European Public Prosecutor’s Office: EUC Report

Lord Rowlands Excerpts

Monday 28th October 2013 Lords Chamber

Moved by

[Lord Rowlands]

That this House takes note of the Report of the European Union Committee on the Commission proposal for a Council Regulation on the establishment of the European Public Prosecutor’s Office (COM(2013)534, Council Document 12558/13) (3rd Report, HL Paper 65).

[Lord Rowlands (Lab)]

My Lords, I beg to move the first Motion on the Order Paper in the name of the noble Lord, Lord Boswell. The noble Lord, Lord Boswell, and the noble Baroness, Lady Corston, present their apologies. Both are attending the COSAC meeting in Vilnius. As a member of Sub-Committee E, which prepared this report, I have the pleasure of inviting the House to agree to its recommendation. That recommendation is that the House issue a formal reasoned opinion that the Commission’s proposal to create a European Public Prosecutor’s Office breaches the principle of subsidiarity.

The principle of subsidiarity enshrined in Article 5 requires that the EU should take legislative action,

“only if and in so far as the objectives of the proposed action cannot be sufficiently achieved by the Member States … but can rather, by reason of the scale or effects of the proposed action, be better achieved at Union level”.

No one now denies that there are significant problems with European Union fraud. Indeed, it was our committee which sought to highlight this point in its April report when it suggested that European fraud now ran to the tune of about £5 billion a year. We recognise that there are considerable shortcomings in the system for combating such fraud. We are not arguing this evening that one does not need to address these issues seriously but about in what way one should address them.

The Commission has now come up with the proposal that the way to deal with European fraud is to create a new supranational European body, with an independent power to investigate and prosecute EU fraud offences in national courts, called the European Public Prosecutor’s Office, or EPPO. Our report outlines, in detail, the structures and powers of the proposed public prosecutor’s office. I will identify some of the features that concern us most. The European Public Prosecutor’s Office will have a very wide jurisdiction as to what it investigates and prosecutes. Although the definition of European fraud has yet to be firmly fixed, it will be very likely to encompass any act or omission which has the effect of wrongly acquiring or retaining EU funds or assets or which results in the diminution of European Union revenue. It would include, for example, incitement, aiding and abetting such offences, and corporate criminal liability.

The committee was particularly concerned about the proposal for the prosecutor’s office to gain exclusive jurisdiction over any other offence which is inextricably linked to a European fraud offence. That has the considerable capacity to further expand and involve the office in national jurisdictions and expand its own jurisdiction. We should all be concerned at the nature and potential character of that proposal.

The proposed office will also have exclusive power to investigate and prosecute a wide range of offences. It will have a wide range of investigative powers such as the right to search premises and intercept telecommunications, to be exercised in accordance with national law and subject to obtaining a judicial warrant where national investigators would be obliged to obtain one. It can require information and assistance from national authorities. The proposals also suggest that it can operate under its own rules on the admissibility of evidence.

The committee, in considering these proposals, concluded that the proposal fails the subsidiarity test. The report lists nine bullet points at paragraph 14 to justify that opinion. I will briefly underline or summarise a few of them. First, we suggest that there are better alternatives, based on the current framework, which is built on criminal enforcement by member states. More can be done to prevent fraud happening in the first place through good quality legislation and careful administration of resources by the Commission and member states. We should remember that 80% of all European Union funds are administered by member states themselves. That is a vital factor, which should be taken into account. Co-ordinated action needs to be improved, but we do not believe that this particular proposal for this particular kind of office is justifiable.

The EPPO would undermine the effectiveness of existing EU fraud-fighting organisations such as Eurojust and OLAF. Giving the EPPO exclusive competence would create an unnecessary faultline between national and European Union efforts to counter fraud, introduce complication, and risk the moral hazard that member states will feel that they can leave EU fraud to the European Public Prosecutor’s Office. By contrast, it must be a shared responsibility, particularly given that, as I emphasise again, 80% of all European Union funds are administered by the member states themselves. Our committee was concerned that the proposal would interfere disproportionately in the sensitive area of member states’ criminal law systems, by conferring exclusive powers on the public prosecutor’s office and giving it power to dictate how finite national criminal law enforcement resources are deployed and by allowing it to operate according to its own rules on the admissibility of evidence.

Our committee found that the Commission has not made its case adequately. It underestimates the costs and overestimates the benefits of such an office, particularly as at least two member states, the UK and Denmark, will not be participating. The Government have made it clear that the UK is not going to opt into this proposal and, indeed, that a referendum would be required for it to do so. It is nevertheless, in our view, appropriate for this House to issue a reasoned opinion, and it does not absolve the House from coming to a position on the issue of subsidiarity. All national parliaments have a special role to play in monitoring compliance with subsidiarity in accordance with the treaties, and many national parliaments have been very active on this proposal.

Although Article 86 of the Lisbon treaty specifically envisaged the creation of a European Public Prosecutor’s Office, that does not undermine our reasoned opinion. First, the article is permissive. Our opinion is consistent with the treaty—we do not challenge the right of the EU to create such a body, but are saying that this particular set of proposals is far-reaching, intrusive and infringes the principle of subsidiarity. Under the subsidiarity procedures, national parliaments can force European institutions to review a proposal—it requires, as I understand it, 14 parliamentary votes across the union. Fascinatingly, there has been, in the past few weeks, a growing groundswell of parliamentary opinion across the union critical of these proposals. I understand that we have already reached 14 parliamentary votes and five more are in the pipeline including, I hope, in this House tonight. The House should support the report and our reasoned opinion, and put further pressure on the Commission to review these radical and unacceptable proposals.

[Lord Hodgson of Astley Abbotts (Con)]

My Lords, I rise to support the noble Lord, Lord Rowlands. He has laid out the case as to why this proposal to establish a European public prosecutor’s office does not comply with the principle of subsidiarity with forensic skill, and I will try to avoid repeating what he has said.

I was a member of Sub-Committee E, both at the time of issuing this subsidiary assessment and of the publication of the report, The Fight Against Fraud on the EU’s Finances. That report found that there appeared to be a significant level of fraud within the EU budget, and that official figures appeared, at least to us, to significantly underestimate the volume and value of that fraud. Therefore, at first blush one has some sympathy with a proposal that appears to have as its objective, the sharpening up of the organisational response to these defects. Further to that, our report found significant weaknesses in the work of the European anti-fraud office, known as OLAF, which included tensions between the supervisory committee and the executive arm of the agency; frequent turnover of representation so that consistent policies were not followed through; an absence of classification of fraud offences, which the noble Lord referred to; a reluctance to name and shame countries where it appeared that fraud was taking place; and last but not least, a lack of will among member states to report and follow up suspected cases of fraud.

To be fair to the commission, it has put in place a number of measures to improve OLAF’s operational efficiency, notably the regulations adopted just six weeks ago on 11 September. However, one of the more depressing features of the Brussels bureaucracy—at least to a Euro-agnostic like me—is the tendency, where an organisation is not operating up to par, not to undertake a serious attempt to improve the efficiency, but instead to pile on top of, or in this case alongside, that organisation yet another body to look after it. It is almost certain that an EPPO operating alongside OLAF and Eurojust will surely only serve to undermine OLAF’s work at this time, when the recent changes just introduced, as I mentioned, should give it a new sense of purpose and direction.

I particularly share the view expressed in the report that the anticipated costs of running the EPPO are woefully understated; a net annual cost of just €6.1 million is surely not credible. The reason for the subsidiarity judgment is that the fight against EU fraud needs to be developed from first principles, and they can be done without the introduction of the EPPO. The Commission needs to improve the clarity of its budgeting system; improve its own systems for overseeing that budget; and work more closely, where appropriate, through OLAF and Eurojust with member states so that they investigate and prosecute fraudulent activity with vigour and purpose.

The noble Lord, Lord Rowlands, quite rightly focused on the impact of this proposal on the national criminal law systems of individual member states. He was right to do so and I support him. However, I believe that even if it were possible to overcome these principle objections—and I, for the record, do not believe this would be possible—establishing the EPPO would, on purely practical grounds, likely offend the principle of subsidiarity and undermine the existing organisations of OLAF and Eurojust at the same time.

My concern on this point was underlined by the Written Statement published in Hansard on 15 October, which states:

“Vice President Reding presented her recent proposals for the creation of a European Public Prosecutor’s Office … There was support, in principle, from a large proportion of Member States … but less agreement on issues of substance, including scope; structure; competence; powers; jurisdiction and governance”.—[Official Report, 15/10/13; col. WS 52.]

In effect, the EU member states could not agree how this thing should be proceeded with on any practical level, and that is why I support this reasoned opinion.

--- Later in debate ---

[The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach) (Con)]

My Lords, I thank the noble Lord, Lord Boswell of Aynho, for tabling this debate. He cannot be here this evening because he is exercising his responsibilities as chairman of the European Union Committee. I thank the noble Lord, Lord Rowlands, for moving the Motions of the committee and its reasoned opinion on the European Public Prosecutor’s Office proposal and for presenting the issues so clearly—as does the report that the committee produced.

It is laid out in the EU treaties that the Commission must consider the principle of subsidiarity when drafting all EU legislation. It must also include a detailed subsidiarity statement in the published text. It should be,

“substantiated by qualitative and, wherever possible, quantitative indicators”.

In effect, the Commission should not only say that the principle of subsidiarity has been met but also clearly demonstrate how it has been met and provide well researched and accurate evidence. To assess this, there is a two-limbed subsidiarity test. The Commission should clearly demonstrate in its rationale and impact assessments that the objectives of a proposal cannot be sufficiently achieved at member state level—the first limb of the test—and then that the objectives of a proposal can be better achieved at EU level by reason of their scale and effect, which is the second limb and the so-called EU added-value test.

The EU treaties give this House and Parliament the right to decide whether the proposal meets both limbs of the subsidiarity test. If noble Lords believe that the Commission has failed clearly to demonstrate that EU-level action is necessary and is of added value, it is their right to say so by issuing a reasoned opinion. This is therefore a matter for Parliament and not for the Government. In the case of the European Public Prosecutor’s Office proposal published in July this year, as we know, the European Union Committee considered the two-limbed test and found that the proposal does not comply with the principle of subsidiarity. The reasoned opinion clearly lays out the reasoning. The Government agree with the European Union Committee’s assessment.

In the Government’s Explanatory Memorandum on the proposal, we made it clear that we do not believe that the principle of subsidiarity has been met in this case. We share the view that the Commission has not presented a convincing case. The figures used by the Commission to justify the EPPO are flawed and inflated, while other evidence draws on inappropriate, partial and unsubstantiated information. There are many gaps and blanks, especially in the costs of change and future funding needs. While of course the issue of fraud must be tackled at all levels—including when it involves funds that form part of the EU budget—we do not agree that the establishment of an EPPO is the right approach. The relevant legal base in the treaties—Article 86 of the Treaty on the Functioning of the European Union—says that a European Prosecutor’s Office “may” be established. The treaties do not say that it “shall” be created, yet the Commission presents that as the only solution.

The Commission has not allowed time for current reforms at national level to take effect and make a difference. For example, reforms to the European Anti-Fraud Office—OLAF—are currently being introduced to improve information exchange between OLAF and national authorities and to improve OLAF’s internal quality control. Indeed, a new regulation governing the work of OLAF entered into force only on 1 October. We hope that the improved quality of evidence provided by OLAF to national courts will address many of the conviction issues that the Commission raises in its assessment of the EU fraud problem. These changes need time to be implemented before any action is contemplated. The Commission has not considered adequately other options to strengthen the current system further. For example, it has not considered enhanced incentives or other options for reform at regional or national level in any detail or in a rigorous manner.

In the Government’s view, the best way to tackle EU fraud is through prevention. The UK has a zero-tolerance approach to all fraud, with robust management controls and payment systems in place that seek to prevent incidents of EU fraud. Additionally, we should continue efforts that are already being made to strengthen the current system. The House is also aware of our long-standing position in the coalition agreement not to participate in the establishment of any European Prosecutor’s Office. The details of the proposal serve only to reinforce that position. This proposal is unnecessary, unsubstantiated and unwelcome.

On the principle of subsidiarity, every reasoned opinion sends a political message to the Commission. If a quarter of the votes allocated to EU national parliaments were cast, the so-called yellow card would be triggered. The Commission would then be obliged to review the proposal. I am pleased to say that, as the noble Lord, Lord Rowlands, indicated, the 14-vote threshold has now been achieved in the case of the European Public Prosecutor’s Office. I firmly believe that this House should join that group and send a political signal to the Commission that its proposal does not meet the subsidiarity test.

I thank the noble Lord, Lord Rowlands, for the way in which he has presented the report of the EU Committee, members of that committee and my noble friends Lord Hodgson of Astley Abbotts and Lord Dykes for their contributions to the debate. It has been a thorough report and a good debate. I thank the noble Baroness, Lady Smith of Basildon, for her support on this issue. Time is of the essence. I understand that our votes have to be in by midnight tonight.

To conclude, this Motion is for Parliament. It is not for the Government to act. I can only encourage your Lordships to agree this reasoned opinion and exercise the right given to this House under EU treaties.

[Lord Rowlands]

Our committee will take great comfort and satisfaction in the nature of this debate and in the unanimity that exists. I will not be tempted to rise to the bait of the noble Lord, Lord Dykes, and describe my Euro-tendencies at this time, except to say that this is one of the rarer moments when he and I agree on European issues. We have not agreed in the past. We certainly can agree on this issue.

I thank all those who have spoken. The noble Lord, Lord Hodgson, rightly emphasised the changes that are occurring within the existing institutions; the door should be left open to carry them through. My noble friend Lady Smith on the Front Bench rightly said that the primary responsibility will lie with national jurisdictions. That is where 80% of the funds are administered. Article 325 of the treaty says that responsibility for dealing with European fraud lies both with the Union and with member states. This proposal is therefore in this context wrong and I am delighted that all of us who have spoken in this debate share that view.

Motion agreed.