Proceeds of Crime: EUC Report

Lord Hannay of Chiswick Excerpts

Tuesday 22nd May 2012 Lords Chamber

Moved By

[Lord Hannay of Chiswick]

To move that this House agrees the recommendation of the European Union Committee that Her Majesty’s Government should exercise their right, in accordance with the protocol on the position of the United Kingdom and Ireland in respect of the area of freedom, security and justice, to take part in the adoption and application of the proposal for a directive of the European Parliament and of the Council on the freezing and confiscation of the proceeds of crime in the European Union (document 7641/12) (32nd Report, Session 2010–12, HL Paper 295).

[Lord Hannay of Chiswick]

My Lords, I beg to move the Motion standing in my name on the Order Paper. It is in my name because I have the honour to chair the European Union Committee’s Sub-Committee on Home Affairs, which at the end of the last Session prepared the report now before your Lordships’ House.

As your Lordships know, when the House considers reports of the European Union Committee, this is almost invariably on the Motion that the House should take note of the report. In the case of this report, the Motion invites the House to agree the committee’s recommendation. The reason for this is that the report deals with draft legislation falling within the area of freedom, security and justice, and the legislation will apply to this country only if the Government exercise their right under the protocols to the treaties to take part in the legislation—in other words, if they opt into it. They have to do this within three months of the proposal being presented to the Council, which, in the case of the directive we are considering tonight, means before 15 June. The committee believes that the Government should do so, and the Motion invites the House to agree with the committee.

Last year, this Government repeated an undertaking given by the previous Government—usually known as the Ashton undertaking—that time would be found to debate opt-in reports well before the expiry of the three-month period. I am grateful that, despite Prorogation, the Government have made time available for this debate early enough for them to be able to take the views of the House into account before they formally reach a decision on whether to opt in.

Freezing and confiscation of the proceeds of crime is one of the most effective ways of fighting crime. Since criminals are much more mobile and much more ingenious about hiding these proceeds, it clearly strengthens this aspect of the fight against organised crime if such freezing and confiscation can be enforced across the whole of the European Union and not just within one country’s borders. There is current EU legislation on the subject in a series of framework decisions stretching from 2001 to 2006. Two of these establish minimum rules on freezing and confiscation of proceeds of crime. There is, however, nothing to prevent member states enacting more stringent legislation, as this country has done in the Proceeds of Crime Act 2002. The new draft directive that we are debating this evening would supersede these two framework decisions and add to them fresh powers—in particular, the power to confiscate the proceeds, despite there having been no criminal conviction because, for example, of the death or flight of the suspected person. This is a power already available to the courts of this country. My committee supports the proposal that the courts of all member states should be required to have this power.

The confiscation of the proceeds of a crime is of course an integral part of the penalty—the criminal should not be allowed to profit from their ill gotten gains—but even more important is the deterrent effect. Criminals who know that the proceeds of their crimes are likely to be confiscated may think twice before embarking on criminal activities. It is therefore a weakness in our law enforcement system that, as things are, the proceeds are not all that likely to be confiscated. The figures available are, unfortunately, very speculative, as estimates of the proceeds of crime vary wildly. In the United Kingdom one estimate is that, of the £15 billion annually criminally acquired, in 2009-10 only £154 million was recovered to the state. That is net of assets recovered for the victims and of management expenses but, even so, the proportion of the proceeds recovered cannot on any measure exceed 3%. The position in other member states is no better. The deterrent effect is thus currently small but not negligible.

The Costa del Sol has been the haven of choice for criminals to retire to and enjoy the fruits of their labours. The statistics from Eurojust show that in 2010 one case in Spain resulted in the confiscation of €112 million, with many other cases netting smaller amounts and, in addition, a number of properties, boats and luxury cars. This demonstrates the importance of all member states having these powers.

The Government have stated on many occasions their determination to pursue the fight against serious organised crime. In my view, this entails not just having adequate domestic law in the United Kingdom but bringing pressure to bear on other member states to have provisions in their own laws on freezing and confiscation which at least meet the minimum requirements laid down in this directive. The committee therefore believes that it is important that the Government should opt in to the proposal and play a constructive part in negotiating a strong directive, and support other member states which may have weaker law enforcement systems thereafter to implement the system effectively. That is where there have been doubts in the past and I hope that this new legislation will provide a basis for much more effective work in the future.

There is one aspect of the draft which has caused the committee real concern. It is a regular feature of serious crime that the criminal will launder the proceeds internationally and put them into assets in many countries. A conviction in one country will therefore be fully effective only if a confiscation order made by one court is automatically recognised and enforced in other member states. There are two framework decisions dealing with mutual recognition of freezing and confiscation orders, but the directive being discussed tonight does not deal with that topic. We hoped that the directive would repeal, replace and strengthen the provisions of all four framework decisions. Instead, it repeals, replaces and strengthens the two dealing with the making of freezing and confiscation orders, but leaves in place those dealing with mutual recognition of orders made in other countries’ courts. The committee fears that that may be an unintended consequence of the arbitrary and illogical division of the former Commission directorate of freedom, security and justice into two separate directorates, dealing respectively with justice and home affairs. I would like to hear the Minister’s views on this; perhaps he could in any case tell the House whether the Government will argue in the negotiations for the new directive to be extended to include mutual recognition provisions as well.

This is only one of a number of aspects of the directive that we would like to see raised in the negotiations. Others are detailed in our report. Some are technical, but there is one to which I should draw attention. If the Government were not to opt in, the United Kingdom would remain bound by the current provisions of the earlier framework decisions, which will thus be included in the list of those measures on which the Government have to decide—by May 2014 at the latest—whether all or none of them should continue to apply to the United Kingdom. That arises under Protocol 36 to the treaties. I am not wishing to raise that extremely interesting and sensitive issue tonight, but merely say that it is one about which your Lordships will hear more in the period ahead of us, not least from the European Union Committee, which will be carrying out an inquiry into the background to the 2014 decision in due course, and nearer that time.

We are continuing to keep the directive under scrutiny, so at this stage one matter only comes formally for decision to the House: whether or not the Government should exercise the United Kingdom’s opt-in. For the reasons I have given, the committee is firmly of the opinion that the Government should do so. I hope very much that we will hear from the Minister at the conclusion of the debate that this is their intention.

--- Later in debate ---

[Lord Hannay of Chiswick]

My Lords, first, I thank all those who participated in this short debate and have made very valuable contributions. Perhaps I may be permitted to thank in particular the noble Lord, Lord Hodgson of Astley Abbotts, whose departure from the sub-committee that drafted this report is a cause of regret to all its members, because he has made a remarkable and constructive contribution to our work over the past three years. He will be sorely missed.

I join those who spoke about Michael Collon, our clerk, who has guided this committee for so long and has now moved on to greater things. He will also be missed.

As to the points raised in the debate, I followed carefully what the Minister said. I understand the procedural complexities of the matter and the need for the Government to handle their relationship in the other place in a way that is consistent with reaching a decision on this. I admit to a scintilla of regret that the Minister could not rise to his feet this evening and say that the Government had decided to opt in, but patience is sometimes rewarded. I can see why they are in the position that they are in.

The only point that I make is that from my own experience, and I think from the experience of much of the legislation in this area, it is a better way to influence this sort of legislation effectively if one opts in and negotiates as a full negotiating partner than to have to try to do it from the outside with the use of the potential opt-in at a later stage when other people have shaped the legislation. I am sure that the Government would in those circumstances still try to exercise their influence, but in my view they would have less influence than if they opted in before 14 June. So I very much hope that that is a decision that they will come to. This may be a triumph of hope over experience, but I even hope that the scrutiny committee in the other place may take a somewhat less negative view than it has on many matters, particularly given the importance to this country of Europe-wide legislation to deal with the confiscation and recovery of assets. I do not find it believable that they should feel that it is not a reasonable objective of our national policy and in our national interests to see tougher provisions Europe-wide, not just in this country.

I hope that this debate and its outcome, which I suggest will be the House’s approval of the Motion on the Order Paper, will be factored into the Government’s consideration and will be given due weight.

Motion agreed.