Proposal for a Council Regulation concerning on-the-spot checks and inspections by the Commission for the detection of frauds and irregularities detrimental to the financial interests of the European Communities
Date: 1995-12-20
Institutions: European Commission
Subjects: Community budget, EAEC Regulation, EU control, application of EU law, fraud against the EU, implementation of the budget

COMMISSION OF THE EUROPEAN  COMMUNITIES 

Brussels,  20.12.1995 
COM(95)  690  final 

95/0358  (CNS) 

Proposal  for a 
COUNCIL  REGULATION  (EC.  Euratom! 

concerning  on-the-spot  checks  and inspections  by  the  Commission 
for the  detection  of  frauds  and irregularities  detrimental  to the 
financial  interests  of  the  European  Communities 

(presented  by  the  Commission) 

EXPLANATORY  MEMORANDUM 

1. 

In  1994  the  Commission  presented  to  the  Council  a  proposal  for  a  Regulation 
(EEC, Euratom)  on  protection  of the Community's financial interests(1).  This proposal 
laid  down  rules  applicable  to  Community  measures  and  administrative  penalties  and 
rules  to  govern  on-the-spot  checks  and  inspections  On  29 June  1995  the  Council 
adopted  a common  position  on this proposal,  which may be formally  adopted  once the 
European  Parliament has been  consulted  a second time. 

2.  Article  10 of the Council's common position on the abovementioned  proposal  stipulates 
that additional  general  provisions concerning on-the-spot checks and inspections  are to 
be adopted  at a later  date in  accordance with the procedures  laid  down in  Article 235 
of the EEC  Treaty  and Article 203 of the Euratom  Treaty. 

3. 

This proposal  is the follow-up  to the  said Article  10. 

4.  The proposal  is based  on the following  approach: 

it is left to the Member  States to adopt, where appropriate, additional rules for the 
on-the-spot  checks and inspections  carried  out by their  own departments; 

the proposal  leaves the existing  Community  rules  unchanged; 

the  proposal,  which  is  based  on  the  notion  of  "irregularity"  as  defined  in  the 
common  position,  lays  down  rules  to  govern  the  powers  and  obligations  of  the 
Commission's inspectors and the means which they  may employ for the purposes 
of on-the-spot  checks in the context  of a fraud  investigation; 

the  draft  text  incorporates  the  amendments  which  Parliament  made  when  first 
consulted  on the proposal Tor  a regulation  on  the protection  of the  Community's 
financial  interests and which were  accepted  by the Commission  at the time. 

5.  Thus, the proposal  should be  seen  as a new  and  additional  legal  basis for  on-the-spot 
checks and inspections in the fraud  prevention  context.  It represents an important  step 
towards  more  effective  fraud  investigations,  particularly  where  several  areas  of  the 
Community  budget  are  affected. 

6.  This proposal  does not entail any  additional  expenditure under the Community  budget. 

(i)  OJNOC216,  6.8.1994,  p.  U 

Proposai  for a 
COUNCIL  REGULATION  (EC.  Euratom) 

concerning  on-the-spot  checks  and inspections  by  the  Commission 
for the  detection  of frauds and irregularities  detrimental  to the 
financial interests  of the European Communities 

THE COUNCIL  OF  THE  EUROPEAN  UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article  235  thereof, 

Having  regard  to  the  Treaty  establishing  the  European  Atomic  Energy  Community,  and  in 
particular  Article  203  thereof, 

Having  regard  to the  proposal  from  the Commission0*, 

Having  regard  to the  opinion  of  the European  Parliament*  >, 

Whereas  Community  law  requires  the  Commission  and  the  Member  States  to  take  steps  to 
protect the  financial  interests  of  the  Communities  against  fraud; 

Whereas  the  system  of  inspection  is  governed  by  special  detailed  provisions  tailored  to  the 
various  Community  policies  concerned;  whereas  Council  Regulation  (EC,  Euratom) 
No  2988/95  of  18 December  1995  on the protection of the European  Communities'  financial 
interests0* has established a common legal framework for all the fields covered by Community 
policies; 

Whereas  that  Regulation  does  not  extend  to  on-the-spot  inspections  and  checks;  whereas 
Article  10 thereof provides for the laying down of additional  general  provisions by a separate 
regulation; 

Whereas  management  audits  and  inspections  as  to  the  regularity  of  accounts  in  general  are 
covered  by  provisions  relating  to  special  on-the-spot  checks  in  respect  of  the  various  fields 
of  the Community  budget;  indeed,  they  form  part of  the Community's  existing  legislation  in 
the  area concerned; 

Whereas  this  Regulation  does  not  affect  the  provisions  of  Community  sectoral  regulations 
which,  although  falling  within  its scope,  go  beyond  its  minimum  rules. 

Whereas,  however,  in  order to  step  up  action  to  combat  organized  fraud  it  is  necessary,  in 
dealing  with  irregularities  committed  deliberately  or through  gross  negligence  and  having  a 
impact  on  the  Community  budget,  to  lay  down  additional  common  provisions  relating  to 
on-the-spot  inspections  and checks by  Commission  officials; 

Whereas  Article  1(2)  of  Regulation  (EC,  Euratom)  No  2988/95  contains  a definition  of  the 
term  "irregularity"; 

(2) 

O J N oC 
OJ  N oC 
O J N o L 3 1 2,  23.12.1995,  p.  1. 

Whereas Article  8 of Regulation (EC, Euratom) No 2988/95 provides that inspection measures 
shall  be appropriate to the particular characteristics of each sector  and that the procedure for 
performing  them  shall  be  determined  as necessary  by  sectoral  rules;  whereas it  is  therefore 
in that context that new provisions are to be developed later with a view to ensuring that the 
same inspections  are carried  out in  all parts of the  Community; 

Whereas  additional  general  provisions  regarding  on-the-spot  inspections  and  checks  by 
officials  of the Member  States may be adopted in line with national  provisions laid down by 
law or regulation; 

Whereas, if action to combat fraud  and irregularities  is to be effective,  it should be possible 
for  the Commission  to carry  out inspections on the premises of government authorities and, 
if need be, those economic operators who may  have been  involved  in the fraud  in question, 
due regard  being had to the fundamental  rights  of the persons  concerned; 

Whereas  Member  States  can  make  a  substantial  contribution  to  inspections  by  the 
Commission's  officials,  whereas  national  officials  should  therefore  be  asked  to  take  part in 
the inspections; whereas in its role as coordinator under the second paragraph of Article 209a 
of the EC Treaty  the Commission  may  ask  officials  from  other  Member  States to take part 
in inspections;  whereas the Member  States concerned  should  be  informed; 

Whereas  the  organization  of  on-the-spot  inspections  and  checks  in  a  spirit  of  cooperation 
between  the  Commission  and  the  Member  States  means  that  the  Commission's  inspectors 
should  have  access to  the  same  premises  and  information  of  whatever  kind  relating  to  the 
operations concerned as do the officials  of the Member State in question; whereas the reports 
by  the  Commission's  inspectors  should  be  usable  as  evidence  which  is  as  valid  for  that 
purpose as reports drawn  up by national  officials; 

Whereas the Treaties contain no powers for  the adoption  of this Regulation  other than those 
provided  for  in  Article 235 of the EC Treaty  and Article 203 of the Euratom  Treaty, 

HAS ADOPTED THIS REGULATION 

Article 1 

Without  prejudice  to  any  other  provisions  laid  down  pursuant  lo  rules governing  particular 
sectors,  the  provisions of  this  Regulation  shall  apply  to on-thc-spol  inspections  and  checks 
performed  by  the Commission  as  part  of  its action  to  combat  fraud  and  for  the  purpose  of 
detecting any irregularity as defined in Article  1(2) of Regulation (EC, Euratom) No 2988/95. 

Article 2 

1.  On-the-spot  inspections  and checks by the Commission  may  be performed  on  central, 
regional  and  local  government  authorities  and  on  organizations  and  departments 
dependent  on  or  reporting  directly  to  them  or  to  which  they  have  delegated  specific 
powers. 

2.  Economic  operators 

-  who directly  or indirectly  receive a financial  benefit,  and/or 
-  who are subject  to obligations imposed by Community  legislation,  and/or 
-  who are directly  or indirectly  involved,  in  whatever  capacity,  in the operations to 

which  the relevant  legislation  applies 

shall  also be  required  to allow  on-the-spot  inspections  and  checks to  be  performed, 
and in  particular  shall  facilitate  access to premises, land,  means of transport  or other 
places to be visited  for  that purpose. 

Article 3 

inspections mmà  checks,  the  Commission  shal 1  notify 

in good Ane  with  a view to obtaining  all  the 

However,  in  the  event  of  an  overriding  need  to  ensure  that  an  inspection  can  be 
out pr^eriy,  the above notification  may be  made just before  the on-the-spot 

Officials  of the Member  State concerned  may take part  in the inspections 

On-the-spot  inspections  and  checks  shall  be  performed  subject  to  the C<3mmission's 
liability,  by  its  officials  or  other  servants  and  by  persons  put  at  the  Commission's 
disposal  by  the  Member  States  and  duly  empowered  by  the  Commission 
(hereinafter:  "the Commission's inspectors"). 

For the purpose of drawing up the reports referred to in Article 6(3), the Commission's 
inspectors shall be treated in the same way as those officials  of the Member  State on 
whom national  law confers  special  powers to perform  inspections  and checks. 

The Commission's inspectors shall produce their written authorization  in which their 
identity  and  position  shall  be  stated.  They  shall,  when  performing  on-the-spot 
inspections  and checks, conduct themselves in accordance  with  the rules  and usages 
observed  by officials  of the Member  States. 

The  Commission  may  ask  officials  of  Member  States  other  than  those  of  the 
Member  State on  whose territory  the inspections  and  checks  are being performed  to 
take part in them,  subject  to its bearing the liability  therefor. 

Where  the  Commission  has  called  on  outside  bodies  to  provide  technical  help  to 
officials  performing  the  inspections,  they  shall  act  subject  to  the  Commission's 
liability.  The  Commission  shall  ensure  that  such  bodies  give  every  guarantee  of 
technical  competence  and independence  and  offer  full  guarantees with  regard  to the 
observation  of  confidentiality. 

Article  5 

Without prejudice to national rules on criminal procedure, the Commission's inspectors 
shall  have  access  to  all  the  information  and  documentation  on  the  operations 
concerned  which  is  required  for  the  proper  conduct  of  the  inspections  and  checks, 
including  that  which  is  obtained  by  national  inspectors  and/or  that  obtained  in  the 
course of judicial  inquiries and which may be useful  in  ensuring that inspections are 
carried  through  successfully;  they  shall  have  power  to  take  copies  of  appropriate 
documents.  The  Commission's  inspectors  may  avail  themselves  of  the  same 
investigating facilities  as national  inspectors. 

On-the-spot  inspections and checks may  concern: 

-  professional  books  and documents  such as invoices,  lists  of terms  and conditions, 

pay  slips,  statements of materials used  and work  done, and bank  statements; 

-  computerized  data; 

-  production,  packing and  dispatching  systems and methods; 

-  physical  checks as to the nature and quantity  of goods or of completed  operations; 

-  the taking and  checking of samples; 

-  the  state  of  progress  of  works  and  investments  for  which  financing  has  been 

provided,  and  the use made of completed  investments; 

-  budgetary  and  accounting  documents; 

-  the financial and technical  implementation  of  subsidized  projects; 

-  any  other  document,  whatever  its nature  or  origin,  which  has  a direct  or  indirect 
bearing either on the subject  of the inspection  or on the protection  of the  financial 
interests of the Community. 

At the Commission's request the competent authorities of the Member State concerned 
shall  enact the appropriate measures to  safeguard  the evidence. 

Article 6 

All information  collected in connection  with on-the-spot  inspections and checks shall 
be covered by the rule of confidentiality  and by the Community's provisions on data 
protection.  It  may  not  be  communicated  to  anyone  except  those  persons within  the 
institutions  of the Community  or the Member  States who  are, by  the nature  of their 
duties,  required  to  be  acquainted  with  it,  nor  may  it be  used  for  any  purpose  other 
than to ensure that the relevant rules are applied uniformly  and effectively,  to forestall 
or  detect  irregularities,  to  recover  or  collect  the  sums  involved  and  to  ensure  that 
penalties are applied. 

The  Commission  shall  report  to  the  competent  authority  of  the  State  on  whose 
territory an inspection or check has been performed  any fact relating to an irregularity 
which has come to its notice in the course of the investigation.  It shall be authorized 
to  report  the  said  irregularity  to  the  competent  authority  of  any  Member  State 
concerned  by the findings  in  question. 

The  reports  drawn  up,  dated  and  signed  by  the  Commission's  inspections  shall,  as 
evidence, be considered just as valid as if they had been drawn up by a servant of the 
Member  State in which  the  information  is used,  particularly  for  the purposes  of any 
further  administrative  or judicial  action. 

Where an on-the-spot inspection or check is performed  outside the Community, reports 
prepared by the Commission's inspectors shall be taken into account in the same way 
as those referred  to in paragraph 3. 

Article  7 

2. 

1. 

2. 

3. 

4. 

Where  the  persons  referred  to  in  Article 2  resist  an  on-the-spot  inspection  or  check,  the 
Member State concerned  shall give the Commission's inspectors such assistance as they need 
to  enable  them  to  take  the  appropriate  steps  to  discharge  their  duty  to  carry  out  such 
on-the-spot  inspection  or check,  in accordance with the Member  State's rules of procedure. 

Article S 

This Regulation  shall  enter into force on the third day  following  that of its publication in 
Official  Journal  of  the European Comfnunities 

TMs 

tion shall be binding in its entirety  and dii 

in all  Member States 

Dime at Bmssefs, 

For the Council 

IMMMMAMMMMM4M 

« 

ISSN 0254-1475 

COM(95) 690 final 

DOCUMENTS 

EN 

09 

Catalogue number  :  CB-C0-95-773-EN-C 

ISBN 92-77-99198-4 

Office for Official Publications of the European Communities 

L*2985 Luxembourg