Explanatory Report on the Second Protocol to the Convention on the protection of the European Communities' financial interests (Text approved by the Council on 12 March 1999)
Date: 1999-03-12
Institutions: Council of the European Union
Subjects: agreement (EU), fraud, fraud against the EU, report

C  91/8

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on  the  Second  Protocol  to  the  Convention  on  the  protection  of  the  European  Communities’
financial  interests

EXPLANATORY  REPORT

(Text  approved  by  the  Council  on  12  March  1999)

(1999/C  91/02)

I. INTRODUCTION

The Convention on the protection of the European Communities’ financial interests was drawn
up  by  the  Council  and  signed  by  the  representatives  of  the  Governments  of  the  Member  States
on  26  July  1995 (1).  This  Convention  (hereinafter  referred  to  as  the  ‘Convention’  or  ‘Fraud
Convention’)  constitutes  the  first  agreement  under  Title  VI  of  the  Treaty  on  European  Union
(TEU)  dealing  with  fraud  affecting  the  European  Communities’  budget.  A  First  Protocol  to  the
Convention was drawn up and signed on 27 September 1996 (2). It is primarily aimed at acts of
corruption  which  involve  national  and  Community  officials  and  damage,  or  are  likely  to
damage,  the  European  Communities’  financial  interests  and  will  be  referred  to  as  the  ‘First’  or
‘Corruption Protocol’. The Protocol on the interpretation, by way of preliminary rulings, by the
Court  of  Justice  of  the  European  Communities,  of  the  Convention  on  the  protection  of  the
European Communities’ financial interests was drawn up and signed on 29 November 1996 (3).
This  instrument  allows  Member  States  to  accept,  by  a  declaration  made  at  the  time  of  the
signing  of  the  Protocol  or  any  time  thereafter,  the  jurisdiction  of  the  Court  to  give  preliminary
rulings  on  the  interpretation  of  the  Convention  and  the  First  Protocol.

Alongside  the  drawing  up  of  the  above  instruments  on  the  basis  of  Title  VI  of  the  Treaty  on
European Union, two instruments of particular interest in this context have been adopted by the
European  Community.  These  are  Council  Regulation  (EC,  Euratom)  No  2988/95  of  18
December  1995  on  the  protection  of  the  European  Communities’  financial  interests (4)  and
Council  Regulation  (Euratom,  EC)  No  2185/96  of  11  November  1996  concerning  on-the-spot
checks  and  inspections  carried  out  by  the  Commission  in  order  to  protect  the  European
Communities’  financial  interests  against  fraud  and  other  irregularities (5).

In the act of the Council drawing up the Convention, the Council stressed that the Convention
should  be  supplemented  shortly  afterwards  by  another  legal  instrument,  in  such  a  way  as  to
improve  the  effectiveness  of  protection  under  criminal  law  of  the  European  Communities’
financial  interests.  The  Commission  presented  a  draft  for  a  Second  Protocol  to  the  Fraud
Convention  in  early  1996 (6).  It  referred  to  the  intention  expressed  by  the  Council  when
drawing  up  the  Convention,  as  well  as  to  the  Council  resolution  of  6  December  1994  on  the
legal  protection  of  the  financial  interests  of  the  Communities (7).  In  the  resolution,  the  Council
requested  the  elaboration  of  possibilities  to  impose  sanctions  on  legal  persons,  as  well  as  the
extension  of  legislation  concerning  money  laundering  to  the  protection  of  the  European
Communities’  financial  interests.  The  Commission  initiative  and  draft  were  taken  over  by  the
Italian Presidency of the Council and, by the end of that Presidency, the discussions on the draft

(1)  OJ  C  316,  27.11.1995,  p.  49.
(2)  OJ  C  313,  23.10.1996,  p.  2.
(3)  OJ  C  151,  20.5.1997,  p.  2.
(4)  OJ  L  312,  23.12.1995,  p.  1.
(5)  OJ  L  292,  15.11.1996,  p.  2.
(6)  OJ  C  83,  20.3.1996,  p.  10.
(7)  OJ  C  355,  14.12.1994,  p.  2.

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were  well  advanced.  In  June  1996,  the  Italian  Presidency  consulted  the  European  Parliament
pursuant to Article K.6 of the Treaty on European Union and the Parliament gave its opinion in
a  resolution  of  24  October  1996 (1).  Discussions  continued  under  the  Irish  Presidency  and
finally  under  the  Netherlands  Presidency  political  agreement  was  reached  on  26  May  1997  on
the  draft  before  the  Council.  On  19  June  1997,  the  act  drawing  up  the  Second  Protocol  was
adopted  by  the  Council  and  the  Second  Protocol  to  the  Convention  on  the  protection  of  the
European  Communities’  financial 
interests  was  signed  by  the  representatives  of  the
Governments  of  the  Member  States (2).

As regards the legal basis for the Second Protocol, reference is made to the remarks under point
II  of  the  Explanatory  report  on  the  Convention (3).

The importance of finalising and implementing the Second Protocol is stressed in the action plan
to  combat  organised  crime,  adopted  by  the  Council  on  28  April  1997 (4),  which  recommends
that  the  Member  States  widen  the  scope  of  the  criminalisation  of  money  laundering,  further
improve and structure cooperation between the Commission and the Member States in the fight
against  fraud  affecting  the  financial  interests  of  the  European  Communities  and  money
laundering  linked  thereto,  introduce  liability  for  legal  persons  involved  in  organised  crime  and
collect relevant information with respect to legal persons in order to prevent the penetration of
organised  crime  in  the  legitimate  economy.

II. COMMENTARY  ON  THE  ARTICLES

Article  1

Definitions

1.1.  General remarks

Protocol  thereto,  the  Corruption  Protocol.  The
link  is  emphasised  by  paragraph  (c),  which  states
that,  in  the  context  of  the  Second  Protocol,
‘passive  corruption’  and  ‘active  corruption’  shall
have  the  same  meanings  as  in  the  First  Protocol.

contains 

introductory  provision 

This 
five
definitions  of  terms  used  in  the  Second  Protocol.
Besides  defining  the  exact  meaning  of  the  terms
for  the  purpose  of  the  Second  Protocol,  the  first
three  terms  also  establish  the  links  between  the
Second  Protocol  and  the  Fraud  Convention  and
the  First  Protocol  thereto.

1.2. 

Paragraphs  (a)  and  (b)

formally 

establish 

paragraphs 

These 
the
relationship  between  the  Second  Protocol  and  the
Fraud  Convention,  providing  that  ‘Convention’
shall  refer  to  the  Fraud  Convention  and  ‘fraud’
shall refer to the conduct described as such in that
Convention.

1.4. 

Paragraph  (d)

The  Second  Protocol  states  that  a  ‘legal  person’
shall mean any entity having such status under the
applicable national law, except for States or other
public  bodies  in  the  exercise  of  State  authority
and  for  public  international  organisations.  In  this
context,  ‘national  law’  means  the  national  law  of
the  Member  State  taking  measures  against  a  legal
person  in  accordance  with  the  Second  Protocol.

1.5. 

Paragraph  (e)

1.3. 

Paragraph  (c)

Besides being related to the Fraud Convention, the
is  also  related  to  the  First
Second  Protocol 

(1)  OJ  C  347,  18.11.1996,  p.  150.
(2)  OJ  C  221,  19.7.1997,  p.  12.
(3)  OJ  C  191,  23.6.1997,  p.  1.
(4)  OJ  C  251,  15.8.1997,  p.  1.

For  the  purpose  of  the  Second  Protocol,  ‘money
laundering’  is  understood  as  the  conduct  defined
as  such  in  Council  Directive  91/308/EEC  of  10
June  1991  on  the  prevention  of  the  use  of  the
financial  system 
the  purpose  of  money
laundering (5) as far as the offences covered by the
Fraud  Convention  and  the  First  Protocol  thereto

for 

(5)  OJ  L  166,  28.6.1991,  p.  77.

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are  concerned.  As  a  result,  under  the  Second
Protocol  money  laundering  refers  to  the  proceeds
of,  at  least,  serious  cases  of  fraud  and  the
proceeds  of  active  and  passive  corruption (1).

Article  3

Liability  of  legal  persons

3.1.  General remarks

Where  reference  is  made  to  the  Directive,  in  the
definition  of  money  laundering,  the  expression
‘property’  used  in  the  third  indent  of  Article  1  of
the Directive is defined in the fourth indent of the
said Article 1. As a consequence, ‘property’ in the
context  of  the  Second  Protocol  means  ‘assets  of
every  kind,  whether  corporeal  or  incorporeal,
movable or immovable, tangible or intangible, and
legal  documents  or  instruments  evidencing  title  to
such  assets’.

the 

legal  person’s 

On  the  basis  of  this  provision,  the  law  of  the
Member  States  must  provide  that  legal  persons
can be held liable for fraud, active corruption and
money  laundering  committed  for  their  benefit.
Paragraph  1  contains  the  criteria  according  to
liability  must  be
which 
established  for  offences  committed  by  persons
with  certain  leading  positions,  whereas  paragraph
2  addresses  the  possibility  of  a  legal  person  being
liable  for  offences  committed  by  other
held 
third
persons  within 
paragraph  stresses  that  the  liability  of  a  legal
person  should  not  exclude  the  liability  of  the
natural  person  involved  in  the  commission  of  the
offences  for  which  the  legal  person  is  liable.

legal  person.  The 

the 

Article  2

Money  laundering

3.2. 

Paragraph 1

that 

recommends 

crime  which 

On  the  basis  of  this  provision,  in  combination  with
Article 1(e), Member States are obliged to ensure that the
criminal  offence  of  money  laundering  in  their  national
legislation  also  includes  the  offences  of  fraud,  at  least  in
serious  cases,  and  of  active  and  passive  corruption  as
predicate  offences.  This  extension  of  the  scope  of  money
laundering  was  encouraged  in  the  action  plan  to  combat
the
organised 
‘criminalisation  of  laundering  of  the  proceeds  of  crime
should be made as general as possible’ (Recommendation
26).  In  order  to  put  this  recommendation  into  practice,
the  Council  adopted  on  3  December  1998  a  joint  action
on money laundering, the identification, tracing, freezing,
seizing and confiscation of instrumentalities and proceeds
of  crime (2),  which  obliges  the  Member  States  to  provide
for a broad list of predicate offences. In its second report
to  the  European  Parliament  and  the  Council  on  the
implementation  of  the  Money  Laundering  Directive (3),
the  Commission  announced  its  intention  to  propose  an
extension  to  the  scope  of  the  Money  Laundering
Directive.  It  should  be  noted  that,  in  order  to  enable
Member  States  to  ratify  the  Second  Protocol  where  they
have  not  yet  been  able  to  implement  such  an  extension,
Article  18(1)  of  the  Second  Protocol  allows  a  temporary
reservation  regarding  cases  other  than  those  related  to
serious cases of active and passive corruption to be made
for  a  period  of  five  years  which  may  be  renewed  once.

(1)  See  also  joint  action  of  3  December  1998  on  money
laundering,  the  identification,  tracing,  freezing,  seizing  and
confiscation of instrumentalities and the proceeds from crime
(OJ  L  333,  9.12.1998,  p.  1).

(2)  OJ  L  333,  9.12.1998,  p.  1.
(3)  Brussels,  1.7.1998,  COM(98)  401  final.

According  to  paragraph  1,  liability  of  a  legal
person  for  one  of  the  offences  mentioned  exists  if
at  least  two  complementary  criteria  are  met:

(i)  the  offence  involved  has  been  committed  for

the  benefit  of  the  legal  person;

and

(ii) the  offence  has  been  committed  by  a  natural
person  who  has  a  certain  leading  position
within  the  legal  person.

The  first  criterion  creates  a  link  between  the
offence and the legal person. The offence must be
committed for the benefit of the legal person. The
possible  benefit  may  be  directly  financial  (e.g.  by
obtaining  the  proceeds  of  EC  fraud)  or  otherwise
(e.g.  by  receiving  orders  due  to  the  corruption  of
an  official).  It  is  not  relevant  whether  the  natural
person  who  physically  commits  the  offence  is
acting  individually  or  as  part  of  an  organ  of  the
legal person.

the 

relationship 

second  criterion,  a 

In 
is
established  between  the  physical  offender  and  the
legal  person  to  be  held  liable  for  the  offence.  It  is
further  stated  that  the  ‘leading  position’  of  the
natural  person  may  be  derived  from  one  or  more
of  the  elements  mentioned  within  paragraph  1,
which  vary  from  the  rather  formal  to  the  rather
substantial:  a  power  of  representation  of  the  legal
person, or an authority to take decisions on behalf
of  the  legal  person,  or  an  authority  to  exercise
control  within  the  legal  person.  As  a  result,  in

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order  to  implement  the  Second  Protocol,  Member
States will have to insert all three elements in their
domestic  legislation  as  alternatives  on  which  the
leading  position  may  be  based.

As  regards  cases  where  the  liability  of  a  legal
person  would  be  based  on  the  physical  offender’s
authority to exercise control within a legal person,
it  should  be  noted  that  the  term  ‘control’  is  to  be
understood 
in  the  way  that  the  power  of
supervision  over  the  legal  person’s  management
must  be  such  as  to  ensure  that  the  physical
offender  occupies  a  leading  position  within  the
legal  person.  Authority  to  exercise  control  within
the  legal  person  may  result  in  particular  from
responsibility  for  internal  financial  control  and
auditing  or  from  membership  of  a  controlling  or
supervisory  body  internal  to  the  legal  person,  to
the  extent  that  these  positions  correspond  to  a
leading  position  which  implies  a  possibility  of
influencing  the  legal  person’s  management.  Thus,
the  power  of  control  vested  in  persons  which
implies  no  possibility  of  influencing  the  legal
person’s management does not count. Paragraph 1
does not cover external  persons  auditing  accounts
of  the  legal  person  in  question,  for  example
persons  from  audit  companies.

The  legal  person  may  also  be  held  liable  with
respect  to  the  involvement  of  the  natural  person
referred  to  in  paragraph  1  as  an  accessory  or
instigator  in  the  offences,  or  in  the  attempted
commission  of  fraud.

3.3. 

Paragraph 2

In  addition  to  the  cases  covered  by  paragraph  1,
Article  3(2)  addresses  the  situation  of  an  offence
referred  to  in  paragraph  1  being  committed  by  a
person  in  a  position  subordinate  to  the  person  in
a  leading  position.  Member  States  are  obliged  to
provide for measures against legal persons in such
cases  if  the  commission  of  the  offence  has  been
made  possible  by  the  lack  of  supervision  or
control  by  one  of  the  persons  in  a  leading
position.  Thus,  paragraph  2  does  not  necessarily
imply an objective responsibility on the part of the
legal person but the paragraph may be interpreted
as  being  limited  to  covering  cases  where  the  legal
person  as  such  may  be  blamed  for  culpable
behaviour of persons acting on its behalf. See also
point  4.3.

3.4. 

Paragraph 3

Article  3(3)  provides  that  criminal  proceedings
against  those  natural  persons  who,  de  facto,

committed  the  offence  should  not  be  excluded  by
the  liability  of  the  legal  person.  As  a  result,
measures  being  taken,  for  example  against  a
company 
fraud  was
for  whose  benefit  a 
committed  by  the  general  manager,  shall  not
exclude  criminal  prosecution  of  the  manager
himself.

Article  4

Sanctions  for  legal  persons

4.1.  General remarks

Article  4  addresses  the  issue  of  sanctions  against
legal  persons  held  liable  for  the  offences  referred
to in Article 3. It recognises the different forms of
liability  dealt  with  in  the  first  two  paragraphs  of
Article 3, distinguishing the liability for an offence
committed by a person in a leading position from
that  for  an  offence  committed  by  a  subordinate
employee.

4.2. 

Paragraph 1

In  its  first  paragraph,  Article  4  obliges  Member
States  to  ensure  that  legal  persons  held  liable  for
one  of  the  offences  covered  by  Article  3(1)
committed  by  a  person  in  a  leading  position  may
‘effective,  proportionate  and
be  punished  by 
dissuasive  sanctions’,  thus  recalling  the  criteria
used in Article 2 of the Fraud Convention and the
case-law of the Court of Justice. According to the
Second  Protocol,  these  sanctions  must  include
fines  of  a  criminal  or  non-criminal  nature  and
may  include  other  sanctions,  some  of  which  are
suggested 
for  other
sanctions,  these  could,  for  example,  be  additional
measures  such  as  the  exclusion  of  a  legal  person
from participation in a public tender, as suggested
in the resolution of the European Parliament of 24
October  1996.

the  paragraph.  As 

in 

4.3. 

Paragraph 2

Paragraph  2  states  that  the  Member  States  must
also  ensure  that  effective,  proportionate  and
dissuasive  sanctions  or  measures  apply  to  legal
persons  held  liable  for  fraud,  corruption  and
money  laundering  pursuant  to  Article  3(2),  i.e.  in
cases  where  the  commission  of  the  offence  by  a
subordinate  employee  was  made  possible  by
insufficient supervision or control by a person in a
leading  position.  For  the  cases  referred  to  in
Articles 3(2) and 4(2), Member States may choose

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the type and severity of the sanctions or measures,
as  long  as  they  are  effective,  proportionate  and
dissuasive.

It  should,  therefore,  be  noted  that  while  the
measures  to  be  taken  under  Article  3(2)  and  4(2)
may be criminal sanctions, administrative and civil
law  measures  are  possible  as  well.  Sanctions  or
measures  contemplated  in  Article  4(2)  of  the
Second  Protocol,  even 
if  they  need  not  be
provided for in the criminal law or administrative
penal  legislation  of  the  Member  States,  should,
where  appropriate,  have  a  certain  punitive
character  in  the  sense  of  going  beyond  mere
reparation  of  damages  or  restitution  of  wrongful
enrichment.

Article  5

Confiscation

In  order  to  ensure  effective  cooperation  in  the  fight
against Community fraud and corruption related thereto,
it  is  necessary  that  the  legislation  of  the  Member  States
allows  similar  minimum  measures  to  be  taken  in  similar
cases  regarding  the  seizure  and  the  confiscation  or
removal of instruments and proceeds of fraud, active and
passive  corruption  and  money  laundering.  The  reference
to  removal  of  instruments  and  proceeds  is  intended  to
cover  cases  which  do  not  necessarily  involve  confiscation
(for  example  civil 
the  purpose  of
law  cases 
compensation  of  damages  or  restitution  of  the  property
concerned  to  its  rightful  owner).

for 

The  seizure,  confiscation  or  removal  measures  which
must  be  in  place  may  concern  the  instruments  used  in
order  to  commit  fraud,  active  or  passive  corruption  or
money  laundering,  and  the  proceeds  of  these  offences.
Moreover, these measures may also concern property the
value  of  which  corresponds  to  such  proceeds.  In  this
context,  the  expression  ‘seizure’  covers  ‘freezing’  and
‘seizure’  as  defined  in  Article  1(I)  of  the  UN  Convention
against  Illicit  Traffic  in  Narcotic  Drugs  and  Psychotropic
Substances  (Vienna,  19  December  1988).

Bona  fide  third  parties  should  be  protected  regarding
confiscation  and  removal  of  instruments  and  proceeds.  It
follows  from  the  second  sentence  of  Article  5,  which
provides  that  the  said  Member  State  will  act 
in
accordance  with  its  national  law,  that  the  question  of
whether  or  not  a  third  party  is  bona  fide  will  be
answered  according  to  that  law.

far  as  the  scope  of  the  Second  Protocol  is  concerned,
supplements  Article  5(3)  of  the  Fraud  Convention.
Whereas  the  latter  excludes  the  application  of  the  fiscal
exception  in  the  context  of  extradition,  Article  6  of  the
Second  Protocol  states  that  mutual  legal  assistance  in
criminal  matters  may  not  be  refused  for  the  mere  reason
of  the  offence  being  tax  or  duty  related.

The  provision  in  itself  is  an  exception  to  Article  2(a)  of
the  European  Convention  on  mutual  assistance 
in
criminal  matters  (Strasbourg,  20  April  1959)  and,
although  several  provisions  similar  to  Article  6  already
exist  (e.g.  in  Article  1  of  the  Additional  Protocol  to  the
1959  Convention  (Strasbourg,  17  March  1978)  and
Article  50  of  the  Schengen  Implementation  Convention
(Schengen,  14  June  1990)),  it  was  decided  that  it  should
be  included  in  the  Second  Protocol  as  well,  as  none  of
these  instruments  were  ratified  by  all  Member  States  at
the  time  of  the  adoption  of  the  act  drawing  up  the
Second Protocol. As regards the scope of ‘tax offences’ in
this  context,  this  will  cover  revenue  (taxes  and  duties)
within  the  meaning  of  the  Convention.

Article  7

Cooperation  with  the  Commission  of  the  European
Communities

7.1.  General remarks

Article  7  and  the  Articles  which  follow  it  set  out
the  provisions  governing  cooperation  between  the
Member States and the Commission in the area of
the  Fraud  Convention  and  the  Protocols  to  it  and
lay  down  the  obligations  resulting  from  that
cooperation  for  the  Commission.

certain 

commitments 

The  Member  States,  as  Contracting  Parties  to  the
Second Protocol, confer on the Commission a task
implying 
the
Commission, not only as regards its relations with
the Member States but also as regards its relations
with  private  individuals  where  data  protection  is
concerned.  The  Commission  is  prepared  to  carry
out  this  task  and  it  accepts  the  responsibility
incumbent  upon  it  under  the  relevant  provisions
of  the  Second  Protocol (1).

by 

Article  6

Tax  and  customs  duty  offences

Article  6  of  the  Fraud  Convention  provides
general rules on cooperation between the Member
States  regarding  cases  of  fraud  detrimental  to  the

This  provision,  which  deals  with  non-invocation  of  the
fiscal  exception  for  the  purpose  of  mutual  assistance  as

(1)  See the Declaration made by the Commission on Article 7 at
the  time  of  the  adoption  of  the  Second  Protocol,  and
published  in  the  Official  Journal  with  the  Second  Protocol.

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European  Communities’  financial  interests.  That
provision  also  applies  to  the  Second  Protocol
pursuant  to  Article  12(1)  of  the  Second  Protocol.
Article  10  of  the  Second  Protocol  lays  down  the
principle  of  data  transfer  between  the  Member
States  and  the  Commission  for  the  purposes  of
applying  the  Convention.

Article  7  of  the  Second  Protocol  follows  on  from
these  provisions.  It  requires  the  Member  States
and the Commission to cooperate with each other
in  the  fight  against  fraud,  active  and  passive
corruption  and  money  laundering.  It  makes  it
clear  that  not  only  the  Member  States,  but  also
the  Commission,  have  a  role  to  play  regarding
cooperation  in  the  fight  against  fraud,  active  and
passive  corruption  and  money  laundering.  The
to 
Commission’s  role 
its  specific
is  related 
responsibilities  and  obligations 
in  respect  of
implementation  of  the  budget  and  combating
fraud  against  the  Communities’  financial  interests
under  Articles  205  and  209a (1)  of  the  Treaty
establishing  the  European  Community.  Article  7
further specifies the rules governing data transfers,
which  are  vital  to  effective  cooperation  between
the  Member  States  and  the  Commission.

7.2. 

Paragraph 1

(a)  This  paragraph  provides 

States 

the  Member 

for  cooperation
between 
the
and 
Commission.  Alongside  the  Member  States’
primary  responsibility  for  investigations  and
prosecutions  (Article  6  of  the  Convention)
Article  7(1) 
and
operational  role  on  the  Commission.  The  text
expresses  the  concept  of  partnership  in  the
fight  against  fraud.

technical 

confers 

a 

What is concerned here is fraud in the criminal
sense.  The  following  situations  are  involved
where  at 
two  Member  States  are
affected:

least 

—  cases  where  fraudulent  acts  are  committed
on  two  sides  of  an  international  border,

—  cases  where  a  fraudulent  act  is  committed
in  one  Member  State  but  the  perpetrators
are  nationals  of  more  than  one  Member
State  or  non-member  country,

(1)  Renumbered  Articles  274  and  280  pursuant  to  Article  12
and  the  Annex  to  the  Treaty  of  Amsterdam  (OJ  C  340,
10.11.1997).

—  cases  where  a  fraudulent  act  is  committed
in  one  Member  State  but  the  evidence  is
spread  over  more  than  one  Member  State
or  non-member  country,

—  cases  where 

the 

fruits  of 

fraud  and
property  liable  to  confiscation  are  to  be
found  outside  the  country  where  the
fraudulent  act  is  committed,  even  outside
the  European  Union,

—  cases 

where, 

although 

individual
fraudulent  acts  are  committed  within  a
national  context,  they  constitute  links  in  a
chain  of 
acts  organised
transnationally.

fraudulent 

These  situations  also  apply  to  corruption  and
money 
is  made  for
cooperation  between  the  Member  States  and
the  Commission  in  all  of  them.

laundering.  Provision 

that 

cooperation 

(b) The  Commission’s  role  is  further  spelled  out
in the second subparagraph. It is provided for
the  purposes  of 
the
Commission  shall  lend  its  assistance.  Where
fraudulent  acts  are  committed  in  a  single
Member  State,  there  may  nonetheless  be  links
with  organised  networks  in  several  Member
States.  Rapid 
cooperation
between the relevant authorities — whether at
Member  State  or  Community  level  —  will  be
investigations  and
conducive  to  successful 
prosecution.

fruitful 

and 

The  role  conferred  on  the  Commission  is
defined  by  the  word  ‘assistance’.  Assistance
the  circumstances  and
will  depend  on 
requirements  of  the 
individual  case.  The
objective  is  to  add  value  to  the  investigations
of the facts and to prosecution and conviction
where  the  case  is  referred  to  the  official
national  authorities,  by  ensuring  that  the
necessary  skills  and  know-how  are  available.
The  concept  will  fall  to  be  interpreted  in  the
broadest  sense,  without  restrictions.

The  role  conferred  on  the  Commission  is
clearly  without  prejudice  to  the  exercise  of
powers  conferred  on  the  Member  States’
judicial  authorities  in  criminal  matters.  The
Member  States’  authorities  have  access  to  the
full  range  of  national  and  international  legal
instruments,  including  the  Convention  on  the
protection  of 
financial
interests  and  the  Protocols  to  it,  to  enable
them  to  act  against  fraud,  particularly  where

the  Communities’ 

C  91/14

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is  made 

organised  financial  crime  is  involved.  No
change 
the  national  and
to 
international  legal  instruments  themselves;  the
provision  is  solely  for  Commission  assistance
in  their  implementation.  Assistance  may  be  in
two  forms  —  technical  and  operational  —
which  must  be  distinguished.

(c) Technical  assistance  corresponds  to  the  value
in  all  areas
the  Commission 
added  by 
governed 
rules.  The
by  Community 
documentary  and  logistical  expertise  that  it
can  make  available  in  the  fight  against  fraud
are  significant  here.  But  so  are  the  full  range
of  its  strategic  data  that  can  be  used  to
identify  current  trends  regarding  fraudulent
activities,  the  typology  of  fraud  perpetrators,
both  individual  and  organisations,  as  well  as
the 
the
vulnerability  to  fraud  of  certain  areas  of
activity.

prompted 

analyses 

risk 

by 

the 

terms, 

judicial 

logistical 

In 
and
prosecuting  authorities  may  well  need  access
to  the  Commission’s  databases  relating  to
potentially  relevant  business  activities;  they
cannot 
the
Commission’s  assistance.

without 

consult 

these 

from 

available 

Technical  assistance  embraces  other  forms  of
support 
the  Unit  on
Coordination  of  Fraud  Prevention’s  (UCLAF)
Criminal  Expertise  and  Liaison  Unit,  which  is
experienced 
legal  matters
extending to national systems. All prosecuting
authorities  will  thus  have  access  to  that
expertise  to  help  them  prepare  requests  to  be
made  to  the  judicial  authorities  of  one  or
more  other  Member  States.

technical 

in 

(d) Operational  assistance  relates  specifically  to
on-the-ground  activities  to  combat  fraud,
corruption and money laundering. It covers all
the  contributions  the  Commission  can  make
to  enhancing  the  effectiveness  of  enforcement
activities 
coordination  of
investigations  undertaken  by  the  national
authorities.

facilitate 

to 

—  identify 

the 

and 

relevant
contact 
authorities  and  establish  relations  for  the
purposes  of  information  and  operations,
thus  linking  the  administrative  and  the
criminal investigations,

—  establish  or 

facilitate  direct  contacts
between  the  relevant  authorities  involved,

—  organise  meetings  quickly  between  the
relevant  authorities,  on  request  or  when
the  need  arises,

—  promote  and  facilitate  relations  between
the  different  relevant  authorities  in  the
relevant  countries  in  cases  of  transnational
organised fraud,

—  provide  the  relevant  national  authorities
with  the  help  they  need  so  as  to  enjoy  the
quickest  and  most  efficient  access  to  the
results  of  investigations  undertaken  by  the
Commission  and 
the  opportunities
to 
offered  by 
international  administrative
cooperation,

—  provide  assistance  to  the  relevant  national
authorities  for  the  purpose  of  the  full
exploitation  of  the  possibilities  offered  by
international 
judicial
agreements 
cooperation.  This  assistance  may,  where
the  provision  of
include 
appropriate, 
the
information 
for 
preparation  of 
judicial
cooperation,

the  purpose  of 
requests 

for 

on 

—  facilitate 

requisite 

contacts  with 

the
relevant  authorities  in  cases  of  organised
international  fraud  so  as  to  promote  the
application  of  Article  6(2)  of  the  Fraud
Convention 
pro-
(centralisation 
secutions).

of 

7.3. 

Paragraph 2

2 

provides 

of
Paragraph 
information, 
the
confidentiality  of  investigations  and  of  personal
data.

exchange 
to  protection  of 

subject 

for 

Clearly  the  investigations  and  prosecutions  in
the  areas  referred  to  in  Article  7  are  a  matter
the  Member  States’  own  competent
for 
(judicial  or  other)  authorities.  But 
the
Commission’s  operational  assistance  can  be
valuable 
the  sound  performance  of
investigations,  particularly  as  it  can  help  to:

for 

(a)  The  purpose  of  paragraph  2  is  to  state  that  in
principle  there  must  be  no  barriers  to  the
exchange  of  information  between  the  Member
States and the Commission, including between
Member  States  via  the  Commission.  The
information  exchange  presupposes  a  flow  of
information  in  two  directions.

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The  aim  of  the  information  exchange  is  to
facilitate  evidence  of  the  facts  of  a  case  and
preventive or enforcement measures in cases of
fraud,  active  and  passive  corruption  and
money laundering. There may be an intensified
administrative 
is
reason  to  expect  real  irregularities;  a  coherent
investigation  strategy  may  also  be  developed.

investigation  where  there 

series 

The  paragraph  does  not  specify  the  types  of
information that may be exchanged. There are
no  good  reasons  for  restricting  them.  Given
the  wide  range  of  cooperation  situations  that
may  arise,  information  needs  will  relate  to  a
whole 
possibilities
depending on the individual case. The concrete
nature  of  the  information  will  depend  on
progress  in  investigations  at  the  time  when
cooperation commences and, of course, on the
specific 
in  which
information  is  required  as  a  basis  for  further
action.

features  of 

the  case 

practical 

of 

The information exchanged under paragraph 2
might,  for  instance,  concern:

—  the  nature  of  the  fraud  and  its  legal

context,

—  the  modus  operandi,

—  the  persons  or  bodies  corporate  involved,

and  personal  data  more  generally.

(b) Paragraph  2 

imposes  two  constraints  on
information  exchanges:  data  protection  and
confidentiality 
Each
individual  situation  will  have  to  be  assessed
individually 
the
the 
circumstances.

investigations. 

basis 

on 

of 

of 

Specific  provisions  of  the  Second  Protocol
(Articles  8  to  11)  secure  the  protection  of
personal  data  in  the  information  exchange
process.

The  national  law  of  each  Member  State  will
apply  to  the  confidentiality  of  investigations.
As  regards  the  Commission,  Community  law
provides  for  the  principle  of  business  secrecy
(Article  214 (1)  of  the  Treaty  establishing  the
European  Community).

given  on 

Consideration 
a
should  be 
case-by-case  basis  to  the  specific  features  and
requirements  of  transnational  investigations
regarding 
financial
interests.

Communities’ 

the 

(1)  Renumbered  Article  287  pursuant  to  Article  12  and  the

Annex  to  the  Treaty  of  Amsterdam.

(c) Article 7(2) also allows a Member State which
supplies  information  to  set  specific  conditions
concerning the use of the information, whether
by  the  Commission  or  by  another  Member
information  may  be
State  to  which  the 
passed.

of 

the 

95/46/EC 

A Member State may, for example, set out for
its  competent  authorities  general  or  specific
provisions  which  may  serve  as  a  basis  for
specific  conditions  relating  to  the  use  of
level  of
information  which  provide  a 
protection  equivalent  to  that  provided 
in
European
Directive 
Parliament  and  of  the  Council  of  24  October
1995  on  the  protection  of  individuals  with
regard  to  the  processing  of  personal  data  and
on the free movement of such data (2)  and  are
consistent with the provisions of national law.
In  so  doing,  the  Member  States  should  take
account  on  a  case-by-case  basis  of  the  specific
features  and  requirements  of  transnational
the  Communities’
investigations  regarding 
financial interests.

Article  8

Data  protection  responsibility  for  the  Commission

The  Commission  shall  ensure  that,  in  the  context  of  the
exchange  of  information  under  Article  7(2),  it  observes,
as  regards  the  processing  of  personal  data,  a  level  of
protection  equivalent  to  the  level  of  protection  set  out  in
Directive  95/46/EC.  A  Commission  statement  entered  in
the  Council  minutes  when  that  Directive  was  adopted
stated  that  the  Commission  accepted  the  obligations
flowing  from  the  Directive.  The  principles  expressed  in
the  recitals  and  the  enacting  provisions  of  that  Directive
will  accordingly  constitute  the  framework  of 
legal
reference for protection of all the data to which Article 7
applies (3).

The kind of assistance which the Commission will be able
to  render  to  the  Member  States,  as  described  in  the
commentary  on  Article  7,  would  imply  the  transfer  by
Member  States  of  all  kinds  of  data,  including  personal
data, to the Commission and the processing by the latter
of  such  data.  Since  it  is  inevitable  that  the  Commission
will  process  such  data  by  creating  its  own  filing  systems,
it  was  felt  necessary  to  introduce  provisions  in  the
Protocol  to  ensure  the  observance  by  the  Commission  of
rules  on  the  protection  of  personal  data  and  the

(2)  OJ  L  281,  23.11.1995,  p.  31.
(3)  This Article fully complies with Article 286 of the EC Treaty,
as  renumbered  by 
the  Amsterdam  Treaty,  regarding
application by the institutions of Community data-protection
law.

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preservation of confidentiality. These rules will define the
conditions  under  which  the  processing  of  personal  data
by  the  Commission 
including  conditions
relating to data quality and legitimacy of data processing,
as  well  as  the  right  of  the  data  subject  to  have  access  to,
object  to  or  have  corrections  made  to,  his  personal
data.

lawful, 

is 

opportunity to check the conditions (Article 7 (2))
in relation to the intended transfer of information
and  to  check  whether  the  information  to  be
transferred  is  up  to  date  and  accurate.

The  Member  State  should  take  into  account  the
need  for  carrying  out  this  verification  without
delay 
to  avoid  any  unnecessary
procedural  complications  concerning  the  transfer
of  information.

in  order 

Article  9

Publication  of  data  protection  rules

10.3.  Paragraph 2

The  rules  adopted  concerning  the  obligations  under
Article  8  will  be  published  in  the  Official  Journal  of  the
European  Communities.  Data  protection  rules  will  thus
have  mandatory  legal  effect.  They  will  be  part  of
Community  data-protection  law.

In this context it should be pointed out that according to
Article  16(4)  of  the  Second  Protocol,  exchange  of
information  by  the  Member  States  with  the  Commission
under  Article  7(2)  will  be  suspended  if,  and  for  as  long
as,  the  rules  adopted  in  conformity  with  Article  8  have
not  yet  been  published  in  the  Official  Journal.

As  regards  the  transfer  of  personal  data  by  the
Commission  to  third  countries,  the  situation  is
different: The Commission may only transfer such
data  to  a  third  country  if  the  providing  Member
State  has  given  its  authorisation  to  do  so.  For
example,  as  is  the  case  under  Chapter  IV  of
Directive  95/46/EC,  this  permits  the  providing
Member  State  to  assess  whether  the  level  of
protection  afforded  by  the  third  State  concerned
in  respect  of  these  data  is  adequate.

Article  11

Supervisory  authority

Article  10

Transfer  of  data  to  other  Member  States  and  third
countries

10.1.  General remarks

This  Article  falls  to  be  considered  in  conjunction  with
Article  28  of  Directive  95/46/EC,  which  provides  that  in
each  Member  State  ‘one  or  more  public  authorities  are
responsible  for  monitoring  the  application  within  its
territory of the provisions adopted by the Member States
in  pursuance  of  this  Directive’.

This  Article  deals  with  the  question  under  which
conditions  the  Commission  may  pass  on  personal
data  obtained  from  a  Member  State  pursuant  to
cooperation  under  Article  7  to  other  Member
States  or  third  States.

10.2.  Paragraph  1

In  principle,  there  are  no  barriers  to  the  transfer
of  information  to  other  Member  States,  taking
into  account  investigation  secrecy  and  subject  to
the  observance  of  conditions  which  the  providing
Member  State  may  have  set  as  to  the  use  of  the
information  concerned  either  by  the  Commission
or  by  Member  States  to  which  this  information
may  be  passed  on.

Before  information  is  transferred,  the  Member
State  which  supplied  the  information  must  be
informed  of  the  intended  transfer.  It  thus  has  the

by 

Article  286(2)  of  the  Treaty  establishing  the  European
Community,  as  renumbered  by  the  Amsterdam  Treaty,
requires  the  European  Parliament  and  the  Council  to
establish 
a  Community
data-protection  supervisory  authority.  Article  11  of  the
Second  Protocol  provides  that  that  authority  shall  be
competent  to  exercise  the  same  function  with  respect  to
personal  data  held  by  the  Commission  by  virtue  of  the
Second  Protocol.

January 

1999 

1 

Article  12

Relation  to  the  Convention

12.1.  Paragraph 1

Paragraph  1  refers  to  specific  provisions  of  the
Fraud  Convention  declaring  them  applicable  to
money laundering as referred to in Article 2 of the
Second  Protocol.  The  relevant  provisions  of  the
Convention  may  be  summarised  as  follows:

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—  Article  3  etablishes  that  business  managers

may  be  held  criminally  liable,

—  Article  5  deals  with  extradition  and  the  aut

dedere  aut  judicare  rule,

—  Article  6  establishes  the  principle  of  close
cooperation  between  Member  States  in  cases
of  fraud  against  the  European  Communities’
financial interests.

These three principles apply without restriction to
the  conduct  to  which  Article  2  refers.

12.2.  Paragraph  2

Paragraph  2  provides  that  certain  provisions  of
the  Convention  apply  to  the  Second  Protocol.
These  provisions  may  be  summarised  as  follows:

to  settle  disputes  between  Member  States  and
between  Member  States  and  the  Commission
relating  to  the  interpretation  or  application  of  the
Second  Protocol,  as  well  as  the 
jurisdiction
conferred  on  the  Court  of  Justice  regarding
preliminary rulings.

13.2.  Paragraphs  1  and  2

Paragraph  1  deals  with  the  conditions  under
which the Court of Justice is competent regarding
disputes  between  Member  States.  Paragraph  2
concerns disputes between Member States and the
Commission.  These  provisions  of  the  Second
Protocol  reproduce,  as 
the
wording  of  Article  8  of  the  Fraud  Convention,
and  that  of  Article  8  of  the  First  Protocol,  in
order  to  ensure  consistency  between  the  three
instruments.  Detailed  commentaries  are  to  be
found 
the
in 
Convention.

the  Explanatory 

far  as  possible, 

report 

to 

—  Article  4  provides 

rules  on 

jurisdiction
regarding the offences concerned. Declarations
made  pursuant  to  Article  4(2)  apply  to  the
Second  Protocol  unless  otherwise  indicated  at
the  Second
the 
Protocol,

ratification  of 

time  of 

—  Article  7  establishes  the  ne  bis  in  idem  rule,
which  is  also  applicable  in  matters  coming
under  the  Second  Protocol.  Declarations  made
pursuant  to  Article  7(2)  apply  to  the  Second
Protocol unless otherwise indicated at the time
of  ratification  of  the  Second  Protocol.  It  is  to
be  noted  that  the  enforcement  of  a  sentence
includes cases where enforcement is suspended
on  probation,

—  Article  9  allows  Member  States  to  enact
provisions  of  national  law  that  are  more
demanding  than  those  of  the  Convention.  The
Second  Protocol  likewise  constitutes  a  set  of
minimum  standards,

—  Article  10  establishes,  inter  alia,  arrangements
for  the  provision  of  information  by  Member
States  to  the  Commission,  and  it  also  applies
in  matters  coming  under  the  Second  Protocol.

13.3.  Paragraph 3

Paragraph  3  provides  that  the  Protocol  of  29
November  1996  on  the  interpretation,  by  way  of
preliminary rulings, by the Court of Justice of the
European Communities, of the Convention on the
protection  of 
the  European  Communities’
financial  interests,  applies  to  the  Second  Protocol.
That  Protocol  also  applies  to  the  Convention  and
the  First  Protocol.  Declarations  made  pursuant  to
the said Protocol are valid in respect of the Second
Protocol  unless  otherwise  indicated  at  the  time  of
ratification  of  the  Second  Protocol.

Article  14

Non-contractual liability

that  action 

the
This  Article  confirms 
Commission  under  the  Second  Protocol  will  be  governed
by  the  rules  of  Community  law  on  the  Community’s
non-contractual  liability,  set  out  in  Articles  215  and  178
of  the  Treaty  establishing  the  European  Community (1).

taken  by 

Article  13

Court  of  Justice

13.1.  General remarks

Since 
it  cannot  be  excluded  that  activities  of  the
Commission  pursuant  to  the  Second  Protocol  may  give
rise to claims for damages by individuals whose personal
data  are  processed  by  the  Commission,  it  was  felt
necessary  to  confirm  that  also  in  a  case  where  the
Commission acts within powers conferred on it otherwise
than  by  the  EC  Treaty,  it  engages  the  non-contractual
liability  of  the  Community  in  accordance  with  the  terms
of  Article  215(2)  of  the  EC  Treaty.

This  Article  specifies  the  jurisdiction  conferred  on
the Court of Justice of the European Communities

(1)  Renumbered  Articles  288  and  235  respectively  under  the

Treaty  of  Amsterdam.

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Moreover,  it  is  clear  that  the  Court  of  Justice  of  the
European  Communities  has 
in  disputes
relating  to  compensation  for  damage  caused  by  the
Commission  or  its  servants  in  the  performance  of  their
duties  under  the  Second  Protocol.

jurisdiction 

Article  15

Judicial  control

(c) the  nature  of  the  decision  which  the  Court  of  Justice
may  take  on  an  action  brought  before  it  (first
paragraph  of  Article  174 (4));

(d) the  legal  effect  of  a  decision  of  the  Court  of  Justice
for  the  Commission  (first  and  second  paragraphs  of
Article  176 (5));

(e) the legal effect of bringing an action before the Court

of  Justice  (Article  185 (6));  and

(f)  that  the  Court  of  Justice  is  entitled  to  prescribe  any
(Article

it  considers  necessary 

interim  measures 
186 (7)).

According  to  Article  22  of  Directive  95/46/EC,  which
deals  with  data  protection,  Member  States  shall  provide
for the right of every person to a judicial remedy for any
breach  of  the  rights  guaranteed  to  him  by  the  national
law  applicable  to  the  processing  of  relevant  data.  Such
rights  include  a  right  of  access,  a  right  of  rectification,
erasure  or  blocking  of  data  when  they  are  incomplete,
inaccurate  or  too  old  to  remain  stored  and  the  right  to
have  access  to  the  supervisory  authority.

Article  16

Entry  into  force

This  Article  concerns  the  entry  into  force  of  the  Second
Protocol  which  may  not  precede  that  of  the  Fraud
Convention.

The  rules  to  be  adopted  pursuant  to  Article  8  of  the
Second  Protocol  will  have  to  include  provisions  granting
such  rights  to  individuals  in  respect  of  personal  data
processed  by  the  Commission.

Article  17

Accession  of  new  Member  States

is  given 

jurisdiction 

Under Article 15(1), the Court of Justice of the European
to  deal  with
Communities 
applications  from  natural  and  legal  persons  against
decisions (which include refusals to take a decision) taken
by the Commission on the basis of the rules adopted by it
pursuant  to  Article  8.  It  will  also  be  possible  for  the
Court  of  Justice  to  assess  in  this  context  whether  the
Commission has fully complied with its obligations under
Article  8.

This Article concerns the accession of new Member States
of  the  European  Union  to  the  Second  Protocol.

Article  18

Reservations

18.1.  Paragraph 1

The wording of Article 15(1) draws largely on that of the
fourth paragraph of Article 173 of the EC Treaty (1) read
also  in  conjunction  with  the  second  paragraph  of  said
Article  173.

The references in Article 15(2) to several other provisions
of  the  EC  Treaty  are  intended  to  clarify:

(a)  that  the  Council  may  decide,  in  accordance  with  the
procedure  of  Article  168a(1)  and  (2)  of  the  EC
Treaty (2), to confer jurisdiction on the Court of First
Instance  in  cases  covered  by  Article  15(1);

(b) the  time  limits  to  be  observed  for  bringing  a  case
before the Court of Justice (fifth paragraph of Article
173 (3));

for 

such  a 

In some Member States, money laundering related
to the proceeds of active and passive corruption is
a  criminal  offence  only  as  far  as  serious  cases  of
corruption  are  involved.  In  order  to  enable  these
Member  States  to  ratify  the  Protocol  without
delay,  they  were  given  the  possibility  of  making  a
reservation  in  this  area.  To  ensure  that  the
necessity 
reservation  will  be
reconsidered on a regular basis, its validity will be
limited  to  a  period  of  five  years  from  the  date  of
notification  that  the  Protocol  has  been  adopted
according  to  Article  16(2).  After  five  years,  the
reservation  may  be  renewed  once  in  order  to
remain valid. As a result, after a maximum period
of  10  years  from  the  date  of  the  notification  of
ratification by the last Member State, reservations
made  with  regard 
the  scope  of  money
laundering  will  cease  to  have  effect.

to 

(1)  Renumbered  Article  230  under  the  Treaty  of  Amsterdam.
(2)  Renumbered  Article  225.
(3)  Renumbered  Article  230.

(4)  Renumbered  Article  231.
(5)  Renumbered  Article  233.
(6)  Renumbered  Article  242.
(7)  Renumbered  Article  243.

31.3.1999

EN

Official  Journal  of  the  European  Communities

C  91/19

18.2.  Paragraph  2

the 

issue  of 

From  the  beginning  of  the  negotiations  on  the
liability  and
Second  Protocol, 
sanctions  for  legal  persons  have  created  problems
for  Austria,  the  concept  of  criminal  liability  for
legal  persons  being  unknown  to  its  legislation.
Because  the  problem  was  considered  of  practical
rather  than  of  fundamental  nature,  it  was  clear
that  Austria  would  need  more  time  to  implement
Articles 3 and 4 than the other Member States. To
ensure  that  this  specific  problem  would  not  delay
the eventual entry into force of the entire Protocol
for  all  Member  States,  and  to  encourage  Austria
to adapt its legislation, it was given the possibility
of  making  a  five-year  reservation  on  these  two

Articles.  Unlike  the  reservation  referred  to  in
Article 18(1), this reservation may not be renewed
and  will  lose  its  validity  five  years  after  the
Council act drawing up the Protocol was adopted,
i.e.  on  19  June  2002.

18.3.  Paragraph 3

Since, according to Article 12(2), Articles 4 and 7
of the Fraud Convention also apply to the Second
Protocol,  reservations  that  were  accepted  under
the  scope  of  those  provisions  of  the  Convention
must  apply  in  the  context  of  the  Second  Protocol
as  well.  Any  of  these  reservations  may  be
withdrawn  at  any  time  by  notice  given  to  the
Secretary-General  of  the  Council.