OLAF Supervisory Committee — Progress Report July 2000 to September 2001
Date: 2001-12-20
Institutions: European Anti-Fraud Office, European Commission
Subjects: European Anti-fraud Office, activity report

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EN

Official Journal of the European Communities

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I

(Information)

COMMISSION

European Anti-fraud Office (OLAF)

OLAF Supervisory Committee

PROGRESS REPORT

July 2000 to September 2001

(2001/C 365/01)

Members of the OLAF Supervisory Committee

Mireille DELMAS-MARTY

Chair until 9 October 2001
Professor at the Panthéon-Sorbonne University (Paris I)

Raymond KENDALL

Chair from 9 October 2001
Honorary General Secretary of Interpol

Edmondo BRUTI-LIBERATI

Deputy Prosecutor-General at the Milan Court of Appeal

Alfredo José DE SOUSA

Member of the Supervisory Committee since 1 April 2001
President of the Court of Auditors of the Republic of Portugal

Harald NOACK

State Secretary in the Government of North Rhine-Westphalia

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CONTENTS

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER I — ADMINISTRATIVE AND BUDGETARY INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER II — RESTRUCTURING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Organisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.1. Reorganisation of administrative structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2. Recruitment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2.1. Advisory Committee on Appointments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2.2. Selection Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2.3. Independence and responsibility of officials and temporary staff

. . . . . . . . . . . . . . . . . . . . . . . . . .

1.3. Role of the Judicial Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.4. Follow-up and recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.5. Intelligence, gathering and evaluating information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.1. Managing cases: the case management system and scoreboards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.2. OLAF manual . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.3. Relations with the Commission; code of conduct for relations between OLAF and the Commission;
MOU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER III — DESCRIPTION OF INVESTIGATION ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. Initial evaluation of documents and information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Decision to open a case and choices of the form of investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Procedure and results of investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.1. Internal investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2. External investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Closure of the investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.1. The investigation report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4.2. The decision to close the investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER IV — EVALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. OLAF’s practice as regards internal investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.1. Nature of internal investigation activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.1.1. The subject matter of investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.1.2. Investigative acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2. Objectives of internal investigation activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2.1. New mission within the institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2.2. Complaints by litigants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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2. OLAF’s practice as regards external investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.1. Familiarity and compliance with national procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.2. The follow-up to reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.3. Transmission of investigation reports to national authorities

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Difficulties common to the two types of investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.1. Relations with the national authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.1.1. Judicial follow-up to OLAF investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.1.2. Cooperation by OLAF with national investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2. Need to define a policy on investigations: intelligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER V — CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. End of the transition from the UCLAF to OLAF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.1. Replacement of structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2. Definition of a proactive management project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Operational start-up of a genuine reform of the practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.1. The institutional positioning of OLAF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.2. The legitimacy and effectiveness of investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ANNEXES

Annex I — Opinion No 3/2001 on the possible establishment of a European public prosecutor responsible
for internal investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annex II — Council conclusions on the first report of the Supervisory Committee of the Anti-fraud Office
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(OLAF)

Annex III — European Parliament resolution on the Commission’s Annual Report for 1999 ‘Protecting
Communities’ financial interests — the fight against fraud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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INTRODUCTION

The Committee maintained the monthly frequency of meet-
ings: it met 11 times between September 2000 and September
2001, during which it regularly heard reports from the
Director of OLAF and his staff. It maintained its contacts with
the institutions, at its meetings or in connection with them:
with Parliament (in particular with the Chairman and rappor-
teurs of the Committee on Budgetary Control); the Council
(representatives of the Presidency and the Permanent Represen-
tatives Committee); the Commission (in particular Ms Schreyer,
Mr Vitorino and the Secretary-General, Mr O’Sullivan); and the
Court of Auditors (which it met twice). The transitional period
needed to set up structures adapted to OLAF’s new functions
was much longer than expected, and the Committee had to
devote a more substantial share of its endeavours than it
would have liked to the task of consolidating the Office’s
independence in establishing new structures and methods. At
the end of this period, the Committee should be able to focus
more on operational questions and fully exercise the function
conferred on it by Regulation (EC) No 1073/1999 of the
European Parliament and of the Council and Council Regu-
lation (Euratom) No 1074/1999 (1): ‘regular monitoring of the
implementation of the investigative function’ of OLAF.

In its first report (Chapter 1.1, OJ C 360, 14.12.2000), the
Committee stressed the limits flowing from the new structures
and the proposed changes. A year on, the balance-sheet has
plus and minus items as regards both the limits flowing
from internal organisational aspects and those flowing from
ambiguities in the Office’s status.

Regarding the limits flowing from internal organisational aspects,
the sought-after improvements in internal organisation (P2
and P4) are gradually being achieved. The first effects yielded
by the restructuring of OLAF, scheduled for summer 2000 in
order to equip the Office to carry out its new tasks, were felt
in relation to the transparency of operations. On 1 January
2001, a system for recording all cases was set up as rec-
ommended by the Court of Auditors. In addition, a major
effort to codify and harmonise operational procedures was
made in connection with the preparation of an OLAF manual,
also on 15 February 2001. Lastly, since the end of the first half
of 2001, all investigation procedures have been managed by
a case management system presented to the Supervisory
Committee, which stressed that it would inevitably be subject
In parallel with this injection of
to further development.

transparency into the management of OLAF, the Supervisory
Committee adapted its operation so as to exploit the docu-
mentation and data thus obtained. OLAF now supplies updated
monthly scoreboards covering all its operational activities and
providing the main items of
information that must be
submitted under Article 11(7) of the Regulation. The Com-
mittee used these scoreboards, which amplify the reports
submitted regularly by OLAF for a year on investigations
running for more than nine months and information on cases
referred to the national courts, to identify priorities for its own
controls. The Committee was also able to base its evaluation
of operational activity in overall terms on OLAF’s answers to
questionnaires prepared by its rapporteurs and in specific
terms on an analysis of a number of cases, supplemented if
necessary by working sessions at OLAF’s offices.

Regarding the limits flowing from ambiguities in the Office’s status,
progress is slow and remains unsatisfactory. With regard to
OLAF’s administrative and budgetary autonomy (proposal P1),
the Council and Parliament confirmed their previous stand-
points and spelled them out in resolutions passed when the
Committee’s first report was presented. At meetings with
Ms Schreyer, Commissioner
responsible for OLAF, and
Mr O’Sullivan, Secretary-General, the Supervisory Committee
was able to satisfy itself that the Commission had the will to
secure the Office’s operational
independence and wished
to grant it the management resources it needed for this
independence. It was agreed that a code of conduct governing
relations between OLAF and the Commission would be
prepared so as to give a constructive meaning to the ambigui-
ties of OLAF’s status noted by the Committee in its first report.
The Commission in particular confirmed its will to take
advantage of the duality of OLAF’s functions, operational and
legislative, and to exploit potential synergies between them.
Regarding the scope of Article 280 of the Treaty in all the
Community institutions and bodies, including with regard to
Members of Parliament (proposal P3), the situation has hardly
developed and remains unsettled pending the judgments of
the Court of First Instance. Lastly, regarding the strengthening
of the legal framework for the protection of the financial
interests of the EU (proposal P5), initiatives have indeed been
taken by Parliament and the Commission with regard both to
the procedural framework (gradual introduction of a European
Public Prosecutor) and to the substantive law (proposal for a
Directive concerning the criminal-law protection of the finan-
cial interests) (2).

(1) For purely practical reasons, only Regulation (EC) No 1073/1999

will be cited in the rest of this report.

(2) See Chapter V.2.

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The establishment of Eurojust, which is supposed to improve
cooperation, raises the problem of relations between OLAF
and the new body. The Intergovernmental Conference on the
reform of the institutions, which ended in Nice, did not agree
on extending its powers to cover the protection of
the
Community’s financial
interests. It is clear, therefore, that
OLAF has powers in relation to crime against Europe and
Eurojust to crime in Europe. All aspects of the protection of
financial interests, including the judicial follow-up, are thus
matters for OLAF. This applies in particular to the fight against
fraud, corruption to the detriment of the Community budget
and the laundering of the proceeds of such offences. The
question of relations between OLAF and Eurojust was con-
sidered at a meeting between the Supervisory Committee,
Mr Vitorino, Commissioner responsible for Justice and Home
Affairs and Mr Brüner. At this meeting, it was made clear that
both the Commission and OLAF wanted these relations to be
organised in a
cooperation and comp-
lementarity (3).

concern for

To give the fullest possible analysis and evaluation, this report
is structured as follows:

Administrative and budgetary independence (Chapter I)

Restructuring (Chapter II)

Description of investigation activities (Chapter III)

Evaluation (Chapter IV)

Conclusions (Chapter V).

CHAPTER I

ADMINISTRATIVE AND BUDGETARY
INDEPENDENCE

During its first year of activity, the Committee had to devote
the bulk of
its work to securing OLAF’s administrative
and budgetary independence. It reported on this last year,
emphasising the legislature’s determination to shield OLAF
against all forms of pressure and influence in the context of its
administrative and budgetary management, but at the same
time it observed that that independence was not yet secured.
Since then, the setting-up of OLAF has continued, and the
following changes have been made.

to manage

It was very difficult

With regard to the establishment of budget estimates, the
powers conferred on the Office’s Director on the basis of
the Committee’s opinion are basically appropriate and
consonant with the need for independence. But
for the
second time, for reasons of timing, the Committee’s opinion
on the preliminary draft budget for 2002 did no more than
take note of the Office’s proposals as the preliminary draft
was not presented early enough. With regard to management
of human resources, OLAF had to deal with recruitment
difficulties and the restructuring process could not be
completed.
selection
procedures without a clear idea of the functions, qualifi-
cations, level and status of the staff to be recruited. And, of
course,
restructuring was bound to cause upheavals in
working methods, organisation and working relations. The
Committee’s deliberations and decisions are based on the
opinions expressed by the institutions on its first report. The
Council resolution of 5 December 2000 on the Supervisory
Committee’s first report (4)‘calls on the Committee to pursue
its function of monitoring OLAF and giving its constructive
and critical assistance’ (point 15). The Council particularly
stresses the need to complete the establishment of OLAF’s
administrative and budgetary independence (point 12),
in
particular as
(point 14). Parliament
wished OLAF to introduce procedures for recruitment to
management posts involving the exercise of the powers of
the appointing authority conferred on the Director by
Article 6 of the Commission Decision of 28 April 1999 (5).
At its initiative, the budgetary authority placed in reserve 76
of the new posts given to OLAF in the 2001 budget to
ensure that the recruitment policy followed by OLAF truly
matched the objectives set by the legislation and solved the
problems generated by the transfer of UCLAF’s staff in its
entirety.

regards recruitment

Following talks between the Committee and the Commission,
an Advisory Committee for Appointments reflecting the
specific status and other features of OLAF was set up (6). The
result of all these discussions was an agreement to seek
pragmatic solutions enabling the OLAF project to be put into
operation as desired by the legislature. The Office is set
up within the Commission’s administrative and budgetary
structures but, as far as the Committee is concerned, in such a
way as to secure its investigative autonomy; the Commission’s
rules of procedure are applicable so long as they do not
hamper the Office’s independence. It is important that the
Commission has agreed to solve the problems of staff redeploy-

(3) Letter to Mr Vitorino dated 1 May 2001.

2001.

(4) See Annex II.
(5) Points 5 and 6 of the resolution.
(6) Meetings on 7 and 8 November 2000 and 16 and 17 January

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ments. Action has been taken on proposal P2 of the first
report — the dual mission of the Office in its investigative
function and the Commission’s legislation and policy function.
The organisation as set up by the Office appears to meet the
conditions for this dual mission. It remained only to inform
Parliament, which wished to seek the Committee’s opinion,
that the objectives pursued by OLAF actually corresponded to
the legislative intention. A meeting convened by Parliament’s
Committee on Budgets on 13 June 2001 noted that the
restructuring process could now be launched on the basis of
a rebalanced establishment plan and the Commission had
undertaken to support the redeployment of former UCLAF
staff. The budgetary authority accordingly adopted an
amending budget containing the establishment plan for OLAF,
effecting the distribution of permanent and temporary A and
B posts on the basis of a compromise between Parliament
and OLAF. The Supervisory Committee considers that the
restructuring process is now irreversible. OLAF’s new organis-
ation chart highlights the separation of functions between
investigations, intelligence, follow-up and judicial advice, and
recruitment policy must be adapted in line with the new
structure. The current position is that OLAF has recruited, in
accordance with its own procedures, three Directors for policy
and legislation, for operations and for intelligence, along with
most of the judicial officers for the Judicial Advice Unit. The
redeployment of former UCLAF staff is in motion and will be
completed by October 2001.

The final decisions concerning the release of the last 38 posts
and the adjustment of OLAF’s budget estimates for 2002 will
be taken in October on the basis of an evaluation of
progress in restructuring by the Supervisory Committee. The
Supervisory Committee considers that, the transitional phase
being over, there is no longer any need for its active support
in the process of restructuring the Office, in which it ran the
risk of being forced into the position of arbitrator as between
the institutions.

CHAPTER II

RESTRUCTURING

1. ORGANISATION

stage, in September 2000, involved the establishment by the
Director of two Directorates, one responsible for legal affairs
and Community legislation governing the protection of finan-
cial interests (Directorate A) and one for investigations and
operations (Directorate B). A number of units principally
responsible for administrative and communication matters
were attached direct to the Director. The second stage came
on 15 June 2001 with a new reorganisation decision, amplify-
ing the mechanism set up in September 2000 in three main
respects:

— the establishment of a third directorate responsible for
intelligence, operational strategy and information tech-
nology (Directorate C),

— changes in the management structure of the Investi-
gations and Operations Directorate to meet the concern
of the legislature for priority to be given to internal
investigations, organising the advisers in charge of investi-
gations in two teams dealing with (a) internal investi-
gations, direct expenditure and structural actions and
(b) external investigations and operations,

— the establishment of a unit in Directorate A to monitor
recovery in accordance with action 96 of the White Paper
on the reform of the Commission, relating to the more
effective management of recovery of funds unduly paid.

In parallel with these structural changes, OLAF set up an
Internal Investigations and Casework Board, consisting of the
Director-General, the Investigations Director, the Operations
Assistant, the advisers in the Investigations and Operations
Directorate and the Heads of the Magistrates and Judicial
Advice, and Pool and Support Functions Units. The Board’s
role is to allow the rationalisation of decisions to open
investigations, improve their follow-up and produce reports in
compliance with the rules of procedure.

The changes have still, of course, to produce their full effects
through proper recruitment and appointments, and especially
by establishing strong and structured connections between
investigators, judges and intelligence on the occasion of each
investigation.

1.1. Reorganisation of administrative structures

1.2. Recruitment

OLAF’s administrative structures developed in stages, and the
Director regularly briefed the Supervisory Committee. The first

Recruitment procedures have been established, but they have
not yet fully borne fruit.

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1.2.1. Advisory Committee on Appointments

The three director appointments in OLAF posed a number of
problems which concerned the Commission, the Director of
OLAF and the Supervisory Committee. In the end an agreement
that maintained the Director’s independence and autonomy
was reached in the form of a Consultative Committee on
Appointments, chaired by the Secretary-General of the Com-
mission and including officials from the Court of Auditors and
the Court of Justice, a member of the Supervisory Committee
and an official from OLAF, and this enabled the Director of
Directorate A to be appointed.

1.2.2. Selection Committee

But as regards the two director posts covered by the budgetary
resources for temporary staff and not eligible for transfer to
other Commission departments, the Advisory Committee for
Appointments was left aside in favour of an internal OLAF
Selection Committee chaired by a member of the Supervisory
Committee. This Selection Committee recruited the Directors
in charge of Directorates B (Investigations and Operations)
and C (Intelligence, Operational Strategy and Information
Technology). But the candidates selected for Directorates B
and C had not yet taken up duty at the time of writing.

1.2.3.

Independence and responsibility of officials and
temporary staff

Regulation (EC) No 1073/1999 determines the independent
status of OLAF’s Director; but OLAF’s staff in general, and its
temporary staff in particular, enjoy no specific status. The
provisions of the manual relating to the independence of
OLAF staff (point 1.5.3) refer mainly to their loyalty to the
Director and the Commission and are based on the Staff
Regulations of Officials and the Code of Conduct for OLAF
staff. The Committee considers that measures should be taken
to ensure that OLAF officials and temporary staff do not
come under pressures during their investigations that might
jeopardise their independence. In general terms, it would help
to secure staff’s independence if the manual provided for
rules to give effect to the disciplinary, financial and other
responsibilities of OLAF staff, in particular in their investi-
gation functions, especially as regards violations of litigants’
rights.

recruited to OLAF departments, either in the Judicial Advice
Unit or in the Investigations and Operations Directorate. This
recruitment answered calls made by the Council (7),
the
European Parliament (8) and the Supervisory Committee (9). In
certain conditions the current rules, laid down in the OLAF
manual, associate judges serving in the Legislation and Legal
Affairs Directorate with investigations conducted by the Inves-
tigations and Operations Directorate. The aim of establishing
this Unit is to involve the judicial advisers in investigative
activity and in contacts with the national judicial authorities
via the European Judicial Network and Eurojust. The Unit will
also provide the Office with internal legal advice so as to
guarantee the legality of investigations, secure respect for
fundamental rights of persons under investigation and avoid
annulment actions when the case reaches the courts. Under
the current rules laid down in the manual of procedures, the
judicial officers are involved at three stages:

— in investigation procedures,

they can be involved
throughout the procedure. They can also be consulted
before the decision to refer the case to a national authority
or to a Community authority is taken,

— they are consulted on coordination procedures involving

activities in non-member countries,

— in mutual assistance procedures, they are involved wher-
ever necessary in action on requests from the administrat-
ive or judicial authorities.

The Committee considers that the rules laid down in OLAF’s
manual in this respect are inevitably only provisional and that
the Unit’s role and responsibilities will need defining more
sharply. If the principle is that the judicial officers are simply
consulted before cases are transmitted to the national judicial
authorities or even formally referred to them, the responsibility
for contacts with these same judicial authorities remains in the
it
investigators’ hands. But on straight efficiency grounds,
would be preferable to involve the judicial advisers more
closely, as they are by definition experienced in matters of
relations with the courts. Unit A 5 (Magistrates and Judicial
Advice) in Directorate A should rapidly have an expert in each
Member State’s legal and judicial system. The number of staff
with judicial experience could well increase as they are also to
perform certain duties in relation to the Investigations and
Operations Directorate, in particular where internal investi-
gations are concerned. They are not representatives of a
Member State and are recruited by the Director of OLAF, like
all OLAF staff, on the basis of procedures that are designed to
secure their independence.

1.3. Role of the judicial officers

At the end of 2000, OLAF set about recruiting 15 judicial
advisers, who during the first half of 2001 were gradually

(7) Council resolution of 5 December 2000.
(8) Resolution A5-0116/2000 of 16 May 2000. Resolution A5-

0116/2000 of 13 December 2000.
(9) Supervisory Committee Report for 2000.

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1.4.

Follow-up and recovery

The Director of OLAF adopted a decision (10) establishing a
Unit (A 4) to monitor recovery in the Legislation and Legal
Affairs Directorate (Directorate A). This decision falls within
the context of action 96 of the White Paper on the reform of
the Commission, relating to the more effective management
of recovery of funds unduly paid. This Unit will be responsible
for monitoring the financial aspect of
in
particular as regards direct expenditure, where the Commission
makes payments itself, but also the administrative and disci-
plinary aspects. Its role in judicial follow-up will have to be
clarified (11). The Supervisory Committee has observed that
interdepartmental agreements are being negotiated between
OLAF and the relevant Commission Directorates-General and
the other institutions and bodies. OLAF quickly needs to
have a clear concept of all aspects of its follow-up activity
(administrative, financial, disciplinary, judicial, etc.) and of its
role and position in the Office’s organisation.

investigations,

1.5.

Intelligence, gathering and evaluating information

the fact

The Supervisory Committee was concerned from a very early
that OLAF did not have a proper
stage about
intelligence service responsible in particular for risk analysis
and the gathering and analysis of information on transnational
and international
fraud in order to enable the Office to
determine its policy on investigations. This situation was all
the more paradoxical as the Commission was involved in
numerous
information
in particular in the customs field,
exchange agreements,
many of them at international
level. The recruitment and
appointment (now in motion) of the Director of the Intelli-
gence Directorate should enable this new department to be so
organised as to meet two major preoccupations:

administrative

cooperation

or

— intensify cooperation between the new department and

Directorates A and B,

— have regard for complementarity with the work of
corresponding departments in the Member States and the
Commission.

Procedures to sort and validate the flow of operational, legal
and statistical information into the Office and, if necessary,

relay it to the Member States still have to be boosted (12). The
Committee observes, incidentally, that a major function of the
Intelligence Directorate (Directorate C) will be to provide the
basis for establishing OLAF’s work programme for examin-
ation by the Committee under Regulation (EC) No 1073/1999.

2. METHODS

2.1. Managing cases: the case management system and

scoreboards

In order to supply information on investigative activity, the
Office has injected the necessary transparency into case
management. The IRENE system, whose defects were highlight-
ed by the Court of Auditors in Report No 8/98, operated in
place of a registration system (13). Apart from its technical
weaknesses, it was far from systematically used. Its ambitions
were excessive (storage of cases reported by Member States,
management of UCLAF files, intelligence and analysis func-
tions),
it was cumbersome in operation and excessively
fragmented, and it had become unreliable. The entry of
cases, the classification of documents, notes and reports and
management practices were not governed by precise, uniform
rules. In the autumn of 2000, the Committee, partly for its
own information and partly for the sake of management
transparency, asked for all cases to be recorded and for
monthly scoreboards to be added to it. The important job of
updating data from IRENE was then undertaken and since the
beginning of 2001 cases have been systematically and fully
recorded. The decision was taken to transfer the entire
management of cases to a new case management system
(CMS), which came on stream in May 2001. This system,
based on systematic recording, provides a full and ongoing
overview of the caseload and is the source for information
transmitted to the Supervisory Committee in the form of
scoreboards. To change from IRENE to the CMS, OLAF carried
out extensive work of checking and validating the files
transferred. The CMS database is now up and running, but
improvements are still needed in several respects:

— the information on cases transmitted to the judicial
authorities and on requests for judicial assistance from
the national authorities,

(10) In June 2001.
(11) On this question, see also points 4.6, 4.7, 4.11, 4.19 and 4.20 of
Court of Auditors Special Report No 8/98 on the Commission’s
anti-fraud units, notably the Unit for the Coordination of Fraud
Prevention (UCLAF).

(12) On this question, see also point 2.18 of Court of Auditors Special
Report No 8/98 on the Commission’s anti-fraud units, notably
the Unit for the Coordination of Fraud Prevention (UCLAF).
(13) On this question, see also points 3.8 to 3.10 and 3.13 to 3.18 of
Court of Auditors Special Report No 8/98 on the Commission’s
anti-fraud units, notably the Unit for the Coordination of Fraud
Prevention (UCLAF).

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— the information on the follow-up to cases (criminal,

disciplinary or financial aspects),

— use of the possibilities offered by CMS as regards analysis

and intelligence.

File management was still not structured uniformly. There was
no general rule laying down criteria for classifying documents,
notes and reports, and files generally suffer from the fact that
there is no clear identification of documents (no summary
contents list, no reference to sources, no indication of date and
contents). This lack of filing rules and the lack of a standard
case layout could be counter-productive when cases are
transmitted to the judicial authorities of the Member States.

2.2. OLAF manual

On 15 February 2001, the Director of the Office put into force
an OLAF manual. The purpose of this manual, which is based
on the Regulations applicable to OLAF, is to improve and
standardise working methods and procedures in the Office
and make them more transparent both internally and exter-
nally. The manual for the first time provides a guide to internal
procedures that establishes a tight framework within which
individual decisions are taken by OLAF’s managers and
investigators. But harmonisation of
internal
procedure by the manual, which helps to standardise the way
the Office goes about its business, does not solve all the
difficulties facing investigators. The principle is that investi-
gations must comply with Treaty provisions, and in particular
with those of the Protocol on Privileges and Immunities, the
Staff Regulations of Officials of the European Communities
and a number of rules laid down by Community legislation or
autonomous decisions of the institutions. The Community
legislation imposes a number of fundamental obligations.

the rules of

The
first obligation incumbent on OLAF, particularly
important in terms of defence rights and of limitation per-
iods (14), is to inform those concerned that an investigation is
being opened (Regulation (EC) No 1073/1999). The second
obligation is to enable those concerned to make their views
known on all
facts concerning them before conclusions
referring specifically to them are drawn (see Article 4 of
Commission Decision 1999/396/CE, ECSC, Euratom of 2 June
1999 concerning the terms and conditions for internal investi-

(14) Article 3 of Council Regulation (EC, Euratom) No 2988/95 (OJ

L 36, 10.2.1998, p. 16).

the case and not of

gations in relation to the prevention of fraud, corruption and
any illegal activity detrimental to the Communities’ interests,
and Article 4 of Council Decision 1999/394/CE, Euratom of
25 May 1999 concerning the terms and conditions for internal
investigations in relation to the prevention of fraud, corruption
and any illegal activity detrimental
to the Communities’
interests). The manual establishes the principles that people
must be informed when an investigation is opened concerning
them, together with a rather restrictive consultation process in
that the person involved is invited to take note of a summary
of
the entire file. The Committee
received two complaints from persons under investigation
who considered that their individual rights were not safeguard-
ed since they had not been given the full file. If defence rights
and therefore the legality of the proceedings are to be to be
regarded as fully secured, any person whose case has not yet
been referred to the national judicial authorities or a European
disciplinary body should be guaranteed an absolute right of
access to the entire file.
Investigators are under a third
obligation at the end of an investigation. The person being
investigated must be aware within a reasonable time that the
investigation into him has been terminated. The OLAF manual
does not provide clearly enough for the Director to inform the
person involved at the end of the investigation. This is a gap
that should be filled, and the right of any person under
investigation to be informed that the investigation against him
has been terminated should be secured. The manual should
also restate the rule that any person investigated must benefit
from a full and rapid investigation procedure.

2.3. Relations with the Commission; code of conduct for

relations between OLAF and the Commission; MOU

Rules of cooperation need to be laid down to specify the
conditions for the Office’s functional independence and the
absence of interference by the Commission with the functions
exercised by the Office as a department associated with the
Commission. Following talks with the Commission Secretary-
General, who supported the initiative, the Supervisory Com-
mittee and the Director-General devoted several meetings to
examining a draft code of conduct laying down rules for
cooperation between OLAF and the Commission. Essentially
this cooperation can be examined under three different aspects:
the reciprocal rights and duties of OLAF and the Commission,
the organisation of interdepartmental work, and the manage-
ment and administration of the Office. This ongoing project
should clarify relations between the Office and the Commission
and consequently express OLAF’s independence as an investi-
gation service. The following matters are to be considered:

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— relations between OLAF and the Secretariat-General and
Directorates-General concerned by the Office’s activities,
in particular as regards follow-up on financial irregulari-
ties affecting the Structural Funds (15),

— relations between OLAF and authorising and accounting

officers regarding recovery,

— the relationship between the Office’s internal

investi-
gations and the Commission’s disciplinary and adminis-
trative procedures,

— the conditions and obligations as to mutual information

regarding investigations.

Likewise, the Supervisory Committee noted that the Director-
General of the Office and the Director of the Commission’s
Internal Audit Service wished to come to an agreement
clarifying or confirming the rules governing collaboration
between them. The agreement should help to avoid overlap-
ping powers.

CHAPTER III

DESCRIPTION OF INVESTIGATION ACTIVITIES

The concept of investigation is based on Articles 2, 3 and 4
of Regulation (EC) No 1073/1999. Under these Articles,
investigations mean all checks and inspections or other action
for the purpose of:

— fighting fraud, corruption and any other illegal activity
affecting the financial interests of the European Com-
munity,

— investigating to that end serious matters relating to the
discharge of professional duties such as to constitute a
dereliction of
the obligations of officials and other
servants of the Communities liable to result in disciplinary
or, as the case may be, criminal proceedings, or an
equivalent failure to discharge obligations on the part of
members of institutions and bodies, heads of offices and
agencies or members of the staff of institutions, bodies,
offices or agencies not subject to the Staff Regulations of
Officials.

There is a great variety of information sources underlying
investigations: information may be transmitted by specialised
departments in the Member States, the institutions, letters and
freephone calls, whistle-blowers or press articles.

1.

INITIAL EVALUATION OF DOCUMENTS AND INFOR-
MATION

Information of all kinds relating to fraud activities is systemati-
cally recorded in a mail registration system in OLAF (Adonis).
The rules laid down in the OLAF manual ought to improve
the way in which information received is quickly evaluated.
The manual lays down the rule that information received must
in normal circumstances undergo initial evaluation within five
days. After this initial evaluation, handled by an official who is
not in charge of the investigation, the Casework Board is asked
to give an opinion on the evaluation and consequently on the
action to be taken on the initial information. The Casework
Board, consisting of the Director-General, the Director of
Investigations, the Sectoral Advisers and the Heads of Unit A 5
(Judicial Advice) and Unit B 1 (Support functions) meets
weekly and is responsible for presenting OLAF’s Director with
proposals to formally open investigations. The Committee
points out that this first stage, when documents or information
received are analysed, raises a number of difficulties and
questions of principle.

First, it notes that there is no representative of Directorate C
(Intelligence, Operational Strategy and Information Tech-
nology) on the Board. This may be because when the manual
came into effect, Directorate C had not been set up and should
be rectified, as the evaluation of information received and
consequently the action to be taken depends for its validity on
account being taken of other information already available,
presumably held and analysed by the Intelligence Directorate.
Moreover, the involvement of the Head of Unit A 5 (Magistrates
and Judicial Advice) should also help to improve the evaluation
of information prompting decisions to open investigations.

In certain cases the decision to open an investigation, and
therefore to deploy exclusively administrative investigation
resources, may prove inconclusive as only a referral to the
judicial authorities, which have more effective procedural rules
and means of coercion, will make it possible to ascertain the
facts that can be used to ground criminal or disciplinary
proceedings. The prospect of a referral to the judicial auth-
orities is one of
the dimensions of a case that should
accordingly be considered as soon as the original information is
analysed (16). Moreover the evaluation of information received
frequently goes beyond the five-day time limit set by the
manual. The question arises therefore whether it
is not
advisable to review the standard that OLAF imposed on itself
and set a more reasonable and realistic period.

(15) See Court of Auditors Special Report No 8/2001.

(16) On this question, see also point 3.8 of Court of Auditors’ Special
Report No 8/98 on the Commission’s anti-fraud units, notably
the Unit for the Coordination of Fraud Prevention (UCLAF).

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2. DECISION TO OPEN A CASE AND CHOICES OF THE

FORM OF INVESTIGATION

Since 1 June 2000, all investigations have been opened by a
decision of the Director of the Office, of his own motion or in
response to a request from a Member State or a Community
institution or body. The Director directs the conduct of an
investigation. The Director’s decision to open an investigation
is an important document which has implications both for the
person who may be concerned and for the case investigators.
This decision must therefore be taken very quickly after the
information received has been evaluated and must be very
clear as to the nature and scope of the facts that are to be
investigated. Investigative acts undertaken outside the scope of
the decision to open the investigation may be annulled as
only the Director of OLAF is legally empowered to open
investigations and determine their scope (Article 5 of Regu-
If the decision to open the
lation (EC) No 1073/1999).
investigation were vague or imprecise, the persons under
investigation would have an opportunity to challenge all or
part of the procedure. The Committee considers that, given the
importance of drafting clear decisions to open investigations,
setting out the nature and scope of the facts to be investigated,
the Judicial Advice Unit should be asked for its opinion before
the case goes up to the Director. This opinion could also state
the form to be taken by the investigation, in particular the
value of transmitting it forthwith or not to the national judicial
authorities in cases where there is manifestly a criminal
dimension. OLAF’s role is then to provide assistance to the
national judicial authorities and in some cases to follow up
progress.

not deal with internal questions. Certain investigation measures
required prior authorisation from the Secretary-General of the
Commission. From 14 July 1998 internal investigations were
governed by the Commission Decision of the same day.
Detailed rules implementing this Decision were adopted on
9 December 1998. Since 1 July 1999 the details of OLAF
investigations have been governed by Regulation (EC)
No 1073/1999 and by decisions adopted by each institution.
These various legal frameworks laid the bases on which the
methodology of investigations was gradually built up. Since
1 July 1999 the Office’s investigations have been expanded for
three reasons:

— first of all because of the extension of the Office’s powers

to the other Community institutions and bodies,

— then the regulatory obligation on all officials and other
staff to report cases of which they were informed,

— lastly, the extension of OLAF’s powers beyond purely
budgetary fraud, resulting in an increase in the number
of cases from 1 July 1999.

3. PROCEDURE AND RESULTS OF INVESTIGATIONS

3.1.

Internal investigations

The internal investigations of UCLAF then of OLAF have come
legal frameworks. First of all, until a
under a variety of
Commission Decision of 14 July 1998, there was no specific
instrument truly determining the conditions in which investi-
gations internal to the European Union institutions and bodies
were to proceed. They were based solely on the horizontal and
sectoral legislation in force. Regulations specific to UCLAF,
such as Council Regulation (EC, Euratom) No 2185/96, did

Analysis of the figures supplied by OLAF reveals that 92
internal investigation cases were in motion on 1 July 2001.
The Committee’s rapporteurs examined a number of cases.
Their examination reveals generally that OLAF defined the
accusations in rather vague terms, which sometimes made it
difficult to process cases. With regard to the charge, it is clear
that the qualification of the facts investigated by OLAF staff
should be along the lines of a criminal, disciplinary or financial
offence. Clear charges should be brought, based on the
applicable provisions in the criminal law of whichever Member
State is relevant to the proceedings, or the Staff Regulations of
the Communities in disciplinary matters, or
Officials of
the financial regulations of the Communities for financial
misconduct, as the case may be, so as to make the presentation
of the cases more transparent and more rational. The table
gives figures relating to the 92 cases of internal investigations
recorded by UCLAF/OLAF. Because OLAF does not use
standard definitions of offences to be charged, the breakdown
adopted may be a little imprecise, but this does not invalidate
the basic data in the table. Fifteen of
these cases were
transmitted by other institutions, which are therefore behind
the opening of the investigations. But 78 cases were opened
by OLAF.

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Internal investigations

Type of fraud
or irregularity (1)

Referral
to Judicial
Authorities

Result

Result

Judgments
obtained

Closed without
further action

Referral
to disciplinary
authorities

Administrative
penalty ordered
by appointing
authority

Closure decision
ordered by
appointing
authority

Cases
transmitted
by other
institutions

1

2

—

1

3

1

—

—

—

1

—

—

9

3

4

1

3

3

1

1

—

2

—

—

—

18

1

—

—

2

1

—

—

—

1

—

—

—

5

1

2

—

—

—

1

—

—

—

—

—

—

4

1

1

—

—

6

4

1

—

1

—

1

—

15

C:

CI-IG-IP:

E:

F:

FP:

MM:

MP:

SP:

ST:

TI:

UA:

V:

8

16

2

10

16

19

8

1

7

2

2

1

92 (2)

5

5

1

1

6

2

1

—

3

1

—

1

26

1

—

—

—

1

—

—

—

—

—

—

—

2

C = corruption,
CI = confusion of interest, IG: interference, IP: personal interest,
E = embezzlement,
F = favouritism,
FP = forgery,
MM = violation of management rules,
MP = infringement of the public procurement rules,
SP = professional secrecy,
ST = infringement of the Staff Regulations of Officials,
TI = trading of favours,
UA = misuse,
V = theft.

(1) The data in the table do not relate to specific criminal offences but to a classification of improper forms of conduct based on statistics extrapolated from OLAF

records. The figures include both cases already closed, cases opened and cases in motion offer an evaluation in snapshot terms.

(2) Of which four were external cases with an internal impact.

On the basis of the cases currently in hand, the judicial
authorities have received referrals in 26 cases, with a positive
result in two of them, and in nine cases a decision has been
taken to terminate without further action. The disciplinary
authorities received referrals in 18 cases, with a positive result
in five and a negative result in four. Examination of the internal
investigation cases reveals that there are several types of
difficulty in the conduct of investigations which can affect
their legitimacy and credibility. First of all, investigations must
be conducted rapidly, and the norm is set by Article 11(7) of
Regulation (EC) No 1073/1999, which introduced a nine-
month deadline for the normal conduct of investigations. The
Committee observes that 58 out of 92 investigations exceeded
the nine-month deadline. The reasons given were often based
on staff shortages for internal investigations and the fact that
no priority had been given. In future this deadline should be
respected as a matter of principle, both on grounds of

efficiency of investigations and for the sake of litigants’ rights,
given that OLAF has attached priority to internal investigations,
set up a structure for the purpose and equipped it with the
requisite resources.

3.2. External investigations

With a view to strengthening fraud prevention, OLAF exercises
the external investigation power under the Regulation concern-
ing 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 (Regu-

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lation (Euratom, EC) No 2185/96) (17). OLAF also exerts this
authority in non-member countries for existing cooperation
agreements. In its external investigation function, the Office
also carries out the checks and inspections provided for by
the Regulation on the protection of the financial interests
of
the European Communities (Regulation (EC, Euratom)
No 2988/95)] and by sectoral regulations.

The ‘autonomous’ investigation procedure, based on Regu-
lation (Euratom, EC) No 2185/96, should be used more
efficiently. In practice, frauds and other irregularities nearly
always tend to be detected in close cooperation between OLAF
and national investigation services. In such cases, the external
investigation takes the form for the Office of a request sent to
the Member States for the opening of an investigation; this
investigation then proceeds under the responsibility of the
Member States, which operate in their national legal frame-
work. The Office is associated with the direction of the
investigations. The investigation may also be based on coordi-
nation and assistance for investigations conducted by the
Member States. In this event, coordination activity consists of
providing Member States with information received by the
Community and giving guidance for operational action by the
In fact,
Member States’ authorities, with their agreement.
almost all cases which involve complex fraud factors require a
series of things to be done, sequentially or not, by OLAF
investigators (associated control, coordination, assistance to
judicial authorities) on a variety of existing legal bases,
depending on the specific needs of the Member State or
non-member country concerned. The number of external
investigation cases recorded in the case management system
on 31 May 2001 was 2 343, according to OLAF’s figures.
OLAF was unable to provide the Committee with precise
information on the practical results obtained from these
investigations in terms of the action by the Member States or
non-member countries in cases in which there was either
coordination and assistance or autonomous controls by OLAF.
Nor did the Office indicate the breakdown between the two
types of activity.

In particular, there was at the time no information on the
administrative penalties imposed as a consequence of these
investigations, on the nature of the proceedings brought in
Member States or non-member countries concerned by these
criminal investigations, on convictions and sentences, or on
recoveries. This information had not been systematically
gathered. OLAF should make progress here with the introduc-
tion of monitoring activities involving the judicial advisers in
matters relevant to them and with the development of the
CMS database. The disparities observed in the clear-up rate are

(17) Council Regulation (Euratom, EC) No 2185/96 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 (OJ L 292, 15.11.1996).

explained by the complexity and the number of cases in the
sector concerned. In addition, certain sectors of OLAF were
obliged to work with limited staff over an extended period,
which naturally affected the rate of processing of cases.

The defragmentation announced by the Director of OLAF does
not seem to have been totally completed as regards external
investigations and management is still, despite the existence
of pools of investigators in the official organisation chart,
conducted on a sectoral basis. The latitude left to the Director
of OLAF to recruit specialist investigators on contract rather
than as permanent officials should enable OLAF in the long
term to set up a team of versatile investigators. Given the
complexity of
the legislative framework for investigation
activity (Community law and criminal law of the Member
States), the intention should be to form a team of versatile
investigators capable of working together in a multidisciplinary
context. This multidisciplinarity involves assigning judicial
officers to work with the investigators from the Member States’
traditional investigation services (customs, tax inspectorate,
police force). The Director of the Office, at meetings with
the Committee, announced his intention of continuing the
reorganisation of OLAF along these lines.

4. CLOSURE OF THE INVESTIGATION

At the end of the investigation, OLAF is left with two main
formalities:

— produce a report for signature by the Director, reflecting
the procedural requirements of the law of the Member
State concerned,

— present a decision terminating the investigation for

signature by the Director.

4.1. The investigation report

The report produced on the investigation must contain the
Director’s ‘recommendations’. It is then sent to the appropriate
administrative or judicial authorities. The basic Regulation
provides that, where an institution or body does not follow
the recommendation adopted by the Director, the Supervisory
Committee is to be informed. The Supervisory Committee has
not been informed this year of cases in which institutions or
bodies did not follow OLAF’s Director’s recommendations.
The Committee observed that in purely customs matters no
report had been sent to judicial authorities as OLAF considered
that the Member States’ services had sole responsibility here.
But
to the
judicial authorities of his own motion. Regarding internal
investigations, the report goes to the relevant institution or
body and the interested party is informed. The administrative,
disciplinary or financial action to be taken on these reports is
the responsibility of the relevant institutions or bodies.

the Director is entitled to submit his report

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4.2. The decision to close the investigation

the investigation, given the general reluctance to decide at the
very outset whether OLAF’s operational activities aim primarily
at criminal or at disciplinary proceedings.

The decision to close the investigation is no mere formality. It
must give an account of all the facts investigated. It releases
the investigator from the case by giving a decision that deals
clearly with the facts under investigation. A termination
decision must be served on the persons concerned within a
reasonable period following completion of the investigation.
Termination decisions might be better drafted if the Judicial
Advice Unit were asked to give an opinion on all such
decisions.

CHAPTER IV

1.1. Nature of internal investigation activity

The remarks made by the Supervisory Committee in its first
report regarding the mismatch between OLAF’s administrative
status and the often criminal context of its investigations were
illustrated quite eloquently by various analyses of its internal
investigation activity. Both the purpose of the investigation
and the proceedings reveal the lack of a clear vision of the
need to conduct procedures on the basis of the result aimed
at.

EVALUATION

1.1.1. The subject matter of investigations

Article 11(7) of Regulation (EC) No 1073/1999 requires the
Director of OLAF to report annually to the Supervisory
Committee on the Office’s programme of activities, and the
Committee states in Article 21(1) of its rules of procedure that
it will evaluate the action taken in the work programme in its
annual report. The Committee, even though OLAF has no
work programme stricto sensu, was able to gather the infor-
mation, and in particular the scoreboards,
the
questionnaires, the internal opinions by the Judicial Advice
Unit and the reports by Directorate B on certain cases, which
provide a basis for a partial evaluation of the Office’s activities.
On this basis, it has been able to ascertain a number of features
of the practices followed so far and to highlight the trends
sought by OLAF as regards both internal and external investi-
gations; some of the problems concern both types of activity.

its visits,

Many cases, despite the criminal dimension that was obvious
from the outset, were managed as though this aspect was
secondary or even non-existent. The practical significance of
this is that procedural acts intended to seek and ascertain facts
in support of criminal or disciplinary proceedings were often
reduced to merely gathering administrative documents and
superseded by activities to gather and evaluate information
and by assistance for the judicial authorities. But
these
activities, which are vitally important upstream and down-
stream of the actual investigation procedure, lose much of their
effectiveness if they are merged into the general organisation of
the investigation. In the new structure of OLAF as currently
envisaged there is to be a distinction but also a separation
between these activities, with close cooperation organised
between them. It would be worth amplifying the manual on
this point.

1. OLAF’S PRACTISE AS REGARDS INTERNAL INVESTI-

GATIONS

1.1.2.

Investigative acts

In quantitative terms, the number of

Given the specific importance attached by Regulation (EC)
No 1073/1999 to internal
investigations, the Supervisory
Committee warmly welcomed the initiative by OLAF’s Director
to ask the Judicial Advice Unit to produce a document
analysing internal investigations case-by-case and produce a
summary report. Their work was extremely useful for our
evaluation.
internal
investigations undertaken since the beginning (92) accounts
for a low percentage of the total number of investigations
undertaken by UCLAF/OLAF, but this area of activity is rapidly
expanding and involves committing greater responsibilities
and therefore greater resources. In particular, the percentage
of cases referred to the judicial authorities as regards internal
investigations (17 %) is considerably higher than for external
investigations. But the really important distinguishing factors
here are qualitative and concern the nature and objectives of

they are not

A large proportion of the information gathered comes from
anonymous letters and calls, whistle-blowers and press articles.
All these information sources are basically matters for the
evaluation and intelligence functions. For the actual investi-
gation,
in themselves adequate evidence to
ground prosecutions. Such information should not be taken
to legitimate the opening of an investigation unless it is
corroborated by hard evidence. On the other hand, inadequate
use is made of the procedure for hearing witnesses or persons
under investigation, and then often in such conditions as to
reduce or negate their value. The Supervisory Committee has
had occasion to note that complaints it has received from
litigants have tended to highlight this weakness. It is rec-
ommended that OLAF investigations be based far more
systematically on such hearings and that formal reports be
drawn up in such a way as to guarantee their evidential status.
The provisions of the manual on this point should be clarified
and amplified with the assistance of the Judicial Advice Unit.

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1.2. Objectives of internal investigation activity

1.2.2. Complaints by litigants

Recital 10 of Regulation (EC) No 1073/1999 guarantees ‘the
principle that the conclusions of an investigation may be based
solely on elements which have evidential value’. According
to Article 1(3) of the Regulation, the purpose of internal
investigations is ‘investigating ... serious matters relating to the
discharge of professional duties such as to constitute a
dereliction of the obligations of officials and other servants of
the Communities liable to result in disciplinary or, as the case
may be, criminal proceedings’. OLAF’s basic Regulation thus
clearly defines the purpose of internal investigations in terms
of principles. But in practice inadequate attention was paid in
advance to deciding whether the case warranted criminal or
disciplinary proceedings before the judicial advisers took office.
Actually the Office is not working for itself. The point of an
investigation is to establish facts to be used either by European
authorities or by the courts in the Member States, always with
full respect for fundamental rights and principles. The lack of
precision as to objectives has prompted OLAF to hesitate
before assuming its new role with the institutions.

1.2.1. New mission within the institutions

the Banks,

OLAF’s hesitations about its new mission came to the surface
with two cases: given the legal disputes resulting in action
the Office waived the opening of an
against
investigation at the EIB; the investigation in the ESC only
began two years after the Council and Parliament asked for it
to be opened (18); and the investigations opened in the
European Parliament exceeded the Regulation’s nine-month
deadline for no apparent reason. The relationship between
internal investigations in the Commission and the disciplinary
and administrative investigation procedures remains uncer-
tain (19). It would be helpful if this question was settled rapidly
on the basis of the principles set out in the draft code of
conduct (20) and, where appropriate, in the Memorandum of
Understanding with the Investigation and Discipline Office
or any other department exercising equivalent investigation
functions in relation to the protection of financial interests.
The arrival of staff with experience of criminal procedure, who
work with the investigators already operating and newly
recruited specialist staff, has already had beneficial effects on
the quality of investigation reports and on the attention paid
to the ultimate objective of the investigation — disciplinary or
criminal.

During this second year the Supervisory Committee received
five complaints from litigants about acts of UCLAF or OLAF
in connection with internal investigations. Acting in accord-
ance with the principles it emphasised when it first began
operating, the Committee, having regard to the regulatory
provisions applicable (Articles 11 and 14 of Regulation (EC)
No 1073/1999) declined jurisdiction in respect of
these
complaints as individual actions and passed them on to the
Director of OLAF. But it took note for information purposes
of the points made in them as material for its evaluation of
investigative activity. This information amplified its analysis of
OLAF’s investigation practice and highlighted the inadequacy
of the review facilities established by Article 14 of Regulation
(EC) No 1073/1999. Examination of the complaints by the
Director in accordance with that Article does not present any
procedural guarantee of objectivity since,
like any other
administrative redress procedure, it is conducted by, or by
persons reporting to,
the person responsible for the act
complained of. The review of these complaints by the Court
of First Instance is totally inadequate, as the first report stated,
since it takes place too late. This is borne out by the fact that
one litigant took the initiative of taking his case to the
European Ombudsman. The Supervisory Committee repeats
what
‘a judicial body should
permanently supervise all OLAF activities and, in particular,
authorise or order measures restricting individual rights to be
adopted during investigations, monitor their implementation
and verify whether an investigation conforms to the evidence
rules...’.

it said in its first report:

2. OLAF’S PRACTICE AS REGARDS EXTERNAL INVESTI-

GATIONS

OLAF’s investigative activities consist of administrative investi-
gations exercised by the Office direct and of coordination and
assistance measures in relation to investigations undertaken by
the Member States. The Committee has no accurate statistics
on this point, but administrative investigations seem to be the
preferred tool as regards the Structural Funds and direct
expenditure. It is also used in the context of the agricultural
policy, where the common organisation of markets is con-
cerned.

By contrast, coordination and assistance procedures are applied
mainly in the context of investigations in relation to own
resources (customs fraud) and to some extent in agriculture.
OLAF’s external activities come up against a number of
difficulties relating to:

(18) OLAF enjoyed such powers only after the entry into force of
Regulation (EC) No 1073/1999 and the internal decision of each
institution or body.

(19) Proposal P3 in the first report.
(20) Draft of 15.7.2001, p. 29.

— knowledge of and compliance with national procedures,

— a lack of information on the follow-up to investigation

reports,

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— the absence of clear rules on the transmission of infor-
mation and investigation reports to national authorities,

— the time taken by national authorities in the Member
States or non-member countries to transmit the docu-
ments needed for the investigation, which sometimes
causes the investigation to exceed the nine-month limit,
particularly in customs cases.

on its investigations. Even so, the Office’s investigators are
involved in certain judicial proceedings:
they sometimes
provide technical assistance in the preparation and execution
of international letters rogatory or attend the actual trial as
witnesses. An effort will have to be made to see that the
transmission of reports to the judicial authorities becomes
both more general and more systematic and to improve the
Office’s judicial follow-up capacity.

2.1.

Familiarity and compliance with national procedures

3. DIFFICULTIES COMMON TO THE TWO TYPES OF INVES-

TIGATION

The Office’s investigations are often complicated by the
problem of familiarity with all the requirements of the Member
States’ national procedures. The Office needs to improve
its investigatory expertise by setting up ‘pools’ of versatile
investigators capable of coming together in multidisciplinary
teams. Guides giving particulars of national procedural require-
ments should also be produced.

2.2. The follow-up to reports

The Office is not properly informed of the follow-up by the
Member States or the Community institutions and other
bodies. But the Community rules impose an obligation on
Member States to ‘transmit to the Commission administrative
or legal decisions ... relating to the application of penalties for
breaches of customs or agricultural legislation’ (Article 49 of
Regulation (EC) No 515/97). But the transmission of infor-
mation between the Member States and the Commission
remains sporadic, and the Office should expand its activities
of gathering information from the Member States as regards
the follow-up to its reports. For the moment the Office does
not have reliable general information on the administrative or
financial follow-up to its reports.

2.3. Transmission of investigation reports to national

authorities

The transmission of investigation reports to national auth-
orities does not
follow clear rules. The Office considers
that, where the investigation was conducted in the form of
‘coordination-assistance’ operations, responsibility for handing
the Office’s investigation report to the judicial authorities lies
with the national administrative authorities to which the Office
addressed its own report. This situation explains why, in the
customs area for example, where the bulk of the frauds against
the Community budget are committed, the Office transmitted
no reports to the national authorities, even though the frauds
were transnational and purely national treatment of cases was
out of order.

The Office actually has only incomplete knowledge of the few
judgments given on the merits in civil or criminal cases based

Analysing the case files also reveals difficulties that are
unrelated to the nature of the investigation but concern the
current situation of OLAF and the fact that, even if objectives
have been defined, the resultant organisation and methods
either are not yet in place or have not yet produced the
expected effects. In this context, OLAF has begun reviewing
the content of
its cooperation with national authorities
and considering the need to review the management of its
investigations, but nothing concrete has yet emerged.

3.1. Relations with the national authorities

The ambiguities mentioned earlier as to the nature of OLAF’s
investigations have their obvious impact on relations with the
national authorities. Given that OLAF’s investigations can
actually range from merely gathering information to coordinat-
ing national investigations, it is necessary to determine when
and how OLAF can take action before or in parallel with
national investigations.

3.1.1.

Judicial follow-up to OLAF investigations

The investigation procedure as described in the manual implies
that it basically takes place upstream of transmission to the
national authorities (even if Article 10(1) of Regulation (EC)
No 1073/1999 authorises the Office to ‘at any time forward
to the competent authorities of the Member States concerned
information obtained in the course of external investigations’).
Yet, although most OLAF cases involve criminal elements, in
only a tiny percentage of them was the report (Article 9) or
other information (Article 10) transmitted to the national
judicial authorities. The reasons for the inadequate judicial
follow-up to OLAF investigations are not clearly visible from
the files. The Committee considers that the tardy transmission
of files could prompt the judicial authorities to conclude
that the material transmitted is insufficient. In addition, the
excessive workload of the courts, their own priorities and the
specific features of national legislation have the undeniable
effect of considerably reducing the interest of the judicial
authorities in the cases transmitted to them. The Supervisory
Committee notes by way of example that in one specific case
the passive response of the national judicial authority was
attributed to the following reasons,
in declining order of
importance:

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— limited resources and low priority in the relevant Member

3.2. Need to define a policy on investigations: intelligence

State,

— legal uncertainty as to jurisdiction ratione loci and the

offences to be charged,

— weakness of the file.

Regarding investigations in which a report or information was
actually transmitted to the national courts, the Supervisory
Committee observed inconsistencies in the choice of judicial
authority and the timing, sometimes too early and sometimes
too late, of the transmission. It also noted that in certain cases
action by UCLAF/OLAF did not have the effect of generating
harmonious cooperation between the various national auth-
orities involved nor the use of all the possibilities offered by
national
law. The restructuring and reorganisation should
seriously improve the quality of the files produced and the
speed with which they are transmitted. These improvements
should inspire the relevant Member States to give priority to
these cases and devote the requisite resources to them.

3.1.2. Cooperation by OLAF with national

investi-

gations

The information available to the Committee in this respect (21)
suggests that the nature of OLAF’s cooperation with national
investigations does not depend on progress in OLAF’s own
proceedings: its cooperation is much the same whether the
investigation is in motion or already at the follow-up stage,
even though the legal situations are different. The manual
should improve matters here as it provides for the judicial
advisers to be involved in such non-investigation situations.
But it is not possible at this stage to state that these provisions
are already in effect. In procedural terms, when an investigation
is opened,
the manual distinguishes between internal or
external investigations and coordination or assistance cases.
Yet practices have not yet fundamentally changed, and the
judicial advisers do not manage these relations. It is difficult to
establish rules here and to allocate powers between depart-
ments without a clear idea of the content of the cooperation
that OLAF can offer national investigations. One of the first
measures to give practical expression to the restructuring
following the appointment of the three Directors should
therefore be a definition of the content of this cooperation
with the national authorities.

Before Regulation (EC) No 1073/1999 came into force, there
was, strictly speaking, no investigations policy based on
priorities defined objectively and transparently. Whatever
trends it was possible to detect flowed from a structure which
at the time was compartmentalised: resources were allocated
fairly evenly to sectors defined in such a way as to cover all
the activities financed by the Community budget. Each sector
developed its activities in accordance with its own specific
features. OLAF is now planning to set up an investigations
policy which will be defined in the work programme by the
horizontal unit and will reflect the contributions of the various
departments involved and in particular the new Intelligence
Directorate. Until recently,
investigation activities have in
practice continued to proceed without a work programme or
a general policy. The decision whether or not to open an
investigation is taken on the basis of specific criteria rather
than a pre-determined policy. Initially, the decision was based
on an evaluation by an investigator specialising in the area
where the fraud was perpetrated, and the criteria used could be
somewhat subjective, especially as the evaluating investigator
could well be put in charge of the investigation. The fact that
for the last few months the final decision has been taken by a
Casework Board, in which the Judicial Advice Unit is now
represented, should help to harmonise practices. But the
Committee has been unable to identify the reasoning behind
the decisions taken nor indeed to detect any consistency in
practice. It has also observed that, even recently, the evaluation
phase could extend well beyond the time-limit allowed by the
manual, possibly because there are no clear and precise criteria.

The absence of criteria and priorities for the decision to open
an investigation is mirrored when it comes to reviewing of the
grounds for exceeding the nine-month limit on investigations
imposed by Article 11(7) of Regulation (EC) No 1073/1999.
In a large number of cases that ran over time, the explanation
was:
‘no priority — lack of resources’. The absence of
priority confirmed nine months after the decision to open the
investigation confirms that it was taken without regard for the
question of priority — something which is of course difficult
to judge. The lack of resources merely highlights the conse-
quence of the absence of priorities. This absence of priorities
is also visible in the course of the actual investigations, where
it often clear that there is little regard for the purpose of the
investigation — criminal or disciplinary proceedings.

(21) Statistics in the scoreboards and information sheets on individual
cases prepared by OLAF. There is currently no comprehensive
analysis except for internal investigations. It is in progress for
external investigations.

The Committee’s first report stressed the need for an investi-
gations policy and for proactive management. This was the
subject of proposal P4 (first indent), and the Committee placed
it at the heart of its recommendations for restructuring the
Office. The first task of Directorate C, whose Director should
soon be taking up duty, will be to define such criteria on the

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basis of the gathering and analysis of all the information
available on the economic and criminological environment of
fraud against the financial interests of the EU, but also with
regard to the resources available and the allocation of powers
between the Member States and the Union. OLAF’s current
plan of action, prepared at a time when the transition from
UCLAF to OLAF is approaching completion but restructuring
is just getting under way, thus focuses mainly on the objectives
of the restructuring and on legislative activity. On the basis of
contributions from the Intelligence, and Investigations and
Operations Directorates, a genuine work programme should
be prepared as soon as possible to make OLAF’s activities both
coherent and effective.

CHAPTER V

CONCLUSIONS

This activity report (covering the period from July 2000 to
September 2001) consequently comes at a defining moment
marking the end of a very long transition from UCLAF to
OLAF and the operational
launch of a genuine reform of
practices making it possible to fully attain the objectives set
is in this dual
for OLAF by the legislative authority.
its
perspective that
proposals.

the Supervisory Committee sets out

It

1. END OF THE TRANSITION FROM THE UCLAF TO OLAF

Before completing this report, the Supervisory Committee was
at pains to make sure that the old structure of UCLAF, designed
for a primarily administrative form of investigation function,
had indeed been replaced by a new structure matching the
disciplinary or criminal proceedings aimed at by investigations,
meeting the constraints of respect for individual and pro-
cedural rights and establishing and implementing an investi-
gations policy. The Committee noted that, at the end of the
report period, important and probably irreversible measures
had been taken to replace structures and allow the develop-
ment of a genuine work programme, as
required by
Article 11(7) of the Regulation.

1.1. Replacement of structures

The management of investigations, which hitherto tended to
be compartmentalised, opaque and to some extent arbitrary,
should benefit from the measures taken with regard both to
personnel (establishment of a new management structure and
of a judicial officers unit) and to methods (transparency of
management).

— Personnel: new managers,

recruited by procedures
allowing specific selection, should play a decisive role in
the implementation of OLAF’s new culture, defined by
the Director, of cooperation between staff and units,
information flows and transparency. The separation of
the investigation, intelligence, follow-up and legal advice
functions was made in the structure, and the challenge
now is to organise cooperation between the various units
to which these functions have been given.

The ‘Magistrates and Judicial Advice’ unit, which has just
started to function with the investigators, should, within
the limits of the possibilities offered by the existing
legal framework, confer on the operational activities the
legitimacy that flows from its expertise in criminal law
and procedure in the 15 national legal orders.

— Methods: a major effort has already been made with
regard to the transparency of management. All OLAF
cases are now well indexed and decisions to open an
investigation are normally taken within no more than a
month of the case being registered. Action has thus at
last been taken on one of the main comments made by
the Court of Auditors in Special Report 8/98 (22).

The Committee also now receives the bulk of the information
it needs to exercise its function of regularly monitoring the
investigation function. Since December 2000, the scoreboards
prepared by OLAF from its databases IRENE and subsequently
CMS have made it possible to introduce the transparency that
is essential for both monitoring and management. The first
versions of an OLAF manual and the case management system
at last made the Office’s practices and procedures precise and
rigorous.

1.2. Definition of a proactive management project

To overcome the inability to lay down and implement a
genuine policy on investigations because of the compart-
mentalisation and opacity of management in the previous
period, OLAF planned to install the structures necessary for
proactive management in cooperation with other departments
of the Office. As regards internal investigations, it should now
be possible to give effect to the legislative authority’s wish that
this interinstitutional activity enjoy the visibility that it deserves
as a priority activity. Care will also have to be taken to enhance
the effectiveness and legitimacy of these investigations, con-
ducted under OLAF’s exclusive responsibility. OLAF also plans
to improve the whole range of its relations with national

(22) See points 3.8 to 3.12 and 3.13 to 3.18 of the Court of Auditors
Special Report No 8/98 on the Commission departments respon-
sible for the fight against fraud, in particular UCLAF.

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authorities by setting up a ‘platform of services’ to be based on
an inventory of
its operational activity and in particular
its external investigations. Lastly, criminal-law, disciplinary,
administrative and financial follow-up (recovery) is the subject
of a study.

2. OPERATIONAL START-UP OF A GENUINE REFORM OF

THE PRACTICES

The ambiguities observed by the Supervisory Committee with
regard to the institutional positioning of OLAF and the
conditions of the legitimacy of its investigations have not been
fully resolved. The Office and the institutions have accepted
that these ambiguities had to be taken into account and might
even have to be used to prevent the OLAF project from being
blocked. But there is general awareness that this is a provisional
situation and that it is important to continue searching for
more stable solutions. The long transitional period from
UCLAF to OLAF was therefore used as an opportunity to study
in greater detail these ideas on the organisation and methods
of the Office to be set up. The thinking process is now
completed and the action stage can begin regarding both the
institutional positioning of OLAF and the legitimacy and
effectiveness of its investigations.

2.1. The institutional positioning of OLAF

The Supervisory Committee, following the comments and
proposals made in its first activity report, maintained its
contacts with the institutions to promote the constructive
interpretation of texts of which it had stressed the ambiguities,
in particular with regard to OLAF’s interinstitutional powers
and status. OLAF is setting up instruments making it possible
to organise transparency in its relations and its communication
with the institutions and with all
interested parties more
generally. The draft code of conduct governing relations
between OLAF and the Commission, the product of convergent
initiatives by the Secretary-General of the Commission and the
Supervisory Committee, takes stock of the practical questions
raised by OLAF’s specific situation and indicates solutions that
reconcile operational independence and effective administrat-
ive management. The guidelines for a communication policy
for OLAF are intended to establish a relation of trust with
the institutions by exposing clearly the obligations and the
constraints incumbent on the Office in its various information
responsibilities. These guidelines deal solely with OLAF’s
relations with the institutions and not with public relations,
which are not formally within this interinstitutional responsi-
bility. But it would be desirable for these two types of activity

to be subject to the same consistency. But it should be noted
that the worst ambiguities will be finally cleared up only by
court decisions and, if necessary, fresh legislative measures.
The actions brought by the Commission against the EIB and
the ECB and by 71 Members of Parliament in the Court of
First Instance address these issues. The two banks and the
71 Members of Parliament proceed from the weaknesses of
the mechanism to assert inapplicability. The Court’s judgment
will answer the question of the scope and of direct applicability
of Regulation (EC) No 1073/1999.

2.2. The legitimacy and effectiveness of investigations

Transparent management having been established, the Super-
visory Committee took stock of the deficiencies, in terms of
legitimacy and effectiveness, in the way in which operational
activities at OLAF have been organised until now. But it also
notes that OLAF’s awareness of these deficiencies has prompted
it to adopt measures that could well solve them, even if they
are partial and provisional, and to relaunch consideration by
the institutions of the need to amplify the system for protecting
the EU’s financial interests.

The internal reorganisation of OLAF undertaken by its Direc-
tor, after a long transition made inevitable by the decision to
take over the old structure of UCLAF en bloc, began in
accordance with guidelines designed to ensure the implemen-
tation of a policy of targeted investigations taking into account
their disciplinary, criminal or administrative nature. The
management staff corresponding to these guidelines have been
recruited and are already helping to complete the new
structure. The Magistrates’ Unit is in place and has begun fitting
into the investigation management process in cooperation with
the investigators already present. The judicial officers have
begun by analysing internal investigations prior to reorganising
them. It is planned that they will do the same for external
investigations, given the number of cases.

With regard to the institutional environment, the limits noted
by the Committee in its first report in connection with
inadequacies in terms of judicial review have been taken into
account by the institutions in initiatives already announced or
in preparation. The fact that the need to strengthen the
legitimacy and effectiveness of
investigations was more
pressing and urgent in relation to internal investigations had
led the legislature to make special provisions for them in
Regulation (EC) No 1073/1999 and in the Interinstitutional
Agreement. In its first report, the Supervisory Committee
considered that the ex post review of the legality of these
investigations by the Court of First Instance was completely
insufficient, and it supported Parliament’s call for the establish-

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rights during investigations,

ment of a judicial body to keep the activities of OLAF in this
field under permanent review. In particular it wished such a
body to have the power to permit or order measures restricting
individual
to check their
implementation and objectivity and to verify that investigation
measures comply with the fraud rules. At Parliament’s request,
the Supervisory Committee issued an opinion evaluating to
what point the management of internal investigations might
be affected by the introduction of a European Public Prosecutor
with jurisdiction confined to these cases.
Its opinion
No 5/1999 and No 2/2000 supported this step taken by
Parliament, which refers to the recommendation of
the
Wise Men’s Report to establish gradually a European Public
Prosecutor for the protection of financial interests; since then
the Supervisory Committee has stated that ‘it is essential to fill
in the gaps in the current legal framework, which prevent
OLAF from operating totally efficiently’ and that, ‘initially the
creation of an independent European Public Prosecutor for
internal investigations, enjoying a statute defining his preroga-
tives and responsible and mandated to enforce common
European rules, possibly inspired by the work done since 1996
by the experts responsible for the Corpus Juris (1997 version
and the Intersentia version of 2000) could supply a solution to
this problem’ (23)

interests,

review the procedures

the Community’s financial

The Commission also took important initiatives to strengthen
the legitimacy and effectiveness of OLAF investigations. After
the rejection of its proposal, supported by the Supervisory
Committee, to create a legal basis in the Treaty for eventually
establishing a European Public Prosecutor for the protection
the Commission
of
embarked on a Green Paper for the consultation of all
interested parties. On the basis of this consultation, it wishes
to further
for establishing and
operating a European Prosecutor in Community secondary
legislation, once the requisite Treaty provisions have been
adopted. Moreover, the Commission sent Parliament and the
for a Directive on the criminal-law
Council a proposal
to
protection of
the Community’s financial
establish principles at Community level and an obligation of
the Member States to provide for those offences and the
relevant penalties. These provisions,
initially provided for
under the Convention of 26 July 1995 and its protocols,
should be adopted on the basis of Article 280(4) of the
Treaty owing to the delays by the Member States in ratifying
the third-pillar instruments.

interests (24)

All these measures and initiatives supply suitable solutions to
the unavoidable problem of the legitimacy and effectiveness of

Supervisory

investigations.

OLAF’s
Committee,
The
responding to requests from the Director of OLAF or of the
institutions, gave them its support and stresses that their
complementarity lies in the fact that they constitute stages in
carrying out a coherent project for the protection of the
financial
interests of the EU, since, as the report of the
Committee of Independent Experts (25) showed, this project
can be carried out only at the face permitted by the legal
framework.

3. PROPOSALS

The Committee supports the various measures envisaged
by OLAF to consolidate its budgetary and administrative
autonomy (internal rules; specific structures) and to adapt its
management of investigations to developments in its methods
(manual, CMS). The Committee considers that by and large the
proposals made in its first report for submission to the
institutions have been well received (see Chapter I).

The internal reorganisation of OLAF is proceeding in accord-
ance with the guidelines set out in the first report. The
Committee approves the measures taken and recommends
that they be implemented as quickly as possible so that initial
effects can be evaluated at the earliest opportunity, in particular
as regards:

— establishing and implementing a reactive and proactive
policy on investigations: integrate the Intelligence Direc-
torate and the Operations Departments in preparing the
work programme, setting priorities and case-selection
criteria and carrying out these tasks,

— involving the Magistrates’ Unit in the investigation pro-
cess, from the decision to open the investigation to the
follow-up stage, and defining its powers in the OLAF
manual,

— raising the profile of the internal investigation function:
taking account of the specific function, of the exclusive
responsibility and of the increased powers of OLAF as
regards investigations within the institutions; creating a
clearly identified structure having the necessary qualified
personnel to combat corruption, financial crime and
crime in relation to public procurement,

— specifying OLAF’s function in relation to external investi-
gations and cooperation with national authorities: setting
up a structure and recruiting staff to handle this mission
(on the basis of a current stock-taking exercise).

(23) Opinion No 3/2001.
(24) COM(2001) 272 final.

(25) Committee of Independent Experts, second report on the reform

of the Commission, points 5.13 and 5.14.

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On questions concerning OLAF’s interinstitutional environ-
ment, the Committee can confine itself to proposals sup-
plementing initiatives already taken:

institutions in this field. A dialogue should be established with
the institutions on the basis of the document drawn up by
OLAF.

P1: Coordinate initiatives carried out to strengthen the legitimacy

and effectiveness of OLAF investigations

The various initiatives to strengthen the legitimacy and effec-
tiveness of OLAF investigations — internal reorganisation;
prosecutor for internal investigations; European Public Pros-
ecutor; criminal-law protection of financial interests — pursue
the same objective and must be conceived in complementary
terms.

P2:

Implement in the various institutions and bodies the obligations
to cooperate with OLAF imposed by Regulation (EC)
No 1073/1999

The institutions
should implement more systematically
Article 7 of Regulation (EC) No 1073/1999 concerning the
information to be supplied to OLAF. In particular, it must be
stressed that any delay in communicating information can
entail problems of limitation periods (26). In addition, it would
be useful if OLAF could be informed of internal investigations
relating to facts falling within its powers, even if the relevant
institution sees no need for an OLAF investigation. Generally,
further thought must be given to the relation between OLAF
investigations and internal procedures in the institutions
(administrative investigations; disciplinary proceedings; etc.).

P3: Amplify the Regulations to consolidate OLAF’s independence

Relations between OLAF and the Commission were defined in
the draft code of conduct on the basis of constructive
interpretation of the dual functions of OLAF. Effect should be
given to these definitions not only in practice but in the
Regulations too. The institutions are therefore invited to
promote the necessary reforms of the Staff Regulations and
the Financial Regulation.

P4: Establish clear communication between OLAF and the insti-

tutions

The guidelines for a communication policy for OLAF should
allow a transparent and foreseeable relationship with the

Ultimately, after the second year of activities, it is clear not
only that the innovatory mechanism set up by Regulation
(EC) No 1073/1999 met the urgent need to improve the
organisation of the protection of the EU’s financial interests
but also that the formula selected, allowing synergy between
operational and legislative functions, is workable as long as all
interested parties approach its inevitable ambiguities construc-
tively. Decisive measures having been taken with regard to
the transparency of management, recruitment of specific
management staff and the setting up of a Magistrates’ Unit, the
conditions are now right for the Office to establish quickly its
investigations policy, organise its cooperation with national
authorities on the basis of a platform of services, perform its
internal investigations function and see to the administrative,
financial, disciplinary and criminal follow-up to its investi-
gations.

With regard to the structural difficulties observed by the
Supervisory Committee in its first report, the institutions took
their thinking further but have still not changed the underlying
philosophy (27), and the adoption of common rules of both
procedure and substance and the creation of a European Public
Prosecutor with jurisdiction throughout Europe is the only
possible way of solving them. Initiatives for action to follow
up the Nice Intergovernmental Conference in this respect at
least have the merit of reviving the debate. The Commission’s
work on a Green Paper on the criminal-law protection of the
Communities’ financial interests and the establishment of a
European Public Prosecutor should provide the basis for a
broad dialogue among the institutions and interested parties,
and the current definition of the function of Eurojust will show
how to establish synergy with OLAF. In the immediate future,
OLAF’s planned internal reorganisation,
for
a Directive concerning the criminal-law protection of the
Community’s financial interests and possible establishment of
a European Pubic Prosecutor with jurisdiction over internal
investigations should make it possible to advance in stages
towards the adoption of permanent judicial control of OLAF
investigations.

the proposal

(26) Regulation (EC, Euratom) No 2988/95, Article 3 (supra, p. 27 to

30, Chapter III — 3.1 internal investigations.

(27) The question of the scope of Regulation (EG) No 1073/1999 in
the institutions will not be settled until the Court of First Instance
gives judgment in the cases concerning the ECB, the EIB and the
71 Members of Parliament.

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ANNEX I

OPINION No 3/2001

on the possible establishment of a European public prosecutor responsible for internal investigations

Parliament stated that it wanted the Supervisory Committee to deliver an opinion assessing the extent to which the
conduct of cases relating to internal investigations might be affected by establishing a European public prosecutor
whose remit would be confined to such cases. The Committee has on several occasions supported the principle of
establishing a European public prosecutor (1) and, in this opinion, considers, on the basis of its work in the context
of monitoring investigation activity, the potential effects of establishing a European prosecutor responsible for
internal investigations on the conduct of cases dealt with by OLAF.

The analysis made by the Committee covered OLAF’s activity in the area of internal investigations in all the
institutions. If must be pointed out at the outset that such activity has been substantially limited owing to the dispute
with the EIB and the ECB, as OLAF did not believe itself to be in a position to conduct investigations within those
bodies. The establishment of a public prosecutor for internal investigations should resolve this problem.

The following differences need to be pointed out as regards the concept of internal investigations: in all institutions,
internal investigations relate to fraud or other unlawful activities (2) occurring in the field of administration and
perpetrated by officials or other employees of the European Communities, i.e. expenditure on personnel or buildings
management, the purchase and upkeep of equipment, documentation or information. At the Commission, this
covers a wider field and also comprises direct expenditure and, pursuant to the principle of connectedness, cases of
fraud and other unlawful activities harmful to financial interests, in particular those relating to the operational
budget, implicating Members, officials or other employees of the institution.

It should also be pointed out that the Committee made its analysis as OLAF was about to introduce a new structure,
and new working methods had still not had any significant impact on the conduct of investigations. The analysis
thus reveals the deficiencies in the old structure (3) whilst the solutions it proposes should in part be implemented
through the new structure, which must obviously be taken into account.

It should be noted that, as a result of the introduction of transparency into the management of OLAF several months
ago, the Supervisory Committee now has tools enabling it to make an initial assessment of the impact of possible
intervention by a prosecutor for internal investigations: scoreboards, information sheets on internal investigations,
on investigations open for longer than the nine months specified in the Regulation and on files forwarded to judicial
authorities; work carried out on-the-spot by its rapporteurs; its exchanges of views with the Director of OLAF and
his staff. From the information thus obtained, it has concluded that OLAF-activity in the field of internal investigations
still accounts, in terms of the number of cases, for a small percentage of the total (about 80 out of 1 700), but also
that such activity has been increasing rapidly since the entry into force of Regulation (EC) No 1073/1999 (by 70 %
as compared with 20 % for its activity as a whole). Moreover, the internal investigations dealt with by OLAF relate to
cases of fraudulent personal enrichment of individual officials and employees acting alone and taking advantage of
weaknesses in the administrative set-up, but even more to concerted action by several people, or even networks, and
may involve substantial amounts of money.

Internal investigations more often than not entail more detailed investigations by OLAF, as it has sole responsibility
for them.

(1) See Opinion No 5/99, Opinion No 2/2000 and first Progress Report.
(2) It should be recalled that the term ‘financial interests’ means more than just Community revenue and expenditure and that

Regulation (EC) No 1073/1999 explicitly refers to measures affecting the Communities’ assets (second recital).

(3) Where reference is made to management of OLAF, the analysis thus concerns both UCLAF and OLAF.

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Already, the observations made by the Committee in the context of monitoring internal investigations have revealed
closely intertwined problems of legitimacy and effectiveness, which could to a large extent be remedied by establishing
a public prosecutor.

1. Contribution of a public prosecutor for internal investigations as regards the legitimacy of investigations

The reservations concerning the legitimacy of OLAF investigations noted by the Supervisory Committee in its first
Progress Report have been borne out subsequently; its examination of case files and objections raised by persons
under investigation and its analysis of disciplinary and legal follow-up have shown the question marks regarding
respect for the rights of defence to be warranted.

The establishment of a prosecutor for internal investigations should therefore result in a strengthening of the validity
of procedures and of the objectivity of investigations.

1.1.

Increasing the stringency of procedures

Procedures which have hitherto remained almost exclusively within the administrative domain have been affected by
a number of weaknesses:

— absence of judicial scrutiny of OLAF investigations, which has been used as an argument by some institutions

and bodies for contesting the legitimacy of such investigations within their ranks,

— absence of a legal framework for OLAF’s investigation methods (examination of witnesses; drawing-up of
witness statements; seizure of documents), which has given rise to objections from some people who have been
under investigation,

— difficulties of maintaining an information communication policy which respects the rights of those under
investigation (in particular to confidentiality in respect of their personal data and the presumption of innocence),
given the pressure from the media in some cases,

— the enormous difficulty of taking 15 very different systems of criminal law and criminal procedure into account

when organising investigations.

The reorganisation of OLAF currently in progress (in particular the taking-up of duties by magistrates, the
introduction of a registration system, the drafting of a manual for investigators and the drawing up of an information
policy) should help remedy these problems.

In the long run, however, the establishment of a public prosecutor exercising scrutiny over OLAF’s internal
investigations in all institutions and bodies of the European Union would be the best guarantee for the proper
conduct of such investigations, as the prosecutor’s statute would be laid down as such and a unified set of clear rules
would ensure that the evidence thus gathered was valid.

1.2.

Strengthening the objectivity of investigations

The conduct of OLAF investigations seems hitherto to have taken place partly on a discretionary basis:

— despite a marked improvement in particular as regards the timing of the decision to open an investigation and
of the registration of the case file, the Committee notes that it is still difficult to identify the criteria on the basis
of which decisions to open, or not to open, investigations are taken by OLAF,

— in the objections of which the Committee has been aware (as it indicated in its first report), those under
investigation argue that OLAF’s investigations consist essentially in gathering incriminating evidence against
them and that evidence in their favour is not taken into consideration.

Probably the most appropriate response is to establish a public prosecutor who would be specifically obliged to open
an investigation when the required objective conditions were met (mandatory prosecution) and duty-bound to
investigate both incriminating and exonerating evidence.

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2. The contribution of a public prosecutor for internal investigations as regards the effectiveness of

investigations

On various occasions, the Committee has recommended that all OLAF investigations be conducted from the outset
in accordance with methods and procedures which take account of the possibility of criminal proceedings and which
do not compromise the outcome thereof as a result of procedural irregularities. It also acknowledged the fact that
the new Director of OLAF, from the moment he took up his duties, stressed the importance he attached to this
requirement.

Consideration of internal cases which OLAF has hitherto dealt with reveals inadequacies as regards judicial and,
sometimes, disciplinary follow-up. In the case of judicial follow-up, such inadequacies primarily stem from the fact
that criminal proceedings fall within the jurisdiction of national courts and are covered by strongly divergent sets of
national rules, although difficulties may also stem from inadequacies in the way investigations are conducted. In the
case of disciplinary follow-up, the Committee noted that the status of OLAF employees in disciplinary proceedings
was characterised by ambiguities which weakened the effectiveness of such proceedings. The intervention of a public
prosecutor responsible for internal investigations would doubtless prevent such ambiguities and, more generally, be
likely to improve the effectiveness both of the investigations themselves and of the interface between OLAF and the
authorities responsible for the proceedings.

2.1.

Effectiveness of investigations — the situation within OLAF

There is a twofold weakness in this area.

Firstly, OLAF employees do not have available to them all instruments used in the field of criminal law and, when
they do have such instruments, they are not guided by precise rules ensuring proper use thereof; moreover, because
there are no unified rules, it is not possible to guarantee the validity of the evidence gathered during investigations. If
we take the basic Regulations, i.e. (EC) No 2185/96 and (EC) No 1073/1999, whose provisions on OLAF employees’
powers of investigation are very vague, the means for conducting investigations are not very effective, as they are
more limited than in the criminal law sphere. If a wider definition of such powers is sought, then there must be
judicial scrutiny of how they are used.

Secondly, and perhaps as a result of the above, it is possible in certain cases to detect a tendency to confine
investigations to inquiries into purely administrative irregularities. Improved use of criminal law methods and
criminal procedure should be achieved by applying the manual drawn up by the Director of OLAF and by recruiting
specialised magistrates to OLAF. However, genuine improvements will be made only by establishing an independent
public prosecutor and laying down a statute which clearly sets out the prosecutor’s prerogatives (in particular as
regards decisions to open investigations, to make inquiries in the course of an investigation, to close investigations
and, if necessary, to refer matters to the relevant disciplinary or criminal law authorities) and responsibilities
(disciplinary arrangements), and stating precisely the rules to be applied (advisability or mandatory nature of
prosecution, investigations to secure both incriminating and exonerating evidence, common conditions for the
examination of witnesses and questioning of suspects, searches and seizures, or even the monitoring of telephone
calls, etc.), so that the search for proof is more effective, and any evidence thus obtained is admissible in all Member
States’ legal systems.

This is the point at which the effectiveness of investigations is bound up with the effectiveness of follow-up (judicial
or disciplinary), i.e. the interface with the responsible authorities.

2.2. An effective interface between OLAF and the authorities responsible for follow-up

Cases that have been the subject of internal investigations by OLAF and forwarded to judicial and/or disciplinary
authorities have been few in number and often reveal difficulties that have adversely affected their outcome. In some
cases, OLAF was unable to organise the allocation of powers and responsibilities between the various national
authorities. In others, the specific features of the proceedings or of national criminal law were not adequately taken
into account. In the case of disciplinary proceedings, intervention by OLAF is generally confined to forwarding files
to the superior authority within the Institution concerned. For the reasons set out above, the establishment of a
public prosecutor for internal investigations would make it possible to markedly improve the interface with the
authorities responsible for judicial and/or disciplinary proceedings.

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To conclude, the Committee would firstly like to stress that the assignment of magistrates to OLAF, the distribution
of a manual to investigators and the clarification of OLAF’s information policy will make appreciable improvements
possible in the short term. However, the Committee also considers that it is necessary to fill the gaps of the existing
legal framework which prevent an efficient action of OLAF. In a first step, only the establishment of an independent
public prosecutor for internal investigations, governed by a statute which sets out the prosecutor’s prerogatives and
responsibilities and who is responsible for applying common European rules, which could be based on the work
done since 1996 by the experts in charge of the ‘Corpus Juris’ project (1997 version and 2000), can provide a response
to this problem.

The OLAF Supervisory Committee is of the opinion that, whether the aim is to remove the reservations on the part
of certain European institutions with regard to OLAF, to provide a lasting solution to the current problems or to
ensure both the effectiveness and the legitimacy of investigations, the establishment of a European public prosecutor
responsible for internal investigations would meet a real need.

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ANNEX II

COUNCIL CONCLUSIONS

on the first report of the Supervisory Committee of the Anti-fraud Office (OLAF)

The Council:

1.

2.

3.

4.

5.

Has noted with interest the high quality report of the Supervisory Committee, which is independent of the
institutions;

Shares, inter alia, the Supervisory Committee’s concern at the delays noted with regard to the transition from
UCLAF to OLAF and the attendant transformation;

Points out that the legislator’s aim was to give OLAF complete independence to perform its operational tasks,
strengthened by the Supervisory Committee, with autonomy in administrative and budgetary matters; notes
that that aim has not yet been attained sufficiently;

Shares the Supervisory Committee’s analysis as to the need to improve methods and procedures to make
OLAF’s operational activity more effective; in particular, supports the efforts made by the Director of OLAF to
improve transparency in the management of operational activities, and notably to step up his monitoring of
the opening of investigations and the transmission of files to disciplinary or judicial authorities; supports the
assignment of magistrates, within OLAF, responsible for providing legal advice and support, particularly in
order to rationalise the conduct of investigations and to guarantee the quality of reports;

Emphasises that the Director of OLAF, who has been given the power of appointing authority, is competent to
establish, in compliance with the Staff Regulations of Officials and the Conditions of Employment of Other
Servants of the European Communities (CEOS), the conditions and procedures for recruitment of his staff
taking into account the special nature of the tasks of OLAF; regrets that the secretariat of the Supervisory
Committee does not yet have appropriate operating funds.

The Council shares the view of the Supervisory Committee that the Director of OLAF must rapidly recruit the
staff provided for in the establishment plan, while observing a high level of professional competence;

6.

Calls on the Supervisory Committee to continue its supportive role providing OLAF with constructive and
critical assistance.

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ANNEX III

EUROPEAN PARLIAMENT RESOLUTION

on the Commission’s Annual Report for 1999 ‘Protecting the Communities’ financial interests — the fight
against fraud’ [COM(2000) 718 — C5-0066/2001 — 2001/2036(COS)]

THE EUROPEAN PARLIAMENT,

Having regard to the Commission’s 1999 Annual Report (COM(2000) 718-C5-0066/2001),

Having regard to Articles 276(3) and 280(5) of the EC Treaty,

Having regard to rule 47(1) of its rules of procedure,

Having regard to the report of the Committee on Budgetary Control (A5-0078/2001),

A. Whereas in 1999 a start was made on reorganising the fight against fraud at Community level and the old Unit
for the Coordination of Fraud Prevention (UCLAF) was replaced on 1 June 1999 by the European Anti-fraud
Office (OLAF), which is operationally independent and has an interinstitutional remit;

B. Whereas in 1999 the Prodi Commission took office claiming that a policy of zero tolerance with regard to

fraud and corruption would be implemented,

1.

Recalls that in 1999 some very serious cases of fraud came to light, the complete clearing-up of which
will constitute a test case for the effectiveness of OLAF and in respect of which the Commission must
provide proof that it intends to put its promises into practice:

(a) A criminal network was uncovered which had for years been perpetrating large-scale cross-border
fraud involving adulterated butter. 100 000 tonnes of butter is now believed to have been
adulterated with vegetable fat, beef fat and chemical substances, and the financial losses are probably
far in excess of the EUR 45 million originally assumed. OLAF has said that the investigations cover
several dozen firms throughout Europe and might need to be extended further. According to the
Italian authorities, those responsible realised that their actions might endanger public health.

b)

In some Member States, it is suspected that serious irregularities and fraud involving EU subsidies
for flax-growing have occurred. In Spain production aid was apparently applied for and granted by
the regional administrations, in breach of Community legislation on the common organisation of
the market in flax. Amongst other things, inquiries have shown that production aid had been
applied for in respect of goods that had never been processed and details of the actual amounts
grown had been covered up by setting fire to the storage facilities, so that subsidies might have been
calculated on the basis of partly notional production figures. The Spanish judiciary has sole
responsibility for determining whether anyone is to be held criminally liable. OLAF has announced
that it will draw up its own report on the cases in Spain and other Member States, and this must
indicate to what extent Community rules have been infringed and whether the competent national
authorities failed to perform their supervisory role properly.

(c) At the Commission office in Stockholm, irregular payments were discovered based on fictitious
contracts. Although, compared with the two cases described above, the amounts involved were
small, this case has done enormous damage to the EU’s standing, especially as the public has been
given the impression that double standards are being applied: the local employees involved have
been dismissed, whereas no penalties have yet been imposed on the officials who were involved, on
the contrary, the head of the office has been promoted.

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(d) OLAF is expected to launch an investigation into the serious irregularities referred to in the Court
of Auditors’ Annual Report for 1999, published in December 2000, in particular with regard to
special arrangements concerning imports of New Zealand dairy produce into the European Union.

2.

Notes with great concern that the OLAF Supervisory Committee takes the view that the organisation of
the protection of the European Union’s financial interests has not yet improved perceptibly in practice (1)
and that the persistent blocking of the recruitment of qualified staff (2) for OLAF could even cause
irreversible damage.

3.

4.

5.

6.

7.

8.

OLAF independence

Reminds the Commission that the independence of the Director was a precondition when Parliament and
the Council conferred on OLAF extensive powers (3) to conduct administrative investigations not only
within the Commission but also in the other Community institutions and bodies.

Reaffirms the belief expressed in paragraph 33 of its resolution of 19 January 2000 (4) on the second
report of the Committee of Independent Experts on reform of the Commission, that OLAF must earn the
respect and wholehearted cooperation of EU institutions and personnel and of Member States’ investigative
and judicial authorities by ensuring that its inquiries are carried out in an independent, efficient and
professional manner; notes that this applies especially to cases that are also politically extremely sensitive
for the Commission (e.g. the Fléchard and flax cases).

Considers it unacceptable, therefore, that applicants for managerial posts in OLAF are to be scrutinised
by a Commission-nominated Advisory Committee on Appointments.

Calls on the Director of OLAF to make use of his powers pursuant to Article 6 of Commission Decision
1999/352/EC, ECSC, Euratom of 28 April 1999 establishing the European Anti-fraud Office (OLAF) (5)
and set up OLAF’s own appointments committee to be chaired by an independent figure whose experience
in the fight against fraud and corruption is beyond all doubt.

Considers it necessary to settle the question whether the Office’s duty to provide information to the
Commission and its Secretary-General might prejudice the independence of the Office in individual cases;
calls on the OLAF Supervisory Committee to deliver an opinion, stating which cases were affected and to
what extent the conducting of investigations was hampered.

European Public Prosecutor’s Office

Calls on the Commission once again (6) to submit a proposal, on the basis of the current Article 280 of
the EC Treaty, for an amendment to Regulation (EC) No 1073/1999 which would allow the early
appointment of a European Public Prosecutor whose jurisdiction would be limited, pending entry into
force of the envisaged changes to the Treaty, to criminal offences committed against the financial interests
of the European Communities by members and employees of EU institutions and who would have the
task of heading the relevant OLAF investigations and facilitating the prosecution of such criminal offences
in the appropriate national courts.

(1) Progress Report of the OLAF Supervisory Committee (July 1999 to July 2000): conclusion (OJ C 360, 14.12.2000, p. 25).
(2) OLAF Supervisory Committee Opinion No 3/2000 on the risk of the stalling of procedures for recruiting OLAF staff.
(3) Regulation (EC) No 1073/1999 of the European Parliament and of the Council of 25 May 1999 concerning investigations

conducted by the European Anti-fraud Office (OLAF) (OJ L 136, 31.5.1999, p. 1).

(4) OJ C 304, 24.10.2000, p. 135.
(5) OJ L 136, 31.5.1999, p. 20.
(6) See paragraph 2 of Parliament’s resolution of 16 May 2000 on the 1998 annual report by the Commission on protecting

Communities financial interests and the fight against fraud (OJ C 59, 23.2.2001, p. 61).

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9.

Recalls that it reaffirmed this demand on 13 December 2000 in paragraph 12 of its resolution on the
protection of the Communities’ financial interests (7), adopted by a majority of its members (8), and that
the Commission is therefore required pursuant to Article 192 of the EC Treaty to submit appropriate
proposals for a relevant Community legal act.

10.

Is of the opinion that such proposals should finally also take into account the calls (9) it made in 1998 to
the effect that the following matters should be dealt with on the basis of Article 280 of the EC Treaty:

(a)

cooperation between the Union’s institutions and the national judicial authorities;

(b) OLAF’s exercise of its powers which have not yet been explicitly regulated, in particular as regards
powers to bring proceedings, protect files and adopt measures to restrict a person’s freedom;

(c)

judicial scrutiny of the work of OLAF;

(d)

the requirement for officers of OLAF to take the oath.

11. Notes that the European Public Prosecutor’s Office must from the outset be located in Luxembourg, in
the immediate vicinity of the Community courts, and that this would also safeguard and clearly emphasise
its independence from the Commission.

12. Reiterates the call (10) it made to the effect that OLAF should work in accordance with the principle of
decentralisation and therefore have departments in Brussels and Luxembourg and that, where necessary,
branch offices should be set up in the Member States or non-member countries on a permanent or
temporary basis.

13. Expects that, by the end of March 2001, the Commission will give a binding undertaking to submit such

proposals by 1 June 2001 at the latest.

Cooperation between Member States and the Commission

14. Welcomes expressly the fact that several Member States have now joined the action brought by the
Commission against big American tobacco concerns without whose involvement the current large-scale
smuggling of cigarettes would not be possible;

15. Recalls that, as a result of such smuggling, the Community and Member States’ budgets suffer losses of
revenue amounting to several billion euro year after year; instructs its President to initiate the necessary
steps without delay so that Parliament can assist the Commission as an intervening party against the
tobacco concerns which have brought an action against the Commission before the Court of Justice of
the European Communities in Luxembourg because they wish to have it denied the right to bring legal
action against them in the USA.

16. Notes with concern that Member States’ practices vary greatly when it comes to reporting cases of fraud

and irregularities; calls therefore on the Commission:

(a)

(b)

to create incentives so that all Member States report fully and accurately, with the aim of avoiding
distortion and achieving comparability;

to make clear, when submitting its report, that the distinction between irregularities and fraud is
based on the information available at the time and that in many cases it will not be clear whether
activities liable to criminal prosecution are involved or not but that at all events the Union budget
has been adversely affected;

(7) Texts Adopted, Item 14.
(8) Minutes of that sitting, Item 20 (roll-call vote on paragraph 12 (by 390 to 81, with 38 abstentions).
(9) Paragraph 4 of its resolution of 7 October 1998 on the independence, role and status of the Unit for the Coordination of Fraud
Prevention (UCLAF) (Court of Auditors Special Report No 8/98 concerning the Commission departments responsible for
fighting fraud) (OJ C 328, 26.10.1998, p. 95).

(10) Paragraph 3(n) of its abovementioned resolution of 7 October 1998.

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(c)

to develop a clear methodology classifying the degrees of financial irregularity from unintentional
administrative oversight to premeditated fraud in order to obtain a clearer picture of the scale and
nature of the issues to be addressed in protecting the Community’s financial interests;

Cooperation with Switzerland

17. Recalls that European taxpayers suffer billions of losses because cooperation with Switzerland in
combating international organised smuggling, in particular involving ‘risk’ products (cigarettes, alcohol,
precious metals and electronic goods), does not function properly.

18.

Stresses therefore the importance, in terms of close and good-neighbourly relations, that it attaches to the
swift conclusion with Switzerland of an agreement to combat fraud in accordance with the negotiating
mandate issued to the Commission by the Council; points out that the protocol which entered into force
in 1997 on customs cooperation is not sufficient effectively to combat organised crime.

Information to the European Parliament

19. Recalls that the provisions of the framework agreement of 5 July 2000 on relations between the European
Parliament and the Commission in no way affect the obligations and rights of the Director of OLAF
concerning the provision of information on the Office’s investigative activities.

20. Notes that, in order to exercise its powers of scrutiny, Parliament needs access to the reports drawn up by
OLAF on its external and internal investigations; wishes to make it perfectly clear that this applies also
the reports drawn up by OLAF on the flax affair, the adulterated butter affair and the events at the Office
of the Commission in Stockholm.

21. Demands, in the interest of public health, immediate access to any document in OLAF’s possession

containing an analysis of the composition of the adulterated butter mentioned in paragraph 1(a).

22. Expects a binding undertaking to be given by the end of March 2001 to the effect that OLAF reports will
in future be forwarded to the European Parliament on request, and without attendant difficulties, so that
they can be considered in accordance with the provisions of Annex VII of the Rules of Procedure; instructs
its President, where appropriate, to initiate the necessary legal steps to ensure that Parliament is able to
exercise its powers of scrutiny.

23. Reaffirms paragraph 24 of its abovementioned resolution of 16 May 2000 on the 1998 annual report on
the fight against fraud, pursuant to which the Director of OLAF is to submit a full list of all cases under
investigation of fraud, corruption or other unlawful activities against the Community budget; expects this
list now to be submitted without delay and that it will be updated at least quarterly in future.

24.

Expects the Commission’s annual report on the fight against fraud and OLAF’s annual report on its
operational activities to be published together in future, albeit without this affecting OLAF’s exclusive
responsibility for the report on its operational activities; calls on OLAF to focus in that report more than
hitherto on specific cases which have been especially important or typical of its previous year’s work.

25.

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