Proposal for Council of the European Union Act establishing a Convention for the protection of the Communities financial interests (94/C 216/06) (Text with EEA relevance) COM(94) 214 final - 94/0146(CNS)

(Submitted by the Commission on 7 July 1994)

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on European Union, and in particular point (c) of the second indent of Article K.3 (2) thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Parliament,

Whereas, by virtue of Article K.1 (5) of the Treaty on European Union, measures to combat fraud on an international scale are, without prejudice to the powers of the European Community, a matter of common interest warranting cooperation under Title VI of that Treaty;

Whereas Article 209a of the Treaty establishing the European Community, Article 78i of the Treaty establishing the European Coal and Steel Community and Article 183a of the Treaty establishing the European Atomic Energy Community impose specific obligations on the Member States to counter fraud against the Communities' financial interests, without prejudice to other more general obligations incumbent on them by virtue of Article 5 of the Treaty establishing the European Community;

Whereas the Council resolution of 30 November 1993 declares that some of the questions to be dealt with in the fight against fraud injuring the Communities' financial interests fall within areas of common interest covered by Title VI of the Treaty on European Union and specifies the substantive questions to which special attention should be paid, including the definition of offences, liability, penalties, extraterritorial application and mutual assistance in criminal matters, and limitation ratione temporis;

Whereas the findings of the comparative law study requested of the Commission by the Council resolution of 13 November 1991 (1) have revealed certain inadequacies; whereas a degree of compatibility should therefore be secured between the laws of the Member States, for the specific purpose of protecting the Communities' financial interests; whereas such laws should be implemented in a consistent fashion;

Whereas (2),

1. has decided to establish the Convention attached hereto, which has been signed this day by the Representatives of the Governments of the Member States of the Union;

2. recommends the Member States to adopt the Convention in accordance with their respective constitutional requirements;

3. calls upon the Member States to lodge with the General Secretariat of the Council their instruments recording the completion of the procedures required by their constitutional rules for the adoption of the Convention;

4. requests the Secretary-General of the Council to inform the Member States of the date of entry into force of the Convention.

(1) OJ No C 328, 17. 12. 1991, p. 1.

(2) See footnote to Title III of the Convention - Judicial cooperation between Member States.

Whereas rules should be laid down to govern jurisdiction, the commencement of proceedings, extradition and mutual assistance, since the conventions concluded hitherto for mutual assistance in criminal matters are not applicable in all the Member States and do not achieve all that is necessary for the protection of the Communities' financial interests; and whereas the Member States bear the primary responsibility for detecting, prosecuting and penalizing fraud against the Communities' financial interests.

CONVENTION FOR THE PROTECTION OF THE COMMUNITIES' FINANCIAL INTERESTS

THE MEMBER STATES OF THE EUROPEAN UNION, HIGH CONTRACTING PARTIES TO THIS CONVENTION,

Having regard to Council of the European Union Act No . . . of . . ,

Whereas cases of economic and financial fraud affecting Community revenue and expenditure are often not confined to a single country and are more and more commonly committed by organized crime;

Whereas organized crime is likely to exploit the systems for collection and disbursement of Community funds with all the more impunity as national bodies of legislation provide for inadequate measures to penalize such fraud and diverge so widely as to hinder the effective protection of the Communities' financial interests;

Whereas protection of the Communities' financial interests calls for the criminal prosecution of all fraudulent conduct injuring those interests and requires the Member States, in doing so, to apply the same definition;

Whereas the principle of personal liability is the basis for criminal liability in the Member States; whereas the treatment of the different parties to the commission of an offence and the complexity of decision-making procedures within businesses necessitate changes to the laws of the Member States;

Whereas businesses play an important role in the areas financed by the Community budget, and provision must be made for them to be held liable for fraud against the Communities' financial interests where the fraud is committed with the assistance of any body, legal agent or person in those businesses who enjoys decision-making powers, whether in law or in fact;

Whereas the Member State in whose territory essential factual elements constituting the fraud occurred should, in the first instance, have jurisdiction;

Whereas transnational fraud against the Communities' financial interests is more and more highly organized and often involves several jurisdictions, whilst the rules governing the territorial extent of national laws impede the efficacy of measures to counter it,

Whereas (1)

HAVE AGREED AS FOLLOWS:

TITLE I GENERAL PROVISIONS

Article 1

Definition of the offence of fraud

1. There shall be a specific offence of fraud against the Communities' financial interests.

2. 'Fraud against the Communities' financial interests' means any act or omission contrary to Community law committed either intentionally or through gross negligence in respect of a duty of care, which has as its object or effect:

- a diminution of the Communities' own resources or other revenue, or

- the misappropriation, wrongful retention or misapplication of monies paid by the Communities.

3. Fraud against the Communities' financial interests shall apply both to revenue and expenditure provided for by the general budget and to all other revenue and expenditure managed by or on behalf of a Community institution.

4. Fraud against the Communities' financial interests includes the following acts:

- the preparation, supply, use or presentation of false, incorrect or incomplete documents or statements where information is to be furnished prior to the grant of a subsidy or the receipt of monies,

- failure to furnish information to the relevant authorities in relation to any change in the circumstances giving rise to the grant of a subsidy or the receipt of monies,

- misappropriation or dissipation of funds,

- knowingly using aid or subsidies obtained on the basis of incorrect or incomplete statements or other misleading acts.

Article 2

Attempts

An attempt to commit fraud against the Communities' financial interests shall be punishable in the same way as the full commission thereof.

Article 3

Liability

1. Any person who is a party to fraud against the Communities' financial interests may be held liable as principal offender, instigator, accomplice or receiver of stolen goods.

2. Any person who exercises legal, delegated or de facto powers within a business may be held liable for a fraud against the Communities' financial interests committed by a member of the untertaking on its behalf.

3. Any legal person shall be liable, at least to financial penalties, for any fraud against the Communities' financial interests committed by any body, legal agent or person enjoying decision-making powers, whether in law or in fact, on its behalf.

4. The heads of liability under paragraphs 1 to 3 shall not be mutually exclusive.

Article 4

Penalties

1. Fraud against the Communities' financial interests shall be punishable by a custodial sentence, by a financial penalty or by both. The subject of the fraud, including the means of transport used for its commission, and the proceeds of the fraud may be confiscated.

2. Aggravated fraud shall be punishable by harsher penalties. Aggravated fraud shall be evidenced by the following:

- the repetition of the facts,

- the premeditated nature of the act,

- the involvement of the offender as a member of a conspiracy,

- the offender's status as a public servant or officer,

- bribery of a public servant,

- involvement of amounts in excess of ECU 50 000.

TITLE II APPLICATION OF NATIONAL LAW

Article 5

National jurisdiction and obligation to prosecute

1. The Member State in which the essential factual elements constituting a fraud against the Communities' financial interests occurred shall, in the first instance, have jurisdiction to commence proceedings under its own law.

2. Rules for the determination of the concept of 'essential factual elements constituting a fraud' shall be established as implementing measures in accordance with Article 10.

Article 6

Ambit of national law

1. Where the essential factual elements constituting a fraud against the Communities' financial interests occurred in the territory of a non-member country, Member States shall treat the fraud as having been committed entirely within their own territory if:

- the benefit could have been obtained or was obtained in, or was transferred to, their territory, or

- the perpetrator of the fraud within the meaning of Article 3 is a national of one of them, or

- any act related to the fraud was performed in their territory.

2. Where paragraph 1 applies, the Member States in whose territory the suspected offender resides or is arrested shall, in the first instance, have jurisdiction to commence proceedings.

TITLE III JUDICIAL COOPERATION BETWEEN MEMBER STATES (2)

Article 7

Extradition, prosecution and limitation (3)

Article 8

Judicial collaboration (4)

TITLE IV RULES TO GIVE EFFECT TO THE CONVENTION

Article 9

Cooperation

The Council shall establish regular cooperation, with the Commission's assistance, to evaluate the operation of this Convention.

To this end a report shall be made every year on the operation of this Convention.

Article 10

Implementing measures

1. The Council, acting at the initiative of a Member State or on a proposal from the Commission, shall adopt such measures as may be necessary to give effect to this Convention.

2. The implementing measures may make provision for cooperation between Member States and the Commission for the settlement of specific cases.

Article 11

Jurisdiction of the Court of Justice

The Court of Justice of the European Communities shall have jurisdiction to:

- interpret the provisions of this Convention by way of preliminary ruling in accordance with the procedure laid down in the second and third paragraphs of Article 177 of the Treaty establishing the European Community,

- hear and determine disputes arising out of the operation of this Convention, on application from a Member State or the Commission.

TITLE V FINAL PROVISIONS

Article 12

Publication

This Convention shall be published in the Official Journal of the European Communities immediately upon its entry into force.

Article 13

Entry into force

This Convention shall enter into force on the first day of the second month following the last lodging by a Member State of its instrument of ratification with the General Secretariat of the Council.

(1) See footnote to Title III - Judicial cooperation between Member States.

Whereas the rules governing the obligation to prosecute, extradite and afford mutual judicial assistance should be applicable to all cases of fraud against the Communities' financial interests, including fiscal cases relating to excise duties, value-added tax and customs duties.

(2) Title III is not within the scope of the Commission's initiative pursuant to Article K.3 (2) of the Union Treaty. It is presented to the Council as material for reflection so as to offer a full document.

(3) Article 7

1. Member States shall, in accordance with the procedures laid down by the extradition treaties and agreements to which they are parties, extradite a person against whom proceedings have been commenced by the requesting Member State where the act or acts of which he is accused constitute or may constitute fraud against the Communities' financial interests.

Extradition shall not be refused solely on the ground that the offence is a fiscal offence, or because double criminality is a precondition.

Member States shall extradite sought for the purpose of enforcement of a criminal penalty or preventive measure imposed for fraud against the Communities' financial interests.

2. If the Member State in whose territory the suspected offender resides or is arrested declines to extradite him on the ground that he is a national, that Member State shall submit the case to its competent authorities in order that proceedings may be brought if they are considered appropriate. For this purpose, it shall request the transfer of proceedings from the Member State having jurisdiction in the first instance.

That Member State shall then treat the fraud as having been committed in its own territory.

3. Any event which suspends limitation periods in the applicant Member State shall have like effect in the Member State applied to, and vice versa.

(4) Article 8

1. Member States shall afford mutual assistance in all judicial proceedings commenced in respect of fraud against the Communities' financial interests.

2. For the purposes of this Convention, judicial assistance shall extend to:

- investigations, including the hearing of witnesses, experts and persons undergoing examination, carriage to the locus in quo and the preparation of expert reports,

- submission of evidence, case files and documents,

- delivery of procedural documents and judicial decisions,

- submission of extracts from court or police records, accompanied by all relevant information,

- searches and seizures,

- notification of documents seeking for the enforcement of penalties and similar, including the recovery of fines and costs,

- measures for the enforcement of fines, including orders for confiscation within the meaning of Article 4 (1).

3. Judicial collaboration shall be afforded in respect of all acts constituting fraud against the Communities' financial interests.

Double criminality shall not be a precondition.

4. Requests for judicial collaboration and responses to them may be made direct between the relevant judicial authorities. Each request and accompanying documents shall be translated into the language, or one of the languages, of the State applied to. A copy of the request and of the response shall be sent to the relevant Ministries of Justice and the Commission.

5. Requests for judicial collaboration shall as a general rule be acted upon in accordance with the rules of the State applied to. They may, however, be acted upon in accordance with the rules of the applicant State if such rules are expressly set forth in the request and are not in conflict with the rules of the State applied to.