OLAF Supervisory Committee — Report September 2001 to June 2002
Date: 2002-09-30
Institutions: European Anti-Fraud Office, European Commission
Subjects: European Anti-fraud Office, activity report

30.9.2002

EN

Official Journal of the European Communities

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I

(Information)

COMMISSION

EUROPEAN ANTI-FRAUD OFFICE (OLAF)

OLAF Supervisory Committee

REPORT

September 2001 to June 2002

(2002/C 234/01)

Members of the OLAF Supervisory Committee

Raymond KENDALL

Chair

Honorary General Secretary of Interpol

Mireille DELMAS-MARTY

Professor at the Panthéon-Sorbonne University (Paris I)

Edmondo BRUTI-LIBERATI

Deputy Prosecutor-General at the Milan Court of Appeal

Alfredo José DE SOUSA

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 EVALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I.1.

Integrating OLAF into Community procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I.2. OLAF’s autonomy of management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I.3.

Independent status of staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I.3.1.

Independence of the Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I.3.2.

Independence of staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

I.4.

Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER II — EVALUATION OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.1. Operational independence: transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.1.1.

The manual

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

II.1.2.

CMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.1.3.

Scoreboards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.2.

Practices in relation to internal investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.2.1. Measures taken by OLAF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.2.2.

Practice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.3.

Practices in relation to external investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.3.1.

Volume and breakdown of external operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.3.2.

Coordination/cooperation with Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.3.3.

Case management in external operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.3.3.1.

Origin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.3.3.2.

Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.3.3.3.

Presentation and supervision of cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.4.

Need for operational consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.4.1.

Need for an investigation policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.4.2.

Supervision and control of the management of investigations and operations . . . . . . . . . . . . .

II.4.3.

Review of legality and protection of individual rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.4.3.1.

Judicial Advice Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.4.3.2.

Data protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

II.4.4.

Effective follow-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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CHAPTER III — INSTITUTIONAL DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

III.1.

Functions and status of OLAF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

III.2.

Relations with the institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

III.2.1.

OLAF’s interinstitutional function with regard to internal investigations . . . . . . . . . . . . . . . . .

III.2.2.

OLAF’s role in interinstitutional relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

III.2.2.1.

Relations between OLAF and the Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . .

III.2.2.2.

Relations between OLAF and Parliament

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

III.2.2.3.

Relations between OLAF and the Court of Auditors . . . . . . . . . . . . . . . . . . . . . . . .

III.2.3.

OLAF’s communication policy vis-à-vis the institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

III.3. OLAF’s position within the European judicial area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

III.3.1.

The background to cooperation: a provisional framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

III.3.2.

Contents of cooperation: the need for cohesion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.

Progress in achieving the operational objectives of Regulation (EC) No 1073/1999 . . . . . . . . . . . . .

1.1.

A comprehensive, programmed approach to investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.1.1.

1.1.2.

1.1.3.

Establishing an investigation policy and setting priorities . . . . . . . . . . . . . . . . . . . . . . . . . .

Taking account of the purpose of investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Clarifying relations with operational partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1.2.

1.3.

Guarantees of independence and of the proper conduct of investigations . . . . . . . . . . . . . . . . . . . . .

New powers concerning internal investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.

3.

The need to consolidate OLAF’s status, structure and mission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preparations for institutional reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annex I

— Recommendations of Progress Report 1999-2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Proposals of Progress Report 2000-2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annex II — Opinion No 2/2002 on the Green Paper on the criminal law protection of the Community’s
financial interests and the establishment of a European Public Prosecutor . . . . . . . . . . . . . . . . . . . . .

Annex III — Opinion No 3/2002 on the preliminary draft budget for OLAF for 2003 . . . . . . . . . . . . . . . . . .

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INTRODUCTION

In the first two years of its term of office, the Committee had
to devote a considerable proportion of the time devoted to its
dialogue with the Director to questions of organisation
and the setting-up of structures and methods to safeguard
investigatory independence. Thus, together with the Director,
it analysed the problems of UCLAF’s transition to OLAF and
defined the objectives of a reorganised Office.

The point was to develop a structure transferred as it stood to
the new Office from a situation where:

— UCLAF was fully integrated into the Commission struc-
to its hierarchical

ture and organisation and subject
authority,

— there was no investigation policy and some laxity in

recording cases and information,

— responsibility for the management of investigations was

scattered.

The Committee concluded its second report by stating that the
transition of UCLAF to OLAF should be completed. In this
third report (1),
it now wishes to take stock of OLAF’s
achievements in order to allow the responsible authorities to
evaluate the result and decide to what extent and how it should
be consolidated in a fully coherent system for protecting
financial interests. Since the situation is constantly evolving,
the Supervisory Committee will take account in its evaluation
of views and proposals concerning both the present structure
of OLAF and its possible incorporation into a system with the
European Prosecutor at its centre (2).

The evaluation was based partly on the special tasks provided
for by the rules, such as consulting the Supervisory Committee
on preliminary draft budgets, or requested by the institutions
or the Director of OLAF (opinion on Green Papers; partici-
pation in the procedures for the selection of managers) and
partly on the activities that have been strongly refocused on
monitoring investigations, the secretariat providing continu-
ous monitoring of operational activities.

On the basis of the information provided by the scoreboards,
the Supervisory Committee stepped up its monitoring of

( 1) The Supervisory Committee continued its meetings since Sep-
tember 2001 at the monthly rate it had decided when it started. It
continued to hold regular hearings with the Director of OLAF and
his colleagues. It also continued to maintain and develop contacts
with the institutions responsible for protecting Community
financial interests: Parliament (the President and rapporteurs for
the Committee on Budgetary Control and Mr Priestley, the
Secretary-General; the Council (Coreper and the anti-fraud work-
ing party); the Commission (Ms Schreyer) and the Court of
Auditors.

( 2) Green Paper on criminal law protection of the financial interests
of the Community and the creation of European Prosecutor, see
Opinion No 2/2002.

operational activities on the basis of reports submitted by
OLAF concerning investigations that had lasted longer than
the statutory nine months and the cases referred to the judicial
authorities. It also carried out on-the-spot examinations of
closed cases. And it continued to take note, by way of
information, of complaints received by the Director from
litigants, of which it receives a copy, as well as OLAF cases
forwarded by litigants to the European Ombudsman.

This new evaluation should supplement the previous year’s
evaluation of the obstacles encountered by OLAF in setting
up the new organisation, both those relating to internal
organisation and those concerning the ambiguities of the
Office’s status.

As regards internal organisation, the legislature’s aim was to
encourage a form of organisation based on transparency and
thus to clarify the allocation of management responsibilities, a
prerequisite for independent investigations.

The measures set up to promote transparent management are
not fully effective as they have been viewed occasionally as so
many formal bureaucratic constraints (Case Management Sys-
tem, Manual). Training measures should speed up their use.
The scoreboards are essentially used by the Supervisory
Committee, although in future they may become useful
tools for OLAF’s own bodies, as much for the intelligence
departments as for the Operations Executive Board. The
registration procedures are now satisfactory, although unable
on their own to guarantee rigorous management of cases and
relevant documents, a task that only a registry could cope
with.

The measures taken to clarify responsibility for investigations
and to establish proper control of their management are also
inadequate. Although the increased transparency of procedures
certainly promotes clarity, the failure to define an investigation
policy and priorities at management level (3) means that
investigators are compelled to define their own criteria. They
play a decisive part in the process of initiating an investigation,

(3) It is to be hoped that this will be remedied as soon as the

‘Intelligence’ Directorate becomes operational.

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at the risk of having to decide which investigations they will
carry out themselves and which will be entrusted to others.
the structures now in place have not completely
Lastly,
eliminated fragmentation between sectors and units. The delay
in appointing the Director of Directorate B and the fact that
the setting-up of an Intelligence Service is a protracted business
goes a long way towards explaining this situation.

Lastly, there has been little progress regarding the Office’s
autonomy. The administrative and budgetary position has
advanced only slightly compared with the position described
by the Committee in its second report (4). The draft code of
conduct which was to govern OLAF’s relations with the
Commission and the other institutions has not yet been
adopted (5). As regards investigations, the definition of the role
of the Judicial Advice Unit is encountering practical difficulties.

On the other hand, the Council decision of 28 February 2002
setting up Eurojust and providing it, as a third-pillar body,
with powers to protect financial interests, and the Council
decision of 6 December 2001 extending the areas covered by
Europol to swindles, fraud and corruption, only increase the
need to coordinate the activities of Eurojust, Europol and
OLAF in order to bring together the various European powers
currently used to combat organised crime into a unit that takes
account of the need for operational efficiency and the demands
of legal certainty and judicial review (see Chapter III below).
Otherwise, the overlapping of poorly coordinated or uncoordi-
nated authorities will only confirm the conclusion reached by
one commentator already criticising the Nice Treaty on the
ground that it contributed ‘a number of additional complexities
for very little change’ (8). It can indeed be argued that the
institutional imbalance is heightened by the failure to improve
coordination ‘although this problem has become acute in
recent years’ and threatens to make enlargement even more
difficult to achieve.

As regards the status of the Office, the positions taken by
the Council (6) and Parliament (7) on OLAF’s budgetary and
administrative autonomy have had little effect on recruitment
procedures and the drawing-up of the preliminary draft budget
for 2003.

To provide the fullest possible evaluation, this report will
present:

— an administrative and budgetary evaluation (Chapter I),

There is no doubt that the Commission has benefited from the
synergy created by the coexistence within OLAF of indepen-
dent operational services and services responsible for preparing
its legislative and policy initiatives. Thus, drawing on OLAF’s
expertise, it followed its global strategic approach and 2001-
2003 action plan with a Green Paper on the criminal-
interests and the
law protection of Community financial
establishment of a European Prosecutor. This project is likely
sooner or later to alter the status and institutional environment
of OLAF and enhance the evolving nature of its present status,
which can now be seen as moving towards the European
Prosecutor.

However, there are still a number of ambiguities, especially the
scope of Article 280 of the Treaty as regards the full range of
Community bodies and institutions, including members of the
European Parliament. The judgment of the Court of First
Instance of 26 February 2002 on an action brought by
71 Members of Parliament has not fundamentally altered the
position and, as regards the EIB and ECB, the position is in
suspense pending the Court of Justice judgment.

( 4) Introduction to the Committee’s second report.
( 5) In addition, a version that is probably final of the ‘Guidelines for
OLAF’s communication activities’ was presented to Supervisory
Committee members at the meeting on 18 June 2002.

( 6) Conclusions of the Ecofin Council, point 3: ‘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’
(Annex II to the second report).

( 7) Resolution of 14 March 2001, points 3 to 6.

— an operational evaluation (Chapter II),

— an institutional evaluation (Chapter III),

— a conclusion.

CHAPTER I

ADMINISTRATIVE AND BUDGETARY EVALUATION

1.

Integrating OLAF into Community procedures

OLAF itself describes itself as a service that, for administrative
purposes, is attached to the Commission, which has given it
administrative and financial autonomy (9).
In fact, OLAF’s
independence was conferred intentionally by the legislator,
which wanted its Director, as head of a service separate from
the Commission, to exercise broad and fully autonomous
decision-making powers on personnel and budgetary matters.
This autonomy is a vital corollary to the complete indepen-
dence OLAF enjoys in its investigations. However, the principle
of independence recognised by the legal texts is sometimes
difficult to put into practice.

(8) F. Dehousse, Le Traité de Nice: un tournant fondamental dans l’histoire
de l’intégration européenne, Journal des Tribunaux, 12 May 2001.

(9) See preliminary draft budget

for 2003, working document,

point II.

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Since OLAF was set up in 1999, the Commission itself has
practised a certain degree of decentralisation by transferring a
series of responsibilities from the full Commission itself to
Directors-General, particularly as regards the management of
human and financial resources. To some extent
this has
brought the Commission’s other departments more into line
with OLAF.

Over the last three years the Director of OLAF has tried to put
his administrative autonomy into practice,
in most cases
working smoothly with the relevant Commission departments.
After some initial difficulties, cooperation with the Com-
mission has gradually improved thanks to a greater awareness
within the Commission of OLAF’s tasks, role and special
position. Discussions with Commission departments have
the
focused,
autonomy granted to its Director, whereby the Commission
has sometimes sought to ensure that its own internal rules to
prevail.

for example, on defining the principles of

Officials and other staff of OLAF are covered by the Staff
Regulations of Officials and the Conditions of Employment of
Other Servants of the Communities and by the Financial
Regulation. Other rules adopted to interpret and/or implement
those instruments may also be binding, unless they are
incompatible with the provisions of the Decision setting up
OLAF.

OLAF’s autonomy of management is recognised in a number
of fields:

— General administration: with its own separate budget
OLAF has full autonomy in respect of office automation
and IT equipment, provided that it complies with the
general rules governing contracts and procurement. On
the buildings front, OLAF is dependent on the Com-
mission’s general buildings policy, but its present accom-
modation is fairly satisfactory, albeit somewhat limited
and not always suitable.

— Organisation chart: in theory the Director of OLAF enjoys
full autonomy here. The Committee and the Director
have exchanged views on the question of changes to the
organisation chart. The Committee feels it should be
asked to give a formal opinion on such changes, given its
budgetary responsibilities, and that OLAF should equip
itself with the means to exercise its autonomy and assess
human resources requirements on the basis of an analysis
of posts and the links between them.

— Staff: the situation varies depending on the particular

aspects of management:

— Appointment of A 2 Directors and A 3 Heads of
Division (officials): OLAF enjoys autonomy but
must follow the customary Commission procedure,
including referral to the Consultative Committee on
Appointments in its ad hoc composition for OLAF.

— Appointment of Directors, Heads of Unit and
Advisers (temporary staff): OLAF enjoys autonomy
within the rules on advertising calls for applications
and on ensuring competition between candidates
(no direct negotiation). These procedures may be
laborious, but they have been designed to ward off
criticism of a lack of transparency and avert the risk
of disputes.

— Appointment of A 3 and A 4 Heads of Unit: like
all other Commission departments, OLAF enjoys
autonomy under a new procedure in force since
December 2000.

— Staff selection procedures: OLAF appoints two-
thirds of the members of the selection committees
and competition selection boards which administer
these procedures;
remaining one-third is
appointed by the Central Staff Committee, preferably
chosen from among OLAF staff.

the

for promotion purposes,

— Careers and promotions: because this area has a
direct impact on the Commission budget, current
practice is that promotions within OLAF are still
subject to the rules applicable to all Commission
the
departments. So,
appointing authority is the Commissioner respon-
sible for personnel, who of course decides on the
basis of a departmental proposal, but within the
limits of a pre-determined rate of all staff eligible for
promotion, depending on the budget available.
Discussions are under way in OLAF to remedy the
defects of this system, which deprives the Director
of part of his decision-making powers on pro-
motions (his power of proposal is unaffected) and is
a tangible reminder for the workforce that they form
part of the Commission’s managerial staff.

— Budget: a distinction must be drawn between the pre-

paration and implementation of the budget:

On the preparation side, the preliminary draft budgets for 2000,
2001 and 2002, presented by OLAF to the Commission’s
Director-General for the Budget under Article 6 of Decision
1999/352/EC, ECSC, Euratom, were transmitted to the budget-
ary authority by the Commission with no amendments. The
Supervisory Committee remarked in its two previous reports
that this practice appears to be consonant with the principle
of OLAF’s budgetary autonomy.

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However, during the preparation of the preliminary draft
budget for 2003, when OLAF asked in its contribution to the
APS procedure in January 2002 for the creation of 26
additional posts ‘to cater for eligible objectives under the
three priorities set by the Commission’ (10), the Commission’s
Director-General for the Budget rejected the Director’s request
for 20 posts and four seconded national experts for the 2003
financial year (11) on the grounds that he had decided to submit
no requests for new posts to the two arms of the budgetary
authority (Parliament and the Council)(12). The Director-
General also proceeded to reduce appropriations. According
to the Commission, the ‘zero’ growth policy adopted in order
to abide by the ceilings of the financial perspective meant that
any increase in posts in one department would lead to an
equivalent reduction in posts in another department.

On 10 April 2002 the Supervisory Committee delivered a
favourable opinion on OLAF’s preliminary draft budget for
2003 (13), while regretting that ‘the preliminary draft was not
produced on the basis of a clear and precise definition of
OLAF’s new tasks and a programme of activities presented for
the Committee’s Opinion’ and noting that ‘the Office must set
its overall priorities as regards investigations and follow-up at
the same time as it fixes its 2003 budget in the light both of
directives from the European institutions and of the risk
sectors identified by OLAF itself’.

In the absence of guidelines specific to OLAF, the Com-
mission’s priorities tend to prevail. It stands to reason that this
state of affairs is incompatible with OLAF’s independence.

the legal

instruments
As regards budget implementation,
stipulate that OLAF has complete autonomy. However,
in
practice, OLAF turns to Commission departments for manage-
ment tasks, as it lacks the necessary infrastructure. In its
first two reports and in several opinions, the Supervisory
Committee has recommended that OLAF equip itself with the
functions it needs to exercise its independence. During the
present
financial year, the Commission has intervened in
OLAF’s management, notably through its Financial Controller,
its legal service and DG ADMIN. The Supervisory Committee
regrets that no action has yet been taken on its recommen-
dations.

2. OLAF’s autonomy of management

Autonomy of management within OLAF is put into effect
through its own structures. The Director does in fact exercise
his powers as appointing authority and in relation to internal

organisation. He recently set up an internal audit service
and, after repeated recommendations by the Supervisory
is planning to equip OLAF with a system of
Committee,
budgetary control and management.

OLAF has not yet adopted the detailed rules which, pursuant
to Articles 6(1) and (4) of Decision 1999/352/EC, ECSC,
Euratom, would enable it to lay down the framework for its
autonomy, particularly in the field of recruitment and budget
management.

OLAF should equip itself with suitable structures, particularly
in the legal and budgetary fields and in personnel management,
so that it can apply its own priorities and analyse, and possibly
challenge, Commission initiatives that might jeopardise its
autonomy of management. (See also Chapter III, points 2.2.1.
and 2.2.2.).

3.

Independent status of staff

3.1.

Independence of the Director

Regulation (EC) No 1073/1999 sought to consolidate OLAF’s
independence by among other things laying down a special
status for its Director (14), who is appointed by the Com-
mission, on the basis of an agreement between the three
institutions, from a list of candidates approved by the Supervis-
ory Committee. The Director may even bring an action against
the Commission before the Court of Justice if he feels that a
measure taken by the Commission calls into question his
independence.

However, in practice, this special status does not fundamentally
mark out the Director of OLAF from Commission Directors-
General.

First, the right to bring an action against the Commission does
not in itself place OLAF’s Director on the outside. The Director-
General of Financial Control has a similar right (15), although
his status within the Commission hierarchy is not fundamen-
tally different from that of the other Directors-General.

Second, the fact that the five-year term of OLAF’s Director is
renewable once and that the Commission enjoys a degree of
discretion as regards the terms of renewal (e.g. whether or not
to publish a call for applications in the Official Journal) means
that, objectively, the Director is dependent on the Commission.

As regards OLAF’s external relations, the Director’s role does
put him in a special position that is different from that of the
Commission. In his contacts with national authorities and the
other institutions, especially Parliament, the Director of OLAF
has exercised his responsibility to manage investigations in an
entirely autonomous manner.

( 10) Preliminary draft budget for 2003, working document, IV.A.2.
( 11) Letter from Mr Mingasson dated 22 April 2002.
( 12) OLAF has maintained its initial request.
( 13) Opinion No 3/2002.

(14) Article 12 of Regulation (EC) No 1073/1999 of the European
Parliament and of the Council; Article 5(1) of the Commission
Decision of 28 April 1999.

(15) Under the present financial Regulation.

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But at the same time, relations between OLAF’s Director
and the Commission, the Commissioners and Commission
Directors-General have naturally become interwoven in the
complex web of relations between the body of Commissioners
and the Commission’s administrative apparatus without the
emergence of any real separate OLAF identity within the
Commission (16).

respect. The Committee has also noted that in a particular case
where OLAF was warned of a possible conflict of interests
affecting an investigator who, in a previous post, had been
involved in the management and control of the case under
investigation, that investigator was taken off the case. It would
be useful if systematic checks were carried out when a case is
assigned to an investigator to ensure that such situations
cannot arise.

3.2.

Independence of staff

In its second report the Committee examined the problems
caused for OLAF by the origins of its staff and the links they
might maintain with the organisations they came from (17).
OLAF responded to the Committee’s requests, pointing out
that the obligations it imposes on all staff,
irrespective of
category, are clear and unequivocal. The Committee observed
that OLAF had no internal rules allowing for the special nature
of its mission. OLAF confirmed that in this respect it applied
the provisions of Article 11 of the Staff Regulations of officials,
which states that,
‘An official shall carry out his duties and
conduct himself solely with the interests of the Communities
in mind; he shall neither seek nor take instructions from any
government, authority, organisation or person outside his
institution’. Under a procedure laid down in the OLAF manual,
whenever an investigator has the feeling that his independence
is in jeopardy, he must report on the facts to his superiors.

OLAF also points out that application of these principles is a
rather delicate matter, since, on the one hand, OLAF officials
can pursue their career within the Commission’s departments
and, on the other,
temporary staff come mainly from
investigating services in the Member States to which they are
likely to return at the end of their contract. OLAF warns that
this situation could lead to a potential conflict of interest and
affect
the parties concerned in the
the independence of
performance of their duties.

Above all, the question of the independence of OLAF staff in
performing their duties within OLAF has a bearing on the
effectiveness and credibility of the Office’s operational work.
To minimise the risks for the independence of its officials —
whether they be temporary or permanent — in OLAF’s day-
to-day operations, a series of measures have been taken to
guarantee the independence of staff in the performance of
their duties. For example, a certain geographical balance has
been established in the hierarchy responsible for operational
work. When teams are formed to take charge of a particular
case, care is taken to ensure that knowledge of the national
context is well complemented by special expertise in the sector
concerned. Involvement of the Magistrates Unit at an early
stage in investigations provides an extra guarantee in this

( 16) See Chapter III-2.2.1: Relations between OLAF and the Com-
mission and Chapter II-2: Internal investigation practices.

( 17) Second activity report, point 1.2.3.

On the recruitment front, OLAF itself defines the profiles of
the staff to be taken on (e.g. legal/judicial expertise for certain
posts such as director of operations, or specialists for internal
investigations, intelligence analysis, etc.), publishes the vacancy
notices (among other places on the Internet to avoid any
particular ‘bias’
in applications) and sits on the selection
committees. So there are guarantees preventing Member States
from placing or even imposing their own candidates.

On recruitment the successful candidates come under the
responsibility of the relevant OLAF departments and are
‘adopted’ by more experienced colleagues.

The initial compulsory training also includes information on
the rights and obligations of staff, with the question of
independence being tackled on the basis of the manual, which
incorporates the obligations laid down in the Staff Regulations.
However, these provisions are not specific to OLAF, whose
special role needs to be taken into account, and this infor-
mation is provided at a rather late stage.

Finally, the Director of OLAF could exploit to the full the
flexibility he enjoys as appointing authority to ensure a smooth
transition to national careers by extending contracts where
appropriate.

These initiatives should be backed up by a number of other
measures.

Consideration could be given to the possibility of requiring
OLAF staff to swear an oath before the Court of Justice of the
European Communities, following practice in most Member
to complete such
States, which compel
formalities when called on to investigate financial affairs. The
quid pro quo for this oath-swearing procedure might be of
interest to OLAF investigators: like their national colleagues,
they could be given the right of requisition.

their own staff

The length of temporary contracts is a relevant factor in the
question of staff independence. Given the breakdown of posts
between permanent officials and temporary staff, OLAF is
faced with the difficulty of deciding on the nature and length
of contracts and on the recruitment of temporary staff.
Obviously, an excessive rate of turnover among temporary
staff would be incompatible with effective investigations.
if contracts are too long, OLAF will have less
Conversely,
scope to recruit staff from national services who have the most
up-to-date knowledge of their field.

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4. Prospects

In its activity reports in the last two years the Committee has
noted and highlighted the ambiguity of OLAF’s status. The
administrative and budgetary autonomy conferred on OLAF
by the legislation is unclear and, in practice, confronted by a
it is inconsistent with the
number of obstacles. Above all
independence of its investigative function vis-à-vis the other
institutions and bodies, which was explicitly provided for by
the legislator.

To establish consistency here, OLAF’s budgetary and adminis-
trative arrangements should in the long term be similar to
those of the European Ombudsman (18). Failing this, OLAF
should be allowed to report to the European Parliament on
administrative and budgetary matters.

The Committee feels that appropriate amendments to the
provisions of the Financial Regulation concerning OLAF could
go a long way towards making the Office more effective in
performing its independent investigative role. Such amend-
ments would also be entirely compatible with its role in
assisting the Commission with legislative initiatives in pursuit
of anti-fraud objectives.

The Committee believes that bringing OLAF’s system of
budgetary and administrative management into line with that
of the European Ombudsman would be a very important step
in laying a sound basis for the future European Public
Prosecutor for the protection of the Communities’ financial
interests. Such amendments to the Financial Regulation would
give effect to the principles of administrative and budgetary
management set out in the Commission Decision of 28 April
1999 and in Article 13 of Regulation (EC) No 1073/1999, in
line with the need for effective independence for OLAF in its
investigations.

CHAPTER II

EVALUATION OF OPERATIONS

As far as operational activities are concerned, the transition
from UCLAF to OLAF consisted mainly of introducing greater
transparency (1) in the management of cases and laying down
the broad outlines of a structure designed to ensure that such
management formed part of a policy on investigations, the
first requirement of the operational independence intended by
the legislation. As the legislator’s intentions were different for
investigations (3),
internal
different criteria must be used for assessing the extent to which
they have been achieved. Nevertheless,
in both cases the
implementation of the legislator’s intentions, measured in
terms of the value added to OLAF’s activities allowing for the

than for external

investigations (2)

( 18) The Ombudsman’s status is laid down in Articles 12, 19(1),
20(3), 22(2) and (5) of the Financial Regulation, as amended by
Regulation (EC, ECSC, Euratom) No 2673/1999, of 13 December
1999.

resources allocated to the Office, is still only at the stage of
sketching the broad outlines and requires further consoli-
dation (4). In any case, this evaluation is only an interim review
of the transition from UCLAF to OLAF, and should in no
circumstances be considered an assessment of the application
of Regulation (EC) No 1073/1999, which will only be possible
once its provisions have actually been applied on the basis of
priorities established in a work programme, since this assess-
ment can only be made in terms of such priorities.

Finally, it should be stressed that OLAF has not yet succeeded
in overcoming the problem of cases opened by UCLAF and
still pending,
in which there could be new developments,
which are taking up a substantial proportion of its human
resources and consequently delaying the handling of new
cases. It should be noted that a work and priorities programme
would have enabled OLAF to put forward a solution in
particular for the problem of politically sensitive internal cases.
It should also be remembered that the handling of old cases
using the new methods was not made easier by the fact that a
number of staff inherited from the former UCLAF remained
with OLAF for too long.

1. Operational independence: transparency

The legislator’s aim of clarifying responsibility for the manage-
ment of investigations by entrusting them to the Director (19)
required OLAF to provide itself with a management structure
and methodology which provided the necessary degree of
transparency for monitoring and directing operational activi-
ties. The legislation also provided the ideal instrument for the
supervision of these operational activities by requiring the
Director to forward the Office’s programme of activities to the
Supervisory Committee each year. For the time being, however,
for the reasons set out in point II.4.1. Need for an investigation
policy, the Office has at its disposal only those instruments
necessary for formal transparency of management, namely the
manual, the CMS and the scoreboards. There can be no real
transparency until operations are managed within the context
of a genuine investigations policy.

1.1. The manual

Over the period in question, the manual of internal procedures,
especially those relating to OLAF, has not been updated.

OLAF’s departments have therefore continued to operate on
the basis of a manual which, although it had the advantage of
a unified presentation and alerted all staff to certain internal
rules, nevertheless had a number of shortcomings, due in
particular to the fact that it includes instructions relating to
completely different areas of activity, dealing with:

— the internal organisation and operation of OLAF,

(19) Opening of investigations: Article 5 of Regulation (EC) No 1073/

1999; directing the conduct of investigations: Article 6.

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— the procedural rules applicable to OLAF’s investigations

1.3. Scoreboards

and findings.

With its occasionally imprecise and irrelevant instructions, the
manual would appear to be inadequate, while at the same time
going into excessive detail in certain areas. After a year in
force, it is clear that some provisions should be revised or
added to, or even redrafted. This exercise would have to be
carried out with the assistance or under the supervision of the
magistrates’ unit.

At the same time a reference to all the rules of procedure
which apply to investigations in order to protect litigants’
rights should be included in the manual.

1.2. CMS

To judge by its name, the purpose of the CMS, or ‘Case
Management System’, should be to manage the Office’s cases. In
fact, this IT tool is used for referencing cases and the stages
reached in investigations. The CMS is now proving to be very
useful in improving the Office’s transparency. However,
its
capacity for monitoring and analysing cases is limited and it is
still proving to be less than fully reliable at the present time.

The CMS is at present more a referencing and case-monitoring
tool, and offers only limited facilities for analysing frauds or
producing synthesis studies on the basis of them.

The system does not at present allow for digital storage and
classification of case documents. Moreover, the same case-file
may, under a single registration number in the CMS, corre-
spond to more than one investigation, or it may not corre-
spond to any investigator and refer to classifications in
different and unspecified places within the Office.

The scoreboards used for keeping the Committee informed are
taken from the CMS database. Since data from before 1999
could not be recorded in reliable bases, it remains difficult to
make use of specific items of information whenever old data
has to be used.

For the period after 1999, however, the data from the CMS
used to create the scoreboards which keep the Committee
informed is acceptable and enable it to identify areas and cases
for inspections.

This increase in the formal transparency of management via
the manual, the CMS and the scoreboards would have no
impact on the quality and efficiency of operational activities
were it not accompanied by strict case management structures,
in particular the introduction of a registry-like body.

2. Practices in relation to internal investigations

The importance attached by the legislator to internal investi-
gations in Regulation (EC) No 1073/1999, compared with
external investigations, has no basis either in the number of
cases or in the size of the amounts involved in the phenomenon
of corruption and fraud within the institutions which, as far as
one can tell, is no worse at Community level than in other
similar situations. It is clear that the legislator intended in this
way to give priority to and take steps to fill a gap in
the protection of the Community’s financial
interests: the
inadequacy of procedures for invoking the liability of Members
and staff of Community bodies and institutions. To assess the
extent to which this priority on the part of the legislator
has been taken into account, the Committee examined the
measures adopted during the period under consideration and
tried to quantify the effect of these measures.

2.1. Measures taken by OLAF

It is vital that the CMS should allow case documents to be
scanned in the near future and should be developed so as to
take account of the needs of the Intelligence Directorate. Half-
way through its development, the CMS could be evaluated in
terms of users’ needs; these can vary widely, since the CMS
should at once be a tool for managing investigations, a means
of monitoring them and following them up, and the means of
preference for providing information for analysis by the
Intelligence Unit and providing the institutions with infor-
mation on trends in crime against the Community budget.

Over the period under consideration, the Committee wanted
to be able to assess the impact of the measures taken by OLAF
to take account of the comments made in its second activity
report largely on the basis of an audit carried out by the
magistrates. Following the second activity report, the Director-
General of the Office decided to reorganise practices in the
area of internal investigations by a decision in January 2002.
This decision covered the following points:

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— an active recruitment policy for new staff led to an
increase in the number of investigators assigned to pool 1
from 19 in October 2001 to 30 on 1 April 2002. This
increase was offset by a number of staff leaving OLAF,

and in most cases they are able to gather useful evidence using
administrative resources. However, the case must be referred
to the national judicial authorities when conclusive evidence
must be obtained for acts under criminal law (searching a
suspect’s home or examining their bank account).

— the unit responsible for the CMS sends the pool 1
managers a monthly report which can be used to identify
investigations subject to abnormal delays and decide on
appropriate action,

— creation of a standard document classification and inven-

tory system,

— regular meetings between advisers and investigators to

monitor the development of cases,

— involvement of the magistrates’ unit from the earliest
stages of investigations and advice from the magistrates’
unit in serious cases of fraud,

— each new investigator is placed under the supervision of
a ‘tutor’, an experienced investigator, for the first few
months of service,

— finally, the use of standard statement forms. Since the
beginning of 2002, OLAF’s investigation teams working
on internal investigations have been using model state-
ment forms prepared by the magistrates’ unit for taking
statements from suspects or witnesses.

OLAF investigations occasionally also encounter problems in
connection with the conditions for withdrawing immunity
from Community officials or other staff. The national judicial
authorities are sometimes surprised that, even when they are
in possession of accusations made by the Director of the
Office, they must themselves ask the Institution to lift the
immunity of officials whose case has been reported by the
Director of the Office. A procedure which is better suited to
the needs of the investigation should be found.

2.2. Practice

The Committee’s assessment of internal investigative activities
is based on information obtained from the scoreboards, the
information sheets supplied by OLAF, the audit carried out by
the magistrates in September 2001,
the examination of
investigation case-files selected on the basis of the scoreboards,
the Committee’s contacts with the institutions and the national
authorities, and the information sent to it in the context of
complaints from litigants to the Director of OLAF and the
European Ombudsman.

These measures should bring about a real improvement in the
quality of internal procedures conducted by OLAF. However,
it is difficult to quantify the effects because they are very
recent. It should be noted that they are necessarily limited by
the fact that OLAF’s investigative powers are too limited to be
fully effective when evidence has to be gathered outside the
Institution. Naturally, OLAF’s officials make use of all the
powers at their disposal and conferred on them by case-law (20)

This assessment has not yet been able to cover a genuine
typology of investigations, which would imply a synergy
between the functions of gathering and analysing information
and the investigative function which does not yet exist (see
Chapter III.1). The assessment did, however, consider three
main aspects.

( 20)

Judgment of the Court of First Instance in Case T 74/99 Tzoanos,
19 March 1998, paragraph 320: ‘In that regard, the question of
any unlawful entry does not arise, since both the computer and
the office which the applicant used in Unit XXIII.A.3 were
provided by the Commission solely for the purpose of his duties
as Head of Unit. Apart from the fact that the Commission
remains the owner of these professional facilities, the applicant
has neither shown, nor even claimed, that the Commission
conferred on him any individual right over them, apart from the
right to use them in the exclusive context of his duties. There is
therefore no reason to consider that the Commission was guilty
of unlawful entry when it accessed the data in the applicant’s
computer or entered the space occupied by his office.’

Volume and trends in internal investigations

According to the data from the CMS, the vast majority of
investigations opened under the old procedure have now been
closed, and 53 of the currently active investigations were
opened after 1 March 2000. However, almost half of all
current investigations have been open for more than nine
months.

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Internal investigations: stages in the procedure (*)

Stage of the procedure

Commission

Other institutions

Bodies, offices
and agencies

Total

Evaluation

Active investigations

Follow-up

Closed without further action

Not relevant

Total

(*) Status on 7 June 2002. Source: OLAF.

7

55

20

22

11

1

7

1

6

3

115

18

8

64

24

30

15

141

2

3

2

1

8

Cooperation with Community institutions, bodies, offices and agencies

Most of the internal investigations conducted by OLAF (evalu-
ation, active investigations and follow-up) concern the Com-
mission (110). However, OLAF’s activities are gradually
expanding and the other institutions and bodies, offices and
agencies are now aware of the obligation imposed on them by
Article 7(1) of Regulation (EC) No 1073/1999 to supply the
Office with any information relating to possible cases of fraud
or corruption or any other illegal activity. The extent of the
obligation on the institutions to forward this information
should be clarified and it would be useful for OLAF to examine,
at
the internal decisions
implementing the interinstitutional agreement and the prac-
tices followed.

the same time,

the content of

purpose of investigations. The measures adopted in January
2001 were designed to improve this aspect on a formal level.
The institutions have not yet settled the question of how the
administrative or disciplinary purpose of these investigations
ties in with administrative or disciplinary proceedings against
their officials (21). The Commission’s work in preparing amend-
ments to the Staff Regulations and the Financial Regulation in
connection with disciplinary proceedings seems to take little
the role of OLAF (22). As regards the other
account of
institutions, it is difficult to judge whether the opening of an
investigation by OLAF should lead to the suspension of any
administrative investigation under way.

The Office’s links with the judicial authorities as regards
internal
investigations are in the process of development.
The table below summarises the information or internal
investigation case-files forwarded to the judicial authorities.

In the case of Parliament, most of the investigations were
opened at the request of the institution. The investigations
involving the Commission, on the other hand, are more varied
in origin.

The purpose of internal investigations

The Committee had pointed out in its second activity report
that a feature of the management of internal investigations
was the failure to take into account the disciplinary or criminal

(21) The Supervisory Committee had stressed the need to settle
the question of how OLAF investigations should tie in with
administrative and disciplinary proceedings in its first report
(recommendation P3) and its second report
(recommenda-
tion P2): recital 10 to Regulation (EC) No 1073/1999 refers to
an amendment of the Staff Regulations of Officials to this effect.
(22) Notes from Mr Brüner to Mr Mingasson and Mr Reichenbach
dated 6 May 2002. Reply from Mr Mingasson dated 4 June 2002.

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Information and internal investigation case-files sent to the judicial authorities (*)

2002

2001

2000

1998

No date

Total

Closed investigations, established before 1/3/2000

Closed investigations, established after 1/3/2000

Active investigations established before 1/3/2000

Active investigations established after 1/3/2000

Total

(*) Status on 7 June 2002. Source: OLAF.

1

1

2

2

2

2

6

4

1

3

2

12

3

1

2

5

3

2

18

In particular,

The Committee has not been able to obtain overall figures for
follow-up action taken with regard to the transfer of this
information.
it has not been kept regularly
informed of recommendations made to the competent autho-
rities in connection with the transfer of the information (23)
and has not been informed of any action taken in response to
such recommendations (24). Nevertheless, the Committee has
been able to establish that some cases were referred to the
judicial authorities when it was clear that the time-limit
applicable in the Member State in respect of the crimes
in question had lapsed and that consequently the judicial
authorities had no choice but to close the case with no further
action.

Experience shows that the relationship between OLAF and the
courts in Brussels and Luxembourg is good but that it is
sometimes difficult to instigate judicial action promptly on the
administrative investigation carried out by OLAF. This question
of cooperation with the national judicial authorities is a vital
one, and the national authorities sometimes have difficulty in
appreciating the priority of such investigations and their
specific nature.

Qualitative evaluation of internal investigations

The evaluation in the second activity report (25) was largely
based on the audit carried out by the magistrates’ unit. Since
then, the Committee has examined ten internal investigation
procedures, two of which were selected to serve as a reference,
since they had followed the old methods and structures. It

emerged that these two cases fully corroborated the results of
the magistrates’ audit and,
in particular, that they did not
take account of the disciplinary or criminal purpose of the
investigation, since those responsible or the persons in ques-
tion had neither been investigated nor questioned. The other
cases, which were conducted in accordance with the methods
established in January 2002, are significantly better presented.
As regards investigative activity itself, and especially its role in
protecting the Community’s financial interests, the Committee
has also taken account of information gathered from the
institutions concerned and from national courts or contained
in complaints to the Director of OLAF or the European
Ombudsman. It has found that the effectiveness of investi-
gations continues to be limited in the following areas:

— evidential value of investigations: this has occasionally
been reduced because of the conditions in which certain
statements were taken, because the independence of an
investigator could be challenged or because the individual
the person under investigation had been
rights of
infringed as a result of leaks,

( 23) Article 9(4) of Regulation (EC) No 1073/1999.
( 24) Article 11(7) of Regulation (EC) No 1073/1999.
( 25) Chapter IV.1.

— information gathered:

in some cases the institutions
involved felt that the information was insufficient or
incomplete,

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— recommendations made in the investigation reports: the
institutions involved sometimes found them impractical,

— subject of the investigation: the institutions feel it is not
always apparent that the Community’s financial interests
are in jeopardy in the investigations opened by OLAF (26).

The Office’s internal investigation function is at last starting to
benefit from the measures on transparency and harmonisation
of procedures adopted early in 2001. It could, however, be
improved by a clearer definition of ‘internal investigations’,
currently incorporated in the ‘anti-corruption’ section, which
would make it possible to set up, also within this section, an
investigations policy managed by means of a body which
would act as a registry. In particular, investigators dealing with
internal investigations should be clearly identified, and they
could be housed separately from their colleagues dealing with
external
in their
investigations, since it is important that,
dealings with the various departments in the institutions and
bodies of the Community, OLAF investigators should be
clearly identified in terms of their duties and that the people
dealing with them should be left in no doubt as to whether
they are dealing with investigators conducting external or
internal investigations.

ance with these powers to conduct on-the-spot checks and
inspections on the one hand, and the powers of coordination
and cooperation with the Member States provided for in
Article 1(2) of Regulation (EC) No 1073/1999, which make
use of other legal means. In fact, neither the procedures
following the manual nor the data recorded in the CMS allow
a clear distinction to be made between these two categories of
activity. When OLAF refers to the use of a legal basis, in
particular Regulation (EC, Euratom) No 2185/96, this does
not seem to have any implications from the point of view of
the purpose of the activity, and in particular the evidential
value of the case.

In the absence of an audit of external operations carried out
under the same conditions as the one conducted in September
2001 on internal investigations, the Committee’s evaluation
was therefore concerned with the quantitative aspects of
external operations, coordination/cooperation with the Mem-
ber States and the quality of case management, and took
account of an analysis of these activities carried out by the
magistrates’ unit.

3. Practices in relation to external investigations

The powers in respect of external investigations conferred on
OLAF by Article 1(1) and Article 3 of Regulation (EC)
No 1073/1999 derive from the transfer of
the powers
conferred on the Commission as regards on-the-spot checks
and inspections by Council Regulation (EC, Euratom) No 2185/
96 and the sectoral regulations. In the process, these powers
underwent a qualitative transformation in that the legislature
incorporated them in specific and independent anti-fraud
measures: these checks and inspections are carried out as part
of investigations and have a different purpose from the checks
which used to be carried out by the Commission’s Directorates-
General or even UCLAF. This intention on the part of the
legislator should therefore be reflected in practice by making a
clear distinction between investigations carried out in accord-

3.1. Volume and breakdown of external operations

According to the CMS data, only thirteen investigations were
carried out using the powers under Regulation (EC, Euratom)
No 2185/96, which is not in itself the only decisive criterion
for investigations provided for in Article 3 of Regulation (EC)
No 1073/1999. One of the investigation case-files examined
by the Committee, which included an inspection on the basis
of Regulation (EC, Euratom) No 2185/96, was made up of an
investigation report, which could in theory have been sent to
the judicial authorities, consisting of a purely administrative
report based on no independent findings and offering no
evidence. The methodology of these autonomous inspections
should consequently be improved.

( 26) The scope of Article 2 of the Interinstitutional Agreement needs

to be clarified in this regard.

The table below, provided by OLAF, shows that on 1 March
2002, 2 921 items of information on investigations were
archived and gives a breakdown by sector of activity. It shows
the
that 646 investigations are in progress, 361 are at
evaluation stage, 586 are being followed up and 386 have
been closed.

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SECTORS

Agricul-
ture

Alcohol

Anti-
corruption

Cigarettes Customs

Expenses

External
aid

Precursors

Structural
Funds

Commer-
cial ven-
tures

VAT

Totals

Active investigations

63

Errors

Closed-IRENE

Evaluation

Existing cases

Follow-up

Non-cases

No action

3

98

39

27

7

28

23

11

—

44

—

2

3

—

15

43

117

66

—

11

26

4

—

3

7

4

23

22

9

4

10

50

65

—

60

85

1

54

—

8

87

23

115

7

92

11

55

10

46

40

14

25

52

31

2

—

—

6

2

85

1

87

—

22

646

—

5

147

201

32

14

19

11

57

15

1

7

627

361

—

106

18

586

2

204

48

26

100

14

386

25

113

180

—

43

Total

288

75

149

133

377

258

388

171

528

490

64

2 921

3.2. Coordination/cooperation with Member States

In addition, OLAF’s involvement in assistance or coordination
activities make it possible to take stock of any fraud committed
on European territory and its impact on the Community
budget.

Most operations are assistance and coordination operations.
OLAF does not act as the lead department in either area, the
strategic or operational decisions in an investigation being
managed by the national authorities. Its role in such operations
is rather to act as a switching point, redistributing information
from either Member States or Commission Directorates-
General.

OLAF could play an important role by sending mutual
assistance reports to Member States to inform them of the
emergence of fraud cases identified by the Office. The following
table provides figures on mutual assistance reports and shows
an overall drop in the number of reports sent to Member
States.

Its role as information hub can also involve giving impetus to
that information, which can in turn result in OLAF depart-
ments calling on Member States to take further action.

It would accordingly be desirable for the Office to carry out an
internal evaluation of the management of such procedures and
to draw up as soon as possible a guide on current mutual
assistance procedures which could be of value to new officials
and staff recruited by OLAF.

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New cases notified to
Member States

AM supplements
(existing cases)

Precursors

Total
communications

DG XXI

1990

1991

1992

1993

1994

UCLAF

1995

1996

1997

1998

OLAF

1999

2000

2001

65

69

87

122

107

60

81

76

50

42

38

15

37

70

80

102

89

83

51

41

36

25

17

8

102

139

167

224

203

167

156

138

104

82

73

35

7

24

24

21

18

15

18

12

3.3. Case management in external operations

Depending on the case, the complaint or the accusation
received by the Office will give rise either to a coordinating
investigation or an independent investigation proper.

3.3.1. Origin

3.3.2. Duration

External operations have a number of origins; several sources
can be identified.

Firstly, the specialised Commission departments (TAXSUD,
AGRI, TRADE) provide OLAF with important sources of
information.

External investigations relating to assistance or coordination
operations are generally lengthy, in most cases exceeding the
nine months provided for in Regulation (EC) No 1073/1999.
In March 2002, 300 investigations that had exceeded the
nine months in question were notified to the Supervisory
Committee.

The following table gives the details of the notifications.

Apart from these administrative sources, a relatively significant
source is the information given by firms that are victims of the
unfair competition caused by fraud on the part of competitors.
OLAF regularly receives information or complaints from
specialised consultancy firms or even legal firms, some of
which may have international status.

Processing the information obtained from these sources means
that a proper investigation strategy should be in place from
the moment the information is received. The Office is anxious
to collect the maximum information and check its consistency
and incidence in the light of frauds reported. It then carries
out an initial evaluation of the information received and
endeavours to obtain evidence from the complainants to add
to the investigation file.

Information notified to the Supervisory Committee

Investigations lasting more than nine months

2002

2001

2000

Total

27

205

68

300

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Even bearing in mind that these often complex investigations
are necessarily lengthy and that nine months is thus inadequate,
the period should be retained as a reference standard. Steps
must therefore be taken to shorten the time needed to carry
out investigations. One method would be to monitor each
phase of each investigation more closely. Reducing investi-
gation times is an objective that helps to enhance the credibility
of the investigation services in the eyes of their interlocutors
(Commission Directorates-General, Member States,
judicial
authorities). From this point of view, credibility means wrap-
ping up investigations rapidly, although the components of
the closed file could be added to another file should new facts
come to light.

3.3.3.

Presentation and supervision of cases

Assistance and cooperation operations entail regular super-
vision of the cases, even if responsibility for follow-up, in
particular judicial and financial follow-up, is primarily a matter
for the national authorities. It would thus be necessary to
introduce activity monitoring, carried out regularly by the
Advisers.

In general, external operations do not seem to be supervised
regularly by Heads of Unit/Advisers. Thus in some cases, the
decisions to close cases were sent for signing by the Director-
General a year or a year and a half after the last document was
added to the file. It is reasonable to wonder why the decision
to close was taken after such a long time rather than being
taken immediately.

It is also essential that Advisers are able at all times to see how
cases are progressing and to take steps to control and reduce
the time spent on each case. By monitoring the progress of a
case it should be possible to take decisions at the right time.

The way in which cases are presented is not entirely satisfac-
tory.

In certain cases OLAF did not notify its counterparts in the
Member States even though considerable periods of time had
already elapsed (e.g. a year or two).

First, the technical presentation of the files could be improved
— the documents are not classified methodically, which makes
it difficult to consult and understand them.

It should be noted, however, that OLAF departments have
made a considerable effort to conclude investigations outstand-
ing from the former UCLAF. The difficulties entailed are
further increased by the need to manage new investigations
initiated since OLAF was set up.

The files only rarely include summaries of the main facts of an
investigation and an analysis of the consequences.

4. Need for operational consolidation

Similarly, apart from the recommendation signed by the
Director when the case is closed, there is no reasoned summary
of each case in each file giving an overall view of the
investigation at a single glance.

The presentation of the files and their readability would be
improved if the investigators drew up a report at the end of
their inquiry explaining clearly the origin of the case, the facts,
a summary of the mechanism of the fraud and the outcome.
In addition, a summary of this kind should be decisive in any
administrative, disciplinary or judicial follow-up. In particular,
follow-up and recovery operations, a
as regards financial
document summarising the duties evaded or defrauded, coun-
try by country, and if necessary operation by operation, should
be added to the investigation report. Naturally, when drawing
up the document and the summary of duties evaded or
avoided, Advisers should check the acts concerned. Advisers
should also be more involved in the management of cases and
of investigators’ working time.

The legislature’s intention of placing investigations under the
responsibility of an independent Director has not yet been
fully achieved. Decisions to initiate and run investigations are
still taken by the investigators who are unable to rely on or be
guided by priorities, directives or rules defined for the Office
as a whole, where the Director is deprived of an efficient
management system. Although guidelines for management
control by the Director have indeed been definitively adopted
in the areas of structures and recruitment, the following areas
require consolidation.

4.1. Need for an investigation policy

The lack of an investigation policy affects not only trans-
parency and responsibilities but also practical aspects. It makes
it very difficult to manage the volume of investigations and
human resources, especially as regards the number of cases in

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the follow-up phase. The practical measures taken so far by
OLAF to deal with these difficulties are not particularly
effective: the proposals to open investigations submitted by
investigators are systematically approved by the management
bodies and incorporated a posteriori in a ‘prioritisation’ plan.
The response to the problem of the growing number of cases
has been to recruit new staff. The lack of any policy also
weakens OLAF when it is confronted with the priorities of
other authorities that do not have the same responsibilities.

Yet an investigation policy was the aim of the legislator when
it required an annual work programme to be submitted to the
Supervisory Committee (Article 11(7) of Regulation (EC)
No 1073/1999). Thus it
is not only necessary but also
mandatory for efforts to be made by OLAF to attain that
objective as soon as possible.

The policy should consist of two levels. At the first level, it
should define OLAF’s general objectives, as laid down by the
legislator and specified by the institutions, taking account of
the result of the ongoing analysis of OLAF’s various functions
and tasks and their interconnection, on the basis of which the
functional relations between the Office and its partners,
institutions and Member States should be defined (27). At the
second level, the policy should identify the main features of
the Office’s operational action on the basis of priorities
established according to the risk analyses carried out by the
strategic intelligence unit and rules laid down by the insti-
tutions responsible for budgetary matters (Parliament, Council,
Commission and Court of Auditors) in connection with those
responsibilities, thus providing the Director with a tool for
management control, transparency and responsibility.

In particular, an investigation policy should have an instrument
to assess and supervise the initiating and running of investi-
gations. The management tool role of the present ‘executive
committee’ needs to be more detailed and confirmed, possible
in the manual.

4.2. Supervision and control of the management of investi-

gations and operations

It is difficult to produce a general evaluation of case manage-
ment as practice continues to differ according to the sector.
The differences are due less to the different nature of the
activities of each sector than to the confusion between
investigation activities and coordination/assistance activities,
both of which involve the same procedures. The amount of
work, the number of cases being evaluated or processed and
the time spent on processing thus vary considerably from one
investigator or sector to another, no precise picture being
possible.

OLAF has not yet completed the task of closing old cases and
continues to face the difficulty of having to absorb the stock
of cases that have accumulated and not been processed. This
has been made more difficult by the departure of a number of
investigators whose cases were managed by the old methods.

The following tables provides an overall view of the activities
of the departments. The figures show that the number of cases
opened has risen significantly since 1999. The increase in the
number of cases compared with the number of cases opened
provides a quantitative picture of the effort to settle old cases.

Investigations by OLAF

Cases opened Cases closed

2002 (January to April)

156

279

2001

2000

1999

1998

1997

499

1 027

336

449

154

99

200

133

347

155

Up to and including 1996 (*)

396 (*)

4 (*)

(*) The data for the period before the CMS was set up are not significant.

A closer look at the statistics obtained from the CMS shows
that efforts to deal with the inherited caseload has been at the
expense of the management of new cases: in April 2002 the
evaluation function had been delayed considerably, these cases
in the initial phase comprising:

— 120 cases opened less than six months previously,

— 51 cases, more than six months and less than a year,

— 25 cases, more than a year and less than 18 months,

— 11 cases, over 18 months and less than 24 months,

— 63 cases, more than two years and less than three years,

( 27) As part of the service platform project.

— 16 cases, more than three years and less than four years.

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OLAF’s efforts to set up structures and procedures to improve
the monitoring and control of the management of investi-
gations should be continued and intensified. The following
measures in particular are concerned:

— developing management tools both for investigations and
for human resources based on the CMS, which should
become a horizontal structure for all operational activities
and prepare the way for a registry,

— strengthening the management committee, which is
to implement investigation policy, apply priorities and
manage resources and interdepartmental cooperation; it
will have a permanent structure and management and, if
necessary, coordinate external and internal investigations,

— redrafting the manual under the supervision of the
Judicial Advice Unit in order to identify and specify both
investigation and coordination/assistance procedures and
evaluation and investigation functions.

4.3. Review of legality and protection of individual rights

As regards investigation proper, the legislator set objectives in
the area of observance of human rights and fundamental
freedoms (28). This requirement was recently referred to in a
communication from the Ombudsman to the Director of
OLAF. A proper response would require a body exercising
judicial review, failing which it is urgent to complete the
manual by incorporating specific rules of procedure on this
point (see Chapter II.1.1 above).

4.3.1.

Judicial Advice Unit

Right from its first meetings in 1999 the Supervisory Com-
mittee had backed the suggestion of
the Committee of
Independent Experts (29) that it repeat UCLAF’s attempt to
recruit judicial officers from the Member States in order to
ensure that ‘cases were presented in a form that was acceptable
to the national courts’. The Unit was set up by decision of
8 September 2000 of the Director of the Office with the
task of establishing appropriate relations with the judicial
authorities and helping to strengthen the judicial dimension of

OLAF’s operational activities. OLAF’s objective is to secure
expertise on all the national systems; at present, nine legal
systems are represented within the Unit. Recruitment for the
remaining systems is under way. On the other hand, one
Member State has not authorised the secondment of judicial
officers recruited by OLAF (30).

The incorporation of this Unit within OLAF has encountered
difficulties. Originally forming part of Directorate A —
Legislation and Legal Affairs, it was attached in early 2002
directly to the Director-General both to emphasise the horizon-
tal nature of its functions and to increase the separation
between responsibility for supervision and for the management
of investigations. The reform, however, failed to settle the
question of the definition of the Unit’s tasks and in particular
its role in reviewing the legality of investigations.

Any such definition comes up against a question of principle,
which is that responsibility for supervising and managing
investigations was entrusted by the legislator to the Director
of OLAF and that independent supervision must come from
outside. The interesting proposal by OLAF to separate the
functions of management and supervision in the internal
organisation has practical and legal limits.

The main difficulty of that definition, however,
lies in the
vagueness that still characterises the definition and manage-
ment of
the various tasks and functions of OLAF and
their interconnections: evaluation, investigation, coordination/
assistance and follow-up, the role of the Unit being different
for each of these functions. In addition, it is also necessary to
define the links between these different functions and the
action of OLAF’s partners, the institutions and the Member
States, an area in which the Unit should also have an important
part to play. The essential need to consolidate the role of the
Judicial Advice Unit means overcoming these difficulties.

4.3.2. Data protection

The Committee continues to pay close attention to questions
concerning the protection of personal data and examines
complaints from litigants to the Director of which it receives a
copy. It also examines the follow-up to each complaint, as well
as the general measures taken by the Office to that end.

It therefore notes that an OLAF Data Protection Officer was
appointed on 1 February 2002, pursuant to Article 24 of
Regulation (EC) No 45/2001, and that the European Data
Protection Supervisor is to be appointed at the end of 2002.

( 28) Recital 10 of Regulation (EC) No 1073/1999 ‘and with full
respect for human rights and fundamental freedoms, in particular
the principle of fairness, for the right of persons involved to
express their views on the facts concerning them and for the
principle that the conclusions of an investigation may be based
solely on elements which have evidential value’.

( 29) Second report, point 5.11.12.

(30) There is the recent decision by the Director to recruit two
Belgian judicial officers to improve the monitoring of internal
investigations by the Belgian judicial authorities.

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4.4. Effective follow-up

— by clarifying the allocation of powers between OLAF and

its partners,

Effective protection of financial interests and investigations is
referred to throughout Regulation (EC) No 1073/1999,
Articles 9 and 10 of which detail the ways in which investi-
gations must be followed up ‘in administrative or judicial
proceedings of the Member State’ for external investigations,
and the action to be taken, ‘in particular disciplinary or legal’,
as regards the internal investigations. The manner in which
to an
investigations are followed up is indeed essential
evaluation of the results of OLAF’s activities and in highlighting
the purpose of its activities.

OLAF took the legislator’s intention into account
in its
organisation chart by creating within Directorate A a structure
responsible for administrative and financial follow-up and by
entrusting the Judicial Advice Unit with the task of judicial
follow-up. In practice, however, the Committee’s findings set
out in its second report concerning the inadequate follow-up
of internal investigations (point 3.1) and external investigations
(point 3.2) are still generally valid.

On the one hand, the follow-up depends by definition on the
quality of the investigation and especially the content of the
final report and the recommendations it must contain under
Article 9(1) of Regulation (EC) No 1073/1999. The Committee
has not identified improvements in this area.

In addition, OLAF is having difficulty in defining follow-up.
As stated above, the powers of the Judicial Advice Unit had
not yet been finalised and the links between OLAF’s internal
investigations and the administrative and disciplinary proceed-
ings of the institutions were still being discussed.

It is also often difficult for various reasons to define follow-up
in coordination/assistance operations. The primary responsi-
bility for administrative and judicial
follow-up often lies
with national authorities. As regards financial follow-up and
recovery, the question of the allocation of powers between
OLAF and the Commission departments (authorising depart-
ments, DG BUDG, legal service) has not been settled. The legal
position can also hamper financial follow-up considerably if
management responsibilities have not been clearly defined.

is therefore necessary to consolidate the organisation

It
measures taken by OLAF in order to ensure follow-up:

— by clarifying the definition of follow-up in connection
both with organisation,
in particular by distinguishing
between investigation follow-up and the follow-up of
coordination/assistance operations, and with investi-
gation reports and recommendations,

— by defining the means and resources to be allocated to

the powers thus defined,

— by improving Member States’ involvement in recovery
and monitoring the recovery of funds committed in error
as direct expenditure (see White Paper, Part I: Reforming
the Commission (COM(2000) 200 final/2) and White
Paper, Part 2, (COM(2000) 200, 5 April 2000), Action
No 96 ‘More effective management of recovery of unduly
paid funds’. See, also, communication from Mrs Schreyer
to the Commission of 13 December 2000, document
SEC(2000) 2204/3 of 12 December 2000.

CHAPTER III

INSTITUTIONAL DEVELOPMENTS

From the institutional environment perspective, the transition
from UCLAF to OLAF is reflected in the establishment by
OLAF of specific relations with the Member States and the
institutions. The general outline of these relations has been
defined, as the Committee pointed out in its second activity
report (31), but OLAF still has to overcome numerous obstacles
and resolve various problems if the legislator’s objective of
putting in place the institutional conditions for operational
independence is to be implemented in full.

As regards the Member States, recitals 3, 13 and 21 and
Article 1(2) of Regulation (EC) No 1073/1999 set out the
principles governing relations between OLAF and the national
authorities: subsidiarity and effectiveness. In connection with
the Community platform of services project (32), the Office has
undertaken a detailed analysis of its missions and functions
with a view to defining and organising its cooperation with
the Member States in particular. This project remains to be
implemented on the basis of that analysis.

As regards the institutions, the question of OLAF’s indepen-
dence essentially arises in connection with internal investi-
gations within the institutions concerned. The nature of
OLAF’s relations with those institutions and its communication
policy towards them (2) are determined by OLAF’s conception
of its own function and status, which should therefore be
examined first (1). But those questions are also raised within a
context of change which should be assessed in the perspective
of OLAF’s incorporation into the remodelled European law-
enforcement area (3).

(31) Second activity report, conclusions, 2.1.
(32) Activity report for the period 1 June 2000 to 31 May 2001,

point 3.7 (OJ C 365, 20.12.2001, p. 61).

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1.

Functions and status of OLAF

In defining itself, OLAF continues to use expressions such as ‘a
department coming under the Commission’ (33) and refers
to its status as ‘hybrid and complex’ (34), emphasising the
coexistence of autonomous powers and compliance with the
Commission’s internal rules. The Office has not yet stated
exactly how its various functions are interlinked. The above-
mentioned Community platform of services project should
help to clarify matters in the longer term.

The ultimate aim of OLAF’s hybrid status under the legislation
is, in particular, to enable all anti-fraud (35) functions (36) to be
placed under the same structure so as to promote the synergy
of those functions within a multidisciplinary framework. This
structure should also enable the recruitment of highly qualified
staff for all those functions which, according to Regulation
(EC) No 1073/1999, are as follows:

— the powers of investigation conferred on the Commission by the
Community rules and regulations and agreements in force
(Article 1(1) of the Regulation); exercise of the powers
conferred on the Commission having been transferred to
OLAF by the Regulation (this concerns powers to conduct
external
investigations as defined in Article 3 of the
Regulation with reference to Regulation (EC, Euratom)
No 2185/96, Council Regulation (EC, Euratom) No 2988/
95 and the sectoral rules), this function being exercised,
pursuant to Article 1(2), in close cooperation with the
competent authorities of the Member States;

— within the institutions, bodies, offices and agencies established
by, or on the basis of, the Treaties, the Office carries out
administrative investigations for the purpose of fighting fraud,
corruption and any other illegal activity affecting the financial
interests of the European Community (Article 1(3) of the
Regulation); this power was created by the Regulation to
enable OLAF to investigate serious misconduct by staff
the institutions, bodies, offices and
or members of
agencies which may constitute offences likely to give rise
to disciplinary or criminal proceedings; this concerns the
powers of internal investigation conferred by Article 4 of
the Regulation;

— the design and development of methods of fighting fraud, the
Office contributes to this as it is tasked with preparing legislative
and regulatory initiatives of the Commission in this field
(Article 1(2) of the Regulation and Article 2(4) of the
decision of 28 April 1999); it carries out these tasks in its
capacity as a Commission department.

Lastly, it should be noted that Articles 5 and 6 of the decision
of 28 April 1999 specify that OLAF receives resources enabling it
to organise with a view to carrying out the aforementioned functions.

The current structure of OLAF takes account of all these
different functions. However, given that the different depart-
ments’ respective roles and responsibilities are not always
clearly defined, their synergy is not yet organised in optimal
fashion and is often limited to the effects of mere juxtaposition,
which should be done as part of the Community platform of
services project.

Synergy between the legislative and operational functions is definitely
promoted by coexistence of the Legislation and Work Pro-
gramme units and monitoring units in Directorate A. Part of
the experience which helps to shed light on options for
legislative activity is to be found in monitoring activities.
However, this form of organisation limits the risks of contagion
described by the Committee in its first activity report (37):
namely that the link of dependency in respect of the Com-
mission, which is necessary for legislative activity, may spread
to investigative activities. Contacts between monitoring and
legislative activity are promoted in Directorate A; but the
autonomy of monitoring arrangements for investigative activi-
ties limits the risks of contagion.

As yet there is no comprehensive, accurate definition of
monitoring activities, and no system has been established for
the contribution of monitoring to legislative activity.

In addition, the contacts which would be useful between the
legislative units and Directorate B’s investigation activities
have been made more difficult by the compartmentalisation
inherited from the previous period which has not yet com-
pletely disappeared and which is exacerbated by differences in
the status of staff: Directorate A staff are generally officials
who work in conjunction with Commission officials, whereas
Directorate B staff are generally temporary staff.

Synergy between external investigation functions and administrative
monitoring functions should allow lessons to be learnt from the
investigators’ regulatory or financial findings. It is based on the
quality of cooperation between Directorate B and Directorate A
which are responsible for those functions. It also assumes that
OLAF’s administrative monitoring functions have been clearly
defined and that they have been clearly distinguished from the
responsibilities retained by the Commission, for instance as
regards debt recovery or discharge of accounts. These issues,
which are still under discussion, should be resolved shortly,
to an assessment of the workload and resources
subject
involved.

( 33) Preliminary draft budget for 2003, working paper, p. 4.
( 34) Ditto.
( 35) Existing or created by Regulation (EC) No 1073/1999.
( 36) As defined in Article 2(1) of Decision 1999/352/EC, ECSC,

Euratom.

(37) Recommendation P2. See conclusion of the second report.

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The proximity of external and internal investigation functions
may disrupt this synergy as it may prompt Commission
officials to distrust OLAF investigators if there is confusion
between evidence-seeking functions in external and internal
investigations. These two functions should therefore be more
obviously separated (38).

Synergy between data collection and analysis functions and investi-
gation functions should be promoted by the recent establishment
of the directorate responsible for intelligence. The data collection
and analysis function provides a working basis for OLAF
investigators, for the legislation function, for the work pro-
gramme and for the national authorities, and receives infor-
mation from those partners. Centralisation of this data collec-
tion and analysis should enable data processing and dissemi-
nation to be improved.

However, at present, OLAF does not yet have strategic
intelligence; as for operational intelligence, it is still covered by
Directorate B. In the absence of a clear definition of OLAF’s
relations with the institutions, it is difficult to determine what
OLAF’s contribution in this area could be.

2. Relations with the institutions

OLAF’s uncertainty as to its own function has been reflected
in its relations with the institutions at both operational
level (OLAF’s interinstitutional
function with regard to internal
investigations) (39) and at organic level (OLAF’s position regarding
relations and external operations), communi-
interinstitutional
cation between OLAF and the institutions being a particularly
difficult issue in view of its political sensitivity.

2.1. OLAF’s interinstitutional function with regard to

internal investigations

In the area of internal investigations, Regulation (EC) No 1073/
1999 has established new powers for OLAF within the
institutions, bodies, offices and agencies. Given that it was
necessary to amend the Staff Regulations for these powers to
be exercised and that the requisite amendment could not be
envisaged in the short term, it was decided that this legal base
should consist of decisions taken by each institution and body
and that these decisions would be structured within an
interinstitutional agreement. This package was adopted ‘pend-
ing amendments to the Staff Regulations’ (40) and, where
appropriate, the Financial Regulation, which were to lay down
arrangements governing the liability of Community officials
and the position and role of OLAF in these arrangements.

( 39)

( 38) Proposal P3 of the Supervisory Committee’s activity report as
incorporated into the proposals of the second report (3rd indent).
Internal investigation activities should be assessed successively
from an operational perspective (effectiveness of investigations:
chapter II.2) and from an institutional perspective (impact on
relations with institutions: the current chapter III.2).
( 40) Model decision, recital No 7 (OJ L 136, 31.5.1999, p. 17).

As it happens, the amendments to the Staff Regulations and
the Financial Regulation are still pending and OLAF’s role in
these arrangements has therefore not been settled. The current
proposals envisage spelling out OLAF’s role within that
framework and determining the division of labour with other
newly created bodies or departments which are to play a role
in this field (Investigation and Discipline Office (IDOC) set up
by the Commission decision of 19 February 2002; Financial
Irregularities Body (FIB) to be set up in each institution
pursuant to Article 66(4) of the draft Financial Regulation).
There are even plans to amend the legal instruments under-
pinning the creation of OLAF (41).

In view of these problems, it is difficult for OLAF to provide a
legal definition of its role and the limits on it or to spell out its
place in these arrangements.

There are also practical difficulties. Administrative short-
comings in connection with the investigations referred to in
Chapter II.2, such as the length of proceedings and the disputed
validity of evidence or investigation reports, have made it more
difficult to incorporate OLAF into the arrangements governing
the liability of the officials of the various bodies and insti-
tutions.

The length of internal investigations, which suffered from a
long-term shortage of funding because of their low priority
status, represented another practical obstacle to effective
cooperation with disciplinary proceedings on the part of
OLAF. Noting that OLAF investigations generally took longer
than a year to complete, institutions were unwilling to use its
services in the interests of efficiency.

The evidential value of OLAF investigations,
in particular
reports on hearings or interrogations, has regularly been called
into question by litigants owing to the procedures by which
evidence was gathered. Arrangements have been made (see
Chapter II.1.1) to overcome these difficulties. At present, the
Committee does not have information enabling it to determine
whether the provisions of the manual issued by the Director
with a view to resolving these problems have worked. The
there are
institutions may hesitate to demand evidence if
doubts about its evidential value.

The Committee also has little information to evaluate action
taken by the institutions on the investigation reports sent to
them by OLAF under Article 9(4) of the Regulation, as it has
not yet been informed by OLAF, as required by Article 11(7),
of the action taken by the institutions on the recommendations
set out in the reports, or of their failure to do so. The
Committee has also noted that only the European Parliament
and the Commission have so far complied with the obligation
to inform the Office of possible cases of
fraud under
Articles 7(1) and 7(3). However, an application was made in
January 2000 by the ESC, further to repeated injunctions by
the Council and Parliament, and a document issued by an
official and referring to criminal offences was forwarded to
OLAF by the Court of Auditors.

(41) White Paper on administrative reform of the Commission of

18 January 2000, p. 4.

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Ultimately, OLAF’s contribution to the institutions’ and bodies’
internal administrative procedures as regards the liability of
their members, officials and staff cannot yet be assessed for
reasons relating to the incomplete state of the legal framework
for these procedures (Staff Regulations) and to the lack of data
on the effects of the new methods and structures established
by OLAF (operating aspects). In addition, OLAF’s remit should
be clarified in the light of administrative and disciplinary
procedures within the institutions so as to avoid the risk of
confusion or contradictions.

2.2. OLAF’s role in interinstitutional relations

The arrangements chosen by the legislator for OLAF’s status
with a view to ensuring the transfer of powers to combat fraud
from the Commission to OLAF and to promoting synergy
between legislative and operational functions is based on the
duality of functions and arrangements. In practice, this duality
has given rise to confusion as regards OLAF’s role in interinsti-
tutional relations, particularly vis-à-vis the Commission and
Parliament. The objective of independence for the Office was
confronted not merely by the principles of responsibility and
democratic control, but also by the constraints inherent in the
Office’s position in the Commission’s administrative and
budgetary structure.

2.2.1. Relations between OLAF and the Commission

For the Commission, incorporating OLAF into its administrat-
ive and budgetary structure raised a problem of principle,
namely that of political responsibility for OLAF’s activities,
and various practical problems in connection with adapting
internal regulations to reflect OLAF’s particular independent
status.

The problem of principle was cleared up relatively quickly.
The Commission made one of its Members, Ms Schreyer,
responsible for protecting the Community’s financial interests
and combating fraud. She exercises political responsibility for
the Commission’s legislative and strategic powers as regards
protection of financial
interests with the assistance of the
relevant OLAF departments. As regards OLAF’s operational
activities, which are governed by the principle of autonomy,
the Commissioner’s responsibility essentially concerns the
award of resources and the material conditions of
this
autonomy, particularly in terms of the budget and human
resources. The Commission mentioned in its first two activity
reports that measures to organise the exercising of
this
responsibility were rapidly put in place. As regards this third
year, it has been pointed out above that the lack of priorities
specific to OLAF created an imbalance, as a result of which the
Commission’s priorities for the 2003 preliminary draft budget
were imposed.

With regard to OLAF’s position in the Commission’s adminis-
trative structure, the question of principle, as the Committee
pointed out in its second activity report (42), was resolved in
the course of meetings with Ms Schreyer (in November 2000)
and Mr O’Sullivan (in January 2001): ‘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
ambiguities of OLAF’s status noted by the Committee in its first
report.’ In contrast, putting this political concept into practice
proved to be difficult and the matter has not been definitively
resolved. After OLAF had drawn up a preliminary code of
conduct on the basis of a list of all the areas of cooperation
with the Commission and its departments, it was eventually
decided that the provisions concerning OLAF’s functioning as
an independent investigations department and concerning the
Office’s administration and management would be annexed to
the manual. Matters relating to OLAF’s remit as a Commission
department or concerning interdepartmental relations were to
be set out in another framework, such as a MoU.

There are probably several reasons for this unfortunate pro-
crastination, such as the legitimate concerns of the Com-
mission’s legal service, which is the only body competent to
represent OLAF in court in the event of legal action being
taken against the Office, but also the unwillingness of certain
Commission departments to acknowledge the specific features
of OLAF’s status, and OLAF’s delay in acquiring the necessary
structures and resources to manage this specific status as far as
implementing the budget and personnel policy are concerned,
although Article 6 of Decision (EC) No 352/1999 expressly
provides for that possibility.

The consequences are none the less prejudicial, as shown by
the following example concerning the implementation of
Regulation (EC) No 1049/2001 (EC) of the European Parlia-
ment and of the Council of 30 May 2001 regarding public
access to European Parliament, Council and Commission
documents in the case of documents concerning OLAF
investigations. The Commission effectively delegated the pow-
er to reply to confirmatory requests for documents concerning
OLAF investigations to the Director of the Office, but also
made the exercising of that power subject
to the prior
agreement of its legal service. The Commission decision clearly
did not take into account that this power of the Director had
in fact already been included in powers granted by the
legislator to the Director by virtue of arrangements for
managing investigations, and that presenting it as an obligation
enabled the legal service to interfere in the running of
investigations. Efforts were made to find a modus vivendi
whereby OLAF’s independence regarding investigations would
not be compromised (43). However, the Director of OLAF
did not exclude recourse to the courts to ensure that the
independence of its investigations was guaranteed.

(42) Introduction.
(43) See Supervisory Committee Opinion No 1/2002 of 25 February

2002.

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2.2.2. Relations between OLAF and Parliament

For Parliament, OLAF occupies a very important position in
arrangements to protect the Community’s financial interests,
for which it claims and assumes responsibility vis-à-vis the
In addition to its prerogatives as co-
European taxpayer.
legislator, Parliament exercises supervisory and budgetary
powers in respect of OLAF. Parliament, which itself endorses
the principle of OLAF’s independence, should promote the
it places OLAF’s
exercise of that independence. However,
independence within its institutional framework and perceives
it as functional independence which does not release OLAF
from the obligations and responsibilities inherent in that
institutional framework.

In the budgetary control field, Parliament regards itself as
entitled to request OLAF to provide it with the necessary
information and documents to carry out its checks, as is the
case for all the Community institutions and bodies. However,
this prerogative on the part of Parliament should not under-
mine OLAF’s effectiveness and independence of action in
investigations — which Parliament itself sought to establish. It
should therefore have been possible to determine ways of
exercising this supervision which take account of the needs of
the investigation and the litigant’s rights. In practice, however,
the provision of documents and information to Parliament has
remained the focus of serious tension, particularly where the
purpose of Parliament’s requests for information is to put the
Commission under political pressure.

In the budgetary authorisation sphere, Parliament, together
with the Council, acting on a proposal from the Commission,
awards the appropriations and posts that OLAF needs in order
to function. In order to exercise this responsibility, Parliament
requires OLAF to provide the elements underpinning forecasts
and, in particular, its objectives and priorities for the year in
question.

The fact that OLAF was unable — as a result of restructuring
— to spell out
its objectives and provide the elements
underpinning its forecasts for 2000 and 2001 raised a number
of problems for Parliament, which could see no other solution
than setting certain objectives itself (on the basis of Regulation
(EC) No 1073/1999) and freezing the appropriations corre-
sponding to the new headings.

In its annual report for 2000 (point 7.44), the Court of
Auditors took the view that ‘this conditional grant of staff
curtails the independence both of the Director and of the
Office as a whole.’ The Supervisory Committee has paid
considerable attention to this issue of independence. It noted
that Parliament’s action was not designed to prevent the
realisation of objectives which OLAF had set its management,
but on the contrary to free OLAF from the constraints and
rigidities of the old structure.

In any event, the frozen headings and appropriations were
unblocked in autumn 2001 following an opinion from the
Supervisory Committee.

However, the lack of real priorities for the 2003 preliminary
draft budget could create difficulties for the decision-making
bodies.

2.2.3. Relations between OLAF and the Court of Auditors

The question of relations between OLAF and the Court of
Auditors can be taken in two parts.

First, the Court has an agreement with OLAF under which it
systematically informs OLAF immediately of any information
or document concerning potential fraud and irregularities
which it collects as part of its checks and audits. For its part,
OLAF intends to make systematic use of Court of Auditor
reports and opinions for risk-analysis purposes within the
framework of its intelligence activity.

Second, the Court of Auditors makes an overall or sectoral
assessment of OLAF’s activity in special reports or its annual
general report as part of its checks and audits.

Accordingly, in report No 8/98, the Court evaluated UCLAF’s
activity, thus making a major contribution to the reform which
gave rise to OLAF. The Court is closely monitoring follow-up
to this report and the Supervisory Committee has emphasised
on several occasions that priority should be given to the
improvements desired by the Court of Auditors (44).

2.3. OLAF’s communication policy vis-à-vis the insti-

tutions

Of OLAF’s relational problems with the institutions, the
provision of information and documents, which is highly
sensitive politically, has given rise to a great deal of tension
and has proved particularly difficult to resolve. The Supervisory
Committee has had to get to grips with this matter because of
its implications for the Office’s operational independence, but
also because of the particular responsibility conferred on it by
Regulation (EC) No 1073/1999 with regard to confidentiality
and data protection (Article 8(4)).

It has concluded that the following principles should apply:

— information and documents must be provided on the
basis of clear, precise criteria which have been laid down
in advance,

(44) For example, as regards the administration of investigation files,
checks on them by management, respect for individual rights in
the course of investigations, checks at the time of recruitment,
etc.

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— these criteria must be based on an exhaustive list of legal
provisions laying down rights and obligations whereby
OLAF is required to provide information but also to
protect the confidentiality of certain information,

— in accordance with the principles of Community legis-
lation, OLAF must promote transparent management
within the framework of its communication strategy,

— lastly, OLAF must endeavour to ensure equality of
treatment for the various institutions; however,
this
does not exclude taking account of their respective
responsibilities.

To date, these guidelines have remained a dead letter and
OLAF has often given communication with the media priority
over communication with the institutions. However, OLAF
has just adopted, on the above-mentioned basis, a set of
guidelines on the Office’s communication policy (45) conceived
as an internal strategic tool and involving the creation of a
this
communication unit responsible for implementation;
should improve the current situation and lend a degree of
cohesion to the Office’s communication policy.

3. OLAF’s position within the European judicial area

Any assessment of OLAF’s relations with EU bodies involved
in cooperation on criminal law (Europol, Eurojust and the
European judicial network) is faced initially with the difficulty
that the remit of these bodies has not yet been defined and
that
legal and institutional
frameworks. These relations are therefore characterised by a
provisional framework and ad-hoc cooperation.

they operate within different

3.1. The background to cooperation: a provisional frame-

work

The existence of
four different European bodies (OLAF,
Europol, Eurojust and the European judicial network) with a
remit to fight organised crime is explained in part by the
arrangements governing the functioning of the European
institutions, but also by the unwillingness of the Member States
clearly to acknowledge a role for the European Community in
this field. This situation requires a minimum amount of
organisation in the ways in which these bodies interact, but
this is not facilitated by the different legal frameworks within
which they operate. The different bodies, which operate under
the first pillar (OLAF) and third pillar (Europol, Eurojust and
the European judicial network) respectively, have access to
different resources and their respective tasks should in principle
be sufficiently different to be complementary. But this comp-
lementarity (entailing power sharing between the first and
third pillars) cannot resolve horizontal (trans-pillar) practical
issues such as exchanges of information. The continuing
uncertainty surrounding the remit of each of these bodies
makes it more difficult to solve these problems.

( 45) Document provided to the Supervisory Committee at the meeting

of 18 June 2002.

If genuine complementarity, as opposed to more or less fair
competition,
is to be established between OLAF, Europol,
Eurojust and the European judicial network, these bodies’
respective tasks will have to be clearly defined. However, the
current report highlights the fact that OLAF has not yet been
definitively established. In addition, discussions are under way
on extending Europol’s action and reinforcing its operational
powers; as for the decision to set up Eurojust dated 28 February
2002 (46),
left the main issues of cooperation between
Eurojust and its partners to be dealt with in future protocols.

it

3.2. Contents of cooperation: the need for cohesion

The current state of cooperation between OLAF and Europol/
Eurojust does not just reflect the provisional character of this
legal framework, but also its lack of cohesion.

OLAF maintains periodic contacts with Europol which focus
essentially on the nature and scope of future cooperation.
OLAF has instructed three magistrates to maintain contacts
with Eurojust on an informal basis for the moment.

OLAF has also launched discussions on guidelines for future
cooperation, taking account of contacts between the Com-
missioner with special responsibility for these issues, Mr Vitori-
no, and the Supervisory Committee (47) and the analysis
contained in the Green Paper (48).

The provisions of Article 26 of the Council Decision setting
up Eurojust (49) envisage cooperation with OLAF purely from
the viewpoint of a contribution by the Office to Eurojust’s
work in coordinating investigations and national proceedings
within the framework of the FIB. The possibility of Eurojust
contributing to OLAF investigations is not envisaged. It should
also be noted that these provisions place Eurojust’s relationship
with its various partners solely within the framework of
cooperation to complete Eurojust’s remit of coordinating,
assisting and supporting national
investigations involving
more than one Member State.

The need for cohesion in European arrangements for combating
organised crime is shown by the complexity of relationships
between the various parties involved. Even if the parties’
respective powers and objectives have not yet been established
definitively, it is not possible to ignore — as is the case at
present — the functional aspect of these relationships which,
since they concern investigation and justice departments,
should be governed by the principle of the legal guarantee of

(46) OJ L 63, 6 March 2002, p. 1.
(47) See second activity report, introduction, in fine.
(48) Point 7.2.
(49) OJ L 63, 6.3.2002, p. 1.

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investigations. In addition, given that the current distribution
of material powers does not resolve problems of overlapping,
it is necessary to state the principle that primary competence
for protecting the Community financial interests should lie
with the first pillar.

It is currently planned to set out the arrangements for this
cohesion within the framework of the agreements or protocols
provided for in Article 26 of the decision setting up Eurojust.
This solution has a number of disadvantages. It is an ad-hoc
approach which is limited by the definition of Eurojust’s remit
to questions of judicial cooperation and coordination of cross-
border national investigations. It is also a process which will
have to take account of the way in which the various partners’
respective powers develop and it will be a long-term affair.
The Supervisory Committee takes the view that the perspective
of a review of the treaties in 2004 on the basis of the
Convention’s work provides a late but not-to-be-missed oppor-
tunity for an overall, cohesive solution to all these problems.

CONCLUSIONS

This third activity report marks both the completion of the
first Supervisory Committee’s term of office and the end of
the three-year period following which the institutions must
examine how the system has operated in order to adapt or
supplement it, where necessary. Having treated its last annual
report as a general stock-taking exercise (1), the Committee has
not formulated any proposals or recommendations, as it did
in its first two reports (50), but has concentrated on presenting
an assessment of progress in achieving the objectives of the
Regulation and of OLAF’s status. On the basis of this stock-
taking exercise, the Committee feels that OLAF’s tasks must
now be consolidated (2) so that it can be made to operate in a
way that meets these objectives. This should pave the way (3)
for the establishment of the European Public Prosecutor, which
the Committee considers as vital for the establishment of a
complete, coherent system for protecting financial interests.

The Committee would point out here that, before being able
to implement Regulation (EC) No 1073/1999, OLAF had to
establish a structure that was suited to its new tasks, in both
quantitative and qualitative terms. The delay in setting up this
structure was such that, in the Committee’s view, the aims laid
down by Regulation (EC) No 1073/1999 for investigations
have still only been partially realised, although a general
outline of the solutions has been sketched out.

1.1. A comprehensive, programmed approach to investi-

gations

OLAF’s responsibility covers ‘all activities relating to safeguard-
ing Community interests against irregular conduct liable to
result in administrative or criminal proceedings’ (53) and is
exercised through ‘the Office’s programme of activities’ (54),
which must be submitted to the Supervisory Committee each
year. OLAF has laid down the necessary conditions for
implementing these provisions of the Regulation, but has not
yet managed to put them into effect.

1.1.1.

Establishing an investigation policy and setting priorities

By establishing an investigation policy and setting priorities,
OLAF should be able: first to manage its affairs along more
transparent lines, and in particular to allocate and assign the
resources at its disposal in a rational manner and to organise
interdepartmental cooperation by reference to predetermined
objectives; second, on the basis of criteria matching these
priorities, to make choices on the opening of cases and
proceedings and on the means to be employed (OLAF
investigation, cooperation with national authorities, etc). Up
to now, all such decisions have been taken in a pragmatic and
often ad-hoc fashion by line managers themselves. Neither the
Supervisory Committee — as part of its scrutiny of the
programme of activities under Article 11(7) of Regulation (EC)
No 1073/1999 — nor the budgetary authority has been given
the opportunity to examine these priorities.

1. Progress in achieving the operational objectives of

Regulation (EC) No 1073/1999

1.1.2. Taking account of the purpose of investigations

In drawing up its progress report, the Committee has taken as
its point of reference the objectives set by the legislator, the
analyses made prior to the drafting of Regulation (EC)
No 1073/1999, in particular the Court of Auditors’ Report
No 8/98 and the Bösch report of the European Parliament of
7 October 1998 (51), and the report by the Committee of
Independent Experts (52).

Throughout Regulation (EC) No 1073/1999, the legislator
stressed the administrative, disciplinary or judicial ends to
which investigations were to be conducted, stating that their
purpose was to gather evidence in support of disciplinary,
administrative or possibly judicial (i.e. criminal) proceedings.
The Committee can only confirm here the assessment it
gave in its second activity report regarding failings in the
disciplinary, administrative and/or judicial follow-up to both
internal and external OLAF investigations (55).

( 50) The proposals and recommendations from the first two reports

are attached in the Annexes.

( 51) C4-0483/98.
( 52) Committee of Independent Experts, second report on reform of

the Commission, Chapter 5.

(53) Recital No 5 of Regulation (EC) No 1073/1999.
(54) Article 11(7) of Regulation (EC) No 1073/1999.
(55) See Chapter II of this report and Chapters IV.1.2, IV.2.2 and

IV.3.1.1 of the second report.

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1.1.3. Clarifying relations with operational partners

Regulation (EC) No 1073/1999 provides for cooperation in
investigations between OLAF and the authorities of
the
Member States and the Community institutions and bodies.
The detailed arrangements for such cooperation are very
complex and need to be structured and coordinated in an
overall plan setting out OLAF’s tasks, which is the only way of
ensuring consistency between those tasks (a platform of
services). The analyses and discussions required to prepare
such a plan have not yet been completed.

1.2. Guarantees of independence and of the proper conduct

of investigations

Independence and the proper conduct of investigations are
objectives set out in recitals 4, 10, 17 and 18 of Regulation
(EC) No 1073/1999, which assigns various means to pursue
those ends, in particular a special status for the Director of
OLAF and, as a further safeguard, the establishment of a
Supervisory Committee. The same objectives have prompted
the Director to take a number of measures regarding OLAF’s
organisation and structure, the most important being the
recruitment of magistrates from the Member States to form a
department responsible for judicial advice and follow-up.
However, the effectiveness of this measure depends on the
tasks entrusted to that department and on its status. As pointed
out
the Director’s plan to strengthen his
independence in his watching brief over the proper conduct of
investigations, supported by the magistrates, has run up against
practical objections.

in Chapter II,

1.3. New powers concerning internal investigations

Regulation (EC) No 1073/1999 puts internal investigations on
a par with external ones, although obviously there is no
comparison between them in terms of either the scope or the
number of fraud cases. The legislator’s intention was therefore
to stress the political importance attached to the fight against
fraud and corruption within the Community administration,
not so much because of the extent of the phenomenon —
there is no evidence that it is more widespread than in other
public administrations — but to fill the vacuum (judicial rather
than legal) which has characterised this field. So far it appears
that too little attention has been paid to the legislator’s
intentions, both at a structural level and in terms of priorities.
Moreover, as pointed out in the introduction, the position of
the EIB and ECB remains unresolved, so that, as things
stand, internal investigations cannot cover the full range of
institutions and bodies.

Union’s financial interests in the operational and legislative
fields and asking it to exercise these responsibilities on the
basis of an annual activity programme. To this end, the
legislator placed considerable means at OLAF’s disposal, both
in legal terms — investigative powers and independent status
— and in budgetary terms, in particular by more than doubling
its staff complement.

However, the legislator left many ambiguities in the legal
instruments which have led to difficulties, or even conflicts, of
In particular, attaching OLAF to the Com-
interpretation.
mission’s administrative and budgetary structure was seen as
the most effective way of ensuring it had the wherewithal to
fulfil its mission, even where that mission implies operational
independence. However, such an arrangement is feasible only
if all the interested parties recognise and pursue the same
objective. In practice, this report demonstrates that OLAF
does not fully enjoy the legal, administrative and budgetary
autonomy that would allow it to set up structures offering an
adequate guarantee of its independence and of the proper
conduct of investigations.

However, the Committee feels that, the decisive guidelines
having been adopted, we can and must envisage consolidating
OLAF’s status, structure and mission, as a vital step towards
achieving the aims laid down by the legislator.

Consolidation should cover:

— OLAF’s administrative, budgetary and legal autonomy,
with its status probably developing along similar lines to
that of the European Ombudsman (see Chapter I),

— the operational level, i.e. the development of an investi-
gation policy, scrutiny and control of the management of
investigations and operations, checks on legality, the
safeguarding of individual rights and effective follow-up
(see Chapter II),

— the definition of OLAF’s mission and how it relates to the
spheres of responsibility of its partners (institutions and
Member States),
in order to develop, spell out and
enhance its specific role as an independent investigative
body seeking to protect financial interests (see Chapter III),

— the function and the status of the Supervisory Committee
interinstitutional body (see foot-

as an independent
note 54).

2. The need to consolidate OLAF’s status, structure and

mission

In general, the legislator set an ambitious target for OLAF,
entrusting it with overall responsibility for protecting the

3. Preparations for institutional reform

A consolidation exercise of this kind, which could then be
assessed by a management audit, would allow OLAF to
function effectively and fulfil properly the mission assigned to
it by the legislator. It would also prepare OLAF to take up its

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place in a complete, coherent system for protecting financial
interests, the need for which no longer requires any demon-
stration. The moves which Parliament and the Commission
have made in this direction will provide the Convention with
the basis for what would appear to be an inevitable discussion
the need for an overall solution that guarantees the
of
effectiveness,
the bodies
transparency and legitimacy of
responsible for pursuing and penalising crime in and against
Europe, and of the procedures they apply.

However, we must also have a clear vision of the requirements
specific to the fight against crime, whether it be the legal status
of OLAF and the Supervisory Committee or application of the
principles of good governance.

OLAF’s legal status is defined above all by what it is not: OLAF
appears not to fall into any existing category. On the one
hand, OLAF is not on the list of regulatory agencies (Memor-
andum from the Commission legal service of 20 February
2001 on the Community agencies, see also the Commission
White Paper on European governance, July 2001). On the other
hand, despite its name, it does not appear to fall within the
category of offices, the differences between offices and agencies
having been recently defined in the Commission Communi-
cation of 28 May 2002, A new type of office for managing support
and administrative tasks at the European Commission: offices have
no legal personality; they are set up by Commission or
interinstitutional Decision; their posts appear in the Com-
mission’s establishment plan; and the powers of appointing
authority are delegated to a varying extent according to the
status of each office. Indeed, OLAF is set aside on the grounds
that ‘the characteristics of the latter result from its particular
mission and operating environment and, therefore, are not
necessarily transferable on other offices’, although no further
light is shed on its legal status.

Taking national legal systems as a point of reference, OLAF is
something approaching an administration with investigating
powers, or a kind of CID dealing with financial affairs, yet its
independent status marks it out from this category. That
same independence suggests it should be categorised as an
independent administrative authority; but OLAF lacks legal
personality, has no recognised power to impose penalties and
is watched over by a ‘Supervisory’ Committee, which has the
task of guaranteeing its independence, the legal nature of
which is spelled out no further.

The need to clarify the status of both one and the other
becomes even more pressing as questions arise regarding the
internal organisation of the European and national institutions.
Referring once again to the Commission White Paper on
European governance (July 2001), it seems that the principles
of ‘good governance’ lead to a radical change of model: ‘the
linear model of dispensing policies from above must be
replaced by a virtuous circle, based on feedback, networks and
involvement from policy creation to implementation at all
levels’ (p. 13).

If this formula were transposed to OLAF,
it would mean
operating a network structure based on feedback and co-
regulation between OLAF and the national and European
authorities exercising powers in adjacent spheres.

However it is not clear that such a concept is well-suited to the
fight against crime. As the White Paper specifically points out,
co-regulation, the preferred instrument of the new ‘virtuous
circle’ model, ‘is only suited to cases where fundamental rights
or major political choices are not called into question. It
should not be used in situations where rules need to apply in
a uniform way in every Member State.’ (p. 25). Yet crime in
Europe, and above all crime against Europe,
in particular
against its financial interests, fails on both counts: it affects
fundamental basic rights and at the same time involves major
political choices. This realisation should encourage us to go
beyond the process of co-regulation and to reintroduce a
certain hierarchy that will benefit the network leaders without
whom log-jams or even breakdowns in the system are
inevitable.

There is no doubt in our minds that an OLAF Supervisory
Committee made up of leading figures exercising their own
activities outside the institutions has neither the wherewithal
nor the legitimacy to exercise such a control function, which
should be a joint role for the various European bodies
responsible for criminal matters.

The present structure (an independent OLAF and an external
Supervisory Committee) can continue to operate only on a
transitional basis. Even so, the ambiguities over status need to
be removed by a clear statement of the Supervisory Com-
mittee’s independence from OLAF: it is something of a paradox
that a supervisory body should depend on the resources placed
at its disposal by the body under supervision (56).

In any event, following on from our response to the Com-
mission’s Green Paper on the European Public Prosecutor (57),
we must again insist on the urgency of setting up a judicial
authority (a prosecutor and if possible a pre-trial chamber)
with the task of supervising and reviewing all the networks
involved in fighting crime in Europe and against Europe. The
status of OLAF, and that of Europol, Eurojust and the European
judicial network, should then be subordinate to this judicial
authority, rather than coordinated by it. The Supervisory
Committee could then depart from the scene, having fully
completed its task.

(56) If the Supervisory Committee’s mandate is to be renewed, it is
also vital
that a clear solution be found to the recurrent
problems of the last three years: recruitment and location of the
Committee’s Secretariat, publication of annual reports, status of
the Committee’s members, who should not be regarded as
experts in a Commission department but as truly independent
individuals, etc.

(57) Opinion No 2/2002; see Agon, No 34, p. 3 et seq.

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ANNEX I

RECOMMENDATIONS OF PROGRESS REPORT 1999-2000

P1: The Supervisory Committee therefore stresses the need to support OLAF’s efforts to establish the administrative
structures and internal rules required to ensure its independence, in particular in the spirit of the conclusions
of the Ecofin Council of 17 July 2000 (see point 12), for it considers this essential for the decentralised exercise
of the functions laid down in the Financial Regulation (functions of authorising officer, accounting officer,
financial controller, Consultative Committee on Purchases and Contracts) and by the Staff Regulations
(appointing authority, Staff Committee, Joint Committee).

P2: Consequently, as far as OLAF’s involvement in the preparation and drawing-up of legislative initiatives is
concerned, the Supervisory Committee considers it advisable that OLAF be structured in such a way as to
prevent any interference which could weaken its operational independence as far as investigative activity is
concerned.

P3: The Supervisory Committee considers that the following ambiguities must be removed as a matter of utmost

urgency at the appropriate legal level:

— scope of Article 280 of the EC Treaty,

— interrelationship of OLAF’s internal investigations with disciplinary procedures and compatibility of an

interinstitutional investigations body with disciplinary procedures proper to each institution and body,

— scope of OLAF investigations in relation to Members of the European Parliament,

— absence of an effective procedure for invoking financial liability.

Moreover, the Supervisory Committee considers that OLAF’s role as regards internal investigations must be one
of its key functions, to be performed by a team of sufficiently high hierarchical rank and possessing the skills
needed in specific areas, especially anti-corruption measures, public procurement and budget and financial
management. Lastly, OLAF’s establishment plan must highlight the specific nature of this role.

P4: The Supervisory Committee recommends that the following measures, which are still on the drawing board, be

put into practice without delay:

— definition and implementation of a reactive and proactive investigations policy based on the collection
and analysis of all available information on the financial and criminal aspects of fraud against the Union’s
financial interests,

— rationalisation of the conduct of investigations and the drawing-up of reports (in cooperation with

magistrates recruited by OLAF on the basis of their expertise in the area of criminal procedure),

— reorganisation of the systems for registering cases and associated documents and standardisation of case

file presentation,

— drafting of precise and detailed rules of procedure for the various stages of the investigations.

P5:

For the time being, the Supervisory Committee considers that what must be done is to adopt measures without
delay relating to OLAF’s internal organisation, such as the creation of a magistrates unit, in order to enhance
the legitimacy of its investigations. Such measures would also foster the emergence of a European legal culture.

At the same time, the Supervisory Committee fully supports the Commission’s initiative of proposing to the
IGC that a legal framework be created for establishing in the long term a European public prosecutor’s office
and the European Parliament’s calls concerning in particular the establishment of a European public prosecutor
for internal investigations. For more on this subject, see also Opinions Nos 5/1999 and 2/2000, which are
annexed to this report.

PROPOSALS OF PROGRESS REPORT 2000-2001

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).

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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 accordance 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
Directorate 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 process, 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 investigations 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).

On questions concerning OLAF’s interinstitutional
supplementing initiatives already taken:

environment,

the Committee can confine itself

to proposals

P1: Coordinate initiatives carried out to strengthen the legitimacy and effectiveness of OLAF investigations

The various initiatives to strengthen the legitimacy and effectiveness of OLAF investigations — internal
reorganisation; prosecutor for internal investigations; European Public Prosecutor; 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. 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 institutions

The guidelines for a communication policy for OLAF should allow a transparent and foreseeable relationship
with the institutions in this field. A dialogue should be established with the institutions on the basis of the
document drawn up by OLAF.

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ANNEX II

OPINION No 2/2002 ON THE GREEN PAPER ON THE CRIMINAL LAW PROTECTION
OF THE COMMUNITY’S FINANCIAL INTERESTS AND THE ESTABLISHMENT
OF A EUROPEAN PUBLIC PROSECUTOR

In presenting a Green Paper and making it widely available on the Internet, the Commission chose to give priority to
an open and participatory concept of democracy which makes a valuable contribution to transparency. After the
Nice European Council in December 2000 decided not to act on its proposal to create a legal basis in the EC Treaty
for establishing the European Public Prosecutor for the protection of the Community’s financial interests, the debate
had to be relaunched. The formula selected, based on a statement that was both objective and precise, was to provide
the general public with information and provoke the expression of well-founded opinions free of all prejudice. The
Supervisory Committee can only give its support for such an initiative, which follows the same principle as its own
policy, as an authority guaranteeing independence in the fight against fraud, of promoting transparency in the
practices, on which their legitimacy depends.

The introduction to the Green Paper recalls that in the Opinions requested of it by the Community institutions the
Supervisory Committee had repeatedly supported the establishment of a European Public Prosecutor for the
protection of the financial interests of the EU (1). During its first two years of operation the Committee has been able
to evaluate the state of the protection of the financial interests by OLAF, both directly and in cooperation with the
national authorities. It considered that the evolution that began with the establishment of OLAF must be continued
and amplified, as proposed incidentally by other authorities, in particular Parliament and the Committee of
Independent Experts.

The Committee based these opinions on its analyses of the operation of OLAF and of the investigative function. Prior
to the restructuring launched by OLAF, the first effects of which are now being felt, the working methods and
organisation of UCLAF/OLAF were directed primarily towards examining cases of fraud and irregularities referred to
them. The aim of the reform is to develop a proactive policy, to set priorities for investigations and to have greater
regard for their disciplinary and criminal purpose. But in the current legal framework, the prospects that this
mechanism might evolve towards greater effectiveness and legitimacy remain limited. In considering the questions
raised by the Green Paper, the Committee plans to take stock, on the basis of its most recent work, both of current
difficulties in the protection of the Community’s financial interests, to which the European Public Prosecutor would
be a response, and of the questions raised for OLAF by the development of its institutional environment.

In permanent contact with OLAF’S investigation activity, the Supervisory Committee has observed a number of
weaknesses attributable to the old working methods. There was a high degree of fragmentation and very little
transparency in management, and resources were dispersed. As a consequence, very few cases were referred to the
disciplinary and/or criminal authorities, and very few actually produced results, and investigations took a very long
time. They did not always shield investigators from pressures, and there were disputes as to compliance with fair
rules of procedure and in particular with respect for individual rights. Lastly, investigations on this basis were
somewhat ineffective as investigators had purely administrative powers of dealing with facts that properly belonged
in the criminal sphere.

The aim of the reform at OLAF, extending to both organisation and methods, is to strengthen transparency in
management, effectiveness in the use of the human resources and means of investigation, and regularity of
procedures. But there is little doubt that the establishment of the Prosecutor proposed by the Green Paper is the only
way of making the structural and functional improvements (I) that are essential for genuine protection of the
European Union’s financial interests. But this agreement in principle of the Supervisory Committee to the main
options of the Green Paper does not exclude certain criticisms concerning structural inconsistencies (II) and functional
weaknesses (III). Finally the Committee deems it necessary also to examine possible developments beyond the
proposals of the Green Paper (IV).

(1) Opinion No 5/99 (OJ C 360, 14.12.2000, p. 28); Opinion No 2/2000 (OJ C 360, 14.12.2000, p. 30); First activity report,
Chapter III.B.2.b. (OJ C 360, 14.12.2000, p. 24); Opinion No 3/2001 (OJ C 365, 20.12.2001, p. 22); Second activity report,
Chapter V.2.2. (OJ C 365, 20.12.2001, p. 19).

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I.

STRUCTURAL AND FUNCTIONAL IMPROVEMENTS

The Green Paper proposals constitute undeniable progress since the European Public Prosecutor would have clear
rules giving him independent status and the powers needed for his task.

I.1. The Prosecutor’s independent status

In its first two annual reports, the Supervisory Committee stressed the provisional character of the mechanism set up
by Regulation (EC) No 1073/1999 to settle the question of the independence of investigations. OLAF has been able
to operate its dual functions — both preparing legislation for the Commission and running investigations as an
autonomous service — because it has applied a constructive interpretation of its ambiguous status. But the question
of the legal guarantee of the investigation is not settled satisfactorily.

This problem, which weakens the legitimacy of the investigation mechanism, was stressed by the legislature when it
made the principle of the independence of investigations one of the main objectives of the Regulation.

With regard more precisely to the weaknesses noted by the Committee in the objectiveness of the management of
investigations, only the European Public Prosecutor’s independent status can bring a stable and complete solution to
the problems of independence with regard to the parties to the lawsuit, the Member States and the Community
institutions and bodies. In particular, this status is probably the best way of guaranteeing that investigations will be
conducted impartially on both sides and with the sole objective of ascertaining the truth.

The Green Paper, by defining an independent status for the European Public Prosecutor along with rules for his
accountability before the European Court of Justice, proposes solutions adapted to the Community environment.
The rules concerning the structure and internal organisation of the European Public Prosecutor (point 4.1.1) are to
some extent inspired by the provisions for the independence of the Members of the Court of Justice, which have
shown their effectiveness.

The Staff Regulations of Officials and the Conditions of Employment of Other Servants of the Communities could
also apply, as they are not in themselves an obstacle to the independence of the Prosecutor.

I.2. The powers needed for the legitimacy and effectiveness of investigations

The Committee has observed a number of shortcomings from the point of view of the effectiveness of investigations,
owing to the dispersal of inquiries and prosecutions between national authorities whose coordination remains
difficult and which are subject to very different rules of procedure and organisation. In this respect, the scope of the
European Public Prosecutor, extending to the whole of the European Communities and covering the direction and
coordination of investigations and prosecutions, is the only coherent approach (see points 6.2.3.1 and 6.3).

The obligation for national and Community authorities to refer fraud cases to the European Public Prosecutor should
give the Prosecutor the means of fulfilling this task. And the lack of priority from which OLAF cases referred to the
national judicial authorities sometimes suffer should disappear since prosecutions would be brought by the European
Public Prosecutor, who would handle the defence of the Communities’ financial interests from investigation to
judgment. In addition, effective and uniform protection of these financial interests also means that the European
Public Prosecutor, as proposed in the Green Paper, can operate under harmonised Community legislation defining
both offences and penalties.

Incidentally, subject to the possibilities for conditional closure of cases provided for by the Community legislation,
the legal formula envisaged by the Green Paper for mandatory prosecution would, as point 6.2.2 of the Green Paper
makes clear, ensure a uniform approach to prosecutions throughout the European law-enforcement area.

Lastly, the current defects of the system for reviewing the regularity of OLAF investigation measures, where, despite
a major effort to codify practices, management and control responsibilities are not separate and the only judicial
review procedures — by the Court of First Instance and the Court of Justice — are remote and come late in the
procedure, can be reduced only by establishing a European Public Prosecutor who directs and controls investigations
and prosecutions.

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He could apply for measures that restrict individual rights during the investigation and check that investigators
respect fundamental rights and rules of procedure. But progress would be complete only if all the European Public
Prosecutors enjoyed the same status and implemented common rules of procedure. Hence the Supervisory
Committee’s reservations on the following points.

II.

STRUCTURAL INCONSISTENCIES

In its Green Paper, the Commission,
in accordance with the subsidiarity and proportionality principles, has
endeavoured to propose only ‘the minimum needed for the European Public Prosecutor to operate effectively ... and
the minimum necessary in order to ensure effective and equivalent prosecution of unlawful conduct harmful to the
Community’s financial interests anywhere in the Community’ (point 3).

But on certain points it has proposed such a restrictive concept of this ‘necessary minimum’ that the very consistency
of its draft is affected by it.

This applies in particular to the options that it proposes for the status of the Delegated European Public Prosecutors,
which remains dependent on specific national situations, and to the relations between the European Public Prosecutor
and European investigation services and for the review of committals for trial.

II.1. The status of the delegated European Public Prosecutor

In the current situation, since prosecution measures and most investigation measures are taken by national
authorities, the execution of these functions in the fight against fraud against the Community budget is extensively
fragmented, with the result that investigations and prosecutions run in competition, are incomplete or do not take
place at all. The decompartmentalisation effect sought with the European Public Prosecutor would be heavily
compromised if his powers were in practice exercised by delegated prosecutors having a national status and possibly
being able, under one of the options proposed, to combine their European powers with national powers. Such
combination would imply a dual statute and a dual loyalty, and it would not be possible to guarantee that the
Community interest prevailed in the event of competing pressures on the delegated prosecutors in their two
functions.

II.2. The European Public Prosecutor’s relations with European investigation services

One purpose of establishing the European Public Prosecutor is to remedy a weakness in the current mechanism that
has been stressed several times by the Supervisory Committee (2): the absence of a legal guarantee as regards OLAF’s
investigation measures (generally internal). Such a guarantee can exist only if the investigation is carried out under
the direction and under the control of the judicial authority, and the objective of the Green Paper is ‘to provide an
opportunity to think in greater depth than hitherto about the judicial guarantee at the preparatory stage and on the
relevant level — national or Community — at which such measures should be managed and controlled’ ( 3).

Even so, the Green Paper, in the case of investigations carried out by national services, falls short of this objective: in
one of its options it envisages conferring on the European Public Prosecutor a role of directing and controlling
investigations, but its preference is for a mechanism in which the national systems of relations between the police
and the courts is not affected by the establishment of the European Public Prosecutor.

In the case of the European investigation services — Europol and OLAF — the Green Paper again does not envisage
a role for the European Public Prosecutor of directing and controlling investigations but simply one of cooperation
and mutual information procedures. The Commission seems to want to avoid stating a view on the future powers of
these bodies. In any event, if Europol and OLAF are to have operational powers in matters in which the European
Public Prosecutor has jurisdiction, which is obviously the case of OLAF at least, it goes without saying that the legal
guarantee on these activities could be secured only if they were subject to the jurisdiction of the European Public
Prosecutor.

(2) First activity report, Chapter III. B.2.b: ‘Obviously, this is completely inadequate, and a judicial body should permanently

supervise all OLAF activities ...’; see, also, second activity report, Chapter V.2.2.

(3) Point 6.2.3.1. of the Green Paper.

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II.3. The review of committals for trial

The Supervisory Committee has observed on many occasions that the choice made by UCLAF/OLAF of the court to
which it refers information or investigation files, a case sometimes even being spread over several countries, did not
always correspond to clear and objective criteria and that such inconsistencies seriously hampered the effectiveness
of proceedings. Likewise a number of cases referred to the national courts were unlikely to come to judgment because
of the inadequate evidence.

By giving the European Public Prosecutor the power to decide on committals for trial, the Green Paper ensures that
this decision will generally be taken in accordance with the Community interest. But the Commission also chooses
to leave for the national courts the power to review the European Public Prosecutor’s decisions on the choice of court
and on the contents of the referral. Yet this option does not constitute a sufficient guarantee with regard to the
danger of inconsistencies already mentioned. In a situation where the national legal environment determines both
the effectiveness of the proceedings and the level of the sentences incurred or passed, the choice of trial court
substantially determines the success or failure of the proceeding. Neither this option, nor the assessment of the
regularity of the pre-trial procedure, should depend on a national court, acting alone in reviewing the European
Public Prosecutor’s committal decisions.

The Committee stresses here that the Commission’s argument in favour of a national court is based primarily on the
fact that the question of establishing a Community committal court was not envisaged in its contribution to the IGC.
Advantage should be taken of this delay to improve the mechanism proposed at Nice.

The establishment of a European Pre-trial Chamber, on the model of the Chamber set up by the Rome Statute of the
International Criminal Court, appears to be necessary as a means of reviewing the preliminary phase and securing
unity in the application of the law and equity in the determination of the trial court.

III.

FUNCTIONAL WEAKNESSES

On the basis of its knowledge of the operation of OLAF, the Supervisory Committee has also identified functional
weaknesses in the options proposed by the Commission which, without calling into question the consistency of the
draft, are likely to compromise its effectiveness.

This particularly concerns the proposals concerning the drawing up of records of questioning and the more general
question of rules on the admissibility and exclusion of evidence.

III.1. The European record of questioning

The Commission’s argument on the substance — that unified rules of procedure for records of questioning would be
out of proportion to the objective of the Green Paper, which is simply to seek ways of making the prosecution
function effective — is not very convincing with respect to the dysfunctioning that flows from the scale of the
procedural differences between Member States (4). All the more so as the European record could facilitate the national
authorities’ work when they are dealing with a case concerning the Community’s financial interests: it is precisely for
the sake of effective prosecution that such a solution needs to be considered, as it would remove the difficulties
inherent in international letters rogatory. As so many judges have stressed so often since the Geneva Appeal, many
investigations fail because international letters rogatory are so slow and there are so many hurdles to be overcome.

But precisely on this point, the Green Paper wishes to merely establish the principle, posited by the Tampere
European Council, of mutual recognition of the admissibility of evidence gathered under national law and transmitted
by the traditional judicial cooperation procedures: ‘evidence lawfully gathered by one Member State’s authorities
should be admissible before the courts of other Member States, subject to the rules applicable there’ (5).

(4) See the analyses of the Vol. IV of the Corpus Juris, Intersentia, 2002.
(5) Tamper European Council, Presidency Conclusions, point 36.

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It must be stressed, however, that the European Council was not referring specifically to the protection of financial
interests but to the fight against cross-border crime in general within the framework of third pillar procedures. By
making this reference, the Commission is no longer relying on the specific character of the protection of the
Community’s financial interests, even though it stressed this itself.

The Green Paper (points 6.3.4.1. and 6.3.4.2.) refers to the possibility of establishing ‘a European record of
questioning to serve as a model for the European Public Prosecutor’, for cases where he questions witnesses himself
without going through the national investigation authorities. The Supervisory Committee has repeatedly drawn
OLAF’s attention to the need for precise rules on the subject and must therefore support a formula which, in its view,
should become a mandatory rule to be applied by the European Public Prosecutor and the investigators working
under his direction. And it must be stressed that the admissibility of evidence gathered in a Member State other than
the trial State should in any event be predicated on unification of the conditions of validity of European records of
questioning.

III.2. The rules on admissibility or exclusion of evidence

The Green Paper sets out also the unfortunate consequences of the differences between national regulations on
recognition of evidence for the success of investigations in cross-border fraud cases. The Supervisory Committee can
only confirm this. On the one hand, a number of actions in the national courts on the basis of evidence gathered by
OLAF or by authorities of another Member State have failed because these courts did not admit the evidence. On the
other hand, the Supervisory Committee regularly receives complaints from litigants about the procedures by which
evidence is gathered.

To solve these difficulties, the Green Paper merely proposes, for the admissibility of evidence, a mutual admissibility
rule (item 6.3.4.1.) and, for the exclusion of evidence, the applicability of the exclusion rules valid in the Member State
where the evidence was gathered and not the rules of the trial State (item 6.3.4.2.). These solutions are, therefore,
based mainly on national law, but they are a move in the direction called for at Tampere, being based on the mutual
recognition principle as is possible wherever there is a high degree of mutual trust, provided fundamental rights are
respected (Brussels Convention of 29 May 2000 on judicial cooperation in criminal matters between Member States
of the European Union, third recital). But they do not bring about the simplification sought by the Corpus Juris and
may raise difficulties of judicial review at the pre-trial stage that can be solved only be establishing a European Pre-
trial Chamber.

As regards administrative investigations, the Commission proposes that the constraints of criminal procedure always
be acted on, even in administrative investigations, so as to secure the highest level of protection. The Supervisory
Committee fully supports this proposal, which matches its own recommendations to OLAF. The Commission also
envisages the possibility that evidence gathered in the course of an investigation be mandatorily admissible in the
national courts if it has been gathered with full respect for fundamental rights. The Supervisory Committee believes
that this approach should apply not only to administrative investigations but to all investigations conducted by the
European Public Prosecutor.

Far from constituting a departure from national traditions, these proposals pursue the harmonisation process
effectively launched by the two European Courts under Article 6 of the European Human Rights Convention, to
which it will be remembered that Article 6 of the EU Treaty refers.

IV.

POSSIBLE DEVELOPMENTS

The Commission wished to maintain its proposals within its own framework of the draft revision of Article 280 of
the EC Treaty submitted to the Nice IGC, which was confined to the protection of the Community’s financial
interests.

The Committee would point out that Regulation (EC) No 1073/1999 defines the Community’s financial interests as
covering not only the management of budget appropriations but extending ‘also to all measures affecting or liable to
affect their assets’. Likewise, the European Public Prosecutor’s jurisdiction could be seen as potentially covering all
forms of crime against Europe, including euro counterfeiting.

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The Commission also refers in the Green Paper (point 5.2.3.) to the extension of the European Public Prosecutor’s
jurisdiction to the general criminal-law protection of the European public service. Although proposals for legislation
have been on the table since 1976, the question of the criminal liability of members, officials and servants of the
Community institutions and bodies, and the related question of their protection, is currently not properly regulated.
OLAF’s powers for internal investigations deal with only part of the problem, because the ordinary criminal procedure
and criminal law are applicable, with all the disadvantages, noted by the Committee, that this entails for the treatment
of crime against Europe by the Belgian and Luxembourg judicial authorities (6).

Lastly, the relationship between the European Public Prosecutor and the European arrest warrant, which is not to be
implemented across the 15 Member States until 2004, must be looked into already. At a time when the Convention
to consider the reform of the institutions is beginning its work, the Supervisory Committee sees the need to consider
making the two mechanisms coincide and to envisage extending the European Public Prosecutor’s jurisdiction to the
forms of cross-border crime concerned by the draft Framework Decision on the arrest warrant (7).

CONCLUSIONS

This opinion highlights the fact that the status of OLAF will have to be seriously reviewed when the European Public
Prosecutor is established. The Commission rightly notes that it is too early to go into the details of future relations
between the European Public Prosecutor and OLAF as long as OLAF’s activity has not been evaluated in detail. The
Committee wishes to stress that such an evaluation will be possible and useful only when the restructuring started
by OLAF takes effect. In addition, the evaluation provided for by Article 15 of Regulation (EC) No 1073/1999 is
conceived as an interim report (mid-term review) that could be accompanied by ‘proposals to modify or extend the
Office’s tasks’ but not by a thorough change in the status of OLAF, awaited at the time of the next Treaty amendment.
The Committee’s third annual report and the opinion that it is to give under Article 15 of Regulation (EC) No 1073/
1999 will provide input for such an amendment.

Lastly, the Committee wishes to recall that both OLAF and the European Public Prosecutor envisaged by the Green
Paper must be evaluated in an evolutionary perspective as stages in the construction of a complete and coherent
project for which the Corpus Juris could serve as a model.

(6) See second activity report, point 3.1.1.
(7) See the Brana Report, Delegation of the French National Assembly for the European Union, 13.2.2002: La Tribune, 15.2.2002.

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ANNEX III

OPINION No 3/2002 ON THE PRELIMINARY DRAFT BUDGET FOR OLAF FOR 2003

Rapporteur: Mr Alfredo José de Sousa

1.

INTRODUCTION

The European Anti-fraud Office (OLAF) is to exercise its powers in full independence of the Commission, the
Governments and the other institutions and bodies (Article 3 of Decision 1999/352/EC, ECSC, Euratom).

The prime task of the Supervisory Committee is to reinforce OLAF’s independence in the exercise of its investigation
function (Article 11(1) of Regulation (EC) No 1073/1999).

OLAF’s independence is also expressed in budgetary terms by appropriations for its operation entered in a separate
annex to Part A of the Commission budget. The posts set aside for OLAF are also provided for in an annex to the
Commission establishment plan.

This is the context in which the Committee is to give the Opinion provided for by Article 6(2) of the Decision of
28 April 1999 and Article 25 of its Rules of Procedure on the preliminary draft budget presented by the Director of
OLAF for 2003.

By way of introduction, the Committee notes that this is the first time that it is giving an Opinion on the preliminary
draft budget on the basis of the official schedule.

But if the Committee is to do this, it must:

— receive in good time the preliminary draft budget with figures for each heading and subdivision,

— make the comparison with the 2002 budget and have information on the increases (if any) in each heading and
subdivision, in particular as regards Articles 01 (staff expenditure) and 04 (financing anti-fraud measures),

— be informed of priorities for investigation activities in 2003 underlying requests (if any) for additional posts.

Article 11(7) of Regulation (EC) No 1073/1999 provides that ‘The Director shall forward to the Supervisory
Committee each year the Office’s programme of activities’, and Article 25(2) of the Committee’s Rules of Procedure
requires the Director of OLAF to present ‘a regular report on the implementation of the budget’, so that an Opinion
on the next preliminary draft budget can be prepared in sound conditions.

This information is important to enable the Committee to give its Opinion on the preliminary draft budget 2003.
We regret that we were not given the information.

2. CIRCUMSTANCES IN WHICH THE OPINION WAS PREPARED

At its meeting of 5 December 2001 the Committee was informed by OLAF that the broad lines of the structure of
the preliminary draft budget 2003 would be put to it at the end of February 2002.

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On 5 February 2002 OLAF informed the Committee that the following needs for additional posts (26) had already
been identified for 2003: 11 for measures to support applicant countries’ anti-fraud activities; seven to reinforce
AFIS; five for protection of the euro; three for monitoring the Green Paper on the European Public Prosecutor.

The allocation of posts between units in the Office on the basis of the structure established by the latest change in
the organisation chart on 1 February 2002 was as follows: 60 attached to the Director-General (including the Judicial
Advice Unit); 54 in Directorate A (Policy, Legislation and Legal Matters); 127 in Directorate B (Investigations and
Operations); 48 in Directorate C (Intelligence, Strategy, Operation and Information Technology); and six at the
Committee’s Secretariat.

At its meeting of 5 March 2002 the Committee reminded the Director of the need to set priorities for action by the
Office, in particular as regards investigations, noting that the Office’s organisation chart had been changed without
priorities first being set.

At that meeting the Director undertook to present a document within two weeks, setting investigation priorities.

On 12 March the Committee sent the Director a note reminding him of the need to supply the rapporteurs for this
Opinion with all the information they needed by 2 April, and in particular with OLAF’s priorities for 2003 and the
grounds for all additional appropriations or posts requested.

The preliminary draft budget for 2003 prepared by the Office was given to the rapporteur, Mr De Sousa, on 5 April.

These are the circumstances in which this Opinion was prepared and adopted by the Committee at its meeting of
9 April 2002.

3. BUDGETARY AND PROCEDURAL FRAMEWORK FOR THE PRELIMINARY DRAFT BUDGET

The budgetary authority has determined the budgetary framework within which OLAF is to operate. As regards the
determination of appropriations, OLAF enjoys the budgetary autonomy generally conferred on Offices, enabling it
to adopt its estimates on the basis of its own priorities. Regarding its establishment plan, the political authority gave
it 300 budgetary posts in 2002, within which the Office is to establish structures corresponding to its tasks and
status. In particular, OLAF is to manage the transition from 149 to 300 staff that the budgetary authority decided
should proceed in two stages of 75 and 76 posts. The authority decided to make the approval of the second tranche
subject to verification whether OLAF’s organisation chart and staffing truly corresponded to its objectives.

For the preparation of its preliminary draft budget for 2003, OLAF began by informing the Commission (APS
procedure, January 2002) of its forecast request for additional posts corresponding to new tasks, evaluated at
26 posts. The Commission observed that only eight posts corresponded to priorities in its own activities, in particular
in relation to enlargement.

According to the Commission, the remaining 18 posts should be found through internal redeployment in view,
among other things, of the large number of posts still vacant.

The Committee had hoped last autumn that structures reflecting OLAF’s own priorities would be in place for the
preparation of the preliminary draft budget 2003. But the Director of Directorate C did not take up office until
1 February 2002 and was not able to present the Committee with guidelines for the future organisation of his
department until the meeting of 5 and 6 March 2002. Since Directorate C will play a key role in determining OLAF’s
future policy on investigations, that policy, obviously, has not yet been established.

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Regarding Directorate B, the situation is not much brighter as the Director has still to take up his post. The structure
of Directorate B is not yet definitively established, and it is not yet possible to define the prospects for establishing
and developing the OLAF project, in particular as regards the procedures for cooperation between the different poles
and the role of the different poles and departments in this organisation.

An important factor for establishing this preliminary draft is therefore still absent on account of the circumstances: a
clear, precise definition on a hierarchical basis of the new tasks that OLAF is planning to perform, chiefly in the
context of its platform of services to formalise its relations with its partners.

4. METHODS FOR ESTABLISHING THE PRELIMINARY DRAFT BUDGET

Apart from that, OLAF has endeavoured to evaluate its needs by asking its various units to calculate their respective
workloads. The outcome of this exercise was a figure for estimated needs of more than 400 staff. OLAF then
endeavoured to reconcile this evaluation with the framework set by the Commission by undertaking a severe
selection process and accepting only those new posts which were indispensable for the satisfactory pursuit of its core
activities on the basis of its new structure and corresponding basically to the priorities acknowledged for the
Commission in the definition of its strategy for 2003.

To produce requests that are acceptable to the different authorities responsible for budgetary decision-making, the
Office reduced its evaluations on the basis of the criteria and priorities followed by the Commission in the APS
exercise and its anti-fraud strategy. As regards the effects of the reduction on its management, the Office shifts the
responsibility for defining criteria for opening new investigations and for allocating tasks as between OLAF and the
national authorities on to the Case Management Board, which will decide case by case. Reference is made to the
priorities set for the Office by the Director, without further clarification.

Regarding the investigation function, the preliminary draft budget for 2003 presents no practical priorities.

OLAF establishes its requests for additional posts at 20 new post to be added to the establishment plan for 2003
(11 permanent and nine temporary posts). It also envisages eight auxiliary posts (for enlargement), financed from
administrative appropriations, and four seconded national experts, whose salaries are mainly paid by their home
departments.

The 32 new posts would be distributed as follows:

— attached to the Director-General:

2 A (1 security officer, 1 financial controller)
8 A (auxiliaries for enlargement),

— in Directorate A for administrative and financial

8 A (in Units A3, A4 and A5),

monitoring:

— in Directorate B:

— in Directorate C:

2 A (investigators),

12 A (intelligence analysts, IT experts).

The Committee notes that only two investigators are assigned to Directorate B and that priority is given to projects
linked to enlargement (eight), administrative and financial monitoring (eight) and intelligence and IT (12).

According to the preliminary draft budget 2003, the staffing situation on February 2002 was as follows: 181 persons
were paid, 43 were being recruited and 76 posts remained to be filled (21 already published).

In March 2002 posts were distributed as follows: 60 attached to the Director-General, of which 14 still to be filled;
54 in Directorate A, of which 11 still to be filled; 127 in Directorate B, of which 25 still to be filled; 48 in
Directorate C, of which three still to be filled; six at the Supervisory Committee, of which three still to be filled( 1).

(1) The figures vary widely from time to time as staff come and go.

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The progression in staff expenditure in 2003 remains moderate (+ 4,2 %), given the automatic index-linking and
increment functions; the same applies to the variation in administrative expenditure (+ 3,2 %).

Additional operating appropriations (Chapter B5-91), indispensable for the development of information exchange
facilities (AFIS) with the Member States (the development of which was previously financed under the Customs 2000
programme) also rise only slightly (+ 4,1 %), assuming a constant legal basis.

5. CONCLUSIONS

The Committee notes that the preliminary draft budget for 2003 presented by OLAF constitutes an evaluation of
what is needed for the Office to operate on the basis of current conditions and assuming that all the posts entered in
the organisation chart for 2002 will be filled by the end of the year.

The Committee:

— regrets that this year again, the preliminary draft was not produced on the basis of a clear and precise definition

of OLAF’s new tasks and a programme of activities presented for the Committee’s Opinion,

— believes that recruitment should be speeded up to fill all the posts still vacant by the end of 2002, with effective

definitions of missing profiles to prompt the right applications,

— notes that the Office must set its overall priorities as regards investigations and follow-up at the same time as it
fixes its 2003 budget in the light both of directives from the European institutions and of the risk sectors
identified by OLAF itself,

— observes that the Director will have more than 70 staff, including the Judicial Advice Unit, reporting direct to

him and that posts should be better distributed over the three existing Directorates.

Finally, the Committee notes that in the third quarter of 2002 the Commission, acting under Article 15 of Regulation
(EC) No 1073/1999, is due to present proposals for the adaptation or extension of OLAF’s tasks.

The potential impact of this could be a far-reaching revision of the Office’s budget for 2003.

Subject to the four observations above, the Committee issues a favourable Opinion on the preliminary draft
budget for OLAF for 2003 presented to it.