACCOUNTABILITY IN THE EU

Existing literature on fraud and corruption in international organisations inevitably focuses on state rather than individual behaviour since the state is the basic unit in international relations; as Carolyn Warner rightly points out: states see fraud and corruption in an international organization as a marginal cost to be discounted by the varied benefits derived from the organization. One of these benefits might actually be the fraud which serves as a side payment to various key constituencies, or as a direct benefit to the policy maker.7

In the case of the EU, although the institutional set-up itself may even be regarded as ‘fraud friendly’ as Member States are entrusted with the disbursement of the bulk of EU funds as well as policing fraud and corruption of these very funds, instances of true fraudulent state behaviour are quite rare, for example the rumoured ‘cooking of the books’ in Italy and Greece to help them reach the Maastricht criteria and join the euro. Fraud within the EU is mainly the result of individual behaviour which takes advantage of the poor provisions to police the single market, the EU’s institutional set-up and, of course, the poor enforcement of EU and national law in some jurisdictions. It can be argued, of course, that poor enforcement of the law is still fraudulent state behaviour and that consequently ‘Member States are able to free ride on, or defraud, the EU because the harm caused is dispersed across all the members while the gains are country-specific’.8 However, this would make sense if the very same states were strict in enforcing national provisions but lax in their enforcement of EU law. Yet, current experience indicates that the Member States singled out for lax enforcement of EU provisions tend to be equally lax in their enforcement of national provisions. In other words, Member States with a poor record in combating fraud in general also have a poor record of combating EU-related fraud. We have yet to find examples of Member States which successfully combat fraud except for EU-related fraud. As mentioned elsewhere in this book, the great explosion in EU fraud came with the opening of the single market and the lack of relevant provisions to safeguard it against organised crime as well as ad hoc instances of fraud in EU-funded programmes. The delays in some Member States in the prosecution of offenders are sometimes translated as reluctance to protect the financial interests of the EU as if it is a kind of orchestrated national approach. Yet, there is little evidence of such behaviour by Member States. Prosecuting transnational crime is always difficult for national enforcement/prosecution agencies and often the practical constraints lead to delays in the prosecution of those who have 7 CM Warner, ‘Creating a Common Market for fraud and Corruption in the European Union: An Institutional Accident or a Deliberate Strategy?’, EUI Working Papers, RSC No 2002/31 (European University Institute, May 2002) 10. 8 Ibid 11.

147

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 3 /

Date: 1/6

JOBNAME: Stefanou PAGE: 4 SESS: 17 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships harmed the financial interests of the Union. Should this be seen as Member State collusion to defraud the EU or is it a matter of inefficiency on the part of some national enforcement and prosecuting authorities? Or should some inefficiencies of prosecuting/enforcement authorities be regarded as malignant rather than benign, in other words as deliberate behaviour9 (this would be in line with interdependence/rationalist theorists’ arguments that states join international organisations and accept constraints from membership only when they perceive future benefits10)? It is, of course, impossible to give a definitive answer to such questions and most of the time circumstantial evidence of delays at the national level is presented as proof of rogue Member State behaviour. It is also interesting to note here that when indisputable evidence was presented by the EC for the involvement of a high-ranking government member in a scandal that involved EU subsidies the former member of government received a jail sentence by a national court.11 Fraud that originates in the Member States is one area of concern. Fraud that originates from the very institutions of an international organisation is much more difficult to detect especially when, as is the case with the EU, that organisation is asked to police itself. In the case of the EU the Commission is the main ‘spending’ institution and, therefore, the one likely to suffer from fraud. In fact, because the Commission also manages the wide variety of spending programmes, the risk of fraud is even greater. So, are institutions such as the Commission prone to be the targets of fraudulent individuals or employees likely to succumb to temptation?12 Institutions of international organisations are, of course, a mirror of their Member States and despite careful selection of staff the risk of corruption and fraud will always be there since it exists at the national level. At this point it should be stressed that we do not subscribe to the cultural theory of corruption where individual countries are identified as ‘exporters’ of corruption as a result of a so-called ‘national trait’ or religious affiliation.13 The

9

The so-called ‘predatory hypothesis’, ibid 14. RO Keohane and J Nye, Power and Interdependence 2nd edn (Boston, Scott Foresman, 1989). 11 In 1988 the Commission took Greece to the ECJ for a scandalous breach of EC law that involved passing off Yugoslav maize as Greek and receiving EC subsidies. The ECJ ruled against Greece on multiple counts of failure to fulfil its obligations and ordered the Hellenic Republic to pay all costs. See Case 68/88 Commission of the European Communities v Hellenic Republic [1989] ECR 02965, 21.9.1989. The deputy minister for the Economy, Nikos Athanasopoulos, was singled out as the member of government responsible for the scandal and in August 1990 he was found guilty of forging state documents and eventually received a 31⁄2-year jail sentence. 12 ‘EU fails to have its accounts signed off for the 14th consecutive year—Might not be signed off before 2020’, Eurofacts, 15 September 2008. 13 W Sandholdz and M Gray, ‘International Integration and National Corruption’ (2003) 57(4) International Organization, http://10.1.1.137.8523[1].pdf; A Barr and D Serra, ‘Culture and Corruption’, Global Poverty Research Group, GPRG-WPS-040, 2006; G Hofstede, ‘Dimensionalizing Cultures: The Hofstede Model in Context’ in WJ Lonner, DL Dinnel, SA Hayes, and DN Sattler (eds.), Online Readings in Psychology and Culture, Unit 2: Conceptual, Methodological and Ethical Issues in Psychology and Culture (Bellingham, WA,Center for Cross Cultural Research 2006). 10

148

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 4 /

Date: 30/6

JOBNAME: Stefanou PAGE: 5 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Fraud and Accountability in the EU most important element in combating fraud and corruption in institutions of international organisations is accountability. Accountability issues have become an important element in the political agenda of the EU. There are different definitions and interpretations of accountability depending on the context in which it is used: ‘accountability is a contestable concept par excellence. Anyone studying accountability will soon discover that it can mean many different things to many different people’.14 However, for most European experts ‘Accountability is seen as a social mechanism, as an institutional relation or arrangement in which an actor can be held to account by a forum.’15 It is quite interesting that the EU’s accountability mechanisms were rather weak in its early days. In a way this emphasises the ‘political’ nature of what Monnet called ‘the European project’. The emphasis was on quick development of the Community and its common policies, on helping the Member States develop strong political and economic ties and on developing a process which today we have termed as ‘Europeanisation’ but was then included in the neofunctionalist concept of ‘spillover’. In other words, the founding fathers were so keen and eager to get the political process of integration going that accountability and auditing were not seen as critical areas of this process. Obviously in the early days the budget was much smaller and the European Community was not involved in hundreds of ‘programmes’ as it is today. In fact it wasn’t until the mid-1970s that the Community developed its first institution dedicated to financial auditing, the Court of Auditors, as the Community institutions were granted their own resources. Indeed it was not until the mid 1990s that the concept of ‘irregularity’ was defined at the EU level as: ‘any infringement of a provision of Community law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the Communities or budgets managed by them, either by reducing or losing revenue accruing from own resources collected directly on behalf of the Communities, or by an unjustified item of expenditure’.16 The EU’s gradual development into a polity17 made it inevitable that the contemporary understanding of democratic governance, which includes ‘accountability’,18 would find its way into EU governance. In fact the issue of accountability has been one of the central themes in the Commission’s attempts 14 M Bovens, ‘New Forms of Accountability and EU Governance’ (2007) Comparative European Politics 105. See also R Mulgan, ‘“Accountability”: an ever-expanding concept?’ (2000) 78 Public Administration 555. 15 Bovens, above n 14, 106. 16 See Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities’ financial interests, OJ L 312, 21.12.1995, 1. For a good analysis of the concept see: European Anti-Fraud Office (OLAF), ‘Requirement to notify irregularities: practical arrangements’, Working Documents, 19° CoCoLaF, 11/04/2002. 17 W van Gerven, The European Union: A Polity of States and People (Oxford, Hart, 2005). 18 R Mulgan, Holding Power to Account: Accountability in Modern Democracies (Basingstoke, Palgrave, 2003).

149

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 5 /

Date: 1/6

JOBNAME: Stefanou PAGE: 6 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships to restructure its financial management system following the Court of Auditors’ scolding attacks of the late 1990s19 and the infamous assertion by the Committee of Independent Experts (headed by a former President of the Court of Auditors) that ‘It is becoming increasingly difficult to find anyone who has even the slightest sense of responsibility’.20 When attempting to assess OLAF’s interinstitutional relationships it is important to understand that this is done in the absence of a wider EU anti-fraud and anti-corruption strategy because such a strategy requires judicial integration. Although steps have been taken towards Third Pillar integration the EU is still a long way from being considered a single judicial area. This part of the book examines OLAF’s relationship with other EU institutions and bodies. It will first look at individual relationships and then attempt to make a wider assessment of OLAF’s standing in the EU system.

RELATIONSHIP WITH THE COMMISSION

Under Article 2 of the Commission’s Decision of 28 April 1999 establishing the European Anti-Fraud Office (OLAF), OLAF is formally part of the Commission. OLAF exercises its powers with the primary task of performing external and internal administrative investigations in cases of ‘fraud, corruption and any other illegal activity adversely affecting the Community’s financial interests’. So, OLAF is a formal part of the Commission with reporting obligations concerning the Commission’s Strategic Planning and Programming Cycle (SPP), which include the Director General’s Annual Activity Report and the half-yearly review of the implementation of OLAF’s Annual Management Plan. OLAF’s staff, including its Director General, are subject to the disciplinary control of the Commission. The activities of OLAF are subject to evaluation by the Commission and OLAF does not report to the European Parliament (EP) on its own legal grounds but as a part of the executive (the Commission). Article 280(5) of the EC Treaty requires the Commission to submit an annual report to the European Parliament and to the Council as to the measures taken to fulfil the requirements of that Article. Accordingly, OLAF produces an Annual Report on the Protection of the Financial Interests of the Communities and the Fight against Fraud. However, although OLAF is part of the Commission, paragraph 4 of Article 3 of the Commission’s Decision of 28 April 1999 establishing the European Anti-Fraud Office (OLAF) grants OLAF administrative autonomy creating the framework for its operational independence. In addition the budget of OLAF is funded separately (in Part A) under administrative appropriations. 19 B Laffan, ‘Auditing and accountability in the European Union’ (2003) 10 Journal of European Public Policy 762–77. 20 Committee of Independent Experts, First Report on Allegations Regarding Fraud: Mismanagement and Nepotism in the European Commission, Brussels, European Parliament, 15 March 1999.

150

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 6 /

Date: 1/6

JOBNAME: Stefanou PAGE: 7 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Commission The operational independence of OLAF is based on: — Article 12 of Regulation (EC) No 1073/99 of the European Parliament and of the Council of 25 May 1999 concerning investigations by the European Anti-fraud Office (OLAF) (OJ 1999 L136), which declares the independence of the Director General of OLAF; and — The Supervisory Committee (Articles 11 and 12 of Regulation 1073/99), which is called to strengthen ‘the independence of the Office in relation to any government, institution, body or agency’ and to reinforce the independence of OLAF’s Director. Moreover, the Director of OLAF is entitled to initiate investigations on his own discretion. In performing his functions he ‘shall neither seek nor take instructions’ from any government or institution of the EU, including the Commission itself (Article 3 of Decision 1999/352).21 Finally, OLAF’s reporting to the Commission exclude active investigations. There is one main question concerning OLAF’s relationship with the Commission, given that OLAF is formally part of the Commission: is ‘complete independence’ possible, as the Commission Decision setting up OLAF requires?22 Clearly OLAF has a number of guarantees of autonomy that UCLAF never enjoyed. In fact, from a practical point of view there have never been any allegations of Commission involvement in any of the investigations.23 So, why is it that OLAF’s relationship with the Commission is seen as problematic? The straightforward answer has to do with internal investigations and the very fact that OLAF is part of the Commission. It stretches the credibility of the system itself when OLAF investigates the Commission on which OLAF’s staff depends for its funding, the continuation of the short and medium term employment contracts as well as their appraisal and rise in the hierarchy. OLAF is the product of a line of thought which argues that it is wrong to rely solely on the Member States for the investigation of fraud committed against the economic interests of the Union since the perpetrators are likely to be citizens of those states. It follows that it must be equally wrong to rely on employees of the Commission for

21 It is worth noting here that the oft-repeated section that the Director ‘shall neither seek nor take instructions’ is quite similar to Article 11(6) of the EU’s Staff Regulations: ‘Title II: Rights and obligations of officials Article 11 (96) 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.’ See: Staff Regulations of Officials of the European Communities, 1.5.2004. 22 Commission Decision 99/352/EEC, OJ L 136/20 (1999). 23 Even the insinuation levelled against OLAF by i.-law.com seems rather weak. ‘If OLAF has based its case on statements made by officials working under the authority of Mr Faull (a senior member of the European Commission) there arises a serious question that might concern the independence of OLAF.’ See ‘OLAF: just another plate of Offal?’, i-law.com, 14.

151

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 7 /

Date: 1/6

JOBNAME: Stefanou PAGE: 8 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships internal investigations, since the perpetrators are likely to be employees of the Commission. In other words, despite efforts to make OLAF autonomous, its organic link with the Commission damages its credibility in internal investigations. Essentially it relies on the integrity of its staff and Director—and to a lesser extent on the integrity of the Supervisory Committee. Not that there is reason to suspect that OLAF’s staff and Director do not have the integrity— except perhaps for the alleged member of staff that according to OLAF received money to hand over important documents to Mr Tillack—but this is not the point of this criticism. The legal framework should be there not only for trustworthy staff and Directors with integrity. It should be there to cater for the worst-case scenario too. For investigative units such as OLAF, administrative independence is a fundamental condition of their trustworthiness. It is in respect of this condition that units such as Europol, Eurojust or the Ombudsman are fully independent and why the Court of Auditors is a separate institution rather than attached to the Commission. And, of course, we also need to look at the individuals that come under OLAF’s scrutiny when it comes to internal investigations. Are they hardened criminals, the so-called usual suspects, with long criminal records? No, they are international civil servants enjoying privileges and immunities. According to the Protocol on the Privileges and Immunities of the European Union (Article 11(a)): subject to the provisions of the Constitution relating, on the one hand, to the rules on the liability of officials and other servants towards the Union and, on the other hand, to the jurisdiction of the Court of Justice of the European Union in disputes between the Union and its officials and other servants, be immune from legal proceedings in respect of acts performed by them in their 16.12.2004 EN Official Journal of the European Union C 310/263 official capacity, including their words spoken or written. They shall continue to enjoy this immunity after they have ceased to hold office;24

While Articles 17 and 18 specify: Article 17 Privileges, immunities and facilities shall be accorded to officials and other servants of the Union solely in the interests of the Union. Each institution of the Union shall be required to waive the immunity accorded to an official or other servant wherever that institution considers that the waiver of such immunity is not contrary to the interests of the Union. Article 18 The institutions of the Union shall, for the purpose of applying this Protocol, cooperate with the responsible authorities of the Member States concerned.25

24 25

OJ C 310, 16.12.2004, 263–64. Ibid 265.

152

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 8 /

Date: 1/6

JOBNAME: Stefanou PAGE: 9 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Commission It is worth noting here that such is the importance of these privileges that OLAF’s website mentions that: These investigations are carried out in compliance with the rules of the treaties (in particular the protocol on privileges and immunities) and with the staff regulations of officials of the European Communities. Additionally, they are carried out in full compliance with human rights, fundamental freedoms and the rules of confidentiality and data protection.26

Finally, Article 22 (Staff Regulations on monetary compensation as a result of serious misconduct) of Staff Regulations of Officials of the European Communities: Article 22 An official may be required to make good, in whole or in part, any damage suffered by the Communities as a result of serious misconduct on his part in the course of or in connection with the performance of his duties. A reasoned decision shall be given by the appointing authority in accordance with the procedure laid down in regard to disciplinary matters. The Court of Justice of the European Communities shall have unlimited jurisdiction in disputes arising under this provision.27

While it is clear that the intention is not to allow functionaries to get away with serious offences,28 nevertheless it is obviously difficult for officials involved in transnational crime to be prosecuted. After all, the whole idea behind privileges and immunities for functionaries (something that probably needs to be re-examined in the 21st century29) is to make their prosecution more difficult. Having said that, Commissioner Edith Cresson’s immunity was lifted so that she could face charges in a Belgian Court30 and as Commissioner Kallas noted,

26

http://ec.europa.eu/dgs/olaf/mission/mission/index_en.html#3. Staff Regulations of Officials of the European Communities, 1.5.2004. 28 The ECJ has made a distinction between ‘official’ and ‘private’ business; see Cases 5/68 Sayag v Leduc [1968] ECR 395 and 9/69 Sayag v Leduc [1969] ECR 329. 29 Experts have raised concerns about the scope and breadth of immunities in the context of the EU; see PHF Bekker, The Legal Position of Intergovernmental Organisations—A Functional Necessity Analysis of Their Legal Status and Immunities (Dordrecht, Martinus Nijhoff, 1994); S Grey, ‘Tackling fraud and mismanagement in the EU’, Centre for European Reform Working Paper, 2000; S White, ‘Proposed measures against corruption of officials in the European Union’ (1996) European Law Review 465–78. 30 The Chambre du conseil of the Tribunal de première instance de Bruxelles decided that there was no evidence of criminal conduct against Edith Cresson. In contrast the ECJ decided that she was in breach of her obligations as a Commissioner. See Case C–432/04 Commission of the European Communities v Edith Cresson. However, in an interesting twist the ECJ did not impose a penalty such as deprivation of benefits or pension, essentially arguing that given Edith Cresson’s political standing the finding of breach in itself was punishment enough! 27

153

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 9 /

Date: 1/6

JOBNAME: Stefanou PAGE: 10 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships between 2002 and 2005 as a result of OLAF investigations the Commission lifted the immunity of jurisdiction on 16 occasions.31 What, we hope, has become clear is that OLAF’s formal relationship with the Commission is a burden on OLAF. It is not a case of apportioning blame since the current relationship between OLAF and the Commission is part of the legal framework that the Member States agreed on and conspiracy theorists will no doubt see this as possible evidence that each element of judicial integration is being sabotaged by the Member States. It is obvious that full independence will remove, from both OLAF and the Commission, at least in internal investigations, any suspicions of collusion—however unreasonable it might be.

RELATIONSHIP WITH THE EUROPEAN PARLIAMENT

The formal relationship between OLAF and the EP is best described as follows: The administrative and operational activities of OLAF are monitored by the Budgetary Control Committee of the European Parliament. In accordance with Article 276(2) of the EC Treaty the Parliament may request the Commission to give evidence with regard to the execution of expenditure or the operation of financial control systems. The Commission is obliged to comply. In addition, the Parliament is entitled to scrutinise the organisation of checks, the prevention, prosecution and punishment of fraud and irregularities affecting the budget of the European Union, and concerning the protection of the Community’s financial interests in general. These provisions apply equally to OLAF, but in performing these functions, the Parliament must observe the independence of the Office in exercising its powers of investigation. To this end, COCOBU is responsible for matters relating to the protection of the Community’s financial interests in general. COCOBU produces draft reports and opinions on matters related to the protection of the Communities’ financial interests including, specifically, OLAF’s annual activity report. At the request of COCOBU, OLAF’s Director General attends meetings of the Committee to give oral progress reports on specific cases. These reports are given in closed sessions. The European Parliament can also submit written questions to the Commission. OLAF must prepare the replies to those questions that touch upon its areas of responsibility.32

31 Comments by Mr Kallas in his response to EP written question E-0066/06 by Herbert Bösch (PSE) to the Commission on ‘Officials’ immunity from legal proceedings’ of 18 January 2006. 32 C Stefanou and H Xanthaki, ‘“Strengthening OLAF” towards greater effectiveness in the protection of the Communities’ financial interests: the revision of the OLAF regulation 1073/99’, Hearing on The Revision of the Regulation on the European Anti-Fraud Office, European Parliament’s Committee on Budgetary Control (COCOBU), European Parliament Study IP/D/CONT/ST/ 2005–1, Brussels, 12–13 July 2005, 13.

154

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 10 /

Date: 1/6

JOBNAME: Stefanou PAGE: 11 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the European Parliament The EP was, of course, one of the institutions that pushed for the reform of UCLAF. The Bosch Report,33 which was scathing about the shortcomings of UCLAF and led to the resignation of the Santer Commission, became an important document in the proposals for reform. It should be pointed out here that the Bosch Report itself suggested that: OLAF might be given the same status as the Office for Official Publications, i.e. not entirely independent of the Commission but equipped with specific decision-making procedures and control mechanisms commensurate with its interinstitutional role.

Despite the EP’s support for the creation of OLAF their relationship has not been an easy one. If one sees the EP’s 2002 ‘Resolution on the protection of the financial interests of the Communities and the fight against fraud’ it is a litany of complaints against OLAF.34 The main source of friction between the EP’s COCOBU and OLAF has been OLAF’s reporting to the EP. OLAF’s reports to the EP (COCOBU) concerning its investigations under Article 11 of Regulation (EC) No 1073/1999 are considered confidential documents.35 COCOBU’s Handbook provides two different procedures for the examination of confidential documents by the committee.36 The first procedure is provided for in Annex 3 to the Framework Agreement between the Commission and the EP.37 According to the Framework Agreement the EP must put in place: (i) a secure archive system for documents classified as confidential; and (ii) a secure reading room in which they can be consulted in accordance with the rules governing their transmission. The second procedure is provided for in Annex VII to the European Parliament’s Rules of Procedure (Section A).38 Article 1 of Annex VII specifies that the term ‘confidential documents’ applies to documents within the meaning of Article 4 of Regulation 1049/2001.39 Any 33 ‘Report on the independence, role and status of the Unit for the Coordination of Fraud Prevention (UCLAF) (Special Report No 8/98 of the Court of Auditors concerning the Commission departments responsible for fighting fraud) (C4–0483/98)’, A4–0297/98, 22 September 1998. 34 European Parliament Resolution the protection of the financial interests of the Communities and the fight against fraud—Annual Report 2002 (COM (2003) 445—C5–0593/2003—2003/ 2248(INI)). 35 This section is based on C Stefanou and H Xanthaki, ‘“Strengthening OLAF” towards greater effectiveness in the protection of the Communities’ financial interests: the revision of the OLAF regulation 1073/99’, Hearing on The Revision of the Regulation on the European Anti-Fraud Office, European Parliament’s Committee on Budgetary Control (COCOBU), European Parliament Study IP/D/CONT/ST/2005–1, Brussels, 12–13 July 2005. 36 COCOBU (European Parliament), Handbook 2004 for New Members of the Committee on Budgetary Control 11–12. The handbook is now on the EP’s site and the relevant section on OLAF’s Reports can be found at: http://www.europarl.europa.eu/comparl/cont/guide/confidential_en. htm#olaf. 37 See Minutes of the EP Plenary Session sitting of 5 July 2000. 38 http://www2.europarl.eu.int/omk/sipade2?PUBREF=-//EP//TEXT+RULESEP+20040720+ANN-07+DOC+XML+V0//EN&HNAV=Y 39 The Article provides: 1. The institutions shall refuse access to a document where disclosure would undermine the protection of: (a) the public interest as regards:

155

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 11 /

Date: 1/6

JOBNAME: Stefanou PAGE: 12 SESS: 18 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships discussion involving documents within the meaning of Article 4 must take place in camera and may be attended exclusively by members of COCOBU and by officials and experts whose presence is strictly necessary. COCOBU’s 2004 Handbook also states that when forwarding confidential documents OLAF insists on the application of the second procedure (the one based on Annex VII),40 consequently ‘COCOBU may not in its working documents or draft reports indicate the names of the natural or legal persons identified by OLAF as suspects of possible financial malpractice or irregularities’.41 Readers might find this whole argument pedantic but it is actually the source of friction and it concerns how OLAF’s Reports will be viewed by COCOBU members. Anecdotal stories of information from these Reports having been leaked to the press by MEPs are rife but never officially put forward. However, OLAF does insist that COCOBU members who are going to look at these confidential Reports must not have with them writing materials—so that they — public security, — defence and military matters, — international relations, — the financial, monetary or economic policy of the Community or a Member State; (b) privacy and the integrity of the individual, in particular in accordance with Community legislation regarding the protection of personal data. 2. The institutions shall refuse access to a document where disclosure would undermine the protection of: — commercial interests of a natural or legal person, including intellectual property, — court proceedings and legal advice, — the purpose of inspections, investigations and audits, unless there is an overriding public interest in disclosure. 3. Access to a document, drawn up by an institution for internal use or received by an institution, which relates to a matter where the decision has not been taken by the institution, shall be refused if disclosure of the document would seriously undermine the institution’s decision-making process, unless there is an overriding public interest in disclosure. Access to a document containing opinions for internal use as part of deliberations and preliminary consultations within the institution concerned shall be refused even after the decision has been taken if disclosure of the document would seriously undermine the institution’s decision-making process, unless there is an overriding public interest in disclosure. 4. As regards third-party documents, the institution shall consult the third party with a view to assessing whether an exception in paragraph 1 or 2 is applicable, unless it is clear that the document shall or shall not be disclosed. 5. A Member State may request the institution not to disclose a document originating from that Member State without its prior agreement. 6. If only parts of the requested document are covered by any of the exceptions, the remaining parts of the document shall be released. 7. The exceptions as laid down in paragraphs 1 to 3 shall only apply for the period during which protection is justified on the basis of the content of the document. The exceptions may apply for a maximum period of 30 years. In the case of documents covered by the exceptions relating to privacy or commercial interests and in the case of sensitive documents, the exceptions may, if necessary, continue to apply after this period. 40 COCOBU (European Parliament), Handbook 2004 for New Members of the Committee on Budgetary Control, 11. 41 Committee on Budgetary Control (COCOBU), Guidelines for dealing with sensitive or confidential matters in COCOBU’s work, http://www.europarl.europa.eu/comparl/cont/guide/ confidential_en.htm#olaf.

156

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 12 /

Date: 8/8

JOBNAME: Stefanou PAGE: 13 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the European Parliament cannot make notes—or even mobile phones with a camera. Obviously confidential information communicated by OLAF to COCOBU falls under the meaning of Article 8 of Regulation (EC) 1073/1999 and must be protected. However, as there are no specific provisions governing the choice of procedure to be followed by COCOBU when classifying confidential information received from OLAF, there seems to be no legal support for OLAF’s persistence that COCOBU classifies the Reports under Annex VII. Article 3 of the Framework Agreement provides stronger and secure protection of OLAF’s data. In fact one might have expected OLAF to insist that COCOBU complies with Article 3 of the Framework Agreement rather than Annex VII of COCOBU’s 2004 Handbook. OLAF’s position would probably be justifiable had the EP not put into place the current secure archive system and secure reading room (as required by the Framework Agreement). Despite protestations by some MEPs this measure is favoured by OLAF since it is possible for MEPs to identify what or who the case is about by reference to locations or transactions (especially if it concerns an investigation in their own Member State) even if crucial names are blacked out. Is this a victory of security arrangements over the duty of directly elected Parliamentarians to report accurately to their constituents or is it a reasonable precaution given the time and effort spent by OLAF on ‘sensitive’ cases? In Case C–315/99 Ismeri Europa srl v Court of Auditors the ECJ ruled that in any procedure which might result in a decision by an EU institution which is likely to affect substantially the interests of a natural or legal person that person should be informed before the measure or report is adopted. From a practical point of view this means that save for ongoing investigations—where secrecy is assured anyway—there is no reason for COCOBU members not to be ‘trusted’ since the individual named by OLAF should by that time have been directly informed. It is, nevertheless, a measure of OLAF’s successful attempts to safeguard its ongoing cases that following an OLAF investigation a former UK MEP was sentenced by a British court to two years in prison for fiddling his expenses.42 That is not to say that the EP does not see a different future for OLAF as evident in the EP’s Resolution of 20 November 2008.43 The original Gräßle Report suggested various possible roles for OLAF as a specialist unit in the coordination of judicial cooperation and criminal matters that could support the penal action before national courts and could become a future European Prosecutor with specific competence in the protection of the financial interests of the Union or an office specialising in the collection, analysis and exchange of information in cases of transnational criminality or a type of European intelligence unit supporting national authorities. This scenario can include a type of

42

See ‘Tom Wise, former MEP, jailed for £39,000 expenses fraud’, The Times, 11 November 2009. ‘European Parliament legislative resolution of 20 November 2008 on the proposal for a regulation of the European Parliament and of the Council amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF) (COM(2006)0244—C6–0228/2006—2006/0084(COD))’, P6_TA-PROV(2008)0553. 43

157

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 13 /

Date: 1/6

JOBNAME: Stefanou PAGE: 14 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships EU administrative police responsible for research of evidence in the European territory and third countries every time that the financial interests of the EU are in danger. Or even a European Prosecutor in charge of sending criminal actions before national courts inclusive of fraud against the EU budget and finally a specialised unit in information analysis of operational and strategic nature.44 On the whole, though, the relationship between OLAF and the EP seems to have normalised. The EP obviously wants more democratic transparency and accountability from OLAF seeing itself, through COCOBU, as the body that will exercise it. As the 2005 EP study on the future of OLAF put it: There is little doubt, therefore, that the nature of the relationship between COCOBU and OLAF is that of political oversight as a means of ensuring efficiency and legitimacy in the achievement of their common goal which is the protection of the financial interests of the EU.45

MEPs are understandably worried about units that have powers to investigate and ‘accuse’ while not transparent and democratically accountable themselves. It is, though, a measure of the good relationship between OLAF and the EP that when a Dutch MEP Paul Van Buitenen (a former Commission whistleblower) sent a dossier of allegations against OLAF to all 400 of OLAF’s staff, naming individual staff, which allegedly deliberately did not pursue investigations, he received a rebuff from COCOBU.46 Despite occasional tensions COCOBU and OLAF have learned to live with each other reasonably well.

RELATIONSHIP WITH THE EUROPEAN COURT OF AUDITORS

According to Article 248(2) EC Treaty the tasks of the Court of Auditors are examining whether Community revenues and expenditures have been incurred in a lawful and regular manner, and whether the financial management has been sound. Article 248 establishes the Court’s power as follows: 2. The Court of Auditors shall examine whether all revenue has been received and all expenditure incurred in a lawful and regular manner and whether the financial management has been sound. In doing so, it shall report in particular on any cases of irregularity. 44 Parlement Européen, Document de Travail No 6, sur la proposition de règlement du Parlement européen et du Conseil modificant le règlement (CE) No 1073/1999 relatif aux enquêtes effectuées par l’Office européen de lutte antifraude (OLAF), Rapporteur: Ingeborg Gräßle, PE409.433v01–00, 26.6.2008. 45 C Stefanou and H Xanthaki, ‘“Strengthening OLAF” towards greater effectiveness in the protection of the Communities’ financial interests’, 51. 46 See: T King, ‘Van Buitenen seeks to “name and shame” Olaf ’, EuropeanVoice, 4.12.2008, http://www.europeanvoice.com/article/imported/van-buitenen-seeks-to-‘name-and-shame’-olaf/ 63280.aspx.

158

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 14 /

Date: 1/6

JOBNAME: Stefanou PAGE: 15 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Court of Auditors 3. The other institutions of the Community … shall forward to the Court of Auditors, at its request, any document or information necessary to carry out its task.

It follows that OLAF is required to report to the Court of Auditors. However, these Reports do not concern the investigations carried out by OLAF but resent accountability with regard to budget and expenditure matters. Cooperation with OLAF is formally based on three decisions: — Decision No 99–2004 concerning the rules concerning arrangements for cooperation by the Members of the Court in internal investigations in relation to the prevention of fraud, corruption and any other illegal activity detrimental to the Communities’ financial interests;47 — decision No 98–2004 of the Court of Auditors concerning the terms and conditions for internal investigations in relation to the prevention of fraud, corruption and any other illegal activity detrimental to the Communities’ financial interests;48 — decision No 97–2004 of the Court of Auditors laying down arrangements for cooperation with the European Anti-Fraud Office in respect of access by the latter to audit information.49 The Court of Auditors has produced two Special Reports on UCLAF/OLAF. The first, back in 1998,50 concerned UCLAF and was quite critical of most aspects of its management and administration of operations. It was also critical of its internal structure and its position as an integral part of the Commission. It more or less painted a picture of a disorganised Commission unit in which internal administration was either non-existent or not functioning. This Special Report was instrumental in the development of the new legislative framework which created OLAF. The second Special Report51 on OLAF was produced in 2005 and is much less critical of the Office and its internal management. The 2005 Report is still critical about some aspects: record keeping for operations and clarified responsibilities, managerial supervision has remained inadequate and results in serious delays in the processing of files, the lodging of inconclusive reports and results that are difficult to identify . . . All too frequently, the preparation and follow-up of investigations is rudimentary . . .

47

http://eca.europa.eu/portal/pls/portal/docs/1/191266.PDF. http://eca.europa.eu/portal/pls/portal/docs/1/191246.PDF. 49 http://eca.europa.eu/portal/pls/portal/docs/1/191226.PDF. 50 European Court of Auditors, Special Report No 8/98 concerning the Commission departments specifically involved in the fight against fraud, notably the Unit for the Coordination of Fraud Prevention (UCLAF), OJ C 230, 22.7.1998. 51 European Court of Auditors, Special Report No 1/2005 concerning the management of the European Anti-Fraud Office (OLAF), together with the Commission’s replies, OJ C 202, 18.8.2005. 48

159

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 15 /

Date: 1/6

JOBNAME: Stefanou PAGE: 16 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships There is no independent guarantee of the legality of investigative procedures in progress or that the fundamental rights of persons under investigation are safeguarded.52

However, it is actually positive about the hybrid nature of OLAF and even notes that OLAF has benefited from being part of the Commission because it enjoys substantial administrative and logistical support. The Special Report also noted some internal, governance difficulties with regards to the Office and the Supervisory Committee. It also recommended that OLAF concentrates on investigations, excluding work on the development of the Commission’s anti-fraud strategy. The Court of Auditors issued an Opinion53 on the Commission’s proposed new legal framework for OLAF in which it largely agreed with the proposals save for a few points concerning notification of the relevant body in internal investigations, the responsibilities of the proposed Review Adviser and the discretionary powers of the Director General. The Court of Auditors is, of course, the original institution whose task is to examine the sound financial management of the EU. In this sense it can be seen as OLAF’s big brother—even though their tasks differ. It is surprising, though, that these two institutions do not have closer links as it is clear that the case management experience of the Court of Auditors would have been invaluable to OLAF. In fact, it is also surprising that fraud against the financial interests of the Union was not seen right from the start as a task closer linked to the duties of the Court of Auditors. Clearly, once UCLAF was created inside the Commission the ‘path dependency’ was set and it would have been difficult for the Member States to link the newly created OLAF to the Court of Auditors. As things stand the Court of Auditors has no legal powers; if it discovers misuse of EU funds, it passes the case to OLAF. From a political point of view any formal link between the two would have given the Court of Auditors additional powers making it the EU’s ‘all-seeing eye’, something that could have spoiled the Union’s overall institutional balance by giving the Court of Auditors powers it was never intended to have.

RELATIONSHIP WITH THE EUROPEAN DATA PROTECTION SUPERVISOR

The relationship between OLAF and the European Data Protection Supervisor hinges on OLAF’s information gathering and management of cases because they require extensive data collection. Especially when it comes to storing and accessing and using personal information concerning ‘suspects’ and ‘modus 52

Ibid 2. European Court of Auditors, Opinion No 7/2006 on a proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF), OJ C 8, 12.1.2007. 53

160

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 16 /

Date: 2/6

JOBNAME: Stefanou PAGE: 17 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Data Protection Supervisor operandi’ linked to specific natural persons OLAF’s position is quite vulnerable because it has to operate on standards set by others. As the European Data Protection Supervisor noted in 2007: However, despite the overall positive impression, the EDPS considers that from the point of view of the protection of personal data, the Proposal could be further improved, without jeopardising the objectives that it pursues. In particular, the EDPS is concerned that the Proposal may be deemed as a lex specialis regulating the processing of personal data collected in the scope of OLAF investigations, which would take precedence over the application of the general data protection framework contained in Regulation (EC) No 45/2001. This is particularly worrisome considering that the data protection standards contained in the Proposal are lower than those contained in Regulation (EC) No 45/2001, and this without any apparent justification.54

With the amount and sensitive nature of data that OLAF handles it was inevitable that there would be disputes that the European Courts would be called to adjudicate. In 2007 OLAF was, for the first time, found to have breached Regulation 45/2001 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data.55 In a Case reported only in French and Greek, T–259/03 Kalliopi Nikoloaou v Commission,56 the Court of First Instance ordered the Commission to pay a €3,000 fine in compensation because OLAF leaked information about its investigation of Ms Nikolaou and made some derogatory statements (which, though, did not name Ms Nikolaou).57 Following the Nikolaou case OLAF has been very diligent in asking for the opinion of the European Data Protection Supervisor on practically all aspects of its operations. Indeed OLAF’s website has a specific page58 with opinions of the European Data protection Supervisor on prior checks of OLAF notifications which cover intelligence, internal investigations, monitoring and coordination of cases, non-cases and prima facie non-cases, Disciplinary, judicial, administrative and financial follow-up, the Fraud Notification System, Custom information system, mutual assistance exchange at the OLAF, Regular monitoring of the implementation of the investigative function, Selection + recruitment of its

54 Opinion of the European Data Protection Supervisor on the Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF), OJ C 91, 26.4.2007, 2. 55 Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community, OJ L 8/1 12.1.2001. 56 OJ C 247 of 20.10.2007, 23. 57 The Press Release by the Court was more informative than the actual decision. See Tribunal de Première Instance des Communautés Européennes, Communiqué de Presse No 59/07, ‘Le Préjudice Subi par Mme Nikolaou, en Raison de Certaines Illégalités Spécifiques Commises par l’Olaf au Cours d’une Enquête la Concernant, Doit Être Indemnisé’, 12 Septembre 2007. It is interesting to note that Ms Nikolaou had initially claimed €900,000 in compensation but the CFI only awarded €3,000 because it found that the damage caused did not justify the amount claimed. 58 http://ec.europa.eu/dgs/olaf/data/index_en.html.

161

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 17 /

Date: 1/6

JOBNAME: Stefanou PAGE: 18 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships temporary agents, OLAF identity and access control system and the OLAF CCTV security system. The European Data Protection Supervisor’s opinions on OLAF’s proposals are not always complementary but OLAF complies with the suggestions/objections.

RELATIONSHIP WITH EUROJUST Eurojust and Olaf are required to pursue and maintain the closest co-operation in operational terms, which is translated—either at the initiative of Eurojust or upon the request of Olaf—into supporting the co-ordination of investigations and prosecutions concerning the protection of the European Community’s financial interests.59

It is a measure of the state of affairs in the area of EU judicial cooperation that the plethora of bodies entrusted with often similar tasks60 has generated competition rather than cooperation. One good example of this competition is the relationship between OLAF and Eurojust. Set up by Council Decision (2002/187/ JHA) of 28 February 200261 Eurojust is an EU body with competence to cover the types of crimes in Europol’s mandate plus fraud and corruption, computer crime, environmental crime, organised crime and money laundering. So why is there tension between OLAF and Eurojust? The source of the tension—termed ‘regrettable’ by the House of Lords’ European Union Committee62—centres on OLAF’s and Eurojust’s overlapping task to cooperate with the Member States.63 Eurojust comprises national prosecutors and magistrates or police officers from each Member State who have the task of facilitating cooperation between the various national prosecuting authorities and assisting coordination of criminal investigations and information exchange. Some experts believe that ‘territoriality’ is a source of tension between OLAF and Eurojust.64 59 G Caselli, ‘Co-operation between OLAF and National Judicial Authorities, Usability of Findings from Investigations and Protection of Procedural Safeguards’, the High Council for the Judiciary, Ninth Commission, Training and Professional Development, Rome, 13–15 November 2006, 7. 60 HG Nillson, ‘Proliferation or concentration of the actors in the JHA area?’ in G de Kerchove and A Weyembergh (eds), L’espace pénal européen: enjeux et perspectives (Brussels, University of Brussels, 2002) 63–79. 61 Council Decision (2002/187/JHA) of 28 February 2002 setting up Eurojust with a view to reinforcing the fight against serious crime, OJ L 63/Vol54/March2002. 62 House of Lords European Union Committee, Judicial Cooperation in the EU: the Role of Eurojust, 23rd Report, 2003–04, HL Paper 138, para 63. 63 See the section on Relations with Eurojust in B Quirke, ‘OLAF: the fight against EU fraud’ (2007) 14(2) Journal of Financial Crime 178–89. 64 ‘Eurojust took the view that OLAF believed it had no role to play in fraud investigation unless other serious crimes were linked to EU fraud, such as using money fraudulently obtained from the European Budget to help fund drug trafficking or arms dealing for example. This view of Eurojust cannot readily be dismissed as paranoia. OLAF officials believe that its own Magistrates Unit is more than capable of liaising with national judicial authorities without the assistance of Eurojust. Such ‘territoriality’ is not conducive to fighting fraud effectively and could inevitably lead to duplication

162

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 18 /

Date: 2/6

JOBNAME: Stefanou PAGE: 19 SESS: 17 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with Eurojust Yet, the problem in the relationship might be somewhat more complicated as Eurojust is perceived as the intergovernmental response to the prosecution aspect of judicial cooperation whilst OLAF represents the Communitarian solution. As Mitsilegas notes: Eurojust—already perceived by some as a threat to centralised or unified models of prosecution in the EU, introduced to stave off calls for a European Public Prosecutor— may be seen to represent also a threat to existing EU anti-fraud structures such as OLAF.65

Despite their imperfect coexistence (or even maybe because of it) OLAF and Eurojust signed, in 2003, a Memorandum of Understanding in which they agree to immediately inform each other in cases within their respective competence.66 However, the relationship was still problematic to the point that Eurojust itself, in a communication to the Institutions, noted: although progress is being made in the Eurojust-OLAF cooperation, the experience of National Members with OLAF has been mixed and, overall, the cooperation cannot yet been considered as sufficient and satisfactory.67

Yet, the very same Communication seems to show a willingness for reconciliation.68 Indeed, about one year later Eurojust and OLAF decided to upgrade their relationship with a ‘Practical Agreement of Cooperation between Eurojust and OLAF’69 which replaces the Memorandum of Understanding. The

and waste of resources.’ B Quirke, ‘The role of OLAF in the fight against EU fraud: Do too many cooks spoil the broth?’, Empowering Anti-Corruption Agencies: Defying Institutional Failure And Strengthening Preventive And Repressive Capacities, ISCTE, Lisbon, 14–16 May 2008, 19. 65

V Mitsilegas, EU Criminal Law (Hart, Oxford, 2009) 199. ‘The Parties should immediately and spontaneously inform one another, in writing or orally, which should be confirmed subsequently in writing, of the existence of any case on which they are working where: — in respect of Eurojust, it appears that the case is related to fraud, corruption or any criminal offence affecting the European Community’s financial interests; — in respect of OLAF, it appears that the case directly involves judicial co-operation between the competent national authorities of two or more Member States, or, where the assistance of Eurojust is requested, the case concerns only one Member State and the Community.’ See: Memorandum of Understanding between the European Judicial Co-operation Unit (Eurojust) and the European Anti-Fraud office (OLAF), Brussels, 14 April 2003, 2. 67 Council of the European Union, ‘Eurojust’s initial contribution for the European Commission Communication concerning the future of Eurojust and the European Judicial Network’, 13079/07, EUROJUST 48, EJN 26, COPEN 133, 20.9.2007, 17. 68 Ibid. In a section titled Relations with OLAF Eurojust notes: ‘Eurojust considers that a formal and clear mutual obligation for OLAF and Eurojust to inform one another, at an early stage, of all cases falling within their respective competence would be desirable as it could circumvent this problem and facilitate better co-operation which has, so far, often been disappointing in both legal and practical terms. Such an obligation which is not contained in the Memorandum of Understanding concluded between Eurojust and OLAF in 2003 would contribute to avoiding occasional competition between the two structures and to enhance the “synergy” between them.’ 69 Practical Agreement of Cooperation between Eurojust and OLAF, Brussels 24.9.2008, http:// www.eurojust.europa.eu/official_documents/Agreements/OLAF-EJ_Agreement_24sept08.pdf. 66

163

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 19 /

Date: 30/6

JOBNAME: Stefanou PAGE: 20 SESS: 17 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships Practical Agreement is a detailed 18-page document where cooperation arrangements are spelled out in very specific terms so that cooperation does not become subject to the ‘interpretation’ each body will give. Consultation with Eurojust at an early stage of investigations is invaluable to OLAF for the collection of information as well as its presentation to the national enforcement/prosecution authorities. So a good relationship between the two is essential for OLAF to become effective. It is very early to say whether this Practical Agreement has changed the relationship between OLAF and Eurojust for the better. Eurojust and OLAF carried out a joint conference in 2008 (on the international dimension of fraud and corruption) while OLAF is a permanent observer in meetings of the European Judicial Network. The detailed provisions of the 2008 Practical Agreement on specific aspects of cooperation indicate that the two units might finally have found a way forward. The adoption of the Lisbon Treaty which specifies in Article 69E that the future European Public Prosecutor’s Office will come from Eurojust70 and the widely held belief that OLAF will become one of the European Public Prosecutor’s chambers will probably contribute to a more cooperative relationship.

RELATIONSHIP WITH EUROPOL

One of the most common criticisms of the state of affairs in EU judicial cooperation is that of duplication of effort.71 To many observers there are too many bodies/agencies at the national and EU levels doing similar work. To those unfamiliar with the work of the various bodies in the field, OLAF’s and Europol’s mandates would appear to be similar. According to the 1995 Europol Convention:72 The objective of Europol is to improve police cooperation between Member States in order to combat terrorism, unlawful drug trafficking and other serious forms of

70 Article 69 E: 1. In order to combat crimes affecting the financial interests of the Union, the Council, by means of regulations adopted in accordance with a special legislative procedure, may establish a European Public Prosecutor’s Office from Eurojust. The Council shall act unanimously after obtaining the consent of the European Parliament. See ‘Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon, 13 December 2007’, OJ C 306 Vol 50, 17 December 2007. 71 L Salazar, ‘Le rôle des nouveaux acteurs dans la définition d’une politique criminelle européenne’ in G de Kerchove and A Weyembergh (eds), L’espace pénal européen: enjeux et perspectives (Brussels, University of Brussels, 2002) 55–62. 72 Council Act of 26 July 1995 drawing up the Convention on the establishment of a European Police Office (Europol Convention), OJ C 316 of 27.11.1995.

164

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 20 /

Date: 30/6

JOBNAME: Stefanou PAGE: 21 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with Europol international organised crime. Member States are setting up national units to liaise between Europol and the national authorities responsible for fighting crime.73

The new 2009 Council Decision, which replaces the 1995 Europol Convention, is a little more laconic: The objective of Europol shall be to support and strengthen action by the competent authorities of the Member States and their mutual cooperation in preventing and combating organised crime, terrorism and other forms of serious crime affecting two or more Member States.74

Formally, Europol and OLAF signed an Administrative Cooperation Agreement75 in 2004 where they agree to cooperate in the fight against: ‘fraud, corruption, money laundering and any other illegal activity in the framework of international organised crime affecting the financial interests of the European Community’.76 The agreement includes cooperation in the following areas: — — — — —

strategic and technical information; intelligence and technical support; common reports and mutual consultation for risk analysis; participation in joint investigation teams; professional training and working groups.

73 http://europa.eu/legislation_summaries/justice_freedom_security/fight_against_terrorism/l14005b_en.htm As part of police cooperation between Member States, Europol: — facilitates the exchange of information between Member States; — collates and analyses information and intelligence; — notifies the competent authorities of Member States without delay via the national units of information concerning them and of any connections identified between criminal offences; — aids investigations in Member States; — maintains a computerised system of collected information; — helps Member States train their competent authorities; — facilitates technical assistance between Member States; — serves as the contact point for combating euro counterfeiting. Europol takes action when one or two Member States are affected by serious international organised crime. This covers an increasing number of areas, namely: — preventing and combating terrorism; — drug trafficking; — trafficking in human beings; — illegal immigrant smuggling; — trafficking in nuclear and radioactive substances; — motor vehicle crime; — counterfeiting and forgery of means of payment; — money laundering (except for predicate offences). Europol’s sphere of competence includes offences involving the types of crime indicated above. 74 Council Decision of 6 April 2009 establishing the European Police Office (Europol), OJ L 121/37, 15.5.2009. 75 See: ‘Administrative Arrangement Between the European Police Office (Europol) and the European Anti-Fraud Office (OLAF)’, Brussels, 8.4.2004, http://www.europol.europa.eu/legal/ agreements/Agreements/52153.pdf. 76 Ibid 1.

165

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 21 /

Date: 2/6

JOBNAME: Stefanou PAGE: 22 SESS: 17 OUTPUT: Tue Aug 9 13:14:31 2011

OLAF’s Interinstitutional Relationships Although Europol and OLAF have different tasks, given Europol’s skills in information gathering (intelligence) one would have thought these skills to be invaluable to OLAF’s investigation tasks. Yet, surprisingly, there is little contact between the two. The usual explanation for the lack of cooperation between OLAF and Europol is that the two bodies are interested in different issues. OLAF focuses on fraud against the financial interests of the Union while Europol appears to be interested in customs issues, drugs and terrorism.77 However, given that often the suspects OLAF investigates are involved in organised transnational crime and that the criminal groups that the suspects belong to are involved in different types of criminal activities which often include drugs and inevitably customs issues, Europol and OLAF are certainly not miles apart in their respective issue spheres. In fact Article 22 of the 2009 Council Decision Establishing Europol specifically requires Europol to establish and maintain cooperative relations—through specific agreements—with, amongst others, OLAF.78 So, it is clear that the Member States do see the need for collaboration between Europol and OLAF and that the two are ‘ordered’ to have a closer relationship. It remains to be seen whether this cooperation will materialise and be effective or yet another fruitless ‘paper’ agreement.79 Cooperation with the body representing national enforcement authorities should by default be an important element in OLAF’s work, indeed one that should give OLAF a comparative advantage in its attempts to combat fraud, which often involves transnational criminal activities.

77

B Quirke, ‘OLAF: the fight against EU fraud’, 184–85. ‘Article 22 Relations with Union or Community institutions, bodies, offices and agencies 1. In so far as it is relevant to the performance of its tasks, Europol may establish and maintain cooperative relations with the institutions, bodies, offices and agencies set up by, or on the basis of, the Treaty on European Union and the Treaties establishing the European Communities, in particular: (a) Eurojust; (b) the European Anti-Fraud Office (OLAF); (c) the European Agency for the Management of Operational Cooperation at the External Borders of the Member States of the European Union (Frontex); (d) the European Police College (CEPOL); (e) the European Central Bank; (f) the European Monitoring Centre for Drugs and Drug Addiction (EMCDDA). 2. Europol shall conclude agreements or working arrangements with the entities referred to in paragraph 1. Such agreements or working arrangements may concern the exchange of operational, strategic or technical information, including personal data and classified information. Any such agreement or working arrangement may be concluded only after approval by the Management Board which shall previously have obtained, as far as it concerns the exchange of personal data, the opinion of the Joint Supervisory Body.’ See: OJ L 121/48, 15.5.2009. 79 In January 2010 OLAF and Europol cooperated in a successful operation against counterfeiting. The operation was coordinated by OLAF and had—amongst others—one Europol liaison officer. See the Europol website: ‘Europol part of a successful operation against counterfeiting’, The Hague, 29 January 2010, http://www.europol.europa.eu/index.asp?page=news&news=pr100129.htm. 78

166

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 22 /

Date: 30/6

JOBNAME: Stefanou PAGE: 23 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Conclusions CONCLUSIONS

Despite being a formal part of the Commission, OLAF enjoys direct formal relationships with all central EU institutions. This in itself is quite rare for such a relatively young and relatively small unit and, if anything, indicates that OLAF’s position in the EU is quite important. As would be expected in any large organisation, some of these relationships seem quite strong, while others appear to be fraught with conflict and envy. What is interesting to note is that OLAF is willing to create formal relationships with other institutions, and it is interesting because the natural inclination of such a body would be to stay aloof, in other words to be distant and detached from those it is likely to investigate. From what was described in this Chapter, perhaps the most difficult relationships are those with the Commission and Eurojust: the former because it creates an obvious internal conflict; the latter because of overlapping competences. There are also minor problems with the EP and Europol. None of these difficulties is serious enough to pose insurmountable problems. But interestingly enough a change in OLAF’s status would probably be the easiest way of eliminating the difficulties.

167

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 23 /

Date: 2/6

JOBNAME: Stefanou PAGE: 24 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter07

/Pg. Position: 24 /

Date: 2/6

JOBNAME: Stefanou PAGE: 1 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

8 Relationship with the Member States CONSTANTIN STEFANOU

INTRODUCTION

OLAF’s relationship with the Member States has two dimensions: one formal and one informal. Strictly speaking the most formal side of the relationship with the Member States takes place during investigations when OLAF cooperates with national authorities, for example for on-the-spot checks. After all, this is one of OLAF’s core activities. However, operational cooperation is not the best benchmark in assessing overall relationships with the Member States. Operational cooperation has many transient and ephemeral parameters (for example, the personnel involved or the methods used), which are often difficult to measure. Thus, cooperating with the very same national authority can be a positive experience on one occasion and a negative experience on another occasion. Moreover, operational cooperation is a formal but indirect side of the relationship. It is indirect because OLAF cooperates not with those involved with national policy making but with those enforcing it. The formal side is dominated by the Advisory Committee for the Coordination of Fraud Prevention (COCOLAF—the French acronym of Comité consultatif pour la Coordination de la Lutte contre la Fraude) and will be examined later. The informal part is rather more complicated as it is based on OLAF’s and the relevant national authorities’ perceptions of each other’s position in the system and usefulness in the fight against organised crime as well as substantial issues concerning the application of the law in different jurisdictions. Perhaps the most common complaint levelled against the Member States concerns delays in prosecutions at the national level or in some cases lack of prosecutions altogether. This is an important point. As Ingeborg Gräßle (MEP) noted: We have member states that have never had a single OLAF case followed up in their justice system, such as Luxembourg. And there are 10,000 EU staff working there. Of course there were cases, but they were simply never followed up by the national

169

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 1 /

Date: 1/6

JOBNAME: Stefanou PAGE: 2 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Member States authorities. It’s inadmissible. When you are an EU staff member in Luxembourg and are involved in a fraud case, you can be sure that nothing will happen.1

Delays in—or lack of—prosecutions has a twofold adverse effect. First, it sends the message that protecting the financial interests of the Union is not important for the Member States. Second, it is demoralising for OLAF staff who have spent time, effort and EU money in pursuit of suspects who are never brought before justice. In short, it scorns the very idea of protecting the financial interests of the EU despite pledges by the Member States to reduce such ‘irregularities’. At the same time, as Commissioner Kallas noted, ‘The priorities of national judiciaries are very different from the priority of handling European money.’2 National authorities, of course, have their own domestic priorities, often in response to national policy or domestic current affairs. However, there are also issues concerning substantial law: Less obvious are problems with the poorly defined legal regime under which prosecutions are pursued. The division of functions between OLAF and the Member States has led to the situation in which OLAF by its conduct, activities or recommendations may cause injury to third parties as well as those subject to its investigation, or Member States may prosecute without taking an independent view or without proper regard to the rights of individuals. Moreover, none of this activity is subject to judicial supervision by the Court of Justice despite the fact that it regards the area of fraud against the European Union as one of Community competence.3

In recent years, especially after the Hoechst 4 and Tillack 5 rulings where, as Wakefield noted, ‘the reverse of the Hoechst judgment was given in the Tillack ruling’,6 the weight is on national enforcement, prosecution and judicial authorities to complete all aspects of cases prepared by OLAF with the ECJ completely separating itself from cases (that is, not subject to judicial review) once they have been passed over to national authorities. It is not surprising that national authorities might feel that cases passed to them by OLAF simply increase their already heavy workload when their priorities might rest with other domestic cases. Moreover, national administrations are naturally geared towards domestic interests and there is an unofficial, unspoken hierarchy of priorities which automatically downgrades requests originating outside the existing system. Perhaps the nature of the problem is more connected to attitudes of European citizens. As OLAF’s former General Director Franz-Hermann Bruner noted: ‘Member states and European citizens must develop more sense of ownership for 1 ‘Fraud cannot be tackled by OLAF alone, commissioner says’, euobserver.com, 20.11.2008, http://euobserver.com/9/27151. 2 Ibid. 3 J Wakefield, ‘Good Governance and the European Anti-Fraud Office’ (2006) 12(4) European Public Law 550. 4 Joined Cases 46/87 and 227/88 Hoechst v Commission [1989] ECR 2859. 5 Case C–521/04 P(R) Hans-Martin Tillack v Commission (2005) 2 Common Market Law Review 37. 6 Wakefield, above n 3, 562.

170

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 2 /

Date: 1/6

JOBNAME: Stefanou PAGE: 3 SESS: 16 OUTPUT: Tue Aug 9 13:14:31 2011

Introduction EU money.’7 This is more of a psychological barrier for the Member States and the citizens who do not see the EU as part of their everyday life and are, therefore, less likely to want to protect its ‘money’. The Commission, and the Member States, identified the difficulties in protecting the financial interests of the Union during the UCLAF era and the Commission developed an overall strategy in fighting irregularities against the financial interests of the EU. As early as 2001 the Commission was clear in its long-term priorities8 which moved along four axes. The first was to strengthen existing legislation (primary legislation) to cut off opportunities for fraud. The second was to fully involve national and EU administrations in the fight against fraud through the newly established OLAF. The third was to foster a climate, amongst EU administrators and beneficiaries, which stressed the ethical dimension of management. The fourth was to encourage harmonisation of national criminal law provisions so that transnational fraud is easier to detect, investigate and prosecute.9 The logic of the Commission’s strategy was straightforward. In order to combat fraud against the financial interests of the Union, a multi-faceted approach is necessary since isolated measures are ineffective. The creation of the OLAF Anti-Fraud Communicators Network (OAFCN)10 is an attempt to ‘reach out’ to the Member States and the citizens and it is part of the Commission’s/OLAF’s external communications strategy aiming to win not necessarily the ‘hearts and minds’ of Member States and citizens but at least their attention. Targeting mainly journalists (and more generally ‘media people’) the OAFCN glorifies informal contacts between OLAF and the Member States and their citizens by having a specific person as a contact point (the OLAF Spokesman) who is responsible for public relations as well as information for national administrations. Although the wider objectives of OAFCN are quite grand,11 its function, in the context of the Commission’s overall strategy, is to intensify informal links with national administrations (COCOLAF’s formal presence has limitations) and foster a climate of ethical management of EU funds. Having

7 F-H Brünner, ‘A Political View on Countering Fraud and Corruption’, ‘Work together, Get results’, EHFCN Conference, Warsaw, Poland, 23.10.2007. 8 Communication from the Commission, ‘Protecting the Communities’ financial interests— Fight against Fraud Action Plan for 2001–2003’(COM(2001) 0254 final). 9 Ibid. 10 http://ec.europa.eu/anti_fraud/olaf-oafcn/suite_en.html. 11 Officially the objectives of the OAFCN are to: ‘1. Prevent fraud through the “free-flow” of information: “prevention is better than cure”. 2. Create a permanent dialogue between OLAF’s External Communication Unit and its counterparts in the national investigation services. 3. Inform European citizens of what OLAF and its partners in the Member States are doing both jointly and individually in order to protect their financial interests. This includes making all concerned aware of the need for an anti-fraud program that is global, balanced and effective throughout the territory of the European Union. 4. Give information to the general public (in particular through the media) relating to the fight against fraud and irregularities to the detriment of the European Union’s financial interests.’ See: http://ec.europa.eu/anti_fraud/olaf-oafcn/suite_en.html.

171

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 3 /

Date: 30/6

JOBNAME: Stefanou PAGE: 4 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Member States learned from the negative Community experience of a diffuse presence in foreign policy (which became spectacularly focused and visible in the eyes of the public through the creation of the High Representative) the creation of the OLAF Spokesman aims to draw the attention of the European media and be extension the European public on the EU’s battle to tackle fraud.12 The Network is not merely an awareness-raising, public relations exercise—although there is an emphasis on the European media—it is also a central point for information and assistance for national administrations in their attempts to combat irregularities against the EU’s financial interests. Formally OLAF cooperates with national investigative bodies in each Member State.13 The OLAF website even has a dedicated page for OLAF’s ‘partners’ in each Member State.14 Indeed the practice in most Member States is to designate a particular unit as OLAF’s national counterpart usually on the basis of similar functions. However, it is interesting to note that OLAF has bilateral cooperation agreements with police forces or national prosecution offices in some Member States. These were signed before the 2005 and 2007 enlargements of the Union and technically they are still in operation. OLAF actually has a better relationship with the Member States which acceded in 2005 and 2007 because the Commission made a point of asking enforcement/prosecution authorities in the accession countries to form a relationship with OLAF and establish contact points. Since 2002, in all EU delegations in accession countries there were individuals designated as contact points for the coordination of all legislative, administrative and operational aspects of the protection of the EU’s financial interests. For some of the accession countries that were designated as ‘high risk’ OLAF sent agents who stayed for two or three years assisting local enforcement and prosecution authorities with know-how and training.15

12 See the interesting exposition of OLAF’s future direction in public relations in A Butticé, ‘What anti-fraud information and communication policy for OLAF?’, How Information and communication can be a means of EU fraud prevention and a true service for the citizens in the respect of their rights?, 4th Training Seminar of the OAFCN, Brussels, 22–26 November 2004. 13 For a complete list of the national investigative bodies with which OLAF cooperates in each Member State see ‘Table 2: OLAF’s Cooperation with national investigative bodies’ in C Stefanou and H Xanthaki, ‘“Strengthening OLAF” towards greater effectiveness in the protection of the Communities’ financial interests: the revision of the OLAF regulation 1073/99’, 72–97. See also European Commission, Commission Staff Working Document Annex to the Report from the Commission, Protection of the European Communities’ financial interests and the fight against fraud, Annual report 2003, Follow up to the Action Plan 2001–2003 and measures taken by the Member States, Implementation of Article 280 of the Treaty by the Member States and the Community in 2003 (COM(2004) 573 Final), Brussels, 30.08.2004, SEC(2004) 1058, 70–72. 14 http://ec.europa.eu/anti_fraud/olaf-oafcn/list/en.html. 15 OLAF agents were sent to Poland for two years as well as Bulgaria and Romania for three years. See C Stefanou and H Xanthaki, ‘“Strengthening OLAF” towards greater effectiveness in the protection of the Communities’ financial interests’, footnote 49, 42–43.

172

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 4 /

Date: 1/6

JOBNAME: Stefanou PAGE: 5 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with COCOLAF RELATIONSHIP WITH COCOLAF

The formal side of the relationship between OLAF and the Member States is managed through the Advisory Committee for the Coordination of Fraud Prevention (COCOLAF). COCOLAF was set up in 1994 following Commission Decision 94/140/EC of 23 February 1994 setting up an advisory committee for the coordination of fraud prevention16 as amended in 2005.17 It comprises two representatives per Member State plus Commission representatives from relevant departments; it is convened and chaired by the Commission (OLAF) and its main tasks are: a)

to facilitate the effective implementation of Community legislation on fraud prevention through regular consultations on any specific problems arising from its application on which exchanges of views are deemed useful; b) to facilitate consultations between Member States on the conditions for its application at national level; c) to coordinate action between Member States and ensure regular close cooperation; d) to advise the Commission, if necessary, on additions or amendments or adaptations to Community legislation.18

Essentially COCOLAF’s mission is to advise OLAF on issues concerning fraud and more generally activities that negatively affect the financial interests of the EU. COCOLAF is assisted by five working groups (although more may be set up if necessary): — Article 280 Group—advises OLAF on the protection of the EU’s financial interests and more importantly is responsible for drafting the annual Commission Report to the EP (according to Article 280 EC); — Fraud and Irregularities Risk Analysis Group—a group of national experts whose task is medium and long term planning; — Irregularity and Mutual Assistance—a group of national experts who specialise in agricultural products’ irregularities, especially agricultural subsidies; — Euro Counterfeiting Experts Group; — Counterfeit Coin Experts Group. In the last decade, following the amendment of Article 208 EC (para 5), COCOLAF has a new task which is to report—in cooperation with the Commission (OLAF)—the measures taken by national administrations to prevent fraud and protect the financial interests of the EU. In order to help national administrations provide better and more accurate reports, OLAF provides COCOLAF

16

OJ L 61, 4.3.1994. Commission Decision of 25 February 2005 amending Decision 94/140/EC setting up an advisory committee for the coordination of fraud prevention, OJ L71, 17.3.2005. 18 http://ec.europa.eu/dgs/olaf/mission/mission/cocolaf/en.html#1. 17

173

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 5 /

Date: 1/6

JOBNAME: Stefanou PAGE: 6 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Member States with annual questionnaires19 and assists national administrators with enquiries about specific questions. These annual questionnaires are compiled by OLAF after discussing some aspects of the content, such as topics, with COCOLAF.20 It would be wrong to assume that COCOLAF is the ‘eyes and ears’ of the Member States. COCOLAF’s—and its working groups’—role is to provide a formal forum for consultation and exchanges of ideas between the Commission and the Member States. No vote is taken in the meetings and the agenda and discussions are set by the Commission. In fact when one looks at the frequency of meetings of the working groups (one or two meetings per year) it is clear that COCOLAF and the working groups are there to keep established formal contacts with relevant national ministries and bounce off ideas about proposed future action. At the same time the Member States want national authorities to be fully aware of, and fully involved with, OLAF’s future plans—in fact the Council often insists that new ideas are first put to COCOLAF for advice—so this arrangement appears to satisfy both sides. Occasionally OLAF has used meetings of COCOLAF to ‘name and shame’ Member States that did not fully cooperate during investigations but on the whole COCOLAF is a forum used by OLAF and the Member States to inform each other about what did or did not go well in specific operations.

NATIONAL VERSUS EU INTERESTS

Having looked at OLAF’s relationships with the various institutions and the Member States one theme becomes obvious: an underlying antagonism between OLAF and the various bodies which represent national enforcement or prosecution authorities, or the Member States. It is as if the two perceive each other’s work as competitive rather than complementary. OLAF’s unsatisfactory relationships with Europol and Eurojust are a good example of this attitude. It is almost self-evident that OLAF could benefit by cooperating with the representatives of the national enforcement or prosecution authorities which it will later need to contact to proceed with a case. Forging close and even personal relationships with enforcement or prosecution authorities in different Member States can often resolve quickly questions about a difficult case of transnational crime using unofficial, personal contacts rather than the time-consuming official path.21 Therefore, one might have expected OLAF to have a closer relationship with 19 See, eg, European Anti-Fraud Office (OLAF), ‘Summary Record of the 35th Meeting of COCOLAF, held in Brussels on 19 May 2009’, http://www.euro.gov.sk/data/files/4957.DOC. 20 See, eg, Document COCOLAF/19–05–09/6. Interesting to note that the 2009 questionnaire was only available online and initially had a deadline which fell on a Sunday (7 June 2009)! However, following French intervention the deadline was changed to 8 June 2009. 21 ‘Interviews with officials in Ministries of Justice or Interior Ministries around Europe sooner or later result in anecdotal stories of legendary individuals who, because of their linguistic skills or personal contacts or good understanding of foreign jurisprudence, were able to get results and

174

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 6 /

Date: 1/6

JOBNAME: Stefanou PAGE: 7 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

National versus EU Interests Eurojust and Europol. Similarly one would have expected national bodies to offer their full cooperation since OLAF will eventually present national authorities with a ready case for prosecution which will no doubt be an important, however small, victory against criminals. And yet there is, so far, episodic evidence of cooperation and the little that exists is grudging and slow. Is it because national enforcement or prosecution authorities see OLAF’s work as interfering with their workload and priorities? As we have already discussed, it is possible that national authorities have different priorities and indeed there might even be an element of misplaced, misdirected and misunderstood ‘national pride’ on the part of individuals in national authorities who might think that by delaying a case prepared by OLAF against one of their compatriots they are offering a minor service to their own country. This kind of attitude is sometimes embedded in national administrations. In a series of lectures on EU law to national officials from a third country at the Institute of Advanced Legal Studies, when it was explained that it is possible to bring your own country to court for damages suffered as a result of breaches of EU law or the wrongful application of EU law at the national level, the authors were asked by one of the officials if this is not tantamount to treason! In fact, in order to shield themselves against such actions and perhaps to reinforce patriotism within the national civil service some countries will only sign international agreements if there is a provision that the international agreement concluded is not valid in that jurisdiction—a practice quite commonly exercised by the United States. Of course, after 50 years of harmonisation and contact with the EU one might have expected national administrations in Member States to have a different attitude towards the Union’s financial interests but this is obviously something that is difficult to guard against and that is why the OAFCN is involved in an awarenessraising and attitude-changing campaign to inform and educate national administrations. Or is it because OLAF’s staff present national authorities with cases which are not up to standard or do not fulfil the legal process in the relevant national jurisdictions? This is an interesting point because over the years the general impression about OLAF and its staff is that they are very competent international civil servants with knowledge and experience in their respective fields and, therefore, able to prepare cases to a high standard. Indeed as Wade noted: It can also come as little surprise that frustration arises where staff must be capable of interacting with criminal justice systems across Europe in order to perform the tasks

wrap-up a difficult MLA case in five minutes with one phone call when it usually took months of tedious and fruitless correspondence.’ See C Stefanou, ‘Organised Crime and the Use of EU-wide Databases’ in I Bantekas and G Keramidas (eds), International and European Financial Criminal Law (London, Butterworths, Lexis-Nexis, 2006) 220–21.

175

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 7 /

Date: 1/6

JOBNAME: Stefanou PAGE: 8 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Member States assigned to them but are deprived of the legal competence to do so and therewith the ability to impact in the most effective way possible.22

However, In the course of researching this book, it became obvious that the overwhelming majority of congratulatory remarks tended to come from the Commission or other EU institutions, bodies and agencies. There has been precious little information about the quality of OLAF’s files, at least from the point of view of national enforcement and prosecution authorities. The implication here is not that OLAF produces substandard files but that the files it prepares might not be in the general format and overall presentation that prosecutors in Member States are used to. National prosecutors are used to the format and presentation of files they receive and pretty much know their way around them—a bit like reading a favourite newspaper. So, from a practical point of view when a case from OLAF arrives to a prosecutor it does seem like hard work and might be relegated to the bottom of the pile of active cases. Moreover, exactly because it is a file prepared by OLAF and because the case will be watched closely by OLAF, national prosecutors want to ensure that they do not make any mistakes—perhaps thinking that they might make fools of themselves in the eyes of the EU; again this means that the file will be put aside so that it can be dealt with when the prosecutor has more time on his or her hands. It is, of course, also possible to put a theoretical coating on this state of affairs and perhaps talk about neofunctionalist versus intergovernmental perspectives (the integration dialectic)23 in which the current state of affairs (the synthesis) is the product of the interaction between the neofunctionalist OLAF and the intergovernmentalist Member States. Being part of the Commission, OLAF is an elite group of technocrats whose task is the ‘good’ of the Union as a whole. In the best gradualist tradition OLAF has slowly become more powerful and more stable internally—via its transformation from toothless UCLAF to efficient OLAF. At the same time the Member States have allowed, what must be regarded as, an encroachment on their sovereignty by allowing ‘outside’ interference, that is, investigations, on their administrations and citizens but protect themselves by having in their hands the ultimate decision to proceed with a prosecution. It is a fine and delicate balance, indeed one that mirrors the wider relationship between the Member States and the central EU institutions. It is difficult to speculate on whether there are ‘high’ and ‘low’ politics considerations24 in the national administrations’ decision to prosecute, just as it is difficult to speculate on the

22 M Wade, ‘OLAF and the Push and Pull Factors of a European Criminal Justice System’ (2008) 3–4 Eucrim 129. 23 C Stefanou and H Xanthaki, A Legal and Political Interpretation of Article 215(2) [new Article 288(2)] of the Treaty of Rome: The Individual Strikes Back (Aldershot, Ashgate, 2000). 24 See S Hoffmann, ‘Reflections on the Nation-State in Western Europe Today’ in L Tsoukalis (ed), The European Community Past, Present and Future (Oxford, Basil Blackwell, 1983) 21–38.

176

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 8 /

Date: 1/6

JOBNAME: Stefanou PAGE: 9 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

National versus EU Interests ‘spillover’ effect (formal spillover through harmonisation of national criminal law provisions and informal spillover through the OAFCN’s awareness-raising attempts). Or is it that the real problem is simply the limited degree of EU legal harmonisation, especially in the field of criminal law? the root of the problem of organised crime within the EU goes back to the opening of the single market and the four freedoms, which constitute the essence of EC law (free movement of persons including freedom of establishment, free movement of goods, free movement of capital and freedom to provide services). The single market created opportunities for legitimate and illegitimate activities alike. New transnational criminal organisations emerged as a result of the four freedoms and because at the time of the establishment of the single market the Member States had not given this problem a lot of attention, serious transnational and organised crime has consistently been ahead of the law at the EU and national levels. Thus, criminal organisations are now in a position to utilise the four freedoms to their advantage by choosing one of 25 different jurisdictions that best serves their purposes either because of its existing legal framework or because of lax implementation of legislation.25

EU legal harmonisation has been erratic and haphazard—that much most experts agree on. It is also the case that different jurisdictions have different legal processes, different penalties for the same offences and indeed there are even fundamental differences in legal systems, that is, common law versus civil law (the former sometimes referred to as the accusatorial system and the latter as the inquisitorial system26). Despite the celebrated agreement on mutual recognition as the basis of EU judicial cooperation (at the 1999 Tampere European Council27) and attempts at harmonisation and codification of law and process related to the protection of the financial interests of the EU (the Corpus Juris project28), official channels of mutual legal assistance are so slow that transnational crime is practically always ahead of national enforcement and prosecution services. But why should there be slow responses when it comes to the protection of the EU’s financial interests? On one level there is a high degree of legal fragmentation as there is no one legal code or system which exists to protect the European Budget. There are twenty-seven different

25

C Stefanou, ‘Organised Crime and the Use of EU-wide Databases’, 217. B Quirke, ‘The role of OLAF in the fight against EU fraud: Do too many cooks spoil the broth?’, Empowering Anti-Corruption Agencies: Defying Institutional Failure And Strengthening Preventive And Repressive Capacities, ISCTE, Lisbon, 14–16 May 2008, 20. 27 After the official coming into force of the Amsterdam Treaty in 1999 the EU was in a position to address crime prevention directly as a recognised policy area on the basis of Article 29 of the Treaty of Amsterdam starting with the well-known Tampere European Council (15 and 16 October 1999) and the birth of an ‘area of freedom, security and justice’ in the EU. 28 M Delmas Marty and J Vervaele, Implementation of the Corpus Juris (Intersentia, 2001). 26

177

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 9 /

Date: 1/6

JOBNAME: Stefanou PAGE: 10 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Member States legal systems with differing law enforcement methods and methods of collecting evidence which makes it very difficult to take evidence before a court in another jurisdiction. A second level where fragmentation exists is in the approach to investigation and control. There are multiple actors involved in the monitoring and investigation of fraud across twenty-seven member states. OLAF in attempting to co-ordinate the activities of these agencies faces a mammoth task due to the territorial, linguistic, legal and cultural barriers which exist.29

And because OLAF can only move as fast as the Member State(s) it is cooperating with in each of its investigations, responses to the protection of the EU’s financial interests tend to be slow. Of course, the fact that there is limited progress towards the creation of a European legal space in the area of criminal law is used so often as an excuse for slow progress or problems in the implementation of Regulations that it has become sine qua non in the relevant academic literature. No doubt it is a problem, but its limits are well known and understood by all actors involved when drafting proposals so its effects should not be exaggerated. The reasons for the limited degree of EU legal harmonisation—that is, the unwillingness of some Member States to make changes to their legal process—are perhaps more important because they confirm the narrow interpretation of ‘national interest’ held by some Member States: ‘criminal law is considered as a relevant expression of national sovereignty: punitive authority is traditionally considered as one of the exclusive prerogatives of the Member States.’30

MISSING THE WINDOW OF OPPORTUNITY

More than a decade ago, Peterson and Bomberg noted that it is ‘an accepted norm of EU decision-making … that issues may remain on the Union’s agenda for long periods of time, even though they remain far from resolution’.31 Policy entrepreneurs, such as the Commission, bide their time until they can identify the best timing for a proposal—in other words, waiting for either the removal of a particularly difficult specific hurdle, such as objections from another institution or a Member State, or simply the identification of optimum timing for political agreement. The ‘policy window’ is an important element of policy making and its successful identification and utilisation can, and does, make a difference in the successful pursuit of a proposal. But how do we know whether or not a window of opportunity is on the horizon? 29

B Quirke, ‘The role of OLAF in the fight against EU fraud’, 46. L Ferola, ‘The Fight Against Organized crime in Europe Building an Area of Freedom, Security and Justice in the EU’ (2002) 30(1) International Journal of Legal Information 55. 31 J Peterson and E Bomberg, Decision-Making in the European Union (London, Macmillan, 1999) 55. 30

178

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 10 /

Date: 1/6

JOBNAME: Stefanou PAGE: 11 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Missing the Window of Opportunity We can distinguish between two different types of window of opportunity: ad hoc and generalised. Ad hoc windows of opportunity are unique to a specific proposal for reform. A good example, in the development of OLAF, would be the collapse of the Santer Commission, which created pressures for a stronger unit to safeguard the financial interests of the Union and led to the reform of UCLAF. Ad hoc windows of opportunity refer to sequences of events which happen to be important in ushering reform in a particular EU body or policy area. For example, it was developments at the national, international and EU levels that created a window of opportunity for the reform of the 1991 money-laundering Directive.32 Yet, these developments did not necessarily affect other policy areas. In contrast, generalised windows of opportunity are a part of history-making events in the European process of integration, such as Treaty reforms. New institutionalist theory places emphasis on ‘important junctures’ in the development of the EU. European integration is a process in which critical, historymaking ‘events’33 can and do alter integration paths and institutional development at both the macro- and micro-political levels.34 Since OLAF’s formal creation in 1999 there have been two Treaty reforms: the Nice Treaty and the Lisbon Treaty. On both occasions OLAF gained nothing from these generalised windows of opportunity. So, has OLAF missed its windows of opportunity altogether? The Nice Treaty came just months after the creation of OLAF in 1999, so that particular generalised window of opportunity was almost irrelevant since the ad hoc window of opportunity of the collapse of the Santer Commission had been utilised. However, OLAF is not mentioned by name in the Treaty of Lisbon— unlike Eurojust and Europol—despite Treaty references to the protection of the financial interests of the European Union. While this is not necessarily a bad sign for the future of OLAF, nevertheless it does indicate that for the Member States, at least at this stage, OLAF is not foreseen to be around in the long term in the guise in which it exists today. OLAF may have to change, and change is probably going to be drastic. There is, of course, nothing new in the idea of a different role for OLAF. By 2005 an EP study on the future relationship between OLAF and the EP35 had identified four different scenarios about the future of OLAF and in all of these OLAF was not foreseen to remain an autonomous structure. OLAF was going to be attached either to the EPP or become a part of Europol or be attached to

32 C Stefanou and H Xanthaki, ‘The EU Draft Money Laundering Directive: A case of Interinstitutional Synergy’ (2000) 3(4) Journal of Money Laundering Control 325–35. 33 For a brief explanation of the importance of ‘events’ see C Stefanou, The Dynamic of the Maastricht Process (Brussels/Athens, Bruylant/Sakkoulas, 2007) 16. 34 Ibid 20–22. 35 Strictly speaking the study identified three scenarios but the last scenario had two different projections. See C Stefanou and H Xanthaki, ‘“Strengthening OLAF” towards greater effectiveness in the protection of the Communities’ financial interests: the revision of the OLAF regulation 1073/99’, 46–49.

179

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 11 /

Date: 1/6

JOBNAME: Stefanou PAGE: 12 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Member States Eurojust. It should be noted that the 2005 EP study had identified what today is the most plausible scenario, which is for OLAF to become one of the EPP’s chambers under Eurojust (see Figure 8.1).36

EUROJUST

EUROPOL

EUROPEAN PUBLIC PROSECUTOR

Units under EPP

OLAF

Units under EPP

Figure 8.1: Possible Future for OLAF

Under this projection OLAF will become one of the investigative units of the EPP who, in turn, will be responsible to Eurojust. According to the terms of Article 69E of the Lisbon Treaty the EPP will be created from Eurojust, provided the European Parliament gives its consent. This scenario, which was actually workable even without the Constitutional Treaty/Lisbon Treaty, will ‘weaken’ OLAF because OLAF will become one of several investigative units attached to the EPP. On the plus side, OLAF will be directly under a judicial authority and its mandate and relationship with other EU institutions will be very clearly defined. The above is, of course, just one of the ideas about reform of OLAF. In fact, reform of OLAF has officially been on the agenda since 2004 and the Commission’s proposals for reform of various aspects of the Office and its procedures.37

36

Ibid 47. See ‘Proposal for a Regulation of the European Parliament and of the Council amending Regulation (EC) No 1073/1999 concerning investigations conducted by the European Anti-Fraud Office (OLAF)’, COM(2004) 103 final, Brussels, 10.2.2004; also see ‘Proposal for a Regulation of the European Parliament and of the Council on mutual administrative assistance for the protection of the financial interests of the Community against fraud and any other illegal activities’, COM(2004) 509 final, Brussels, 20.7.2004. 37

180

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 12 /

Date: 1/6

JOBNAME: Stefanou PAGE: 13 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Missing the Window of Opportunity Yet, some six years later these proposals have been unable to utilise a window of opportunity. It may well be that the timing is still not right despite some opportunities. It may also be that reform is not forthcoming because the Commission has been unable to push the reforms through because they are unpopular with some Member States who have not decided on OLAF’s future. The Commission’s proposals did not suggest a different role for OLAF, focusing instead on procedural reforms. In other words the Commission’s preference was for the strengthening and prolongation of the status quo. So far the Commission has, by default, been successful in the prolongation of the status quo but unsuccessful in getting the Member States to reform the Office. At the moment, it looks as if OLAF has lost its windows of opportunity altogether. Reform will probably come, but it will be along the lines of the Member States’ preferences and directly connected to other developments in the common judicial sphere, such as the development of the EPP office. The initial decisions to reform UCLAF, taken under the circumstances discussed in previous chapters, have laid paths which are difficult to deviate from. The logic of the Member States is that OLAF will have to continue as was agreed (pacta sunt servanda) in the late 1990s. If it is going to be reformed then a new agreement, perhaps more substantial, will have to be negotiated. In contrast, the Commission initially attempted a gradualist strengthening of OLAF so that a radical change would be deemed unnecessary by the Member States and the status of the Office would be maintained. However, as some Member States became responsive to the idea of the EPP—a communitarian development and one that the Commission favours—the Commission appears to have accepted the eventual loss of OLAF from its roster and simply waits until the EPP becomes formally a part of the European judicial sphere. In other words, a possible explanation as to why OLAF missed ad hoc and generalised windows of opportunity might simply be because the Commission did not actively pursue them. The Commission has accepted that trying to keep OLAF is a lost cause and has simply done what was absolutely necessary to support OLAF’s work while it is part of the Commission waiting for the key development that will get the wheels of the prointegration movement towards a harmonised European legal sphere. The protection of the financial interests of the EU is just one of many areas waiting for their window of opportunity and OLAF is no longer an institutional priority for the Commission.

181

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 13 /

Date: 1/6

JOBNAME: Stefanou PAGE: 14 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Member States RELATIONSHIP WITH THIRD COUNTRIES

In a globalised world fraud has an international dimension. OLAF cooperates with both third countries (via bilateral mutual cooperation agreements38) and international organisations in an attempt to fight fraud directly as well as take part in a global approach to tackling fraud and corruption. ‘The EU allocates around €15 billion per annum to “External Actions” principally from the Community budget but also from the European Development Fund (EDF) and through loans from the European Investment Bank.’39 The EU is the largest Overseas Development Assistance donor. Development Assistance is channelled in cooperation with the Member States, international organisations (both IGOs and NGOs) and, of course, the governments of third countries. With so much money allocated for use in third countries it is essential to prevent and detect fraud against the EU’s financial interests. In recent years irregularities in external actions are on the increase to the point that the number of cases in active investigation is now up to 102, in second place overall (EU institutions and bodies are still in first place with 107 cases).40 The problems OLAF encounters in its efforts to prevent fraud in external aid are not much different from the usual modus operandi of organised crime in Europe. The difference is that detection is much more difficult because (a) of the usually poor coordination between the actors involved as international donors— for example, a project might be co-funded by a dozen or more donors while the overall management might rest with a local IGO; and (b) because the jurisdictions in which aid is distributed often have serious shortcomings in their ability to detect and even prosecute offenders. OLAF agents have to operate in different jurisdictions and often receive little cooperation from local enforcement and prosecution agencies. From a practical point of view this means that OLAF had to move along two main lines: — create stable and workable relationships with other international organisations, which often co-fund or manage external EU aid projects. OLAF has close contacts and a good working relationship with international bodies 38 Third countries for which EC Provisions on Mutual Administrative Assistance in Customs Matters have entered into Force: Albania, Algeria, Andorra, Antigua and Barbuda, Armenia, Azerbaijan, Bahamas, Barbados, Belize, Bosnia and Herzegovina, Canada, Chile, China, Croatia, Dominica, Dominican Republic, Egypt, Faroe Islands, Georgia, Guyana, Hong Kong, Iceland, India, Israel, Jamaica, Japan, Jordan, Kazakhstan, Kyrgyzstan, Lebanon, Liechtenstein, Macedonia/Fyrom, Mexico, Moldova, Montenegro, Morocco, Norway, Palestinian Authority, Republic of Korea, Russian Federation, Saint Christopher and Nevis, Saint Lucia, Saint Vincent and the Grenadines, San Marino, Serbia, South Africa, Suriname, Switzerland, Tajikistan, Trinidad and Tobago, Tunisia, Turkey, Ukraine, USA, Uzbekistan. Source: OLAF Website http://ec.europa.eu/dgs/olaf/assist_3rd/index_en.html. 39 OLAF, ‘1999–2009 OLAF: The first 10 Years in the Fight Against Fraud’, Brussels, 2009, 17. 40 See Commission Report to the European Parliament and to the Council, ‘Protection of the Communities’ financial interests—Fight against fraud—Annual Report 2008’, COM (2009) 372 final, Brussels, 15.7.2009, 13.

182

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 14 /

Date: 1/6

JOBNAME: Stefanou PAGE: 15 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with Third Countries such as the UN, the World Bank, the WHO, the World Customs Organisations, Interpol and the OECD. Of those, the UN is an important target partner and the European Community has recently ratified the United Nations Convention against Corruption (UNCAC);41 — increase the number of bilateral administrative cooperation agreements with third countries and offer training and know-how so that it has a reasonably extensive network of partners (national enforcement and judicial authorities) in third countries.42 The problem with external aid fraud is that it has grown too much too quickly. In its attempt to prevent and detect fraud OLAF relies on other Commission departments and of course the official EU delegations which often manage EU projects in third countries. The difficulty is that most of the fraud in this area takes place in the implementation stage—for example, forged signatures or non-existent suppliers—which is probably the most difficult stage to detect for the non-specialist members of EU delegations or the untrained project managers so detection tends to come quite late. Often by the time OLAF is informed it is too late for the recovery of money or the prosecution of the offenders. OLAF does carry out a lot of investigations in third countries—financing agreements allow OLAF to perform on-the-spot checks in third countries (grant recipients are reminded of this fact in their grant agreement or contracts). However, the problems in identifying the appropriate ‘sister’ authority to carry out on-the-spot checks and the limited cooperation OLAF sometimes receives from the host country makes things even more difficult. Of course, when certain illegal activities are on-going for years, such as counterfeit cigarettes from the Far East, it is possible for OLAF to ask for special treatment—for example, OLAF has a liaison officer in Beijing whose task is to cooperate with the Chinese authorities on criminal activities which fall under OLAF’s remit. But when fraud is episodic, as is the case with external aid, OLAF has to rely on the goodwill of national authorities and, where bilateral agreements are present, on the willingness to implement the bilateral agreement. At the moment the Commission—and OLAF in particular—are concentrating on cultivating good working relationships with the national authorities of third countries which receive EU aid. For example: Additional funds have been made available under the Hercule II Programme (a Community programme to promote activities in the field of the protection of the Community’s financial interests) to provide co-financing for the purchase of specialist

41 Council Decision No 2008/801/EC on the conclusion, on behalf of the European Community, of the United Nations Convention against corruption, OJ L 287 of 29.10.2008. 42 As part of the creation of a world-wide network OLAF has started a series of regional conferences aiming to raise the awareness of national authorities in third countries on issues concerning fraud and corruption. See OLAF 2009 Annual Report, 42.

183

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 15 /

Date: 1/6

JOBNAME: Stefanou PAGE: 16 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Relationship with the Member States technical equipment, training and technical support for the monitoring of illegal activity in this area. Hercule II has a total budget of €98 million for the period 2007–2013.43

Essentially OLAF is attempting to create a network similar to the OAFCN, but for third countries. It is difficult to say, at this stage, whether OLAF’s efforts are merely a damage-limitation exercise or if they are going to reduce fraud in ‘External Actions’. If after 50 years of EU integration European citizens still have not developed a sense of ownership of EU money and national administrations are still not fully geared towards the protection of the EU’s financial interests, it will be almost impossible for the impoverished national administrations and citizens of third countries to care at all.

CONCLUSIONS

OLAF’s relationship with the Member States is not an easy one and the source of the problem can easily be identified as the unwillingness of national authorities to accept OLAF’s ‘intervention’ in their natural territories. This is a serious problem because, as we have already discussed, the formal side of the relationship is not necessarily the one that will allow OLAF to move quickly and efficiently in order to complete its tasks. It is really the informal side, in other words the de facto acceptance of OLAF as a part of national mechanisms that combat crimes against the financial interests of the Union, that will allow OLAF to be successful. This OLAF has not ‘earned’ yet and it is probably OLAF’s worst failure in its relationship with the Member States. It is difficult to say whether the lack of good informal relationships is ‘fixable’ or that it is simply a question of time. However, it is reasonable to think that unless there is a quick and permanent-looking resolution of OLAF’s future status, there will not be a change in the informal side of the relationship with the Member States.

43

OLAF 1999–2009, 26.

184

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter08

/Pg. Position: 16 /

Date: 1/6

JOBNAME: Stefanou PAGE: 1 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Conclusion OLAF represents the legitimate interests of the European taxpayer as the victim of fraud affecting the EU budget. The three authors of this book have argued that OLAF is in need of reform. Some of the areas ripe for reform include the codification of due process, the role and functioning of the Supervisory Committee, the definition of independence, inter-institutional aspects of operational work and the way OLAF, Europol and Eurojust work together. For some commentators, this has the hallmarks of a constitutional overhaul and Regulation 1073/99 needs a large number of amendments. These amendments have been the subject of inter-institutional discussions since 2004. For others, Regulation 1073/99 simply needs implementing rules. Any amendment of OLAF basic legislation has proved problematic at a time when the European Commission has expressed the wish to ‘externalise’ OLAF—to separate it from the European Commission. Without knowing exactly was status OLAF would have after ‘externalisation’, it becomes difficult to change Regulation 1073/99 and to define future relationships with Europol, Eurojust and the European Public Prosecutor. We know that the relations between Europol, Eurojust and OLAF should be ‘as close as possible’: this includes the possibility of mergers. OLAF is at the crossroads. Three scenarios have been examined in this book. First, that OLAF becomes one of the units under the European Public Prosecutor. Second, the possibility of OLAF becoming a fully fledged criminal law actor. Lastly, the possibility of adopting approaches that major on the recovery of taxpayers’ money is also mooted. Constantin Stefanou explores OLAF’s inter-institutional relationships in his Chapters and argues that OLAF is at the centre of a fundamental contradiction as it claims operational independence when it has no administrative independence. Still, OLAF’s inter-institutional relationships, despite the occasional hiccup, do not really pose any serious problems. The main problem for OLAF continues to be its relationship with the Member States and more specifically with those national authorities who are not always willing to accept OLAF’s involvement in what some regard as national terrain. Helen Xanthaki foresees a more radical change, where OLAF becomes a fully fledged criminal law body operating in an evolving European judicial space. This is a criminal-law-centred vision of the future, which may well prove to be the one followed. Despite being an administrative actor with limited powers, OLAF is now focusing on more serious cases of fraud. In this, OLAF relies on full cooperation from the national, criminal law authorities and positions itself as an 185

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter09

/Pg. Position: 1 /

Date: 30/6

JOBNAME: Stefanou PAGE: 2 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Conclusion actor with criminal law powers. There are of course drawbacks to this mismatch between powers and alignment: the emperor may be found to have no clothes. Simone White argues that close attention to what already works at the level of enforcement by OLAF should make progress possible, given political will. It seems that after ten years of aspiring to a more effective fight against fraud at EU level, the legislator should not put all his eggs in the same (criminal law) basket. All possible routes should be pursued in order to protect the legitimate interests of the European taxpayer and improve prevention, detection and the likelihood of penalty for misuse or misappropriation of taxpayers’ cash. In particular, civil law aspects of enforcement could be further explored and more emphasis should be placed on prevention, without prejudice to the future adoption of a European Public Prosecutor. So, let us return to our original hypotheses that the existing framework for OLAF represents a victory of intergovernmentalism over supranationalism and that the reasons for this victory rest on path dependencies created by prevailing EU developments. The analysis in the first two Chapters clearly demonstrates the failures of UCLAF and the failed attempt by the EP, and to a lesser extent by the Commission, to make OLAF all that UCLAF was not. The Member States’ perceptions for an EU anti-fraud office did not include what they obviously perceived as ‘meddling’ with their own national authorities’ supremacy within their jurisdiction and at the end of the day the agreement on the OLAF framework reflected these national choices. OLAF does represent a victory of intergovernmentalism over supranationalism but there is a twist in this assertion. It is the current framework of OLAF that represents an intergovernmental victory. The idea of an EU anti-fraud office with operational and administrative independence, indeed one that can have powers equal to those of national authorities, is still lingering—which is why some Member States still object to the European Public Prosecutor which is seen as a possible first step towards a supranational framework for a European anti-fraud office. Of course, in the EU context few things are more permanent than temporary or intermediate solutions, so it may well be that OLAF’s framework remains intact for some time. The issue of path dependencies is rather more complicated. Our assertion was that the events surrounding the collapse of the Santer Commission were the trigger for the creation of OLAF. Of course, it could be argued here that we are taking a ‘chance event’ as our starting point for this path dependency but this would not really be out of character with new institutionalism. The collapse of the Santer Commission was the starting point but the framework for OLAF was in fact the result of negotiations by the Member States. Irrespective of whether Member States came to this decision as a result of long-term views about the future of European integration or short-term reactions to public opinion, their decision to accept that particular framework for OLAF created path dependencies from which it is still difficult to deviate. And this is particularly evident in the operational side of things as put forward in Chapters 4, 5 and 6. The emphasis on criminal law and the dependence of the EU’s anti-fraud office on the Member 186

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter09

/Pg. Position: 2 /

Date: 30/6

JOBNAME: Stefanou PAGE: 3 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Conclusion States’ political will to cooperate is beginning to show the limitations of the framework. In fact, the difficulties (real or perceived) in getting 27 Member States to agree on the revision of the old framework are so disheartening that inertia is more preferable than action. In other words, the window of opportunity has not opened yet and procrastination is, in this case, the alternative to failure.

187

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter09

/Pg. Position: 3 /

Date: 30/6

JOBNAME: Stefanou PAGE: 4 SESS: 15 OUTPUT: Tue Aug 9 13:14:31 2011

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Chapter09

/Pg. Position: 4 /

Date: 30/6

JOBNAME: Stefanou PAGE: 1 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index access to documents 52, 90–3, 108–11, 119 access to EC premises 82, 97, 102 accountability administrative accountability 48–52 allegations 116 COCOBU 37, 71, 61–2 collusion 148 Commission 148, 149–50 Court of Auditors 149–50, 159 culture 148–9 definition 149 delay 147–8 enforcement 147–8 European Parliament 37, 58, 70–2, 158 independence 48 inefficiency 147–8 institutions 48, 147–9 integration 149 judicial accountability 48, 51–8 mandate of OLAF 34 regulatory framework 35–75 Supervisory Committee 34, 70–2 UCLAF 7, 12 UK Government Accountability Project 140–1 accused, rights of 59, 65–8, 87–93, 97, 103, 109 actionable information see whistleblowing and actionable information active corruption, definition of 23–4 administrative accountability 48–52 administrative independence 36–48, 70, 72, 85, 120, 185 administrative investigations 26–7, 36, 78, 150 administrative measures 17–19, 21, 33, 82 administrative offences 19, 20, 22, 39, 126, 185–6 admissions, right to silence and 93 Advisory Committee for the Coordination of Fraud Prevention (COCOLAF) 169, 173–4 aid x, 10, 78, 102–3, 182–4 anonymous information 114–15, 140 Annual Activity Reports 50, 51, 60, 150, 154 annulment actions 54–5, 93–4 Anti Contraband and Anti Counterfeit Agreement between Canada and EU 132–6 Anti-Corruption Convention (EU) 24–5, 33 assimilation principle 24–5 assist, duty to 79, 90, 102 attitudes of EU citizens 170–1 auditing institutions, competences of national 40–2

bias 83–5, 120 budget see also COCOBU (Budgetary Control Committee) civil recoveries 136, 143 civil route 144 Commission 79 Court of Auditors 159 criminal law 128 Director General 28 European Public Prosecutor 158 implementation 62–3, 71 independence 47, 118 legal basis of OLAF 15–16 on-the spot checks and inspections 102–3 PIF Convention 20 PIF Regulation 19 tobacco industry, Commission’s case against the 126 UCLAF 7 Canada and EU, Anti Contraband and Anti Counterfeit Agreement between 132–6 CCTV 162 centralisation 2–3, 12 Charter of Fundamental Rights of the EU 84, 90–1 Civil False Claims Act 1986 (US) 136 Civil RICO (United States) 121, 126, 130–1, 135 civil route, expansion of 121–2, 129–36, 186 budget 136, 143–4 Civil False Claims Act 1986 (US) 136 civil fraud agency, creation of 144 civil recoveries 136–8, 142–4 criminal law 121–2 Europol 144 fines 126 partie civile in national proceedings, OLAF as 73–5 PATRIOT Act 2001 130, 131–2, 142 prosecutions 144 RICO 121, 126, 130–1, 135 tobacco industry, Commission’s case against the 121, 126, 129–37, 142 COCOBU (Budgetary Control Committee), relationship with accountability 37, 51–2, 61–2, 71 accused, rights of 59, 65, 66–8 annual reports 60 authorisation of disclosure 66–7, 72 budget, implementation of 62–3 Chair 66–7 COCOBU Handbook 63–4, 155–7 Commission 58–9, 155, 157

189

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 1 /

Date: 9/8

JOBNAME: Stefanou PAGE: 2 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index confidentiality 59–61, 63–9, 71, 155–7 conflicts of interest 69 Director General 60–2 disclosure 59–61, 63–9, 71–2 Eurostat affair 63 external investigations 61–2 independence 65–6, 71 interinstitutional relationships 154–8 internal investigations 61–6, 82 mandate 62–3 MEPs 67–8 monitoring 51–2, 62–3, 154 on-the spot checks and inspections 61 over-performance 70–1 political oversight 58–9 regulatory framework 71–2 relationship with European Parliament 37, 58–71 relevant information, types of 60, 62 reporting 34, 59–60, 63–9, 70–2, 155–7 staff, confidentiality and 59–60 Staff Regulations 60, 66 Supervisory Committee 65, 67–9 UCLAF ix–x, 1, 8 whistleblowing 59, 65, 66–8 witnesses, protection of 59, 65, 66–8 COCOLAF (Advisory Committee for the Coordination of Fraud Prevention) 8, 169, 173–4 codification 86, 105, 106 collusion 148 Commission access to documents 108–11 access to EC premises 97 accountability 50, 148, 149–50 administrative checks 19 administrative investigations 150 Advisory Committee for the Coordination of Fraud Prevention 38 annulment actions 93 budget 79 civil recoveries 143 COCOBU 58–9, 155, 157 COCOLAF 174 Committee of Independent Experts 9, 10–11, 14 communications, enhancing 106 competition 83, 89, 93 complaints, review mechanism for 106–7 confidentiality 155, 157 cooperation 79, 143 corruption xii, 10, 13 Court of Auditors 9–10, 160 decisions of Secretary General, annulment of 93 delay, damages for 85 Director General 46–8, 150–1 due process 97, 98–9

Eurojust 144 European Convention on Human Rights 86, 103 European Parliament 9–14, 58–9, 63–4, 71, 150 European Public Prosecutor 181 evidence 59 failure to act actions 55 Financial Control DG XX 2, 6 immunity 98–9, 152–4 independence 7, 11–12, 27, 36–7, 46–8, 118–20, 150–4 interinstitutional relationships 150–4, 166 internal investigations 4, 7, 41–3, 78–9, 97, 98–9, 150–1 investigations 4, 7, 41–3, 78–9, 85, 97, 98–9, 150–1 joint task forces 118 legal basis of OLAF 16–17 legislation, preparation of 27 leniency 143–4 mandate of OLAF 27 media 120 member states, relationship with 143, 171, 178 on-the spot checks and inspections 13, 30 operational activities 79 part of Commission, OLAF as xii, 4–13, 27, 43, 48–9, 58–9, 70–1, 150–1, 159–60, 167, 176, 181 PIF Regulation 18–19 political oversight 58–9 priorities 171 referral obligation 4 reform 180–1 regulatory framework 36–7 reporting 49–50, 150 Review Adviser, proposal for 106–8 Santer Commission, collapse of xi–xii, 9–10, 58, 98, 144–5, 155, 179, 186 silence, right to 93 staff 7, 13, 150–3, 176 Strategic Planning and Programming Cycle 50 Supervisory Committee 54, 117–18, 151–2 tobacco industry, Commission’s case against the 121, 126, 129–37, 142 UCLAF xiii–xiv, 1–5, 7–14, 186 whistleblowing 10 Committee of Budgetary Control see COCOBU (Budgetary Control Committee) Committee of Independent Experts 9, 10–11, 14 Common Agricultural Policy (CAP) ix–x communications, enhancing 105, 106 compensation 126, 133–4 see also damages competition 35–6, 83, 86, 88–93, 141, 143–4

190

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 2 /

Date: 9/8

JOBNAME: Stefanou PAGE: 3 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index complaints 42, 105–8 complementarity, principle of 17 compulsory powers 82, 93 computers, access to staff 97–8 confidentiality see also disclosure administrative accountability 49–50 authorisation of disclosure 60, 66–8, 71–2 Chair 66–7 COCOBU 59–61, 63–9, 71–2, 155–7 Commission 155, 157 conflicts of interest 69 defence, rights of the 59, 65, 66–8 definition of confidential documents 63–4 disclosure 59–61, 63–9 documents, definition of 155–6 European Ombudsman 57 European Parliament 58, 71 exceptions 60, 65 Framework Agreement between Commission and Parliament 63–4 informed, right to be 99 intelligence 79–80 internal investigations 61–6 judicial proceedings 69 media, leaks to 96, 156–7 MEPs 67–8, 156–7 naming individuals 67–8 national auditing institutions, competences of 41 operative confidentiality 69 procedure 63–7, 155–7 proportionality 69 regulatory framework 71–2 reporting 49–50 safeguards 63–5 security arrangements 63–7, 155–7 Serious Fraud Office 69, 72 Staff Regulation 60, 66 Supervisory Committee 45 whistleblowing 59, 65, 66–8 witnesses, protection of 59, 65, 66–8 conflicts of interest 49–50, 69, 84–5 conspiracy to defraud 136 cooperation and coordination assistance 79 civil recoveries 143 Commission 79, 143 criminal law 40–1, 185–6 Eurojust 112–13, 162–4 European Parliament 157–8 Europol 112, 113, 165–6 external investigations 38–40, 78, 119 independence 119 informed, right to be 99 investigations 38–40, 78, 85, 119, 172 judicial cooperation 7–8, 27, 40–1, 146, 162–3, 177 legal basis of OLAF 16

length of cases 85 mandate of OLAF 27 member states, relationship with 169–78, 185–7 national authorities 5, 32, 119, 169–78, 185 Eurojust 162–3 external investigations 38–40 legal basis of OLAF 17 member states, relationship with 169–78, 185 PIF Convention 23 UCLAF 5, 7–9, 14, 32 on-the spot checks and inspections 102 operational activities 79, 169 PIF Convention 23 police 27, 172 refusal to cooperate 119 UCLAF 1–8, 11, 13–14, 32 core activities 77–87, 105, 106–8 corruption xii, 10, 13, 23–5 counterfeiting 126, 133–5, 137 Court of Auditors access to documents 52 accountability 48, 51–2, 149–50, 159 audit information, access to 159 budget and expenditure 159 Commission 9–10, 160 Common Agricultural Policy ix–x Director General 160 independence 151, 160 information, exchange of 51–2 interinstitutional relationships 158–60 internal investigations 159 powers 158–9 reform 159–60 reporting 71, 159–60 Review Advisor, role of 160 UCLAF ix–x, 1, 9–10, 13–14, 159 court proceedings access to documents 108–9, 111 confidentiality 69 definition of 108–9, 111 public interest 110, 111 creation of OLAF 5, 9–12, 26–9, 145–6, 155, 179 Cresson scandal 9–10, 98–9, 153 criminal law 121–9 see also European Public Prosecutor (EPP); prosecutions administrative offences 19, 20, 22, 39, 126, 185–6 Anti-Corruption Convention 24 budget 128 certainty 35–6 civil route, expansion of 121–2 competence 35–6 competition between bodies 35–6 conspiracy to defraud 136 cooperation 40–1, 185–6 corruption 23–5

191

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 3 /

Date: 9/8

JOBNAME: Stefanou PAGE: 4 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index criminalisation 3, 18–19, 21, 23–4 disciplinary and criminal procedures, relationship between 96–9 European Court of Justice 123–4 European federal crimes, proposal for 122 fines 126 Hague Programme 142 immunity 100 irregularities, estimates of extent of 128–9, 142 legal persons 21, 26 Lisbon Treaty 35–6, 121, 123–4 national auditing institutions, competences of 40–1 outcomes 124–5 penalties 24 PIF Convention 3, 20–6, 33 PIF Regulation 18–19 prosecutions, lack of 124–7, 142 reform 185 statistical comparisons 125, 128 stay of proceedings 100 unrecorded crime, extent of 128–9 criminalisation 3, 18–19, 21, 23–4 damages 55–6, 85, 94–5, 126, 130 see also compensation data protection 79–80, 92, 95, 103–4, 112–13, 160–2 defence, rights of 59, 65–8, 87–93, 97, 103, 109 definition of fraud 3, 9, 20–2, 27, 34 defraud, conspiracy to 136 delay 85, 97, 99, 119, 147–8, 169–70, 175 democratic deficit 15 deterrence 121, 126, 136, 139 diligence, duty of 83–6 Director General accountability 49–50 Acting Director 46–7 annulment actions 93 appointment 46–8 budget 28 COCOBU 61–2 Commission 46–8, 150–1 Court of Auditors 160 discretion 83 European Parliament 46–7 independence 43–8 initiation of investigations 46 investigations 46, 83, 117–18 judicial supervision 56 mandate of OLAF 28 reports 49, 60 Review Adviser, proposal for 107 staff 56, 80 Supervisory Committee 44–5, 116, 117–18 Surveillance Commission 28 disciplinary proceedings 92, 96–9

disclosure see also confidentiality; whistleblowing and actionable information access to documents 108–11 authorisation 60, 66–8, 71–2 COCOBU 59–61, 63–9, 71–2 Director General 61–2 European Parliament 71 internal investigations 61–6 investigations, protection of 61–6, 110–11 media, unwarranted disclosure to the 94–6, 156–7 operational safeguards 110–11 PIF Convention 20, 25 public interest 110 regulatory framework 71–2 Serious Fraud Office, operational activities of 72 documents access to documents 52, 90–3, 108–11, 119 definition of document 108, 111 electronic documents 108 due process 86–103 access to EC premises 82, 97, 102 access to the file 90–2 codification 86 Commission 97, 98–9 competition 86, 88 computers, access to staff 97–8 defence, rights of the 87–8, 97, 103 delay 99 disciplinary and criminal procedures, relationship between 96–9 European Convention on Human Rights 86, 103 European Court of Justice 86, 103 European Data Protection Supervisor 103–4 European Ombudsman 103 external investigations 101–3 fair hearing, right to a 88, 138 fundamental rights 86–8, 103 general principles of EU law 87 heard, right to be 89–90, 91 immunity 96, 98–9 informed, right to be 88–9 internal investigations 87, 96–101 judicial review 93–4 media, unwarranted disclosure to the 94–6 on-the spot checks and inspections 101–3 Operational Manual 86–7, 103 searches 97 sectors 86, 101–2 self-incrimination, right to refrain from 93 silence, right to 93 staff 88, 96–9 third countries 101–3 duration of investigations 85–6, 114, 116, 117 duty of care 83–4

192

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 4 /

Date: 9/8

JOBNAME: Stefanou PAGE: 5 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index electronic documents 108 enrichment requirement 25 entry, rights of 82, 97, 102 EPP see European Public Prosecutor (EPP) equivalence principle 24 ethical dimension of management 171–2 Eurojust appeals 53 Commission 144 cooperation 112–13, 162–4 criminal law 36 data protection 112–13 European Parliament 179–80 European Public Prosecutor 122 independence 48 information, exchange of 73, 112–13 interinstitutional relationships 162–4, 166 Joint Supervisory Body 53–4 judicial cooperation 162–3 Memorandum of Understanding 112, 163–4 monitoring 53 national prosecuting authorities, cooperation with 162–3 national versus EU interests 174–5 operational safeguards 112–13 role 162 territoriality 162 European Arrest Warrant (EAW) 122–3 European Central Bank (ECB) 16, 31, 38, 54, 96 European Commission see Commission European Convention on Human Rights 86, 93, 103, 115–16, 124 European Criminal Records System, proposal for 123 European Data Protection Supervisor 103–4, 160–2 European Evidence Warrant 42, 123 European federal crimes, proposal for 122 European Investigation Order 123 European Investment Bank (EIB) 16, 37–8, 63, 96, 182 European Judicial Network (EJN) 164 European Ombudsman 57, 103, 114, 140 European Parliament see also COCOBU (Budgetary Control Committee) accountability 37, 48, 51–2, 58, 70–2, 158 administrative accountability 48, 51–2, 58 annual reports 150 Code of Conduct 66 Commission 9–14, 58–9, 63–4, 71, 150 Committee on Verification of Credentials 100–1 confidentiality 58, 71 cooperation 157–8 creation of OLAF 155 defence, rights of the 59 Director General 46–7

discharge functions 59 disclosure 71 Eurojust 179–80 European Ombudsman 57 European Public Prosecutor, proposal for 157–8, 179–80 Europol 179–80 evidence 59 immunity 99, 100–1 independence 59, 62, 71 initiation of investigations 46 interinstitutional relationships 154–8 internal investigations 41, 96 MEPs 38, 62, 67–8, 71–2, 99–101, 156–7 over-performance 70–1 political oversight 59, 62 regulatory framework 37, 58–71 relationship with OLAF 58–60 62, 66, 157–8, 179–80 reporting 50–1, 59, 62, 70–1, 150 Review Adviser, proposal for 107–8 Santer Commission, resignation of 58, 155 scrutiny functions 58 Staff Regulations 60 Supervisory Committee 54 transparency 158 UCLAF ix–x, xiii, 1–2, 4, 6–7, 10–14, 155, 186 European Public Prosecutor (EPP) 122–4, 144, 186 budget 158 Commission 181 competence 122 Eurojust 122–3, 124, 164, 180 European Arrest Warrant 122–3 European Convention on Human Rights, EU’s accession to 124 European Criminal Records System, proposal for 123 European Evidence Warrant 123 European federal crimes 122 European Investigation Order 123 European Parliament 157–8, 178–80 Europol 122, 124 legal basis of OLAF 32 Lisbon Treaty 73, 124, 164, 180 mandate 180 member states, relationship with 181 partie civile in national proceedings, OLAF as 74–5 PIF Convention 21 quasi-administrative and quasi-prosecutorial function 75 reform 185 regulatory framework 73 Supervisory Committee 120 Europol appeals 53

193

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 5 /

Date: 9/8

JOBNAME: Stefanou PAGE: 6 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index asymmetrical relationship 112 civil fraud agency, creation of 144 cooperation 112, 113, 165–6 criminal law 36 data protection 112, 113 European Parliament 73, 179–80 European Public Prosecutor 122, 124 Europol Convention 164–5 interinstitutional relationships 164–6 Joint Supervisory Body 53 monitoring 53 national versus EU interests 174–5 operational safeguards 112–13 reform 185 UCLAF 13 evidence European Evidence Warrant 42, 123 European Parliament 59 on-the spot checks and inspections 102 witnesses 59, 65, 66–8, 81 executive, right to send case reports to authorities without delay or amendment by 119 experts 84 external investigations access to documents 91–2 administrative penalties 39 aid 78 areas of investigation 78 COCOBU 61–2 Commission’s Advisory Committee for the Coordination of Fraud Prevention 38 complaints 42 cooperation 78, 119 due process 101–3 European Evidence Warrant 42 guarantees 43 independence 38–43, 119 informed, right to be 88 internal investigations, distinction from 79 irregularities, nature and seriousness of 39 Judicial Advice Unit (OLAF) 39 limitation periods 39 member states 78, 101 national auditing institutions, competences of 40–2 national authorities, cooperation of 38–40 national courts 39 third countries 101 recovery of sums 39 reports 91–2 structural funds 78 supervisory role 39 third countries 78 UCLAF 1, 6, 10–13 failure to act actions 55 fair hearing, right to a 88, 138

files, access to see 52, 90–3, 108–11, 119 Financial Control DG XX 2, 6 financial penalties 21, 86, 126–7, 136, 143, 161 see also compensation; damages ‘flying squad’, proposal for a x, 1, 2 follow-ups 45, 80, 82, 92, 110–11, 161 freedom of expression 115–16 freedom, security and justice, area of 7–8, 12, 14, 23 fundamental/human rights 86–8, 103 see also due process Charter of Fundamental Rights of the EU 84, 90–1 codification 105, 106 competition 88 damages actions for non-contractual liability 55–6 defence, rights of 59, 65–8, 87–93, 97, 103, 109 duty of care 84 European Convention on Human Rights 86, 93, 103, 115–16, 124 freedom of expression 115–16 investigations, rights during 105, 106 judicial supervision 54, 55–6 operational safeguards 15–16 searches 115–16 sectors 106 silence, right to 93 staff cases 88 Supervisory Committee 54, 115 gender equality 81 general principles of EU law 84, 87, 94–5 Hague Programme 142 harmonisation 17, 23, 33, 171, 177–8 heads of businesses 25 heard, right to be 89–90, 91 historical institutionalism 145 HM Revenue & Customs (UK) 137–8 horizontal legal framework 4, 29, 82 human rights see fundamental/human rights humanitarian aid x, 10 hybrid nature of OLAF 36–7, 70, 160 immunity access to EC premises 97 Commission 98–9, 152–4 Cresson scandal 98–9, 153 criminal proceedings, stay of 100 disciplinary and criminal procedures, relationship between 96–9 due process 96, 98–9 European Parliament 96, 100–1 independence 152–4 internal investigations 32, 78–9, 96, 98–101 MEPs 99–101

194

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 6 /

Date: 9/8

JOBNAME: Stefanou PAGE: 7 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index presumption of innocence 100 Protocol on Privileges and Immunities 78–9, 100, 152–4 reasons for waiver 100–1 waiver 32, 98–101, 153–4 impartiality 83–5, 120 independence access to accounts, records, property, operations and functions, right to direct and prompt 119 accountability 48 administrative independence 36–48, 70, 72, 75, 185 budget 47, 118 COCOBU 65–6, 71 Commission 7, 11–12, 27, 46–8, 150–4 complaints, review mechanism for 107 cooperation from national authorities, rights to 119 Court of Auditors 151, 160 definition 118, 185 Director General 43–8, 151 Eurojust 48 European Evidence Warrant 42 European Parliament 59, 62, 71 executive, right to send case reports to authorities without delay or amendment by 119 external investigations 38–43, 119 immunity 152–4 initiation of investigations 46, 118, 151 interinstitutional relationships 185 internal investigations 37–8, 41–3, 150–1 mandate of OLAF 27, 28 national bodies with equivalent functions to OLAF 70 on-the-spot administrative checks and balances 38–9 operational independence 36–48, 70, 72, 75, 120, 185 operational policy, right to devise 120 reform 185 regulatory framework 36–48, 70, 72, 75 resources, identification of 118 Review Adviser, proposal for 107 self-regulation 37–8 Serious Fraud Office (UK) 70 staff 47–8, 120 stand by decisions, ability of staff to 119–20 Supervisory Committee 43–6, 54, 151–2 staff 150–3 UCLAF 6–7, 12 whistleblowing policy 119 work plans, autonomy in establishing investigative 118 zero tolerance 37

information see also confidentiality; disclosure; informed, right to be; whistleblowing and actionable information anonymous information 114–15, 140 audit information, access to 159 code of conduct 41 Court of Auditors 51–2, 159 Eurojust 73, 112–13 European Ombudsman 57 Europol 73 exchange of information 8–9, 11, 40–1, 51–2, 73, 80, 112–13 intelligence 79–80 internal investigations 97 national auditing institutions, competences of 40–2 regulatory framework 73 sources of information 45 UCLAF 8–9, 11 informed, right to be competition 88–9 confidentiality 88 cooperation 88 defence, rights of 89 due process 88–9 European Court of Justice 88–9 external investigations 88 interested parties 88 internal investigations 38, 65, 88 reasons, duty to give 88–9 subject-matter and purpose of investigations 89 whistleblowing and actionable information 114 initiation of investigations 2, 11, 46, 118, 151 innocence, presumption of 95–6, 100, 120 inspections see on-the spot checks and inspections institutions see also internal investigations; interinstitutional relationships; particular institutions (eg Commission) accountability 48 institutionalism xiii, xiv, 145, 186 maladministration 57 UCLAF ix, xi–xiv, 4–5, 8–14 integration ix, xii, 149, 176, 184, 186 intelligence 8–9, 11, 79–80, 160–1 intention 21–3, 25 interinstitutional relationships 145–66 accountability 147–9 administrative independence 185 COCOBU 154–8 Commission 150–4, 166 Court of Auditors 158–60 Eurojust 162–4, 166 European Data Protection Supervisor 160–2 European Parliament 154–8

195

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 7 /

Date: 9/8

JOBNAME: Stefanou PAGE: 8 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index Europol 164–6 historical institutionalism 145 independence 185 Inter-Institutional Agreement 30–1, 37–8 internal investigations 30–1, 37–8 judicial cooperation 146 macro approaches 145–6 micro approaches 145–6 new institutionalism 145, 186 reform 185 internal investigations access to EC premises 97 challenges from other EU institutions and bodies 96 COCOBU 61–6 Commission 41–3, 78–9, 97, 98–9, 150–1 communications, enhancing 105, 106 complaints 42 computers, access to staff 97–8 confidentiality 61–6 Court of Auditors 159 defence, rights of the 97 delay 99 disciplinary and criminal procedures, relationship between 96–9 disclosure 61–6 due process 87, 96–101 European Central Bank 31 European Parliament 41, 96 exchange of information, code of conduct on 41 immunity 32, 78–9, 96, 98–101 independence 37–8, 41–3, 150–1 information 41, 97 informed, right to be 88 Inter-Institutional Agreement 30–1, 37–8 legal basis 30–1 mandate of OLAF 27, 29, 30–2 notification of investigations 38, 65 operational rules 31 purpose, delimitation of 30 reluctance to participate 38 reporting 41 searches 97 staff 78, 96–9 UCLAF 4, 7, 11, 13 international organisations, work with 79 investigations see also external investigations; informed, right to be; internal investigations administrative investigations 26–7, 36, 78, 150 Commission 85 competition 83 conduct of investigations 28 conflicts of interest 84–5 cooperation and coordination 85, 172 delay 85

Director General 83, 117–18 disclosure 110–11 discretion for opening investigations 83 duration 85–6, 114, 116, 117 European Investigation Order 123 external investigations 78 follow-ups 45, 80, 82, 92, 110–11, 161 fundamental/human rights 105, 106 independence 118 informed, right to be 88–9, 114 initiation of investigations 2, 11, 46, 118, 151 internal investigations 78–9 operational activities 78–9, 83, 85–6 outcomes, right to be informed of 114 partie civile in national proceedings, OLAF as 74 proportionality 85 reactive investigations 80 subject-matter and purpose of investigations 89 Supervisory Committee 85, 116–19 threshold for opening investigations 83 work plans, autonomy in establishing investigative 118 irregularities breach of EU law, as 17 Commission 128 complementarity, principle of 17 definition 3 estimates of extent 128–9, 142 external investigations 39 intention 22 limitation periods 18 mandate of OLAF 30 mens rea 17, 19, 22 nature and seriousness 39 notification 30 PIF Convention 21–2 PIF Directive 3 PIF Regulation 17, 18–19, 33 Italy, independence of Guardia di Finanza in 70 journalists’ sources, right not to reveal 115–16 judicial cooperation 7–8, 27, 40–1, 146, 162–3, 177 judicial review/supervision accountability 51–8 annulment acts 54–5, 93–4 damages actions for non-contractual liability 55–6 Director General 56 due process 93–4 European Ombudsman 57 failure to act actions 55 fundamental freedoms and rights 54, 55–6 indirect review 56 informed, right to be 89

196

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 8 /

Date: 9/8

JOBNAME: Stefanou PAGE: 9 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index provisional measures 94 quasi-judicial function 53–4, 71, 74 Staff Regulations 56 Supervisory Committee 53–5, 58, 71 judiciary see also judicial review/supervision accountability 48, 51–8 cooperation 7–8, 27, 40–1, 146, 162–3, 177 European Judicial Network 164 Judicial Advice Unit 39 supervision 51–8 UCLAF xiv, 7–8 jurisdiction 25, 33

accession countries 172 attitudes of citizens 170–1 COCOLAF (Advisory Committee for the Coordination of Fraud Prevention) 169, 173–4 Commission 143, 171, 178 cooperation 169–78, 185–7 delay in prosecutions 169–70, 175 ethical dimension of management 171–2 European Public Prosecutor 181 external investigations 78 formal relationship 169, 184 harmonisation of criminal law 171, 177–8 informal relationship 169, 171–2, 184 national versus EU interests 174–8 neofunctionalism 176 OAFCN (OLAF Anti-Fraud Communicators Network) 171–2, 175 on-the spot checks and inspections 102, 169 operational cooperation 169 police forces, cooperation agreements with 172 policy window of opportunity 178–81 prosecutions, lack of 169–70, 176–7 spillover effect 177 staff 80–1, 175–6 state sovereignty 176, 186 mens rea 17, 19, 22 misapplication of funds 20–1, 25 money laundering 132, 133–4 monitoring administrative accountability 48, 51–3 COCOBU 51–2, 62–3, 154 Eurojust 53 European Parliament 48, 51–2, 58 Europol 53 judicial supervision 51–3 Supervisory Committee 116–17

Kosovo 79 legal basis of OLAF 15–32 Articles 317 and 325 of Treaty 15–17, 32–3 Lisbon Treaty 32 OLAF Decision and its Supplementing Instruments 26–31 PIF Convention and protocols 20–5 PIF Regulation 16–19 legal persons 21, 26 legal proceedings see court proceedings legal professional privilege 111 leniency 141–4 length of investigations 85–6, 114, 116, 117 Lisbon Treaty criminal law 35–6, 121, 123–4, 164, 180 European Public Prosecutor 72–3, 124, 164, 180 legal basis of OLAF 32 regulatory framework 72–3 UCLAF 3 maladministration 57 mandate of OLAF 15–34 media Commission 120 committees, communications through 96 confidentiality 95, 156–7 costs 95 damages 94–5 data protection 95 disclosure 94–6, 156–7 due process 94–6 European Court of Justice 94–5 independence 120 journalists’ sources, right not to reveal 115–16 OAFCN (OLAF Anti-Fraud Communicators Network) 171–2, 175 policy, right to devise own 120 presumption of innocence 95–6, 120 reparations 94–5 member states, relationship with 169–81 see also national authorities; national laws and practices

national authorities access to documents 91 auditing institutions 40–2 cooperation 5, 32, 119, 169–78, 185 Eurojust 162–3 external investigations 38–40 legal basis of OLAF 17 member states, relationship with 169–78, 185 PIF Convention 23 UCLAF 5, 7–9, 14, 32 Eurojust, cooperation with 162–3 equivalent functions to OLAF, bodies with 70 external investigations 38–40 legal basis of OLAF 17 mandate of OLAF 27, 29 member states, relationship with 169–78, 185 national versus EU interests 174–8 on-the spot checks and inspections 102

197

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 9 /

Date: 9/8

JOBNAME: Stefanou PAGE: 10 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index parliamentary committees, reporting to 69–70 PIF Convention 23 priorities 170, 175 staff 81–2 UCLAF x–xi, 3, 5, 6–9, 14, 32 national court proceedings, OLAF staff as witnesses in 81 national laws and practices access to documents 111 administrative offences 22 definition of fraud 21–2 legal basis of OLAF 16 PIF Convention 21–5 PIF Regulation 18 strengthening laws 171 national officials, definition of 23–4 national versus EU interests 174–8 ne bis in idem 22–3 neofunctionalism ix, xi–xii, 149, 176 new institutionalism xiii, xiv, 145, 186 non-contractual liability, damages for 55–6 non-disclosure see disclosure notification see informed, right to be OAFCN (OLAF Anti-Fraud Communicators Network) 171–2, 175 OLAF Decision and its Supplementing Instruments 26–31 Ombudsman 57, 103, 114, 140 on-the spot checks and inspections access to premises, refusal of 102 assistance of national authorities 102 authorisation 103 budget 102–3 checks and balances 38–9 COCOBU 61 Commission 13, 30 due process 101–3 evidence, preservation of 102 external investigations 78 independence 38–9 legal bases 78 mandate of OLAF 29–30 member states 102, 169 non-cooperation 102 On-the Spot Checks and Inspections Regulation 3–4 own resources 30 PIF Convention 29–30, 33 PIF Regulation 19, 29–30, 33 sectoral checks 101–2 territorial scope 103 third countries 102–3 UCLAF x, 1, 3–4, 13 operational activities 77–86 see also operational safeguards for persons and institutions

assistance 79 confidentiality 69 conflicts of interest 84–5 control mechanism 83 cooperation and coordination 77–86, 169 diligence 84, 85–6 duty of care 83–84 extent of powers 83 independence 36–48, 70, 72, 75, 120, 185 intelligence 79–80 internal investigations 31 international organisations, work with 79 investigations 31, 78–9, 83, 85–6 mandate of OLAF 28 policy, right to devise own 120 staff and work methods 80–2 UCLAF 2–7, 13 Operational Manual 86–7, 103 operational safeguards for persons and institutions 105–20 access to documents 108–11 anonymous information 114–15 codification of rights of persons 105, 106 communications, enhancing 105, 106 complaints, review mechanism for 105, 106–8 disclosure 110–11 Eurojust and Europol, cooperation with 112–13 European Convention on Human Rights 115–16 human rights 115 journalists’ sources, right not to reveal 115–16 OLAF Regulation 105–8, 116–17 searches 115–16 Supervisory Committee, independence and 115–20 transparency 120 whistleblowing 113–15 oral hearings 90 over-performance 70–1 own resources ix, 17, 30, 128, 149 parallel prosecutions 22–3 Parliament see European Parliament parliamentary committees, reporting to 69–70 participation, norm of 25 partie civile in national proceedings, OLAF as 73–5 passive corruption, definition of 23–4 path dependencies 160, 186–7 PATRIOT Act 2001 (United States) 130, 131–2, 142 penalties and sanctions administrative penalties 22, 39 Civil False Claims Act 1986 (US) 136 compensation 126, 133–4

198

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 10 /

Date: 9/8

JOBNAME: Stefanou PAGE: 11 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index damages 55–6, 85, 94–5, 126, 130 dissuasiveness 18 effectiveness 18 external investigations 39 financial penalties 21, 86, 126–7, 136, 143, 161 legal basis 17–18 PIF Convention 25, 33 PIF Regulation 17–18 proportionality 18 United Kingdom 127 PIF Convention 3, 9, 19–26, 33–4 PIF Directive, proposal for 3 PIF Regulation 16–19, 22, 29–30, 33 police, cooperation with 27, 112, 113, 165–6, 172 policy window of opportunity 178–81 premises, access to 82, 97, 102 preparatory measures 93 presumption of innocence 95–6, 100, 120 priorities 170–1, 175 privilege against self-incrimination 93 proportionality 18, 69, 85, 109 prosecutions see also European Public Prosecutor (EPP) civil route, expansion of 144 lack of prosecutions 124–7, 142, 169–70, 176–7 parallel prosecutions 22–3 Serious Fraud Office 125 protection of financial interests PIF Convention 3, 9, 19–26, 33–4 PIF Directive, proposal for 3 PIF Regulation 16–19, 22, 29–30, 33 provisional measures 94 public interest 84, 110, 111 Public Prosecutor see European Public Prosecutor (EPP)

Europol 185 externalisation 185 independence, definition of 185 inter-institutional aspects of operational work 185 policy window of opportunity 180–1 regulatory framework 75 Supervisory Committee 54–5, 185 regulatory framework 35–75 accountability 37, 48–58, 70–2, 75 administrative and operational dependence 36–48, 70, 72, 75 administrative investigations 36 certainty and precision, requirement for 35–6, 70 COCOBU 37, 58–72 Commission, independence from the 36–7 confidentiality 71–2 criminal law, certainty of 35–6 Director General, appointment of 47 disclosure 71–2 European Parliament, relationship with 37, 58–71 European Public Prosecutor, OLAF as chamber of 73 evaluation 70–5 hybrid nature of OLAF 35–6, 70 independence 36–48, 70, 72, 75 information, exchange of 73 legal basis for OLAF 32 legislation 34 legitimate interest, OLAF as bearer of 73–4 Lisbon Treaty 72–3 mandate 28, 32–4 partie civile in national proceedings, OLAF as 73–5 PIF Convention 26 PIF Regulation 19 quasi-judicial role of OLAF 74 reform 75 reporting requirements 71 UCLAF 2–3, 5, 9, 12–13, 32, 70 reparations 94–5 reports and reporting access to documents 91–2 administrative accountability 48–51 Annual Activity Reports 50, 51, 60, 150, 154 annual reports 45, 48–51, 60, 150 annulment actions 92 binding effects 91–2 COCOBU 34, 59–60, 63–9, 70–2, 155–7 COCOLAF 173–4 Commission 49–50, 150, 159–60 confidentiality 49–50 conflicts of interest 49–50 Court of Auditors 71 Director General 49, 60 European Ombudsman 57

quality of files 176 quasi-judicial function 53–4, 71, 74 Racketeer Influenced and Corrupt Organisations Act (RICO) (United States) 121, 126, 130–1, 135 rational choice institutionalism xiii reasons, right to 84, 88–9 recovery of proceeds 136–8 reform access to documents 108–9 civil recoveries 185 civil route, expansion of 121–2, 129–36, 186 Commission 180–1 Court of Auditors 159–60 criminal law 185 due process, codification of 185 Eurojust 185 European Public Prosecutor 185

199

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 11 /

Date: 9/8

JOBNAME: Stefanou PAGE: 12 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index European Parliament 49, 59, 62, 70–1, 150 external investigations 91–2 internal investigations 41 mandate of OLAF 28, 34 parliamentary committees, reporting to 69–70 regulatory framework 71 Supervisory Committee 45, 50, 71–2 UCLAF 159 Revenue & Customs (UK) 137–8 Revenue Rule (US) 130–2, 135 Review Adviser ad hoc adviser 107 Commission 106–8, 160 Director General 107 European Parliament 107–8 independence 107 proposal 106–8 role 160 Supervisory Committee 107–8, 117 rewards 141–2, 144 RICO (United States) 121, 126, 130–1, 135 right to a fair hearing 88, 138 right to silence 93

follow-ups 82 horizontal legal framework 82 impartiality 84–5 independence 47–8, 120, 150–3 internal investigations 78, 96–9 judicial supervision 56 location 80 member states 80–1, 175–6 national authorities, working with 81–2 national court proceedings, witnesses in 81 operational activities 80–2 quality of files 176 redirection of investigations involving OLAF staff 120 seizure 82 selection 109 Staff Regulations confidentiality 60, 66 due process 96–7 impartiality 84–5 internal investigations 78 judicial supervision 56 whistleblowing and actionable information 113–14, 139–40, 143 witnesses 81 state sovereignty 176, 186 status of staff 6–7, 13, 80, 119–20, 162 third countries 80–1 UCLAF 4, 7–8, 11, 13–14 whistleblowing and actionable information 113–14, 139–40, 143 witnesses, staff as 1 women 81 state aid 83 Strategic Planning and Programming Cycle (Commission) 50 structural funds 78 supervision see judicial review/supervision Supervisory Committee access to documents 92–3 accountability 34, 50, 70–2 administrative accountability 50 advisory function 45 annual reports 45 appointment 44 changes to role 117 COCOBU 65, 67–9 Commission 54, 117–18, 151–2 composition 44, 53, 58, 70–1 confidentiality 45 Director 44–5, 116, 117–18 enhancement of role 54–5 duration of investigations 85, 116, 117 European Parliament 54 European Public Prosecutor 120 fundamental/human rights 54, 115 independence 43–6, 54, 115–20, 151–2 investigations 85, 116–19

sanctions see penalties and sanctions Santer Commission, collapse of xi–xii, 9–10, 58, 98, 144–5, 155, 179, 186 searches 97, 115–16 sectors 86, 101–2, 106 seizure 26, 82, 129, 133–4 self-incrimination, right to refrain from 93 self-regulation 37–8 self-reporting 141 Serious Fraud Office (SFO) (UK) 69, 70, 72, 125, 138 serious fraud, threshold for 21 silence, right to 93 smuggling 126, 129–35, 137 spillover 149, 177 staff and work methods 80–2 access to documents 109 administrative measures 82 autonomy in establishing investigative in work plans 118 COCOBU 59–60 Commission 7, 13, 119–20, 150–3, 176 competence 176 compulsion 82 computers, access to staff 97–8 confidentiality 59–60 Director General 56, 80 disciplinary and criminal procedures, relationship between 96–9 due process 88, 96–9 entry, powers of 82 European Court of Justice 82 European Parliament 60

200

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 12 /

Date: 9/8

JOBNAME: Stefanou PAGE: 13 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index judicial supervision 53–5, 58, 71 mandate of OLAF 28, 29, 34 monitoring 116–17 operational safeguards 115–20 opinions 44–5 quasi-judicial function 54 reform 54–5, 185 reporting 45, 50, 71–2 Review Adviser 107–8, 117 sources of information 45 Surveillance Commission 29 termination or suspension 44 Surveillance Commission 27–8, 29 territoriality 103, 162 terrorism 132 third countries, relationships with 78, 80–1, 101–3, 182–4 tipping off 106 tobacco industry, Commission’s case against the 121, 126, 129–37, 142 transparency 60, 92, 108, 120 Treaty of Lisbon see Lisbon Treaty UCLAF accountability 7, 12 aid x budget 7 centralisation 2–3, 12 clarification of functions 2–3 COCOBU ix–x, 1 COCOLAF 8 Commission xiii–xiv, 1–14, 186 Committee of Independent Experts 9, 10–11, 14 Common Agricultural Policy ix–x coordination 1–2, 6, 8,,11, 13–14 cooperation 2–3, 4–5, 7–8, 13–14, 32 corruption xii, 10, 13 Court of Auditors ix–x, 1, 9–10, 13–14, 159 Cresson scandal 9–10 data exchange with institutions 8–9, 11 definition of fraud 9 democratic deficit 15 Directorates 2 European Parliament ix–x, xiii, 1–2, 4, 6–7, 10–14, 155, 186 Europol 13 evaluation 12–14 external aid x external investigations 1, 6, 10–13 Financial Control DG XX 2, 6 ‘flying squad’, proposal for a x, 1, 2 freedom, security and justice, area of 7–8, 12, 14 function 2–3, 6–8 genesis of UCLAF ix–x, 1–5 humanitarian intervention x

independence 6–7, 12 inquiries, initiation of 2–3 institutions ix, xi–xiv, 4–5, 8–14 intelligence and data-gathering 8–9, 11 internal investigations, conduct of 4, 7, 11, 13 judiciary xiv, 7–8 legal basis 3 legislation 3, 13, 32 Lisbon Treaty 3 mandate 34 national authorities x–xi, 3, 5, 6–8, 14, 32 OLAF, establishment of 5, 9–12, 26–7, 145–6, 179 on-the-spot checks x, 1, 3–4, 13 On-the Spot Checks and Inspections Regulation 3–4 operational framework 2–7, 14 PIF Convention 3, 9 PIF Directive 3 protection of financial interests of EU 3–5, 9, 11–12 referral obligation 4 regulation 2–3, 5, 9, 12–13, 32, 70, 160 Santer Commission, resignation of xi–xii, 9–10, 179 staff 4, 7–8, 11, 13–14 unit of Commission, as 4–13 weaknesses 5–9, 70, 155, 186 zero tolerance 10 Unit for the Co-ordination of Fraud Prevention see UCLAF United Kingdom civil recoveries 137–8 extent and impact of fraud 127 fair hearing, right to a 138 Government Accountability Project 140–1 HM Revenue & Customs 137–8 Levi Report 127 penalties, table of 127 Serious Fraud Office 69, 70, 72, 125, 138 whistleblowing and actionable information 140–1 United States Civil False Claims Act 1986 (US) 136 PATRIOT Act 2001 130, 131–2, 142 Revenue Rule 130–1 RICO 121, 126, 130–1, 135 tobacco industry, Commission’s case against the 121, 126, 129–37, 142 UNMIK (UN Interim Administration in Kosovo) 79 unrecorded crime, extent of 128–9 whistleblowing and actionable information 122, 139–42 anonymous information 114–15, 140 approved channels 114, 141 categories of officials 139

201

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 13 /

Date: 9/8

JOBNAME: Stefanou PAGE: 14 SESS: 3 OUTPUT: Tue Aug 9 13:14:31 2011

Index civil recoveries 136–7 COCOBU 59, 65, 66–8 Commission 10 conditions 114 confidentiality 59, 65, 66–8 deterrence 139 European Ombudsman 114, 140 external whistleblowers 139 good faith 114, 139–40 independence 119 internal whistleblowers 139 leniency 141–4 operational safeguards

outcome and duration of investigations, right to be informed of 114 policy 119 recovered assets, receipt of 136–7 rewards 141–2, 144 Staff Regulations 113–14, 139–40, 143 UK Government Accountability Project 140–1 United Kingdom 140–1 witnesses protection 59, 65, 66–8 staff as witnesses in national proceedings 81 women 81 zero tolerance 10, 37

202

Columns Design XML Ltd

/

Job: Stefanou

/

Division: Index

/Pg. Position: 14 /

Date: 9/8