CHECK AGAINST DELIVERY
The original proposal for this Directive was communicated by the EU Commission to the Council on 12 July 2012. It aimed to replace what is known as the PIF Convention of 1995 and its protocols.
The proposal contained a requirement for Member States to criminalise various forms of fraud and corruption which damage the financial interests of the Union along similar lines to the 1995 Convention. The Commission’s proposal went further to address procurement related offences, to encompass VAT, to require mandatory minimum sentences, and to require minimum prescription (or statute of limitations) periods. Most controversially, the Commission’s proposal was based on Article 325 of the Treaty on the Functioning of the European Union (TFEU). A majority of Member States, with the support of the Council’s Legal Service, objected to Article 325 as a legal base for criminal law measures as they are of the view that criminal law measures must be based on an article within Title V of Part 3 TFEU (Articles 67 to 89) concerning an area of freedom security, and justice.
Following lengthy negotiations at the Working Group, Counsellor and COREPER level the Justice and Home Affairs Council agreed on 6 June a Council General Approach on the proposed Directive. The Government has decided that Ireland should opt in to this General Approach in accordance with Protocol 21. In accordance with Article 29.4.7 the approval of the Houses is sought to that course.
The General Approach is significantly different from the Commission’s original proposal in a number of areas. The scope excludes VAT and is limited to expenditure in the form of grants and subsidies or cases where intention to make an unlawful gain or cause a loss can be proven. Procurement related offences have been removed. There are no mandatory minimum prison sentences, only minimum levels of maximum sentences. The prescription provisions are significantly modified. Most importantly, however, the Council agreed the General Approach on the understanding that the legal basis for the measure would be Article 83 (2) TFEU.
On foot of this agreement on a General Approach, the Council noted that 6 June would mark the commencement of the opt-in period for Ireland and the UK in accordance with Article 3 of Protocol 21 to the Treaties.
The General Approach will form the basis for the Council’s engagement in trilogues with the European Parliament and the Commission.
The 3 month period in respect of this proposal will expire on 6 September.
Purpose of the draft Directive
The purpose of the draft Directive is to move the basis for criminal laws to protect the financial interests of the EU from the 1995 PIF Convention to a basis under the provisions of the Lisbon Treaty. There is an added significance to the proposed Directive in that Article 86 TFEU provides for the possible establishment of a European Public Prosecutor’s Office (EPPO) which would have responsibility for investigation and prosecuting offences against the Union’s financial interests. Participation in EPPO, if a proposal is advanced, will be optional for Member States.
Provisions of the Council’s General Approach to the Proposed Directive
The key provisions in the Council’s General Approach to the proposed Directive are as follows:
Article 83 (2) is the legal base for the measure. (Preamble)
VAT revenues are excluded from the definition of the Union’s financial interests. (Article 2)
The definition of fraud affecting the Union’s financial interests is limited to expenditure in the form of grants and subsidies or cases where intention to make an unlawful gain or cause a loss can be proven. (Article 3)
Article 4 provides for fraud-related offences affecting the Union’s financial interests - money laundering, corruption and misappropriation. It also defines "public official" which has a particular relevance for those offences.
Article 5 addresses incitement, aiding and abetting and attempt to commit offences.
Article 6 addresses the liability of legal persons
Article 7 requires that offences are punishable by criminal penalties. "serious offences" – a matter for Member States to define in their own law – must be punishable by a maximum penalty of at least four years imprisonment.
Article 8 requires that the commission of offences as part of a criminal organisation shall be regarded as an aggravating circumstance.
Article 9 addresses sanctions for legal persons.
Article 10 relates to the freezing and confiscation of the proceeds and instrumentalities of offences.
Article 11 requires Member States to assert jurisdiction over offences committed wholly or partly in their territory or by their citizens.
Article 12 requires a prescription (statute of limitations) period of at least 5 years for "serious offences". Recital 19 clarifies that this is without prejudice to Member States (such as Ireland, UK and Cyprus) which do not set limitation periods.
Article 13 refers to the recovery of sums unduly paid.
Article 14 is intended to ensure that the imposition of administrative sanctions provided for in Regulation 2988/95 relating to the Union’s financial interests will not be prejudiced by the proposed Directive.
Article 15 provides for cooperation with the European Anti Fraud Office (OLAF).
Article 16 provides for the replacement (not repeal) of the 1995 PIF Convention for those Member States participating in the Directive.
Articles 17 to 20 deal with transposition, reporting on implementation, entry into force and the usual formalities.
Issues which arise for Ireland
While the original Commission proposal contained some elements of concern to Ireland, such as mandatory minimum sentences and a legal base other than in Title V of Part 3 TFEU, the General Approach agreed by Council does not present any significant difficulties for Ireland.
Much of the content of the proposed Directive replicates the PIF Directive of 1995 which was provided for in Part 6 of the Criminal Justice (Theft and Fraud offences) Act 2001. While a preliminary examination of the proposal in its present form indicates that Part 6 may need to be replaced, it is not envisaged that the replacement provisions will be substantially different to those in Part 6. When negotiations have concluded, the final text of the instrument will be examined in conjunction with the Office of the Attorney General to establish the precise legislative requirements necessary to give full legislative effect to the Directive in Irish law.
Conclusion
The proposed directive will bring the law in this area under the framework of the Lisbon treaty. It will further harmonise the approach across the EU to the criminalisation of fraud affecting the Union’s financial interests. Our own interests as a Member State are better protected by this measure and by our participation in its negotiation and implementation. I commend the motion to the Committee.
ENDS