Activity report — June 2003 to July 2004
Date: 2005-05-20
Institutions: European Anti-Fraud Office, European Commission
Subjects: European Anti-fraud Office, activity report, committee (EU)

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I

(Informations)

COMMISSION

THE OLAF SUPERVISORY COMMITEE ACTIVITY REPORT

ACTIVITY REPORT

June 2003 to July 2004

(2005/C 122/01)

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Members of the OLAF Supervisory Committee

Raymond KENDALL

Chair
Honorary Secretary General, Interpol

Mireille DELMAS-MARTY

Professor, Collège de France, Paris

Edmondo BRUTI-LIBERATI

Deputy Prosecutor-General, Court of Appeal, Milan

Alfredo José DE SOUSA

President, Court of Auditors, Republic of Portugal

Harald NOACK

State Secretary, Government of North Rhine-Westphalia (*)

(*) Mr Noack resigned with effect from 1 September 2004. But this report reflects the contributions of all five mem-

bers.

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CONTENTS

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

Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Observations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER I — MEANS IMPLEMENTED BY OLAF IN ORDER TO CARRY OUT ITS TASKS . . . . . . . . . . . .

A.

Instruments for operations management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1. The Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. The Manual

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

3. The programme of activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. The instruments for administrative and budgetary management . . . . . . . . . . . . . . . . . . .

C. The registry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

D. Monitoring the legality of investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPITER II — REVIEW OF OLAF’S OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. Activities explicitly provided for by Regulation (EC) No 1073/1999 . . . . . . . . . . . . . . . .

1.

Investigations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(a) The distinction between internal and external investigations . . . . . . . . . . . . . . . . . . . . .

(b) Assessing how each stage of the procedure works . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Coordination operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. Activities implicitly provided for by Regulation (EC) No 1073/1999 . . . . . . . . . . . . . . .

1. OLAF’s cooperation with administrative authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. OLAF’s coopération with judicial authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER III — RECOMMENDATIONS OF THE COMMITTEE TO IMPROVE THE FUNCTIONING OF
OLAF AND PREPARE THE TRANSITION TO THE EUROPEAN PUBLIC PROSECUTOR’S
OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

A. Coordination of the investigative function with OLAF’s other functions . . . . . . . . . . .

1. The need for improved organisation of OLAF’s activities based on an investigation policy

2. The need to modify OLAF’s status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

B. Mechanisms and structures required for the investigative function . . . . . . . . . . . . . . . . .

1. Rules of procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Monitoring the legality of the investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C. Role and status of the Supervisory Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ANNEXES

Annex I — Recommendations of Activity Report 1999 to 2000 . . . . . . . . . . . . . . . . . . . . . . . . . .

Annex II — Proposals of Activity Report 2000 to 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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INTRODUCTION

The Committee has now been in existence for five years. This
report starts by assessing OLAF’s fulfilment of the objectives
established by the legislator. It therefore differs from the previous
reports and opinions, in which the Committee’s aim, in accor-
dance with the last part of recital 17 of Regulation (EC)
No 1073/1999 of the European Parliament and of the Council (1),
was to support the establishment and organisation of OLAF while
fully respecting the independence of its Director, on the basis of
the experience gained in carrying out its task of reinforcing the
Office’s independence by regularly monitoring the investigative
function. Since the report also happens to coincide with the
political authorities’ current examination of the future of OLAF,
it should also be able to make a contribution to this work.

Between June 2003 and July 2004, the Committee continued to
meet monthly; 10 meetings were held in this period, at which it
received regular reports from the Director of OLAF and his staff.
The Committee maintained its contacts with the institutions,
either at its meetings or in connection with them; with Parliament
(in particular with the Chairman and the rapporteurs of the Com-
mittee on Budgetary Control); with the Council (anti-fraud task
force); with the Commission (in particular with Ms Schreyer and
the Secretary-General, Mr O’Sullivan); and with the Court of
Auditors (which it met twice).

Methods (2)

Because the transitional period needed to establish structures
suited to OLAF’s new functions has been much longer than
originally envisaged, in the last five years the Committee has had
to dedicate more of its efforts than it would have liked to
setting up new structures and methods. Since the introduction
by OLAF of more transparent management methods, the Com-
mittee has been able to devote more of its time to the opera-
tional area and fully exercise the function assigned to it by
Regulation (EC) No 1073/1999 and Council Regulation (Eura-
tom) No 1074/1999 (3): to regularly monitor OLAF’s investiga-
tive role. In particular, on 1 January 2001 a comprehensive file
registration system was introduced, acting on one of the recom-
mendations of the Court of Auditors. Significant work on the
codification and harmonisation of operational procedures was
also carried out as part of the preparation of successive versions
of an OLAF ‘Manual’ (last amended on 1 August 2003 and cur-
rently being revised). Lastly, since the end of the first half of 2001,
all investigative procedures have been managed by a Case Man-
agement System (CMS), which is constantly being improved.

(1) OJ L 136, 31.5.1999, p. 1; end of recital 17: ‘… the Committee’s
duties should also include assisting the Office’s Director in discharg-
ing his responsibilities.’

(2) See Rules of Procedure of the Supervisory Committee of 17 Novem-

ber 1999, OJ L 41, 15.2.2000, p.12.

The Supervisory Committee has adapted its procedures to enable
it to make use of the documentation and information that have
become available as a result of the transparency introduced by
OLAF’s management. OLAF now has scoreboards, updated
monthly, which track all the Office’s operational activities and
contain the essential information to be sent to the Committee
according to Article 11(7) of the Regulation. The Committee uses
these scoreboards, which supplement and provide a framework
for the information sheets regularly submitted by OLAF on inves-
tigations that have been in progress for more than nine months,
as well as the information given on the case files transmitted to
the national courts, to identify priorities for its monitoring task.
Since December 2003, it has had access to full documentation on
the information or files transmitted to the judicial authorities, in
principle before they are transmitted, and it comments to OLAF
on the procedures followed in each case.

In addition, the Committee has been able to base its assessment
of OLAF’s operational activities both on the global viewpoint
gained from the meetings of its rapporteurs with OLAF on ques-
tions of principle and the specific viewpoint obtained from analy-
sis of a certain number of case files, supplemented if necessary by
examination of files in situ at OLAF’s offices.

Lastly, the Committee cooperates with OLAF in implementing the
provisions of Article 8 of the Regulation on the protection of per-
sonal data.

In the light of its work these first five years, the Supervisory Com-
mittee would emphasise that the main challenge facing OLAF in
fulfilling its investigative remit has been the fact that investiga-
tions that may result in criminal proceedings have to be car-
ried out within a framework designed for administrative
investigations.

The Committee has highlighted this problem from the outset,
broadly in line with the comments made in the report of the
‘Committee of the Wise Men’ (4). First, it drew the attention of
OLAF’s Director to the need to introduce a structure under which,
due to their independence, OLAF’s investigations would be clearly
differentiated from purely administrative investigations.

To this end, the Supervisory Committee also recommended (5)
adopting rules of procedure and introducing a mechanism to
monitor compliance with these rules and an explicit methodol-
ogy for the investigations.

(4) Point 5.11.15 of the Report: ‘We thus return to the issue which has
lurked constantly in the background of this chapter. How can quasi-
criminal investigations in UCLAF, the need for some judicial control
over such investigations and more effective criminal prosecutions of
EU fraud be reconciled with the principle that criminal jurisdiction is
and for the foreseeable future will remain a prerogative of national
legal and judicial systems?’

(3) OJ L 136, 31.5.1999, p. 8. For practical reasons, henceforth only

(5) The Annex contains the proposals and recommendations made by the

Regulation (EC) No 1073/1999 will be referred to.

Committee in its previous annual reports and opinions.

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Observations

When making its assessment, the Committee must take into
account both the definitions contained in Regulation (EC)
No 1073/1999 and the activities effectively carried out by OLAF.

empowers the Office, as part of the investigative function, to use
the means of carrying out these checks and inspections created
pursuant to Council Regulation (EC, Euratom) No 2988/95 (5)
and the sectoral regulations to enable the Commission to moni-
tor and manage its financial instruments.

The definition of OLAF’s task contained in Regulation (EC)
No 1073/1999 is based on the legislator’s intention of creating an
independent investigative function and integrating it in a viable
structure until a more complete and coherent system can be
introduced.

For the functions of coordinating national activities and contrib-
uting to the design and development of methods of fighting fraud,
Regulation (EC) No 1073/1999 (Article 1(2)) merely entrusts to
OLAF the tasks previously carried out by UCLAF on behalf of the
Commission.

The legislator’s approach echoes the objectives set out
in
Article 280 of the EC Treaty, in particular paragraph 4 (1): to
adopt the necessary measures in the fields of the prevention of
and fight against fraud affecting the financial interests of the
Community with a view to affording effective and equivalent pro-
tection in the Member States. This Article also establishes the
framework for and limits of this approach: in accordance with the
principle of subsidiarity referred to in the preceding paragraphs,
these measures shall not concern either the application of national
criminal law or the national administration of justice (2).

Regulation (EC) No 1073/1999 therefore maintains the existing
distribution and balance of responsibilities between the national
and Community levels. At Community level, its aim is to imple-
ment the means of conducting anti-fraud administrative investi-
gations made available by the Commission (the creation of OLAF);
with regard to fraud prevention, it requires the Office to contrib-
ute to the Commission’s activities in the field of designing and
developing methods to fight fraud. At national level, the Regula-
tion requires the Office to ‘coordinate’ the cooperation between
the competent authorities in the Member States provided for by
Article 280(3) of the EC Treaty (3).

Specifically, as regards the new investigative function, in the area
of internal investigations, Regulation (EC) No 1073/1999 adds
new means to those already in existence (Article 4), while for
external investigations it transfers to OLAF the powers of carry-
ing out on-the-spot checks and inspections in the Member States
and in third countries conferred on the Commission by Council
Regulation (Euratom, EC) No 2185/96 (4) (Article 3). It thus

(1) Article 280(4) of the EC Treaty: ‘The Council, acting in accordance
with the procedure referred to in Article 251, after consulting the
Court of Auditors, shall adopt the necessary measures in the fields of
the prevention of and fight against fraud affecting the financial inter-
ests of the Community with a view to affording effective and equiva-
lent protection in the Member States. These measures shall not con-
cern the application of national criminal
law or the national
administration of justice’.

(2) It should be emphasised that these restrictions are omitted in the
Treaty establishing a Constitution for Europe (Article III 415(4)).
(3) Without prejudice to other provisions of this Treaty, the Member
States shall coordinate their action aimed at protecting the financial
interests of the Community against fraud. To this end they shall orga-
nise, together with the Commission, close and regular cooperation
between the competent authorities.

These provisions provide original solutions, still largely provi-
sional, to the question of exactly how criminal investigations can
be carried out in an administrative environment. The aim of
Regulation (EC) No 1073/1999 does not presume to fully and
definitively fulfil the objectives of Article 280, and the political
authorities (in particular the constituent authority) envisage new
developments for the protection of the Community’s financial
interests. In addition, no more than summary solutions are pro-
vided for the problems of the independence of investigations and
the protection of fundamental rights, in particular as regards the
question of how to coordinate OLAF’s investigations with crimi-
nal, disciplinary and administrative procedures.

However, in its previous reports the Committee took the view
that this arrangement could be viable as a transitional solution
based on the guiding principle of ‘constructive ambiguity’.

The implementation of these arrangements by OLAF, due to the
and provisional nature of Regulation (EC)
incomplete
No 1073/1999, has been marked by a tendency to explore all the
possibilities of the instruments adopted while pursuing the activi-
ties hitherto carried out by UCLAF. It is only recently that pro-
gramming has been introduced, which should ultimately make it
possible to specify how the different tasks (investigations, coor-
dination, assistance, legislation, strategy, intelligence, monitoring,
etc.) are to be coordinated. It is therefore still difficult to clearly
define OLAF’s different tasks and how they tie in with one another
and with the tasks of their partners.

In addition, the Office had to endeavour to avoid the uncertain-
ties resulting from the political difficulties involved in complet-
ing the arrangements (how long will it be before the public pros-
ecutor’s office is introduced?) and the ambiguities inevitably
arising from its administrative status (the problem of reconciling
its functions as an independent investigative body with those dis-
charged on behalf of or for the Commission, e.g. coordination,
legislation).

(4) OJ L 292, 15.11.1996, p. 2.

(5) OJ L 312, 23.12.1995, p. 1.

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To sum up, this report comes at a time when, on the one hand,
the institutions are currently examining the amendments to Regu-
lation (EC) No 1073/1999 proposed with a view to improving
OLAF’s functioning while, on the other, the Treaty establishing a
Constitution for Europe adopted by the Intergovernmental Con-
ference on 18 June 2004 envisages the creation ‘of a European Pub-
lic Prosecutor’s Office responsible for investigating, prosecuting and
bringing to judgment, where appropriate in liaison with Europol, the
perpetrators of, and accomplices in, offences against the Union’s finan-
cial interests, and for exercising the functions of prosecutor in the com-
petent courts of
the Member States in relation to such offences’
(Article III.274(2)). The report should therefore also provide a
basis for resolving the problem of how to reconcile these two
approaches.

The report will examine the means implemented by OLAF (I) and
then assess the results obtained (II) before presenting recommen-
dations on how to improve OLAF’s functioning and prepare the
transition to a European public prosecutor’s office (III).

CHAPTER I

MEANS IMPLEMENTED BY OLAF IN ORDER TO CARRY OUT
ITS TASKS

The Committee’s recommendations on the means to be put in
place in order to fulfil the objectives established by the legislator
are based on Recital 17 of Regulation (EC) No 1073/1999 (1).

As regards OLAF’s organisation and functioning, the Court of
Auditors is currently carrying out a management audit. In this
area, therefore, the Committee merely notes that it had recom-
mended, firstly, separating the functions discharged indepen-
dently from those exercised under the authority of the Commis-
sion, and secondly, decompartmentalising operational areas.

As regards the more general question of the means available to
carry out its tasks, OLAF needs to innovate. UCLAF, whose struc-
tures and personnel were inherited by OLAF, was not an investi-
gative body and had neither the powers nor the instruments cor-
responding to such a body (2). OLAF’s first task was therefore to
create these instruments in the areas of operations, administra-
tive and budgetary management, and to introduce a registry
(greffe). However, the question of how to monitor the legality of
the investigations has not yet been resolved.

(1) End of recital 17: ‘… the Committee’s duties should also include assist-

ing the Office’s Director in discharging his responsibilities’.

(2) Regulation (Euratom, EC) No 2185/96, which provided for a degree
of investigative power, did not really have any effect under UCLAF.

A.

INSTRUMENTS FOR OPERATIONS MANAGEMENT

In the interests of efficient management and the independence of
decisions, the Committee has advised OLAF to introduce proac-
tive operations management. This involves dividing investigative
powers between OLAF and the competent national authorities, in
accordance with the subsidiarity principle; taking account of the
need to set priorities for focused management to improve effi-
ciency and resource management (the Office’s means are limited
in relation to the magnitude of the task); and defining objective
criteria for the decisions to be taken in order to guarantee their
independence.

However, it may seem paradoxical to try and plan an investiga-
tive activity in the same way as, for an example, an audit or
inspection. Since investigations are triggered by the discovery of
events that are by nature fortuitous, investigative activity tends to
be reactive. But even if rigid planning of investigations is impos-
sible, it is necessary to base investigative activities on an analy-
sis of the phenomenon of Community budget fraud and to
define priorities and criteria for decisions regarding investiga-
tions, as well as for planning and using resources. Further-
more, Article 11(7) of Regulation (EC) No 1073/1999 requires an
annual programme of activities to be submitted to the Committee.

Once the principle of proactive management has been adopted,
different approaches to management control can be taken at
different levels, and OLAF has experienced several of these simul-
taneously. Firstly, a collective element can be introduced in
decision-making to make its activities more coherent: to this end
it has set up a Board. Secondly, instructions can lay down gen-
eral criteria for decisions, as is the case in the Manual, and lastly,
a strategic approach based on an analysis of the phenomenon of
fraud could allow activities to be geared to priorities; OLAF has
undertaken to present the priorities for its operational activities in
a programme of activities.

1. The Board

During the transition phase, the Committee advised OLAF to take
organisational measures to end the compartmentalisation of
activities typical of the previous period. To this end OLAF set up
the Board, whose composition and functioning are described in
point 3.1.1 of the Manual. Its function is defined as being ‘to assist
the Director General in taking decisions relating to the treatment
of cases, in particular with regard to whether to open or close a
specific case’. This provides a framework of procedures for deci-
sions on investigations, although these procedures have not yet
been clearly defined.

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2. The Manual

Partly in response to the Committee’s recommendation that
investigations should be conducted in accordance with rules of
procedure (1), OLAF has drawn up a Manual, one of whose func-
tions is to establish a framework for the Office’s activity by
describing its tasks, legal environment, operating principles and
structure.

includes

the Manual

Specifically,
‘operational priorities’
(point 3.2) which operate in practice as criteria which, when a
decision is taken to open an investigation, automatically trigger
or exclude OLAF’s competence or govern the choice of the type
of action to be taken by OLAF (investigation, cooperation, assis-
tance, etc.).

The approach adopted for the programme of activities, while
retaining these criteria, also seeks to take a dynamic approach by
referring to an analysis of the phenomenon of Community bud-
get fraud.

3. The programme of activities

The programme of activities, which is required under Article 11(7)
of Regulation (EC) No 1073/1999, requires a strategic approach
to be taken to the control of operational activities.

In March 2004, OLAF presented the Committee with a draft work
programme for 2005 which summarises the numerous reflec-
tions there have been on the nature and purpose of the Office’s
activities and makes an essential contribution to achieving the
aim of introducing proactive management of operational activi-
ties. However, the Committee considered that examination of this
area should continue inasmuch as the analyses and assessments
made in the work programme are largely determined by the cur-
rent activities and structures. It has sent its comments on the
document to OLAF.

This process of reflection, which the Committee has encouraged,
on OLAF’s own mission and the coordination of its different
functions, is based on the ‘strategic programming’ and ‘strategic
intelligence’ (2) functions. Efficient technical means, in particular
the CMS, are available for these functions.

(1) The Manual includes Title II concerning operational working instruc-
tions, essentially intended for the investigators. However, these are not
true rules of procedure aimed at ensuring respect for legality, since
they seek first at harmonising investigators’ working practices.

(2) Operational intelligence, which is part of the investigative function
occurring either before opening an investigation, assessment, exact
limits necessary, or during an investigation, is subject to the same rules
of procedure as the activities to which it relates.

This programme of activities is based on a preliminary risk analy-
sis that is useful in the attempt to define criteria for establishing
operational priorities. In establishing these priorities the docu-
ment distinguishes between principles of general policy (enlarge-
ment for external investigations and zero tolerance for internal
investigations) aimed at bringing OLAF’s activities within the
Commission’s priorities,
in particular from the viewpoint of
assigning additional resources, and the criteria for applying the
discretionary principle (3), which are not strictly speaking priori-
ties but rather the conditions for OLAF’s action or for selection
of the procedure.

In an attempt to ‘define a mechanism capable of identifying
parameters making it possible to assess the potential priorities of
the Office’s antifraud operational activities’ in order to assist man-
agement in allocating resources, OLAF has embarked on an excer-
cise to quantify the factors that are either favourable or unfavour-
able to action by OLAF for each sector. The Committee has
encouraged OLAF to develop this approach and make it more
balanced.

B. THE INSTRUMENTS FOR ADMINISTRATIVE AND BUDGET-

ARY MANAGEMENT

In order to organise its structure and define the means of carry-
ing out its task, OLAF’s main concern was to acquire manage-
ment instruments suited to the twofold nature of this task, bear-
ing in mind the requirements arising from this dual role. These
requirements are: independence in its investigative activity and
regard for the Commission’s priorities in the activities subject to
the Commission’s authority.

The Committee has concentrated on the means to be made
available for exercising the independent
function, and has
made recommendations concerning budgetary and personnel
management.

With regard to budgetary management, in its opinion 4/2000 the
Committee recommended a system of budgetary autonomy for
OLAF. This would enable the Office to set its own priorities for
budgeting the expenses of the activities coming under its func-
tion of operational independence and to assess the means required
by it. The Financial Regulation of 25 June 2002 defines OLAF as
a European office subject to certain exceptions (Article 176). In
successive opinions on the preliminary draft budgets, the Com-
mittee has emphasised the need for OLAF to base its budgetary
requests on the priorities of its operational policy and has asked
it to present this policy to the Committee within the framework
of the programme of activities provided for in Article 11(7) of
Regulation (EC) No 1073/1999.

(3) P. 10 of the document and Annex II.

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With regard to personnel management, OLAF has been asked by
the Committee and the Commission (1) to regard itself as an
autonomous service with its own rules based on its own person-
nel policies in accordance with the Staff Regulations, enabling it
to pursue a personnel management policy suited to its func-
tion (2). For example, the recruitment of temporary staff for OLAF
by simplified procedures is useful for functions that do not exist
within the Commission and require very specific qualifications.

the thorniest point of the reform since OLAF was first set up (4).
At the outset, the Committee was in favour of assigning moni-
toring powers to the magistrates unit, which powers would have
been different from hierarchical review. This is because the Com-
mittee considered that the external checks were too distant and
therefore insufficient for investigations involving individual rights
and, in particular, because the Ombudsman does not have the
powers to monitor legality and is unable to remedy the shortcom-
ings observed.

The current system has drawbacks for OLAF, but it is difficult to
apply the same administrative and budgetary system to functions
of a different nature integrated in a dual rather than mixed struc-
ture (independent functions co-existing with functions exercised
under the Commission’s direct responsibility), within which it
would,
in principle, be necessary to grant autonomy to the
Office’s independent activities while making the other activities
subject to the Commission’s general system (3).

OLAF has opted to confine itself to hierarchical review and has
assigned to the magistrates unit the task of advising on decisions
regarding investigations.

Lastly, the fact that in disciplinary matters the Commission
has the powers corresponding to the appointing authority not
only with regard to the Director (Article 12(4) of Regulation
(EC) No 1073/1999) but also with regard to OLAF’s other per-
sonnel (decision of 28 April 2004) may pose a problem of inde-
pendence, since the Supervisory Committee is only consulted in
the event of such disciplinary proceedings.

The practice, initiated by UCLAF, of recruiting staff with profes-
sional experience as magistrates, has been continued by OLAF
with a threefold objective: to ensure sound knowledge of national
criminal law procedures, facilitate contacts with national judicial
authorities and monitor the legality of investigations.

C. THE REGISTRY

To provide OLAF with a reliable system for registering incoming
documents, information and procedural documents and storing
originals, the Committee recommended introducing a registry.
OLAF has done so and the registry is functioning satisfactorily.

D. MONITORING THE LEGALITY OF INVESTIGATIONS

The question of how to monitor the legality of investigations has
not yet been resolved even though it has been regarded as

(1) ‘Article 15’ report, recommendation No 15.
(2) See Point 3.1.2 of the Commission’s ‘Article 15’ report.
(3) For example, it would be difficult to treat requests for posts differently
depending on whether or not they related to independent functions.

In practice, these staff have been assigned either to the magistrates
unit or to management or directing the investigation services.
‘Magistrates, Judicial Advice and
Point 2.1.6 of the Manual,
Follow-up’, describes the activities of this unit: operational sup-
port, judicial advice, follow-up, the treatment of whistleblowers
and informants and relations with national authorities. These pro-
visions do not give the magistrates unit competences for moni-
toring the legality of investigations, as proposed by the Supervi-
sory Committee (5). The unit’s role is therefore to advise on
decisions rather than to monitor in the true sense.

(4) Point 5.10.12 of the Wise Men’s Report: ‘This lack of an overseeing
judicial authority is much more obvious and potentially damaging in
cases involving Commission officials. Here, UCLAF more overtly plays
a de facto role of criminal investigation, but answerable to whom and
with the authority of whom? As noted above, jurisdiction over the
Commission, its officials and buildings, is acquired on a case-by-case
basis by whatever national authority or authorities are competent. But
no judicial authority holds permanent authority over UCLAF, autho-
rises its investigations, verifies the conduct and quality of its inquiries
or ensures (until after the event, when it may be too late) that its
results meet admissible standards of evidence. Bizarrely perhaps,
UCLAF is equipping itself with internal “judicial” expertise (i.e. a team
of magistrates) in a partial response to this void’.

(5) Proposal 5 in the first activity report (OJ C 360, 14.12.2000, p. 1:
page 25: ‘P5: For the time being, the Supervisory Committee consid-
ers that what must be done is to adopt measures without delay relat-
ing to OLAF’s internal organisation, such as the creation of a magis-
trates unit, in order to enhance the legitimacy of its investigations.
Such measures would also foster the emergence of a European legal
culture.’

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The idea of giving the magistrates unit a clearly identifiable role
in monitoring the legality of investigations, separate from that of
directing investigations, has not been altogether abandoned (1),
but it would entail a complete restructuring of this service. OLAF
is currently studying an alternative proposal, namely to give this
task to the Board.

Under any scenario, it will not be possible to truly monitor the
legality of investigations unless OLAF has precise rules of proce-
dure, which at present it does not. In addition, it will be neces-
sary to specify OLAF’s role in relation to judicial and/or disciplin-
ary procedures and the procedural arrangements for examining
in accordance with
complaints addressed to the Director
Article 14 of Regulation (EC) No 1073/1999.

relative input of OLAF and national authorities in providing
investigative resources to process the case (4). This classification,
which is based on the means and resources used, by definition,
governs the issue of the appropriateness of the means to the case.
It does, however, pose other problems: it brings about the possi-
bility of independent activities and activities for which the Com-
mission is responsible both being present in the same case or in
the activities of the same agent and/or the same department.
Moreover, while it is possible for a good assessment to help deter-
mine whether a case should be an investigation or a coordination
case, this judgment will necessarily alter throughout the opera-
tion, forcing OLAF to use certain procedures in frameworks other
than those for which they were intended (5). The classification
also makes it impossible to manage means and human resources
on the basis of the nature (independent or otherwise) of the activi-
ties, which in turn prevents the Commission and the budgetary
authority from accurately assessing the resources required for
each activity.

CHAPTER II

REVIEW OF OLAF’S OPERATIONS

Nevertheless, recent changes in OLAF’s activities reveal two posi-
tive points: first, the success of efforts to clear cases opened by
UCLAF, and second, the setting up of more efficient management
methods, as reflected by the rise in the number of cases closed as
given in the monthly statistics provided to the Committee.

Given that the Commission’s recommendations on the resources
needed to achieve the objectives set out in the legislation have
only partly been put into practice, it is hard to tell what and how
much effect they might have had on the efficiency and quality of
OLAF’s activities.

This assessment concerns the results of the various activities car-
ried out using the resources put in place by OLAF. It does not aim
to pre-empt the results of the assessments being prepared as part
of the management audit undertaken by the Court of Auditors or
of the supplementary assessment report carried out by the Com-
mission at the request of the Council. It should also be noted that
practices vary from sector to sector as the internal structure is still
compartmentalised.

The main difficulty in assessing operations is the fact that the cat-
egories defined by the Manual (2) and taken over in the CMS’s
classifications (3) do not always correspond to the activities actu-
ally carried out. The Manual states that these definitions are based
on quantitative and not qualitative distinctions; what distin-
guishes investigative activities from coordination activities is the

(1) Point 87 of the House of Lords’ report: ‘one possibility is for the mag-
istrates unit within OLAF to take on an active role in monitoring com-
pliance by OLAF investigators with procedural guarantees’; HL
paper 139.
(2) Point 3.3.3.1.
(3) The classifications laid down in the CMS do not always correspond to
the nature of the activity (cases classed as not involving investigative
acts within the meaning of point 3.4.4 of the Manual) or are entirely
absent (450 cases had not yet been classified at 30 April 2004),
although a greater or lesser effort, depending on the sector, has been
made to arrive at a more precise method of classification.

A more accurate assessment of OLAF’s actual activity should be
based on the nature of the activity as defined in the Regulation
and on OLAF’s substantive powers. Account should also be taken
of the fact that the Regulation provides for some of OLAF’s opera-
tions explicitly and others only implicitly.

A. ACTIVITIES EXPLICITLY PROVIDED FOR BY REGULATION

(EC) No 1073/1999

Article 1 of Regulation (EC) No 1073/1999 provides for two
types of task: investigations, which aim to ascertain individual
liability, and coordination, the purpose of which is to encourage
coordinated activity with the responsible authorities of the Mem-
ber States.

(4) ‘external investigations are those where OLAF provides the majority of
the investigative input’; ‘for coordination cases, the majority of the
investigative input is provided by authorities (other than OLAF)’. The
Manual does not in theory rule out a distinction based on the nature
of activities: it points out that coordination and criminal-assistance
activities do not ordinarily involve investigations within the meaning
of point 3.4.4 (access to premises and documents, interviews, on-the-
spot checks provided for by Regulation (Euratom, EC) No 2185/96,
etc.), but that in practice legal bases otherwise confined to investiga-
tions are sometimes seen being used in coordination cases.

(5) For instance, including legal conclusions or explanations in the infor-
mation sent to judicial authorities under Article 10 of the Regulation.
See II. A(1)(b), ‘Transmitting information to the responsible authori-
ties’.

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1. Investigations

investigations, and by Regulations

The unclear nature of OLAF’s investigations makes the need for
clear and definite procedures all the more urgent. Despite being
administrative in nature, investigations are often targeted on a
prosecution and involve putting in place resources related to the
field of individual rights, defined in Articles 4(2) and 4(3) for
internal
(Euratom, EC)
No 2185/96 and (EC, Euratom) No 2988/95 and sectoral regu-
lations referred to by them, for external investigations. To this
end, recital 10 of Regulation (EC) No 1073/1999 provides for the
respect of fundamental rights and Article 9(2) requires investiga-
tion reports to be drawn up in the light of the procedural require-
ments for establishing admissible evidence for national adminis-
trative and judicial proceedings.

The guarantees that the investigations are independent (status of
the Director and the role of the Supervisory Committee) go far
beyond those given to ordinary investigative bodies (e.g. IDOC).
They are currently subject only to administrative law (1). How-
ever, given that they are ultimately targeted on a prosecution,
they should also incorporate the rules of national criminal law
and supranational principles (ECHR and the EU Charter).

A distinction must also be made depending on the nature of the
investigation and the stage of the procedure.

(a) The distinction between internal

and external

investigations

This distinction is based on the definitions given by Regula-
tion (EC) No 1073/1999:

— internal

investigations are a new responsibility car-
ried out using the resources set up by Article 4 (in
particular paragraphs 2, 3 and 6) of Regulation (EC)
No 1073/1999,

— external investigations are carried out, as part of the
unaltered distribution (2) of powers and responsibili-
ties between Member States and the Commission (3),
using the resources and responsibilities provided for by
Regulation (Euratom, EC) No 2185/96 (Article 3(1) of
Regulation (EC) No 1073/1999), which itself refers to
Regulation (EC, Euratom) No 2988/95 and to the sec-
toral
(Article 3(2) of Regulation (EC)
regulations
No 1073/1999).

The main reason for this distinction is that the institutions
which had a hand in drawing up the Regulation saw matters
from different angles. The distinction criteria are not very
precise, making the decisions on hybrid cases less transpar-
ent, bringing about duplicate investigations and having a
negative effect on the protection of individual rights (4).

(b) Assessing how each stage of the procedure works

The Committee has observed improvements in the course of
the reference period, in the form of greater attention to accu-
racy and efforts to be consistent. But these efforts have only
a limited impact, given the rather vague dividing line between
investigative acts and other operations: the meaning of dif-
ferent procedural acts is different for activities involving
establishing individual liability as compared to, for instance,
organisational activities regarding the coordination of differ-
ent departments’ actions. While the manual clearly states that
coordination, legal assistance and monitoring do not involve
investigative acts as defined in 3.4.4, it is less clear on the
criteria of jurisdiction governing the choice between the dif-
ferent procedures and portrays the choice of a procedure
(investigation, coordination, assistance, monitoring, etc.)
as an issue of efficient action and adapting resources rather
levels
than distributing responsibilities across different
(Community/national, or administrative/disciplinary/penal,
as the case may be). While the manual mentions subsidiar-
ity as one of the criteria for this choice, it is only one crite-
rion among many. Past experience, as described by OLAF (5),
shows that practices vary from sector to sector (agricul-
ture, customs, structural measures), while cooperation
between OLAF and its partners can take very different forms
and, in particular, may involve information- and evidence-
gathering activities, which may encroach on issues of indi-
vidual responsibility otherwise confined to independent
investigations.

The unclear nature of the dividing line between investiga-
tions and other operations has repercussions on the other
stages of an investigation provided for by the Regulation: the
opening of investigations (Article 5), the investigations pro-
cedure (Article 6), the final report (Article 9), the transmis-
sion of
information (Article 10) and the action taken
(Article 11(7)) inasmuch as these procedures, which are
intended for use in investigations, can also be used in other
operations.

(1) The jurisprudence of the Court of First Instance in Gómez-Reino seems
to assimilate them to decisions by the appointing authority (Order of
the Court of First Instance of 18 December 2003, Case T-215/02).
(2) Established in particular by Regulation (Euratom, EC) No 2185/96.
(3) Recital 21 of Regulation (EC) No 1073/1999.

(4) Removal of access to appeal procedures, despite the appeal procedure
provided for in Article 14 having drawbacks; see III. A(2)(a)) (control
mechanisms): this policy tool discriminates between officials and non-
officials by excluding the latter from the appeal procedure.
(5) Note sent to the Committee by Mr Brüner on 17 August 2004.

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Opening of investigations

investigation whether an administrative, disciplinary or legal
objective is being pursued for the purposes of Article 9 of the
Regulation (content of reports).

As laid down in Article 5 of Regulation (EC) No 1073/1999,
both internal and external investigations are opened by a
decision of the Director of the Office, acting on his own ini-
tiative or following a request from one of the institutions or
Member States.

Carrying out investigations

Whereas the provisions of the Regulations only concern
investigations and relate specifically to the responsibility of
the Director-General, the Manual places this decision imme-
diately after the Board’s initial assessment of information and
subsequent deliberation, making it a practically identical for-
mality both for investigations and for other activities which
fall under the responsibility of the head of operations, in line
with the rationale of choosing activities based on efficiency
rather than on substantive powers. In practice, however,
these decisions are often signed by the Director-General.

But noteworthy improvements include the fact that the pro-
cedures for assessing initial information have become stricter
and, on average, quicker. The Manual gives detailed instruc-
tions (point 3.3.3 and form 9) for this stage of the procedure,
which was designed to allow the investigator heading the
investigation to give suggestions on, in particular, the type of
operation to be undertaken (investigation, coordination,
assistance, etc.). In practice, OLAF now avoids giving the task
of evaluating a case to the investigator who is to head it.

The opening-of-investigation stage may undergo changes if
the opinions expressed in the activity programme for 2005
on the application of the discretionary investigation prin-
ciple (1), and in particular the first ‘precondition’ of OLAF’s
remit, are implemented. In practice, this could mean that the
issue of OLAF’s authority to open an investigation (e.g. sub-
sidiarity, serious doubts, etc.) may be examined by an inde-
pendent specialised department rather than as part of the
Board’s general deliberations.

The opening decision may become more formally linked
with other procedures which, as yet, have no formal link at
all, e.g. work plan (form 10) or investigation authorisation
(form 14) which would allow the scope of the investigation
to be defined more coherently and make it easier to check
that the investigations are kept within the limits initially set
out (2). It would also be useful to specify at the outset of the

(1) Page 10 of the document; the criteria given in the work programme
are an update of the ‘Operational priorities’ given in the Manuel
(point 3.2). The draft additional assessment report submitted to the
Committee (point 1.3.1) confirms this trend: the decision to open an
investigation depends on an affirmative reply to three questions, of
which the first is ‘Does this fall within OLAF’s remit?’

(2) That said, the Manual does allow for additional authorisations
(point 3.4.5). This would, in some cases, avoid discovering during the
course of an investigation that OLAF does not have the means,
resources or skills to carry it out.

Point 3.3.3.1 of the Manual states that both internal and
external
investigations involve certain investigative acts,
which are defined at point 3.4.4, i.e. access to premises and
documents, interviews, analyses of hard-drives, on-the-spot
checks as
referred to in Regulation (Euratom, EC)
No 2185/96, etc. This definition requires further explanation:

— the Manual clearly states that coordination,

legal-
assistance and monitoring activities do not involve
investigative activities of this nature, a possible criterion
for distinguishing the two types of activity. However, the
Manual adds a further, quantitative criterion: the major-
ity share of OLAF (3) in the investigative work. In prac-
tice, this criterion is not in a consistent way used when
it would be of most use, i.e. when a case is opened. Cases
opened as investigations, for the most part external,
often evolve with time in such a way that OLAF no
longer has a majority share in the investigative work. Its
contribution therefore becomes one of support and
coordination,

— among

the

activities

described

investigative

at
point 3.4.4, the Manual confines access to premises and
documents and the analysis of hard-drives to internal
investigations. The Manual does not provide for the
same restriction for interviews despite the fact that
Regulation (EC) No 1073/1999 clearly allows for oral
requests for information only in the case of internal
investigations. In practice, efforts are being made to har-
monise interview practice in external investigations, par-
ticularly as regards formal reports. As well as these regu-
latory differences between the investigative means
available for internal and external resources (4), there are
also differences between different sectors of activity.
Such a sectoral structure is, however, perfectly justified
for follow-up, and even coordination, activities.

(3) In relation to national authorities’ share.
(4) The scale of the difference brought about by the Regulation and the
Manual in the resources available for internal and external investiga-
tion is theoretically limited, since Article 7 of Regulation (Euratom,
EC) No 2185/96 allows for similar powers to those allowed for in
internal
investigations by Article 4(2) of Regulation (EC)
No 1073/1999.

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Differences in the resources made available by existing regu-
lations for internal and external investigations have some-
times led OLAF to choose between the two procedures on
the basis of this and to conduct parallel investigations.

Finally, the Committee would point out that interim reports
allow recommendations to be formulated before the final
report and the end of the investigation, with the concomi-
tant risk that these recommendations bypass the procedural
guarantees associated with the closing of the case.

Finally, as regards OLAF’s obligation to conduct its investi-
gations continuously, good progress has been made recently,
but the reasons given to extend investigations are sometimes
based on ‘low priority’, ‘unavailable resources’ or ‘strategic
considerations’. It must also be highlighted that this obliga-
tion does not have the same meaning for investigative activi-
ties (interested parties’ fundamental right to quick process-
ing) as for cooperation activities, which are mainly the
responsibility of national authorities.

Final report

Article 9 of Regulation (EC) No 1073/1999 contains provi-
sions concerning the final report drawn up at the end of an
investigation and making it possible to specify whether an
administrative, disciplinary or legal objective is to be pur-
sued. The report should give the facts and bring together the
collected material evidence and proof in such a way that the
set of documents will have proper evidential value for the
authorities they are intended for; the conclusions should
include the Director’s recommendations for the authorities.
The report is thus the main purpose of investigative activity.

The Manual’s provisions for this stage of the procedure, and
in particular the forms, are identical for investigations and
operations carried out under the responsibility of the Com-
mission. An advantage of this solution might be that opera-
tions that are less highly structured than investigations have
to be carried out more strictly. It has the disadvantage, how-
ever, of diluting the purpose of investigations. In particular,
recommendations are often sent to OLAF’s follow-up units
rather that the intended authorities and institutions (1).

In practice, reports have not always made it possible to check
whether the evidence had been gathered ‘taking account of
the procedural requirements laid down in the national law of
the Member State concerned’, and the conclusions were not
always solely based on ‘elements which have evidential value’.
This study of cases and information forwarded to national
authorities (24 cases since December 2003) has shown that
things have clearly improved and that implementing new
and clear procedural rules could help solve this problem.

Transmitting information to the responsible judicial, disciplinary
and administrative authorities

Regulation (EC) No 1073/1999 provides for two ways in
which OLAF can transmit evidence liable to warrant pro-
ceedings to responsible authorities.

Information is, in principle, transmitted at the end of the
investigation (Article 9), and is in the form of the final report,
which has evidential value and includes the ascertained facts
and the Director’s recommendations for action to be taken.
Article 9 distinguishes between external
investigations
(Article 9(3)), for which the report is sent to the responsible
authorities of the Member States concerned by the rules gov-
erning external investigation (2), and internal investigations
(Article 9(4)), for which the report is sent to the institution
in question, which will be responsible for the disciplinary
and judicial follow-up recommended by the Director. This
form of transmitting information thus determines the nature
and purpose of the investigation.

Article 10 of the Regulation provides for another way of
transmitting information, more specifically, the small pieces
of information gathered during the course of the investiga-
tion. It allows information to be sent quickly to the relevant
authorities.

Given that the transmission of information is compulsory for
internal investigations, the objective is to ensure the infor-
mation reaches the judicial authority in time for it to exer-
cise its jurisdiction.

As regards external investigations, information is transmit-
ted on an optional basis and goes to the ‘competent authori-
ties of the Member States’ referred to at Article 9(3). This type
of information-transmission is essentially a precautionary
measure.

The Regulation does not, however, set out the relationship
between these two methods of transmitting information. The
Manual deals with this at point 3.4.8.2 for external investi-
gations, stating that the normal procedure for transmitting
information is that laid down in Article 9(3) (final report) and
that ‘in certain cases, information can be directly forwarded

(1) Point 3.4.9.2 of the Manual (form 30): recommendations seem to be
targeted more at follow-up units than at the intended authorities.

(2) Article 3 of Regulation (EC) No 1073/1999 refers to Regulation (Eura-
tom, EC) No 2185/96, Regulation (EC, Euratom) No 2988/95 and sec-
toral regulations.

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to the criminal prosecution authorities before the end of the
investigation’. The Manual lays down the criteria for such
exceptional cases: serious suspicion of a criminal offence, the
risk of evidence being destroyed or the risk of a suspect flee-
ing. The Manual also states that the information sent to these
authorities should present only facts and not conclusions.

OLAF considers at this point that it is able to continue the
investigation itself (1) and, in general, gives a more or less for-
mal offer of technical assistance to the relevant authority.

As regards the disciplinary follow-up, the issue of coordinat-
ing OLAF’s investigations with disciplinary procedures had
begun to be addressed with the new Staff Regulations of offi-
cials which entered into force on 1 May 2004, empowering
OLAF to conduct disciplinary investigations (6), and with a
Memorandum of Understanding. But these provisions do not
fully exhaust the issue of relations with the disciplinary
bodies of other institutions (7). The Committee has examined
the institutions’ follow-up to OLAF reports recommending
disciplinary action and notes that the institutions do not
always feel able to take these reports into consideration. In
relation to the point made in its third Activity Report (8), the
Committee highlights that the institutions are now develop-
ing good cooperative relations with OLAF.

The abovementioned provisions of the Manual seek to avert
certain risks, e.g. premature conclusions in the case of unfin-
ished investigations, material lacking evidential value and
consequently of little interest to national authorities, difficul-
ties in respecting interested parties’ right to be heard. Such
risks could be reduced by clearer regulation.

Follow-up to closed investigations

In its previous reports (2), the Committee noted that the data
it had did not allow it, whether generally or in more detail,
to assess the follow-up to procedures opened by national
authorities in response to investigations files or information
sent them by OLAF (3). The Committee highlighted the fact
that relations between OLAF and the judicial authorities were
being developed and stated that efforts would need to be
made on both sides to improve the follow-up procedure. The
Committee now possesses clearer data: detailed data for cer-
tain sectors (4) as well as more general data. This data con-
firms that national authorities react late or not at all (5), giv-
ing the following reasons for the latter case: lack of evidence
(62 %), time-barred cases (18 %), lack of legal basis (5 %) and
low-priority cases (5 %).

(1) In certain Member States, an administrative investigation cannot be

undertaken if a judicial investigation is already open.

(2) Supervisory Committee Annual Report 2001 to 2002 (OJ C 328,
30.12.2002, p. 1) point II.2.2, third bullet-point: ‘The Committee has
not been able to obtain overall figures for follow-up action taken with
regard to the transfer of this information. In particular, it has not been
kept regularly informed of recommendations made to the competent
authorities in connection with the transfer of the information and has
not been informed of any action taken in response to such recommen-
dations.’

(3) The efficiency of OLAF’s operations is assessed in a report by the
Court of Auditors and an assessment report by the Commission, both
currently being prepared.

(4) Customs, direct expenditure, Phare and Tacis.
(5) The number of transfers to judicial authorities varies greatly from year
to year (10 in 2002; 43 in 2003; 7 for the first half of 2004). Out of
57 negative decisions, 33 were put down to lack of evidence.

To sum up, the recommendations made in the final investigation
reports give a varied picture of the nature of OLAF’s investigative
activities. Depending on the case, these include gathering evi-
dence which can be used in administrative and judicial proceed-
ings, assessing individual
liability, assessing the efficiency of
administrative or financial instruments, assessing the liability of
institutions or departments, charging with a criminal offence on
the basis of facts discovered by OLAF or others, sending requests
to judicial authorities for the implementation of acts of proce-
dure, etc. In general, as regards the results of investigative opera-
tions, the Committee feels that the assessment should not be con-
fined to quantitative data and should take into account the
response of the recipient authorities. Factors such as the deterrent
effect of an investigative body cooperating with national prosecu-
tion bodies cannot be quantified.

In this context, the Committee notes that efforts are being made
to have judicial authorities take greater account of OLAF’s con-
tributions, but highlights the fact that the lack of efficient legality
review and the Office’s ‘hybrid’ status may, to some extent, have
weakened the legitimacy and credibility of its contributions (9).

(6) Article 86. Annex 9 lays down the rules applicable to the procedure

and to the protection of individual rights.

(7) For the Commission, a Memorandum of Understanding is only

planned with IDOC.

(8) Supervisory Committee Annual Report 2001 to 2002, point II.2.2,

third indent.

(9) In its report on the assessment of OLAF’s activities (Article 15), the
Commission considers that: ‘recognition of the role of OLAF staff by
national prosecution authorities would obviate an additional diffi-
culty.’

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2. Coordination operations

B. ACTIVITIES IMPLICITLY PROVIDED FOR BY REGULATION

(EC) No 1073/1999

Article 1(2) of Regulation (EC) No 1073/1999 provides for the
activities that OLAF undertakes as a Commission department.
The second part of these provisions refers to OLAF’s contribution
to the creation and development of anti-fraud methods, particu-
larly operational and strategic intelligence regarding illegal activi-
ties to the detriment of the Community’s financial interests. The
first part of these provisions refers to the Commission’s assistance
in organising close and regular cooperation between the authori-
ties in the different Member States in order to coordinate their
action to protect the Community’s financial
interests against
fraud.

Article 1(2) as a whole targets the organisation of actions to pro-
tect financial interests but does not refer to investigative or opera-
tional activities. Nevertheless, the OLAF Manual, by linking
Article 280(3) of the EC Treaty (1) to Article 1(2) of the Regula-
tion, makes the latter a legal basis not only for ‘coordination and
criminal assistance’ (2), but also for supporting national jurisdic-
tion, as well as giving it operational scope.

In practice, OLAF is as much involved in organising close and
regular cooperation between the competent authorities of
Member States, e.g. chairing and providing secretarial services
for COCOLAF (3), as in providing operational support and coor-
dination for national investigations. OLAF’s role in these proce-
dures is generally some kind of contribution to the investigations
of national authorities which the Manual stipulates does not
consist of investigative acts (4). The Manual does, however, gen-
erally subject this support and coordination role to the same pro-
visions as for investigations as regards the opening, processing
(within nine months) and closing of cases. The legal bases used in
certain coordination procedures can also, in practice, allow for
scrutinies
investigations
(Article 3(2) of Regulation (EC) No 1073/1999; Article 9(2) of
Regulation 2988/95) for which OLAF in independent. These
activities are thus implicitly allowed for in Regulation (EC)
No 1073/1999. In practice, these activities may be carried out at
the request of national judicial or police authorities or on OLAF’s
initiative.

theoretically confined to external

By providing that OLAF should take over the whole remit of the
former UCLAF, Article 1 of Commission Decision 1999/352/EC,
ECSC, Euratom (5), refers to a whole series of provisions, speci-
fied in point 3.4.1.3 of the Manual, which allow Commission
agents to participate in national administrative scrutinies as part
of mutual assistance in the fields of customs and agriculture. The
Manual allows for these competences to be used as part of the
support and coordination procedures and gives them several legal
bases specified in point 3.4.1.3: Article 280(3) of the EC Treaty,
Article 1(2) of Regulation (EC) No 1073/1999 as well as several
provisions of sectoral regulations.

As part of administrative, judicial and disciplinary follow-up,
OLAF also carries out activities involving cooperation with
national authorities within investigative and coordination
activities (6).

Consequently, coordination/assistance activities and follow-up
activities seem, in practice, to be very similar in nature, despite
coordination and legal assistance being formally presented as
independent activities and follow-up as part of the investigation
or coordination procedure. Furthermore, any assessment of
follow-up activities should take into account the fact that they fol-
low on from and implement the recommendations of investiga-
tive or coordination activities.

Follow-up work, inasmuch as it consists in finding out about the
action taken by recipients on the recommendations given in the
final reports, is primarily an act of good internal administration
allowing OLAF, among other things, to determine its priorities on
a more complete and up-to-date basis and allowing inspection
authorities to assess the impact of OLAF’s work. Given that the
action to be taken on the recommendations given in the final
reports is basically a matter for the recipients of the recommen-
dations, follow-up work in itself should not be viewed as impos-
ing fresh obligations but rather as providing advice and support,
even assistance. It thus largely depends on the quality of the rec-
ommendations. It should be noted that, in practice, follow-up
work (particularly judicial follow-up) can be carried out before the
investigation is closed.

(1) Article 280(3) of the EC Treaty: ‘Without prejudice to other provisions
of this Treaty, the Member States shall coordinate their action aimed
at protecting the financial interests of the Community against fraud.
To this end they shall organise, together with the Commission, close
and regular cooperation between the competent authorities.’

(2) Point 3.4.1.3.
(3) Advisory Committee for the Coordination of Fraud Prevention.
(4) Point 3.3.3 of the Manual naturally confines investigative acts as

defined in point 3.4.4 to investigations.

Despite the fact that both the Manual and the OLAF reports
present support and coordination procedures as constituting a
whole and that they are procedurally treated in the same way, the
activities they involve differ in nature depending on whether they
concern relations with administrative authorities or judicial
authorities and correspond to different roles of OLAF.

(5) OJ L 136, 31.5.1999, p. 20.
(6) Point 3.5.2 of the Manual, last indent.

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1. OLAF’s cooperation with administrative authorities

This is the main activity of several operational units and, by
extension, the corresponding follow-up units. The purpose of this
activity, which has been taken over from UCLAF under Article 1
of Decision 1999/352/EC, ECSC, Euratom (1), is by definition
determined by the remit of the Commission and national authori-
ties (Member States and third countries) with which OLAF coop-
erates, and is essentially financial in nature. Due to its nature and
the legal bases used, this activity is carried out under the formal
responsibility of the Commission. In practice, it is sometimes dif-
ficult to distinguish activities which, within the same department
of the Office or even within the same case, are carried out under
the responsibility of the Commission and which have a financial
purpose from those which are independent and intended to estab-
lish individual liability. To resolve this difficulty, interdepartmen-
tal protocols have been drawn up with a view to establishing, as
clearly as possible, the respective remits of OLAF and the
Directorates-General of the Commission. It is, however, difficult
to find everyday solutions to problems which raise an issue of
principle: the nature and purpose of OLAF’s activities (2), which,
in the form of proposals, often have a crucial role in the decision
taken by the authorising officer (3).

This ambiguousness is also present in OLAF’s cooperation with
national administrative authorities, for which it would have been
advisable to establish a concept and guidelines.

2. OLAF’s cooperation with judicial authorities

The problems in the relationship between OLAF and the judicial
authorities are due to the fact that its legal basis is unclear. They
come into relation either during the judicial follow-up stage (4) or
as part of the support activity (5). Article 10(2) of Regulation (EC)
No 1073/1999, to which paragraph 13 refers, explicitly allows
for direct relations with national judicial authorities with a view
to transferring information gathered during internal investiga-
tions. Such relations might
implicitly be envisaged under
Article 10(1) and also inasmuch as OLAF is obliged to inform the
Supervisory Committee about the follow-up work done on its
investigations (Articles 11(7) and (8)).

(1) For instance, in agriculture, Annex 2 of Commission Decision of
10 February 1995 was not amended by the creation of OLAF
(cooperation between UCLAF and DG VI in determining the financial
consequences of the fraudulent amounts not recovered).

(2) In its Special Report No 3/2004 (OJ C 269, 4.11.2004, p. 1), the Court
of Auditors states that, as regards the recovery of irregular payments
related to the common agricultural policy, ‘the involvement of both
OLAF and the Commission’s Directorate-General for Agriculture in
decisions of writing off is a source of confusion and inefficiency.’
(3) For instance, in the framework of the DG AGRI – OLAF task force for
recovery, OLAF, among other things, submits proposals to DG AGRI
regarding the financial corrections to be applied to Member States as
part of the account-clearance procedure based on the assessment of
cases of irregularities made known by the Member States.

(4) Point 3.5.5.1 of the Manual.
(5) Point 3.3.3.1 of the Manual distinguishes ‘criminal assistance cases’

from other types of case.

OLAF has set up a stage in the investigative procedure dedicated
to follow-up work and has allowed for specific judicial follow-up
work in its Manual. In practice, much activity has been developed
on the following basis: on the one hand, ‘follow-up’ work (which,
paradoxically, can be carried out during the OLAF investigation),
and on the other hand, an OLAF investigation being carried out
during the national judicial procedure.

The OLAF Manual has also set up support activities using the
legal bases for ‘coordination’ intended for the activities carried out
by OLAF as a Commission department.

Such activities have proved to be very useful in the context of
relations with national judicial authorities and are an essential
extension of investigative activities. They should, however, be
considered as OLAF acting as an independent department rather
than as a Commission department. Given that, by nature their
purpose is criminal proceedings, they should eventually become
part of the remit of the future European Public Prosecutor. In the
meantime, these activities would bring about the adoption of
internal rules governing OLAF’s participation. The legislator
would have the task of defining their legal basis and organisation.

CHAPTER III

RECOMMENDATIONS OF THE COMMITTEE: TO IMPROVE
THE FUNCTIONING OF OLAF AND PREPARE THE
TRANSITION TO THE EUROPEAN PUBLIC PROSECUTOR’S
OFFICE

Following the positions adopted by the Committee on the Com-
mission report assessing OLAF’s activity (Article 15 report) and
then on the proposed amendments
to Regulation (EC)
No 1073/1999 presented by the Commission in February 2004,
the prospect that a European public prosecutor’s office would be
established with competence for Community budget
fraud
emerged clearly when the Constitutional Treaty was adopted on
29 October 2004. Moreover, the urgent need for such a measure
has become more evident in view of the crisis caused by the Euro-
stat case. The conclusions to be drawn from the first five years of
OLAF’s existence must therefore take into account the prospect
of creating, in the mid-term, a European public prosecutor’s office
with responsibility in OLAF’s sphere of competence for investi-
gations, prosecutions and committal for trial in the competent
national courts. In addition, it would be governed by rules on its
functioning, procedures and, in particular, the admissibility of evi-
dence, since a European public prosecutor’s office created from
Eurojust would obviously also have to be able to work with
Europol.

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The Supervisory Committee believes that the transition towards
this more complete and coherent arrangement must be prepared
if OLAF is to fulfil its mission and come to assume the role of a
‘judicial support body’ that was referred to by President Prodi
when he set out the benefits of establishing a European public
prosecutor’s office (1).

In setting out his action plan, President Prodi also underlined the
need for reflexion on the need to refocus OLAF’s activities on the
task set by the legislature (2), in view of the difficulties that the
Office has encountered in defining its different tasks and how
they tie in with one another and with those of its partners. In par-
ticular, the plan for a platform of services designed to achieve this
aim appears to have been abandoned.

The Supervisory Committee’s recommendations therefore have a
threefold objective: to improve the coordination of the investiga-
tive function with OLAF’s other functions (A), to reinforce the
guarantees required by the criminal proceedings aimed at by the
investigations (B), and to adapt the role of the Supervisory Com-
mittee (C).

A. COORDINATION OF THE INVESTIGATIVE FUNCTION WITH

OLAF’S OTHER FUNCTIONS

The definition of OLAF’s functions is complex. As defined in the
Regulation, they comprise several very different tasks: investiga-
tions, support for investigations carried out by national authori-
ties and contribution to the Commission’s political and legisla-
tive action in combating Community budget fraud.

In the light of the experience gained, the question of the syner-
gies between these different activities is now seen in new terms
and the main difficulty is the coherence of all these activities.

Analysis of OLAF’s activities reveals that interesting possibilities
are being developed, often based on the activities of the old
UCLAF, in addition to the strictly investigative function. A notable
example of this is the wide-ranging support provided to national
services, in particular in the form of intelligence, expertise in how
Community funding works, assessment of the reliability of finan-
cial or accounting systems from the point of view of their vulner-
ability to fraud, and customs investigations.

In addition, the provision of assistance by OLAF to the Commis-
sion’s Directorates-General in tasks related one way or another to
anti-fraud investigations (recovery, clearance of accounts, cus-
toms and trade regulations) would share competences more
clearly between OLAF and the Commission’s DGs, against the
background of the interdepartmental protocols currently in

preparation, and provide OLAF with a status corresponding to its
tasks. This would entail both improving the organisation of
OLAF’s activities based on an investigation policy (1) and modi-
fying its status (2).

1. The need for improved organisation of OLAF’s activities

based on an investigation policy

In its programme of activities for 2005, OLAF outlined several
categories of priority for its activities, relating chiefly to the finan-
cial impact, the organised nature of fraud and complementarity
with national means. But OLAF must also take account of the pri-
orities of the institutions, even if this means sacrificing a degree
of consistency. In particular, its investigation programme must
take into account priorities laid down in another context, such as
zero tolerance or enlargement.

The ‘operational criteria’ set out in the Manual do not allow pri-
orities to be defined on the basis of the analysis of fraud. Instead,
they basically enable ‘non-cases’ (unfounded allegations or allega-
tions that are outside OLAF’s sphere of competence) to be
removed and case files to be divided between ‘investigations’ and
‘coordination/assistance’. Hitherto, this division has been theoreti-
cal, since the procedures and methods used are identical and the
principle of independence is applied to all cases.

The Committee is in favour of applying the discretionary prin-
ciple (3) for opening investigations. To ensure proportionality an
investigation policy must be explicitly established specifying the
criteria on which decisions are to be taken. These are necessary
because of the subsidiarity principle and the limited means avail-
able. The independence of the Director’s decision to open an
investigation means that he can make a responsible choice based
on these criteria.

On this basis, the decision to open an investigation could help the
investigator by specifying more clearly the aim of the investiga-
tion, its scope, the means and resources to be used and the nature
of the evidence to be sought (4).

This investigation policy should also make it possible to define
the role of OLAF’s investigations in relation to national and Com-
munity procedures, rank priorities and make decisions more
transparent and therefore more independent.

(1) Talk given on 25 September 2003 at Parliament’s Conference of Presi-
dents: ‘In this context the question will once again arise of hiving off
an Office that might come to assume the role of a judicial support
body in internal investigations as well as external investigations.’

(3) Proposal No 2 of Mr Prodi’s action plan: ‘… the possibility for the
Office to concentrate on its priorities. To this end, a discretionary prin-
ciple should be established and included in the regulation’, is along
these lines.

(4) Points 3.3.3.4 and 3.4.5 in the Manual only refer to the persons to be

(2) Speech to Parliament on 18 November 2003, priority No 1.

investigated.

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2. The need to modify OLAF’s status

Regulation (EC) No 1073/1999 and Decision 1999/352/EC,
ECSC, Euratom are based on the distinction between the Office’s
new fully independent investigative role and the tasks it carries
out as a Commission service. In practice, the distinction is not
always clear and this could affect the functioning of OLAF’s inter-
nal organisation and the perception of the responsibilities of the
different players.

(a) OLAF’s internal organisation

In OLAF’s internal organisation the boundaries between its activi-
ties as an independent investigative body and its role in provid-
ing Member States with assistance from the Commission in coor-
dinating cooperation between different States are not always
clearly defined. At the time of its establishment, the Committee
recommended that in order to avoid any confusion, and in par-
ticular in order to protect OLAF’s independence in conducting its
investigations, OLAF’s internal organisation with respect to staff
structure and regulations should keep its activities as an indepen-
dent body separate from its activities as a Commission service.
This would also have made it easier to implement the provisions
on officials’ accountability and to clarify the division of powers
between OLAF and the Commission.

In practice, this differentiation has not been fully applied in all
areas. For example, there is sometimes confusion between the
functions of the investigator and the authorising officer. The
Manual fails to prevent such confusion (1) or guarantee harmoni-
sation of procedures, in particular those relating to the use of the
legal bases. Some of the tasks carried out by the Office in provid-
ing assistance from the Commission are in fact conducted as inde-
pendent activities.

In order to avoid this confusion, OLAF needs legislative provi-
sions that determine its powers and functions absolutely
unambiguously.

Recommendation 1: establish a structure separating the ser-
vices entrusted with independent functions from those
entrusted with ‘Commission’ functions, and clarify the divi-
sion of competences between OLAF and the Commission’s
services and DGs (memoranda of understanding are cur-
rently being negotiated)
in the area of administrative
cooperation;

Recommendation 2: establish arrangements for personnel
(temporary staff or officials) adapted to their functions;

Recommendation 3: establish a budgetary system for the
Office
independence of
investigations.

that will not hinder

the

carried out by OLAF. Its situation would be equally difficult in
cases of court actions brought by an official or member of another
institution.

Similarly, regarding the status of OLAF’s Director, the regulations,
in particular Staff Regulations (Article 86 and 90a) (2), confer the
disciplinary functions of the appointing authority on him, since
he is responsible both for directing investigations and investigat-
ing complaints against acts carried out during investigations. This
is conceivable in administrative law but can cause problems in
investigations carried out with the intention of bringing criminal
proceedings. Such complaints constitute the first phase of what
is in fact a means of redress aimed at protecting the individual’s
rights; these rights are usually protected if the investigation is
aimed at establishing individual liability.

Furthermore, giving OLAF’s Director the powers of the appoint-
ing authority (3) in internal investigations for all the officials of
the institutions contravenes the principle of the administrative
autonomy of the institutions since the action brought in the Court
of Justice should be made against the Commission (Article 91a).

(c) OLAF’s external relations

The current relations between OLAF and the Commission high-
light the problems caused by the fact that OLAF combines sev-
eral co-existing functions and that the division of competences
between OLAF and the Commission’s services is not clearly
defined. The discussions currently under way on the planned
interdepartmental memoranda of understanding underline the
complexity of the problems, in particular that of communication
between OLAF and the Commission, the transmission of infor-
mation from OLAF to the Commission or access by OLAF to the
Commission’s databases. But OLAF’s role and position vis-à-vis
the disciplinary authorities, which necessarily have an inter-
institutional dimension, also continue to raise questions since the
disciplinary authorities sometimes find it difficult to follow up the
recommendations contained in the reports addressed to them.
They have requested additional guarantees to make OLAF’s deci-
sions more objective (4).

(b) Administrative status and accountability

OLAF’s administrative status as a part of the structure of the Com-
mission could make the Commission subject to a conflict of inter-
est in cases in which it is defending itself or OLAF in an action
brought by one of its officials, which officials it has a duty to pro-
tect, against measures taken on the basis of an investigation

(1) See points 1.2, 1.3 and 1.4 of the Manual.

(2) Thus confirming point 46 of the Court of First Instance Order in the
Gomez Reino case, which makes appeal pursuant to Article 14 of Regu-
lation (EC) No 1073/1999, a special case of the means of redress
established by Article 90(2) of the Staff Regulations.

(3) Whereas DG ADMIN is the appointing authority for OLAF’s officials
in disciplinary matters (Commission Decision of 28 April 2004).
(4) See, for example, the comments by the EESC and the CoR of 7 May
2004 requesting additional guarantees regarding the opening and
duration of investigations concerning members, according to the Pro-
tocol of 8 April 1965, for example in the form of a prior opinion of
the Supervisory Committee.

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The provisions of the new Staff Regulations, which are based on
a strictly administrative view of OLAF’s role, do not for example
address the question of investigations carried out by OLAF that
may also have a bearing on facts coming under disciplinary law
and criminal law. Relations between IDOC and OLAF show that
the question of OLAF’s role in the disciplinary procedure is not
regulated (1).

As indicated in Chapter II, the support role has proved to be very
useful and is a necessary development of the investigative role. In
the transitional period, internal rules would have to be adopted
regarding OLAF’s participation. The legislator should specify the
legal basis and the framework for this participation.

Recommendation 4: define precisely OLAF’s tasks, position
and relations with its partners and the role played by it in
the different procedures (2), in particular disciplinary: regu-
late OLAF’s task of providing support to the judicial authori-
ties by specifying its legal framework.

B. MECHANISMS AND STRUCTURES REQUIRED FOR

THE INVESTIGATIVE FUNCTION

The Office analyses its investigations as preparatory measures
similar to traditional administrative measures. The new Staff
Regulations of officials that came into force on 1 May 2004,
which give OLAF powers to conduct disciplinary investiga-
tions (3), underline the administrative nature of OLAF’s investiga-
tive function and say nothing of the fact that it is aimed at bring-
ing criminal proceedings.

Similarly, the Court of First Instance appears to confirm the
administrative nature of OLAF’s investigations (4). It specifies that
the judicial review to which they are subject under Article 14 of
the Regulation, which applies only to officials and other staff who
are subject to the Staff Regulations, is conducted only if an act
adversely affecting staff within the meaning of Article 90 of the
Staff Regulations has been committed and cannot be directly con-
ducted in respect of OLAF’s investigative measures.

(1) It is true that Article 4(2) of Commission Decision C/2004/1588 states
that before IDOC opens an administrative inquiry, the Director-
General for Administration consults OLAF to ascertain that that Office
is not undertaking an investigation regarding the same facts. However,
Article 4(7) of the same decision states that: ‘After receiving an inquiry
report from OLAF, the Director-General for Personnel and Adminis-
tration may, if appropriate, either ask OLAF to supplement the report
or decide to open an administrative inquiry himself or immediately
open a disciplinary procedure or indeed close the file without any dis-
ciplinary consequences.’ The role of the investigation conducted by
OLAF with respect to the disciplinary procedure thus varies greatly.
However, one thing seems clear: the administrative investigation prior
to the disciplinary procedure is primarily a matter for OLAF. The par-
ticular nature (criminal law dimension?) of OLAF’s investigation would
thus be confirmed. Conclusions still have to be drawn on how to
monitor legality.

(2) Recommendation No 8 of the Commission’s ‘Article 15’ report: ‘The
Commission recommends that memoranda of understanding be con-
cluded to make the practical breakdown of tasks between the Office
and disciplinary bodies more transparent.’

(3) Article 86. Annex 9 lays down the rules applicable to disciplinary pro-

cedures and to the protection of individual rights.

(4) Article 90a: investigative measures are similar to traditional adminis-
trative measures and OLAF’s Director has equivalent powers to the
appointing authority for officials and other servants of the Commu-
nity.

However, with regard to other litigants, the case-law of the Court
of Justice is less clear as to the nature of these investigations. Para-
graphs 49 and 50 of the Rothley judgment, applicable to mem-
bers of Parliament, state that they have the option ‘not to comply
(with the obligations to cooperate with OLAF) if they are per-
suaded that it is open to them to do so without infringing Com-
munity law. If, in a specific case, one of the Members of the Par-
liament adopts that approach, any subsequent measures taken by
the Parliament with regard to that Member and to his disadvan-
tage will, in principle, be subject to judicial review’ (5).

With regard to individuals, OLAF clearly does not have all the
coercive powers pertaining to criminal law. However, it does have
significant powers, such as access to premises or documents
(Article 4(2)(1) of Regulation (EC) No 1073/1999) or the power
to request information (Article 4(2)(2)). OLAF’s activities can
therefore have an impact on individual liberties, which is why the
Supervisory Committee considers that internal monitoring of
legality is insufficient for action taken in this context.

This monitoring of legality is based on Article 14 of the Regula-
tion and on the new Staff Regulations of officials. However, it has
several drawbacks.
It establishes a degree of discrimination
between different categories of litigant (officials and other ser-
vants of the Communities; members of the institutions; citizens);
it does not take full account of the fact that OLAF’s investigations,
which are often conducted in close cooperation with the national
prosecuting authorities, using methods and means adapted to the
purpose of the investigation, may result in criminal proceedings;
and it treats appeals ‘against an act adversely affecting (the offi-
cial) committed by the Office as part of an internal investigation’,
as provided for in Article 14 as the equivalent of administrative
appeals by officials against their appointing authority (6). It is true
that this equivalence is based on the fact that OLAF’s Director is
given equivalent powers to those of the appointing authority for
all Community officials. But the appointing authority has a rela-
tionship of trust with the official, whereas that between OLAF’s
Director and the official is a relationship based on suspicion.

(5) Judgment of the Court of 30 March 2004; the Court has been criti-
cised for issuing what amounts to an invitation to disobedience to the
Members of Parliament concerned (AJDA 12/2004; note by Bélorgey,
Gervagony, Lambert). However, it should be emphasised that the
Court judgment is based on the Commission’s assurance that there is
effective monitoring of legality. In point 58 of his conclusions,
Advocate-General Jacobs states that ‘The Commission points to a
number of legal acts which might be challenged in that way (various
opportunities to bring judicial proceedings): the decision of the director of
OLAF to open an internal investigation as required by the second
paragraph of Article 5 of Regulation (EC) No 1073/1999; various
measures taken by OLAF in the course of an investigation, including
the decision to have access to an office, to seise documents or to
request oral information; as well as the agreement, explicit or implicit,
of the institution in question.’

(6) This is the position taken by the Court of First Instance in its Gomez
Reino Order of 18 December 2003 and in Article 90a of the new Staff
Regulations.

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Whatever interpretation is placed on the provisions specifying
OLAF’s role and powers, the Committee considers that in order
to ensure that the system works as well as possible, OLAF should
follow up the Committee’s recommendations to introduce pre-
cise rules of procedure and internal monitoring of legality that
would be independent of the conduct of investigations.

and thereby affect the legality of the final decision.’ It is not pos-
sible to monitor compliance with these principles or legality
unless there are precise rules. OLAF has so far not provided a sat-
isfactory response to this problem.

1. Rules of procedure

Under the authority of the hierarchical superior, investigators
must comply with the instructions in the Manual. This contains
provisions on how to conduct investigative measures, in particu-
lar point 3.4.4. It also highlights the need to comply with certain
principles (1) and certain rights of litigants are also mentioned, for
example in points 3.4.4.3 (rights of interviewees), 3.4.10.1 (right
of interested parties to be given prior notification when informa-
tion concerning them is passed on to the competent authorities),
and 3.4.10.2 (right of access to the investigation file).

However, the rules set out in the Manual do not sufficiently and
effectively implement the principles laid down in Regulation
(EC) No 1073/1999, in particular in recitals 10 (2) and 14 (3), or
other principles or regulations applicable to investigations.

Recommendation 5: In order to take better account of the
fact that investigations may result in criminal proceedings,
the Committee reiterates the recommendation contained in
its first activity report (5), regarding the introduction of
internal rules of procedure adapted to the different phases of
the investigation, which should be sufficiently precise to
ensure respect for the existing principles.

2. Monitoring the legality of the investigations

This question is regulated by Article 14 of Regulation (EC)
No 1073/1999 (6), ‘Judicial Review’. Recital 10 of the Regulation
also lays down the basis for monitoring legality and emphasises
that the terms and conditions under which investigations are con-
ducted are subject to the adoption of decisions by the institutions
and to amendment of the Staff Regulations. Some of the difficul-
ties encountered in conducting investigations have generated
court actions.

This is corroborated by the case-law of the Court of First Instance,
in particular the Order of 18 December 2003 in the Gomez Reino
case (4), which considers such rules of procedure necessary when
it states that ‘… Failure to take account of this provision (respect
for rights to defence) would constitute a violation of the substantial
formal requirements applicable to the investigation procedure

With regard to monitoring the legality of investigative measures,
OLAF recognises the need to respect the provisions referred to in
Recital 10 of Regulation (EC) No 1073/1999, but transfers the
responsibility to other bodies (7) at the risk of lessening the effec-
tiveness of the monitoring.

(1) Point 3.4 of the Manuel states that certain principles must always be

applied:
— The rights of the individual must always be respected
— The admissibility of evidence must always be preserved
— OLAF investigations must always be lawful and proportionate
— OLAF’s obligations to its institutional partners must always be fulfilled.
The Manual does not indicate how these principles must be applied.
(2) ‘(10) Whereas these investigations must be conducted in accordance
with the Treaty and in particular with the Protocol on the Privileges
and Immunities of the European Communities, while respecting the
Staff Regulations of officials and the Conditions of employment of
other servants of the Communities (hereinafter referred to as the Staff
Regulations), and with full respect for human rights and fundamental
freedoms, in particular the principle of fairness, for the right of per-
sons 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; whereas to that end
the institutions, bodies, offices and agencies must lay down the terms
and conditions under which such internal investigations are con-
ducted; whereas consequently the Staff Regulations should be
amended in order to lay down the rights and obligations of officials
and other servants as regards internal investigations.’

(3) ‘(14) Whereas the terms on which the Office’s employees will dis-
charge their duties and the terms governing the Director’s exercise of
his responsibility for the conduct of investigations by the Office’s
employees should be laid down.’

(4) Case T-215/02, paragraph 65.

Hierarchical control, by its nature, is subject to ambiguities and
limitations. Furthermore, the disciplinary supervision of investi-
gative measures is purely notional. Proof of this has been the fail-
ure to set up an internal monitoring function independent of the
conduct of investigations. Similarly, OLAF has not yet succeeded
in introducing objective and impartial treatment of litigants’ com-
plaints independent of the bodies conducting the investigation.

External monitoring, which, in principle, is more satisfactory
from the point of view of independence, is also very limited. The
Ombudsman’s decisions are not always put into effect in practice,
and he does not have the power to monitor legality. With regard
to the monitoring carried out by the Supervisory Committee,

(5) Proposal P4; this proposal was reiterated in the subsequent reports.
(6) Monitoring by the Committee of the investigative function (the moni-
toring referred to in Article 11(1) of the Regulation is not strictly
speaking monitoring of legality). See Chapter III.C.

(7) In its Order of 18 December 2003 in the Gomez Reino case the Court
of First Instance rules that respect for these principles is a necessity, yet
refuses to monitor it.

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Regulation (EC) No 1073/1999 specifies that it does not affect the
Director’s independence in conducting investigations (recital 18),
and its only opportunity for intervention (within its sphere of
competence as defined in Article 11(1) of the Regulation) is at the
time of the consultation that takes place before information is
forwarded to the judicial authorities of a Member State
(Article 11(7)). This consultation, which has given satisfactory
results since the beginning of 2004, allows only an exchange of
views with the Committee.

The political authorities, both Community and national, are
aware of the problem of monitoring legality and have made sev-
eral recommendations for resolving it. Some of these do not
directly concern the Committee, since they involve assigning
responsibility for internal control to the magistrates unit, assign-
ing responsibility for monitoring legality to the Community
courts or basing the organisation of this monitoring function on
the role of the Hearing Officer in competition matters (3).

The Committee would therefore reiterate that since Regulation
(EC) No 1073/1999 came into force, this weakness has been
pointed out (1), and that it has emphasised on many occasions
that there was ultimately no alternative to establishing the Euro-
pean Public Prosecutor’s Office. Since there is now a basis for this
in the Treaty establishing a Constitution for Europe, the transi-
tion should be prepared by measures minimising the shortcom-
ings of the current situation and taking account of the prospects
and the context.

C. ROLE AND STATUS OF THE SUPERVISORY COMMITTEE

Concerning the proposals to strengthen its powers in respect of
monitoring legality, the Committee would point out that the two
functions conferred on it by Regulation (EC) No 1073/1999 are
regular monitoring of the investigative function (Article 11(1))
and assistance to the Director in discharging his responsibilities
(recital 17).

The Committee must reinforce the Office’s independence by
‘regular monitoring of the investigative function’ (2), in other
words by ex post checks to ascertain whether the investigations
are being properly conducted, aimed at examining the objectivity
of the procedures. This monitoring is therefore limited and sub-
ject to support for the Director’s independence. This support
might be given in certain cases if the Director was faced with pres-
sure or an obstacle and called on the Supervisory Committee for
assistance. In fact, in the five years since the Committee was set
up the Director has never called on it in such circumstances.
However, at his request, the Committee provided assistance to
him while OLAF was being set up, whether with respect to the
budget or in recruiting management personnel. Since the estab-
lishment of OLAF was completed, the Committee’s activities have
centred more on organising the investigative function (rules, pro-
cedures, programme of activities, assignment of resources). This
is undoubtedly its main contribution.

However, another suggestion that has been made is to reinforce
the Supervisory Committee’s powers to monitor the legality of
investigations (4). In other words, the Committee would be given
a new role which it is forbidden to undertake under the current
Regulation. The Committee has its doubts about this proposal. As
it emphasised in a previous opinion, ‘the independence of OLAF’s
investigations must not be compromised by any power of deci-
sion of the Committee in the conduct of the investigations, which
would, moreover, alter this status by making it necessary for
members to be in permanent attendance’ (5).

Due to the nature of its members (independent persons with
senior posts in their respective countries relating to OLAF’s areas
of activity), which determines its functioning (monthly meetings),
the Committee’s main strength lies in the independence and
impartiality of its evaluations. If it were given powers of decision
regarding the conduct of the investigations, its status would nec-
essarily be changed into a permanent status integrated in the
Community institutions; this would increase its powers but might
weaken its independence and impartiality.

For this reason, the Committee had suggested that an individual
rights lawyer (avocat des libertés) be appointed to assist it in the
exercise of its new functions. This person, who would belong to
the Committee’s Secretariat, would examine the Committee’s
opinions on complaints sent to the Director of OLAF on the basis
of Article 14 of Regulation (EC) No 1073/1999 and of requests
sent to it spontaneously by persons concerned by investigations.
The principles governing cooperation between this individual
rights lawyer and OLAF would be laid down in a Memorandum
of Understanding between the Committee and the Office. OLAF
would have to put in place the necessary structure for effective
internal control (6).

(1) Wise Men’s Report, point 5.11.7: ‘This final element is both the most
interesting and unsatisfactory aspect of the OLAF reform. On the one
hand, it is vital that there be some guarantor of the proper and effec-
tive conduct of OLAF’s inquiries. The qualifications specified for the
members of the Committee clearly reflect a concern that the supervi-
sion exercised be akin to that of a judicial authority (e.g. a juge de
l’instruction), able to assess the conduct of investigations with a pro-
fessional eye. But precisely here lies the problem, quasi-judicial author-
ity is placed in the hands of a group whose authority and status, with
all respect for the future nominees, will be open to question.’

(2) Article 11(1) of Regulation (EC) No 1073/1999

(3) Report of the Chamber of Lords ‘Strengthening OLAF’, HL paper 139,

points 87 and 108.

(4) Proposal for an amendment of Regulation (EC) No 1073/1999 pre-
sented by the Commission (COM(2004) 103) Articles 7(7), 11, 14.
Resolution of the European Parliament of 4 December 2003 on the
evaluation of OLAF’s activities (A5-0393/2003), points 52, 53, 54.
French Parliament, information report No 1533 on OLAF’s shortcom-
ings, point 4 of the proposed resolution.

(5) Opinion No 1/2004 on the proposed amendment of Regulation

No (EC) 1073/99, p. 3.

(6) Opinions Nos 3/2003 and 1/2004.

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In addition, the transitional nature of OLAF within the measures
for protecting the Community’s financial interests is manifested,
above all, in the difficulties encountered by it in regulating its rela-
tions with its partners, which are at the root of most of the
problems raised by its operational activity. A comprehensive and
coherent solution to these problems will not be found until the
European public prosecutor’s office provided for by the Consti-
tutional Treaty is set up to coordinate the powers exercised by the
different players involved. However, during the transition period,
coherence could be enhanced by concrete proposals aimed at
avoiding confusions or conflicts of competence relating to OLAF’s
operational activities. Since it started its work, the Supervisory
Committee has considered the question of OLAF’s relations with
the other players involved in operational activities to protect the
Community’s financial interests to be an essential one. These
players are not only the national judicial authorities and the Com-
munity disciplinary and/or administrative authorities to whom its
investigation reports and support activities are addressed, but also
Europol and Eurojust (1), since the operational jurisdiction of
these two bodies will be increased in the future. For these reasons,
it would be desirable for the Supervisory Committee to be
explicitly assigned the task of interinstitutional coordination.

Recommendation 6: Explicitly assign the Supervisory Com-
mittee the task of interinstitutional coordination of the play-
ers involved in operational action to protect the Communi-
interests in order to avoid problems of
ty’s financial
confusions and conflicts of interest.

With respect to its own status, the Committee reminds the
institutions that it must have the necessary means to carry
out its task, as regards both the enforcement of Regulation
(EC) No 1073/1999, which specifies the information that must be
made available to it, and its administrative and budgetary posi-
tion, which must ensure that it functions smoothly (2). In particu-
lar, it must be emphasised that the Supervisory Committee does
not come under the Commission, but is an independent body
reporting to all the institutions. To make this even clearer, the sta-
tus of its members should be spelled out. In addition, the func-
tioning of the Committee and its secretariat (establishment of the
headquarters, recruitment and career path of personnel, budget,
etc.) should be completely independent with respect to the bodies
controlled (3).

Article III.273 of the Treaty states that European law will organ-
ise the procedures for the exercise of Eurojust’s powers (4), in par-
ticular as regards the initiation and coordination of criminal
investigations in the area of the protection of financial interests.
Article III.274 provides for the establishment of a European Pub-
lic Prosecutor’s Office from Eurojust, with responsibility for these
tasks and also for bringing to judgment, where appropriate in liai-
son with Europol. These two provisions may be implemented at
the same time.

The procedure for revising Regulation (EC) No 1073/1999, based
on the Commission’s proposal, should take account of this pro-
posed development by considering this revision as a transition
from the existing system to the future system based on the Euro-
pean Public Prosecutor’s Office. The management audit currently
being prepared at the Court of Auditors and the observations
made by the institutions that have expressed their views (5) should
suggest provisional solutions for this transition phase to the
legislator.

In particular, as regards the nature of OLAF’s activities, the fact
that OLAF’s investigations may result in criminal proceedings
should be taken fully into account now that the Constitution
envisages the establishment of a European Public Prosecutor’s
Office with powers for investigations and prosecutions in the area
of Community budget fraud and thus confirm that the investiga-
tions are liable to result in criminal proceedings.

Regulation (EC) No 1073/1999 indicates that the conclusions and
information obtained in investigations are liable to be used in
criminal proceedings (Articles 9 and 10) and makes the conduct
of investigations subject to respect for more restrictive rules and
principles than those applicable to the investigations provided for
in the Staff Regulations (recital 10), but the effect of these provi-
sions has been insufficient. To prepare the transition towards a
European Public Prosecutor’s Office, it is therefore necessary to
elaborate on the new provisions in the Staff Regulations
(Article 86 and Annex IX, in particular Article 2) (6) and to pro-
vide a better guarantee of fundamental rights.

(4) Article III.273(1): ‘… In this context, European laws shall determine
Eurojust’s structure, operation, field of action and tasks. Those tasks
may include:
(a)

the initiation of criminal investigations, as well as proposing the
initiation of prosecutions, conducted by competent national
authorities, particularly those relating to offences against the
financial interests of the Union;
the coordination of investigations and prosecutions referred to in
point (a);
the strengthening of judicial cooperation, including by resolution
of conflicts of jurisdiction and by close cooperation with the
European Judicial Network.’

CONCLUSION

The Treaty establishing a Constitution for Europe signed in Rome
on 28 October 2004 makes specific provision for developing the
interests.
current system for protecting European financial

(b)

(c)

(1) See, in particular, the Committee’s letter to Mr Vitorino of 10 May
2001; its Opinion No 2/2002 of 12 March 2002 on the Commission’s
Green Paper, point II.2; its Opinion No 2/2003 on the evaluation of
OLAF (Article 15) of 18 June 2003, point IV.4.

(2) The Committee’s Opinion No 3/2003 of 22 October 2003 on the
Institutions’ proposals aimed at reinforcing the role of the Supervisory
Committee.

(3) The Committee’s Opinion No 2/2003 of 18 June 2003 accompany-
ing the Commission’s report on the evaluation of the activities of the
European Anti-fraud Office (OLAF).

(5) Parliament, the Council, the Commission, the Court of Auditors, the
Court of Justice and the Court of First Instance, the Ombudsman, but
also the Supervisory Committee.

(6) Article 2(1): ‘The rules set out in Article 1 of this Annex shall apply,
with any necessary changes, to other administrative enquiries carried
out by the Appointing Authority.’ This not only ignores the fact that
OLAF investigations may result in criminal proceedings but makes it
difficult to draw a distinction between the role and nature of investi-
gations carried out by OLAF and by the Appointing Authority, in par-
ticular the IDOC, particularly since the same means of redress have
been provided for in both cases.

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Taking into account also the results of the audit carried out by the
Court of Auditors, guidelines should be drawn up for preparing
this transition and improving both OLAF’s internal organisation
and its relations with its partners.

It should therefore be possible to find solutions to many of the
problems that have been encountered by OLAF and to facilitate
the transition to a European Public Prosecutor’s Office.

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RECOMMENDATIONS

Recommendation 1:

establish a structure separating the services entrusted with independent
functions from those entrusted with ‘Commission’ functions, and clarify
the division of competences between OLAF and the Commission’s services
and DGs (memoranda of understanding are currently being negotiated) in
the area of administrative cooperation.

Recommendation 2:

establish arrangements for personnel (temporary staff or officials) adapted
to their functions.

Recommendation 3:

establish a budgetary system for the Office that will not hinder the inde-
pendence of investigations.

Recommendation 4: define precisely OLAF’s tasks, position and relations with its partners and
the role played by it in the different procedure (1), in particular disciplin-
ary: regulate OLAF’s task of providing support to the judicial authorities by
specifying its legal framework.

Recommendation 5:

in order to take better account of the fact that investigations may result in
criminal proceedings, the Committee reiterates the recommendation con-
tained in its first activity report (2) regarding the introduction of internal
rules of procedure adapted to the different phases of the investigation,
which should be sufficiently precise to ensure respect for the existing prin-
ciples.

Recommendation 6:

explicitly assign the Supervisory Committee the task of interinstitutional
coordination of the players involved in operational action to protect the
Community’s financial interests in order to avoid problems of confusions
and conflicts of interest.

(1) Recommendation No 8 of the Commission’s ‘Article 15’ report: ‘The Commission recommends that memoranda of
understanding be concluded to make the practical breakdown of tasks between the Office and disciplinary bodies
more transparent.’

(2) Proposal P4; this proposal was reiterated in the subsequent reports.

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ANNEX I

Recommendations of Activity Report 1999 to 2000

P1: The Supervisory Committee therefore stresses the need to support OLAF’s efforts to establish the administrative struc-
tures and internal rules required to ensure its independence, in particular in the spirit of the conclusions of the Ecofin Coun-
cil 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 interinstitu-

tional 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 establish-
ment 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 No 5/1999 and No 2/2000, which are annexed to this report.

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ANNEX II

Proposals of Activity Report 2000 to 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).

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 Com-
mittee 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 Department in preparing the work programme, setting priorities and case-selection criteria and car-
rying 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 respon-
sibility and of the increased powers of OLAF as regards investigations within the institutions; creating a clearly iden-
tified structure having the necessary qualified personnel to combat corruption, financial crime and crime in relation to
public procurement,

— setting up a structure and recruiting staff to handle OLAF’S function in relation to ‘external investigations’ and coop-

eration with national authorities (on the basis of a current stock-taking exercise).

On questions concerning OLAF’s interinstitutional environment, the Committee can confine itself to proposals supplement-
ing initiatives already taken:

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

The various initiatives to strengthen the legitimacy and effectiveness of OLAF investigations – internal reorganisation; pros-
ecutor 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 infor-
mation 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 (administra-
tive 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 inter-
pretation of the dual functions of OLAF. Effect should be given to these definitions not only in practice but in the Regula-
tions 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 insti-
tutions in this field. A dialogue should be established with the institutions on the basis of the document drawn up by OLAF.