European Public Prosecutor’s Office (EUC Report)
(9 years, 1 month ago)
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Baroness Corston
That this House takes note of the report of the European Union Committee on the impact of the European Public Prosecutor’s Office on the United Kingdom (4th Report, HL Paper 53).
Baroness Corston (Lab)
My Lords, it was my pleasure to serve as both a member and the chair of the Sub-Committee on Justice, Institutions and Consumer Protection. At the outset I thank my colleagues who served as members of that committee, who all brought extraordinary expertise and diligence to their work, and pay tribute to our staff. We were very fortunate in the clerks who served when I was on the committee and in our legal advisers, who were second to none. Having served for 13 years as a Member of another place, I think I can say without contradiction that the scrutiny role of the House of Lords in its European work is second to none and is recognised as such throughout the European Union.
On 17 July 2013, the European Commission published its long-awaited proposal for a European public prosecutor’s office. It is subject to the UK’s opt-in protocol, but the coalition agreement had already ruled out participation by the United Kingdom. I interject a personal note here. It seems to me to be quite a discourtesy in parliamentary terms to start a consultation process on 17 July in any year as Parliament has either risen for the Summer Recess or is about to do so. In order for us to do our scrutiny work properly, not only did it involve holiday time for staff, it meant that the committee had to come back when the House was not sitting to be able to fulfil its role. I hope that the European Commission will not persist with that kind of timetable in future.
Under the Commission’s proposal, the prosecutor would be made,
“responsible for investigating, prosecuting and bringing to judgment … the perpetrators of … offences against the Union’s financial interest”,
and would be empowered to,
“exercise the functions of prosecutor in the competent courts of the Member States”.
This organisation was going to be responsible for all fraud in the European Union. At its meeting on 11 September 2013, the Sub-Committee on Justice, Institutions and Consumer Protection, which at the time I chaired, considered the Commission’s proposal for the first time and decided to issue a reasoned opinion, challenging it on the grounds of subsidiarity. In October of the same year, this House approved the sub-committee’s proposed reasoned opinion and because the number of reasoned opinions submitted by the national parliaments reached the “yellow card” threshold, the Commission was obliged to review the proposal. It is important to point out that this was only the second time that sufficient national parliaments had ever forced the Commission to undertake such a review.
We were consequently very disappointed when shortly thereafter, in November, following its review, the Commission produced a communication in which it decided to maintain its proposed European prosecutor as originally brought forward. There was not much in the way of a reasoned argument. Following this news, in January 2014, the sub-committee agreed to launch an inquiry into the ramifications of the proposed European public prosecutor’s office for non-participating states such as the United Kingdom—but of course, the United Kingdom is not the only one. While we had our doubts about the proposal, we were also very concerned about the impact it would have on the non-participating member states, of which the UK is one, and on the ongoing relationship with the European Union’s current anti-fraud body, OLAF, and Eurojust.
We began taking evidence in March 2014. We heard from leading academics in the field, representatives of the legal profession, the current president of Eurojust and one former holder of that position, and the current director-general of OLAF. The sessions concluded with evidence from the Home Secretary. We are grateful to all those who submitted evidence to our inquiry. Unfortunately, the committee’s planned timetable was somewhat frustrated in that while the evidence sessions were well under way, following the member states’ initial discussion of the Commission’s proposal, the then Greek presidency of the Council brought forward an alternative prosecutor’s proposal, addressing some of the member states’ key concerns. The Government submitted an Explanatory Memorandum on this alternative text in June 2014.
We took the decision to postpone publication to allow all those who gave evidence to the inquiry an opportunity to consider the rival text. The committee’s subsequent report was published on 3 November 2014. My committee found a number of very significant problems with the Commission’s proposal. We were worried about the principle that the prosecutor would be responsible for investigating and prosecuting all EU fraud crimes, to the exclusion of the national bodies responsible—what is referred to in the jargon as exclusive competence. This in turn would run the risk of the prosecutor being overwhelmed from birth by an excessive workload. We also expressed doubts about the proposed centralised structure.
Unfortunately, we did not see the presidency’s text as a panacea. The committee found that the rival text raised more questions than answers. There was a lack of clarity about sharing competence for these crimes between the member states and the relevant national authorities. We also thought that the attempt to mimic Eurojust’s collegiate structure was overly complicated. As for the position of the non-participating member states, neither of the texts considered during the inquiry addressed their position at all. However, the report warned that the proposed European prosecutor could seriously undermine the UK’s relationship with the European Union’s current anti-fraud body, OLAF, and with Eurojust.
Unsurprisingly, given their long-standing opposition to the European public prosecutor’s office, the Government shared many of the committee’s concerns. There is a great deal of common ground between the committee and the Government and, as we know, that is not always the case.
Lord Spicer (Con)
I do not quite see why the committee was so surprised that it was all or nothing. As it is all going to be conducted under a different form of law from ours, it has to be, in the interests of fairness, all or nothing, does it not?
Baroness Corston
The main problem, as we saw it, was not only that the prosecutor would be completely overwhelmed but that no consideration at all was given to countries that, from the outset, would not play any part. I think that formed the basis of both our concern and the concern of the Government.
Given that there was a great deal of common ground between the Government and the committee, the Government agreed with nearly all our conclusions and recommendations. The only point of disagreement relates to the Home Secretary’s suggestion during her evidence that the United Kingdom might not be legally obliged to respond to requests for assistance from the European public prosecutor’s office. Given her doubts, the committee called for an urgent consultation by the Home Office on this matter. Sadly, our call was rejected by the Government. They cited as a reason the current lack of clarity over the prosecutor’s potential role. I accept, of course, that a lack of clarity pervades any discussion of the proposed public prosecutor’s office—indeed, this theme runs throughout the report—but I would suggest that the issue of co-operation between the European public prosecutor in whatever form and the relevant UK authorities—for example, in relation to European arrest warrants—is not going to go away.
Witnesses to the inquiry were quite clear that any weakness or failure by the UK authorities to co-operate with the European public prosecutor in this regard risked the UK being seen as a safe-haven for those suspected of committing offences against the European Union’s financial interests and for illegally obtained EU funds. The members of my former committee would not want to see the UK become, as one witness warned, the Costa del Sol of the 1980s for those who perpetrate criminal frauds against the European Union’s finances.
I again thank those who contributed to the inquiry and my former colleagues on the sub-committee, whose company I very much appreciated. No doubt we all agree that it is essential that the European Union and the UK consider the full implications of the establishment of the European public prosecutor, not only for those states that will not participate but for bringing to justice those people who commit fraud against the interests of the European Union. I beg to move.
Lord Hope of Craighead (CB)
My Lords, I congratulate the noble Baroness, Lady Corston, and her committee on the work they have done and on their very timely report on this rather troublesome issue. For the most part, I welcome the response by the Home Office to the report. I particularly welcome the Government’s decision not to opt in to the Commission’s proposal to establish a European public prosecutor’s office. I am delighted that the committee has taken the opportunity in paragraph 6 of its report to endorse that proposal.
I last worked on Sub-Committee E about 15 years ago. At that time, the splendidly named OLAF had only just been born and Eurojust was still in the course of being conceived. It was being talked about, but had not yet come into existence. Now that they have grown up, as it were, it is a real pleasure for me to cast an eye over them to see how they are getting on. As it happened, last October I attended a seminar in Florence, at which one of the delegates was from Eurojust. We enjoyed a conversation over dinner, at which she spoke with real enthusiasm about the contacts which she had in the course of her work with prosecutors in the United Kingdom. As I spent some time when I was at the Bar as a prosecutor in Scotland, I was particularly interested in what she had to say about her contacts with the Lord Advocate’s department. Here, too, she was enthusiastic about her contacts with that department and the practical value which she saw in those contacts.
Your Lordships would get much the same message if they were to read the written evidence which the committee received in March last year from Frank Mulholland QC, the Lord Advocate, to which brief reference is made in paragraph 37 of the report. He tells us that the serious and organised crime division in his department, which has an international co-operation unit, participates fully in the work of Eurojust and OLAF. That unit liaises regularly with colleagues abroad in relation to investigations and prosecutions in Scotland, as well as providing assistance to colleagues from other jurisdictions in their own investigations. He tells us that it has successfully used the assistance of Eurojust in a number of serious and high-profile cases, especially those, as in the case of VAT fraud, which are especially complicated.
The Lord Advocate describes the work that Eurojust does in the co-ordination of investigations of the different member states when dealing with cross-border crime as “extremely valuable”. He says that his department also has experience of working with OLAF and that it too carries out much valuable work, although it is fair to say that he adds that difficulties have sometimes arisen because OLAF was not engaged at a sufficiently early stage of an investigation to meet the procedural requirements of Scots law.
If I have any criticism of the report, it is the tiny point that it did not make a little more use of the Lord Advocate’s criticism. As I have said, it gets only one very brief mention in two sentences in paragraph 37. The essence of that evidence is accurately summarised in these two sentences, but it might have been helpful if some more references had been given to his evidence in the later passages dealing particularly with OLAF and Eurojust. Of course, it is possible to trace the evidence online with the assistance of the reference in footnote 98. I am particularly grateful to our Librarian for being able to do this for me. I encourage the Minister and his team to do just that, and to read what the Lord Advocate has to say. That is because one does get from it some valuable insight from someone who as a prosecutor is really in touch with what is going on on the ground.
May I mention briefly some of the points the Lord Advocate makes because I think that they add force to the points made in conclusions and recommendations 6, 7, 8 and 9, with all of which I respectfully agree? The first point is that his department does not see the need for the creation of the EPPO. It is perhaps a bit late in the day to make that point, but it does underline the good sense of the decision not to opt in to the proposal, and the reasons why he makes it are worth stressing. He says:
“There are many challenges to overcome where criminal jurisdiction is potentially viable in different Member States and the diverse rules of evidence within Europe bring their own barriers. Whilst it is recognised that organised crime is not necessarily related to a specific Member State and that the fight against crime needs to be addressed Europe wide, without an evidence based assessment relating to why existing measures and national procedures and practices are not sufficient it is difficult to come to the conclusion that a European Public Prosecutor’s Office would be able to prosecute cases more effectively than individual Member States”.
It is worth stressing the different evidential rules which arise from state to state. The complications for a central office trying to deal with that are fairly obvious. He also makes the point that,
“there is scope for further improvements to be made in the investigation and prosecution of frauds against EU interests through better use of Eurojust and OLAF and by improving working practices between Member States and those organisations”.
He believes, and one can see the force of this, that:
“It is logical that Member States use the current structures available to their full extent before consideration is given to establishing a new body with such far reaching powers”.
As for the impact that the creation of an EPPO would have on a non-participant member state, the Lord Advocate makes the point several times that there is a lack of sufficiently robust evidence to demonstrate that such an office is required. This reinforces the point made in conclusion 6 that the Commission has failed to address the EPPO’s impact on OLAF and the knock-on effect for non-participating member states. As the Lord Advocate sees it, there is a lack of information which makes these effects difficult to assess. He sees real difficulties, whichever model is adopted, whether it is exclusive competence to the EPPO in matters affecting the EU’s budget or a competence that is shared with member states. Either way, conflicts of competence or jurisdiction will arise, which would be a recipe for confusion and delay and would play into the hands of offenders and their defence teams. As the Lord Advocate puts it, a system that gives exclusive competence in some cases and a shared competence in others would result in confusion as to who is dealing with which offence, which would be highly undesirable.
As for the effect on Eurojust and OLAF, here too there is a lack of sufficient information. That is why the assurances referred to in recommendations 6 to 9 are so necessary. There is real cause for concern. This would not be so if the functions of Eurojust were to remain as they are, as Scottish prosecutors would still have the access they enjoy at present, but that is not what seems likely to happen if the proposal goes ahead.
I warmly support what the report says in these recommendations. It is important that the Government take an active role in the development of the proposal. I hope that they will draw strength and guidance from the points made by the Lord Advocate, to which I have referred. I stress that they are not motivated in the least by any kind of Euroscepticism on his part. On the contrary, he is all in favour of inter-state co-operation. He has seen on the ground the benefits that that can bring in combating fraud conducted across borders. The points are essentially practical ones made by someone who really does know what he is talking about,
Baroness O'Loan (CB)
My Lords, I speak in this debate as a member of European Union Sub-Committee E, which was so ably chaired by the noble Baroness, Lady Corston. This report deals with a subject which has much exercised the committee over the past years as the heart of it goes to how the European Union and the member states thereof seek to control crime, and particularly fraud affecting the EU.
There can be little doubt that co-operation between member states and European institutions and agencies in the fields of justice and home affairs has resulted in significant achievements in the battle against crime. Eurojust, Europol and OLAF—the European anti-fraud office—have all played their role in fighting crime. While there are deficiencies which have been identified, there can be no doubt that co-operation in the processes of investigation et cetera has facilitated effective action. The sub-committee was aware that there is a problem of hitherto unquantified fraud on the EU’s finances and it published a report on this matter.
European Union law obliges both the European Commission and member states to combat fraud on the EU’s finances, but the onus to protect the EU’s financial interests falls mainly on individual member states because they are currently responsible for administering 80% of EU funds. We found that the EU’s anti-fraud system has a number of weaknesses. The Commission cites a figure of fraud worth €404 million per annum, but we felt it offered only a glimpse of the level of fraud perpetrated against the EU’s budget. Based on the evidence we received, we felt that the actual figure is around £5 billion but may be even more. There clearly is a problem and the proposal for the EPPO is one of the initiatives intended to address this issue, but it does not really address the problem. Rather, we found that it had the capacity to create major problems both within participating member states—as the noble Baroness, Lady Corston, said, the UK would not be one at present because we would exercise our right not to participate—but also in other member states because of the capacity of the proposals to interfere with the working of the two institutions which have been really useful in the fight against crime against the EU’s financial interests: Eurojust and OLAF.
An EU body to investigate and prosecute crimes against the EU’s financial interests was provided for in Article 86 of the treaty on the functioning of the EU, which says that any EPPO would be responsible for investigating and prosecuting and bringing to judgment the perpetrators against the EU’s financial interests and that it would be empowered to exercise the functions of prosecutor in competent courts of the member states. The noble Baroness, Lady Corston, has articulated what happened when that proposal came before the sub-committee. We published a report in October 2013 which suggested that the House challenge the EPPO proposal on the very considerable grounds of subsidiarity. The House approved that opinion, and 14 other legislatures reached similar views, causing the EU Commission to review its proposal. However, it was a cursory review, and in December 2013 the Commission indicated that it would proceed with its proposal. We therefore undertook the second stage of the inquiry.
We found many problems with the current proposal for the EPPO, and many potential difficulties for the United Kingdom in the proposed arrangements and the possible UK response to them. First, the potential workload of the EPPO would be absolutely overwhelming, given the range of crimes against the EU’s financial interests. Witness after witness gave evidence to that effect, and even the Home Secretary was clear that it was impossible for anybody to give the correct figure for such crime—a view shared by the British former president of Eurojust, Mike Kennedy. The UK could not legally respond to EPPO requests for assistance, giving rise to the risk that the UK would—as the noble Baroness, Lady Corston, said—become a safe haven for illegally obtained EU funds; there would be problems for non-participating states in that the proposal might affect the capacity of Eurojust to support all member states; the proposals for shared competence between the EPPO and the member states are unclear to the extent that they may be unworkable; robust and capable monitoring of investigations and supporting fast and efficient decision-making would not be possible; and there is no clarity as to the impact of the existence of the EPPO on OLAF.
At a time when the activities and costs of the EU are under significant scrutiny, when organised crime is becoming even more effective despite the massive resources poured into the attempts to control it, and when there is deep scepticism in some quarters about the benefits of EU membership—scepticism which I do not share—the committee has called on the Government to take effective action to ensure that the UK’s interests and indeed the interests of its colleagues of the European Union are not compromised, that very clear steps are taken both here and in the Union to ensure that before any EPPO is established there are very clear rules about how its shared competence will operate, and to provide for the situation in which we do not participate but must be protected against the adverse consequences which may result. In addition, the need to protect OLAF and the assistance currently received by the UK from OLAF and Eurojust is vital.
I therefore commend the recommendations of this report to Government for implementation. I welcome their response to the report, but urge them to accept all the recommendations, notwithstanding the lack of clarity about the proposal for the EPPO’s role and operation.
Lord Pearson of Rannoch (UKIP)
My Lords, I cannot resist speaking briefly in the gap, because I think this is the first time in 25 years that I am able to congratulate an EU Select Committee on one of its reports, and indeed the Government on their reply.
I also take the opportunity to apologise for scratching last Wednesday 11 March from our debate on the competences review, or balance of power between Brussels and our Government. A long-standing family engagement meant that I could not have stayed to the end—not that I would have asked the Minister, the noble Lord, Lord Wallace, any questions. I would just have explained why the whole exercise is pretty much a waste of time that will do little to curb the appetite of the corrupt octopus in Brussels.
I will, however, take this opportunity to say that I am disappointed that the Minister, the noble Lord, Lord Wallace, took the opportunity—at col.748—to criticise me and my views on the European Union in my absence. The richest bit of this criticism was perhaps that the noble Lord opined that Euroscepticism in this country is a belief, a faith, a prejudice. Yet it is surely our Europhiles who demonstrate a disease-like blind faith in the project of European integration, which is failing before our eyes, causing great misery across the continent, and which will continue to do so until it eventually collapses.
This report and the Government are rightly critical of the Commission’s stubbornness in continuing with its plans for a European public prosecutor. I therefore thought that it might be helpful if I put the powers of the unelected Commission on the record, perhaps for the first time, so that people can see what our powerless national Government are up against.
First, the Commission enjoys the monopoly to propose in secret all EU legislation, and thus a large proportion of our national law.
Secondly, its proposals go for still-secret discussion in COREPER—the Committee of Permanent Representatives, sometimes described as EU ambassadors—where the bureaucrats from the member states negotiate their national interest, the members of the Commission having sworn allegiance to the EU and not to support any partial national interest. I have never understood how our privy counsellors square their oath of allegiance to Her Majesty with that one. That is their problem, I suppose.
Thirdly, when the proposals emerge from COREPER as pretty much a done deal, they go for ratification to the Council of Ministers from the member states, in still largely clandestine discussion, and to the European Parliament, with its powers of co-decision.
Fourthly, our Parliament can scrutinise the emerging legislation but cannot change it. Indeed, it has never done so, as we see with this proposed public prosecutor.
Fifthly, the Commission then becomes the sole enforcer of all EU law and can impose massive fines for transgression, subject only to the Europhile Luxembourg court.
Sixthly, the Commission manages the EU budget so badly that the EU’s accounts have not been signed off by its internal auditors—there being no external auditor— for the last 19 years. If a public company was in a similar position, its directors would have been in jail many years ago.
Seventhly, the Commission negotiates all our foreign trade arrangements, again badly. Singapore has had free trade agreements with India, China, Japan and the United States for 10 years, but we have none because the Commission is in charge on behalf of all the member states.
I cannot help feeling that if the British people understood the full extent of the unelected Commission’s powers, which I have set out above, and how powerless their Parliament has become in this and other matters, their dislike of our EU membership would increase even further.
I have only one question for the Minister: what happens if the Commission decides to plough on with this proposal?
Baroness Smith of Basildon (Lab)
My Lords, to return to the committee report, I thank my noble friend Lady Corston and her committee. I was also grateful for her introduction to the debate. She was extremely helpful in her narrative about the twists and turns, and the ongoing debate on this issue. It was of benefit to the House to hear about the frustrations that her committee had in dealing with some of these issues.
Other noble Lords who took part in our previous debate on this issue on 28 October 2013 will recall that the report that we then discussed and the scrutiny that the committee had provided were invaluable in the understanding and analysis of what a European public prosecutor’s office could do and was intended to do. That position remains the same. I thank my noble friend and her colleagues on the committee, including the noble Baroness, Lady O’Loan, for providing what for me, having not considered this in great detail before, is a clear and detailed report.
There are important issues, but although the premise may be very straightforward, there are complexities and differences of opinion on how they can best be tackled, which cannot be lightly dismissed or ignored because they are genuine and justified concerns. As my noble friend Lady Corston pointed out, it is not a new proposal. The idea had been discussed even before the Commission’s proposals in the 2001 Green Paper, particularly in discussions on the Nice treaty. At that time, an outline proposal was debated but then abandoned though lack of support. Concerns were expressed and discussed then. They are still being discussed and concerns remain, which have not been addressed, about the relationship between an EPPO, Eurojust and OLAF, the European Anti-Fraud Office. The European Scrutiny Committee in the other place reported that a body such as the EPPO was,
“unnecessary, particularly given the existence of Eurojust”.
Our committee took evidence from experts of exactly the same view.
It is not the first time that this has been raised and it is not the first time that it has been debated in your Lordships’ House; it is the second report of the EU Committee. However, despite the criticisms of the proposed mechanism, the issues that the proposal seeks to address are very serious. That is why the deficiencies in the proposals are so disappointing and so serious. This is not an issue that has been plucked out of thin air; it seeks to address a very genuine and serious problem. The level of fraud against the EU budget must be taken extremely seriously and action has to be taken to address it. When we last discussed the issue, the Commission estimated the level of fraud at around €5 million in each of the previous five years. That is money taken from British taxpayers. Not only do we need to take action against those responsible and bring them to justice, it is very clear that far more preventive work and action must be undertaken.
The ongoing debate is not on whether we should tackle fraud, or assess whether we are tackling it or how best to tackle it, but on whether the proposal that has been put forward for the European Public Prosecutor’s Office is the best way to deal with the problem and to bring those responsible to justice. As this report highlights and analyses, there is also the question of whether the Commission recognises the concerns that have been raised and why they were not addressed in the revised proposals. As we said, the proposals previously presented clearly breached the subsidiarity principle, and the national level approach supported by existing EU mechanisms was far more appropriate.
It was therefore unfortunate and unhelpful that, as the report makes clear, despite the response of a number of national parliaments expressing their concerns and despite the Commission being forced to review the proposals in December 2013, the Commission decided not to make any amendments but to continue with the proposal as originally intended. The noble Baroness, Lady O’Loan, referred to it as a cursory review; I think that that is a correct assessment. As a result, 14 reasoned opinions were issued by national parliaments, which clearly makes the case that there are widespread concerns across the EU—we are not the only country with such concerns and reservations. Then we had the position where, seeking compromise, the Greek presidency issued an alternative text—but that is not supported by the Commission.
So where are we now? The conclusions and recommendations of the EU Committee are not based, as we have seen so often with debates on EU legislation, on whether the committee is pro-European Union or anti-European Union. I mention that because it sometimes characterises debates. We heard earlier from the noble Lord, Lord Pearson—and whether someone is pro-EU or anti-EU can colour their judgment on anything brought forward. When we had that farce of the opt out, opt in again debates on policing and criminal justice measures, it was very clear that the Government’s position was highly political, rather than a pragmatic, principled position in the interests of tackling crime across the European Union.
I have to return to this—I know that the Minister will groan with frustration as I do—but I have never, ever had an answer from the Government to my question about the practical impact or the operational value of those EU crime and policing measures that the Government have opted out of. I suspect that their answer is that there is very little: surely no Government want to get rid of EU-wide measures that are effective in tackling crime. Either the measures that the UK has opted out of had a practical and operational effect, or it was just a political stunt. I suspect that it was the latter.
That is where the committee’s report is so useful, both for your Lordships’ consideration in this debate and for wider consideration. I hope that the Minister recognises that it is also helpful to the Government. I saw the Government’s response rather late in the day in an undated letter to the noble Lord, Lord Boswell. I do not know when the letter was sent; I was able to get a copy only today. I certainly would have appreciated a copy of that letter much sooner for today’s debate than collecting it from the Printed Paper Office earlier.
I come back to the central point about this report: it is factual, well informed and principled. I think that the frustration of the committee in looking at these issues comes across very loud and clear. On this occasion, it is frustration—I have to say—not with the UK Government but with what appears to be, and I put it politely, some intransigence on the part of the Commission. All of us need to understand how serious the issue of EU fraud and financial crime is. Being critical of the proposals put forward in no way detracts from our wish to tackle these issues or from our understanding of how serious it is. The proposals and recommendations of the committee seek, first, to address some of the problems that have arisen from the Commission’s proposals, and, secondly, to suggest how the UK could take a lead and play a key role in seeking to ensure that those issues are addressed.
It should also be recognised that the political landscape has changed—as my noble friend Lady Corston observed—in the way that these matters are considered. Any new proposal such as this would now be subject to a referendum and legislation if its adoption by the UK were to be recommended—although that is not currently the case and it seems unlikely that it will be so. What is so disappointing is that the Commission’s position does not appear to have changed and it does not appear to be designed to try to gain as much support as possible for an EU-wide body or EU-wide co-operation around the core principles and actions of tackling crime. Had the Commission wanted to garner greater support, and if it was serious about ensuring that this was workable and that other nations would sign up to it, it would have amended the proposals and had more discussions. That frustration comes through in the report. There is no doubt that tackling any cross-border crime, including—or perhaps especially—EU fraud, benefits from EU-wide co-operation.
The objections outlined in this report cannot be lightly dismissed and I was pleased to read the Government’s response. The objections deserve far greater consideration by the Commission. On the issues that were highlighted—exclusive competence and workload—evidence was given to the committee that a new body such as the EPPO would collapse under the weight of the work it was provided with. The impact on Eurojust and OLAF is important, not just in principle, but in pragmatic, operational terms: how a new body such as the EPPO could possibly be effective in practice. It seems that all those who gave evidence for the report said that the complications of such a body would make it even more difficult to prosecute than it would be without the body: first, because it would collapse under the weight of the work, and, secondly, because of its relationship with the other bodies.
It is worrying—as the report and the Home Secretary’s evidence highlighted—that the lack of attention to the impact on non-participating member states creates an unacceptable level of risk that has to be addressed. When this proposal was first discussed, it was on the basis that all member states would sign up to it; that is clearly not the case, so the issue about those member states that do not sign up to it has to be properly considered. We had a similar debate on the National Crime Agency not applying to Northern Ireland, and we see it in this debate on a far wider scale; it is clear that they have not properly looked at this issue. My noble friend Lady Corston warned that the UK could be placed at risk by being, in effect, a safe haven for illegally obtained EU funds. That is why this issue has to be considered.
I do not want to repeat the detail of the report. It is an excellent report, and it does this House a great service to be able to consider such reports. The committee’s recommendations are useful and seek to find some way forward. The Government’s response—in the time that I have had to look at it—is positive, but this is a debate that will continue for weeks, months and, I suspect, possibly for years. We often say that a committee’s report is a valuable contribution to a debate, but in this case it goes far wider than that. This report is essential reading for any Government who have to deal with this matter. I look forward to the Minister’s response.
The Parliamentary Under-Secretary of State, Home Office (Lord Bates) (Con)
My Lords, I join others in paying tribute to the work of the wider EU committees under the chairmanship of the noble Lord, Lord Boswell, and, specifically in this context, to the work of the Sub-Committee on Justice, Institutions and Consumer Protection under the chairmanship of the noble Baroness, Lady Corston.
The report is very thorough and comprehensive, and the body of evidence that it drew upon in arriving at its conclusions was substantial. Anyone who has had anything to do with EU institutions will recognise the high regard that is held throughout the European Union member states for the work of this House in carrying out scrutiny of proposals. It is therefore doubly disappointing that the concerns, which were clearly expressed in the reasoned opinion, were not taken more seriously. The yellow card system could perhaps have worked a little better in that regard. However, the Government have very much welcomed the report. The Home Secretary gave evidence to it, and we have responded to the committee and to its specific recommendations. I now want to cover some of the principal points raised during the debate.
The Government have consistently made it clear that we will not participate in an EPPO, and we have assurances from the Commission and all member states that our non-participation will be respected. We continue to take an active role in negotiations to ensure that it is, and those negotiations are ongoing. I was amazed to see that the idea of an EPPO had its genesis back in 2000 or 2001, so it has been going on for some 14 years. I do not understand why, in the words of the noble and learned Lord, Lord Hope, people are not looking at the existing structure and making what we have work better rather than seeking to develop something that is new, untried and untested. That logic escapes the Government, as it has escaped the committee.
The negotiations are contentious and extremely fluid. The focus to date has been on Chapters I to V of the proposal. Participating member states regard these as internal business matters that concern only them. In their view, it is too early to have discussions about impacts on non-participating member states. The Latvian presidency is aiming to reach a partial general approach at the June Justice and Home Affairs Council, which it hopes will firm up the basic structure of the EPPO. Yet member states still have divergent positions on many of these issues.
There are other factors in play, many of which have been mentioned today. Under negotiation are separate EU measures, such as the directive in the fight against fraud to the Union’s financial interests by means of criminal law, known as the PIF directive, as well as the Eurojust regulation. The PIF directive in particular will affect how an EPPO would deal with cases on a day-to-day basis. It is therefore extremely difficult for us to know what effect an EPPO will have on existing EU co-operation mechanisms and systems. It is also still too early for the presidency and other member states to consider how an EPPO will impact on the UK. We totally accept that, as stated by the noble Baroness, Lady O’Loan, there will be very serious implications for the UK, including Scotland, and these will need to be addressed and assessed. However, there will be a continuing need to engage closely in the negotiations, and where we deem that so-called internal issues directly affect the UK we will continue to strongly raise our concerns. We also continue to make it clear that we want to strengthen the existing—
Lord Spicer (Con)
The Minister says that there could be serious effects on the UK. Is one of those effects that we could have to go across to a different form of law?
Lord Bates
I do not think that is the particular effect that I was thinking about in this context. Clearly we have a system that works to a degree at the moment with Eurojust and OLAF as the two bodies that then refer back, in our case, to the Serious Fraud Office and the newly established National Crime Agency, which is doing very good work in tackling fraud of this nature. They are then prosecuted through a court in the UK. It is more that operational level which the Government are thinking about at this time.
Lord Hope of Craighead
I am grateful to the Minister for allowing me to intervene. The point that really gives rise to concerns for the Lord Advocate is confusion about competence and jurisdiction. At the moment we have complete clarity as to which body is entitled to prosecute in our courts. They have a complete understanding, rights of audience, and so on. Introducing this outside body would give rise to differentials and demarcations. That in itself would give rise to disputes and we would have a sort of preliminary session as to whether one body or the other should prosecute, which gives rise to delay. So it is not really a matter of resources so much as a matter of confusion, which is why the call for further detail is really so important and why I still support the line that the Government are taking.
Lord Bates
That very clearly makes the point that we are talking about, and perhaps explains why it has been impossible to find a way forward so far. I would also mention some of the challenges, which may be insurmountable, in trying to progress down this model. The Government are absolutely committed carefully to watching the negotiations and ensuring that our interests are defended.
The noble and learned Lord also asked about shared competence. Ideally member states would retain competence. It is the only way in which they could contain the elements of the Commission’s proposal that they favour. An independent prosecutor would investigate cases inside member states free of bribery and corruption. We believe that that would be the only way in which the EPPO would add any value to the fight against EU fraud. The UK would prefer the EPPO to have as little competence as possible.
In response to a number of questions raised particularly by the noble Baroness, Lady Corston, in her introduction, it is worth putting on the record and restating the fact that the UK Government are absolutely committed to the fight against fraud. We certainly cannot envisage any circumstances in which it would be tolerated that the UK could become a safe haven for fraud. We are expressing confidence in our own legal systems and existing cross-border co-operation to ensure that that does not become the case.
Lord Pearson of Rannoch
While he is on that subject, can the Minister give noble Lords any estimate of the annual amount of EU fraud across the European Union? Do we have a modern figure for that?
Lord Bates
A figure has been mentioned. I am trying to put my hand on it. I wonder whether the noble Lord would accept the Commission’s estimate of the level of fraud. Those of us who are participating in this debate are still trying to recover and see whether we are on the right track when praised by the noble Lord, Lord Pearson, on European matters. It slightly shook our confidence, but we are recovering from that, and I think we are all on the same page here.
The Commission’s estimate of the level of fraud in July 2013 in the impact assessment put EU fraud at not detectable, and therefore unknown, at around £2.55 billion a year. I am reading out this figure and am aware that it is slightly contradictory to say, “not detectable, and therefore unknown”, when the estimate is around £2.55 billion a year. But that is the Commission’s estimate.
Baroness Corston
Can I point out to the Minister that evidence given to the EU Justice, Institutions and Consumer Protection Sub-Committee before this inquiry was that the dimension of fraud against the European Union budget was probably about €5 billion a year?
Lord Bates
Yes. They are extraordinarily large and very worrying sums of money, and this Government remain absolutely committed to tackling that. We continue to support efforts by the EU anti-fraud office to tackle EU fraud, we value the role of OLAF and Eurojust, and we want to minimise disruption to current and future anti-fraud cases if an EPPO is created.
We understand that the EPPO-to-Eurojust relationship and the EPPO’s impact on OLAF will not be discussed until later in the negotiations. We also have no further information from the Commission on any plan for reform of OLAF. I appreciate that this lack of clarity makes assessment of the impact of an EPPO difficult at this stage. The Luxembourg presidency may be in a position in the latter half of this year to begin constructive discussions on EPPO interactions with other EU bodies, third countries and non-participating member states, but that is highly likely to depend on where things stand in June. As soon as there are significant developments, we will update noble Lords in the normal way.
Lord Spicer
We always used to be told that European criminal law would not incurse itself into our law, which is a different form of law. This is surely an example of the reverse; this is the incursion of European criminal law into our common law-based system. It is very serious from the point of view of this country, surely.
Lord Bates
These are important constitutional matters. I am looking across to the Benches where we have a distinguished constitutional academic and a distinguished former member of the Supreme Court, who may offer opinion, but I think I will slightly side-step the question.
Help is at hand.
Baroness O'Loan
My Lords, the proposal is that prosecutions will occur in British courts under British law. This is not a proposal that European law will be exercised in British courts, so the reservations of the noble Lord are not warranted.
Lord Pearson of Rannoch
I am not quite sure whether the Minister was attempting to answer the question that I put to him, but just to be sure I will repeat it. What happens if the Commission decides to plough on with this proposal? Are we capable of stopping it or must we just live with the muddle, the increase in fraud and the damage that will ensue, thanks to the Commission’s activities?
Lord Bates
If the Commission continues down that line, there will have to be treaty changes. Negotiations will have to take place on the implications for non-member states and third-party countries as well as for member states. However, the proposal is in such flux at the moment that trying to judge what it is is nigh on impossible at present, let alone what a future Government’s position would be in responding to it. The fact is that we would have a position, there would be a negotiation and there would have to be agreement as to how it would operate in this country. The report, which has been presented so ably today, has highlighted the many complex issues that will need to be addressed by a future Government.
Baroness Corston
My Lords, I am very grateful to all noble Lords who have taken part in this debate. While it has been a short debate, it has been an excellent one. I am very grateful to my noble friend Lady O’Loan for drawing your Lordships’ attention to the possible dimensions of fraud against the European Union, particularly so-called carousel fraud. We all take that terribly seriously and want it to be addressed, except that we do not think that the EPPO is the remedy.
I also want to reassure the noble and learned Lord, Lord Hope of Craighead, that no discourtesy at all was intended in not referring more comprehensively to the evidence submitted to us by the Lord Advocate for Scotland, Frank Mulholland QC; we found his contribution to be both cogent and persuasive and based very much on practical experience. I also want to thank the Minister for his thoughtful response.