Opinion on the proposal for a Council Regulation (EC) on measures to be taken in dealing with certain beneficiaries of operations financed by the Guarantee Section of the EAGGF () (94/C 393/16)

On 14 July 1994 the Council decided to consult the Economic and Social Committee, under Articles 43 and 198 of the Treaty establishing the European Community, on the abovementioned proposal.

The Section for Agriculture and Fisheries, which was responsible for preparing the Section's work on the subject, adopted its Opinion on 1 September 1994 (Rapporteur: Mr Bastian).

The Economic and Social Committee unanimously adopted the following Opinion at its 318th Plenary Session held on 14/15 September 1994 (meeting of 14 September).

SUMMARY

Subject to the amendments and additions proposed below, the Committee endorses the proposed Regulation.

The Committee deplores the fact that in the field of measures to curb fraud, a field in which discreet action is required, informal cooperation between the Member States is not enough to bring about a sizeable reduction in the number of cases of fraud attributed to operators.

The Committee trusts that the more binding regulatory framework proposed by the Commission will measure up to the task of curbing this type of fraud.

The main objective of the proposed Regulation is to initiate a fraud-prevention campaign based on an 'early warning system' involving the Member States and the adoption of concrete measures once a 'warning' has been issued. The Committee recommends, in particular, that the Member States' fraud departments launch an intensive campaign of preventive measures (involving, for example, increased physical inspections).

The Committee draws attention to the fact that the effectiveness of the measures will depend, to a large extent, on the readiness of each Member State to identify unreliable operators without delay and to forward relevant information on these operators as soon as there has been an administrative finding of an irregularity, in order that preventive measures may be taken in the other Member States.

1. Preliminary Observations

1.1. The general framework for EU measures to combat fraud committed against the Guarantee Committee of the EAGGF is provided by Council Regulation (EEC) No 595/91 of 4 March 1991 concerning irregularities and the recovery of sums wrongly paid in connection with the financing of the Common Agricultural Policy and the organization of an information system in this field.

1.2. Recognizing the need to avoid unnecessary multiplication of regulations, the Committee deplores the fact that it has not been possible, on the basis of the abovementioned Regulation, and in particular its Article 4, to develop more effective administrative cooperation between the Member States in respect of the communication of cases of fraud and irregularity.

1.2.1. The Committee does, however, recognize that the above Regulation does not meet all the requirements (it does not, for example, lay down any time limits for the communication of the relevant information between Member States). Furthermore, the task of the Member States is complicated by the introduction of the Single Market, the establishment of the European Economic Area, and the large number of preferential agreements signed by the European Union.

1.2.1.1. The Committee also considers that the complexity of EU rules is a factor in the increased incidence of fraud; it calls upon the EU authorities to simplify, as far as possible, the provisions which they lay down and to bear in mind at all times, when drafting the provisions, how they will be able to monitor their effective application, with the collaboration of the competent authorities in the Member States.

1.3. Although the Proposal for a Regulation covers only a number of types of fraud committed against the budget of the Guarantee Section of the EAGGF, it nonetheless complements the existing instruments for combating fraud and should contribute towards the general strengthening of the measures to combat fraud which the EU authorities have been pursuing in collaboration with the Member States.

1.3.1. The Committee would point out that fraud is not limited to operations financed by the Guarantee Section of the EAGGF - all operations financed by the EU may fall victim to fraud.

1.4. In the Committee's view, the Regulation proposed by the Commission is an appropriate, necessary contribution to the pursuit - as advocated by the Copenhagen European Council on 21 and 22 June 1993 - of the campaign against fraud and irregularities affecting the EU budget and, in particular, fraud committed by the various economic operators in connection with the tendering procedures, the granting of export refunds and sales at reduced prices of intervention products.

1.5. The Committee welcomes the action taken by the Commission, which has made the campaign against the various economic operators, who are the main perpetrators of fraud (by volume) against the Guarantee Section of the EAGGF, one of the priorities of its anti-fraud policy in 1994. The Commission's 1993 report demonstrated that fraud in respect of refunds accounted for 22% of the cases of fraud notified to the Commission in 1993 and 68% of the sums involved (i.e. ECU 168 million of the overall total of ECU 248 million).

1.6. From a general point of view, the Committee notes that fraud against the Guarantee Section of the EAGGF damages the transparency of the Common Agricultural Policy and, as a consequence, harms the public image of farmers at a time of economic crisis and budgetary stringency. The Committee therefore approves the aim of the proposed Regulation, which is to facilitate cooperation between the competent authorities in the campaign against irregularities committed by operators.

2. General Considerations

2.1.

Respect for the principle of subsidiarity

2.1.1. Measures to combat fraud are primarily the responsibility of the Member States, who possess most of the means of action and powers. Under Article 209a of the EC Treaty, the Commission and the Member States have clear obligations and responsibilities as regards measures to combat fraud.

2.1.2. The Member States are required to arrange regular and close collaboration between the competent departments of their administrations, with the assistance of the Commission. The Proposal is fully in accordance with this legal framework since its aim is to strengthen partnership and to expand anti-fraud cooperation between the Member States.

2.1.3. The Committee notes that the Commission respects the principle of subsidiarity by excluding itself from the field of application of the proposed Regulation; only the 'competent national authorities of the Member States' will be provided with the information available under the new system of identification. The political significance of the proposed Regulation is, however, very considerable since it establishes a Community system requiring Member States to distribute information on certain operators and adopt preventive measures.

2.1.4. The Committee notes that the Commission does not consider it necessary for the proposed identification system to be managed on a centralized basis but it points out that, where appropriate, clearance of accounts will depend on a proper application of the proposed Regulation.

2.2.

Guarantees given to operators

2.2.1. In the Committee's view, this is the most sensitive aspect of the proposal for a Regulation since it will mean Member States accepting the principle of a systematic exchange of information on operators.

2.2.2. The Committee wishes to stress the difference between cases where it is established that an operator has committed a fraud and cases where operators are simply suspected of fraud.

2.2.3. In the former case, which is referred to in Article 1(2)(a), identification of the operator at EU level does not appear to raise any particular legal problem. Following an administrative or legal procedure, such an operator had been convicted of fraud; the Committee considers it to be absolutely essential for this information to be transmitted between Member States and for preventive administrative measures to be adopted in respect of the operator concerned.

2.2.4. In the latter case, which is referred to in Article 1(2)(b), the operator is the subject of a 'well-founded suspicion' of having committed fraud. The Proposal for a Regulation does not specify the criteria for assessing this suspicion, which is however linked to such important legal consequences as whether or not the operator will be identified in all the Member States and whether or not the measures specified in Article 3 will be invoked in respect of the operator. The Committee calls upon the Council to define these criteria as accurately as possible in its Regulation.

2.2.5. The Committee wishes to underline the seriousness of the injury to an operator unjustly identified by a Member State as presenting a risk of 'non-reliability'. It is therefore essential that the Regulation clarifies the terms 'well-founded suspicion' and that the proposed system should indeed 'have built into it a maximum of guarantees and precautions' to protect operators, as stated in the Explanatory Memorandum.

3. Specific comments

3.1.

Article 1(2)(b)

3.1.1. The Committee considers that the term 'well-founded suspicion' is too vague to be legally acceptable. The Commission intends to provide a concrete definition of the term in the implementing Regulation in the light of the substantive law of each Member State in order to avoid complicating the Regulation by technical details arising as result of the different legal situations in the Member States.

3.1.2. The Committee would, however, call upon the Council to define this term more precisely in the Regulation itself. With reference to Article 3(1) of Council Regulation (EEC) No 595/91, the Committee proposes to the Council that, for example, the following wording be adopted:

'those who are the subject of a well-founded suspicion, i.e. operators in respect to whom there has been a primary administrative finding of an irregularity'.

3.1.3. The implementing Regulation will set out the classification of 'primary administrative findings of an irregularity' established by the competent administrative authorities of the Member States with regard to operators; this classification will enable each Member State to set in motion the procedure for identification and communication provided for in the framework Regulation.

3.1.4. In the Committee's view, this will remove the legal risk of 'well-founded suspicions' resulting from a simple 'assessment' of the risk of non-reliability made by the competent authority in a Member State; the concept of 'well-founded suspicions' will be clearly defined on the basis of a precise administrative act.

3.2.

Article 2

3.2.1. In the Committee's view the final phrase of Article 2, 'or where appropriate, at the Commission's initiative', would appear to be in contradiction with a system of identifying non-reliable operators and communicating the information solely between the Member States, as established under Article 1(1).

3.2.2. The proposed wording of Article 2 may give the impression that the Commission would be able to compel a Member State to initiate an identification and communication procedure. According to the Commission's interpretation, the final phrase only relates to cases covered by Article 3(3).

3.2.3. With a view to avoiding any misinterpretation and in order to observe the principle of subsidiarity which underlies the Regulation, the Committee proposes that the passage in question be clarified as follows:

'(...) or, where appropriate, at the Commission's initiative in the case provided for under Article 3(3)'.

3.3.

Article 3

3.3.1. The effectiveness of the proposed system hinges on the measures set out in Article 3.

3.3.2. The Committee would point out that, although the agricultural regulations already include provisions whereby beneficiaries who commit serious irregularities may be temporarily or permanently excluded from benefits paid directly to farmers, there are no such EU rules covering operators.

3.3.2.1. The proposed Regulation will make good this legal shortcoming and should strengthen the preventive side of the campaign against fraud.

3.3.3. The Committee does, however, consider that it should be possible, where appropriate, for the measures set out in indents (a) and (b) to be cumulative so as to strengthen the range of sanctions available to the Member States. The Committee therefore proposes that the preposition 'or' between indents (a) and (b) be replaced by 'and/or'.

3.3.4. With a view to guaranteeing the rights of operators, the Committee also proposes that indent (b) be amended to read as follows:

'b) suspension of the payment of the amounts in respect of operations in progress to be determined and, where appropriate, of the release of the security relating thereto, until an irregularity within the meaning of Article 1(2)(a) has been determined (or no such irregularity has been determined)'.

3.4.

Article 4

3.4.1.

Point 1

3.4.1.1. With a view to guaranteeing the basic rights of the operators covered by the proposed Regulation, the Committee proposes that the first sentence be amended to read as follows:

'the measures referred to Article 3 must comply inter alia with the following principles ...'.

3.4.1.2. It also proposes that the following indent d) be added:

'd) a reasonable time-lag between the initiation and the conclusion of the procedures set out in Article 3(1)(a) and (b)'.

3.4.1.3. Inclusion of this indent would also help to guarantee the economic interests of the operators covered by the proposed Regulation. The implementing Regulation should specify what is to be understood by the term 'reasonable time-lag' in each Member State in the light of its own national procedures.

3.4.2.

Point 3

3.4.2.1. The Committee cannot accept the proposed wording of this paragraph as it is bound to offend the legal sensitivity of the Member States; in the light of the principle of subsidiarity it would, in the Committee's view, be difficult if not impossible to ask the Member States to make changes to their national laws on the confidentiality of judicial investigations for the sake of the application of this one Regulation.

3.4.2.1.1. By way of contrast, it is stated in one of the recitals to Council Regulation (EEC) No 595/91 that 'national rules relating to criminal proceedings or mutual assistance between Member States at judicial level in criminal matters must not be affected by the provisions of this Regulation'.

3.4.2.2. The Committee understands the reasons why the Commission has inserted this paragraph; it frequently happens that when the Commission asks for information with regard to an operator, cooperation is refused on the grounds of the confidentiality of judicial investigations.

3.4.2.3. According to the Committee's understanding of the proposed Regulation, however, this problem does not arise because:

- the information referred to in Article 1(2)(b) relates to an administrative phase to which the confidentiality of judicial investigations does not apply;

- the information referred to in Article 1(2)(a) implies that the operator has:

7 either admitted having committed fraud and agreed to pay a fine to the competent administrative department of the Member State, which could then decide not to initiate (or to terminate) legal proceedings; in this case the confidentiality of judicial investigations does not apply (or no longer applies);

7 or been convicted by the courts, in which case the confidentiality of judicial investigations no longer applies.

3.4.2.4. The Committee proposes that Article 4(3) amended to read as follows:

'In the case of operators as referred to in Article 1(2)(b), Member States shall take all the necessary measures to ensure the earliest possible transmission between the appropriate national authorities of information which they have gathered in the course of the administrative phase of the procedure for establishing that fraud has been committed or attempted.'

3.4.2.4.1. For the same reasons the Committee proposes that the penultimate recital of the proposed Regulation be amended to read as follows:

'Whereas a maximum of guarantees must be provided to operators in the implementation of this Regulation in order to ensure that it does not have unjustified or disproportionate damaging effects on the operators concerned.'

3.4.2.5. The Committee also calls for the following new point 4 to be added:

'This Regulation shall be implemented in accordance with existing EU and national provisions governing the protection of personal data.'

3.4.2.5.1. The Committee considers that this clarification is necessary in order to guarantee all the basic rights of the operators.

Done at Brussels, 14 September 1994.

The President

of the Economic and Social Committee

Susanne TIEMANN

() OJ No C 151, 2. 6. 1994, p. 13.