P6_TA(2006)0438

Recovery of Community funds

European Parliament resolution on the recovery of Community funds (2005/2163(INI))

The European Parliament,

- having regard to the Commission's white paper on its reform (COM(2000)0200) and, in particular, the part thereof relating to action 96 concerning the more effective management of recovery of unduly paid funds,

- having regard to the Commission communication entitled "Improving the recovery of Community entitlements arising from direct and shared management of Community expenditure" (COM(2002)0671),

- having regard to the report from the Commission to the Council and the European Parliament on the use of the provisions on mutual assistance for the recovery of claims relating to certain levies, duties, taxes and other measures (COM(2006)0043),

- having regard to its resolution of 8 April 2003 on the discharge for 2001 [1], especially paragraphs 39 to 43 thereof,

- having regard to its resolution of 29 January 2004 on the follow-up to the discharge for 2001 [2], especially paragraphs 7 to 9 thereof,

- having regard to its resolution of 21 April 2004 on the discharge for 2002 [3], especially paragraph 7 thereof,

- having regard to its resolution of 12 April 2005 on the discharge for 2003 [4], especially paragraphs 83 to 85 thereof,

- having regard to its resolution of 7 June 2005 on the protection of the Communities' financial interests and the fight against fraud [5],

- having regard to the Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities [6], especially Article 72 thereof,

- having regard to Commission Regulation (EC, Euratom) No 2342/2002 [7] laying down detailed rules for the implementation of Council Regulation (EC, Euratom) No 1605/2002, and particularly Article 78 (3)(f) and Article 84 thereof,

- having regard to the report of the Commission to the Council and the European Parliament on the application of the implementing rules for the new Financial Regulation (COM(2005)0181),

- having regard to the proposal for a Council regulation amending Council Regulation (EC, Euratom) No 1605/2002 on the Financial Regulation applicable to the budget of the European Communities (COM(2005)0181),

- having regard to Regulation (EEC) No 595/91 [8], especially Articles 3 and 5 thereof as regards irregularities and fraud, and to Regulations (EC) Nos 1469/95 [9], 515/97 [10] and 1258/1999 [11],

- having regard to Regulation (EC) No 1290/2005 of 21 June 2005 on the financing of the common agricultural policy [12] (the new CAP Regulation), especially Article 32 thereof,

- having regard to the judgment of the Court of Justice of the European Communities in Case C-87/01 P Commission v CEMR [13],

- having regard to Article 256 of the EC Treaty,

- having regard to Rule 45 of its Rules of Procedure,

- having regard to the report of the Committee on Budgetary Control (A6-0303/2006),

A. whereas the Commission has still not implemented the detailed action plan for quantifying, identifying and explaining the use of the sums actually paid in interest and penalty fees to the agricultural payment agencies, as Parliament called for in paragraphs 39 to 43 of its above mentioned resolution on the discharge for 2001,

B. whereas Parliament noted with concern in its above mentioned resolution on the follow-up to the discharge for 2001 the absence of any such detailed plan; whereas the amounts of the Community funds recovered on a basis of shared management are not regularly entered in the EU budget,

C. having regard to the joint seminar organised in Bled, Slovenia, on 30 March 2006 by the Slovenian customs authorities and the European Anti-fraud Office (OLAF), which brought together veterinarians, health experts and anti-fraud investigators to discuss the action to be taken to combat illegal trade in agricultural products and the resultant health risks to consumers,

The Financial Regulation

1. Recalls that the Financial Regulation states that the recovery of sums owing to the EU may, should the debtor not voluntarily effect the reimbursement, be secured by judicial means or by an enforcement order obtained pursuant to Article 256 of the EC Treaty;

2. Welcomes, as far as recovery is concerned, the three proposals submitted by the Commission in the framework of the 2002 reform of the Financial Regulation, whose main features are as follows:

- recognition of the privileged nature of debts owed to the Community, on the grounds of equivalence to Member States' tax debts;

- a five-year deadline for recovery of sums owed to the Community, subject naturally to the possibility of prolonging this deadline where active steps are being taken to secure recovery; this would create greater security for the institutions and for debtors;

- making sums owed to the Community equivalent to sums owed in the civil sphere, in line with the instruments adopted in the field of civil judicial cooperation (cf. Articles 72(2), 73a and 73b of the above mentioned proposal for a Council regulation amending Council Regulation (EC, Euratom) No 1605/2002;

3. Calls on the Commission to prepare a revision of the Financial Regulation, especially its implementing rules, with a view to clarifying the exact classification in accrual terms of the sums owed in the context of different types of Community payment;

4. Recalls that this proposal is covered by Article 3(1) of the implementing rules for the Financial Regulation; recalls further that Article 105 of the implementing rules distinguishes between pre-financing, interim payments and closure of the expenditure and that a distinction is also made between pre-financing paid to Member States in performance of a contract within the meaning of Article 88 of the Financial Regulation or under pre-accession instruments and advances pursuant to Article 265 of the implementing rules for the Financial Regulation;

5. Notes that arrangements must be made to recover advance payments in cases where a project has to be discontinued owing to force majeure or for other reasons; notes also that such cases can be dealt with not by recovering the sum owed, but rather by offsetting it against a due and certain claim on the European Union by the contractual partner under another contract;

6. Takes the view that the legitimate expectations of the beneficiary should as a rule be protected where he has used the monies or made arrangements relating to the monies which cannot be cancelled or can be cancelled only subject to unreasonable penalties; is of the opinion that the beneficiary cannot invoke legitimate expectations where:

(a) he has obtained authorisation of expenditure through deliberate deception, threat or bribery;

(b) the authorisation of expenditure has been obtained by supplying information which in essential respects was incorrect or incomplete; and

(c) the beneficiary was aware of the illegal nature of the measures on which the authorisation was based or was unaware thereof owing to gross negligence;

7. Considers that the Commission should submit to Parliament, at regular intervals, an overview of outstanding amounts to be recovered broken down by the total owed per directorate-general and the length of time for which each amount has been outstanding;

8. Considers that the principles of budget universality and accuracy, as embodied in the Treaty and the Financial Regulation, must be respected by the implementing rules and the sectoral legislation;

9. Considers, furthermore, that the Member States need above all to prove their compliance with international accounting standards, and that it needs to be asked whether that could be used by the EU in order to develop a common approach in the matter;

10. Points out that, pursuant to Article 78(1)(c) of the Financial Regulation, the authorising officer may ascertain whether expenditure is consistent with the provisions of the contract, and that, before the authorising officer can forward the recovery order to the accounting officer, he must consider whether the beneficiary could legitimately expect that the expenditure would be authorised and whether those expectations should be protected given the public interest in the recovery of the sums owed;

11. Notes that too little use is made of the possibility of granting the debtor additional time for payment against the lodging of a guarantee and payment of default interest pursuant to Article 85 of the implementing rules for the Financial Regulation with a view to recovering at least a part of the sum owed;

12. Notes that, in most cases, recovery is effected by offsetting the sum owed against a debt payable to the contractual partner, if the conditions governing offsetting have been met; notes also that in cases where offsetting is not possible, the sum owed can ultimately be recovered only by threatening the contractual partner with the discontinuance of his services unless he repays the sum owed;

13. Considers it important to point out that the authorising officer should inform OLAF immediately if he establishes that the expenditure is not consistent with the contract or that authorisation was obtained by deceit, threat or bribery;

Procedures

14. Notes that, seven years after the outbreak of the "Italburro" scandal over adulterated butter and despite the attention paid to the matter by the EU institutions, notably Parliament and the Commission (OLAF):

(a) the sum recovered is less than 0,1 % of the estimated amount of the fraud;

(b) the action of the Italian authorities, thanks to which it was possible to dismantle the criminal network, bring dozens of perpetrators to justice, confiscate hundreds of tonnes of adulterated products and collect proofs of trafficking in tens of thousands of tonnes of adulterated butter sent to other Member States, has had almost no follow-up, and the level of EU cooperation has been particularly disappointing, if not non-existent;

(c) the Member States have different and mutually incompatible procedures, and the very fact that trafficking in adulterated substances is a crime in one Member State and a purely administrative problem in another has meant that the sum recovered has been a mere one tenth of that expected;

(d) public health has been neglected, with no-one to date having analysed the possible contamination of the butter by the use of substances prohibited for food products in the wake of the BSE crisis;

15. Notes that although the Commission has acknowledged the existence of wrongdoing in the so-called Blue Dragon affair and has decided to cut EU funds corresponding to the fraud, it considers it to be the sole responsibility of the Member State that shares the management of these funds to investigate the full extent of the alleged irregularity, to pursue its culprits, and/or to seek compensation for the victims of the fraud; notes also the fact that the Blue Dragon affair falls between two Member States, Spain and France, which makes the attribution of responsibility more difficult and which gives it a more obviously European character; considers that the Commission is a public authority with direct responsibilities concerning European citizens, on whose trust it depends — through the European Parliament — and that, therefore, the Commission should not only seek to recover European funds from a Member State where they have been misused, but should also use its best endeavours to see that wrongdoers are prosecuted and their victims compensated;

16. Recalls that the procedure for recovery of sums owed by legal means by an enforcement order, which may be obtained under Article 256 of the EC Treaty, has thus far been used only in exceptional circumstances, essentially for the recovery of fines imposed in competition cases; notes the Commission's intention, pursuant to the Financial Regulation, to widen the scope of the procedure in future;

17. Stresses that the procedure currently followed by the Commission with regard to recovery, which is of an institutional nature and consists, in the absence of voluntary payment, of addressing the national authorities, is far too long-winded, and that the forced recovery of the sum owed cannot in that case be effected or, in the best of cases, is subject to delays which are contrary to the Communities' financial interests;

18. Considers, with regard to enforcement orders, that communications between the Commission and the Member States would have to be simplified and that closer links need to be established between the Commission's services and those responsible in the Member States;

Reform of OLAF

19. Believes, in addition, that it is necessary to reflect on how to compensate for the lack of means on the part of the national authorities responsible for legal proceedings in order to reach a correct estimate of the complexity of the fraud problem in the EU, and also to consider how the Union bodies responsible should best deal with the national control authorities, in order to alert them and involve them in investigating fraud-related cases; recalls that by their nature the national fraud authorities are not under a binding obligation to involve those bodies;

20. Believes, furthermore, that the possibility of closer cooperation with Eurojust and Europol needs to be explored in order to strengthen the real protection of the Union's financial interests, as well as an evaluation of the possibility of OLAF's full administrative independence from the Commission and the other institutions;

21. Notes that the Court of Auditors' Special Report No 1/2005 described the present organisation of OLAF in regard to the independence of its investigative activities and its administrative cooperation with the Commission as functioning well, and that, in particular, the report noted that independence was guaranteed in practice, since the Commission had not interfered in OLAF's work;

22. Notes that, despite the measures already decided, the issue of the clarification of the rules on opening and closing OLAF inquiries, as well as on their extension, will require further legislative initiatives, which should also involve strengthening the link between the Parliament and OLAF;

23. Awaits with interest the Commission's proposal for a regulation on the reform of OLAF;

Public health

24. Recalls that under the rules in force only legal, healthy and market-friendly products are eligible for refunds, and that products not meeting those conditions are ineligible for aid of any kind;

25. Observes, as the Director of OLAF pointed out at the above mentioned meeting in Bled, that fraud in trade in agricultural products is a clear potential risk to human and animal health;

26. Stresses the need to make the national and international control services more aware of this problem, and that only close cooperation at international level, also involving third countries, can in the long term ensure the better protection of the consumer and of the Union's financial interests;

27. Stresses that the various illegal practices analysed reveal the urgent need for closer cooperation between the national customs authorities, the veterinary services and EU authorities such as OLAF;

28. Stresses that the Commission, unlike the Member States, has no powers of control as regards product analysis in relation to consumer health in the Union;

29. Recalls that in the adulterated butter case the initial fraud concerned not a health matter but the composition of the incriminated products, which were from a sector receiving large amounts in Community subsidies;

30. Believes that the Commission and OLAF should ensure that the Member States, through their quasipublic bodies, are able to carry out a sufficient number of properly effective controls using genuinely independent inspectors;

31. Considers that, where a fraud could at a given moment have health repercussions, the health services responsible should be informed and have access, in the context of a properly conducted procedure, to samples, and that such samples should be kept for a considerably longer period;

OLAF inquiries and national procedures

32. Notes that OLAF does not possess suitable information on the quantities of incriminated products, while undertaking the inquiries in a criminal law context has proved disastrous from the viewpoint of recovery, even if it is true that in strictly legal terms OLAF is entitled, on behalf of the Commission, to contest a national decision;

33. Recalls that, while in some countries recovery proceedings may be initiated even if a criminal action is under way, in others the criminal law has precedence over the civil law, so that the existence of an action on the part of a judicial authority makes it impossible to recover the disputed sums;

34. Deplores the fact that in some Member States irregularities and frauds are admitted only in respect of individually proven sums, that is, lot by lot, and that where no lot is present the operator is automatically deemed innocent;

Notification and recording of irregularities and recoveries

35. Regrets the Commission's failure to implement the action plan referred to in paragraphs 39 to 43 of the above mentioned resolution on the discharge for 2001 and in the resolution on the follow-up to the discharge;

36. Welcomes the Commission's positive reply to Parliament's repeated demands — namely those expressed in paragraph 102 of its above-mentioned resolution on the discharge for 2001 — for public disclosure of the amounts received by and the names of the beneficiaries under the EU budget, as proposed in the European Transparency Initiative (COM(2006)0194 — SEC(2005)1300); regrets, however, that the equivalent information regarding recoveries of Community funds is excluded from the European Transparency Initiative; calls on the Commission to make available to the budgetary authority and ultimately to the public the names and amounts of recoveries due under or credited to the EU budget, as well as the final destination of these sums;

37. Considers it essential that the regulatory framework should include the provision of full accounts regarding all sums owed arising from irregularities, the sums recovered and any interest or penalty payments actually paid to third party bodies from Community funds on the basis of the principles of budget universality and accuracy, as laid down in the Treaty and the Financial Regulation; calls on the Commission to take action to ensure this;

38. Considers that the Commission must ensure that the principle of independence regarding the activities of authorisation, auditing and certification required for directly managed Community expenditure is also followed for Community expenditure subject to shared responsibility;

39. Notes that it is not the Commission but the Member States which ensure, in accordance with the shared management principle, that the same principles regarding the independence of authorisation, auditing and certification are applied to Community expenditure subject to shared responsibility as are applied to directly managed Community expenditure; notes further that this applies in particular to the establishment of accredited payment agencies with an internal audit service and the setting-up of independent certifying bodies for the purposes of Regulation (EC) No 1663/95 [14] for the European Agricultural Guidance and Guarantee Fund, Guarantee Section (EAGGF-G) and of independent persons or departments within the meaning of Article 38(1)(f) of Regulation (EC) No 1260/1999 [15] in conjunction with Article 15 of Regulation (EC) No 438/2001 [16];

40. Considers that recovery should be carried out by public authorities, where the EU budget can finance the costs of recovery, or else by profit-making entities; considers that, in the latter case, there should of course be a call for tenders;

41. Believes that, in all circumstances, the revision of the regulatory framework must ensure that rules of transparency apply and conflicts of interest are avoided with regard to the motivation, the sums concerned and the end use of the sums arising from penalty payments, interest payments or recovery of Community funds;

The European Public Prosecutor

42. Recalls the above mentioned judgment of the Court of Justice in Case C-87/01 P Commission v CEMR, in which the Court found that, from the moment when the enterprise concerned established its headquarters in a Member State, that implied that the law of that Member State should prevail over the Commission, given that the supremacy of Community law does not justify a legal interpretation under which the Commission would prevail over the judge of the Member State concerned;

43. Considers that the creation of the office of European Public Prosecutor will be a decision of major importance, since it will facilitate direct access to the national public prosecutor's offices, thus working in the interests of a more "joined-up" procedure; believes that this should help reduce complexity, since the result should be a converged use of the European Prosecutor's services; recalls that, while OLAF enjoys powers of intervention in the context of its inquiries, it does not enjoy judicial powers;

44. Notes that the project to establish a European Public Prosecutor must be regarded more as a longterm undertaking, and that, in order to achieve an improvement in the short term, coordination between Member States' public prosecutors must be central to plans to create added value, reducing OLAF's workload and protecting the financial interests of the Community;

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45. Instructs its President to forward this resolution to the Council, the Commission, the Court of Justice, the Court of Auditors, the OLAF Surveillance Committee and OLAF.

[1] OJ C 64 E, 12.3.2004, p. 199.

[2] OJ C 96 E, 21.4.2004, p. 112.

[3] OJ C 104 E, 30.4.2004, p. 640.

[4] OJ C 33 E, 9.2.2006, p. 169.

[5] OJ C 124 E, 25.5.2006, p. 232.

[6] OJ L 248, 16.9.2002, p. 1.

[7] OJ L 357, 31.12.2002, p. 1.

[8] OJ L 92, 13.4.1991, p. 43.

[9] OJ L 145, 29.6.1995, p. 1.

[10] OJ L 82, 22.3.1997, p. 1.

[11] OJ L 160, 26.6.1999, p. 103.

[12] OJ L 209, 11.8.2005, p. 1.

[13] [2003] ECR I-7617.

[14] OJ L 158, 8.7.1995, p. 6.

[15] OJ L 161, 26.6.1999, p. 1.

[16] OJ L 63, 3.3.2001, p. 21.

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